SIRIUS XM HOLDINGS INC., 10-K filed on 1/30/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Jan. 28, 2019
Jun. 30, 2018
Document And Entity Information [Abstract]      
Entity Registrant Name SIRIUS XM HOLDINGS INC.    
Entity Central Index Key 0000908937    
Trading Symbol SIRI    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Filer Category Large Accelerated Filer    
Entity Emerging Growth Company false    
Entity Small Business false    
Entity Shell Company false    
Entity Public Float     $ 8,907,120,420
Entity Common Stock, Shares Outstanding   4,345,777,230  
v3.10.0.1
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Revenue:      
Total revenue $ 5,770,692 $ 5,425,129 $ 5,017,220
Cost of services:      
Subscriber acquisition costs 470,336 499,492 512,809
Sales and marketing 484,044 437,739 386,724
Engineering, design and development 123,219 112,427 82,146
General and administrative 356,819 334,023 341,106
Depreciation and amortization 300,720 298,602 268,979
Total operating expenses 4,043,744 3,784,265 3,585,091
Income from operations 1,726,948 1,640,864 1,432,129
Other income (expense):      
Interest expense (350,073) (345,820) (331,225)
Loss on extinguishment of debt 0 (43,679) (24,229)
Other income 43,699 12,844 14,985
Total other income (expense) (306,374) (376,655) (340,469)
Income before income taxes 1,420,574 1,264,209 1,091,660
Income tax expense (244,681) (616,301) (345,727)
Net income 1,175,893 647,908 745,933
Foreign currency translation adjustment, net of tax (28,613) 18,546 363
Total comprehensive income $ 1,147,280 $ 666,454 $ 746,296
Net income per common share:      
Basic (in dollars per share) $ 0.26 $ 0.14 $ 0.15
Diluted (in dollars per share) $ 0.26 $ 0.14 $ 0.15
Weighted average common shares outstanding:      
Basic (in shares) 4,461,827 4,637,553 4,917,050
Diluted (in shares) 4,560,720 4,723,535 4,964,728
Dividends declared per common share (in dollars per share) $ 0.0451 $ 0.041 $ 0.01
Subscriber revenue      
Revenue:      
Total revenue $ 4,593,803 $ 4,472,522 $ 4,196,852
Advertising revenue      
Revenue:      
Total revenue 187,569 160,347 138,231
Equipment      
Revenue:      
Total revenue 154,878 131,586 118,947
Cost of services:      
Cost of services 30,768 35,448 40,882
Music royalty fee and other revenue      
Revenue:      
Total revenue 834,442 660,674 563,190
Revenue share and royalties      
Cost of services:      
Cost of services 1,393,842 1,210,323 1,108,515
Programming and content      
Cost of services:      
Cost of services 405,686 388,033 353,779
Customer service and billing      
Cost of services:      
Cost of services 382,537 385,431 387,131
Satellite and transmission      
Cost of services:      
Cost of services $ 95,773 $ 82,747 $ 103,020
v3.10.0.1
CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 54,431 $ 69,022
Receivables, net 232,986 241,727
Inventory, net 22,198 20,199
Related party current assets 10,585 10,284
Prepaid expenses and other current assets 158,033 129,669
Total current assets 478,233 470,901
Property and equipment, net 1,512,865 1,462,766
Intangible assets, net 2,501,361 2,522,846
Goodwill 2,289,985 2,286,582
Related party long-term assets 960,316 962,080
Deferred tax assets 292,703 505,528
Other long-term assets 137,273 118,671
Total assets 8,172,736 8,329,374
Current liabilities:    
Accounts payable and accrued expenses 735,079 794,341
Accrued interest 128,204 137,428
Current portion of deferred revenue 1,931,613 1,881,825
Current maturities of debt 3,447 5,105
Related party current liabilities 4,335 2,839
Total current liabilities 2,802,678 2,821,538
Long-term deferred revenue 148,983 174,579
Long-term debt 6,884,536 6,741,243
Related party long-term liabilities 4,270 7,364
Deferred tax liabilities 47,251 8,169
Other long-term liabilities 101,939 100,355
Total liabilities 9,989,657 9,853,248
Commitments and contingencies (Note 15)
Stockholders’ (deficit) equity:    
Common stock, par value $0.001; 9,000,000 shares authorized; 4,345,606 and 4,530,928 shares issued; 4,345,606 and 4,527,742 outstanding at December 31, 2018 and December 31, 2017, respectively 4,346 4,530
Accumulated other comprehensive (loss) income, net of tax (6,193) 18,407
Additional paid-in capital 242,235 1,713,816
Treasury stock, at cost; 0 and 3,186 shares of common stock at December 31, 2018 and December 31, 2017, respectively 0 (17,154)
Accumulated deficit (2,057,309) (3,243,473)
Total stockholders’ (deficit) equity (1,816,921) (1,523,874)
Total liabilities and stockholders’ (deficit) equity $ 8,172,736 $ 8,329,374
v3.10.0.1
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized (in shares) 9,000,000,000 9,000,000,000
Common stock, shares issued (in shares) 4,345,606,000 4,530,928,000
Common stock, shares outstanding (in shares) 4,345,606,000 4,527,742,000
Treasury stock (in shares) 0 3,186,000
v3.10.0.1
CONSOLIDATED STATEMENT OF STOCKHOLDERS (DEFICIT) EQUITY - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Accumulated Other Comprehensive Income (Loss)
Additional Paid-in Capital
Treasury Stock
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Cumulative effect of change in accounting principle $ 293,896         $ 293,896
Beginning balance (in shares) at Dec. 31, 2015   5,153,451     5,804  
Beginning balance at Dec. 31, 2015 (166,491) $ 5,153 $ (502) $ 4,783,795 $ (23,727) (4,931,210)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Comprehensive income, net of tax 746,296   363     745,933
Share-based payment expense 97,539     97,539    
Exercise of options and vesting of restricted stock units (in shares)   13,411        
Exercise of options and vesting of restricted stock units 348 $ 13   335    
Minimum withholding taxes on net share settlement of stock-based compensation (42,827)     (42,827)    
Cash dividends paid on common shares (48,079)     (48,079)    
Common stock repurchased (in shares)         420,111  
Common stock repurchased (1,672,697)       $ (1,672,697)  
Common stock retired (in shares)   (420,815)     (420,815)  
Common stock retired 0 $ (421)   (1,673,097) $ 1,673,518  
Ending balance (in shares) at Dec. 31, 2016   4,746,047     5,100  
Ending balance at Dec. 31, 2016 (792,015) $ 4,745 (139) 3,117,666 $ (22,906) (3,891,381)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Comprehensive income, net of tax 666,454   18,546     647,908
Issuance of common stock as part of recapitalization of Sirius XM Canada (in shares)   35,000        
Issuance of common stock as part of recapitalization of Sirius XM Canada 178,850 $ 35   178,815    
Share-based payment expense 108,871     108,871    
Exercise of options and vesting of restricted stock units (in shares)   22,322        
Exercise of options and vesting of restricted stock units 774 $ 22   752    
Minimum withholding taxes on net share settlement of stock-based compensation (93,283)     (93,283)    
Cash dividends paid on common shares (190,242)     (190,242)    
Common stock repurchased (in shares)         270,527  
Common stock repurchased (1,403,283)       $ (1,403,283)  
Common stock retired (in shares)   (272,441)     (272,441)  
Common stock retired 0 $ (272)   (1,408,763) $ 1,409,035  
Ending balance (in shares) at Dec. 31, 2017   4,530,928     3,186  
Ending balance at Dec. 31, 2017 (1,523,874) $ 4,530 18,407 1,713,816 $ (17,154) (3,243,473)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Cumulative effect of change in accounting principle 44,682   4,013 30,398   10,271
Comprehensive income, net of tax 1,147,280   (28,613)     1,175,893
Share-based payment expense 133,175     133,175    
Exercise of options and vesting of restricted stock units (in shares)   26,837        
Exercise of options and vesting of restricted stock units 7 $ 28   (21)    
Minimum withholding taxes on net share settlement of stock-based compensation (119,625)     (119,625)    
Cash dividends paid on common shares (201,434)     (201,434)    
Common stock repurchased (in shares)         208,973  
Common stock repurchased (1,297,132)       $ (1,297,132)  
Common stock retired (in shares)   (212,159)     (212,159)  
Common stock retired 0 $ (212)   (1,314,074) $ 1,314,286  
Ending balance (in shares) at Dec. 31, 2018   4,345,606     0  
Ending balance at Dec. 31, 2018 $ (1,816,921) $ 4,346 $ (6,193) $ 242,235 $ 0 $ (2,057,309)
v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities:      
Net income $ 1,175,893 $ 647,908 $ 745,933
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 300,720 298,602 268,979
Non-cash interest expense, net of amortization of premium 9,297 9,050 8,608
Provision for doubtful accounts 50,824 55,715 55,941
Amortization of deferred income related to equity method investment (2,776) (2,776) (2,772)
Loss on extinguishment of debt 0 43,679 24,229
Loss (gain) on unconsolidated entity investments, net 10,479 (4,561) (12,529)
Gain on fair value instrument (42,617) (472) 0
Dividend received from unconsolidated entity investment 2,128 3,606 7,160
Loss on disposal of assets 0 0 (12,912)
Share-based payment expense 133,175 124,069 108,604
Deferred income taxes 256,575 583,520 323,562
Changes in operating assets and liabilities:      
Receivables (42,083) (73,777) (44,188)
Inventory (1,999) 1,874 1,932
Related party, net 1,046 (1,738) (3,485)
Prepaid expenses and other current assets (20,189) 50,194 7,156
Other long-term assets 10,385 7,333 38,835
Accounts payable and accrued expenses (20,086) 41,367 78,920
Accrued interest (9,224) 22,795 22,978
Deferred revenue 70,002 41,894 79,404
Other long-term liabilities (1,132) 7,307 (2,942)
Net cash provided by operating activities 1,880,418 1,855,589 1,719,237
Cash flows from investing activities:      
