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NOVEMBER 11, 2008
Sirius XM Posts $4.88 Billion Loss Due to Charge
Satellite-Radio Operator Faces Nearly $1 Billion in Debt Coming Due, as Subscriber Growth Is Hampered by Slowing
Economy
By SARAH M CBRIDE
Sirius XM Radio Inc. reported a $4.88 billion net loss for the third quarter,
reflecting a big impairment charge stemming from the decline of the company's
share price since the 2007 agreement to merge satellite-radio operators Sirius
Satellite Radio Inc. and XM Satellite Radio Holdings Inc.
Sirius XM has endured heavy turbulence since the merger closed at the end of
July. Subscriber growth has been hobbled by the slow economy, and Sirius XM
faces almost $1 billion in debt that comes due next year -- a problem the
company said Monday it is working with creditors to relieve.
Sirius XM's loss of $1.93 a share, on revenue of $488.4 million, compares with a
year-earlier loss of $120.1 million, or eight cents a share, on revenue of $241.8
million. The figures for this year's quarter reflect two months of the combined
Sirius-XM operation, and the year-ago quarter doesn't include XM, the larger of
the two merged companies.
The results include a $4.75 billion impairment charge to goodwill, largely
reflecting the drop in Sirius's share price from $3.70 when the deal was
announced in February 2007 to 27 cents, up one cent, in 4 p.m. Nasdaq trading
Monday.
The company said its Securities and Exchange Commission filing would be
delayed for up to five days to "carefully review" how to account for the value of
assets.
Sirius stressed pro-forma results assuming the two companies were merged
effective Jan. 1, 2007, which show a narrowing loss and higher revenue. Viewed
that way, the company showed a third-quarter loss of $217 million, or nine cents
a share, compared with a year-earlier loss of $265.5 million, or 18 cents a share.
Pro-forma revenue rose 16% to $613 million. But the pro-forma results don't
include the $4.75 billion impairment charge reflected in the actual results.
Sirius XM Chief Executive Mel Karmazin underscored the rising pro forma
http://online.wsj.com/article/SB122637502375916671.html
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Sirius XM Posts $4.88 Billion Loss Due to Charge - WSJ.com
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revenue but lamented the poor economic environment, particularly declining
auto sales, a key driver for satellite radio. He said it was "the most difficult
quarter that most of us have ever seen," and the company delivered "admirable
performance" given the economy's negative trends.
Mr. Karmazin said the company would lose less money than expected for 2008 -$300 million before expenses such as interest and depreciation, compared with
its previous estimate of $350 million. He reiterated that Sirius XM would earn
money, before expenses such as interest and depreciation, in 2009.
The satellite-radio company said it ended the third quarter with 18.9 million
subscribers. Last week, it cut its estimate for the year-end subscriber count to
19.1 million, down from its 19.5 million estimate in September. The estimates
indicate the company doesn't expect to add many subscribers in the normally
strong fourth quarter. Last year, Sirius and XM, then separate companies, added
a combined 1.1 million subscribers in the fourth quarter.
Mr. Karmazin said the company is in active discussions with both creditors and
with new investors who are considering putting money in the company. A $300
million debt payment due in February has been reduced in recent weeks to $210
million by exchanging the debt for stock, and Mr. Karmazin said he hopes to
announce shortly plans to refinance the remaining portion of the debt.
Meanwhile, the company is focusing "diligently" on keeping existing subscribers,
Mr. Karmazin said. Around half of customers who try satellite radio as part of
buying a new car elect to keep it after a promotional period.
He said consumer response to the company's "Best of Both" programming, in
which XM subscribers can pay an extra $4 a month to add a few Sirius channels,
and vice versa, was strong.
Write to Sarah McBride at sarah.mcbride@wsj.com
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