<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 0-24710
A. Full title of the plan and the address of the Plan, if different from that of
the issuer named below:
CD Radio 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
CD Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, NY 10020
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
<PAGE> 2
CD RADIO 401 (k) SAVINGS PLAN
SEPTEMBER 1, 1998 (INCEPTION) TO DECEMBER 31, 1998
INDEX
Page
Part I - Financial Statements (Unaudited)
Statement of Net Assets Available for Benefits as of December
31, 1998 1
Statement of Changes in Net Assets Available for Benefits for
the period from September 1, 1998 (Inception) to December
31, 1998 2
Notes to Financial Statements 3
Part II - Supplemental Schedules
Item 27 (a) - Schedule of Assets Held for Investment Purposes 8
Item 27 (d) - Schedule of Reportable Transactions 9
Signatures 10
<PAGE> 3
CD RADIO 401(k) SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENTS, at market value
CD Radio Inc. Common Stock - Non-participant Directed $ 138,467
CD Radio Inc. Common Stock - Participant Directed 108,925
Merrill Lynch S&P 500 Index Fund 34,678
Davis New York Venture Fund 19,474
Merrill Lynch Preservation Trust Fund 7,893
MFS Emerging Growth Fund 5,235
Merrill Lynch Global Allocation Fund 3,736
Merrill Lynch Basic Value Fund 3,147
IVY Bond Fund 2,830
AIM Constellation Fund 2,499
---------
Total Investments $ 326,884
Employer Contribution Receivable 12,526
Employee Contribution Receivable 12,526
---------
Assets Available for Benefits $ 351,936
Accrued Forfeitures (3,299)
---------
Net Assets Available for Benefits $ 348,637
=========
</TABLE>
The accompanying notes are an integral part of this financial statement.
1
<PAGE> 4
CD RADIO 401(k) SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 1, 1998 (INCEPTION) TO DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
CD Radio Inc. CD Radio Inc.
Common Stock- Common Stock - Merrill Lynch Davis New
Non-participant Participant S&P 500 Index York Venture
Directed Directed Fund Fund
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $ -- $ -- $ -- $ --
ADDITIONS:
Employer contributions 104,306 -- -- --
Employee contributions -- 30,524 31,668 18,097
Employee rollovers -- 62,150 -- --
Interest and dividend income -- -- -- --
Net appreciation of investments 34,161 15,224 4,479 2,217
--------- --------- --------- ---------
Total additions $ 138,467 $ 107,898 $ 36,147 $ 20,314
--------- --------- --------- ---------
DEDUCTIONS:
Forfeitures -- -- -- --
Distributions -- (590) (1,469) --
--------- --------- --------- ---------
Total Deductions $ -- $ (590) $ (1,469) $ --
--------- --------- --------- ---------
TRANSFERS AMONGST FUNDS -- 1,617 -- (840)
--------- --------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 138,467 $ 108,925 $ 34,678 $ 19,474
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
Merrill Lynch
Merrill Lynch Global Merrill Lynch
Preservation MFS Emerging Allocation Basic Value IVY Bond
Trust Fund Growth Fund Fund Fund Fund
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $ -- $ -- $ -- $ -- $ --
ADDITIONS:
Employer contributions -- -- -- -- --
Employee contributions 7,631 4,172 3,558 2,971 3,593
Employee rollovers -- -- -- -- --
Interest and dividend income 262 -- -- -- --
Net appreciation of investments -- 1,063 178 176 14
--------- --------- --------- --------- ---------
Total additions $ 7,893 $ 5,235 $ 3,736 $ 3,147 $ 3,607
--------- --------- --------- --------- ---------
DEDUCTIONS:
Forfeitures -- -- -- -- --
Distributions -- -- -- -- --
--------- --------- --------- --------- ---------
Total Deductions $ -- $ -- $ -- $ -- $ --
--------- --------- --------- --------- ---------
TRANSFERS AMONGST FUNDS -- -- -- -- (777)
--------- --------- --------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 7,893 $ 5,235 $ 3,736 $ 3,147 $ 2,830
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AIM
Constellation
Fund Other Total
---------------------------------------------
<S> <C> <C> <C>
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $ -- $ -- $ --
ADDITIONS:
Employer contributions -- 12,526 116,832
Employee contributions 2,092 12,526 116,832
Employee rollovers -- -- 62,150
Interest and dividend income -- -- 262
Net appreciation of investments 407 -- 57,919
--------- --------- ---------
Total additions $ 2,499 $ 25,052 $ 353,995
--------- --------- ---------
DEDUCTIONS:
Forfeitures -- (3,299) (3,299)
Distributions -- -- (2,059)
--------- --------- ---------
Total Deductions $ -- $ (3,299) (5,358)
--------- --------- ---------
TRANSFERS AMONGST FUNDS -- -- --
--------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 2,499 $ 21,753 $ 348,637
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
2
<PAGE> 5
CD RADIO 401 (k) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(UNAUDITED)
NOTE - 1 DESCRIPTION OF THE PLAN
CD Radio Inc. ("CD Radio") sponsors the CD Radio 401(k) Savings Plan (the
"Plan"). The inception date of the Plan was September 1, 1998 and the Plan has
an anniversary date of December 31.