Additions to property and equipment (355,703) (287,970) (205,829)
Purchases of other investments (7,605) (7,847) (4,295)
Acquisitions, net of cash acquired (2,377) (107,273) 0
Investments in related parties and other equity investees (16,833) (612,465) 0
Repayment from (loan to) related party 3,242    
Repayment from (loan to) related party   (130,794) 0
Net cash used in investing activities (379,276) (1,146,349) (210,124)
Cash flows from financing activities:      
Proceeds from exercise of stock options 7 774 348
Taxes paid in lieu of shares issued for stock-based compensation (119,625) (92,619) (42,824)
Revolving credit facility, net of deferred financing costs 136,190 (90,000) 50,000
Proceeds from long-term borrowings, net of costs 0 2,473,071 987,143
Principal payments of long-term borrowings (15,998) (1,512,578) (660,985)
Payment of premiums on redemption of debt 0 (33,065) (19,097)
Common stock repurchased and retired (1,314,286) (1,409,035) (1,673,518)
Dividends paid (201,434) (190,242) (48,079)
Net cash used in financing activities (1,515,146) (853,694) (1,407,012)
Net decrease in cash, cash equivalents and restricted cash (14,004) (144,454) 102,101
Cash, cash equivalents and restricted cash at beginning of period 79,374 [1] 223,828 [1] 121,727
Cash, cash equivalents and restricted cash at end of period [1] 65,370 79,374 223,828
Cash paid during the period for:      
Interest, net of amounts capitalized 344,906 310,492 292,556
Income taxes paid 6,072 28,045 20,639
Non-cash investing and financing activities:      
Capital lease obligations incurred to acquire assets 499 2,577 6,647
Treasury stock not yet settled 17,154 5,752 821
Accumulated other comprehensive loss (income), net of tax 28,613 (18,546) (363)
Issuance of common stock as part of recapitalization of Sirius XM Canada $ 0 $ 178,850 $ 0
[1] The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year.Cash and cash equivalents : December 31, 2018: $54,431, December 31, 2017: $69,022, December 31, 2016: $213,939, December 31, 2015: $111,838 Restricted cash included in Prepaid expenses and other current assets : December 31, 2018: $150, December 31, 2017: $244, December 31, 2016 : $0, December 31, 2015: $0 Restricted cash included in Other long-term assets: December 31, 2018: $10,789, December 31, 2017: $10,108, December 31, 2016 : $9,889, December 31, 2015: $9,889 Total cash, cash equivalents and restricted cash at end of period: December 31, 2018: $65,370, December 31, 2017: $79,374, December 31, 2016 : $223,828, December 31, 2015: $121,727
v3.10.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Statement of Cash Flows [Abstract]        
Cash and cash equivalents $ 54,431 $ 69,022 $ 213,939 $ 111,838
Restricted cash included in Prepaid expenses and other current assets 150 244 0 0
Restricted cash included in Other long-term assets 10,789 10,108 9,889 9,889
Cash, cash equivalents and restricted cash at end of period $ 65,370 [1] $ 79,374 [1] $ 223,828 [1] $ 121,727
[1] The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year.Cash and cash equivalents : December 31, 2018: $54,431, December 31, 2017: $69,022, December 31, 2016: $213,939, December 31, 2015: $111,838 Restricted cash included in Prepaid expenses and other current assets : December 31, 2018: $150, December 31, 2017: $244, December 31, 2016 : $0, December 31, 2015: $0 Restricted cash included in Other long-term assets: December 31, 2018: $10,789, December 31, 2017: $10,108, December 31, 2016 : $9,889, December 31, 2015: $9,889 Total cash, cash equivalents and restricted cash at end of period: December 31, 2018: $65,370, December 31, 2017: $79,374, December 31, 2016 : $223,828, December 31, 2015: $121,727
v3.10.0.1
Business & Basis of Presentation
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Business & Basis of Presentation
Business & Basis of Presentation
This Annual Report on Form 10-K presents information for Sirius XM Holdings Inc. (“Holdings”).  The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein, and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries, and “Sirius XM” refers to our wholly-owned subsidiary Sirius XM Radio Inc. Holdings has no operations independent of its wholly-owned subsidiary, Sirius XM.
Business
We transmit music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through our two proprietary satellite radio systems. We also transmit a larger set of music and other channels and video programming through our streaming service. Our streaming service is available online and through applications for mobile devices, home devices and other consumer electronic equipment.  We also provide connected vehicle services.  Our connected vehicle services are designed to enhance the safety, security and driving experience for vehicle operators while providing marketing and operational benefits to automakers and their dealers.
We have agreements with every major automaker (“OEMs”) to offer satellite radio in their vehicles, through which we acquire the majority of our subscribers. We also acquire subscribers through marketing to owners and lessees of used vehicles that include factory-installed satellite radios that are not currently subscribing to our services. Our satellite radios are primarily distributed through automakers, retailers, and our website. Satellite radio services are also offered to customers of certain rental car companies.
Our primary source of revenue is subscription fees, with most of our customers subscribing to monthly, quarterly, semi-annual or annual plans.  We offer discounts for prepaid subscription plans, as well as a multiple subscription discount.  We also derive revenue from certain fees, the sale of advertising on select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as our weather, traffic and data services.
In many cases, a subscription to our radio services is included with the purchase or lease of new or previously owned vehicles. The length of these subscriptions varies but is typically three to twelve months.  We receive payments for these subscriptions from certain automakers.  We also reimburse various automakers for certain costs associated with satellite radios installed in new vehicles and pay revenue share to various automakers.
On September 23, 2018, Holdings entered into an agreement to acquire Pandora Media, Inc. (“Pandora”) in an all-stock transaction initially valued at $3.5 billion. In connection with the acquisition, each outstanding share of Pandora common stock, par value $0.0001 per share, will be converted into the right to receive 1.44 shares of Holdings common stock, par value $0.001 per share. The transaction is conditioned upon the vote of holders of a majority of the combined voting power of the outstanding shares of Pandora common stock and the outstanding shares of Pandora’s Series A Preferred Stock, voting together as a single class, in favor of the adoption of the merger agreement. In addition, the completion of the transaction is subject to other customary conditions, including, among others, the absence of any law or order that prohibits or makes illegal the merger and, subject to certain exceptions, the accuracy of the representations and warranties of each party and compliance by the parties with their respective covenants. The transaction is expected to close in the first quarter of 2019. Refer to Note 11 for more information on this transaction.
As of December 31, 2018, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 73% of the outstanding shares of our common stock.  As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements.
Basis of Presentation
The accompanying consolidated financial statements of Holdings and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation.
Public companies are required to disclose certain information about their reportable operating segments.  Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have one reportable segment as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the consolidated results of operations of our business.
We have evaluated events subsequent to the balance sheet date and prior to the filing of this Annual Report on Form 10-K for the year ended December 31, 2018 and have determined that no events have occurred that would require adjustment to our consolidated financial statements.  For a discussion of subsequent events that do not require adjustment to our consolidated financial statements refer to Note 17.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes.  Estimates, by their nature, are based on judgment and available information.  Actual results could differ materially from those estimates.  Significant estimates inherent in the preparation of the accompanying consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense, and income taxes.
v3.10.0.1
Acquisition
12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
Acquisition
Acquisition
On April 18, 2017, Sirius XM acquired Automatic Labs Inc. (“Automatic”), a connected vehicle device and mobile application company, for an aggregate purchase price of $107,736, net of cash and restricted cash acquired of $819. The transaction was accounted for using the acquisition method of accounting. No purchase price adjustments were recorded during the year ended December 31, 2018. As of December 31, 2018, the Goodwill balance associated with the acquisition was $81,475
v3.10.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
In addition to the significant accounting policies discussed in this Note 3, the following table includes our significant accounting policies that are described in other notes to our consolidated financial statements, including the number and page of the note:
Significant Accounting Policy
 
