<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 2000
Commission file number 000-27441
XM SATELLITE RADIO HOLDINGS INC.
--------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 54-1878819
-------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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)
1250 23rd Street, NW, Suite 57
Washington, DC 20037
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ____
--------------------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS A COMMON STOCK, $0.01 PAR VALUE 32,250,244 SHARES
CLASS B COMMON STOCK, $0.01 PAR VALUE 16,557,262 SHARES
-------------------------------------
(Class) (Outstanding as of June 30, 2000)
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<TABLE>
<CAPTION>
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
INDEX
Part I - Financial Information
Page
<S> <C>
Unaudited Condensed Consolidated Statements of Operations for the three and six
months ended June 30, 1999 and 2000 and for the period December 15, 1992
(date of inception) to June 30, 2000............................................ 1
Condensed Consolidated Balance Sheets as of December 31, 1999 and June 30,
2000 (unaudited)................................................................ 2
Unaudited Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 2000 and for the period December 15,
1992 (date of inception) to June 30, 2000....................................... 3
Notes to Unaudited Condensed Consolidated Financial Statements................... 5
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 9
Part II - Other Information
Signatures
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
<TABLE>
<CAPTION>
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Month and Six-Month Periods ended June 30, 1999 and 2000,
and for the period from December 15, 1992 (date of inception) to June 30, 2000
Three Months ended Six Months ended December 15, 1992
June 30, June 30, (date of inception)
1999 2000 1999 2000 to June 30, 2000
---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
(in thousands, except share data)
Revenue.............................................. $ -- $ -- $ -- $ -- $ --
---------- ----------- ---------- ---------- ----------
Operating expenses:
Research and development........................... 630 219 1,378 4,739 15,954
Professional fees.................................. 1,263 5,193 2,560 10,787 27,088
General and administrative......................... 2,127 8,525 4,503 15,300 35,777
---------- ----------- ---------- ---------- ----------
Total operating expenses.......................... 4,020 13,937 8,441 30,826 78,819
---------- ----------- ---------- ---------- ----------
Operating loss.................................... (4,020) (13,937) (8,441) (30,826) ( 78,819)
Other income (expense) --interest income
(expense), net...................................... 21 8,849 76 12,999 6,269
---------- ----------- ---------- ---------- ----------
Net loss.......................................... $ (3,999) $ (5,088) $ (8,365) $ (17,827) $ (72,550)
========== =========== ========== ========== ==========
Preferred stock dividend requirement................ -- (2,171) -- (3,643) --
Net loss attributable to common stockholders........ $ (3,999) $ (7,259) $ (8,365) $ (21,470) $ (72,550)
========== =========== ========== ========== ===========
Net loss per share:
Basic and diluted................................... $ (0.60) $ (0.15) $ (1.25) $ (0.45)
========== =========== ========== ===========
Weighted average shares used in
computing net loss per share-basic
and diluted 6,689,250 48,735,802 6,689,250 48,033,191
========== =========== ========== ==========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1999 and June 30, 2000
December 31, June 30,
1999 2000
-------- ----------
(unaudited)
(in thousands, except share data)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................................ $ 50,698 267,372
Short-term investments.............................................................................. 69,472 --
Restricted investments.............................................................................. -- 93,415
Prepaid and other current assets.................................................................... 1,077 1,390
-------- ----------
Total current assets............................................................................... 121,247 362,177
Other assets:
Restricted investments, net of current portion....................................................... -- 81,208
System under construction............................................................................ 362,358 579,981
Property and equipment, net.......................................................................... 2,551 24,783
Goodwill and intangibles, net........................................................................ 25,380 24,694
Other assets, net.................................................................................... 3,653 13,762
-------- ----------
Total assets....................................................................................... $515,189 $1,086,605
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................................................... 23,338 $ 39,438
Accrued expenses..................................................................................... 1,514 1,359
Due to related parties............................................................................... 62 84
Accrued interest on senior secured notes............................................................. -- 13,271
Royalty payable...................................................................................... 1,646 2,296
Deferred lease benefit............................................................................... - 760
-------- ----------
Total current liabilities.......................................................................... 26,560 57,208
Senior secured notes.................................................................................. -- 261,171
Royalty payable, net of current portion............................................................... 3,400 2,800
Deferred lease benefit, net of current portion ...................................................... -- 3,041
Capital lease, net of current portion................................................................. 212 168
-------- ----------
Total liabilities.................................................................................. 30,172 324,388
-------- ----------
Stockholders' equity:
Series A convertible preferred stock, par value $0.01; 15,000,000 shares authorized,
10,786,504 shares issued and outstanding at December 31, 1999 and June 30, 2000.................... 108 108
Series B convertible redeemable preferred stock, par value $0.01 (liquidation preference
of $100,000,000); 3,000,000 shares authorized, no shares and 2,000,000 shares issued
and outstanding at December 31, 1999 and June 30, 2000, respectively............................... -- 20
Class A common stock, par value $0.01; 180,000,000 shares authorized,
26,465,333 shares and 32,250,244 shares issued and outstanding at December 31, 1999,
and June 30, 2000, respectively.................................................................... 265 323
Class B common stock, par value $0.01; 30,000,000 shares authorized,
17,872,176 and 16,557,262 shares issued and outstanding at December 31, 1999 and
June 30, 2000, respectively........................................................................ 179 166
Class C common stock, par value $0.01; 30,000,000 shares authorized, no shares
issued and outstanding at December 31, 1999 and June 30, 2000, respectively........................ -- --
Additional paid-in capital......................................................................... 539,187 834,150
Deficit accumulated during development stage......................................................... (54,722) (72,550)
-------- ----------
Total stockholders' equity......................................................................... 485,017 762,217
-------- ----------
Commitments and contingencies
Total liabilities and stockholders' equity......................................................... $515,189 $1,086,605
======== ==========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
2
<PAGE>
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six-Month Period ended June 30, 1999 and 2000, and for the period from
December 15, 1992 (date of inception) to June 30, 2000
<TABLE>
<CAPTION>
Six Months ended December 15, 1992
June 30, (date of inception) to
1999 2000 June 30, 2000
---- ---- -------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................................... $ (8,365) $ (17,827) $ (72,550)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Depreciation and amortization............................................ 127 1,014 2,581
Amortization of deferred financing fees.................................. -- -- 509
