##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD FROM _________ TO _______________
 Commission
    
    
    
    I.R.S. EmployerFile
    
    
    
    IdentificationNumber
    
    Exact name of Registrant As Specified in its Charter
    
    Number333-39178
    
    XM SATELLITE RADIO INC.
    
    52-1805102
 DELAWARE
(State or other jurisdiction of incorporation or organization)
 1500 ECKINGTON PLACE, NE
WASHINGTON, DC 20002-2194
(Address of principal executive offices) (Zip code)
 (202) 380-4000
(Registrants telephone number, including area code)
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o þ
  (Class)
    
    (Outstanding as of July 30, 2010)XM SATELLITE RADIO INC.COMMON STOCK, $0.10 PAR VALUE(all shares are issued to Sirius XM Radio Inc.)
    
    100 SHARES




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##### 



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 INDEX TO FORM 10-Q
 Item No.
    
    DescriptionPART I  Financial InformationItem 1.
    
    Financial Statements:Unaudited Consolidated Statements of Operations for the three and six months ended
June 30, 2010 and 2009
    
    
    1Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009
    
    
    2Unaudited Consolidated Statements of Stockholders Deficit as of June 30, 2010 and
Comprehensive Income for the six months ended June 30, 2010
    
    
    3Unaudited Consolidated Statements of Cash Flows for the six months ended June 30,
2010 and 2009
    
    
    4Notes to Unaudited Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3.
    
    Quantitative and Qualitative Disclosures About Material Risk
    
    
    49Item 4.
    
    Controls and Procedures
    
    
    49PART II  Other InformationItem 1.
    
    Legal Proceedings
    
    
    50Item 1A.
    
    Risk Factors
    
    
    50Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    50Item 3.
    
    Defaults Upon Senior Securities
    
    
    50Item 4.
    
    (Removed and Reserved)
    
    
    50Item 5.
    
    Other Information
    
    
    50Item 6.
    
    Exhibits
    
    
    50Signatures
    
    
    51EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I: FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 XM SATELLITE RADIO INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,(in thousands, except per share data)
    
    2010
    
    2009
    
    2010
    
    2009Revenue:Subscriber revenue, including effects of rebates
    
    $
    312,892
    
    
    $
    291,859
    
    
    $
    617,903
    
    
    $
    579,324Advertising revenue, net of agency fees
    
    
    5,022
    
    
    
    4,807
    
    
    
    9,116
    
    
    
    9,328Equipment revenue
    
    
    13,959
    
    
    
    6,107
    
    
    
    24,217
    
    
    
    12,024Other revenue
    
    
    38,477
    
    
    
    4,058
    
    
    
    72,368
    
    
    
    8,388Total revenue
    
    
    370,350
    
    
    
    306,831
    
    
    
    723,604
    
    
    
    609,064Operating expenses (depreciation and amortization
shown separately below):Cost of services:Revenue share and royalties
    
    
    45,870
    
    
    
    46,405
    
    
    
    88,851
    
    
    
    96,021Programming and content
    
    
    27,469
    
    
    
    27,893
    
    
    
    55,743
    
    
    
    56,542Customer service and billing
    
    
    32,852
    
    
    
    31,347
    
    
    
    62,208
    
    
    
    65,105Satellite and transmission
    
    
    11,732
    
    
    
    11,362
    
    
    
    23,487
    
    
    
    25,468Cost of equipment
    
    
    4,470
    
    
    
    3,442
    
    
    
    8,970
    
    
    
    6,907Subscriber acquisition costs
    
    
    38,796
    
    
    
    22,226
    
    
    
    71,017
    
    
    
    48,475Sales and marketing
    
    
    27,506
    
    
    
    26,797
    
    
    
    53,557
    
    
    
    58,510Engineering, design and development
    
    
    4,991
    
    
    
    6,631
    
    
    
    10,223
    
    
    
    11,383General and administrative
    
    
    28,391
    
    
    
    34,721
    
    
    
    54,928
    
    
    
    66,472Depreciation and amortization
    
    
    36,418
    
    
    
    50,049
    
    
    
    73,887
    
    
    
    104,875Restructuring, impairments and related costs
    
    
    702
    
    
    
    26,586
    
    
    
    702
    
    
    
    26,586Total operating expenses
    
    
    259,197
    
    
    
    287,459
    
    
    
    503,573
    
    
    
    566,344Income from operations
    
    
    111,153
    
    
    
    19,372
    
    
    
    220,031
    
    
    
    42,720Other income (expense):Interest expense, net of amounts capitalized
    
    
    (56,881
    )
    
    
    (87,925
    )
    
    
    (116,880
    )
    
    
    (155,840
    )Loss on extinguishment of debt and credit facilities, net
    
    
    (4,617
    )
    
    
    (107,450
    )
    
    
    (4,625
    )
    
    
    (108,076
    )Loss on change in value of embedded derivative
    
    
    (11,311
    )
    
    
    (19,799
    )
    
    
    (48,603
    )
    
    
    (78,003
    )Interest and investment (loss) income
    
    
    (2,281
    )
    
    
    3,737
    
    
    
    (3,904
    )
    
    
    (2,672
    )Other income
    
    
    138
    
    
    
    839
    
    
    
    1,467
    
    
    
    1,226Total other expense
    
    
    (74,952
    )
    
    
    (210,598
    )
    
    
    (172,545
    )
    
    
    (343,365
    )Income (loss) before income taxes
    
    
    36,201
    
    
    
    (191,226
    )
    
    
    47,486
    
    
    
    (300,645
    )Income tax expense
    
    
    (516
    )
    
    
    (578
    )
    
    
    (1,145
    )
    
    
    (1,156
    )Net Income (loss)
    
    $
    35,685
    
    
    $
    (191,804
    )
    
    $
    46,341
    
    
    $
    (301,801
    )
  1




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 June 30, 2010
    
    December 31, 2009(in thousands, except share and per share data)
    
    (unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    95,974
    
    
    $
    212,155Accounts receivable, net
    
    
    73,379
    
    
    
    60,042Inventory, net
    
    
    5,426
    
    
    
    4,016Prepaid expenses
    
    
    148,337
    
    
    
    75,199Related party current assets
    
    
    1,593
    
    
    
    103,479Deferred tax asset
    
    
    70,382
    
    
    
    64,641Other current assets
    
    
    6,086
    
    
    
    4,585Total current assets
    
    
    401,177
    
    
    
    524,117Property and equipment, net
    
    
    857,916
    
    
    
    799,405Restricted investments
    
    
    250
    
    
    
    250Deferred financing fees, net
    
    
    65,139
    
    
    
    68,571Intangible assets, net
    
    
    2,577,347
    
    
    
    2,611,461Related party long-term assets
    
    
    28,221
    
    
    
    111,730Other long-term assets
    
    
    78,480
    
    
    
    25,529Total assets
    
    $
    4,008,530
    
    
    $
    4,141,063LIABILITIES AND STOCKHOLDERS DEFICITCurrent liabilities:Accounts payable and accrued
expenses
    
    $
    224,014
    
    
    $
    198,219Accrued interest
    
    
    43,826
    
    
    
    46,939Current portion of deferred revenue
    
    
    558,424
    
    
    
    506,441Current portion of deferred credit on executory contracts
    
    
    263,998
    
    
    
    252,831Current maturities of long-term debt
    
    
    6,858
    
    
    
    11,382Related party current liabilities
    
    
    90,902
    
    
    
    184,693Total current liabilities
    
    
    1,188,022
    
    
    
    1,200,505Deferred revenue
    
    
    151,386
    
    
    
    133,863Deferred credit on executory contracts
    
    
    647,691
    
    
    
    784,078Long-term debt
    
    
    1,456,873
    
    
    
    1,494,921Long-term related party debt
    
    
    159,674
    
    
    
    157,032Deferred tax liability
    
    
    922,286
    
    
    
    915,274Related party long-term liabilities
    
    
    26,655
    
    
    
    46,301Other long-term liabilities
    
    
    38,770
    
    
    
    38,851Total liabilities
    
    
    4,591,357
    
    
    
    4,770,825Commitments and contingencies (Note 12)Stockholders deficit:Common stock, par value $0.010; 1,000 shares authorized; 100 shares
issued and outstanding as of June 30, 2010 and December 31, 2009,
respectively
    
    
    -
    
    
    
    -Accumulated other comprehensive loss, net of tax
    
    
    (5,987
    )
    
    
    (6,581
    )Additional paid-in capital
    
    
    6,060,660
    
    
    
    6,060,660Accumulated deficit
    
    
    (6,637,500
    )
    
    
    (6,683,841
    )Total stockholders
deficit
    
    
    (582,827
    )
    
    
    (629,762
    )Total liabilities and
stockholders deficit
    
    $
    4,008,530
    
    
    $
    4,141,063
  2




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE INCOME
 AccumulatedCommon Stock
    
    Other
    
    Additional
    
    
    
    
    
    TotalComprehensive
    
    Paid-in
    
    Accumulated
    
    Stockholders(in thousands, except share data)
    
    Shares
    
    Amount
    
    Loss
    
    Capital
    
    Deficit
    
    DeficitBalance at December 31, 2009
    
    
    100
    
    
    $
    -
    
    
    $
    (6,581
    )
    
    $
    6,060,660
    
    
    $
    (6,683,841
    )
    
    $
    (629,762
    )Net income
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    46,341
    
    
    
    46,341Other comprehensive income:Unrealized gain on available-for-sale securities
    
    
    -
    
    
    
    -
    
    
    
    469
    
    
    
    -
    
    
    
    -
    
    
    
    469Foreign currency translation adjustment, net of tax of $10
    
    
    -
    
    
    
    -
    
    
    
    125
    
    
    
    -
    
    
    
    -
    
    
    
    125Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    46,935Balance at June 30, 2010
    
    
    100
    
    
    $
    -
    
    
    $
    (5,987
    )
    
    $
    6,060,660
    
    
    $
    (6,637,500
    )
    
    $
    (582,827
    )
  3




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Six MonthsEnded June 30,(in thousands)
    
    2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    46,341
    
    
    $
    (301,801
    )Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    73,887
    
    
    
    104,875Non-cash interest expense, net of amortization of premium
    
    
    29,958
    
    
    
    51,043Provision for doubtful accounts
    
    
    7,773
    
    
    
    8,634Restructuring, impairments and related costs
    
    
    702
    
    
    
    26,586Amortization of deferred income related to equity method investment
    
    
    (2,137
    )
    
    
    (1,388
    )Loss on extinguishment of debt and credit facilities, net
    
    
    4,625
    
    
    
    108,076Loss on investments
    
    
    6,065
    
    
    
    3,791Share-based payment expense
    
    
    14,010
    
    
    
    24,932Deferred income taxes
    
    
    1,145
    
    
    
    1,156Loss on change in value of embedded derivative
    
    
    48,603
    
    
    
    78,003Other non-cash purchase price adjustments
    
    
    (120,706
    )
    
    
    (85,223
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (12,074
    )
    
    
    5,053Inventory
    
    
    (1,410
    )
    
    
    855Related party assets
    
    
    174
    
    
    
    11,200Prepaid expenses and other current assets
    
    
    24,234
    
    
    
    1,986Other long-term assets
    
    
    9,132
    
    
    
    28,275Accounts payable and accrued expenses
    
    
    (18,321
    )
    
    
    (53,096
    )Accrued interest
    
    
    (1,885
    )
    
    
    4,950Deferred revenue
    
    
    68,788
    
    
    
    51,113Related party liabilities
    
    
    (65,437
    )
    
    
    28,405Other long-term liabilities
    
    
    35
    
    
    
    3,979Net cash provided by operating activities
    
    
    113,502
    
    
    
    101,404Cash flows from investing activities:Additions to property and equipment
    
    
    (118,474
    )
    
    
    (4,121
    )Purchase of available-for-sale securities
    
    
    9,450
    
    
    
    -Net cash used in investing activities
    
    
    (109,024
    )
    
    
    (4,121
    )Cash flows from financing activities:Long-term borrowings, net of costs
    
    
    -
    
    
    
    387,427Related party long-term borrowings, net of costs
    
    
    -
    
    
    
    95,093Payment of premiums on redemption of debt
    
    
    -
    
    
    
    (16,572
    )Repayment of long-term borrowings
    
    
    (120,659
    )
    
    
    (255,035
    )Repayment of related party long-term borrowings
    
    
    -
    
    
    
    (100,000
    )Net cash (used in) provided by financing activities
    
    
    (120,659
    )
    
    
    110,913Net (decrease) increase in cash and cash equivalents
    
    
    (116,181
    )
    
    
    208,196Cash and cash equivalents at beginning of period
    
    
    212,155
    
    
    
    206,740Cash and cash equivalents at end of period
    
    $
    95,974
    
    
    $
    414,936Supplemental Disclosure of Cash and Non-Cash Flow InformationCash paid during the period for:Interest, net of amounts capitalized
    
    $
    82,271
    
    
    $
    102,457Non-cash investing and financing activities:Non-cash capital contributions from SIRIUS XM
    
    
    -
    
    
    
    119,218Property acquired through capital leases
    
    
    -
    
    
    
    260Release of restricted investments
    
    
    -
    
    
    
    120,000
  4




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  (1) Business
       (2) Principles of Consolidation and Basis of Presentation
 Principles of Consolidation
  Basis of Presentation
   5




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
    (3) Summary of Significant Accounting Policies
 Use of Estimates
   Recent Accounting Pronouncements
 Accounting for Own-Share Lending Arrangements in
Contemplation of Convertible Debt Issuance
 As Originally
    
    
    Retrospective
    
    
    As CurrentlyBalance Sheet Line Item:
    
    Reported
    
    
    Adjustments
    
    
    ReportedDeferred financing fees, net
    
    $
    5,307
    
    
    $
    63,264
    
    
    $
    68,571Related party long-term assets, net of current portion
    
    
    110,439
    
    
    
    1,291
    
    
    
    111,730Long-term debt
    
    
    1,502,349
    
    
    
    (7,428
    )
    
    
    1,494,921Long-term related party debt
    
    
    157,183
    
    
    
    (151
    )
    
    
    157,032Additional paid-in capital
    
    
    5,989,700
    
    
    
    70,960
    
    
    
    6,060,660Accumulated deficit
    
    
    (6,685,015
    )
    
    
    1,174
    
    
    
    (6,683,841
    )
  For the Three Months
    
    
    For the Six MonthsEnded June 30, 2009
    
    Ended June 30, 2009As Originally
    
    
    Retrospective
    
    
    As Currently
    
    
    As Originally
    
    
    Retrospective
    
    
    As CurrentlyStatement of Operations Line Item:
    
    Reported
    
    
    Adjustments
    
    
    Reported
    
    
    Reported
    
    
    Adjustments
    
    
    ReportedInterest expense, net of amounts
capitalized
    
    $
    (88,118
    )
    