Note #
 
Page #
Fair Value Measurements
 
4

 
Goodwill
 
8

 
Intangible Assets
 
9

 
Property and Equipment
 
10

 
Equity Method Investments
 
11

 
Share-Based Compensation
 
14

 
Legal Reserves
 
15

 
Income Taxes
 
16

 

Cash and Cash Equivalents
Our cash and cash equivalents consist of cash on hand, money market funds, certificates of deposit, in-transit credit card receipts and highly liquid investments purchased with an original maturity of three months or less.
Revenue Recognition
Revenue is measured according to Accounting Standards Codification ("ASC") 606, Revenue - Revenue from Contracts with Customers, and is recognized based on consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. We recognize revenue when it satisfies a performance obligation by transferring control over a service or product to a customer. We report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing transaction between a seller and a customer in our consolidated statements of comprehensive income. For equipment sales, we are responsible for arranging for shipping and handling. Shipping and handling costs billed to customers are recorded as revenue and are reported as a component of Cost of equipment.
The following is a description of the principal activities from which we generate our revenue, including from self-pay and paid promotional subscribers, advertising, and sales of equipment.
Subscriber revenue consists primarily of subscription fees and other ancillary subscription based revenues. Revenue is recognized on a straight line basis when the performance obligations to provide each service for the period are satisfied, which is over time as our subscription services are continuously transmitted and can be consumed by customers at any time. Consumers purchasing or leasing a vehicle with a factory-installed satellite radio typically receive between a three and twelve month subscription to our service.  In certain cases, the subscription fees for these consumers are prepaid by the applicable automaker. Prepaid subscription fees received from automakers or directly from consumers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon sale. Activation fees are recognized over one month as the activation fees are non-refundable and do not provide for a material right to the customer. There is no revenue recognized for unpaid trial subscriptions. In some cases we pay a loyalty fee to the OEM when we receive a certain amount of payments from self-pay customers acquired from that OEM. These fees are considered incremental costs to obtain a contract and are, therefore, recognized as an asset and amortized to Subscriber acquisition costs over an average subscriber life. Revenue share and loyalty fees paid to an OEM offering a paid trial are accounted for as a reduction of revenue as the payment does not provide a distinct good or service.
We recognize revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising; therefore, revenue is recognized at a point in time when each advertising spot is transmitted. Agency fees are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory and are reported as a reduction of advertising revenue.  Additionally, we pay certain third parties a percentage of advertising revenue.  Advertising revenue is recorded gross of such revenue share payments as we control the advertising service, including the ability to establish pricing, and we are primarily responsible for providing the service.  Advertising revenue share payments are recorded to Revenue share and royalties during the period in which the advertising is transmitted.
Equipment revenue and royalties from the sale of satellite radios, components and accessories are recognized when the performance obligation is satisfied and control is transferred, which is generally upon shipment. Revenue is recognized net of discounts and rebates. Shipping and handling costs billed to customers are recorded as revenue.  Shipping and handling costs associated with shipping goods to customers are reported as a component of Cost of equipment.
Music royalty fee and other revenue primarily consists of U.S. music royalty fees ("MRF") collected from subscribers. The related costs we incur for the right to broadcast music and other programming are recorded as Revenue share and royalties expense.  Fees received from subscribers for the MRF are recorded as deferred revenue and amortized to revenue ratably over the service period as the royalties relate to the subscription services which are continuously delivered to our customers.
Customers pay for the services in advance of the performance obligation and therefore these prepayments are recorded as deferred revenue. The deferred revenue is recognized as revenue in our consolidated statement of comprehensive income as the services are provided. Changes in the deferred revenue balance during the period ended December 31, 2018 was not materially impacted by other factors.
As the majority of our contracts are one year or less, we have utilized the optional exemption under ASC 606-10-50-14 and will not disclose information about the remaining performance obligations for contracts which have original expected durations of one year or less. As of December 31, 2018, less than ten percent of our total deferred revenue balance related to contracts that extended beyond one year. These contracts primarily include prepaid data trials which are typically provided for three to five years as well as for self-pay customers who prepay for their audio subscriptions for up to three years in advance. These amounts are recognized on a straight-line basis as our services are provided.
Revenue Share
We share a portion of our subscription revenues earned from self-pay subscribers with certain automakers.  The terms of the revenue share agreements vary with each automaker, but are typically based upon the earned audio revenue as reported or gross billed audio revenue.
Programming Costs
Programming costs which are for a specified number of events are amortized on an event-by-event basis; programming costs which are for a specified season or include programming through a dedicated channel are amortized over the season or period on a straight-line basis. We allocate a portion of certain programming costs which are related to sponsorship and marketing activities to Sales and marketing expense on a straight-line basis over the term of the agreement.
Advertising Costs
Media is expensed when aired and advertising production costs are expensed as incurred.  Advertising production costs include expenses related to marketing and retention activities, including expenses related to direct mail, outbound telemarketing and email communications.  We also incur advertising production costs related to cooperative marketing and promotional events and sponsorships.  During the years ended December 31, 2018, 2017 and 2016, we recorded advertising costs of $266,935, $262,701 and $226,969, respectively.  These costs are reflected in Sales and marketing expense in our consolidated statements of comprehensive income.
Subscriber Acquisition Costs
Subscriber acquisition costs consist of costs incurred to acquire new subscribers which include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; commissions paid to retailers and automakers as incentives to purchase, install and activate radios; product warranty obligations; freight; and provisions for inventory allowance attributable to inventory consumed in our OEM and retail distribution channels.  Subscriber acquisition costs do not include advertising costs, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios.
Subsidies paid to radio manufacturers and automakers are expensed upon installation, shipment, receipt of product or activation and are included in Subscriber acquisition costs because we are responsible for providing the service to the customers.  Commissions paid to retailers and automakers are expensed upon either the sale or activation of radios.  Chipsets that are shipped to radio manufacturers and held on consignment are recorded as inventory and expensed as Subscriber acquisition costs when placed into production by radio manufacturers.  Costs for chipsets not held on consignment are expensed as Subscriber acquisition costs when the automaker confirms receipt.
Research & Development Costs
Research and development costs are expensed as incurred and primarily include the cost of new product development, chipset design, software development and engineering.  During the years ended December 31, 2018, 2017 and 2016, we recorded research and development costs of $105,975, $96,917 and $69,025, respectively.  These costs are reported as a component of Engineering, design and development expense in our consolidated statements of comprehensive income.
Accumulated Other Comprehensive (Loss) Income, net of tax
Accumulated other comprehensive loss of $6,193 was primarily comprised of the cumulative foreign currency translation adjustments related to Sirius XM Canada (refer to Note 11 for additional information). During the year ended December 31, 2018, we recorded a foreign currency translation adjustment loss of $28,613, which is recorded net of tax of $9,451. In addition, we reclassified stranded tax effects of $4,013 related to the adoption of Accounting Standards Update ("ASU") 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. During the years ended December 31, 2017 and 2016, we recorded foreign currency translation adjustment gains of $18,546 and $363, respectively, net of tax.
Recent Accounting Pronouncements
In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The implementation costs incurred in a hosting arrangement that is a service contract should be presented as a prepaid asset in the balance sheet and expensed over the term of the hosting arrangement to the same line item in the statement of income as the costs related to the hosting fees. The guidance in this ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted including adoption in any interim period. The amendments should be applied either retrospectively or prospectively to all implementation costs incurred after adoption. This ASU will not have a material impact on our consolidated statements of operations.
In February 2016, FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, amending certain aspects of the new leasing standard. The amendment allows an additional optional transition method whereby an entity records a cumulative effect adjustment to opening retained earnings in the year of adoption without restating prior periods. We will adopt this ASU on January 1, 2019 and elected the additional transition method and do not expect to record a cumulative effect adjustment to opening Accumulated deficit. Our leases consist of repeater leases, facility leases and equipment leases. We expect the adoption of ASU 2016-02 will result in the recognition of right-of-use assets of approximately $360,000 and lease liabilities of approximately $370,000 in our consolidated balance sheets for operating leases and will not impact our consolidated statements of operations or our debt.
Recently Adopted Accounting Policies
ASU 2014-09, Revenue - Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09 which requires entities to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We adopted ASU 2014-09, and all related amendments, which established ASC Topic 606 (the "new revenue standard"), effective as of January 1, 2018. We adopted the new revenue standard using the modified retrospective method by recognizing the cumulative effect of initially applying the new revenue standard to all non-completed contracts as of January 1, 2018 as an adjustment to opening Accumulated deficit in the period of adoption. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.
The new revenue standard primarily impacts how we account for revenue share payments and also has other immaterial impacts.
Revenue Share - Paid Trials
We previously recorded revenue share related to paid trials as Revenue share and royalties expense. Under the new revenue standard, we have recorded these revenue share payments as a reduction to revenue as the payments do not transfer a distinct good or service to us. Prior to the adoption, we recognized revenue share related to paid trial subscriptions as the Current portion of deferred revenue. Under the new revenue standard, we reclassified the revenue share related to paid trial subscriptions existing as of the date of adoption from Current portion of deferred revenue to Accounts payable and accrued expenses. For new paid trial subscriptions, the net amount of the paid trial subscription is recorded as deferred revenue and the portion of revenue share is recorded to Accounts payable and accrued expenses.
Other Impacts
Other impacts of the new revenue standard include:
Activation fees were previously recognized over the expected subscriber life using the straight-line method. Under the new revenue standard, activation fees have been recognized over a one month period from activation as the activation fees are non-refundable and they do not convey a material right. As of January 1, 2018, we reduced deferred revenue related to activation fees of $8,260, net of tax, to Accumulated deficit.
Loyalty payments to OEMs were previously expensed when incurred as Subscriber acquisition costs. Under the new revenue standard, these costs have been capitalized in Prepaid expenses and other current assets as costs to obtain a contract and these costs will be amortized to Subscriber acquisition costs over an average self-pay subscriber life of that OEM. As of January 1, 2018, we capitalized previously expensed loyalty payments of $10,156, net of tax, to Prepaid expenses and other current assets by reducing Accumulated deficit.
These changes do not have a material impact to our financial statements.
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. In February 2018, the FASB issued ASU 2018-02 to amend its standard on comprehensive income to provide an option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) that was passed in December 2017 from accumulated other comprehensive income (“AOCI”) directly to retained earnings. The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement. The guidance is effective for interim and fiscal years beginning after December 15, 2018, with early adoption permitted. We elected to adopt ASU 2018-02 effective January 1, 2018 and reclassified the stranded tax effects due to the Tax Act of $4,013 related to the currency translation adjustment from our investment balance and note receivable with Sirius XM Canada from AOCI to Accumulated deficit. The adoption did not have any impact on our consolidated statement of comprehensive income.
ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. In June 2018, the FASB issued ASU 2018-07 which simplifies the accounting for share-based payments made to nonemployees so that the accounting for such payments is substantially the same as those made to employees, with certain exceptions. Under this ASU, equity-classified share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to ASC 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees, unless the award is modified after the service has been rendered, any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and the nonemployee is no longer providing services. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. We elected to early adopt ASU 2018-07 effective July 1, 2018 and remeasured our unsettled liability-classified nonemployee awards at their January 1, 2018 fair value by recording a retrospective cumulative effect adjustment to opening Accumulated deficit and reclassified our previously liability-classified awards to equity.
The cumulative effects of the changes made to our consolidated balance sheet as of January 1, 2018 for the adoption of ASU 2014-09, ASU 2018-02 and ASU 2018-07 are included in the table below.
 