Non-cash stock compensation.............................................. -- 2,258 6,468
Non-cash charge for beneficial conversion feature of note
issued to Parent......................................................... -- -- 5,520
Changes in operating assets and liabilities:
(Increase) decrease in prepaid and other current assets................ 80 (313) (1,390)
(Increase) decrease in other assets.................................... 21 -- (416)
Increase in accounts payable and
accrued expenses...................................................... (858) 8,554 22,778
Increase (decrease) in amounts due to related
parties................................................................ 4,994 21 83
-------- --------- ---------
Net cash used in operating activities................................. (4,001) (6,293) (36,417)
-------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment....................................... (279) (18,814) (21,326)
Additions to system under construction................................... (18,367) (191,319) (487,688)
Net Purchase/Maturity of short-term investments.......................... -- 69,471 --
Purchase of restricted investments....................................... -- (125,863) (125,863)
Other investing activities............................................... -- (54,250) (54,250)
-------- --------- ---------
Net cash used in investing activities.............................. (18,646) (320,775) (689,127)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock and
capital contribution....................................................... 22,967 229,225 256,306
Proceeds from issuance of Series B convertible redeemable preferred
stock..................................................................... -- - 96,499
Proceeds from issuance of convertible notes payable to related party....... -- -- 148,939
Proceeds from issuance of options........................................... -- 1,500
Proceeds from issuance of Series A convertible notes........................ -- -- 250,000
Proceeds from issuance of 14% Senior Secured Notes
and Warrants............................................................... -- 322,898 322,898
Repayments of loans payable to related party................................ -- -- (75,000)
Payments for deferred financing costs....................................... (455) (8,381) (8,227)
Other net financing activities.............................................. (12) -- --
-------- --------- ---------
Net cash provided by financing activities................................. 22,500 543,742 992,915
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents...................... (147) 216,674 267,372
-------- --------- ---------
Cash and cash equivalents at beginning of period............................. 310 50,698 --
Cash and cash equivalents at end of period................................... $ 163 $ 267,372 $ 267,372
======== ========= =========
</TABLE>
3
<PAGE>
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended March 31, 1999 and 2000, and for the period from
December 15, 1992 (date of inception) to June 30, 2000
<TABLE>
<CAPTION>
Six Months December 15, 1992
ended June 30, (date of inception) to
1999 2000 June 30, 2000
---- ---- -------------
(in thousands)
<S> <C> <C> <C>
Supplemental cash flow disclosure:
Increase in FCC license, goodwill and intangibles.............. $ -- $ -- $ 51,624
Liabilities exchanged for convertible note to Parent.......... 4,601 -- 81,676
Accrued expenses transferred to loan balance................... 7,405 -- --
Non-cash interest capitalized.................................. 8,201 15,499 44,386
Accrued system milestone payments............................. 81,167 26,699 26,699
Property acquired through capital lease....................... 431 -- 470
Conversion of debt to equity.................................. -- -- 363,815
Use of deposit for terrestrial repeater contract.............. -- 3,422 --
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
XM SATELILITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Organization and Business
XM Satellite Radio Inc. ("XMSR") was incorporated on December 15, 1992 in the
State of Delaware as a wholly owned subsidiary of Motient Corporation ("Motient"
or "Parent"), formerly American Mobile Satellite Corporation, for the purpose of
procuring a digital audio radio service ("DARS") license. Business activity for
the period from December 15, 1992 through December 31, 1996 was insignificant.
Pursuant to various financing agreements entered into in 1997 between Motient,
XMSR and WorldSpace, Inc. ("WSI"), WSI acquired a 20 percent interest in XMSR.
On May 16, 1997, Motient and WSI formed XM Satellite Radio Holdings Inc. (the
"Company") as a holding company for XMSR in connection with the construction,
launch and operation of a domestic communications satellite system for the
provision of DARS. Motient and WSI exchanged their respective interests in XMSR
for equivalent interests in the Company, which had no assets, liabilities or
operations prior to the transaction.
On July 7, 1999, Motient acquired WSI's 20 percent interest in the Company.
(2) Principles of Consolidation and Basis of Presentation
The condensed consolidated financial statements include the accounts of XM
Satellite Radio Holdings Inc. and its subsidiaries, XM Satellite Radio Inc. and
XM Radio Inc. All significant intercompany transactions and accounts have been
eliminated. The Company's management has devoted substantially all of its time
to the planning and organization of the Company, obtaining its DARS license, and
to the process of addressing regulatory matters, initiating research and
development programs, conducting market research, initiating construction of the
satellite system, securing content providers, and securing adequate debt and
equity capital for anticipated operations and growth. The Company has not
generated any revenues and planned principal operations have not commenced.
Accordingly, the Company's financial statements are presented as those of a
development stage enterprise, as prescribed by Statement of Financial Accounting
Standards ("SFAS") No. 7, Accounting and Reporting by Development Stage
Enterprises.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments, consisting of only normal
recurring accruals, necessary for a fair presentation of the consolidated
financial position of XM Satellite Radio Holdings Inc. and subsidiaries, a
development stage entity, as of June 30, 2000, and the results of operations for
the three and six months ended June 30, 1999 and 2000 and the period from
December 15, 1992 (date of inception) through June 30, 2000 and the cash flows
for the six months ended June 30, 1999 and 2000 and the period from December 15,
1992 (date of inception) through June 30, 2000. The results of operations for
the six months ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the full year. These condensed consolidated financial
statements are unaudited, and do not include all related footnote disclosures.
The interim unaudited condensed consolidated financial statements should be read
in conjunction with the audited financial statements of the Company included in
the Company's filings with the Securities and Exchange Commission.
(3) Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with SFAS No.
128, Earnings Per Share and SEC Staff Accounting Bulletin No. 98 ("SAB 98").
Under the provisions of SFAS No. 128 and SAB 98, basic net income (loss) per
share is computed by dividing the net income (loss) available to common
stockholders (after deducting preferred dividend requirements) for the period by
the weighted average number of common shares outstanding during the period.
Diluted net income (loss) available per share is computed by dividing the net
income (loss) available to common stockholders for the period by the weighted
average number of common and dilutive common equivalent shares outstanding
during the period. The Company has presented historical basic and diluted net
income (loss) per share in accordance with SFAS No. 128. As the Company had a
net loss in each of the periods presented, basic and diluted net income (loss)
per share is the same.
(4) Restricted Investments
5
<PAGE>
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Restricted investments consist of fixed income securities and are stated at
amortized costs plus accrued interest income. The securities included in
restricted investments are $125.9 million of US Treasury strips restricted to
provide for the first six scheduled interest payments on the Company's 14%
Senior Secured Notes due 2010, which are classified as held-to-maturity
securities under the provision of SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and $48.8 million in money market
funds for scheduled milestone payments under the Hughes Electronics Corporation
contract.
(5) Reclassifications
Certain amounts in the prior period's financial statements have been
reclassified to conform to the current period presentation.