    $
    193
    
    
    $
    (87,925
    )
    
    $
    (156,319
    )
    
    $
    479
    
    
    $
    (155,840
    )Net (loss) income
    
    
    (191,997
    )
    
    
    193
    
    
    
    (191,804
    )
    
    
    (302,280
    )
    
    
    479
    
    
    
    (301,801
    )
  6




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
   Accounts Receivable
   June 30,
    
    
    December 31,2010
    
    
    2009Gross accounts receivable
    
    $
    78,933
    
    
    $
    65,399Allowance for doubtful accounts
    
    
    (5,554
    )
    
    
    (5,357
    )Total accounts receivable, net
    
    $
    73,379
    
    
    $
    60,042
 Inventory
   June 30,
    
    
    December 31,2010
    
    
    2009Raw materials
    
    $
    5,393
    
    
    $
    5,002Finished goods
    
    
    8,068
    
    
    
    4,975Allowance for obsolescence
    
    
    (8,035
    )
    
    
    (5,961
    )Total inventory, net
    
    $
    5,426
    
    
    $
    4,016
 Reclassifications
  7




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
  (4) Intangible Assets
  June 30, 2010
    
    
    December 31, 2009Weighted Average
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Net CarryingUseful Lives
    
    Value
    
    
    Amortization
    
    
    Value
    
    
    Value
    
    
    Amortization
    
    
    ValueIndefinite life intangible assetsFCC licenses
    
    Indefinite
    
    $
    2,000,000
    
    
    $
    -
    
    
    $
    2,000,000
    
    
    $
    2,000,000
    
    
    $
    -
    
    
    $
    2,000,000Trademark
    
    Indefinite
    
    
    250,000
    
    
    
    -
    
    
    
    250,000
    
    
    
    250,000
    
    
    
    -
    
    
    
    250,000Definite life intangible assetsSubscriber relationships
    
    9 years
    
    $
    380,000
    
    
    $
    (118,677
    )
    
    $
    261,323
    
    
    $
    380,000
    
    
    $
    (91,186
    )
    
    $
    288,814Licensing agreements
    
    9.1 years
    
    
    75,000
    
    
    
    (18,813
    )
    
    
    56,187
    
    
    
    75,000
    
    
    
    (13,906
    )
    
    
    61,094Proprietary software
    
    6 years
    
    
    16,552
    
    
    
    (8,430
    )
    
    
    8,122
    
    
    
    16,552
    
    
    
    (6,823
    )
    
    
    9,729Developed technology
    
    10 years
    
    
    2,000
    
    
    
    (383
    )
    
    
    1,617
    
    
    
    2,000
    
    
    
    (283
    )
    
    
    1,717Leasehold interests
    
    7.4 years
    
    
    132
    
    
    
    (34
    )
    
    
    98
    
    
    
    132
    
    
    
    (25
    )
    
    
    107Total intangible assets
    
    
    
    $
    2,723,684
    
    
    $
    (146,337
    )
    
    $
    2,577,347
    
    
    $
    2,723,684
    
    
    $
    (112,223
    )
    
    $
    2,611,461
 Indefinite Life Intangible Assets
    st
 Definite Life Intangible Assets
   Year ending December 31,
    
    AmountRemaining 2010
    
    $
    31,8022011
    
    
    58,8502012
    
    
    53,4202013
    
    
    47,0972014
    
    
    38,619Thereafter
    
    
    97,559Total definite life intangible assets, net
    
    $
    327,347
 8




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 (5) Subscriber Revenue
   For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Subscription fees
    
    $
    311,367
    
    
    $
    291,151
    
    
    $
    615,070
    
    
    $
    578,076Activation fees
    
    
    1,538
    
    
    
    818
    
    
    
    2,882
    
    
    
    1,387Other fees and rebates
    
    
    (13
    )
    
    
    (110
    )
    
    
    (49
    )
    
    
    (139
    )Total subscriber revenue
    
    $
    312,892
    
    
    $
    291,859
    
    
    $
    617,903
    
    
    $
    579,324
 (6) Interest Costs
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Interest costs charged to expense
    
    $
    56,881
    
    
    $
    87,925
    
    
    $
    116,880
    
    
    $
    155,840Interest costs capitalized
    
    
    12,226
    
    
    
    9,942
    
    
    
    23,096
    
    
    
    17,557Total interest costs incurred
    
    $
    69,107
    
    
    $
    97,867
    
    
    $
    139,976
    
    
    $
    173,397
  (7) Property and Equipment
  June 30,
    
    
    December 31,2010
    
    
    2009Satellite system
    
    $
    490,125
    
    
    $
    490,126Terrestrial repeater network
    
    
    41,583
    
    
    
    41,604Leasehold improvements
    
    
    7,249
    
    
    
    7,250Broadcast studio equipment
    
    
    8,386
    
    
    
    7,957Capitalized software and hardware
    
    
    55,110
    
    
    
    53,772Satellite telemetry, tracking and control facilities
    
    
    33,049
    
    
    
    32,877Furniture, fixtures, equipment and other
    
    
    27,947
    
    
    
    27,418Land
    
    
    38,100
    
    
    
    38,100Building
    
    
    53,849
    
    
    
    53,851Construction in progress
    
    
    320,718
    
    
    
    223,083Total property and equipment
    
    
    1,076,116
    
    
    
    976,038Accumulated depreciation and amortization
    
    
    (218,200
    )
    
    
    (176,633
    )Property and equipment, net
    
    $
    857,916
    
    
    $
    799,405
  9




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 Satellites
   (8) Related Party Transactions
  Related party
    
    
    Related party
    
    
    Related party
    
    
    Related party
    
    
    Related partycurrent assets
    
    
    long-term assets
    
    
    current liabilities
    
    
    long-term liabilities
    
    
    long-term debtJune 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,
    
    
    June 30,
    
    
    December 31,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Liberty Media
    
    $
    -
    
    
    $
    -
    
    
    $
    1,631
    
    
    $
    1,937
    
    
    $
    4,588
    
    
    $
    4,589
    
    
    $
    -
    
    
    $
    -
    
    
    $
    159,674
    
    
    $
    157,032XM Canada
    
    
    1,593
    
    
    
    1,011
    
    
    
    26,590
    
    
    
    24,429
    
    
    
    2,776
    
    
    
    2,775
    
    
    
    26,655
    
    
    
    28,793
    
    
    
    -
    
    
    
    -General Motors
    
    
    -
    
    
    
    99,554
    
    
    
    -
    
    
    
    85,364
    
    
    
    -
    
    
    
    93,107
    
    
    
    -
    
    
    
    17,508
    
    
    
    -
    
    
    
    -American Honda
    
    
    -
    
    
    
    2,914
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    3,841
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -SIRIUS
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    83,538
    
    
    
    80,381
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Total
    
    $
    1,593
    
    
    $
    103,479
    
    
    $
    28,221
    
    
    $
    111,730
    
    
    $
    90,902
    
    
    $
    184,693
    
    
    $
    26,655
    
    
    $
    46,301
    
    
    $
    159,674
    
    
    $
    157,032
  Liberty Media
   June 30,
    
    
    December 31,2010
    
    
    200911.25% Senior Secured Notes due 2013
    
    $
    87,000
    
    
    $
    87,00013% Senior Notes due 2013
    
    
    76,000
    
    
    
    76,0007% Exchangeable Senior Subordinated Notes due 2014
    
    
    11,000
    
    
    
    11,000Total
    
    $
    174,000
    
    
    $
    174,000
  XM Canada
  10




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XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
     For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Amortization of XM Canada deferred income
    
    $
    694
    
    
    $
    694
    
    
    $
    1,388
    
    
    $
    1,388Subscriber and activation fees royalties
    
    
    2,658
    
    
    
    160
    
    
    
    5,005
    
    
    
    274Licensing fee revenue
    
    
    750
    
    
    
    1,500
    
    
    
    2,250
    
    
    
    3,000Advertising reimbursements
    
    
    333
    
    
    
    367
    
    
    
    667
    
    
    
    733Total revenue from XM Canada
    
    $
    4,435
    
    
    $
    2,721
    
    
    $
    9,310
    
    
    $
    5,395
 General Motors and American Honda
    11




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
  Non-cashBalance sheet line item
    
    AdjustmentRelated party current assets
    
    $
    107,908Related party long term assets
    
    
    73,016Related party current liabiilties
    
    
    57,996
  For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010*
    
    
    2009
    
    
    2010*
    
    
    2009General Motors
    
    $
    4,995
    
    
    $
    6,264
    
    
    $
    12,759
    
    
    $
    13,256American Honda
    
    
    2,103
    
    
    
    2,995
    
    
    
    4,990
    
    
    
    5,827Total
    
    $
    7,098
    
    
    $
    9,259
    
    
    $
    17,749
    
    
    $
    19,083
 
 *
    
    GM and American Honda were considered related parties through May 27, 2010.  For the Three Months Ended June 30,
    
    
    For the Six Months Ended June 30,2010*
    
    
    2009
    
    
    2010*
    
    
    2009General
    
    
    American
    
    
    General
    
    
    American
    
    
    General
    
    
    American
    
    
    General
    
    
    AmericanMotors
    
    
    Honda
    
    
    Motors
    
    
    Honda
    
    
    Motors
    
    
    Honda
    
    
    Motors
    
    
    HondaSales and marketing
    
    $
    5,575
    
    
    $
    -
    
    
    $
    7,537
    
    
    $
    -
    
    
    $
    13,374
    
    
    $
    -
    
    
    $
    15,631
    
    
    $
    -Revenue share and royalties
    
    
    6,756
    
    
    
    1,337
    
    
    
    13,982
    
    
    
    1,530
    
    
    
    15,823
    
    
    
    3,167
    
    
    
    31,655
    
    
    
    2,965Subscriber acquisition costs
    
    
    7,027
    
    
    
    742
    
    
    
    5,545
    
    
    
    1,414
    
    
    
    17,514
    
    
    
    1,969
    
    
    
    14,805
    
    
    
    2,745Customer service and billing
    
    
    50
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    125
    
    
    
    -
    
    
    
    -
    
    
    
    -Interest expense, net of amounts capitalized
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,421
    
    
    
    -
    
    
    
    -
    
    
    
    -Total
    
    $
    19,408
    
    
    $
    2,079
    
    
    $
    27,064
    
    
    $
    2,944
    
    
    $
    48,257
    
    
    $
    5,136
    
    
    $
    62,091
    
    
    $
    5,710
 
 *
    
    GM and American Honda were considered related parties through May 27, 2010. SIRIUS
    12




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XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 (9) Investments
  June 30,
    
    
    December 31,2010
    
    
    2009Investment in XM Canada
    
    $
    -
    
    
    $
    2,390Investment in XM Canada debentures
    
    
    3,073
    
    
    
    2,970Auction rate certificates
    
    
    -
    
    
    
    8,556Restricted investments
    
    
    250
    
    
    
    250Total investments
    
    $
    3,323
    
    
    $
    14,166
 XM Canada
    For the Three Months
    
    
    For the Six MonthsEnded June 30,
    
    
    Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Share of XM Canada net loss (income)
    
    $
    (3,339
    )
    
    $
    4,847
    
    
    $
    (6,490
    )
    
    $
    943Impairment of XM Canada
    
    
    -
    
    
    
    (1,700
    )
    
    
    -
    
    
    
    (4,734
    )Gain on sale of auction rate certificate
    
    
    -
    
    
    
    -
    
    
    
    425
    
    
    
    -Total
    
    $
    (3,339
    )
    
    $
    3,147
    
    
    $
    (6,065
    )
    
    $
    (3,791
    )
   Auction Rate Certificates
  13




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 Restricted Investments
  (10) Fair Value
  Fair Value Measurements UsingQuoted Prices in Active
    
    
    
    
    
    
    SignificantMarkets for Identical
    
    
    Significant Other
    
    
    Unobservable(in thousands)
    
    Assets (Level 1)
    
    
    Observable Inputs (Level 2)
    
    
    Inputs (Level 3)
    
    
    Carrying ValueAssets:Host contract and embedded derivatives
    
    
    N/A
    
    
    
    N/A
    
    
    $
    3,073
    
    
    $
    3,073Liabilities:Debt-related embedded derivatives
    
    $
    -
    
    
    $
    -
    
    
    $
    104,795
    
    
    $
    104,795
  Fair Value Measurements Using Significant Unobservable Inputs (Level 3)Debentures and
    
    
    Debt-RelatedAuction Rate Securities
    
    
    Embedded Derivatives
    
    
    Embedded DerivativesBalance at December 31, 2009
    
    $
    8,556
    
    
    $
    2,970
    
    
    $
    56,192Total gains and losses (realized /unrealized)
    
    
    425
    
    
    
    32
    
    
    
    48,603Included in other comprehensive income
    
    
    469
    
    
    
    71
    
    
    
    -Sale of assets
    
    
    (9,450
    )
    
    
    -
    
    
    
    -Balance at June 30, 2010
    
    $
    -
    
    
    $
    3,073
    
    
    $
    104,795
  14




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 (11) Debt
  ConversionPrice (per
    
    
    June 30,
    
    
    December 31,SIRIUS share)
    
    
    2010
    
    
    200910% Senior PIK Secured Notes due 2011 (a)
    
    
    N/A
    
    
    
    -
    
    
    
    113,685Less: discount
    
    
    
    
    
    
    -
    
    
    
    (7,711
    )11.25% Senior Secured Notes due 2013 (b)
    
    
    N/A
    
    
    
    525,750
    
    
    
    525,750Less: discount
    
    
    
    
    
    
    (28,474
    )
    
    
    (32,259
    )13% Senior Notes due 2013 (c)
    
    
    N/A
    
    
    
    778,500
    
    
    
    778,500Less: discount
    
    
    
    
    
    
    (68,450
    )
    
    
    (76,602
    )9.75% Senior Notes due 2014 (d)
    
    
    N/A
    
    
    
    5,260
    
    
    
    5,2607% Exchangeable Senior Subordinated Notes due 2014 (e)
    
    $
    1.875
    
    
    
    550,000
    
    
    
    550,000Less: discount
    
    
    
    
    
    
    (251,337
    )
    
    
    (263,784
    )Other debt:Capital leases
    
    
    N/A
    
    
    
    7,361
    
    
    
    14,304Embedded derivatives (f)
    
    
    
    
    
    
    104,795
    
    
    
    56,192Total debt
    
    
    
    
    
    
    1,623,405
    
    
    
    1,663,335Less: current maturities
    
    
    
    
    
    
    6,858
    
    
    
    11,382Total long-term
    
    
    
    
    
    
    1,616,547
    
    
    
    1,651,953Less: related party
    
    
    
    
    
    
    159,674
    
    
    
    157,032Total long-term, excluding related party
    
    
    
    

    $
    
    1,456,873
    
    
    $
    1,494,921
 (a) 10% Senior PIK Secured Notes due 2011
  (b) 11.25% Senior Secured Notes due 2013
  (c) 13% Senior Notes due 2013
  15