Balance at
December 31, 2017
 
Adjustments Due to ASU 2014-09
 
Adjustments Due to ASU 2018-02
 
Adjustments Due to ASU 2018-07
 
Balance at
January 1, 2018
Balance Sheet
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Prepaid expenses and other current assets
$
129,669

 
$
8,262

 
$

 
$

 
$
137,931

Other long-term assets
118,671

 
2,576

 

 

 
121,247

Deferred tax assets
505,528

 
(5,915
)
 

 

 
499,613

 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
794,341

 
32,399

 

 
(26,266
)
 
800,474

Current portion of deferred revenue
1,881,825

 
(41,902
)
 

 

 
1,839,923

Long-term deferred revenue
174,579

 
(3,990
)
 

 

 
170,589

 
 
 
 
 

 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
Additional paid-in capital
1,713,816

 

 

 
30,398

 
1,744,214

Accumulated deficit
(3,243,473
)
 
18,416

 
(4,013
)
 
(4,132
)
 
(3,233,202
)
AOCI, net of tax
18,407

 

 
4,013

 

 
22,420


The following tables illustrate the impacts of adopting ASU 2014-09 on our consolidated statement of comprehensive income.
 
For the Year Ended December 31, 2018
 
As Reported
 
Impact of Adopting ASU 2014-09
 
Balances Without Adoption of ASU 2014-09
Income Statement
 
 
 
 
 
Revenues
 
 
 
 
 
Subscriber revenue
$
4,593,803

 
$
94,767

 
$
4,688,570

 
 
 
 
 
 
Expenses
 
 
 
 
 
Revenue share and royalties
1,393,842

 
88,122

 
1,481,964

Subscriber acquisition costs
470,336

 
3,540

 
473,876

Income tax expense
(244,681
)
 
(534
)
 
(245,215
)
 
 
 
 
 
 
Net Income
$
1,175,893

 
$
2,571

 
$
1,178,464


ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This ASU updates the guidance related to the statement of cash flows and requires that the statement includes restricted cash with cash and cash equivalents when reconciling beginning and ending cash. The guidance was effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. We adopted this ASU effective January 1, 2018. As a result of the adoption, we have added restricted cash to the reconciliation of beginning and ending cash and cash equivalents and included a reconciliation of total cash, cash equivalents and restricted cash to the balance sheet for each period presented in the consolidated statements of cash flows.
ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. We elected to early adopt this ASU in the third quarter of 2016, which required that any adjustments be reflected as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture calculations, and classification on the statement of cash flows. The primary impact of adoption of ASU 2016-09 was the recognition of excess tax benefits in our provision for income taxes.
Additionally, we recognized net operating losses related to excess share-based compensation tax return deductions that were previously tracked off balance sheet but not recorded in our financial statements. As of January 1, 2016, $293,896, net of a $1,946 reserve for an uncertain tax position, was recorded as an increase to our Deferred tax assets and decrease to our Accumulated deficit in our consolidated balance sheets as a result of the cumulative effect of this change in accounting principle.
v3.10.0.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants. As of December 31, 2018 and 2017, the carrying amounts of cash and cash equivalents, receivables, and accounts payable approximated fair value due to the short-term nature of these instruments. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for input into valuation techniques as follows:
i.
Level 1 input: unadjusted quoted prices in active markets for identical instrument;
ii.
Level 2 input: observable market data for the same or similar instrument but not Level 1, including quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and
iii.
Level 3 input: unobservable inputs developed using management's assumptions about the inputs used for pricing the asset or liability.
Investments are periodically reviewed for impairment and an impairment is recorded whenever declines in fair value below carrying value are determined to be other than temporary. In making this determination, we consider, among other factors, the severity and duration of the decline as well as the likelihood of a recovery within a reasonable timeframe.
Our assets and liabilities measured at fair value were as follows:
 