(6) Commitments and Contingencies
(a) FCC License
The FCC has established certain system development milestones that must be met
for the Company to maintain its license to operate the system. The Company
believes that it is proceeding into the system development as planned and in
accordance with the FCC milestones.
(b) Application for Review of FCC License
One of the losing bidders for the DARS licenses filed an Application for Review
by the full FCC of the Licensing Order which granted the Company its FCC
license. The Application for Review alleges that WSI had effectively taken
control of the Company without FCC approval. The FCC or the U.S. Court of
Appeals has the authority to overturn the award of the FCC license should they
rule in favor of the losing bidder. Although the Company believes that its
right to the FCC license will withstand the challenge as WSI is no longer a
stockholder in the Company, no prediction of the outcome of this challenge can
be made with any certainty.
(c) Technical Services
Effective January 1, 1998, the Company entered into agreements with Motient and
WorldSpace Management Corporation ("WorldSpace MC"), an affiliate of WSI, in
which Motient and WorldSpace MC would provide technical support in areas
related to the development of a DARS system. Payments for services provided
under these agreements are made based on negotiated hourly rates. These
agreements may be terminated by the parties on or after the date of the
commencement of commercial operation following the launch of the Company's
first satellite. There are no minimum services purchase requirements. The
Company incurred costs of $84,000 and $65,000 under its agreement with Motient
and no costs were incurred under its agreement with WorldSpace MC during the
quarter ended June 30, 2000 and 1999, respectively.
(d) Technology Licenses
Effective January 1, 1998, XMSR entered into a technology licensing agreement
with Motient and WorldSpace MC by which as compensation for certain licensed
technology currently under development to be used in the XM Radio system, XMSR
will pay up to $14,300,000 to WorldSpace MC over a ten-year period. As of June
30, 2000, XMSR incurred costs of $6,696,000 payable to WorldSpace MC. Any
additional amounts to be incurred under this agreement are dependent upon
further development of the technology, which is at XMSR's option. No liability
exists to Motient or WorldSpace MC should such developments prove unsuccessful.
The Company maintains an accrual of $5,096,000 payable to WorldSpace MC, for
quarterly royalty payments to be made. In addition, XMSR agreed to pay 1.2
percent of quarterly net revenues to WorldSpace MC and a royalty of $0.30 per
chipset, payable to WorldSpace MC, for equipment manufactured using certain
source encoding and decoding signals technology.
(e) Satellite Contract
6
<PAGE>
XM SATELITTE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
During the first half of 1999, the Company and Hughes Space and Communications,
Inc. ("Hughes") amended the satellite contract to construct and launch the
Company's satellites to implement a revised work timetable, payment schedule to
reflect the timing of the receipt of additional funding, and technical
modifications. The Company expects to incur total payment obligations under
this contract of approximately $541,300,000, which includes amounts the Company
expects to pay pursuant to the exercise of the option to build the ground spare
satellite and certain financing costs and in-orbit incentive payments. On June
27, 2000, the Company exercised this option. As of June 30, 2000, the Company
had paid $350,820,000 under the Satellite contract with Hughes and had accrued
$2,000,000.
(f) Terrestrial Repeater System Contracts
In August 1999, the Company signed a contract with LCC International, Inc., a
related party, calling for payments of approximately $115,000,000 for
engineering and site preparation. As of June 30, 2000, the Company has paid
$13,956,000 under this contract, and accrued an additional $13,743,000. The
Company also entered into a contract effective October 22, 1999, with Hughes
Electronics Corporation for the design, development and manufacture of the
terrestrial repeaters. Payments under this contract are expected to be
approximately $128,000,000. As of June 30, 2000, the Company had paid
$12,500,000 under this contract, and accrued an additional $68,000.
(g) General Motors Distribution Agreement
The Company has signed a long-term distribution agreement with the OnStar
division of General Motors providing for the installation of XM radios in
General Motors vehicles. During the term of the agreement, which expires 12
years from the commencement date of the Company's commercial operations,
General Motors has agreed to distribute the service to the exclusion of other
S-band satellite digital radio services. The Company will also have a non-
exclusive right to arrange for the installation of XM radios included in OnStar
systems in non-General Motors vehicles that are sold for use in the United
States. The Company has significant annual, fixed payment obligations to
General Motors for four years following commencement of commercial service.
These payments approximate $35,000,000 in the aggregate during this period.
Additional annual fixed payment obligations beyond the initial four years of
the contract term range from less than $35,000,000 to approximately
$130,000,000 through 2009, aggregating approximately $400,000,000. In order to
encourage the broad installation of XM radios in General Motors vehicles, the
Company has agreed to subsidize a portion of the cost of XM radios, and to make
incentive payments to General Motors when the owners of General Motors vehicles
with installed XM radios become subscribers for the Company's service. The
Company must also share with General Motors a percentage of the subscription
revenue attributable to General Motors vehicles with installed XM radios, which
percentage increases until there are more than 8 million General Motors
vehicles with installed XM radios. The Company will also make available to
General Motors bandwidth on the Company's systems. The agreement is subject to
renegotiations at any time based upon the installation of radios that are
compatible with a unified standard or capable of receiving Sirius Satellite
Radio's service. The agreement is subject to renegotiations if, four years
after the commencement of XM Radio's commercial operations and at two-year
intervals thereafter GM does not achieve and maintain specified installation
levels of General Motors vehicles capable of receiving the Company's service,
starting with 1,240,000 units after four years, and thereafter increasing by
the lesser of 600,000 units per year and amounts proportionate to target market
shares in the satellite digital radio service market. There can be no
assurances as to the outcome of any such renegotiations. General Motors'
exclusivity obligations will discontinue if, four years after the Company
commences commercial operations and at two-year intervals thereafter, the
Company fails to achieve and maintain specified minimum market share levels in
the satellite digital radio service market.
(h) Sony Warrant
In February 2000, the Company issued a warrant to Sony exercisable for shares
of the Company's Class A common stock. The warrant will vest at the time that
the Company attains its millionth customer, and the number of shares underlying
the warrant will be determined by the percentage of XM Radios that have a Sony
brand name
7
<PAGE>
XM SATELITTE RADIO HOLDINGS INC. AND SUBSIDIARIES
(A Development Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as of the vesting date. If Sony achieves its maximum performance target, it
will receive 2% of the total number of shares of the Company's Class A common
stock on a fully-diluted basis upon exercise of the warrant. The exercise price
of the Sony warrant will equal 105% of fair market value of the Class A common
stock on the vesting date, determined based upon the 20-day trailing average.