As permitted by 29 CFR 2520.104-50 of the Department of Labor Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974 ("ERISA"), the Plan has elected to defer attaching an
accountant's opinion for the first of two plan years, one of which is a short
plan year of seven months or less.
The following description of the Plan provides only general information.
Participants should refer to the Plan document for a more complete description
of the Plan's provisions. Information with regard to eligibility, contributions,
distributions, vesting, trustees, withdrawals, loans, fund redistribution and
definitions of all terms are contained in that document.
General
The Plan is a defined contribution plan covering all non-union employees of CD
Radio who have attained 21 years of age. Participation in the Plan begins on the
first day of the first month following an employee's date of hire. The Plan is
subject to the provisions of ERISA.
Contributions
Participants may elect to contribute up to 12% of compensation, as defined,
provided their contributions do not exceed maximum allowable amounts under the
Internal Revenue Code (the "Code"). Under the Code, individual contributions for
which taxes may be deferred were limited to $10,000 in 1998. Contributions for
highly compensated participants, as defined, are limited to an amount set by the
plan administrator to permit the Plan to meet certain discrimination tests
required by the Code.
The Plan provides for employer matching contributions based on employee
contribution levels. For the initial Plan year, CD Radio provided a matching
employer contribution of dollar for dollar for the first $10,000 deferred. This
matching employer contribution was in the form of common stock of CD Radio. Each
plan year, CD Radio will review and determine the matching employer
contributions for the subsequent plan year. Employees are eligible to receive
the matching employer contribution during a year in which the employee has
performed at least one hour of service, regardless of employment status on the
last day of the plan year.
3
<PAGE> 6
CD Radio may also elect to contribute to the profit sharing portion of the Plan
based upon the total compensation of all participants eligible to receive an
allocation. These additional contributions, referred to as regular employer
contributions, will be limited to profits as determined by the 401(k) Committee
and will be determined for each plan year by CD Radio. Employees are only
eligible to share in regular employer contributions during any plan year in
which they are employed on the last day of the plan year.
Administrative Expenses
All administrative expenses are paid by the Plan, except to the extent paid by
the Plan sponsor. For the period ending December 31, 1998, administrative
expenses were funded by Plan forfeitures.
Participant Accounts
Each participant's account is credited with participant contributions, employer
matching and regular contributions and allocations of Plan earnings. Allocations
of investment income are based on participant earnings or account balances. The
benefit to which a member is entitled is the benefit that can be provided from
the participant's vested account.
Vesting
Participants are immediately vested in their contributions plus earnings
thereon. Vesting in company matching and regular contributions begins one year
after employment at a rate of 33 1/3% per year until the third year of
employment when 100% is vested. Notwithstanding the foregoing statement, a
participant becomes fully vested in his or her company matching and regular
contributions upon his or her retirement, disability, death, upon reaching age
65, or if there is a change in control of the employer.
Investment Options
Upon enrollment, participants may designate the funds in which their
contributions are to be invested, in increments of 5%. Participants may elect to
contribute or to modify a previous election before the first day of each month.
This may done by filing a written notice with the Plan Administrator or by
calling the interactive voice response system at least 10 days before the first
day of the month for which the modification is effective. The investment options
available are as follows:
- - CD Radio Inc. Common Stock- shares of CD Radio Inc. stock.
- - Merrill Lynch S & P 500 Index Fund- an index fund that invests in a
portfolio of equities that mirrors the Standard & Poor's 500 Index.
- - Davis New York Venture Fund- a growth fund investing primarily in
equities issued by companies with market capitalization of at least $250
million, though it may also hold securities of smaller companies.
4
<PAGE> 7
- - Merrill Lynch Preservation Trust Fund- a money market fund designed to
provide investors with high current income, consistent with liquidity
and stability of principal.