December 31, 2018
 
December 31, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total Fair
Value
Assets:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Pandora investment (a)

 
$
523,089

 

 
$
523,089

 

 
$
480,472

 

 
$
480,472

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Debt (b)

 
$
6,632,505

 

 
$
6,632,505

 

 
$
6,987,473

 

 
$
6,987,473

(a)
During the year ended December 31, 2017, Sirius XM completed a $480,000 investment in Pandora. We have elected the fair value option to account for this investment. Refer to Note 11 for information on this transaction.
(b)
The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm.  Refer to Note 12 for information related to the carrying value of our debt as of December 31, 2018 and 2017.
v3.10.0.1
Earnings per Share
12 Months Ended
Dec. 31, 2018
Earnings Per Share [Abstract]  
Earnings per Share
Earnings per Share
Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period.  Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options and restricted stock units) were exercised or converted into common stock, calculated using the treasury stock method. We had no participating securities during the years ended December 31, 2018, 2017 and 2016.
Common stock equivalents of 39,877, 40,541 and 208,202 for the years ended December 31, 2018, 2017 and 2016, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.
 
For the Years Ended December 31,
 
2018
 
2017(1)
 
2016
Numerator:
 
 
 
 
 
Net income available to common stockholders for basic and diluted net income per common share
$
1,175,893

 
$
647,908

 
$
745,933

Denominator:
 

 
 
 
 
Weighted average common shares outstanding for basic net income per common share
4,461,827

 
4,637,553

 
4,917,050

Weighted average impact of dilutive equity instruments
98,893

 
85,982

 
47,678

Weighted average shares for diluted net income per common share
4,560,720

 
4,723,535

 
4,964,728

Net income per common share:
 

 
 
 
 
Basic
$
0.26

 
$
0.14

 
$
0.15

Diluted
$
0.26

 
$
0.14

 
$
0.15


(1)
Our net income per basic and diluted share includes the impact of $184,599 in income tax expense, or a decrease of approximately $0.04 per share due to the reduction in our net deferred tax asset balance as a result of the Tax Act.
v3.10.0.1
Receivables, net
12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Receivables, net
Receivables, net
Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables.
Customer accounts receivable, net, includes receivables from our subscribers and other customers, including advertising, and is stated at amounts due, net of an allowance for doubtful accounts. Our allowance for doubtful accounts is based upon our assessment of various factors.  We consider historical experience, the age of the receivable balances, current economic conditions and other factors that may affect the counterparty’s ability to pay.  Bad debt expense is included in Customer service and billing expense in our consolidated statements of comprehensive income.
Receivables from distributors primarily include billed and unbilled amounts due from OEMs for services included in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios.  Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced.  We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with OEMs or other third parties.
Receivables, net, consists of the following:
 
December 31, 2018
 
December 31, 2017
Gross customer accounts receivable
$
104,604

 
$
100,342

Allowance for doubtful accounts
(6,618
)
 
(9,500
)
Customer accounts receivable, net
$
97,986

 
$
90,842

Receivables from distributors
107,251

 
121,410

Other receivables
27,749

 
29,475

Total receivables, net
$
232,986

 
$
241,727

v3.10.0.1
Inventory, net
12 Months Ended
Dec. 31, 2018
Inventory Disclosure [Abstract]  
Inventory, net
Inventory, net
Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios and connected vehicle devices. Inventory is stated at the lower of cost or market.  We record an estimated allowance for inventory that is considered slow moving or obsolete or whose carrying value is in excess of net realizable value.  The provision related to products purchased for resale in our direct to consumer distribution channel and components held for resale by us is reported as a component of Cost of equipment in our consolidated statements of comprehensive income.  The provision related to inventory consumed in our OEM channel is reported as a component of Subscriber acquisition costs in our consolidated statements of comprehensive income.
Inventory, net, consists of the following:
 
December 31, 2018
 
December 31, 2017
Raw materials
$
4,854

 
$
6,489

Finished goods
23,056

 
21,225

Allowance for obsolescence
(5,712
)
 
(7,515
)
Total inventory, net
$
22,198

 
$
20,199

v3.10.0.1
Goodwill
12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill
Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our single reporting unit is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASC 350, Intangibles - Goodwill and Other, states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASC 350 also states that a reporting unit with a zero or negative carrying amount is not required to perform a qualitative assessment. The carrying amount recorded for our one reporting unit and goodwill was $(1,816,921) and $2,289,985, respectively, as of December 31, 2018.
We recorded $3,403 to Goodwill related to an immaterial acquisition during the year ended December 31, 2018.
As of December 31, 2018, there were no indicators of impairment, and no impairment losses were recorded for goodwill during the years ended December 31, 2018 and 2017.  As of December 31, 2018, the cumulative balance of goodwill impairments recorded since the July 2008 merger between our wholly owned subsidiary, Vernon Merger Corporation, and XM Satellite Radio Holdings Inc. (“XM”), was $4,766,190, which was recognized during the year ended December 31, 2008.
v3.10.0.1
Intangible Assets
12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Intangible Assets
Our intangible assets include the following:
 
 
 
December 31, 2018
 
December 31, 2017
 
Weighted
Average
Useful Lives
 
Gross
Carrying
Value
 
Accumulated Amortization
 
Net Carrying
Value
 
Gross
Carrying
Value
 
Accumulated Amortization
 
Net Carrying
Value
Indefinite life intangible assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

FCC licenses
Indefinite
 
$
2,083,654

 
$

 
$
2,083,654

 
$
2,083,654

 
$

 
$
2,083,654

Trademarks
Indefinite
 
250,800

 

 
250,800

 
250,800

 

 
250,800

Definite life intangible assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

Subscriber relationships
9 years
 

 

 

 
380,000

 
(380,000
)
 

OEM relationships
15 years
 
220,000

 
(75,778
)
 
144,222

 
220,000

 
(61,111
)
 
158,889

Licensing agreements
12 years
 
45,289

 
(38,012
)
 
7,277

 
45,289

 
(34,350
)
 
10,939

Software and technology
7 years
 
35,572

 
(20,164
)
 
15,408

 
43,915

 
(25,351
)
 
18,564

Total intangible assets
 
 
$
2,635,315

 
$
(133,954
)
 
$
2,501,361

 
$
3,023,658

 
$
(500,812
)
 
$
2,522,846



Indefinite Life Intangible Assets
We have identified our FCC licenses and the XM and Automatic trademarks as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use.
We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. Each of the FCC licenses authorizes us to use radio spectrum, a reusable resource that does not deplete or exhaust over time.
ASC 350-30-35, Intangibles - Goodwill and Other, provides for an option to first perform a qualitative assessment to determine whether it is more likely than not that an asset is impaired. If the qualitative assessment supports that it is more likely than not that the fair value of the asset exceeds its carrying value, a quantitative impairment test is not required. If the qualitative assessment does not support the fair value of the asset, then a quantitative assessment is performed. Our annual impairment assessment of our identifiable indefinite lived intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
We completed qualitative assessments of our FCC licenses and XM and, to the extent applicable, Automatic trademarks during the fourth quarter of 2018, 2017 and 2016. As of the date of our annual assessment for 2018, 2017 and 2016, our qualitative impairment assessment of the fair value of our indefinite intangible assets indicated that such assets substantially exceeded their carrying value and therefore was not at risk of impairment. No impairments were recorded for intangible assets with indefinite lives during the years ended December 31, 2018, 2017 and 2016.
Definite Life Intangible Assets
Definite-lived intangible assets are amortized over their respective estimated useful lives to their estimated residual values, in a pattern that reflects when the economic benefits will be consumed, and are reviewed for impairment under the provisions of ASC 360-10-35, Property, Plant and Equipment/Overall/Subsequent Measurement. We review intangible assets subject to amortization for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the carrying amount of the asset exceeds its fair value. No impairments were recorded for intangible assets with definite lives during the years ended December 31, 2018, 2017 and 2016.
Amortization expense for all definite life intangible assets was $23,185, $37,455 and $48,545 for the years ended December 31, 2018, 2017 and 2016, respectively. We retired definite lived intangible assets of $390,043 during the year ended December 31, 2018 primarily related to fully amortized subscriber relationships and acquired proprietary software. There were no retirements of definite lived intangible assets during the years ended December 31, 2017 and 2016. The expected amortization expense for each of the fiscal years 2019 through 2023 and for periods thereafter is as follows:
Years ending December 31,
 