(i) Prior Litigation
On January 12, 1999, Sirius Radio, the other holder of an FCC satellite radio
license, commenced an action against the Company in the United States District
Court for the Southern District of New York, alleging that the Company was
infringing or would infringe three patents assigned to Sirius Radio. In its
complaint, Sirius Radio sought money damages to the extent the Company
manufactured, used or sold any product or method claimed in their patents and
injunctive relief. On February 16, 2000, this suit was resolved in accordance
with the terms of a joint development agreement between the Company and Sirius
Radio and both companies agreed to cross-license their respective property.
However, if this agreement is terminated before the value of the license has
been determined due to the Company's failure to perform a material covenant or
obligation, then this suit could be refiled.
(j) Preferred Stock Dividend
On May 1, 2000, the Company paid its regular quarterly dividend on its 8.25%
Series B convertible redeemable preferred stock. The dividend was paid in
shares of Class A common stock and 62,318 shares of Class A common stock were
issued to the holders of record on April 12, 2000.
(7) Subsequent Events
(a) Issuance of Series C Convertible Redeemable Preferred Stock
On July 7, 2000, the Company reached an agreement for a private offering of
235,000 shares of its Series C convertible redeemable preferred stock for
$1,000.00 per share, which closed on August 8, 2000 and yielded net proceeds of
approximately $227,000,000. The Series C convertible redeemable preferred
stock provides for 8.25% cumulative dividends payable in cash. The Series C
convertible redeemable preferred stock is convertible, at the holders' option,
into Class A common stock at the conversion price then in effect. Currently,
the conversion price is $26.50. The Series C convertible redeemable preferred
stock may be redeemed beginning on February 8, 2005 in cash or, at the holder's
option, in Class A Common Stock. The Company must redeem the Series C
convertible redeemable preferred stock in Class A common stock on February 1,
2012. The Company expects to record a $123.0 million beneficial conversion
charge that will reduce earnings available to common stockholders. The
issuance of the Series C preferred stock caused the exercise price of the
warrants sold in March 2000 to be adjusted to $47.94.
(b) Preferred Stock Dividend on Series B Convertible Redeemable Preferred Stock
On July 7, 2000, the Company announced its regular quarterly dividend on its
8.25% Series B convertible redeemable preferred stock, which was paid on August
1, 2000. The dividend was paid in shares of Class A common stock and 57,114
shares of Class A common stock was issued to the holders of record on July 21,
2000. The net loss attributable to common stockholders reflects the accrual and
payments of the dividend to the preferred stockholders as of June 30, 2000.
(c) Application for Change of Control
On July 14, 2000, the Company filed an application with the FCC to allow the
Company to transfer its control from Motient to a diffuse group of owners, none
of whom will have controlling interest. This application is pending with the
FCC. If the application is granted, Motient would still retain its Board of
Directors membership but would no longer have the right to elect a majority of
the Company's Board of Directors.
8
<PAGE>
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and other sections herein,
including statements regarding the development of our business, the markets for
our services, our anticipated capital expenditures, and other similar statements
are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) which can be identified as any
statement that does not relate strictly to historical or current facts. Forward-
looking statements use such words as "plans", "expects", "will", "will likely
result", "are expected to", "will continue", "is anticipated", "estimate",
"project", "believes", "anticipates", "intends", "may", "should", "continue",
"seek", "could" and other similar reasonable expressions. Although we believe
that our expectations are based on reasonable assumptions, we can give no
assurance that our expectations will be achieved. The important factors that
could cause actual results to differ materially from those in the forward-
looking statements herein (the "Cautionary Statements") include, without
limitation, the key factors that have a direct bearing on our future results of
operations. These are the potential risk of delay in implementing our business
plan; possible increased costs of construction and launch of necessary
satellites; dependence on Hughes Space and Communications, Inc., LCC
International, and consumer electronics manufacturers; the availability of
receivers and antennas; risk of launch failure; unproven market for our proposed
service; unproven application of existing technology; difficulties in developing
with Sirius Radio a unified standard for satellite radio; our need for
additional financing, as well as other risks referenced from time to time in our
filings with the SEC, including our Form 8-K dated February 25, 2000. All
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
Cautionary Statements. We do not undertake any obligation to release publicly
any revisions to such forward-looking statements to reflect the occurrence of
unanticipated events.
The following discussion and analysis should be read in conjunction with our
Condensed Consolidated Financial Statements and Notes thereto included herewith,
and with our Management's Discussion and Analysis of Financial Condition and
Results of Operations and audited consolidated financial statements and notes
thereto for the three year period ended December 31, 1999, and for the period
from December 15, 1992 (date of inception) to December 31, 1999, included in our
Annual Report on Form 10-K.
OVERVIEW
XM Satellite Radio Inc. was incorporated in Delaware in 1992 as a wholly-owned
subsidiary of Motient Corporation ("Motient"), formerly American Mobile
Satellite Corporation. XM Satellite Radio Holdings Inc. became a holding company
for XM Satellite Radio Inc. in early 1997.
In October 1999, we completed an initial public offering which yielded net
proceeds of $114.1 million. Concurrent with the closing of our initial public
offering, $250.0 million of our Series A subordinated convertible notes,
together with associated accrued interest, converted into shares of Series A
convertible preferred stock and shares of Class A common stock. Additionally,
$103.1 million of convertible notes issued to Motient, together with associated
accrued interest, converted into shares of our Class B common stock.
In the first and second quarters of 2000, we completed:
. a follow-on offering of 4,370,000 shares of Class A common stock, which
yielded net proceeds of $132.1 million;
. a concurrent offering of 2,000,000 shares of Series B convertible
redeemable preferred stock, which yielded net proceeds of $96.5 million;
and
. a private placement of 325,000 units, each consisting of $1,000 principal
amount of 14% senior secured notes due 2010 and one warrant to purchase
8.024815 shares of Class A common stock at $49.50 per share which yielded
net proceeds of $191.3 million excluding $123.0 million for an interest
reserve.
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Subsequent to the second quarter of 2000, we completed a private placement of
235,000 shares of our Series C convertible redeemable preferred stock for
$1,000.00 per share, which yielded net proceeds of approximately $227,000,000.
The Company expects to record a $123.0 million beneficial convertible charge
that will reduce earnings available to common stockholders.
We are in the development stage. Since our inception in December 1992, we
have devoted our efforts to establishing and commercializing the XM Radio
system. Our activities were fairly limited until 1997, when we pursued and
obtained regulatory approval from the FCC to provide satellite radio service.
Our principal activities to date have included
. designing and developing the XM Radio system;
. negotiating contracts with satellite and launch vehicle operators,
specialty programmers, radio manufacturers and car manufacturers;
. developing technical standards and specifications;
. conducting market research; and
. securing financing for working capital and capital expenditures.