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 (d) 9.75% Senior Notes due 2014
   (e) 7% Exchangeable Senior Subordinated Notes due 2014
   (f) Embedded Derivatives
   Covenants and Restrictions
    16




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 (12) Commitments and Contingencies
  Remaining(in thousands)
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    Thereafter
    
    
    TotalLong-term debt obligations
    
    $
    4,586
    
    
    $
    2,748
    
    
    $
    27
    
    
    $
    1,304,250
    
    
    $
    555,260
    
    
    $
    -
    
    
    $
    1,866,871Cash interest payments
    
    
    99,933
    
    
    
    199,461
    
    
    
    199,365
    
    
    
    169,791
    
    
    
    38,756
    
    
    
    -
    
    
    
    707,306Lease obligations
    
    
    14,517
    
    
    
    9,641
    
    
    
    5,983
    
    
    
    3,633
    
    
    
    3,108
    
    
    
    2,041
    
    
    
    38,923Satellite and transmission
    
    
    31,975
    
    
    
    2,826
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    8,635
    
    
    
    43,436Programming and content
    
    
    31,410
    
    
    
    111,131
    
    
    
    101,020
    
    
    
    20,683
    
    
    
    10,350
    
    
    
    4,000
    
    
    
    278,594Satellite performance incentive payments
    
    
    2,229
    
    
    
    4,695
    
    
    
    5,030
    
    
    
    5,392
    
    
    
    5,784
    
    
    
    37,048
    
    
    
    60,178Marketing and distribution
    
    
    8,643
    
    
    
    9,271
    
    
    
    9,034
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    1,500
    
    
    
    34,448Other
    
    
    1,162
    
    
    
    412
    
    
    
    70
    
    
    
    1
    
    
    
    -
    
    
    
    -
    
    
    
    1,645Total
    
    $
    194,455
    
    
    $
    340,185
    
    
    $
    320,529
    
    
    $
    1,506,750
    
    
    $
    616,258
    
    
    $
    53,224
    
    
    $
    3,031,401
 Long-term debt obligations.
 Cash interest payments.
 Satellite and transmission.
 Programming and content.
 Marketing and distribution.
 Satellite incentive payments.
 Operating lease obligations.
 Other.
  17




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 Legal Proceedings
 FCC Merger Order.
 Advanced Recording Functionality Disputes/Atlantic Recording Corporation, BMG Music, Capital
Records, Inc., Elektra Entertainment Group Inc., Interscope Records, Motown Record Company, L.P.,
Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records, Inc. and Warner Bros. Records
Inc. v. XM Satellite Radio Inc.
  Other Matters
 (13) Condensed Consolidating Financial Information
   Basis of Presentation
   18




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2010
 XM
    
    
    XM 1500
    
    
    XM
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    XM Radio
    
    
    Equipment
    
    
    Eckington
    
    
    Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    Inc.
    
    
    Leasing LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Revenue
    
    $
    370,335
    
    
    $
    -
    
    
    $
    -
    
    
    $
    2,580
    
    
    $
    334
    
    
    $
    -
    
    
    $
    (2,899
    )
    
    $
    370,350Cost of services
    
    
    122,393
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    122,393Subscriber acquisition costs
    
    
    38,796
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    38,796Sales and marketing
    
    
    27,506
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    27,506Engineering, design and development
    
    
    4,992
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (1
    )
    
    
    4,991General and administrative
    
    
    30,222
    
    
    
    -
    
    
    
    10
    
    
    
    290
    
    
    
    72
    
    
    
    -
    
    
    
    (2,203
    )
    
    
    28,391Depreciation and amortization
    
    
    35,808
    
    
    
    -
    
    
    
    -
    
    
    
    507
    
    
    
    103
    
    
    
    -
    
    
    
    -
    
    
    
    36,418Restructuring, impairments and related costs
    
    
    702
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    702Total operating expenses
    
    
    260,419
    
    
    
    -
    
    
    
    10
    
    
    
    797
    
    
    
    175
    
    
    
    -
    
    
    
    (2,204
    )
    
    
    259,197Income (loss) from operations
    
    
    109,916
    
    
    
    -
    
    
    
    (10
    )
    
    
    1,783
    
    
    
    159
    
    
    
    -
    
    
    
    (695
    )
    
    
    111,153Other income (expense):Interest expense, net of amounts
capitalized
    
    
    (42,394
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (14,487
    )
    
    
    (56,881
    )Loss on extinguishment of debt and credit facilities, net
    
    
    (4,617
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,617
    )Gain (loss) on change in value of
embedded derivative
    
    
    (11,311
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (11,311
    )Interest and investment income (loss)
    
    
    4,119
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (168
    )
    
    
    (6,232
    )
    
    
    (2,281
    )Other income (expense)
    
    
    (20,090
    )
    
    
    47,331
    
    
    
    2,826
    
    
    
    -
    
    
    
    -
    
    
    
    14,732
    
    
    
    (44,661
    )
    
    
    138Net income (loss) before
income taxes
    
    
    35,623
    
    
    
    47,331
    
    
    
    2,816
    
    
    
    1,783
    
    
    
    159
    
    
    
    14,564
    
    
    
    (66,075
    )
    
    
    36,201Benefit from
(provision for) income taxes
    
    
    62
    
    
    
    (578
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (516
    )Net income (loss)
    
    $
    35,685
    
    
    $
    46,753
    
    
    $
    2,816
    
    
    $
    1,783
    
    
    $
    159
    
    
    $
    14,564
    
    
    $
    (66,075
    )
    
    $
    35,685
 XM
SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2009
 XMEquipment
    
    
    XM 1500
    
    
    XM
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    XM Radio
    
    
    Leasing
    
    
    Eckington
    
    
    Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    Inc.
    
    
    LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Revenue
    
    $
    306,832
    
    
    $
    -
    
    
    $
    -
    
    
    $
    2,566
    
    
    $
    332
    
    
    $
    -
    
    
    $
    (2,899
    )
    
    $
    306,831Cost of services
    
    
    120,333
    
    
    
    -
    
    
    
    9
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    107
    
    
    
    120,449Subscriber acquisition costs
    
    
    22,226
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    22,226Sales and marketing
    
    
    26,797
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    26,797Engineering, design and development
    
    
    6,631
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    6,631General and administrative
    
    
    36,608
    
    
    
    -
    
    
    
    -
    
    
    
    334
    
    
    
    87
    
    
    
    -
    
    
    
    (2,308
    )
    
    
    34,721Depreciation and amortization
    
    
    45,999
    
    
    
    -
    
    
    
    3,441
    
    
    
    507
    
    
    
    102
    
    
    
    -
    
    
    
    -
    
    
    
    50,049Restructuring, impairments and related costs
    
    
    26,586
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    26,586Total operating expenses
    
    
    285,180
    
    
    
    -
    
    
    
    3,450
    
    
    
    841
    
    
    
    189
    
    
    
    -
    
    
    
    (2,201
    )
    
    
    287,459Income (loss) from operations
    
    
    21,652
    
    
    
    -
    
    
    
    (3,450
    )
    
    
    1,725
    
    
    
    143
    
    
    
    -
    
    
    
    (698
    )
    
    
    19,372Other income (expense):Interest expense, net of amounts
capitalized
    
    
    (87,925
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (87,925
    )Loss on extinguishment of debt and credit facilities, net
    
    
    (107,450
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (107,450
    )Gain (loss) on change in value of
embedded derivative
    
    
    (19,799
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (19,799
    )Interest and investment income (loss)
    
    
    6,066
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (2,329
    )
    
    
    3,737Other income (expense)
    
    
    (3,770
    )
    
    
    43,686
    
    
    
    2,903
    
    
    
    -
    
    
    
    -
    
    
    
    14,445
    
    
    
    (56,425
    )
    
    
    839Net income (loss) before
income taxes
    
    
    (191,226
    )
    
    
    43,686
    
    
    
    (547
    )
    
    
    1,725
    
    
    
    143
    
    
    
    14,445
    
    
    
    (59,452
    )
    
    
    (191,226
    )Benefit from (provision for)
income taxes
    
    
    (578
    )
    
    
    (578
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    578
    
    
    
    (578
    )Net income (loss)
    
    $
    (191,804
    )
    
    $
    43,108
    
    
    $
    (547
    )
    
    $
    1,725
    
    
    $
    143
    
    
    $
    14,445
    
    
    $
    (58,874
    )
    
    $
    (191,804
    )
 19




---



##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
 XMEquipment
    
    
    XM 1500
    
    
    XM
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    XM Radio
    
    
    Leasing
    
    
    Eckington
    
    
    Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    Inc.
    
    
    LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Revenue
    
    $
    723,574
    
    
    $
    
    
    
    $
    
    
    
    $
    5,163
    
    
    $
    664
    
    
    $
    
    
    
    $
    (5,797
    )
    
    $
    723,604Cost of services
    
    
    239,256
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239,259Subscriber acquisition costs
    
    
    71,017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,017Sales and marketing
    
    
    53,557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,557Engineering, design and development
    
    
    10,223
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,223General and administrative
    
    
    58,422
    
    
    
    185
    
    
    
    12
    
    
    
    567
    
    
    
    145
    
    
    
    
    
    
    
    (4,403
    )
    
    
    54,928Depreciation and amortization
    
    
    72,667
    
    
    
    
    
    
    
    
    
    
    
    1,015
    
    
    
    205
    
    
    
    
    
    
    
    
    
    
    
    73,887Restructuring, impairments and related costs
    
    
    702
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    702Total operating expenses
    
    
    505,844
    
    
    
    188
    
    
    
    12
    
    
    
    1,582
    
    
    
    350
    
    
    
    
    
    
    
    (4,403
    )
    
    
    503,573Income (loss) from operations
    
    
    217,730
    
    
    
    (188
    )
    
    
    (12
    )
    
    
    3,581
    
    
    
    314
    
    
    
    
    
    
    
    (1,394
    )
    
    
    220,031Other income (expense):Interest expense, net of amounts
capitalized
    
    
    (116,880
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (116,880
    )Loss on extinguishment of debt and credit facilities, net
    
    
    (4,625
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,625
    )Gain (loss) on change in value of
embedded derivative
    
    
    (48,603
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (48,603
    )Interest and investment income (loss)
    
    
    4,118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (168
    )
    
    
    (7,854
    )
    
    
    (3,904
    )Other income (expense)
    
    
    (5,410
    )
    
    
    93,369
    
    
    
    5,650
    
    
    
    
    
    
    
    
    
    
    
    29,135
    
    
    
    (121,277
    )
    
    
    1,467Net income (loss) before
income taxes
    
    
    46,330
    
    
    
    93,181
    
    
    
    5,638
    
    
    
    3,581
    
    
    
    314
    
    
    
    28,967
    
    
    
    (130,525
    )
    
    
    47,486Benefit from (provision for)
income taxes
    
    
    11
    
    
    
    (1,156
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,145
    )Net income (loss)
    
    $
    46,341
    
    
    $
    92,025
    
    
    $
    5,638
    
    
    $
    3,581
    
    
    $
    314
    
    
    $
    28,967
    
    
    $
    (130,525
    )
    
    $
    46,341
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2009
 XMEquipment
    
    
    XM 1500
    
    
    XM
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    XM Radio
    
    
    Leasing
    
    
    Eckington
    
    
    Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    Inc.
    
    
    LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Revenue
    
    $
    609,065
    
    
    $
    
    
    
    $
    
    
    
    $
    5,135
    
    
    $
    664
    
    
    $
    
    
    
    $
    (5,800
    )
    
    $
    609,064Cost of services
    
    
    249,811
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214
    
    
    
    250,043Subscriber acquisition costs
    
    
    48,475
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,475Sales and marketing
    
    
    58,510
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,510Engineering, design and development
    
    
    11,383
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,383General and administrative
    
    
    70,270
    
    
    
    
    
    
    
    
    
    
    
    646
    
    
    
    172
    
    
    
    
    
    
    
    (4,616
    )
    
    
    66,472Depreciation and amortization
    
    
    98,288
    
    
    
    
    
    
    
    5,440
    
    
    
    908
    
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    104,875Restructuring, impairments and related costs
    
    
    26,586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,586Total operating expenses
    
    
    563,323
    
    
    
    
    
    
    
    5,458
    
    
    
    1,554
    
    
    
    411
    
    
    
    
    
    
    
    (4,402
    )
    
    
    566,344Income (loss) from operations
    
    
    45,742
    
    
    
    
    
    
    
    (5,458
    )
    
    
    3,581
    
    
    
    253
    
    
    
    
    
    
    
    (1,398
    )
    
    
    42,720Other income (expense):Interest expense, net of amounts
capitalized
    
    
    (155,840
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (155,840
    )Loss on extinguishment of debt and credit facilities, net
    
    
    (108,076
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (108,076
    )Gain (loss) on change in value of
embedded derivative
    
    
    (78,003
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (78,003
    )Interest and investment income (loss)
    
    
    (2,672
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,672
    )Other income (expense)
    
    
    (1,796
    )
    
    
    86,740
    
    
    
    5,804
    
    
    
    
    
    
    
    
    
    
    
    28,893
    
    
    
    (118,415
    )
    
    
    1,226Net income (loss) before
income taxes
    
    
    (300,645
    )
    
    
    86,740
    
    
    
    346
    
    
    
    3,581
    
    
    
    253
    
    
    
    28,893
    
    
    
    (119,813
    )
    
    
    (300,645
    )Benefit from (provision for)
income taxes
    
    
    (1,156
    )
    
    
    (1,156
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,156
    
    
    
    (1,156
    )Net income (loss)
    
    $
    (301,801
    )
    
    $
    85,584
    
    
    $
    346
    
    
    $
    3,581
    
    
    $
    253
    
    
    $
    28,893
    
    
    $
    (118,657
    )
    
    $
    (301,801
    )
 20




---



##### Table of Contents



XM
SATELLITE
RADIO INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  Continued
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATESUNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETSAS OF JUNE 30, 2010
 XM
    
    
    XM 1500
    
    
    XM
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    
    
    
    
    Equipment
    
    
    Eckington
    
    
    Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    XM Radio Inc.
    