Amount
2019
 
$
23,268

2020
 
22,687

2021
 
17,198

2022
 
15,542

2023
 
15,446

Thereafter
 
72,766

Total definite life intangible assets, net
 
$
166,907

v3.10.0.1
Property and Equipment
12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Property and Equipment
Property and Equipment
Property and equipment, including satellites, are stated at cost, less accumulated depreciation. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated using the straight-line method over the following estimated useful life of the asset:
Satellite system
15 years
Terrestrial repeater network
5 - 15 years
Broadcast studio equipment
3 - 15 years
Capitalized software and hardware
2 - 7 years
Satellite telemetry, tracking and control facilities
3 - 15 years
Furniture, fixtures, equipment and other
2 - 7 years
Building
20 or 30 years
Leasehold improvements
Lesser of useful life or remaining lease term
We review long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds the estimated future cash flows, an impairment charge is recognized in an amount by which the carrying amount exceeds the fair value of the asset. We did not record any impairments during the years ended December 31, 2018, 2017 and 2016.
Property and equipment, net, consists of the following:
 
December 31, 2018
 
December 31, 2017
Satellite system
$
1,586,794

 
$
1,586,794

Terrestrial repeater network
98,093

 
123,254

Leasehold improvements
58,447

 
57,635

Broadcast studio equipment
111,031

 
96,582

Capitalized software and hardware
824,345

 
639,516

Satellite telemetry, tracking and control facilities
75,837

 
69,147

Furniture, fixtures, equipment and other
97,078

 
96,965

Land
38,411

 
38,411

Building
62,649

 
61,824

Construction in progress
411,503

 
301,153

Total property and equipment
3,364,188

 
3,071,281

Accumulated depreciation and amortization
(1,851,323
)
 
(1,608,515
)
Property and equipment, net
$
1,512,865

 
$
1,462,766


Construction in progress consists of the following:
 
December 31, 2018
 
December 31, 2017
Satellite system
$
296,281

 
$
183,243

Terrestrial repeater network
4,388

 
2,515

Capitalized software and hardware
76,980

 
94,456

Other
33,854

 
20,939

Construction in progress
$
411,503

 
$
301,153


Depreciation and amortization expense on property and equipment was $277,535, $261,147, and $220,434 for the years ended December 31, 2018, 2017 and 2016, respectively.  We retired property and equipment of $35,122, $78,559 and $843,129 during the years ended December 31, 2018, 2017 and 2016, respectively, which included approximately $801,206 related to satellites during 2016. We recognized a loss on disposal of assets of $12,912, which was recorded in Satellite and transmission expense in our consolidated statements of comprehensive income, during the year ended December 31, 2016, which related to the disposal of certain obsolete spare parts for a future satellite.
We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were $11,864, $4,948 and $419 for the years ended December 31, 2018, 2017 and 2016, respectively, which related to the construction of our SXM-7 and SXM-8 satellites.
Satellites
As of December 31, 2018, we owned a fleet of five satellites.  The chart below provides certain information on our satellites as of December 31, 2018:
Satellite Description
 
Year Delivered
 
Estimated End of
Depreciable Life
SIRIUS FM-5
 
2009
 
2024
SIRIUS FM-6
 
2013
 
2028
XM-3
 
2005
 
2020
XM-4
 
2006
 
2021
XM-5
 
2010
 
2025

Each satellite requires an FCC license and prior to the expiration of each license, we are required to apply for a renewal of the FCC satellite licenses.  The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred.
The following table outlines the years in which each of our satellite licenses expires:
FCC satellite licenses
 
Expiration year
SIRIUS FM-5
 
2025
SIRIUS FM-6
 
2022
XM-3
 
2021
XM-4
 
2022
XM-5
 
2026
v3.10.0.1
Related Party Transactions
12 Months Ended
Dec. 31, 2018
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions 
In the normal course of business, we enter into transactions with related parties such as Liberty Media, Sirius XM Canada and Pandora.

Liberty Media
As of December 31, 2018, Liberty Media beneficially owned, directly and indirectly, approximately 73% of the outstanding shares of our common stock. Liberty Media has two executives and one of its directors on our board of directors.  Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors.

Sirius XM Canada
On May 25, 2017, Sirius XM completed a recapitalization of Sirius XM Canada (the “Transaction”), which is now a privately held corporation.
Following the Transaction, Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, with the remainder of the voting power and equity interests held by two of Sirius XM Canada’s previous shareholders. The total consideration from Sirius XM to Sirius XM Canada, excluding transaction costs, during the year ended December 31, 2017 was $308,526, which included $129,676 in cash and we issued 35,000 shares of our common stock with an aggregate value of $178,850 to the holders of the shares of Sirius XM Canada acquired in the Transaction. Sirius XM received common stock, non-voting common stock and preferred stock of Sirius XM Canada. We own 590,950 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of one Canadian dollar per share.
In connection with the Transaction, Sirius XM also made a loan to Sirius XM Canada in the aggregate amount of $130,794. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. The loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to Sirius XM Canada’s failure to maintain specified leverage ratios. The terms of the loan require Sirius XM Canada to prepay a portion of the outstanding principal amount of the loan within sixty days of the end of each fiscal year in an amount equal to any cash on hand in excess of C$10,000 at the last day of the financial year if all target dividends have been paid in full. During the year ended December 31, 2018, Sirius XM Canada repaid $3,242 of the principal amount of the loan.
In connection with the Transaction, Sirius XM also entered into a Services Agreement and an Advisory Services Agreement with Sirius XM Canada. Each agreement has a thirty year term. Pursuant to the Services Agreement, Sirius XM Canada pays Sirius XM 25% of its gross revenues on a monthly basis through December 31, 2021 and 30% of its gross revenues on a monthly basis thereafter. Pursuant to the Advisory Services Agreement, Sirius XM Canada pays Sirius XM 5% of its gross revenues on a monthly basis. These agreements superseded and replaced the former agreements between Sirius XM Canada and its predecessors and Sirius XM.
Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance.
The difference between our investment and our share of the fair value of the underlying net assets of Sirius XM Canada is first allocated to either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. We follow ASC 350, Intangibles - Goodwill and Other, which requires that equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-lived intangibles and goodwill are not amortized. The amortization of equity method finite-lived intangible assets is recorded in Other income (expense) in our consolidated statements of comprehensive income. We periodically evaluate our equity method investments to determine if there has been an other-than temporary decline in fair value below carrying value. Equity method finite-lived intangibles, indefinite-lived intangibles and goodwill are included in the carrying amount of the investment.
We had the following related party balances associated with Sirius XM Canada:

December 31, 2018

December 31, 2017
Related party current assets
$
10,585

 
$
10,284

Related party long-term assets
$
437,227

 
$
481,608

Related party current liabilities
$
4,335

 
$
2,839

Related party long-term liabilities
$
4,270

 
$
7,364


As of December 31, 2018 and 2017, our related party current asset balance included amounts due under the Services Agreement and Advisory Services Agreement and certain amounts related to transactions outside the scope of the new services arrangements. Our related party long-term assets balance as of December 31, 2018 and 2017 included the carrying value of our investment balance in Sirius XM Canada of $311,213 and $341,214, respectively, and, as of December 31, 2018 and 2017, also included $126,013 and $140,073, respectively, for the long-term value of the outstanding loan to Sirius XM Canada. Our related party liabilities as of each of December 31, 2018 and 2017 included $2,776 for the current portion of deferred revenue and $2,312 and $5,088, respectively, for the long-term portion of deferred revenue recorded as of the date of the Sirius and XM merger related to agreements with legacy XM Canada, now Sirius XM Canada.  These costs are being amortized on a straight line basis through 2020.
We recorded the following revenue and other income associated with Sirius XM Canada in our consolidated statements of comprehensive income:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
Revenue (a)(b)
$
96,960