We have incurred substantial losses to date and expect to continue to incur
significant losses for the foreseeable future as we continue to design, develop
and deploy the XM Radio system and for some period following our commencement of
commercial operations.
We intend to capitalize all costs related to our satellite contract and our FCC
license, including all applicable interest. These capitalized costs will be
depreciated over the estimated useful lives of the satellites and ground control
stations. Depreciation of our satellites will commence upon in-orbit delivery.
Depreciation of our satellite control facilities and terrestrial repeaters and
the amortization of our FCC license will commence upon commercial operations.
After we begin commercial operations, which we are targeting for the second
quarter of 2001, we anticipate that our revenues will consist primarily of
customers' subscription fees and advertising revenues.
RESULTS OF OPERATIONS
Three Months Ended June 30, 2000 Compared With Three Months Ended June 30, 1999
Research and Development. Research and development expenses decreased to
approximately $0.2 million for the three months ended June 30, 2000, compared
with approximately $0.6 million for the three months ended June 30, 1999. The
decrease in the research and development expenses primarily resulted from the
completion of some of our system technology development during the second
quarter of 2000.
Professional Fees. Professional fees increased to approximately $5.2 million
for the three months ended June 30, 2000, compared with $1.3 million for the
three months ended June 30, 1999. The increase primarily reflects additional
legal, regulatory and marketing expenses as we engaged more consultants,
including incurring $3.2 million for enterprise information technology
consultants. We expect the professional fees to trend upward as we continue to
evaluate the system alternatives and develop market strategies.
General and Administrative. General and administrative expenses increased to
$8.5 million for the three months ended June 30, 2000, compared with $2.1
million for the three months ended June 30, 1999. The increase reflects
increased headcount and facilities expenses. We have granted certain key
executives stock options and incurred a non-cash compensation charge of
approximately $1.6 million in the second quarter of 2000 primarily for
performance-based stock options. We will continue to incur quarterly non-cash
compensation charges over the vesting period depending on the market value of
our Class A common stock at the end of the quarter. We also continued the
amortization of goodwill and other intangibles during the second quarter of
2000. We anticipate
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general and administrative expenses to continue to increase through commercial
operations.
Interest Income. Interest income increased to $8.9 million for the three months
ended June 30, 2000, compared to the three months ended June 30, 1999, which was
insignificant. The increase was the result of higher average balances of cash
and cash equivalents during the three months ended June 30, 2000, which exceeded
expenditures for satellite and launch vehicle construction, other capital
expenditures and operating expenses.
Interest Expense. We capitalized interest costs of $13.3 million and $4.0
million associated with our FCC license and the XM Radio system during the three
months ended June 30, 2000 and 1999, respectively. The increase was the result
of incurrence of new debt during the first quarter.
Net Loss. The net loss for the three-month periods ended June 30, 2000 and 1999
was $5.1 million and $4.0 million, respectively. The increase in net losses for
the three months ended June 30, 2000, compared with the three months ended June
30, 1999, reflects additional general and administration expenses, primarily due
to increased headcount and facility expenses in preparation for commercial
operations and the amortization of goodwill and intangibles.
Six Months Ended June 30, 2000 Compared With Six Months Ended June 30, 1999
Research and Development. Research and development expenses increased to
approximately $4.7 million for the six months ended June 30, 2000, compared with
approximately $1.4 million for the six months ended June 30, 1999. The increase
in the research and development expenses primarily resulted from the accelerated
development of some of our system technology during the first half of 2000.
Professional Fees. Professional fees increased to approximately $10.8 million
for the six months ended June 30, 2000, compared with $2.6 million for the six
months ended June 30, 1999. The increase primarily reflects additional legal,
regulatory and marketing expenses as we engaged more consultants, including
incurring $5.6 million for enterprise information technology consultants. We
expect the professional fees to trend upward as we continue to evaluate the
system alternatives and develop market strategies.
General and Administrative. General and administrative expenses increased to
$15.3 million for the six months ended June 30, 2000, compared with $4.5 million
for the six months ended June 30, 1999. The increase reflects increased
headcount and facilities expenses. We have granted certain key executives stock
options and incurred a non-cash compensation charge of approximately $2.3
million in the first half of 2000 primarily for performance-based stock options.
We will continue to incur quarterly non-cash compensation charges over the
vesting period depending on the market value of our Class A common stock at the
end of the quarter. We also continued the amortization of goodwill and other
intangibles during the first half of 2000. We anticipate general and
administrative expenses to continue to increase through commercial operations.
Interest Income. Interest income increased to $13.0 million for the six months
ended June 30, 2000, compared with $0.1 million for the six months ended June
30, 1999. The increase was the result of higher average balances of cash and
cash equivalents during the six months ended June 30, 2000, due to the proceeds
from the private placement of 14% senior secured notes and warrants and the
public offering of Class A common stock and Series B convertible redeemable
preferred stock, both in the first half of 2000, which exceeded expenditures for
satellite and launch vehicle construction, other capital expenditures and
operating expenses.
Interest Expense. We capitalized interest costs of $15.5 million and $8.6
million associated with our FCC license and the XM Radio system during the six
months ended June 30, 2000 and 1999, respectively. The increase was the result
of incurrence of new debt during the first quarter.
Net Loss. The net loss for the six-month periods ended June 30, 2000 and 1999
was $17.8 million and $8.4 million, respectively. The increase in net losses for
the six months ended June 30, 2000, compared with the six months ended June 30 ,
1999, reflects an increase in research and development expenses and additional
general and administration expenses, primarily due to increased headcount and
facility expenses in preparation for commercial operations and the amortization
of goodwill and intangibles.
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LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, we had a total of cash and cash equivalents of $267.4 million
and working capital of $305.0 million, compared with cash, cash equivalents and
short-term investments of $120.2 million and working capital of $94.7 million at
December 31, 1999. The increases in the respective balances are due primarily to
the proceeds from the issuance of Series B convertible redeemable preferred
stock, which yielded net proceeds of $96.5 million, a concurrent follow-on
offering of Class A common stock, which yielded net proceeds of $132.1 million,
and a private placement of 14% senior secured notes and warrants, which yielded
net proceeds of $191.3 million, which in the aggregate, exceeded capital
expenditures and operating expenses for the six months ended June 30, 2000.
Funds Required for XM Radio Through Commencement of Commercial Operations
We estimate that we will require approximately $1.1 billion to develop and
implement the XM Radio system from inception through the commencement of
commercial operations, targeted for the second quarter of 2001. Since inception,
we have raised an aggregate of $1.1 billion, net of expenses, interest reserve
and repayment of debt. These funds are expected to be sufficient, in the absence
of additional financing, to cover funding needs until the commencement of
commercial operations.