- - MFS Emerging Growth Fund- a mid-cap growth fund that normally invests at
least 80% of assets in common stocks of small and medium sized companies
having just begun their life cycle, but have the potential to become
major enterprises. The fund may also invest in established companies
with earnings growth that is expected to accelerate.
- - Merrill Lynch Global Allocation Fund- a multi-asset global fund that
invests in domestic and foreign equities, debt and money markets.
- - Merrill Lynch Basic Value Fund- a growth and income fund that invests
primarily in equities that are selling at a discount to their book
values or to their historical P/E ratios, or that seem capable of
recovering from temporarily unfavorable conditions.
- - IVY Bond Fund- a long-term bond fund that invests at least 65% of assets
in investment grade corporate bonds and government debt that mature in
more than 13 months.
- - AIM Constellation Fund- a mid-cap growth fund that invests primarily in
common stocks, emphasizing small to mid-size emerging growth companies.
All employer matching and regular contributions are invested in CD Radio stock.
Distributions of Benefits
Upon termination of employment due to death, disability, retirement, or upon
attaining age 59-1/2, a participant may receive a lump sum amount equal to the
value of the participant's vested interest in his or her account. In addition,
participants may elect to withdraw funds from their respective accounts in an
event of hardship, as defined.
Participant Loans
Participants have the ability to borrow against their vested account balance, up
to the lesser of $50,000 or 50% of their vested balance, with a minimum
borrowing of $1,000. Loans must generally be repaid within five years in equal
installments via payroll deductions, with the exception of loans taken to
purchase a principal residence, which may be repaid over a reasonable period of
time in excess of five years, as determined by the Plan Administrator. Loans are
secured by the balance in the participant's account and bear interest at a
comparable rate charged by a bank or other financial institution at the time of
the loan.
Forfeitures
Forfeitures of non-vested contributions are used to reduce matching employer
contributions or administrative expenses borne by the employer. At December 31,
1998, forfeited non-vested contributions totaled $3,299 and were used to pay
administrative expenses.
5
<PAGE> 8
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan are prepared under the accrual method of
accounting.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Plan Administrator to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results may differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Stocks and fund shares are
valued at their quoted market price.
Purchases and sales of securities are recorded on a trade-date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
Payment of Benefits
Benefits are recorded when paid.
NOTE 3 - FEDERAL INCOME TAX
The Plan sponsor has applied for an IRS determination letter in accordance with
applicable sections of the Code. Although determination has not yet been
granted, the Plan Administrator and Plan counsel believe that the Plan is
designed and currently being operated in compliance with the applicable
requirements of the Code.
NOTE 4 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company reserves the
right to terminate the Plan, in whole or in part, at any time. In the event that
such termination occurs, all amounts credited to participant accounts will
become 100% vested. The net assets of the Plan will be distributed by the
trustee in accordance with the Plan document in a uniform and nondiscretionary
manner.
NOTE 5 - PARTY-IN-INTEREST TRANSACTIONS
CD Radio and Merrill Lynch Trust Company, plan trustee, are parties-in-interest
with respect to the Plan under the provisions of ERISA. The records of the Plan
indicate no party-in-interest transactions which are prohibited by ERISA Section
406 and for which no statutory or administrative exemption exists.
6
<PAGE> 9
NOTE 6 - INVESTMENTS
The fair value of investments that individually represent 5% or more of the
Plan's net assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
CD Radio Inc. Common Stock $ 247,392
Merrill Lynch S&P 500 Index 34,678
Davis New York Venture Fund 19,474
</TABLE>
NOTE 7 - RECONCILIATION TO FORM 5500-C/R
The following is a reconciliation between the Form 5500-C/R and the enclosed