    

Leasing LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Current assets:Cash and cash equivalents
    
    $
    87,790
    
    
    $
    -
    
    
    $
    -
    
    
    $
    7,187
    
    
    $
    997
    
    
    $
    -
    
    
    $
    -
    
    
    $
    95,974Accounts receivable, net
    
    
    73,379
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    73,379Due from subsidiaries/affiliates
    
    
    68,200
    
    
    
    878,137
    
    
    
    69,726
    
    
    
    52,689
    
    
    
    6,054
    
    
    
    806,677
    
    
    
    (1,881,483
    )
    
    
    -Inventory, net
    
    
    5,426
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    5,426Prepaid expenses
    
    
    148,337
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    148,337Related party current assets
    
    
    1,593
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    
    
    
    
    1,593Deferred tax asset
    
    
    70,382
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    70,382Other current assets
    
    
    5,139
    
    
    
    -
    
    
    
    64
    
    
    
    278
    
    
    
    -
    
    
    
    -
    
    
    
    605
    
    
    
    6,086Total current assets
    
    
    460,246
    
    
    
    878,137
    
    
    
    69,790
    
    
    
    60,154
    
    
    
    7,051
    
    
    
    806,677
    
    
    
    (1,880,878
    )
    
    
    401,177Property and equipment, net
    
    
    789,460
    
    
    
    -
    
    
    
    -
    
    
    
    56,141
    
    
    
    12,315
    
    
    
    -
    
    
    
    -
    
    
    
    857,916Investment in subsidiaries/affiliates
    
    
    3,121,866
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (3,121,866
    )
    
    
    -Restricted investments
    
    
    250
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    250Deferred financing fees, net
    
    
    65,139
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    65,139Intangible assets, net
    
    
    577,347
    
    
    
    2,000,000
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,577,347Related party long-term assets
    
    
    28,221
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    28,221Other long-term assets
    
    
    76,462
    
    
    
    -
    
    
    
    -
    
    
    
    2,018
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    78,480Total assets
    
    $
    5,118,991
    
    
    $
    2,878,137
    
    
    $
    69,790
    
    
    $
    118,313
    
    
    $
    19,366
    
    
    $
    806,677
    
    
    $
    (5,002,744
    )
    
    $
    4,008,530Current liabilities:Accounts payable and accrued expenses
    
    $
    273,469
    
    
    $
    -
    
    
    $
    111
    
    
    $
    290
    
    
    $
    72
    
    
    $
    -
    
    
    $
    (49,928
    )
    
    $
    224,014Accrued interest
    
    
    43,826
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    43,826Due to subsidiaries/affiliates
    
    
    1,752,779
    
    
    
    -
    
    
    
    -
    
    
    
    5,187
    
    
    
    -
    
    
    
    3,417
    
    
    
    (1,761,383
    )
    
    
    -Current portion of deferred revenue
    
    
    558,424
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    558,424Current
portion of deferred credit on executory contracts
    
    
    263,998
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    263,998Current maturities of long-term debt
    
    
    6,858
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    6,858Related party current liabilities
    
    
    150,377
    
    
    
    4,522
    
    
    
    268
    
    
    
    1,550
    
    
    
    661
    
    
    
    -
    
    
    
    (66,476
    )
    
    
    90,902Total current liabilities
    
    
    3,049,731
    
    
    
    4,522
    
    
    
    379
    
    
    
    7,027
    
    
    
    733
    
    
    
    3,417
    
    
    
    (1,877,787
    )
    
    
    1,188,022Deferred revenue
    
    
    151,386
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    151,386Deferred credit on executory contracts
    
    
    647,691
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    647,691Long-term debt
    
    
    1,456,873
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,456,873Long-term related party debt
    
    
    159,674
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    159,674Deferred tax liability
    
    
    166,632
    
    
    
    755,654
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    922,286Related party long-term liability
    
    
    26,655
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    26,655Other long-term liabilities
    
    
    43,175
    
    
    
    -
    
    
    
    -
    
    
    
    (1,315
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,090
    )
    
    
    38,770Total liabilities
    
    
    5,701,817
    
    
    
    760,176
    
    
    
    379
    
    
    
    5,712
    
    
    
    733
    
    
    
    3,417
    
    
    
    (1,880,877
    )
    
    
    4,591,357Commitments and contingenciesStockholders equity (deficit):Capital stock
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Accumulated other comprehensive loss
    
    
    (5,987
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (5,987
    )Additional paid-in-capital
    
    
    6,060,659
    
    
    
    1,781,641
    
    
    
    57,853
    
    
    
    99,348
    
    
    
    17,615
    
    
    
    691,811
    
    
    
    (2,648,267
    )
    
    
    6,060,660Retained earnings (deficit)
    
    
    (6,637,498
    )
    
    
    336,320
    
    
    
    11,558
    
    
    
    13,253
    
    
    
    1,018
    
    
    
    111,449
    
    
    
    (473,600
    )
    
    
    (6,637,500
    )Total stockholders equity (deficit)
    
    
    (582,826
    )
    
    
    2,117,961
    
    
    
    69,411
    
    
    
    112,601
    
    
    
    18,633
    
    
    
    803,260
    
    
    
    (3,121,867
    )
    
    
    (582,827
    )Total liabilities and stockholders
equity (deficit)
    
    $
    5,118,991
    
    
    $
    2,878,137
    
    
    $
    69,790
    
    
    $
    118,313
    
    
    $
    19,366
    
    
    $
    806,677
    
    
    $
    (5,002,744
    )
    
    $
    4,008,530
 21




---



##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2009
 XM
    
    
    XM 1500
    
    
    XM
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    
    
    
    
    Equipment
    
    
    Eckington
    
    
    Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    XM Radio Inc.
    
    
    Leasing LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Current assets:Cash and cash equivalents
    
    $
    205,638
    
    
    $
    -
    
    
    $
    16
    
    
    $
    5,615
    
    
    $
    886
    
    
    $
    -
    
    
    $
    -
    
    
    $
    212,155Accounts receivable, net
    
    
    60,042
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    60,042Due from subsidiaries/affiliates
    
    
    44,316
    
    
    
    784,768
    
    
    
    63,941
    
    
    
    48,768
    
    
    
    6,216
    
    
    
    774,293
    
    
    
    (1,722,302
    )
    
    
    -Inventory, net
    
    
    4,016
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4,016Prepaid expenses
    
    
    75,199
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    75,199Related party current assets
    
    
    103,479
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    103,479Deferred tax asset
    
    
    64,641
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    64,641Other current assets
    
    
    4,325
    
    
    
    -
    
    
    
    64
    
    
    
    196
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    4,585Total current assets
    
    
    561,656
    
    
    
    784,768
    
    
    
    64,021
    
    
    
    54,579
    
    
    
    7,102
    
    
    
    774,293
    
    
    
    (1,722,302
    )
    
    
    524,117Property and equipment, net
    
    
    729,729
    
    
    
    -
    
    
    
    -
    
    
    
    57,157
    
    
    
    12,519
    
    
    
    -
    
    
    
    -
    
    
    
    799,405Investment in subsidiaries/affiliates
    
    
    2,991,341
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (2,991,341
    )
    
    
    -Restricted investments
    
    
    250
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    250Deferred financing fees, net
    
    
    68,571
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    68,571Intangible assets, net
    
    
    611,461
    
    
    
    2,000,000
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    2,611,461Related party long-term assets
    
    
    111,730
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    111,730Other long-term assets
    
    
    23,478
    
    
    
    -
    
    
    
    -
    
    
    
    2,051
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    25,529Total assets
    
    $
    5,098,216
    
    
    $
    2,784,768
    
    
    $
    64,021
    
    
    $
    113,787
    
    
    $
    19,621
    
    
    $
    774,293
    
    
    $
    (4,713,643
    )
    
    $
    4,141,063Current liabilities:Accounts payable and accrued expenses
    
    $
    241,981
    
    
    $
    -
    
    
    $
    105
    
    
    $
    295
    
    
    $
    72
    
    
    $
    -
    
    
    $
    (44,234
    )
    
    $
    198,219Accrued interest
    
    
    46,939
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    46,939Due to subsidiaries/affiliates
    
    
    1,671,720
    
    
    
    -
    
    
    
    -
    
    
    
    4,810
    
    
    
    714
    
    
    
    -
    
    
    
    (1,677,244
    )
    
    
    -Current portion of deferred revenue
    
    
    506,441
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    506,441Current portion of deferred credit
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -on executory contracts
    
    
    252,831
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    252,831Current maturities of long-term debt
    
    
    11,382
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    11,382Current maturities of long-termrelated party debt
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Related party current liabilities
    
    
    180,667
    
    
    
    -
    
    
    
    143
    
    
    
    977
    
    
    
    516
    
    
    
    -
    
    
    
    2,390
    
    
    
    184,693Total current liabilities
    
    
    2,911,961
    
    
    
    -
    
    
    
    248
    
    
    
    6,082
    
    
    
    1,302
    
    
    
    -
    
    
    
    (1,719,088
    )
    
    
    1,200,505Deferred revenue
    
    
    133,863
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    133,863Deferred credit on executory contracts
    
    
    784,078
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    784,078Long-term debt
    
    
    1,494,921
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    1,494,921Long-term related party debt
    
    
    157,032
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    157,032Deferred tax liability
    
    
    156,442
    
    
    
    758,832
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    915,274Related party long-term liability
    
    
    46,301
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    46,301Other long-term liabilities
    
    
    43,379
    
    
    
    -
    
    
    
    -
    
    
    
    (1,315
    )
    
    
    -
    
    
    
    -
    
    
    
    (3,213
    )
    
    
    38,851Total liabilities
    
    
    5,727,977
    
    
    
    758,832
    
    
    
    248
    
    
    
    4,767
    
    
    
    1,302
    
    
    
    -
    
    
    
    (1,722,301
    )
    
    
    4,770,825Commitments and contingenciesStockholders equity (deficit):Capital stock
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -Accumulated other comprehensive loss
    
    
    (6,581
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (6,581
    )Additional paid-in-capital
    
    
    6,060,659
    
    
    
    1,781,641
    
    
    
    57,853
    
    
    
    99,348
    
    
    
    17,615
    
    
    
    691,811
    
    
    
    (2,648,267
    )
    
    
    6,060,660Retained earnings (deficit)
    
    
    (6,683,839
    )
    
    
    244,295
    
    
    
    5,920
    
    
    
    9,672
    
    
    
    704
    
    
    
    82,482
    
    
    
    (343,075
    )
    
    
    (6,683,841
    )Total stockholders equity (deficit)
    
    
    (629,761
    )
    
    
    2,025,936
    
    
    
    63,773
    
    
    
    109,020
    
    
    
    18,319
    
    
    
    774,293
    
    
    
    (2,991,342
    )
    
    
    (629,762
    )Total liabilities and stockholders
equity (deficit)
    
    $
    5,098,216
    
    
    $
    2,784,768
    
    
    $
    64,021
    
    
    $
    113,787
    
    
    $
    19,621
    
    
    $
    774,293
    
    
    $
    (4,713,643
    )
    
    $
    4,141,063
 22




---



##### Table of Contents



XM
SATELLITE
RADIO INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS  Continued
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
 XM Satellite
    
    
    
    
    
    
    XM Equipment
    
    
    XM 1500
    
    
    XM Investment
    
    
    Other
    
    
    
    
    
    
    Consolidated XM(in thousands)
    
    Radio Inc.
    
    
    XM Radio Inc.
    
    
    Leasing LLC
    
    
    Eckington LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    

Satellite Radio Inc.Balance at December 31, 2009
    
    $
    (629,761
    )
    
    $
    2,025,936
    
    
    $
    63,773
    
    
    $
    109,020
    
    
    $
    18,319
    
    
    $
    774,293
    
    
    $
    (2,991,342
    )
    
    $
    (629,762
    )Net income (loss)
    
    
    46,341
    
    
    
    92,025
    
    
    
    5,638
    
    
    
    3,581
    
    
    
    314
    
    
    
    28,967
    
    
    
    (130,525
    )
    
    
    46,341Other comprehensive loss:Unrealized gain on available-for-sale
securities
    
    
    469
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    469Foreign currency translation
adjustment
    
    
    125
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    125Comprehensive income (loss)
    
    
    46,935
    
    
    
    92,025
    
    
    
    5,638
    
    
    
    3,581
    
    
    
    314
    
    
    
    28,967
    
    
    
    (130,525
    )
    
    
    46,935Balance at June 30, 2010
    
    $
    (582,826
    )
    
    $
    2,117,961
    
    
    $
    69,411
    
    
    $
    112,601
    
    
    $
    18,633
    
    
    $
    803,260
    
    
    $
    (3,121,867
    )
    
    $
    (582,827
    )
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
 XMEquipment
    
    
    XM 1500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    XM Radio
    
    
    Leasing
    
    
    Eckington
    
    
    XM Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    Inc.
    
    
    LLC
    
    
    LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Net cash provided by (used in)
operating activities
    
    $
    111,835
    
    
    $
    -
    
    
    $
    (16
    )
    
    $
    1,572
    
    
    $
    111
    
    
    $
    -
    
    
    $
    -
    
    
    $
    113,502Cash flows from investing activities:Additions to property and
equipment
    
    
    (118,474
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (118,474
    )Sale of restricted and other
investments
    
    
    9,450
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    9,450Net cash (used in) provided by
investing activities
    
    
    (109,024
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (109,024
    )Cash flows from financing activities:Repayment of long-term borrowings
    
    
    (120,659
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (120,659
    )Net cash provided by (used in)
financing activities
    
    
    (120,659
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (120,659
    )Net increase (decrease) in cash
and cash equivalents
    
    
    (117,848
    )
    
    
    -
    
    
    
    (16
    )
    
    
    1,572
    
    
    
    111
    
    
    
    -
    
    
    
    -
    
    
    
    (116,181
    )Cash and cash equivalents at
beginning of period
    
    
    205,638
    
    
    
    -
    
    
    
    16
    
    
    
    5,615
    
    
    
    886
    
    
    
    -
    
    
    
    -
    
    
    
    212,155Cash and cash equivalents at
end of period
    
    $
    87,790
    
    
    $
    -
    
    
    $
    -
    
    
    $
    7,187
    
    
    $
    997
    
    
    $
    -
    
    
    $
    -
    
    
    $
    95,974
 23




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##### Table of Contents



XM SATELLITE RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS  Continued
 XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009
 XMEquipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    ConsolidatedXM Satellite
    
    
    XM Radio
    
    
    Leasing
    
    
    XM 1500
    
    
    XM Investment
    
    
    Other
    
    
    
    
    
    
    XM Satellite(in thousands)
    
    Radio Inc.
    
    
    Inc.
    