Sources of Funds
To date, we have raised approximately $1.1 billion of net proceeds, net of
expenses, interest reserve and repayment of debt. These funds have been used to
acquire our FCC license, make required payments for our system; including the
satellites, terrestrial repeater system, and ground networks, and for working
capital and operating expenses.
In the first and second quarter of 2000, we completed:
. a follow-on offering of 4,370,000 shares of Class A common stock, yielding
net proceeds of $132.1 million;
. a concurrent offering of 2,000,000 shares of our Series B convertible
redeemable preferred stock, which yielded net proceeds of $96.5 million;
and
. a private placement of 325,000 units, each consisting of $1,000 principal
amount of 14% senior secured notes due 2010 and one warrant to purchase
8.024815 shares of Class A common stock at $49.50 per share that provided
net proceeds of $191.3 million excluding $123.0 million for an interest
reserve.
Subsequent to the second quarter of 2000, we closed a private offering of
235,000 shares of our Series C convertible redeemable preferred stock, which
yielded net proceeds of approximately $227.0 million. The Company expects to
record a $123.0 million beneficial convertible charge that will reduce earnings
available to common stockholders. The issuance of the Series C preferred stock
caused the exercise price of the warrants sold in March 2000 to be adjusted to
$47.94.
Uses of Funds
Of the approximately $1.1 billion of funds to be used through commencement of
commercial operations, an estimated $569.4 million are expected to be incurred
under contracts presently in place and for our FCC license, which has already
been paid for in full. Total capital expenditures from inception to June 30,
2000 totaled $509.0 million.
Satellite Contract. Under our satellite contract, Hughes will deliver two
satellites in orbit and complete construction of a ground spare satellite.
Hughes will also provide ground equipment and software to be used in the XM
Radio system and certain launch and operations support services. We expect that
by commencement of commercial operations in the second quarter of 2001, we will
have had to pay an aggregate amount of approximately $472.6 million for these
items and for Hughes to complete the ground spare satellite. This amount does
not include incentive payments, which will depend in part on projected satellite
performance at the acceptance date. Such payments could total up to an
additional $68.7 million over the useful lives of the satellites. As of June 30,
2000, we
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had paid approximately $350.8 million under our satellite contract and have
recognized an additional $2.0 million in accrued milestone payments.
Launch Insurance. Based on current industry estimates, we expect that launch
insurance for both satellites will cost approximately $50.0 million. As of June
30, 2000, we had not incurred any costs with respect to launch insurance.
Terrestrial Repeater System. Based on the current design of the XM Radio system
and existing contracts, we estimate that through our expected commencement of
operations in the second quarter of 2001 we will incur aggregate costs of
approximately $263.3 million for a terrestrial repeater system. We expect these
costs to cover the capital cost of the design, development and installation of a
system of terrestrial repeaters to cover approximately 70 cities and
metropolitan areas. As of June 30, 2000, we had incurred costs with respect to
the terrestrial repeater buildout of $24.2 million which we paid. In August
1999, we signed a contract with LCC International, Inc., related party, calling
for payments of approximately $115.0 million for engineering and site
preparation. As of June 30, 2000, we had paid $13.9 million under this contract
and accrued an additional $13.7 million. We also entered into a contract
effective October 22, 1999, with Hughes Electronics Corporation for the design,
development and manufacture of the terrestrial repeaters. Payments under this
contract are expected to be approximately $128.0 million. As of June 30, 2000,
we had paid $12.5 million under this contract, and accrued an additional $0.1
million.
Ground Segment. Based on the design of the XM Radio system, available research
and existing contracts, we expect to incur aggregate ground segment costs
through the expected commencement of operations in the second quarter of 2001 of
approximately $65.9 million. We expect these costs will cover the satellite
control facilities, programming production studios and various other equipment
and facilities. As of June 30, 2000, we had incurred $21.9 million with respect
to the ground segment.
FCC License. In October 1997, we received one of two satellite radio licenses
issued by the FCC. We have paid approximately $90.0 million for this license,
including the initial bid right. There are no further payments required relating
to the license.
Operating Expenses and Working Capital Requirements. In addition to the above
capital needs, we will require funds for working capital, operating expenses and
royalty payments currently estimated to be approximately $138.3 million through
targeted commercial launch in the second quarter of 2001. From inception through
June 30, 2000, we have incurred total expenses of $72.6 million. Total cash used
in operating activities was $36.4 million. The difference between the loss
incurred to date and cash used in operations is principally due to $5.5 million
beneficial conversion charge, $6.5 million non- cash stock compensation charge
and $22.8 million in accounts payable and accrued expenses.
Joint Development Agreement Funding Requirements. We may require additional
funds to pay license fees or make contributions towards the development of the
technologies used to develop a unified standard for satellite radios under our
joint development agreement with Sirius Radio. Each party is obligated to fund
one half of the development cost for such technologies. Each party will be
entitled to license fees or a credit towards its one half of the cost based upon
the validity, value, use, importance and available alternatives of the
technology it contributes. The amounts of these fees or credits will be
determined over time by agreement of the parties or by arbitration. We cannot
predict at this time the amount of license fees or contribution payable by us or
Sirius Radio or the size of the credits to us and Sirius Radio from the use of
the other's technology. This may require significant additional capital.
Funds Required for XM Radio Following Commencement of Commercial Operations
Even after commencement of commercial operations, we expect to need significant
additional funds to cover our cash requirements before we generate sufficient
cash flow from operations to cover our expenses. We cannot accurately estimate
the amount of additional funds needed, since it will depend on business
decisions to be made in the future and revenues received from operations, but we
expect the amount to be substantial. Funds will be needed to cover operating
expenses, marketing and promotional expenses including an extensive marketing
campaign in connection with the launch of our service, distribution expenses,
programming costs and any further development of the XM Radio system that we may
undertake after operations commence. Marketing and distribution expenses are
expected to include joint advertising and joint development with and
manufacturing subsidies of certain costs of some of our manufacturers and
distribution partners. We cannot estimate accurately the total amount of these
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operational, promotional, subscriber acquisition, joint development and
manufacturing costs and expenses, but they are expected to be substantial.
We will have significant payment obligations after commencement of operations
under our distribution agreement with General Motors. We will pay an aggregate
of approximately $35 million in the first four years following commencement of
commercial service. After that, through 2009, we will have additional fixed
annual payments ranging from less than $35 million to approximately $130
million, aggregating approximately $400 million. In order to encourage the broad
installation of XM radios, we have agreed to subsidize a portion of the cost of
XM radios and to make incentive payments to General Motors when the owners of
General Motors vehicles with installed XM radios become subscribers for the XM
Radio service. We must also share with General Motors a percentage of the
subscription revenue attributable to General Motors vehicles with installed XM
radios. This percentage increases until there are more than eight million
General Motors vehicles with installed XM radios. This agreement is subject to
renegotiation if General Motors does not achieve and maintain specified
installation levels, starting with 1.24 million units after four years and
thereafter increasing by the lesser of 600,000 units per year and amounts
proportionate to our share of the satellite digital radio market.