Statement of Net Assets Available for Benefits:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Net Assets Available for $ 346,751
Benefits per Form 5500-C/R
Accrued Benefits Payable 1,884
Miscellaneous 2
----------
Net Assets Available for Benefits $ 348,637
==========
</TABLE>
The following is a reconciliation between the Form 5500-C/R and the enclosed
Statement of Changes in Net Assets Available for Benefits:
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
Net Income per Form 5500-C/R $ 346,751
Benefits requested but not paid as of December 31, 1998 1,884
Miscellaneous 2
----------
Net Income per enclosed Statement of Changes in Net Assets Available for
Benefits $ 348,637
==========
</TABLE>
7
<PAGE> 10
SCHEDULE I
CD RADIO 401 (k) SAVINGS PLAN
ITEM 27a -- SCHEDULE OF ASSETS HELD FOR
INVESTMENT PURPOSES
DECEMBER 31, 1998
(UNAUDITED)
EIN 52-1700207
<TABLE>
<CAPTION>
(c) DESCRIPTION OF
INVESTMENT, INCLUDING
MATURITY DATE, RATE OF
(b) IDENTITY OF ISSUER, BORROWER, INTEREST, COLLATERAL, PAR
(a) LESSOR OR SIMILAR PARTY OR MATURITY VALUE (d) COST (e) CURRENT VALUE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
*CD Radio Inc. Common Stock, 7,092 shares in participation $193,975 $247,392
*Merrill Lynch Trust Company S&P 500 Index Fund, 2,268 shares in 31,759 34,678
participation
Davis Selected Advisors New York Venture Fund, 788 shares in 17,598 19,474
participation
*Merrill Lynch Trust Company Preservation Trust Fund, 7,893 shares in 7,893 7,893
participation
MFS Investment Management Emerging Growth Fund, 120 shares in 4,213 5,235
participation
*Merrill Lynch Trust Company Global Allocation Fund, 301 shares in 3,826 3,736
participation
*Merrill Lynch Trust Company Basic Value Fund, 84 shares in 3,009 3,147
participation
IVY Management, Inc. Bond Fund, 298 shares in participation 2,852 2,830
AIM Management Group Inc. Constellation Fund, 83 shares in 2,140 2,499
participation
-----------------------------
Total Investments $267,265 $326,884
=============================
</TABLE>
*Represents a party-in-interest
The accompanying notes are an integral part of this statement.
8
<PAGE> 11
SCHEDULE II
CD RADIO 401 (k) SAVINGS PLAN
ITEM 27d -- SCHEDULE OF REPORTABLE TRANSACTIONS (A)
SEPTEMBER 1, 1998 (INCEPTION) TO DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF (c) PURCHASE (g) COST OF
(a) IDENTITY OF PARTY INVOLVED (b) DESCRIPTION OF ASSET TRANSACTIONS PRICE (d) SELLING PRICE ASSET
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
*CD Radio Inc. Common Stock 16 $196,980 n/a $196,980
Common Stock 4 n/a $4,334 3,005
*Merrill Lynch Trust Company S&P 500 Index Fund 9 33,127 n/a 33,127
S&P 500 Index Fund 3 n/a 1,499 1,368
Davis Selected Advisors New York Venture Fund 7 18,379 n/a 18,379
New York Venture Fund 1 n/a 841 781
*Merrill Lynch Trust Company Preservation Trust Fund 61 7,893 n/a 7,893
MFS Investment Management Emerging Growth Fund 7 4,213 n/a 4,213
*Merrill Lynch Trust Company Global Allocation Fund 9 3,826 n/a 3,826
*Merrill Lynch Trust Company Basic Value Fund 8 3,009 n/a 3,009
IVY Management, Inc. Bond Fund 9 3,629 n/a 3,629
Bond Fund 1 n/a 772 777
AIM Management Group Inc. Constellation Fund 8 2,140 n/a 2,140
*Merrill Lynch Trust Company CMA Money Fund 17 128,504 n/a 128,504
CMA Money Fund 21 n/a 128,504 128,504
</TABLE>
<TABLE>
<CAPTION>
(h) CURRENT VALUE OF
ASSET ON (i) NET GAIN OR
(a) IDENTITY OF PARTY INVOLVED TRANSACTION DATE (LOSS)
- ------------------------------------------------------------------------
<S> <C> <C>
*CD Radio Inc. $196,980 n/a
4,334 $1,329
*Merrill Lynch Trust Company 33,127 n/a
1,499 131
Davis Selected Advisors 18,379 n/a
841 60
*Merrill Lynch Trust Company 7,893 n/a
MFS Investment Management 4,213 n/a
*Merrill Lynch Trust Company 3,826 n/a
*Merrill Lynch Trust Company 3,009 n/a
IVY Management, Inc. 3,629 n/a
772 (5)
AIM Management Group Inc. 2,140 n/a
*Merrill Lynch Trust Company 128,504 n/a
128,504 n/a
</TABLE>
(A) Reportable transactions are those purchases and sales of the same
security which, individually or in the aggregate, exceed 5% of the
Plan's assets as of the beginning of the plan year.
*Represents a party-in-interest
The accompanying notes to financial statements are an integral part of
this schedule.
9
<PAGE> 12
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange
Act of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CD RADIO 401(k) SAVINGS PLAN
By: /s/ John T. McClain
-----------------------------
John T. McClain
Vice President and Controller
(Chief Accounting Officer)
June 28, 1999
10