    
    LLC
    
    
    Eckington LLC
    
    
    LLC
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Radio Inc.Net cash provided by (used in)
operating activities
    
    $
    99,195
    
    
    $
    -
    
    
    $
    1
    
    
    $
    1,869
    
    
    $
    339
    
    
    $
    -
    
    
    $
    -
    
    
    $
    101,404Cash flows from investing activities:Additions to property and
equipment
    
    
    (4,121
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,121
    )Net cash used in
investing activities
    
    
    (4,121
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (4,121
    )Cash flows from financing activities:Long-term borrowings,
net of costs
    
    
    387,427
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    387,427Related Party long-term borrowings,
net of costs
    
    
    95,093
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    95,093Payment of premiums on redemption
of debt
    
    
    (16,572
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (16,572
    )Repayment of long-term borrowings
    
    
    (255,035
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (255,035
    )Repayment of related party long-term borrow
    
    
    (100,000
    )
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    (100,000
    )Net cash used in
financing activities
    
    
    110,913
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    -
    
    
    
    110,913Net increase (decrease) in cash
and cash equivalents
    
    
    205,987
    
    
    
    -
    
    
    
    1
    
    
    
    1,869
    
    
    
    339
    
    
    
    -
    
    
    
    -
    
    
    
    208,196Cash and cash equivalents at
beginning of period
    
    
    205,861
    
    
    
    -
    
    
    
    15
    
    
    
    760
    
    
    
    104
    
    
    
    -
    
    
    
    -
    
    
    
    206,740Cash and cash equivalents at
end of period
    
    $
    411,848
    
    
    $
    -
    
    
    $
    16
    
    
    $
    2,629
    
    
    $
    443
    
    
    $
    -
    
    
    $
    -
    
    
    $
    414,936
 24




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 (All dollar amounts referenced in this Item 2 are in thousands, unless otherwise stated.)
 Special Note Regarding Forward-Looking Statements
   
    
    our dependence upon automakers, many of which have experienced a dramatic drop in sales,
and other third parties, such as manufacturers and distributors of satellite radios,
retailers and programming providers;
    
    the substantial indebtedness of XM;
    
    the useful life of our satellites, which have experienced component failures including,
with respect to a number of satellites, failures on their solar arrays, and, in certain
cases, are not insured; and
    
    our competitive position versus other forms of audio entertainment including terrestrial
radio, HD radio, Internet radio, mobile phones, iPods and other MP3 devices, and emerging
next-generation networks and technologies.
   Executive Summary
  25




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##### Table of Contents



26




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##### Table of Contents



Actual Results of Operations
  Total Revenue
 Subscriber Revenue
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, subscriber revenue
was $312,892 and $291,859, respectively, an increase of 7%, or $21,033. The increase was
primarily attributable to the 3% increase in daily weighted average subscribers, an
increase in the sale of Best of programming, rate increases on multi-subscription and
internet packages and a $11,209 decrease in the impact of purchase price accounting
adjustments attributable to deferred subscriber revenues.
    
    Six Months: For the six months ended June 30, 2010 and 2009, subscriber revenue was
$617,903 and $579,324, respectively, an increase of 7%, or $38,579. The increase was
primarily attributable to the 2% increase in daily weighted average subscribers, an
increase in the sale of Best of programming, rate increases on multi-subscription and
internet packages and a $22,931 decrease in the impact of purchase price accounting
adjustments attributable to deferred subscriber revenues.
  Advertising Revenue
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, advertising revenue
was $5,022 and $4,807, respectively, which represents an increase of 4%, or $215. The
increase was primarily due to more effective sales efforts and improvements in the
national advertising market.
    
    Six Months: For the six months ended June 30, 2010 and 2009, advertising revenue was
$9,116 and $9,328, respectively, which represents a decrease of 2%, or $212. The
decrease was due to the expiration of a long-term contract, partially offset by more
effective sales efforts and improvements in the national advertising market.
  Equipment Revenue
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, equipment revenue
was $13,959 and $6,107, respectively, which represents an increase of 129%, or $7,852.
The increase was driven by royalties from increased OEM installations.
    
    Six Months: For the six months ended June 30, 2010 and 2009, equipment revenue was
$24,217 and $12,024, respectively, which represents an increase of 101%, or $12,193. The
increase was driven by royalties from increased OEM installations.
  Other Revenue
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, other revenue was
$38,477 and $4,058, respectively. The increase was primarily due to the introduction of
the U.S. Music Royalty Fee in the third quarter of 2009.
 27




---



##### Table of Contents




    
    Six Months: For the six months ended June 30, 2010 and 2009, other revenue was
$72,368 and $8,388, respectively. The increase was primarily due to the introduction of
the U.S. Music Royalty Fee in the third quarter of 2009.
  Operating Expenses
 Revenue Share and Royalties
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, revenue share and
royalties were $45,870 and $46,405, respectively, which represents a decrease of 1%, or
$535. The decrease was primarily attributable to a decrease in the revenue sharing rate
with an automaker and a $4,577 increase in the benefit to earnings from the amortization
of deferred credits on executory contracts initially recognized in purchase price
accounting, partially offset by an increase in our revenues and the statutory royalty
rate for the performance of sound recordings.
    
    Six Months: For the six months ended June 30, 2010 and 2009, revenue share and
royalties were $88,851 and $96,021, respectively, which represents a decrease of 7%, or
$7,170. The decrease was primarily attributable to a decrease in the revenue sharing
rate with an automaker and a $9,137 increase in the benefit to earnings from the
amortization of deferred credits on executory contracts initially recognized in purchase
price accounting, partially offset by an increase in our revenues and the statutory
royalty rate for the performance of sound recordings.
  Programming and Content
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, programming and
content expenses were $27,469 and $27,893, respectively, which represents a decrease of
2%, or $424. The decrease was primarily due to savings in content agreements, partially
offset by a $3,999 reduction in the benefit to earnings from purchase price accounting
adjustments attributable to the amortization of the deferred credit on programming executory contracts.
    
    Six Months: For the six months ended June 30, 2010 and 2009, programming and content
expenses were $55,743 and $56,542, respectively, which represents a decrease of 1%, or
$799. The decrease was primarily due to savings in content agreements and production
costs, partially offset by increases in personnel costs, general operating expenses and
a $7,742 reduction in the benefit to earnings from purchase price accounting adjustments
attributable to the amortization of the deferred credit on programming
executory contracts.
  28




---



##### Table of Contents



Customer Service and Billing
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, customer service and
billing expenses were $32,852 and $31,347, respectively, which represents an increase of
5%, or $1,505. The increase was primarily due to higher call volumes, partially offset
by lower call center expenses as a result of moving calls to lower cost locations.
    
    Six Months: For the six months ended June 30, 2010 and 2009, customer service and
billing expenses were $62,208 and $65,105, respectively, which represents a decrease of
4%, or $2,897. The decrease was primarily due to lower call center expenses as a result
of moving calls to lower cost locations.
  Satellite and Transmission
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, satellite and
transmission expenses were $11,732 and $11,362, respectively, which represents an
increase of 3%, or $370. The increase was primarily due to increased satellite insurance
expense, partially offset by savings in personnel costs, consulting expenses and
repeater maintenance expenses.
    
    Six Months: For the six months ended June 30, 2010 and 2009, satellite and
transmission expenses were $23,487 and $25,468, respectively, which represents a
decrease of 8%, or $1,981. The decrease was primarily due to savings in personnel costs,
consulting expenses and repeater maintenance expenses, partially offset by increased
satellite insurance expense.
  Cost of Equipment
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, cost of equipment
was $4,470 and $3,442, respectively, which represents an increase of 30%, or $1,028. The
increase was primarily due to higher inventory reserves.
    
    Six Months: For the six months ended June 30, 2010 and 2009, cost of equipment was
$8,970 and $6,907, respectively, which represents an increase of 30%, or $2,063. The
increase was primarily due to increased component sales to manufacturers and
distributors and higher inventory reserves.
  Subscriber Acquisition Costs
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, subscriber
acquisition costs were $38,796 and $22,226, respectively, which represents an increase
of 75%, or $16,570. The increase was primarily due to a 32% increase in gross
subscriber additions and a 106% increase in  OEM production with
factory-installed satellite radios associated with the automotive
industry recovery, offset by a $6,963 increase in the benefit to earnings from the
amortization of the deferred credit for executory contracts recognized in
purchase price accounting.
 29




---



##### Table of Contents




    
    Six Months: For the six months ended June 30, 2010 and 2009, subscriber acquisition
costs were $71,017 and $48,475, respectively, which represents an increase of 47%, or
$22,542. The increase was primarily due to a 23% increase in gross subscriber
additions and a 99% increase in OEM production with factory-installed satellite radios associated with the automotive industry
recovery, offset by an $13,987 increase in the benefit to earnings from the amortization of
the deferred credit for executory contracts recognized in purchase price
accounting.
  Sales and Marketing
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, sales and marketing
expenses were $27,506 and $26,797, respectively, which represents an increase of 3%, or
$709. The increase was primarily due to additional cooperative marketing and personnel
costs, partially offset by reductions in consumer advertising, event marketing and third
party distribution support expenses.
    
    Six Months: For the six months ended June 30, 2010 and 2009, sales and marketing
expenses were $53,557 and $58,510, respectively, which represents a decrease of 8%, or
$4,953. The decrease was primarily due to reductions in consumer advertising, event
marketing and third party distribution support expenses, partially offset by additional
cooperative marketing and personnel costs.
  Engineering, Design and Development
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, engineering, design
and development expenses were $4,991 and $6,631, respectively, which represents a
decrease of 25%, or $1,640. The decrease was primarily due to savings in personnel
costs.
    
    Six Months: For the six months ended June 30, 2010 and 2009, engineering, design and
development expenses were $10,223 and $11,383, respectively, which represents a decrease
of 10%, or $1,160. The decrease was primarily due to savings in personnel costs.
  General and Administrative
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, general and
administrative expenses were $28,391 and $34,721, respectively, which represents a
decrease of 18%, or $6,330. The decrease was primarily due to lower share-based payment
expense, consulting, accounting and office costs, partially offset by increased
personnel and legal costs.
    
    Six Months: For the six months ended June 30, 2010 and 2009, general and
administrative expenses were $54,928 and $66,472, respectively, which represents a
decrease of 17%, or $11,544. The decrease was primarily due to lower share-based payment
expense, consulting, accounting and office costs, partially offset by increased
personnel and legal costs.
  Depreciation and Amortization
 30




---



##### Table of Contents




    
    Three Months:For the three months ended June 30, 2010 and 2009, depreciation and
amortization expense was $36,418 and $50,049, respectively, which represents an decrease
of 27%, or $13,631. The decrease was primarily due to a $13,916 reduction in the charge
to earnings attributable to the satellite constellation and subscriber
relationships, partially offset by additional depreciation recognized on building
improvements.
    
    Six Months:For the six months ended June 30, 2010 and 2009, depreciation and
amortization expense was $73,887 and $104,875, respectively, which represents a decrease
of 30%, or $30,988. The decrease was primarily due to a $26,114 reduction in the charge
to earnings attributable to the satellite constellation and subscriber
relationships, partially offset by additional depreciation recognized on assets placed
in-service subsequent to the Merger.
  Other Income (Expense)
 Interest Expense, Net of Amounts Capitalized,
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, interest expense was
$56,881 and $87,925, respectively, which represents a decrease of 35%, or $31,044. The
decrease was primarily due to decreases in the interest rates on our outstanding debt in
the three months ended June 30, 2010 compared to the three months ended June 30, 2009
and the redemption of XMs 10% Senior PIK Secured Notes due 2011 on June 1, 2010.
    
    Six Months: For the six months ended June 30, 2010 and 2009, interest expense was
$116,880 and $155,840, respectively, which represents a decrease of 25%, or $38,960. The
decrease was primarily due to decreases in the interest rates on our outstanding debt in
the six months ended June 30, 2010 compared to the six months ended June 30, 2009 and
the redemption of XMs 10% Senior PIK Secured Notes due 2011 on June 1, 2010.
 Loss on Extinguishment of Debt and Credit Facilities, Net,
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, loss on
extinguishment of debt and credit facilities, net, was $4,617 and $107,450,
respectively, which represents a decrease of 96%, or $102,833. During the three months
ended June 30, 2010, the loss was incurred on the repayment of our 10% Senior PIK
Secured Notes due 2011. During the three months ended June 30, 2009, the loss was
incurred on the repayment of our Amended and Restated Credit Agreement due 2011 and the
termination of our Second Lien Credit Agreement.
    
    Six Months: For the six months ended June 30, 2010 and 2009, loss on extinguishment
of debt and credit facilities, net, was $4,625 and $108,076, respectively, which
represents a decrease of 96%, or $103,451. During the six months ended June 30, 2010,
the loss was incurred on the repayment of our 10% Senior PIK Secured Notes due 2011.
During the six months ended June 30, 2009, the loss was incurred on the repayment of our
Amended and Restated Credit Agreement due 2011 and the termination of our Second Lien
Credit Agreement.
 Loss on change in value of embedded derivative.
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, we recorded a loss
on change in value of embedded derivative of $11,311 and $19,799, respectively, a
decrease of 43%, or $8,488. As a result of the Merger, we recorded derivative
liabilities reflecting the fair value of the embedded derivative as of the Merger date.
During the three months ended June 30, 2010 and 2009, the SIRIUS stock price increased
resulting in an increased fair value and a loss on the change in value of the
derivative. Because the change in the stock price during the three months ended June 30,
2010 was less than the change in the stock price during the three months ended June 30,
2009, we recorded a smaller loss.
 31




---



##### Table of Contents




    
    Six Months: For the six months ended June 30, 2010 and 2009, we recorded a loss on
change in value of embedded derivative of $48,603 and $78,003, respectively, a decrease
of 38%, or $29,400. As a result of the Merger, we recorded derivative liabilities
reflecting the fair value of the embedded derivative as of the Merger date. During the
six months ended June 30, 2010 and 2009, the SIRIUS stock price increased resulting in
an increased fair value and a loss on the change in value of the derivative. Because the
change in the stock price during the six months ended June 30, 2010 was less than the
change in the stock price during the six months ended June 30, 2009, we recorded a
smaller loss.
 Interest and Investment Income (Loss)
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, interest and
investment (loss) income was ($2,281) and $3,737, respectively, which represents a
decrease in income of 161%, or $6,018. The decrease in income was primarily attributable
to higher net losses at XM Canada during the three months ended June 30, 2010.
    
    Six Months: For the six months ended June 30, 2010 and 2009, interest and investment
loss was $3,904 and $2,672, respectively, which represents an increase of 46%, or
$1,232. The increase was primarily attributable to higher net losses at XM Canada during
the six months ended June 30, 2010 and an impairment charge recorded during the six
months ended June 30, 2009.
 Income Taxes
 Income Tax Expense
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, income tax expense
was $516 and $578, respectively, which represents a decrease of 11%, or $62.
    