We currently expect to satisfy our funding requirements for the period following
commencement of commercial operations by selling debt or equity securities and
by obtaining loans or other credit lines from banks or other financial
institutions. In addition, we plan to raise funds through vendor financing
arrangements associated with our terrestrial repeater project. If we are
successful in raising additional financing, we anticipate that a significant
portion of the financing will consist of debt. We are actively considering
possible financings, and because of our substantial capital needs we may
consummate one or more financings at any time.
We may not be able to raise any funds or obtain loans on favorable terms or at
all. Our ability to obtain the required financing depends on several factors,
including future market conditions; our success or lack of success in
developing, implementing and marketing our satellite radio service; our future
creditworthiness; and restrictions contained in agreements with our investors or
lenders. If we fail to obtain any necessary financing on a timely basis, a
number of adverse effects could occur. We could default on our commitments to
creditors or others and may have to discontinue operations or seek a purchaser
for our business or assets.
Recent Accounting Pronouncement
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions Involving Stock
Compensation ("FIN 44"). FIN 44 further defines the accounting consequences of
various modifications to the terms of a previously fixed stock option or award
under APB Opinion No. 25, Accounting for Stock Issued to Employees. FIN 44
becomes effective on July 1, 2000, but certain conclusions in FIN 44 cover
specific events that occur after either December 15, 1998 or January 12, 2000.
In July 1999, the Company repriced 818,339 options and FIN 44 requires that
these options be accounted for as variable from July 1, 2000 until the date the
award is exercised, is forfeited, or expires unexercised. For those options that
have vested as of July 1, 2000, compensation cost is recognized only to the
extent that the exercise price exceeds the stock price on July 1, 2000. For
those options that have not vested as of July 1, 2000, the portion of the
award's intrinsic value measured at July 1, 2000 is recognized over the
remaining vesting period. Additional compensation cost is measured for the full
amount of any increases in stock price after the effective date and is
recognized over the remaining vesting period. Any adjustment to compensation
cost for further changes in the stock price after the award vests is recognized
immediately. The effects of implementing FIN 44 may require the Company to
recognize additional non-cash compensation commencing in the third quarter of
2000.
Quantitative and Qualitative Disclosures About Market Risk
As of June 30, 2000, we do not have any derivative financial instruments and do
not intend to use derivatives. We invest our cash in short-term commercial
paper, investment-grade corporate and government obligations and money market
funds. Our long-term debt includes a fixed interest rate and the fair market
value of the debt is sensitive to changes in interest rates. We run the risk
that market rates will decline and the required payments will exceed those based
on current market rates. Under our current policies, we do not use interest rate
derivative instruments to manage our exposure to interest rate fluctuations.
Additionally, we believe that our exposure to interest rate risk is not material
to our results of operations.
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PART II: OTHER INFORMATION
Item 1: Legal Proceedings
On January 12, 1999, Sirius Radio, the other holder of an FCC satellite
radio license, commenced an action against us in the United States
District Court for the Southern District of New York, alleging that we
were infringing or would infringe three patents assigned to Sirius
Radio. In its complaint, Sirius Radio sought money damages to the extent
we manufactured, used or sold any product or method claimed in their
patents and injunctive relief. This suit was dismissed without prejudice
in February 2000 in accordance with the terms of a joint development
agreement between us and Sirius Radio in which both companies agreed to
develop a unified standard for satellite radios and license our
respective intellectual property, including the patents that were the
subject of the suit, for use in this joint development. If this
agreement is terminated before the value of the licenses has been
determined due to our failure to perform a material covenant or
obligation, then this suit could be refiled.
Item 2: Changes in Securities and Use of Proceeds
On August 8, 2000, we completed a private placement of 235,000 shares of
Series C convertible redeemable preferred stock, which yielded gross
proceeds of $235,000,000, or net proceeds of approximately $227,000,000
after expenses. The Series C preferred stock is convertible, at the
holders' option, into Class A common stock at the conversion price then
in effect. Currently, the conversion price is $26.50. The Series C
convertible redeemable preferred stock may be redeemed beginning on
February 8, 2005 in cash or, at the holder's option, in Class A Common
Stock. The Company must redeem the Series C convertible redeemable
preferred stock in Class A common stock on February 1, 2012. This sale
was exempt from registration under Section 4(2) of the Securities Act of
1933 and Regulation D thereunder.
Item 4: Submission of Matters to a Vote of Security Holders.
None.
Item 5 Other information.
Motient Corporation (formerly American Mobile Satellite Corporation) is
our controlling stockholder. Motient has certain rights regarding the
election of persons to serve on our board of directors and as of the
date of this report, holds approximately 55% of the voting power of XM
Satellite Radio Holdings, or 46% giving effect to the conversion of all
of our outstanding common stock equivalents. Motient cannot relinquish
its position as our controlling shareholder, its right to designate a
majority of our directors or hold less than 40% of our voting power
without obtaining the prior approval of the FCC.
On July 14, 2000, the Company filed an application with the FCC to allow
the Company to transfer its control from Motient to a diffuse group of
owners, none of whom will have controlling interest. This application is
pending with the FCC. If the application is granted, Motient would still
retain its Board of Directors membership but would no longer have the
right to elect a majority of the Company's Board of Directors.
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Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No. Description
----------- -----------
3.1/\ Restated Certificate of Incorporation of XM Satellite Radio Holdings
Inc.
3.2/\ Restated Bylaws of XM Satellite Radio Holdings Inc.
4.1 Form of Certificate for our Class A common stock (incorporated by
reference to Exhibit 3 to the XM Satellite Radio Holdings Inc.
Registration Statement on Form 8-A, filed with the SEC on September
23, 1999).
4.2/\/\ Form of Certificate for our 8.25% Series B Convertible Redeemable
Preferred Stock.
4.3/\/\/\ Certificate of Designation Establishing the Voting Powers,
Designations, Preferences, Limitations, Restrictions and Relative
Rights of 8.25% Series B Convertible Redeemable Preferred Stock due
2012.
4.4 Warrant to purchase shares of XM Satellite Radio Holdings Inc.'s
Class A common stock, dated February 9, 2000, issued to Sony
Electronics, Inc. (incorporated by reference to the Registrant's
quarterly report on Form 10-Q for the quarter ended March 31, 2000,
filed with the SEC on May 12, 2000).