$
87,111

 
$
45,962

Other income (expense)





 
 

Share of net (loss) earnings (b)
$
(804
)

$
4,561

 
$
12,529

Dividends (c)
$


$

 
$
3,575

Interest income (d)
$
10,302


$
6,243

 
$

(a)
Prior to the Transaction, under our former agreements with Sirius XM Canada, we received a percentage-based fee of 10% and 15% for certain types of subscription revenue earned by Sirius XM Canada for the use of the Sirius and XM platforms, respectively, and additional fees for premium services and fees for activation fees and reimbursements for other charges.  We record revenue from Sirius XM Canada as Music royalty fee and other revenue in our consolidated statements of comprehensive income.
(b)
Prior to the Transaction, we recognized our proportionate share of revenue and earnings or losses attributable to Sirius XM Canada on a one month lag. As a result of the Transaction, there is no longer a one-month lag and Sirius XM Canada changed its fiscal year-end to December 31 to align with our fiscal year. For the years ended December 31, 2018 and 2017, Share of net (loss) earnings included $2,434 and $1,501, respectively, of amortization expense related to equity method intangible assets.
(c)
Sirius XM Canada paid gross dividends to us of $2,240, $3,796, and $7,548 during the years ended December 31, 2018, 2017 and 2016, respectively.  Dividends are first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance existed and then as Other income (expense) for the remaining portion.
(d)
This interest income relates to the loan to Sirius XM Canada and is recorded as Other income (expense) in our consolidated statements of comprehensive income.

Pandora
On September 22, 2017, Sirius XM completed a $480,000 investment in Pandora in which Sirius XM purchased 480 shares of Pandora’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”). As of December 31, 2018, the Series A Preferred Stock, including accrued but unpaid dividends, represents a stake of approximately 18% of Pandora's common stock outstanding and approximately a 15% interest on an as-converted basis. Pandora operates an internet-based music discovery platform, offering a personalized experience for listeners.
The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock of Pandora (“Pandora Common Stock”) at an initial conversion price of $10.50 per share of Pandora Common Stock and an initial conversion rate of 95.2381 shares of Pandora Common Stock per share of Series A Preferred Stock, subject to certain customary anti-dilution adjustments. Holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of 6.0% per annum, payable quarterly in arrears, if and when declared. Pandora has the option to pay dividends in cash or accumulate dividends in lieu of paying cash. Any conversion of Series A Preferred Stock may be settled by Pandora, at its option, in shares of Pandora Common Stock, cash or any combination thereof. However, unless and until Pandora’s stockholders have approved the issuance of greater than 19.99% of the outstanding Pandora Common Stock, the Series A Preferred Stock may not be converted into more than 19.99% of Pandora’s outstanding Pandora Common Stock as of June 9, 2017. The liquidation preference of the Series A Preferred Stock, including accrued dividends of $40,969, was $520,969 as of December 31, 2018.
As the investment includes a conversion option, we have elected to account for this investment under the fair value option to reduce the accounting asymmetry that would otherwise arise when recognizing the changes in the fair value of available-for-sale investments. Under the fair value option, any gains (losses) associated with the change in fair value will be recognized in Other income within our consolidated statements of comprehensive income. In connection with the acquisition of Pandora, the Series A Preferred Stock will be canceled as part of the proposed transaction. We recognized a $42,617 and $472 unrealized gain during the years ended December 31, 2018 and 2017 as Other income (expense) in our consolidated statements of comprehensive income for this investment. The fair value of our investment in Pandora, including accrued dividends, as of December 31, 2018 and 2017 was $523,089 and $480,472, respectively, and is recorded as a related party long-term asset within our consolidated balance sheets. This investment does not meet the requirements for the equity method of accounting as it does not qualify as in-substance common stock.
On September 23, 2018, Holdings entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), by and among Holdings, Pandora, Billboard Holding Company, Inc., a wholly-owned subsidiary of Pandora, Billboard Acquisition Sub, Inc., a wholly-owned subsidiary of Billboard Holding Company, Inc., Sirius XM and White Oaks Acquisition Corp., pursuant to which, subject to the terms and conditions of the Merger Agreement, Holdings agreed to acquire Pandora (such transaction, the “Merger”). Pursuant to the Merger, each outstanding share of Pandora Common Stock, will be converted into the right to receive 1.44 shares (the “Exchange Ratio”) of Holdings common stock, par value $0.001 per share (“Holdings Common Stock”). In connection with the Merger, the Series A Preferred Stock will be canceled for no consideration.

Further, pursuant to the Merger:
 
each option granted by Pandora under its stock incentive plans to purchase shares of Pandora Common Stock, whether vested or unvested will be assumed and converted into an option to purchase shares of Holdings Common Stock, with appropriate adjustments (based on the Exchange Ratio) to the exercise price and number of shares of Holdings Common Stock subject to such option, and will have the same vesting schedule and exercise conditions as in effect as of immediately prior to the closing of the Merger;
 
each unvested restricted stock unit granted by Pandora under its stock incentive plans will be assumed and converted into an unvested restricted stock unit of Holdings, with appropriate adjustments (based on the Exchange Ratio) to the number of shares of Holdings Common Stock to be received, and will have the same vesting schedule and settlement date as in effect as of immediately prior to the closing of the Merger; and
 
each unvested performance award granted by Pandora under its stock incentive plans shall be canceled and forfeited if the per share value of merger consideration at the closing of the transactions as determined pursuant to the Merger Agreement is less than $20.00, and otherwise each such award will be assumed and converted into a time vesting award to receive a number of shares of Holdings Common Stock based on the Exchange Ratio, and will have the same vesting schedule as in effect as of immediately prior to the closing of the Merger.

The Merger Agreement contains customary representations and warranties from both Holdings and Pandora, and each party has agreed to customary covenants, including covenants relating to the conduct of Holdings’ and Pandora’s businesses during the period between the execution of the Merger Agreement and the closing of the Merger. In the case of Pandora, such obligations include its agreement to call a meeting of its stockholders to adopt the Merger Agreement, and, subject to certain exceptions, to recommend that its stockholders adopt the Merger Agreement.

The Pandora stockholders voted to adopt the Merger Agreement at a special stockholder meeting on January 29, 2019.

The completion of the Merger is subject to customary conditions, including, among others, the absence of any law or order that prohibits or makes illegal the Merger and, subject to certain exceptions, the accuracy of the representations and warranties of each party and compliance by the parties with their respective covenants.
v3.10.0.1
Debt
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Debt
Debt
Our debt as of December 31, 2018 and 2017 consisted of the following:
 
 
 
 
 
 
 
 
 
 
 
 
Carrying value(a) at
Issuer / Borrower
 
Issued
 
Debt
 
Maturity Date
 
Interest Payable
 
Principal Amount at December 31, 2018
 
December 31, 2018
 
December 31, 2017
Sirius XM
(b)
 
July 2017
 
3.875% Senior Notes
 
August 1, 2022
 
semi-annually on February 1 and August 1
 
$
1,000,000

 
$
993,628

 
$
992,011

Sirius XM
(b)
 
May 2013
 
4.625% Senior Notes
 
May 15, 2023
 
semi-annually on May 15 and November 15
 
500,000

 
497,207

 
496,646

Sirius XM
(b)
 
May 2014
 
6.00% Senior Notes
 
July 15, 2024
 
semi-annually on January 15 and July 15
 
1,500,000

 
1,489,539

 
1,488,002

Sirius XM
(b)
 
March 2015
 
5.375% Senior Notes
 
April 15, 2025
 
semi-annually on April 15 and October 15
 
1,000,000

 
992,283

 
991,285

Sirius XM
(b)
 
May 2016
 
5.375% Senior Notes
 
July 15, 2026
 
semi-annually on January 15 and July 15
 
1,000,000

 
991,067

 
990,138

Sirius XM
(b)
 