    Six Months: For the six months ended June 30, 2010 and 2009, income tax expense was
$1,145 and $1,156, respectively, which represents a decrease of 1%, or $11.
 32




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##### Table of Contents



Subscriber Data
  For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Beginning subscribers
    
    
    9,787,034
    
    
    
    9,656,062
    
    
    
    9,749,100
    
    
    
    9,850,741Gross subscriber additions
    
    
    998,426
    
    
    
    754,727
    
    
    
    1,794,781
    
    
    
    1,455,676Deactivated subscribers
    
    
    (728,080
    )
    
    
    (768,989
    )
    
    
    (1,486,501
    )
    
    
    (1,664,617
    )Net additions
    
    
    270,346
    
    
    
    (14,262
    )
    
    
    308,280
    
    
    
    (208,941
    )Ending subscribers
    
    
    10,057,380
    
    
    
    9,641,800
    
    
    
    10,057,380
    
    
    
    9,641,800Retail
    
    
    3,441,647
    
    
    
    3,952,790
    
    
    
    3,441,647
    
    
    
    3,952,790OEM
    
    
    6,478,507
    
    
    
    5,602,687
    
    
    
    6,478,507
    
    
    
    5,602,687Rental
    
    
    137,226
    
    
    
    86,323
    
    
    
    137,226
    
    
    
    86,323Ending subscribers
    
    
    10,057,380
    
    
    
    9,641,800
    
    
    
    10,057,380
    
    
    
    9,641,800Self-pay
    
    
    9,234,628
    
    
    
    8,921,031
    
    
    
    9,234,628
    
    
    
    8,921,031Paid promotional
    
    
    822,752
    
    
    
    720,769
    
    
    
    822,752
    
    
    
    720,769Ending subscribers
    
    
    10,057,380
    
    
    
    9,641,800
    
    
    
    10,057,380
    
    
    
    9,641,800Retail
    
    
    (65,927
    )
    
    
    (169,892
    )
    
    
    (217,857
    )
    
    
    (366,842
    )OEM
    
    
    317,954
    
    
    
    161,526
    
    
    
    490,359
    
    
    
    159,963Rental
    
    
    18,319
    
    
    
    (5,896
    )
    
    
    35,778
    
    
    
    (2,062
    )Net additions
    
    
    270,346
    
    
    
    (14,262
    )
    
    
    308,280
    
    
    
    (208,941
    )Self-pay
    
    
    183,414
    
    
    
    (70,147
    )
    
    
    194,606
    
    
    
    (174,548
    )Paid promotional
    
    
    86,932
    
    
    
    55,885
    
    
    
    113,674
    
    
    
    (34,393
    )Net additions
    
    
    270,346
    
    
    
    (14,262
    )
    
    
    308,280
    
    
    
    (208,941
    )Daily weighted average number of
subscribers
    
    
    9,896,520
    
    
    
    9,628,373
    
    
    
    9,827,267
    
    
    
    9,677,490Average self-pay monthly churn (1)
    
    
    1.8
    %
    
    
    2.0
    %
    
    
    1.9
    %
    
    
    2.1
    %Conversion rate (2)
    
    
    47.2
    %
    
    
    47.1
    %
    
    
    46.3
    %
    
    
    47.2
    %
 
 Note: See pages 42 through 48 for footnotes. Subscribers.
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, net additions were
270,346 and (14,262), respectively, an increase in net additions of 284,608. Net
additions in our OEM channel increased 156,428 in the three months ended June 30, 2010
compared to the three months ended June 30, 2009. Net reductions in our retail channel
decreased 103,965 in the three months ended June 30, 2010 compared to the three months
ended June 30, 2009. The improvement in net additions was due to the 32% increase in
gross subscriber additions, primarily resulting from an improvement in U.S. auto sales,
and the 5% decline in deactivations resulting from improvements in the conversion rate
in paid promotional trials and average self-pay monthly churn.
    
    Six Months: For the six months ended June 30, 2010 and 2009, net additions were
308,280 and (208,941), respectively, an increase in net additions of 517,221. Net
additions in our OEM channel increased 330,396 in the six months ended June 30, 2010
compared to the six months ended June 30, 2009. Net reductions in our retail channel
decreased 148,985 in the six months ended June 30, 2010 compared to the six months ended
June 30, 2009. The improvement in net additions was due to the 23% increase in gross
subscriber additions primarily resulting from an improvement in U.S. auto sales, and
the 11% decline in deactivations.
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##### Table of Contents



Average Self-pay Monthly Churn
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, our average self-pay
monthly churn rate was 1.8% and 2.0%, respectively. The decrease was due to an improving
economy, the success of retention and win-back programs and reductions in non-pay
cancellations.
    
    Six Months: For the six months ended June 30, 2010 and 2009, our average self-pay
monthly churn rate was 1.9% and 2.1%, respectively. The decrease was due to an improving
economy, the success of retention and win-back programs and reductions in non-pay
cancellations.
 Conversion Rate
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, our conversion rate
was 47.2% and 47.1%, respectively.
    
    Six Months: For the six months ended June 30, 2010 and 2009, our conversion rate was
46.3% and 47.2%, respectively. The decrease in conversion rate is primarily due to an
increase in the mix of lower converting models in the six months ended June 30, 2010,
compared to the six months ended June 30, 2009.
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Adjusted Results of Operations
      Unaudited AdjustedFor the Three Months Ended
        
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009ARPU (3)
    
    $
    11.96
    
    
    $
    10.80
    
    
    $
    11.83
    
    
    $
    10.69SAC, per gross subscriber addition (4)
    
    $
    50
    
    
    $
    44
    
    
    $
    52
    
    
    $
    46Customer service and billing expenses, per average
subscriber (5)
    
    $
    1.10
    
    
    $
    1.07
    
    
    $
    1.05
    
    
    $
    1.11Free cash flow (6)
    
    $
    41,893
    
    
    $
    59,781
    
    
    $
    4,478
    
    
    $
    97,283Adjusted total revenue (8)
    
    $
    376,149
    
    
    $
    323,838
    
    
    $
    736,182
    
    
    $
    644,573Adjusted EBITDA (7)
    
    $
    97,155
    
    
    $
    71,201
    
    
    $
    195,545
    
    
    $
    124,858
 
 Note: See pages 42 through 48 for footnotes. ARPU
 35




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##### Table of Contents




    
    Three Months: For the three months ended June 30, 2010 and 2009, total ARPU was
$11.96 and $10.80, respectively. The increase was driven primarily by the introduction
of the U.S. Music Royalty Fee in the third quarter of 2009,
increased revenues from the sale of Best of programming and rate increases on
multi-subscription and internet packages.
    
    Six Months: For the six months ended June 30, 2010 and 2009, total ARPU was $11.83
and $10.69, respectively. The increase was driven primarily by the introduction of the
U.S. Music Royalty Fee in the third quarter of 2009, increased revenues from the sale of
Best of programming and rate increases on multi-subscription and internet packages.
 SAC, Per Gross Subscriber Addition
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, SAC, per gross
subscriber addition was $50 and $44, respectively. The increase was primarily due to a
32% increase in gross subscriber additions, a 106% increase in OEM production with
factory-installed satellite radios associated with the automotive industry recovery,
partially offset by lower per radio subsidy rates for certain OEMs and growth in
subscriber reactivations and royalties from satellite radio manufacturers compared to
the three months ended June 30, 2009.
    
    Six Months: For the six months ended June 30, 2010 and 2009, SAC, per gross
subscriber addition was $52 and $46, respectively. We experienced a 23% increase in
gross subscriber additions and a 99% increase in OEM production with factory-installed
satellite radios associated with the automotive industry recovery, partially offset by
lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations
and royalties from satellite radio manufacturers compared to the six months ended June
30, 2009.
 Customer Service and Billing Expenses, Per Average Subscriber
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, customer service and
billing expenses, per average subscriber was $1.10 and $1.07, respectively. The increase
was primarily due to higher call volumes, partially offset by lower call center expense
as a result of moving calls to lower cost locations.
    
    Six Months: For the six months ended June 30, 2010 and 2009, customer service and
billing expenses, per average subscriber was $1.05 and $1.11, respectively. The decrease
was primarily due to lower call center expense as a result of moving calls to lower cost
locations.
 Free Cash Flow
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, free cash flow was
$41,893 and $59,781, respectively, a decrease of $17,888. Net income plus non-cash
operating activities increased to $57,481, from $14,396, principally as a result of
improvements in our adjusted EBITDA. Changes in our operating assets and liabilities
decreased by $12,298 compared to the three months ended June 30,
2009. The decrease was
primarily due to growth in receivables from subscribers, radio manufacturers and
distributors and the payment of related party obligations and accrued interest during
the three months ended June 30, 2010, partially offset by increases in trade payables
related to subsidies and commissions associated with the increase in our subscriber base
and growth in deferred revenue. In addition, capital expenditures in the three months
ended June 30, 2010 increased by $48,675 compared to the three months ended June 30,
2009, primarily due to increased satellite and related launch vehicle spending.
    
    Six Months: For the six months ended June 30, 2010 and 2009, free cash flow was
$4,478 and $97,283, respectively, a decrease of $92,805. Net income plus non-cash
operating activities increased to $110,266, from $18,684, principally as a result of
improvements in our adjusted EBITDA. The increase was partially offset by a reduction in
cash provided by operating activities, principally as a result of pay-downs of related
party liabilities deferred in 2009 and employee bonus payments in the first quarter of
2010 where no bonus payments were made in 2009 and a prepayment to a programming
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provider in 2010 that had been paid over the course of the year in 2009. As a result of
these transactions net cash provided by operating activities increased $12,098 to
$113,502 in the six months ended June 30, 2010 compared to the $101,404 provided by
operations in the six months ended June 30, 2009. In addition, capital expenditures in
the six months ended June 30, 2010 increased $114,353 to $118,474 compared to $4,121
expended in the six months ended June 30, 2009, primarily due to increased satellite and
related launch vehicle spending, offset by $9,450 of proceeds from the sale of
investment securities in the six months ended June 30, 2010.
 Adjusted Total Revenue.
 UnauditedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Revenue:Subscriber revenue, including effects of rebates
    
    $
    312,892
    
    
    $
    291,859
    
    
    $
    617,903
    
    
    $
    579,324Advertising revenue, net of agency fees
    
    
    5,022
    
    
    
    4,807
    
    
    
    9,116
    
    
    
    9,328Equipment revenue
    
    
    13,959
    
    
    
    6,107
    
    
    
    24,217
    
    
    
    12,024Other revenue
    
    
    38,477
    
    
    
    4,058
    
    
    
    72,368
    
    
    
    8,388Purchase price accounting adjustments:Subscriber revenue
    
    
    3,986
    
    
    
    15,195
    
    
    
    8,952
    
    
    
    31,883Other revenue
    
    
    1,813
    
    
    
    1,812
    
    
    
    3,626
    
    
    
    3,626Adjusted total revenue
    
    $
    376,149
    
    
    $
    323,838
    
    
    $
    736,182
    
    
    $
    644,573
 
    
    Three Months: Our adjusted total revenue grew 16%, or $52,311, in the three months
ended June 30, 2010 compared to the three months ended June 30, 2009. Subscriber revenue
increased 3%, or $9,824, in the three months ended June 30, 2010 compared to the three
months ended June 30, 2009. The increase in subscriber revenue was driven by the
increase in subscribers as well as an increase in the sale of Best of programming and
the rate increases on multi-subscription and internet packages. Advertising revenue
increased 4%, or $215, in the three months ended June 30, 2010 compared to the three
months ended June 30, 2009. The increase in advertising revenue was driven by more
effective sales efforts and improvements in the national advertising market. Equipment
revenue increased 129%, or $7,852, in the three months ended June 30, 2010 compared to
the three months ended June 30, 2009. The increase in equipment revenue was driven by
increased OEM installations and aftermarket production. Other revenue increased $34,420,
in the three months ended June 30, 2010 compared to the three months ended June 30,
2009. The increase in other revenue was driven by the introduction of the U.S. Music
Royalty Fee in the third quarter of 2009.
    
    Six Months:Our adjusted total revenue grew 14%, or $91,609, in the six months ended
June 30, 2010 compared to the six months ended June 30, 2009. Subscriber revenue
increased 3%, or $15,648, in the six months ended June 30, 2010 compared to the six
months ended June 30, 2009. The increase in subscriber revenue was driven by the
increase in subscribers as well as an increase in the sale of Best of programming and
the rate increases on multi-subscription and internet packages. Advertising revenue
decreased 2%, or $212, in the six months ended June 30, 2010 compared to the six months
ended June 30, 2009. The decrease in advertising revenue was driven by the expiration of
a long-term contract, partially offset by more effective sales efforts and improvements
in the national advertising market. Equipment revenue increased 101%, or $12,193, in the
six months ended June 30, 2010 compared to the six months ended June 30, 2009. The
increase in equipment revenue was driven by increased OEM installations and aftermarket
production. Other revenue increased $63,980, in the six months ended June 30, 2010
compared to the six months ended June 30, 2009. The increase in other revenue was driven
by the introduction of the U.S. Music Royalty Fee in the third quarter of 2009.
 Adjusted EBITDA.
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Unaudited AdjustedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,(in thousands)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Adjusted EBITDA
    
    $
    97,155
    
    
    $
    71,201
    
    
    $
    195,545
    
    
    $
    124,858
 
    
    Three Months: For the three months ended June 30, 2010 and 2009, adjusted EBITDA was
$97,155 and $71,201, respectively, an increase of 36%, or $25,954. The increase was
primarily due to an increase of 16%, or $52,311 in revenues,
partially offset by an increase of 10%, or $26,357, in expenses included in adjusted
EBITDA. The increase in revenue was primarily due to the increase in our subscriber base
and the introduction of the U.S. Music Royalty Fee in the third quarter of 2009, as well
as increased equipment revenue, rate increases on multi-subscription and internet
packages, and an increase in the sale of Best of programming. The increase in expenses
was primarily driven by higher subscriber acquisition costs related to the 32% increase
in gross additions and higher revenue share and royalties expenses associated with growth
in revenues subject to revenue sharing and royalty arrangements.
 