10.1/\ Shareholders' Agreement, dated as of July 7, 1999, by and among XM
Satellite Radio Holdings Inc., American Mobile Satellite Corporation,
Baron Asset Fund, Clear Channel Investments, Inc., Columbia XM Radio
Partners, LLC, DIRECTV Enterprises, Inc., General Motors Corporation,
Madison Dearborn Capital Partners III, L.P., Special Advisors Fund I,
LLC, Madison Dearborn Special Equity III, L.P., and Telcom-XM
Investors, L.L.C.
10.2/\ Registration Rights Agreement, dated July 7, 1999, by and among XM
Satellite Radio Holdings Inc., American Mobile Satellite Corporation,
the Baron Asset Fund series of Baron Asset Fund, and the holders of
Series A subordinated convertible notes of XM Satellite Radio
Holdings Inc.
10.3/\ Note Purchase Agreement, dated June 7, 1999, by and between XM
Satellite Radio Holdings Inc., XM Satellite Radio Inc., Clear Channel
Communications, Inc., DIRECTV Enterprises, Inc., General Motors
Corporation, Telcom-XM Investors, L.L.C., Columbia XM Radio Partners,
LLC, Madison Dearborn Capital Partners III, L.P., Madison Dearborn
Special Equity III, L.P., and Special Advisors Fund I, LLC (including
form of Series A subordinated convertible note of XM Satellite Radio
Holdings Inc. attached as Exhibit A thereto).
10.4/\* Technology Licensing Agreement by and among XM Satellite Radio Inc.,
XM Satellite Radio Holdings Inc., WorldSpace Management Corporation
and American Mobile Satellite Corporation, dated as of January 1,
1998, amended by Amendment No. 1 to Technology Licensing Agreement,
dated June 7, 1999.
10.5/\* Technical Services Agreement between XM Satellite Radio Holdings Inc.
and American Mobile Satellite Corporation, dated as of January 1,
1998, as amended by Amendment No. 1 to Technical Services Agreement,
dated June 7, 1998.
10.6/\* Satellite Purchase Contract for In-Orbit Delivery, by and between XM
Satellite Radio Inc. and Hughes Space and Communications
International Inc., dated July 21, 1999.
10.7/\* Amended and Restated Agreement by and between XM Satellite Radio,
Inc. and STMicroelectronics Srl, dated September 27, 1999.
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10.8/\* Distribution Agreement, dated June 7, 1999, between OnStar, a
division of General Motors Corporation, and XM Satellite Radio Inc.
10.9/\* Operational Assistance Agreement, dated as of June 7, 1999,
between XM Satellite Radio Inc. and DIRECTV, INC.
10.10/\* Operational Assistance Agreement, dated as of June 7, 1999,
between XM Satellite Radio Inc. and Clear Channel Communication,
Inc.
10.11/\* Operational Assistance Agreement, dated as of June 7, 1999,
between XM Satellite Radio Inc. and TCM, LLC.
10.12/\ Agreement, dated as of July 16, 1999 between XM Satellite Radio
Holdings Inc. and Gary Parsons.
10.13/\ Employment Agreement, dated as of June 1, 1998, between XM
Satellite Radio Holdings Inc. and Hugh Panero.
10.14/\ Letter Agreement with Lee Abrams dated May 22, 1998.
10.15/\ Letter Agreement with Stelios Patsiokas dated September 14, 1998
10.16/\ Letter Agreement with Heinz Stubblefield dated May 22, 1998.
10.17/\ Form of Indemnification Agreement between XM Satellite Radio
Holdings Inc. and each of its directors and executive officers.
10.18/\ 1998 Shares Award Plan (incorporated by reference to the
Registrant's Registration Statement on Form S-8, File No. 333-
92049).
10.19/\ Form of Employee Non-Qualified Stock Option Agreement.
10.20/\* Firm Fixed Price Contract #001 between XM Satellite Radio Inc. and
the Fraunhofer Gesellschaft zur Foderung Der angewandten Forschung
e.V., dated July 16, 1999.
10.21/\* Contract for Engineering and Construction of Terrestrial Repeater
Network System by and between XM Satellite Radio Inc. and LCC
International, Inc., dated August 18, 1999.
10.22 Employee Stock Purchase Plan (Incorporated by reference to the
Registrant's Registration Statement on Form S-8, File No. 333-
42590, filed with the SEC on July 28, 2000).
10.23/\ Non-Qualified Stock Option Agreement between Gary Parsons and XM
Satellite Radio Holdings Inc., dated July 16, 1999.
10.24/\ Non-Qualified Stock Option Agreement between Hugh Panero and XM
Satellite Radio Holdings Inc., dated July 1, 1998, as amended.
10.25/\ Form of Director Non-Qualified Stock Option Agreement.
10.26/\ Lease between Consortium One Eckington, L.L.C. and XM Satellite
Radio Inc., dated September 29, 1999
10.27/\/\ Letter Agreement with Stephen Cook dated January 12, 1999
10.28/\/\/\* Contract for the Design, Development and Purchase of Terrestrial
Repeater Equipment by and between XM Satellite Radio Inc. and
Hughes Electronics Corporation, dated February 14, 2000.
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10.29* Joint Development Agreement , dated February 16, 2000, between XM
Satellite Radio Inc. and Sirius Satellite Radio Inc. (incorporated by
reference to the Registrant's quarterly report on Form 10-Q for the
quarter ended March 31, 2000, filed with the SEC on May 12, 2000)
21.1/\/\ Subsidiaries of XM Satellite Radio Holdings Inc.
27.1 Financial Data Schedule.
------------------
/\ Incorporated by reference to the Registrant's Registration Statement
on Form S-1, File No. 333-83619.
/\/\ Incorporated by reference to the Registrant's Registration Statement on
Form S-1, File No. 333-93529.
/\/\/\ Incorporated by reference to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1999, File No. 0-27441.
* Pursuant to the Commission's Orders Granting Confidential Treatment
under Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the
Securities Exchange Act of 1934, certain confidential portions of this
Exhibit were omitted by means of redacting a portion of the text.
(b) Reports on Form 8-K.
On July 14, 2000, we filed a Current Report on Form 8-K that reported the
issuance of a press release announcing our receipt of commitments to
purchase $235 million of a new series of preferred stock. The Company filed
the press release as an exhibit.
(c) Exhibits:
Exhibit 27.1 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
XM SATELLITE RADIO HOLDINGS INC.
(Registrant)
August 11, 2000 By: /s/ Heinz Stubblefield
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Heinz Stubblefield
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
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