July 2017
 
5.00% Senior Notes
 
August 1, 2027
 
semi-annually on February 1 and August 1
 
1,500,000

 
1,487,309

 
1,486,162

Sirius XM
(c)
 
December 2012
 
Senior Secured Revolving Credit Facility (the "Credit Facility")
 
June 29, 2023
 
variable fee paid quarterly
 
1,750,000

 
439,000

 
300,000

Sirius XM
 
Various
 
Capital leases
 
Various
 
 n/a
 
 n/a

 
5,380

 
10,597

Total Debt
 
6,895,413

 
6,754,841

Less: total current maturities
 
3,447

 
5,105

Less: total deferred financing costs for Notes
 
7,430

 
8,493

Total long-term debt
 
$
6,884,536

 
$
6,741,243

(a)
The carrying value of the obligations is net of any remaining unamortized original issue discount.
(b)
Substantially all of our domestic wholly-owned subsidiaries have guaranteed these notes.
(c)
In June 2018, Sirius XM entered into an amendment to extend the maturity of the Credit Facility to June 2023. Sirius XM's obligations under the Credit Facility are guaranteed by certain of its material domestic subsidiaries and are secured by a lien on substantially all of Sirius XM's assets and the assets of its material domestic subsidiaries.  Interest on borrowings is payable on a monthly basis and accrues at a rate based on LIBOR plus an applicable rate.  Sirius XM is also required to pay a variable fee on the average daily unused portion of the Credit Facility which is payable on a quarterly basis.  The variable rate for the unused portion of the Credit Facility was 0.25% per annum as of December 31, 2018.  All of Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our consolidated balance sheets due to the long-term maturity of this debt.
Covenants and Restrictions
Under the Credit Facility, Sirius XM, our wholly-owned subsidiary, must comply with a debt maintenance covenant that it cannot exceed a total leverage ratio, calculated as consolidated total debt to consolidated operating cash flow, of 5.0 to 1.0.  The Credit Facility generally requires compliance with certain covenants that restrict Sirius XM's ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of Sirius XM's assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions.
The indentures governing Sirius XM's notes restrict Sirius XM's non-guarantor subsidiaries' ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiary guaranteeing each such series of notes on a pari passu basis.  The indentures governing the notes also contain covenants that, among other things, limit Sirius XM's ability and the ability of its subsidiaries to create certain liens; enter into sale/leaseback transactions; and merge or consolidate.
Under Sirius XM's debt agreements, the following generally constitute an event of default: (i) a default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary guarantees, subject to grace periods where applicable.  If an event of default occurs and is continuing, our debt could become immediately due and payable.
At December 31, 2018 and 2017, we were in compliance with our debt covenants.
v3.10.0.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Stockholders' Equity
Stockholders’ Equity
Common Stock, par value $0.001 per share
We are authorized to issue up to 9,000,000 shares of common stock. There were 4,345,606 and 4,530,928 shares of common stock issued and 4,345,606 and 4,527,742 shares outstanding on December 31, 2018 and December 31, 2017, respectively.
As of December 31, 2018, there were 278,010 shares of common stock reserved for issuance in connection with outstanding stock based awards to be granted to members of our board of directors, employees and third parties.
Quarterly Dividends
During the year ended December 31, 2018, we declared and paid the following dividends:
Declaration Date
 
Dividend Per Share
 
Record Date
 
Total Amount
 
Payment Date
January 23, 2018
 
$
0.0110

 
February 7, 2018
 
$
49,397

 
February 28, 2018
April 26, 2018
 
$
0.0110

 
May 10, 2018
 
$
49,287

 
May 31, 2018
July 18, 2018
 
$
0.0110

 
August 10, 2018
 
$
49,316

 
August 31, 2018
October 9, 2018
 
$
0.0121

 
November 9, 2018
 
$
53,434

 
November 30, 2018

Stock Repurchase Program
As of December 31, 2018, our board of directors had approved for repurchase an aggregate of $12,000,000 of our common stock.  Our board of directors did not establish an end date for this stock repurchase program.  Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, including transactions with Liberty Media and its affiliates, or otherwise.  As of December 31, 2018, our cumulative repurchases since December 2012 under our stock repurchase program totaled 2,683,109 shares for $10,674,252, and $1,325,748 remained available for future share repurchases under our stock repurchase program.
The following table summarizes our total share repurchase activity for the years ended:
 
 
December 31, 2018
 
December 31, 2017
 
December 31, 2016
Share Repurchase Type
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
Open Market
 
208,973

 
$
1,297,132

 
270,527

 
$
1,403,283

 
420,111

 
$
1,672,697


Preferred Stock, par value $0.001 per share
We are authorized to issue up to 50,000 shares of undesignated preferred stock with a liquidation preference of $0.001 per share.  There were no shares of preferred stock issued or outstanding as of December 31, 2018 and 2017.
v3.10.0.1
Benefit Plans
12 Months Ended
Dec. 31, 2018
Retirement Benefits [Abstract]  
Benefit Plans
Benefit Plans 
We recognized share-based payment expense of $133,175, $124,069 and $108,604 for the years ended December 31, 2018, 2017 and 2016, respectively.
We account for equity instruments granted in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on fair value. We use the Black-Scholes-Merton option-pricing model to value stock option awards and have elected to treat awards with graded vesting as a single award. Share-based compensation expense is recognized ratably over the requisite service period, which is generally the vesting period. We measure restricted stock awards and units using the fair market value of the restricted shares of common stock on the day the award is granted. Stock-based awards granted to employees, non-employees and members of our board of directors include stock options and restricted stock units.
Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used for the expected life, expected stock price volatility, expected dividend yield and risk-free interest rates. For the years ended December 31, 2018, 2017 and 2016, we estimated the fair value of awards granted using the hybrid approach for volatility, which weights observable historical volatility and implied volatility of qualifying actively traded options on our common stock. The expected life assumption represents the weighted-average period stock-based awards are expected to remain outstanding. These expected life assumptions are established through a review of historical exercise behavior of stock-based award grants with similar vesting periods. Where historical patterns do not exist for non-employees, contractual terms are used. Dividend yield is based on the current expected annual dividend per share and our stock price. The risk-free interest rate represents the daily treasury yield curve rate at the grant date based on the closing market bid yields on actively traded U.S. treasury securities in the over-the-counter market for the expected term. Our assumptions may change in future periods.
2015 Long-Term Stock Incentive Plan
In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”).  Employees, consultants and members of our board of directors are eligible to receive awards under the 2015 Plan.  The 2015 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and other stock-based awards that the compensation committee of our board of directors deems appropriate.  Stock-based awards granted under the 2015 Plan are generally subject to a graded vesting requirement, which is generally three to four years from the grant date.  Stock options generally expire ten years from the date of grant.  Restricted stock units include performance-based restricted stock units (“PRSUs”), the vesting of which are subject to the achievement of performance goals and the employee's continued employment and generally cliff vest on the third anniversary of the grant date. Each restricted stock unit entitles the holder to receive one share of common stock upon vesting.  As of December 31, 2018, 154,973 shares of common stock were available for future grants under the 2015 Plan.
Other Plans
We maintain two other share-based benefit plans — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan and the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan. Excluding dividend equivalent units granted as a result of a declared dividend, no further awards may be made under these plans.
The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees and members of our board of directors:
 
For the Years Ended December 31,
 
2018
 
2017
 
2016
Risk-free interest rate
2.7%
 
1.8%
 
1.1%
Expected life of options — years
4.38
 
4.59
 
4.25
Expected stock price volatility
23%
 
24%
 
22%
Expected dividend yield
0.7%
 
0.7%
 
0.0%

Since we did not historically pay dividends on our common stock prior to the fourth quarter of 2016, the expected dividend yield used in the Black-Scholes-Merton option-pricing model was less than one tenth percent for the year ended December 31, 2016.
The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2018, 2017 and 2016:
 
Options
 
Weighted-
Average
Exercise
Price Per Share
 
Weighted-
Average
Remaining
Contractual
Term (Years)
 
Aggregate
Intrinsic
Value
Outstanding at the beginning of January 1, 2016
338,481

 
$
3.29