    
    Six Months: For the six months ended June 30, 2010 and 2009, adjusted EBITDA was
$195,545 and $124,858, respectively, an increase of 57%, or $70,687. The increase was
primarily due to an increase of 14%, or $91,609, in revenues, partially offset by an
increase of 4%, or $20,922, in total expenses included in adjusted EBITDA. The increase
in revenue was primarily due to the increase in our subscriber base and the introduction
of the U.S. Music Royalty Fee in the third quarter of 2009, as well as increased
equipment revenue, rate increases on multi-subscription and internet packages, and an
increase in the sale of Best of programming. The increase in expenses was primarily
driven by higher subscriber acquisition costs related to the 23% increase in gross
additions and higher revenue share and royalties expenses associated with growth in
revenues subject to revenue sharing and royalty arrangements.
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Liquidity and Capital Resources
 Cash Flows for the Six Months Ended June 30, 2010 Compared with the Six Months Ended June 30, 2009
  For the Six MonthsEnded June 30,2010
    
    
    2009
    
    
    2010 vs. 2009Net cash provided by operating activities
    
    $
    113,502
    
    
    $
    101,404
    
    
    $
    12,098Net cash used in investing activities
    
    
    (109,024
    )
    
    
    (4,121
    )
    
    
    (104,903
    )Net cash (used in) provided by financing activities
    
    
    (120,659
    )
    
    
    110,913
    
    
    
    (231,572
    )Net (decrease) increase in cash and cash equivalents
    
    
    (116,181
    )
    
    
    208,196
    
    
    
    (324,377
    )Cash and cash equivalents at beginning of period
    
    
    212,155
    
    
    
    206,740
    
    
    
    5,415Cash and cash equivalents at end of period
    
    $
    95,974
    
    
    $
    414,936
    
    
    $
    (318,962
    )
 Cash Flows Provided by Operating Activities
 
    
    Six Months: Net cash provided by operating activities increased $12,098, to $113,502,
for the six months ended June 30, 2010 from net cash provided by operating activities of
$101,404 for the six months ended June 30, 2009. The increase was primarily the result
of improvements in our income from operations and increases in deferred revenue related
to the growth of our subscriber base, offset in part by pay-downs of related party
liabilities deferred in 2009, employee bonus payments in 2010 where no bonus payments
were made in 2009 and a prepayment to a programming provider in 2010 that had been paid
over the course of the year in 2009.
 Cash Flows Used in Investing Activities
 
    
    Six Months: Net cash used in investing activities increased $104,903, to $109,024,
for the six months ended June 30, 2010 from $4,121 for the six months ended June 30,
2009. The increase was primarily the result of an increase of $114,353 in capital
expenditures for construction of our satellites and related launch vehicles, partially
offset by $9,450 from the sale of available-for-sale securities.
  Cash Flows (Used in) Provided by Financing Activities
 
    
    Six Months: Net cash used in financing activities increased $231,572, to $120,659,
for the six months ended June 30, 2010 from net cash provided by financing activities of
$110,913 for the six months ended June 30, 2009. The increase in cash used in financing
activities was primarily due to a decrease of $482,520 in net proceeds from the issuance
of debt, partially offset by a decrease of $234,376 in repayments of debt. During the
six months ended June 30, 2009, we received net proceeds of $482,520 from the issuance
of our 11.25% Senior Secured Notes due 2013. During the six months ended June 30, 2010,
we made debt repayments of $120,659, principally to holders of our 10% Senior PIK
Secured Notes due 2011. During the six months ended June 30, 2009, we made debt
repayments of $355,035, principally to holders of our Amended and Restated Credit
Agreement due 2011. During the six months ended June 30, 2009, we paid $16,572 in
premiums on the redemption of debt, respectively.
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Financings and Capital Requirements
  Future Liquidity and Capital Resource Requirements
      Debt Covenants
   Off-Balance Sheet Arrangements
  Contractual Cash Commitments
  40




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Related Party Transactions
  Critical Accounting Policies and Estimates
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Footnotes
 (1)
    
    Average self-pay monthly churn represents the monthly average of self-pay deactivations for
the quarter divided by the average self-pay subscriber balance for the quarter.(2)
    
    We measure the percentage of vehicle owners and lessees that receive our service and convert
to self-paying after the initial promotion period. We refer to this as the conversion rate.
At the time satellite radio enabled vehicles are sold or leased, the owners or lessees
generally receive three month trial subscriptions. Promotional periods generally include the
period of trial service plus 30 days to handle the receipt and processing of payments. We
measure conversion rate three months after the period in which the trial service ends. Based
on our experience it may take up to 90 days after the trial service ends for vehicle owners
and lessees to respond to our marketing communications and become self-paying subscribers.(3)
    
    ARPU is derived from total earned subscriber revenue, net advertising revenue and other
subscription-related revenue, net of purchase price accounting adjustments, divided by the
number of months in the period, divided by the daily weighted average number of subscribers
for the period. Other subscription-related revenue includes amounts recognized on account of
the U.S. Music Royalty Fee since the third quarter of 2009. Purchase price accounting
adjustments include the recognition of deferred subscriber revenues not recognized in purchase
price accounting. ARPU is calculated as follows (in thousands, except for subscriber and per
subscriber amounts):
 UnauditedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Subscriber revenue (GAAP)
    
    $
    312,892
    
    
    $
    291,859
    
    
    $
    617,903
    
    
    $
    579,324Net advertising revenue (GAAP)
    
    
    5,022
    
    
    
    4,807
    
    
    
    9,116
    
    
    
    9,328Other subscription-related revenue (GAAP)
    
    
    33,327
    
    
    
    
    
    
    
    61,581
    
    
    
    Purchase price accounting adjustment
    
    
    3,986
    
    
    
    15,195
    
    
    
    8,952
    
    
    
    31,883$
    355,227
    
    
    $
    311,861
    
    
    $
    697,552
    
    
    $
    620,535Daily weighted average number of subscribers
    
    
    9,896,520
    
    
    
    9,628,373
    
    
    
    9,827,267
    
    
    
    9,677,490ARPU
    
    $
    11.96
    
    
    $
    10.80
    
    
    $
    11.83
    
    
    $
    10.69
 42




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(4)
    
    SAC, per gross subscriber addition is derived from subscriber acquisition costs and
margins from the direct sale of radios and accessories, excluding share-based payment expense
and purchase price accounting adjustments, divided by the number of gross subscriber additions
for the period. Purchase price accounting adjustments include the elimination of the benefit
of amortization of deferred credits on executory contracts recognized at the Merger date
attributable to third party arrangements with an OEM. SAC, per gross subscriber addition is
calculated as follows (in thousands, except for subscriber and per subscriber amounts):
 UnauditedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Subscriber acquisition costs (GAAP)
    
    $
    38,796
    
    
    $
    22,226
    
    
    $
    71,017
    
    
    $
    48,475Less: margin from direct sales of radios and
accessories (GAAP)
    
    
    (9,489
    )
    
    
    (2,665
    )
    
    
    (15,247
    )
    
    
    (5,117
    )Add: purchase price accounting adjustments
    
    
    20,300
    
    
    
    13,337
    
    
    
    37,966
    
    
    
    23,979$
    49,607
    
    
    $
    32,898
    
    
    $
    93,736
    
    
    $
    67,337Gross subscriber additions
    
    
    998,426
    
    
    
    754,727
    
    
    
    1,794,781
    
    
    
    1,455,676SAC, per gross subscriber addition
    
    $
    50
    
    
    $
    44
    
    
    $
    52
    
    
    $
    46
 (5)
    
    Customer service and billing expenses, per average subscriber is derived from total
customer service and billing expenses, excluding share-based payment expense and purchase
price accounting adjustments, divided by the number of months in the period, divided by the
daily weighted average number of subscribers for the period. We believe the exclusion of
share-based payment expense in our calculation of customer service and billing expenses, per
average subscriber is useful given the significant variation in expense that can result from
changes in the fair market value of Sirius common stock, the effect of which is unrelated to the
operational conditions that give rise to variations in the components of our customer service
and billing expenses. Purchase price accounting adjustments include the elimination of the
benefit associated with share-based payment arrangements recognized at the Merger date.
Customer service and billing expenses, per average subscriber is calculated as follows (in
thousands, except for subscriber and per subscriber amounts):
 UnauditedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Customer service and billing expenses (GAAP)
    
    $
    32,852
    
    
    $
    31,347
    
    
    $
    62,208
    
    
    $
    65,105Less: share-based payment expense, net of purchaseprice accounting adjustments
    
    
    (305
    )
    
    
    (453
    )
    
    
    (667
    )
    
    
    (976
    )Add: purchase price accounting adjustment
    
    
    78
    
    
    
    126
    
    
    
    172
    
    
    
    243$
    32,625
    
    
    $
    31,020
    
    
    $
    61,713
    
    
    $
    64,372Daily weighted average number of subscribers
    
    
    9,896,520
    
    
    
    9,628,373
    
    
    
    9,827,267
    
    
    
    9,677,490Customer service and billing expenses, per average
subscriber
    
    $
    1.10
    
    
    $
    1.07
    
    
    $
    1.05
    
    
    $
    1.11
 (6)
    
    Free cash flow is calculated as follows (in thousands):
 UnauditedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net cash provided by operating activities
    
    $
    91,132
    
    
    $
    60,345
    
    
    $
    113,502
    
    
    $
    101,404Additions to property and equipment
    
    
    (49,239
    )
    
    
    (564
    )
    
    
    (118,474
    )
    
    
    (4,121
    )Restricted and other investment activity
    
    
    -
    
    
    
    -
    
    
    
    9,450
    
    
    
    -Free cash flow
    
    $
    41,893
    
    
    $
    59,781
    
    
    $
    4,478
    
    
    $
    97,283
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(7)
    
    EBITDA is defined as net income before interest, taxes, depreciation and amortization. We adjust EBITDA to also remove the
impact of other income and expense, loss on extinguishment of debt as well as certain non-cash charges discussed below. This
measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base
our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes
(if applicable):  (i) certain adjustments as a result of the purchase price accounting for the Merger, (ii) goodwill impairment,
(iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The
purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in Canadian
Satellite Radio, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination
of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM
and programming providers.  We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which
provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase
price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating
performance to the performance of other communications, entertainment and media companies. We believe that investors use current and
projected adjusted EBITDA to estimate our current or prospective enterprise value and to make investment decisions. Because we fund
and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our adjusted results
of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given
significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives,
all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of
restructuring, impairments and related costs is useful given the nature of these expenses. We also believe the exclusion of share-based
payment expense is useful given the significant variation in expense that can result from changes in the fair market value of SIRIUS common
stock.Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of
certain expenses, including share-based payment expense and certain purchase price accounting for the Merger. We endeavor to compensate
for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and
descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure.  Investors that wish to compare
and evaluate our operating results after giving effect for these costs, should refer to net income (loss) as disclosed in our consolidated
statements of operations. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be
susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be
considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The
reconciliation of net income (loss) to the adjusted EBITDA is calculated as follows (see footnotes for reconciliation of the adjusted
amounts to their respective GAAP amounts) (in thousands):
 UnauditedFor the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss) (GAAP)
    
    $
    35,685
    
    
    $
    (191,804
    )
    
    $
    46,341
    
    
    $
    (301,801
    )Add back items excluded from Adjusted EBITDA:Purchase price accounting adjustments:Revenues (see pages 45-48)
    
    
    5,799
    
    
    
    17,007
    
    
    
    12,578
    
    
    
    35,509Operating Expenses (see pages 45-48)
    
    
    (64,857
    )
    
    
    (57,184
    )
    
    
    (127,467
    )
    
    
    (112,387
    )Depreciation and amortization
    
    
    36,418
    
    
    
    50,049
    
    
    
    73,887
    
    
    
    104,875Restructuring, impairments and related costs
    
    
    702
    
    
    
    26,586
    
    
    
    702
    
    
    
    26,586Share-based payment expense, net of purchase priceaccounting adjustments
    
    
    7,940
    
    
    
    15,371
    
    
    
    15,814
    
    
    
    27,555Interest expense, net of amounts capitalized
    
    
    56,881
    
    
    
    87,925
    
    
    
    116,880
    
    
    
    155,840Loss on extinguishment of debt and credit facilities, net
    
    
    4,617
    
    
    
    107,450
    
    
    
    4,625
    
    
    
    108,076Loss on change in value of embedded derivative
    
    
    11,311
    
    
    
    19,799
    
    
    
    48,603
    
    
    
    78,003Interest and investment (loss) income
    
    
    2,281
    
    
    
    (3,737
    )
    
    
    3,904
    
    
    
    2,672Other income
    
    
    (138
    )
    
    
    (839
    )
    
    
    (1,467
    )
    
    
    (1,226
    )Income tax expense
    
    
    516
    
    
    
    578
    
    
    
    1,145
    
    
    
    1,156Adjusted EBITDA
    
    $
    97,155
    
    
    $
    71,201
    
    
    $
    195,545
    
    
    $
    124,858
 44




---



##### Table of Contents



(8)
    
    The following tables reconcile our actual revenues and
operating expenses to our adjusted revenues and operating expenses:
 Unaudited For the Three Months Ended June 30, 2010Purchase Price
    
    
    Allocation of Share-(in thousands)
    
    As Reported
    
    
    Accounting
    
    
    based Payment
    
    
    AdjustedAdjustments
    
    
    ExpenseRevenue:Subscriber revenue, including effects of rebates
    
    $
    312,892
    
    
    $
    3,986
    
    
    $
    -
    
    
    $
    316,878Advertising revenue, net of agency fees
    
    
    5,022
    
    
    
    -
    
    
    
    -
    
    
    
    5,022Equipment revenue
    
    
    13,959
    
    
    
    -
    
    
    
    -
    
    
    
    13,959Other revenue
    
    
    38,477
    
    
    
    1,813
    
    
    
    -
    
    
    
    40,290Total revenue
    
    $
    370,350
    
    
    $
    5,799
    
    
    $
    -
    
    
    $
    376,149Operating expenses (depreciation and amortization
shown separately below) (1)Cost of services:Revenue share and royalties
    
    
    45,870
    
    
    
    26,417
    
    
    
    -
    
    
    
    72,287Programming and content
    
    
    27,469
    
    
    
    13,702
    
    
    
    (1,044
    )
    
    
    40,127Customer service and billing
    
    
    32,852
    
    
    
    78
    
    
    
    (305
    )
    
    
    32,625Satellite and transmission
    
    
    11,732
    
    
    
    303
    
    
    
    (288
    )
    
    
    11,747Cost of equipment
    
    
    4,470
    
    
    
    -
    
    
    
    -
    
    
    
    4,470Subscriber acquisition costs
    
    
    38,796
    
    
    
    20,300
    
    
    
    -
    
    
    
    59,096Sales and marketing
    
    
    27,506
    
    
    
    3,661
    
    
    
    (1,236
    )
    
    
    29,931Engineering, design and development
    
    
    4,991
    
    
    
    148
    
    
    
    (550
    )
    
    
    4,589General and administrative
    
    
    28,391
    
    
    
    248
    
    
    
    (4,517
    )
    
    
    24,122Depreciation and amortization (2)
    
    
    36,418
    
    
    
    -
    
    
    
    -
    
    
    
    36,418Restructuring, impairments and related costs
    
    
    702
    
    
    
    -
    
    
    
    -
    
    
    
    702Share-based payment expense
    
    
    -
    
    
    
    -
    
    
    
    7,940
    
    
    
    7,940Total operating expenses
    
    $
    259,197
    
    
    $
    64,857
    
    
    $
    -
    
    
    $
    324,054(1) Amounts related to share-based payment expense included in operating expenses were as follows:Programming and content
    
    $
    916
    
    
    $
    128
    
    
    $
    -
    
    
    $
    1,044Customer service and billing
    
    
    227
    
    
    
    78
    
    
    
    -
    
    
    
    305Satellite and transmission
    
    
    206
    
    
    
    82
    
    
    
    -
    
    
    
    288Sales and marketing
    
    
    1,117
    
    
    
    119
    
    
    
    -
    
    
    
    1,236Engineering, design and development
    
    
    402
    
    
    
    148
    
    
    
    -
    
    
    
    550General and administrative
    
    
    4,269
    
    
    
    248
    
    
    
    -
    
    
    
    4,517Total share-based payment expense
    
    $
    7,137
    
    
    $
    803
    
    
    $
    -
    
    
    $
    7,940
 (2)
    Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the three months ended June 30, 2010 was
$17,000.
 45




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##### Table of Contents



Unaudited For the Three Months Ended June 30, 2009Purchase Price
    
    
    Allocation of Share-(in thousands)
    
    As Reported
    
    
    Accounting
    
    
    based Payment
    
    
    AdjustedAdjustments
    
    
    ExpenseRevenue:Subscriber revenue, including effects of rebates
    
    $
    291,859
    
    
    $
    15,195
    
    
    $
    -
    
    
    $
    307,054Advertising revenue, net of agency fees
    
    
    4,807
    
    
    
    -
    
    
    
    -
    
    
    
    4,807Equipment revenue
    
    
    6,107
    
    
    
    -
    
    
    
    -
    
    
    
    6,107Other revenue
    
    
    4,058
    
    
    
    1,812
    
    
    
    -
    
    
    
    5,870Total revenue
    
    $
    306,831
    
    
    $
    17,007
    
    
    $
    -
    
    
    $
    323,838Operating expenses (depreciation and amortization
shown separately below) (1)Cost of services:Revenue share and royalties
    
    
    46,405
    
    
    
    21,840
    
    
    
    -
    
    
    
    68,245Programming and content
    
    
    27,893
    
    
    
    17,701
    
    
    
    (1,316
    )
    
    
    44,278Customer service and billing
    
    
    31,347
    
    
    
    126
    
    
    
    (453
    )
    
    
    31,020Satellite and transmission
    
    
    11,362
    
    
    
    354
    
    
    
    (430
    )
    
    
    11,286Cost of equipment
    
    
    3,442
    
    
    
    -
    
    
    
    -
    
    
    
    3,442Subscriber acquisition costs
    
    
    22,226
    
    
    
    13,337
    
    
    
    -
    
    
    
    35,563Sales and marketing
    
    
    26,797
    
    
    
    3,173
    
    
    
    (1,456
    )
    
    
    28,514Engineering, design and development
    
    
    6,631
    
    
    
    247
    
    
    
    (812
    )
    
    
    6,066General and administrative
    
    
    34,721
    
    
    
    406
    
    
    
    (10,904
    )
    
    
    24,223Depreciation and amortization (2)
    
    
    50,049
    
    
    
    -
    
    
    
    -
    
    
    
    50,049Restructuring, impairments and related costs
    
    
    26,586
    
    
    
    -
    
    
    
    -
    
    
    
    26,586Share-based payment expense
    
    
    -
    
    
    
    -
    
    
    
    15,371
    
    
    
    15,371Total operating expenses
    
    $
    287,459
    
    
    $
    57,184
    
    
    $
    -
    
    
    $
    344,643(1) Amounts related to share-based payment expense included in operating expenses were as follows:Programming and content
    
    $
    1,111
    
    
    $
    205
    
    
    $
    -
    
    
    $
    1,316Customer service and billing
    
    
    327
    
    
    
    126
    
    
    
    -
    
    
    
    453Satellite and transmission
    
    
    297
    
    
    
    133
    
    
    
    -
    
    
    
    430Sales and marketing
    
    
    1,272
    
    
    
    184
    
    
    
    -
    
    
    
    1,456Engineering, design and development
    
    
    565
    
    
    
    247
    
    
    
    -
    
    
    
    812General and administrative
    
    
    10,497
    
    
    
    407
    
    
    
    -
    
    
    
    10,904Total share-based payment expense
    
    $
    14,069
    
    
    $
    1,302
    
    
    $
    -
    
    
    $
    15,371
 (2)
    Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the three months ended June 30, 2009 was $31,000.
 46




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##### Table of Contents



Unaudited For the Six Months Ended June 30, 2010Purchase Price
    
    
    Allocation of Share-(in thousands)
    
    As Reported
    
    
    Accounting
    
    
    based Payment
    
    
    AdjustedAdjustments
    
    
    ExpenseRevenue:Subscriber revenue, including effects
of rebates
    
    $
    617,903
    
    
    $
    8,952
    
    
    $
    -
    
    
    $
    626,855Advertising revenue, net of agency fees
    
    
    9,116
    
    
    
    -
    
    
    
    -
    
    
    
    9,116Equipment revenue
    
    
    24,217
    
    
    
    -
    
    
    
    -
    
    
    
    24,217Other revenue
    
    
    72,368
    
    
    
    3,626
    
    
    
    -
    
    
    
    75,994Total revenue
    
    $
    723,604
    
    
    $
    12,578
    
    
    $
    -
    
    
    $
    736,182Operating expenses (depreciation and
amortization
shown separately below) (1)Cost of services:Revenue share and royalties
    
    
    88,851
    
    
    
    51,772
    
    
    
    -
    
    
    
    140,623Programming and content
    
    
    55,743
    
    
    
    28,850
    
    
    
    (1,863
    )
    
    
    82,730Customer service and billing
    
    
    62,208
    
    
    
    172
    
    
    
    (667
    )
    
    
    61,713Satellite and transmission
    
    
    23,487
    
    
    
    626
    
    
    
    (638
    )
    
    
    23,475Cost of equipment
    
    
    8,970
    
    
    
    -
    
    
    
    -
    
    
    
    8,970Subscriber acquisition costs
    
    
    71,017
    
    
    
    37,966
    
    
    
    -
    
    
    
    108,983Sales and marketing
    
    
    53,557
    
    
    
    7,186
    
    
    
    (2,451
    )
    
    
    58,292Engineering, design and development
    
    
    10,223
    
    
    
    334
    
    
    
    (1,213
    )
    
    
    9,344General and administrative
    
    
    54,928
    
    
    
    561
    
    
    
    (8,982
    )
    
    
    46,507Depreciation and amortization (2)
    
    
    73,887
    
    
    
    -
    
    
    
    -
    
    
    
    73,887Restructuring, impairments and related
costs
    
    
    702
    
    
    
    -
    
    
    
    -
    
    
    
    702Share-based payment expense
    
    
    -
    
    
    
    -
    
    
    
    15,814
    
    
    
    15,814Total operating expenses
    
    $
    503,573
    
    
    $
    127,467
    
    
    $
    -
    
    
    $
    631,040(1) Amounts related to share-based payment expense included in operating
expenses were as follows:Programming and content
    
    $
    1,575
    
    
    $
    288
    
    
    $
    -
    
    
    $
    1,863Customer service and billing
    
    
    495
    
    
    
    172
    
    
    
    -
    
    
    
    667Satellite and transmission
    
    
    453
    
    
    
    185
    
    
    
    -
    
    
    
    638Sales and marketing
    
    
    2,187
    
    
    
    264
    
    
    
    -
    
    
    
    2,451Engineering, design and development
    
    
    879
    
    
    
    334
    
    
    
    -
    
    
    
    1,213General and administrative
    
    
    8,421
    
    
    
    561
    
    
    
    -
    
    
    
    8,982Total share-based payment expense
    
    $
    14,010
    
    
    $
    1,804
    
    
    $
    -
    
    
    $
    15,814
 (2)
    Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the six months ended June 30, 2010 was $36,000.
 47




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##### Table of Contents



Unaudited For the Six Months Ended June 30, 2009Purchase Price
    
    
    Allocation of Share-(in thousands)
    
    As Reported
    
    
    Accounting
    
    
    based Payment
    
    
    AdjustedAdjustments

    
    ExpenseRevenue:Subscriber revenue, including effects of rebates
    
    $
    579,324
    
    
    $
    31,883
    
    
    $
    -
    
    
    $
    611,207Advertising revenue, net of agency fees
    
    
    9,328
    
    
    
    -
    
    
    
    -
    
    
    
    9,328Equipment revenue
    
    
    12,024
    
    
    
    -
    
    
    
    -
    
    
    
    12,024Other revenue
    
    
    8,388
    
    
    
    3,626
    
    
    
    -
    
    
    
    12,014Total revenue
    
    $
    609,064
    
    
    $
    35,509
    
    
    $
    -
    
    
    $
    644,573Operating expenses (depreciation and amortization
shown separately below) (1)Cost of services:Revenue share and royalties
    
    
    96,021
    
    
    
    42,635
    
    
    
    -
    
    
    
    138,656Programming and content
    
    
    56,542
    
    
    
    36,592
    
    
    
    (2,845
    )
    
    
    90,289Customer service and billing
    
    
    65,105
    
    
    
    243
    
    
    
    (976
    )
    
    
    64,372Satellite and transmission
    
    
    25,468
    
    
    
    681
    
    
    
    (1,040
    )
    
    
    25,109Cost of equipment
    
    
    6,907
    
    
    
    -
    
    
    
    -
    
    
    
    6,907Subscriber acquisition costs
    
    
    48,475
    
    
    
    23,979
    
    
    
    -
    
    
    
    72,454Sales and marketing
    
    
    58,510
    
    
    
    6,831
    
    
    
    (2,978
    )
    
    
    62,363Engineering, design and development
    
    
    11,383
    
    
    
    548
    
    
    
    (2,070
    )
    
    
    9,861General and administrative
    
    
    66,472
    
    
    
    878
    
    
    
    (17,646
    )
    
    
    49,704Depreciation and amortization (2)
    
    
    104,875
    
    
    
    -
    
    
    
    -
    
    
    
    104,875Restructuring, impairments and related costs
    
    
    26,586
    
    
    
    -
    
    
    
    -
    
    
    
    26,586Share-based payment expense
    
    
    -
    
    
    
    -
    
    
    
    27,555
    
    
    
    27,555Total operating expenses
    
    $
    566,344
    
    
    $
    112,387
    
    
    $
    -
    
    
    $
    678,731(1) Amounts related to share-based payment expense included in operating expenses were as follows:Programming and content
    
    $
    2,509
    
    
    $
    336
    
    
    $
    -
    
    
    $
    2,845Customer service and billing
    
    
    733
    
    
    
    243
    
    
    
    -
    
    
    
    976Satellite and transmission
    
    
    800
    
    
    
    240
    
    
    
    -
    
    
    
    1,040Sales and marketing
    
    
    2,601
    
    
    
    377
    
    
    
    -
    
    
    
    2,978Engineering, design and development
    
    
    1,522
    
    
    
    548
    
    
    
    -
    
    
    
    2,070General and administrative
    
    
    16,767
    
    
    
    879
    
    
    
    -
    
    
    
    17,646Total share-based payment expense
    
    $
    24,932
    
    
    $
    2,623
    
    
    $
    -
    
    
    $
    27,555
 (2)
    
    Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the six months ended June 30, 2009 was $62,000.
 (9)
    
    The following table reconciles our GAAP Net cash provided by operating activities to our
Net income plus non-cash operating activities (in thousands):
 For the Three Months Ended
    
    For the Six Months EndedJune 30,
    

    June 30,2010
    
    2009
    
    2010
    
    2009Net cash provided by operating activities
    
    $
    91,132
    
    
    $
    60,345
    
    
    $
    113,502
    
    
    $
    101,404Less: Changes in operating assets and liabilities, net
    
    
    (33,651
    )
    
    
    (45,949
    )
    
    
    (3,236
    )
    
    
    (82,720
    )Net income plus non cash operating activities
    
    $
    57,481
    
    
    $
    14,396
    
    
    $
    110,266
    
    
    $
    18,684
 48




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##### Table of Contents



ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
    
 ITEM 4 CONTROLS AND PROCEDURES
 Controls and Procedures
  49




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  50




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##### Table of Contents



SIGNATURES
  XM Satellite Radio Inc.By:
    /s/ David J. FrearDavid J. FrearTreasurer
(Principal Financial Officer and
Principal Accounting Officer) 51




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##### Table of Contents



EXHIBIT INDEX
 Exhibit
    
    Description3.1
    
    
    Certificate of Ownership and Merger, dated April 14, 2010
(incorporated by reference to Exhibit 3.1 to XM Satellite Radio
Inc.s Current Report on Form 8-K filed on April 16, 2010).4.1
    
    
    Assumption and Joinder Agreement, dated as of June 1, 2010,
between XM 1500 Eckington LLC and XM Investment LLC to the
Collateral Agreement, dated as of December 31, 2009, by and
among XM Satellite Radio Inc. and certain subsidiaries
thereof and U.S. Bank National Association, as collateral
agent, relating to the 11.25% Senior Secured Notes due 2013
(incorporated by reference to Exhibit 4.1 to Sirius XM
Radio Inc.s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2010).4.2
    
    
    Supplemental Indenture, dated April 14, 2010, among XM
Satellite Radio Holdings Inc., XM Satellite Radio Inc.,
certain subsidiaries thereof and U.S. Bank National
Association, as trustee, relating to the Senior PIK Secured
Notes due 2011 (incorporated by reference to Exhibit 4.1 to
XM Satellite Radio Inc.s Current Report on Form 8-K filed
on April 16, 2010).4.3
    
    
    Supplemental Indenture, dated April 14, 2010, among XM
Satellite Radio Inc., certain subsidiaries thereof and U.S.
Bank National Association, as trustee, relating to the
11.25% Senior Secured Notes due 2013 (incorporated by
reference to Exhibit 4.2 to XM Satellite Radio Inc.s
Quarterly Report on Form 10-Q for the quarter ended March
31, 2010).4.4
    
    
    Third Supplemental Indenture, dated April 14, 2010, among
XM Satellite Radio Inc., certain subsidiaries thereof and
the Bank of New York Mellon, as trustee, relating to the
13% Senior Notes due 2013 (incorporated by reference to
Exhibit 4.3 to XM Satellite Radio Inc.s Quarterly Report
on Form 10-Q for the quarter ended March 31, 2010).4.5
    
    
    Supplemental Indenture, dated April 14, 2010, among XM
Satellite Radio Inc., certain subsidiaries thereof and the
Bank of New York Mellon, as trustee, relating to the 7%
Exchangeable Senior Subordinated Notes due 2014
(incorporated by reference to Exhibit 4.4 to XM Satellite
Radio Inc.s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2010).4.6
    
    
    Fourth Supplemental Indenture, dated April 14, 2010, among
XM Satellite Radio Inc., certain subsidiaries thereof and
the Bank of New York Mellon, as trustee, relating to the
9.75% Senior Notes due 2014 (incorporated by reference to
Exhibit 4.5 to XM Satellite Radio Inc.s Quarterly Report
on Form 10-Q for the quarter ended March 31, 2010).31.1
    
    
    Certificate of Mel Karmazin, President of XM Satellite
Radio Inc., pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).31.2
    
    
    Certificate of David J. Frear, Treasurer of XM Satellite
Radio Inc., pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (filed herewith).32.1
    
    
    Certificate of Mel Karmazin, President and David J. Frear,
Treasurer of XM Satellite Radio Inc., pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith).