SIRIUS XM HOLDINGS INC., 10-K filed on 2/4/2020
Annual Report
v3.19.3.a.u2
Cover Page - USD ($)
12 Months Ended
Dec. 31, 2019
Jan. 31, 2020
Jun. 30, 2019
Cover page.      
Entity Central Index Key 0000908937    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Document Type 10-K    
Document Annual Report true    
Document Period End Date Dec. 31, 2019    
Document Transition Report false    
Entity File Number 001-34295    
Entity Registrant Name SIRIUS XM HOLDINGS INC.    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 38-3916511    
Entity Address, Address Line One 1221 Avenue of the Americas    
Entity Address, Address Line Two 35th Floor    
Entity Address, City or Town New York    
Entity Address, State or Province NY    
Entity Address, Postal Zip Code 10020    
City Area Code 212    
Local Phone Number 584-5100    
Title of 12(b) Security Common stock, $0.001 par value    
Trading Symbol SIRI    
Security Exchange Name NASDAQ    
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Large Accelerated Filer    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Public Float     $ 7,370,915,284
Entity Common Stock, Shares Outstanding   4,413,944,475  
Documents Incorporated by Reference
Information included in our definitive proxy statement for our 2020 annual meeting of stockholders scheduled to be held on Thursday, June 4, 2020 is incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this report.
   
v3.19.3.a.u2
Consolidated Statements of Comprehensive Income - USD ($)
shares in Millions, $ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Revenue:      
Revenue $ 7,794 $ 5,771 $ 5,425
Cost of services:      
Cost of services 3,383    
Subscriber acquisition costs 427 470 499
Sales and marketing 937 484 438
Engineering, design and development 280 123 112
General and administrative 524 354 335
Depreciation and amortization 468 301 299
Acquisition and other related costs 84 3  
Total operating expenses 6,147 4,044 3,784
Income from operations 1,647 1,727 1,641
Other (expense) income:      
Interest expense (390) (350) (346)
Loss on extinguishment of debt (57) 0 (44)
Other (expense) income (3) 44 13
Total other (expense) income (450) (306) (377)
Income before income taxes 1,197 1,421 1,264
Income tax expense (283) (245) (616)
Net income 914 1,176 648
Foreign currency translation adjustment, net of tax 14 (29) 19
Total comprehensive income $ 928 $ 1,147 $ 667
Net income per common share:      
Basic (in dollars per share) $ 0.20 $ 0.26 $ 0.14
Diluted (in dollars per share) $ 0.20 $ 0.26 $ 0.14
Weighted average common shares outstanding:      
Basic (in shares) 4,501 4,462 4,638
Diluted (in shares) 4,616 4,561 4,724
Subscriber revenue      
Revenue:      
Revenue $ 6,120 $ 5,264 $ 4,990
Advertising revenue      
Revenue:      
Revenue 1,336 188 160
Equipment      
Revenue:      
Revenue 173 155 132
Cost of services:      
Cost of services 29 31 35
Other revenue      
Revenue:      
Revenue 165 164 143
Revenue share and royalties      
Cost of services:      
Cost of services 2,291 1,394 1,210
Programming and content      
Cost of services:      
Cost of services 462 406 388
Customer service and billing      
Cost of services:      
Cost of services 475 382 385
Transmission      
Cost of services:      
Cost of services $ 170 $ 96 $ 83
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 106 $ 54
Receivables, net 670 233
Inventory, net 11 22
Related party current assets 22 11
Prepaid expenses and other current assets 194 158
Total current assets 1,003 478
Property and equipment, net 1,626 1,513
Intangible assets, net 3,467 2,501
Goodwill 3,843 2,290
Related party long-term assets 452 960
Deferred tax assets 153 293
Operating lease right-of-use assets 466  
Other long-term assets 139 138
Total assets 11,149 8,173
Current liabilities:    
Accounts payable and accrued expenses 1,151 736
Accrued interest 160 128
Current portion of deferred revenue 1,930 1,932
Current maturities of debt 2 3
Operating lease current liabilities 46  
Related party current liabilities 4 4
Total current liabilities 3,293 2,803
Long-term deferred revenue 130 149
Long-term debt 7,842 6,885
Related party long-term liabilities 0 4
Deferred tax liabilities 70 47
Operating lease liabilities 456  
Other long-term liabilities 94 102
Total liabilities 11,885 9,990
Commitments and contingencies (Note 16)
Stockholders’ equity (deficit):    
Common stock, par value $0.001 per share; 9,000 shares authorized; 4,412 and 4,346 shares issued; 4,412 and 4,346 outstanding at December 31, 2019 and December 31, 2018, respectively 4 4
Accumulated other comprehensive income (loss), net of tax 8 (6)
Additional paid-in capital 395 242
Treasury stock, at cost; 0 and 0 shares of common stock at December 31, 2019 and December 31, 2018, respectively 0 0
Accumulated deficit (1,143) (2,057)
Total stockholders’ equity (deficit) (736) (1,817)
Total liabilities and stockholders’ equity (deficit) $ 11,149 $ 8,173
v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
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) 4,412,000,000 4,346,000,000
Common stock, shares outstanding (in shares) 4,412,000,000 4,346,000,000
Treasury stock (in shares) 0 0
v3.19.3.a.u2
Consolidated Statement of Stockholders' Equity (Deficit) - USD ($)
shares in Millions, $ in Millions
Total
Common Stock
Accumulated Other Comprehensive Income (Loss)
Additional Paid-in Capital
Treasury Stock
Accumulated Deficit
Pandora
Pandora
Common Stock
Pandora
Additional Paid-in Capital
Beginning balance (in shares) at Dec. 31, 2016   4,746     5        
Beginning balance at Dec. 31, 2016 $ (792) $ 4 $ 0 $ 3,118 $ (23) $ (3,891)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Comprehensive income, net of tax 667   19     648      
Issuance of common stock as part of recapitalization of Sirius XM Canada (in shares)   35              
Issuance of common stock as part of recapitalization of Sirius XM Canada 179     179          
Share-based payment expense 109     109          
Exercise of stock options and vesting of restricted stock units (in shares)   22              
Exercise of stock options and vesting of restricted stock units 1     1          
Withholding taxes on net share settlement of stock-based compensation (93)     (93)          
Cash dividends paid on common stock (190)     (190)          
Common stock repurchased (in shares)         271        
Common stock repurchased (1,403)       $ (1,403)        
Common stock retired (in shares)   (272)     (273)        
Common stock retired 0     (1,409) $ 1,409        
Ending balance (in shares) at Dec. 31, 2017   4,531     3        
Ending balance at Dec. 31, 2017 (1,522) $ 4 19 1,715 $ (17) (3,243)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Comprehensive income, net of tax 1,147   (29)     1,176      
Share-based payment expense 133     133          
Exercise of stock options and vesting of restricted stock units (in shares)   27              
Exercise of stock options and vesting of restricted stock units 0                
Withholding taxes on net share settlement of stock-based compensation (121)     (121)          
Cash dividends paid on common stock (201)     (201)          
Common stock repurchased (in shares)         209        
Common stock repurchased (1,297)       $ (1,297)        
Common stock retired (in shares)   (212)     (212)        
Common stock retired 0 $ 0   (1,314) $ 1,314        
Ending balance (in shares) at Dec. 31, 2018   4,346     0        
Ending balance at Dec. 31, 2018 (1,817) $ 4 (6) 242 $ 0 (2,057)      
Increase (Decrease) in Stockholders' Equity [Roll Forward]                  
Comprehensive income, net of tax 928   14     914      
Share-based payment expense 263     263          
Exercise of stock options and vesting of restricted stock units (in shares)   38              
Exercise of stock options and vesting of restricted stock units 8     8          
Withholding taxes on net share settlement of stock-based compensation (150)     (150)          
Cash dividends paid on common stock (226)     (226)          
Issuance of common stock as part of Pandora Acquisition (in shares)               392  
Issuance of common stock as part of Pandora Acquisition             $ 2,355 $ 1 $ 2,354
Equity component of convertible note 62     62          
Common stock repurchased (in shares)         364        
Common stock repurchased (2,159)       $ (2,159)        
Common stock retired (in shares)   (364)     (364)        
Common stock retired 0 $ (1)   (2,158) $ 2,159        
Ending balance (in shares) at Dec. 31, 2019   4,412     0        
Ending balance at Dec. 31, 2019 $ (736) $ 4 $ 8 $ 395 $ 0 $ (1,143)      
v3.19.3.a.u2
Consolidated Statement of Stockholders' Equity (Deficit) (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Statement of Stockholders' Equity [Abstract]      
Cash dividend per share of common stock (in dollars per share) $ 0.04961 $ 0.0451 $ 0.041
v3.19.3.a.u2
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Cash flows from operating activities:      
Net income $ 914 $ 1,176 $ 648
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 468 301 299
Non-cash interest expense, net of amortization of premium 17 9 9
Provision for doubtful accounts 53 51 56
Amortization of deferred income related to equity method investment (3) (3) (3)
Loss on extinguishment of debt 57 0 44
Loss (gain) on unconsolidated entity investments, net 21 10 (5)
Gain on fair value instrument 0 (43) 0
Dividend received from unconsolidated entity investment 2 2 4
Share-based payment expense 250 133 124
Deferred income taxes 259 257 584
Changes in operating assets and liabilities:      
Receivables (137) (42) (74)
Inventory 11 (2) 2
Related party, net (10) 1 (2)
Prepaid expenses and other current assets (3) (20) 50
Other long-term assets 4 10 7
Operating lease right-of-use assets (14)    
Accounts payable and accrued expenses 109 (20) 41
Accrued interest 32 (9) 23
Deferred revenue (58) 70 42
Operating lease liabilities 36    
Other long-term liabilities 9 (1) 7
Net cash provided by operating activities 2,017 1,880 1,856
Cash flows from investing activities:      
Additions to property and equipment (363) (355) (288)
Purchases of other investments (7) (8) (8)
Acquisition of business, net of cash acquired 313 (2) (108)
Sale of short-term investments 73 0 0
Investments in related parties and other equity investees (19) (17) (612)
Repayment from (loan to) related party 0 3 (131)
Net cash used in investing activities (3) (379) (1,147)
Cash flows from financing activities:      
Proceeds from exercise of stock options 8 0 1
Taxes paid from net share settlements for stock-based compensation (150) (120) (93)
Revolving credit facility, net of deferred financing costs (439) 136 (90)
Proceeds from long-term borrowings, net of costs 2,715 0 2,473
Proceeds from sale of capped call security 3 0 0
Principal payments of long-term borrowings (1,666) (16) (1,513)
Payment of premiums on redemption of debt (45) 0 (33)
Common stock repurchased and retired (2,159) (1,314) (1,409)
Dividends paid (226) (201) (190)
Net cash used in financing activities (1,959) (1,515) (854)
Net increase (decrease) in cash, cash equivalents and restricted cash 55 (14) (145)
Cash, cash equivalents and restricted cash at beginning of period 65 [1] 79 [1] 224
Cash, cash equivalents and restricted cash at end of period [1] 120 65 79
Cash paid during the period for:      
Interest, net of amounts capitalized 337 345 310
Income taxes paid 10 6 28
Non-cash investing and financing activities:      
Capital lease obligations incurred to acquire assets 0 0 3
Treasury stock not yet settled 0 17 6
Fair value of shares issued related to acquisition of a business 2,355 0 0
Accumulated other comprehensive income (loss), net of tax 14 (29) 19
Fair value of shares issued related to acquisition of a business $ 0 $ 0 $ 179
[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, 2019: $106, December 31, 2018: $54, December 31, 2017: $69, December 31, 2016: $214 Restricted cash included in Other long-term assets: December 31, 2019: $14, December 31, 2018: $11, December 31, 2017: $10, December 31, 2016: $10 Total cash, cash equivalents and restricted cash at end of period: December 31, 2019: $120, December 31, 2018: $65, , December 31, 2017: $79, December 31, 2016: $224
v3.19.3.a.u2
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Millions
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Statement of Cash Flows [Abstract]        
Cash and cash equivalents $ 106 $ 54 $ 69 $ 214
Restricted cash included in Other long-term assets 14 11 10 10
Cash, cash equivalents and restricted cash at end of period $ 120 [1] $ 65 [1] $ 79 [1] $ 224
[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, 2019: $106, December 31, 2018: $54, December 31, 2017: $69, December 31, 2016: $214 Restricted cash included in Other long-term assets: December 31, 2019: $14, December 31, 2018: $11, December 31, 2017: $10, December 31, 2016: $10 Total cash, cash equivalents and restricted cash at end of period: December 31, 2019: $120, December 31, 2018: $65, , December 31, 2017: $79, December 31, 2016: $224
v3.19.3.a.u2
Business & Basis of Presentation
12 Months Ended
Dec. 31, 2019
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. and subsidiaries (“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. “Sirius XM” refers to our wholly owned subsidiary Sirius XM Radio Inc. and its subsidiaries. “Pandora” refers to Sirius XM's wholly owned subsidiary Pandora Media, LLC (the successor to Pandora Media, Inc.) and its subsidiaries. Holdings has no operations independent of Sirius XM and Pandora.
Business
We operate two complementary audio entertainment businesses - our Sirius XM business and our Pandora business. 

Sirius XM
Our Sirius XM business features music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis. The Sirius XM service is distributed through our two proprietary satellite radio systems and through the internet via applications for mobile devices, home devices and other consumer electronic equipment. Satellite radios are primarily distributed through automakers, retailers and our website. Our Sirius XM service is also available through our user interface, which we call “360L,” that combines our satellite and streaming services into a single, cohesive in-vehicle entertainment experience. The primary source of revenue from our Sirius XM business is generated from subscription fees, with most of our customers subscribing to monthly, quarterly, semi-annual or annual plans.  We also derive revenue from advertising on select non-music channels, direct sales of our satellite radios and accessories, and other ancillary services.  As of December 31, 2019, our Sirius XM business had approximately 34.9 million subscribers.
In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers and directly to consumers through aftermarket devices. These services are designed to enhance the safety, security and driving experience of consumers. We also offer a suite of data services that includes graphical weather, fuel prices, sports schedules and scores and movie listings, a traffic information service that includes information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems, and real-time weather services in vehicles, boats and planes.
Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM Canada Holdings Inc. (“Sirius XM Canada”). Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics.

Pandora
Our Pandora business operates a music, comedy and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, car speakers or connected devices.  Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts and select Sirius XM content as well as search and play songs and albums on-demand.  Pandora is available as an ad-supported radio service, a radio subscription service, called Pandora Plus, and an on-demand subscription service, called Pandora Premium.  As of December 31, 2019, Pandora had approximately 6.2 million subscribers. The majority of revenue from our Pandora business is generated from advertising on our Pandora ad-supported radio service. In addition, through AdsWizz Inc., Pandora provides a comprehensive digital audio advertising technology platform, which connects audio publishers and advertisers.
Liberty Media
As of December 31, 2019, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 72% 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 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. Music Royalty Fee revenue was reported as Other revenue in our December 31, 2018 and 2017 Annual Reports on Form 10-K. This revenue was reclassified to Subscriber revenue to conform with the current period presentation.
 
For the Year Ended December 31, 2018
 
For the Year Ended December 31, 2017
 
As Reported
 
Reclassification
 
Current Report
 
As Reported
 
Reclassification
 
Current Report
Subscriber revenue
$
4,594

 
$
670

 
$
5,264

 
$
4,472

 
$
518

 
$
4,990

Advertising revenue
188

 

 
188

 
160

 

 
160

Equipment revenue
155

 

 
155

 
132

 

 
132

Other revenue
834

 
(670
)
 
164

 
661

 
(518
)
 
143

Total revenue
$
5,771

 
$

 
$
5,771

 
$
5,425

 
$

 
$
5,425


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 two reportable segments as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the financial results of these segments. Refer to Note 18 for information related to our segments.
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, 2019 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 19.
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, income taxes, and the purchase accounting related to the Pandora Acquisition (defined below).
v3.19.3.a.u2
Summary of Significant Accounting Policies - 10-K
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
In addition to the significant accounting policies discussed in this Note 2, 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 #
Acquisition
 
3

 
Fair Value Measurements
 
4

 
Goodwill
 
8

 
Intangible Assets
 
9

 
Property and Equipment
 
10

 
Equity Method Investments
 
12

 
Share-Based Compensation
 
15

 
Legal Reserves
 
16

 
Income Taxes
 
17

 

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. Collected taxes are recorded within Other current liabilities until remitted to the relevant taxing authority. 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 may 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 automakers when we receive a certain amount of payments from self-pay customers acquired from that automaker. 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 automaker offering a paid trial are accounted for as a reduction of revenue as the payment does not provide a distinct good or service.
Music royalty fee 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 Subscriber revenue ratably over the service period.
We recognize revenue from the sale of advertising as performance obligations are satisfied, which generally occurs as ads are delivered. 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 upon shipment, 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. Other revenue primarily includes revenue recognized from royalties received from Sirius XM Canada.
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, 2019 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, 2019, 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.
Royalties
In connection with our businesses, we must enter into royalty arrangements with two sets of rights holders: holders of musical compositions copyrights (that is, the music and lyrics) and holders of sound recordings copyrights (that is, the actual recording of a work). Our Sirius XM business and our Pandora business use both statutory and direct music licenses as part of their businesses. We also license varying rights - such as performance and mechanical rights - for use in our Sirius XM and Pandora businesses based on the various radio and interactive services they offer. The music rights licensing arrangement for our Sirius XM and Pandora businesses are complex.
We pay performance royalties for our Sirius XM business and our Pandora business to holders and rights administrators of musical compositions copyrights, including performing rights organizations and other copyright owners. These performance royalties are contained in direct license agreements and are generally fixed fees per year.
For our interactive music services offered by our Pandora business, we pay mechanical royalties to copyright holders at the rates determined by the Copyright Royalty Board (the “CRB”) in accordance with the statutory license set forth in Section 115 of the United States Copyright Act. These mechanical royalties are calculated as the greater of a percentage of our revenue or a percentage of our payments to record labels.
For our satellite radio business, we pay performance royalties to owners of sound recordings based on a percentage of our subscription revenue (subject to certain exclusions) through SoundExchange. We pay these royalties at a statutory rate established by the CRB.
For our streaming music and interactive music services offered by our Pandora business, we pay royalties to owners of sound recordings based on either a per-performance fee based on the number of sound recordings transmitted, a percentage of revenue associated with the applicable service, or a per-subscriber minimum amount. The royalty rates paid by our Pandora business are primarily stipulated in direct license agreements with record companies. The performance royalty rates paid to owners of sound recordings by our Sirius XM business for streaming music are primarily set by the CRB.
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, 2019, 2018 and 2017, we recorded advertising costs of $392, $267 and $263, 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 automotive 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, 2019, 2018 and 2017, we recorded research and development costs of $231, $106 and $97, respectively.  These costs are reported as a component of Engineering, design and development expense in our consolidated statements of comprehensive income.
Accumulated Other Comprehensive Income (Loss), net of tax
Accumulated other comprehensive income of $8 was primarily comprised of the cumulative foreign currency translation adjustments related to Sirius XM Canada (refer to Note 12 for additional information). During the year ended December 31, 2019, we recorded a foreign currency translation adjustment gain of $14, which is recorded net of tax of $5. During the years ended December 31, 2018 and 2017, we recorded foreign currency translation adjustment (loss) gain of $(29) and $19, 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. This ASU aligns 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.
Recently Adopted Accounting Policies
ASU 2016-02, Leases (Topic 842). In February 2016, FASB issued ASU 2016-02 which requires companies 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, measure, and present 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 was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption was 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 adopted this ASU on January 1, 2019 and elected the additional transition method per ASU 2018-11. Our leases consist of repeater leases, facility leases and equipment leases. We elected the package of practical expedients permitted under the transition guidance within the new standard.
Adoption of the new standard resulted in the recording of additional lease assets and lease liabilities of approximately $347 and $369, respectively, as of January 1, 2019. The standard did not impact our consolidated statements of operations, consolidated statements of cash flows or debt. Additionally, we did not record a cumulative effect adjustment to opening retained earnings.
The effect of the changes made to our consolidated balance sheet as of January 1, 2019 for the adoption of ASU 2016-02 is included in the table below.
 
Balance at December 31, 2018
 
Adjustments Due to ASU 2016-02
 
Balance at January 1, 2019
Balance Sheet
 
 
 
 
 
Assets:
 
 
 
 
 
Operating lease right-of-use assets
$

 
$
347

 
$
347

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Accounts payable and accrued expenses
$
736

 
$
(1
)
 
$
735

Operating lease current liabilities

 
30

 
30

Operating lease liabilities

 
339

 
339

Other long-term liabilities
102

 
(21
)
 
81


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.
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, 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, 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.
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
 
Current Report
 
Impact of Adopting ASU 2014-09
 
Balances Without Adoption of ASU 2014-09
Income Statement
 
 
 
 
 
Revenues
 
 
 
 
 
Subscriber revenue (1)
$
5,264

 
$
95

 
$
5,359

 
 
 
 
 
 
Expenses
 
 
 
 
 
Revenue share and royalties
1,394

 
88

 
1,482

Subscriber acquisition costs
470

 
4

 
474

Income tax expense
(245
)
 

 
(245
)
 
 
 
 
 
 
Net Income
$
1,176

 
$
3

 
$
1,179

(1)
Music Royalty Fee revenue was reported as Other revenue in our December 31, 2018 and 2017 Annual Reports on Form 10-K. This revenue was reclassified to Subscriber revenue to conform with the current period presentation. Refer to Note 1 for more information.
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 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.
v3.19.3.a.u2
Acquisition
12 Months Ended
Dec. 31, 2019
Business Combinations [Abstract]  
Acquisition
Acquisition
On February 1, 2019, through a series of transactions, Pandora Media, Inc., became an indirect wholly owned subsidiary of Sirius XM and continues to operate as Pandora Media, LLC (the “Pandora Acquisition”). In connection with the Pandora Acquisition, we purchased all of the outstanding shares of the capital stock of Pandora for $2,355 by converting each outstanding share of Pandora common stock into 1.44 shares of our common stock and we also canceled our preferred stock investment in Pandora for $524 for total consideration of $2,879. Net cash acquired was $313. As part of the Pandora Acquisition, Holdings unconditionally guaranteed all of the payment obligations of Pandora under its outstanding 1.75% convertible senior notes due 2020 and 1.75% convertible senior notes due 2023.
The table below shows the value of the consideration paid in connection with the Pandora Acquisition:
 
Total
Pandora common stock outstanding
272

Exchange ratio
1.44

Common stock issued
392

Price per share of Holdings common stock
$
5.83

Value of common stock issued to Pandora stockholders
$
2,285

Value of replacement equity awards attributable to pre-combination service
$
70

Consideration of common stock and replacement equity awards for pre-combination service
$
2,355

Sirius XM’s Pandora preferred stock investment (related party fair value instrument) canceled
$
524

Total consideration for Pandora Acquisition
$
2,879

Value attributed to par at $0.001 par value
$
1

Balance to capital in excess of par value
$
2,354


The table below summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date:
Acquired Assets:
 
Cash and cash equivalents
$
313

Receivables, net
353

Prepaid expenses and other current assets
109

Property and equipment
65

Intangible assets
1,107

Goodwill
1,553

Deferred tax assets
102

Operating lease right-of-use assets
104

Long term assets
7

Total assets
$
3,713

 
 
Assumed Liabilities:
 
Accounts payable and accrued expenses
$
324

Deferred revenue
37

Operating lease current liabilities
28

Current maturities of debt
151

Long-term debt (a)
218

Operating lease liabilities
69

Other long-term liabilities
7

Total liabilities
$
834

Total consideration
$
2,879

(a)
In order to present the assets acquired and liabilities assumed, the conversion feature associated with Pandora's convertible notes for $62 has been included within Long-term debt in the table above and included within Additional paid-in-capital within our statement of stockholders' equity (deficit). Refer to Note 13 for additional information.

The Pandora Acquisition was accounted for using the acquisition method of accounting. As of December 31, 2019, the purchase price allocation has been finalized. The excess purchase price over identifiable net tangible and intangible assets of $1,553 has been recorded to Goodwill in our consolidated balance sheets as of December 31, 2019. A total of $776 has been allocated to identifiable intangible assets subject to amortization and relates to the assessed fair value of the acquired customer relationships and software and technology and is being amortized over the estimated weighted average useful lives of 8 and 5 years, respectively. A total of $331 has been allocated to identifiable indefinite lived intangible assets and relates to the assessed fair value of the acquired trademarks. The fair value assessed for the majority of the remaining assets acquired and liabilities assumed equaled their carrying value. Goodwill represents synergies and economies of scale expected from the combination of services. Goodwill has been allocated to the Pandora segment. Additionally, in connection with the Pandora Acquisition, we acquired gross net operating loss (“NOL”) carryforwards of approximately $1,287 for federal income tax purposes that are available to offset future taxable income. The acquired NOL's are limited by Section 382 of the Internal Revenue Code. Those limitations are not expected to impact our ability to fully utilize those NOL's within the carryforward period.
We recognized acquisition related costs of $84 that were expensed in Acquisition and other related costs in our consolidated statements of comprehensive income during the year ended December 31, 2019.
Pro Forma Financial Information
Pandora was consolidated into our financial statements starting on the acquisition date, February 1, 2019. The aggregate revenue and net loss of Pandora consolidated into our financial statements since the date of acquisition was $1,607 and $303, respectively, for the year ended December 31, 2019. The following pro forma financial information presents our results as if the Pandora Acquisition had occurred on January 1, 2017:
 
For the Years Ended December 31,
 
2019
 
2018
 
2017
Total revenue
$
7,921

 
$
7,348

 
$
6,818

Net income
$
938

 
$
844

 
$
335


These pro forma results are based on estimates and assumptions, which we believe are reasonable. They are not the results that would have been realized had the acquisition actually occurred on January 1, 2017 and are not indicative of our consolidated results of operations in future periods. The pro forma results primarily include adjustments related to amortization of acquired intangible assets, depreciation of property and equipment, acquisition costs, fair value gain or loss on the Pandora investment and associated tax impacts.
v3.19.3.a.u2
Fair Value Measurements
12 Months Ended
Dec. 31, 2019
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, 2019 and 2018, 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, 2019
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total Fair
Value
 
Level 1
 
Level 2
 
Level 3
 
Total Fair
Value
Assets:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Pandora investment (a)

 
$

 

 
$

 

 
$
523

 

 
$
523

Liabilities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Debt (b)

 
$
8,378

 

 
$
8,378

 

 
$
6,633

 

 
$
6,633

(a)
During the year ended December 31, 2017, Sirius XM completed a $480 investment in Pandora. Prior to the Pandora Acquisition, we elected the fair value option to account for this investment. This investment was canceled in conjunction with the Pandora Acquisition. Refer to Note 3 for information on this acquisition.
(b)
The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm.  Refer to Note 13 for information related to the carrying value of our debt as of December 31, 2019 and 2018.
v3.19.3.a.u2
Earnings per Share
12 Months Ended
Dec. 31, 2019
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, restricted stock units and convertible debt) were exercised or converted into common stock, calculated using the treasury stock method. We had no participating securities during the years ended December 31, 2019, 2018 and 2017.
Common stock equivalents of 66, 40, and 41 for the years ended December 31, 2019, 2018 and 2017, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive. We issued 392 shares of our common stock in connection with the Pandora Acquisition.
 
For the Years Ended December 31,
 
2019
 
2018
 
2017(1)
Numerator:
 
 
 
 
 
Net Income available to common stockholders for basic net income per common share
$
914

 
$
1,176

 
$
648

Effect of interest on assumed conversions of convertible debt, net of tax
7

 

 

Net Income available to common stockholders for dilutive net income per common share
$
921

 
$
1,176

 
$
648

Denominator:
 

 
 
 
 
Weighted average common shares outstanding for basic net income per common share
4,501

 
4,462

 
4,638

Weighted average impact of assumed convertible notes
28

 

 

Weighted average impact of dilutive equity instruments
87

 
99

 
86

Weighted average shares for diluted net income per common share
4,616

 
4,561

 
4,724

Net income per common share:
 

 
 
 
 
Basic
$
0.20

 
$
0.26

 
$
0.14

Diluted
$
0.20

 
$
0.26

 
$
0.14


(1)
Our net income per basic and diluted share includes the impact of $185 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.
v3.19.3.a.u2
Receivables, net
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Receivables, net
Receivables, net
Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables. We do not have any customer receivables that individually represent more than ten percent of the receivables.
Customer accounts receivable, net, includes receivables from our subscribers, advertising customers and other customers, 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, industry experience 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 automakers 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 automakers or other third parties.
Receivables, net, consists of the following:
 
December 31, 2019
 
December 31, 2018
Gross customer accounts receivable
$
546

 
$
105

Allowance for doubtful accounts
(14
)
 
(7
)
Customer accounts receivable, net
$
532

 
$
98

Receivables from distributors
113

 
107

Other receivables
25

 
28

Total receivables, net
$
670

 
$
233


v3.19.3.a.u2
Inventory, net
12 Months Ended
Dec. 31, 2019
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, 2019
 
December 31, 2018
Raw materials
$
3

 
$
5

Finished goods
13

 
23

Allowance for obsolescence
(5
)
 
(6
)
Total inventory, net
$
11

 
$
22


v3.19.3.a.u2
Goodwill
12 Months Ended
Dec. 31, 2019
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 two reporting units 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. Our Sirius XM reporting unit, which has an allocated goodwill balance of $2,290, had a negative carrying amount as of December 31, 2019.
As of December 31, 2019, there were no indicators of impairment, and no impairment losses were recorded for goodwill during the years ended December 31, 2019 and 2018.  As of December 31, 2019, the cumulative balance of goodwill impairments recorded was $4,766, which was recognized during the year ended December 31, 2008 and is included in the carrying value of the goodwill allocated to our Sirius XM reporting unit.
As a result of the Pandora Acquisition, we recorded additional goodwill of $1,553 during the year ended December 31, 2019 at our Pandora reporting unit. The goodwill of the acquired company is not deductible for tax purposes. Refer to Note 3 for information on this acquisition.

Refer to the table below for our goodwill activity for the years ended December 31, 2019 and 2018:
 
Sirius XM
 
Pandora
 
Total
Balance at December 31, 2017
$
2,287

 
$

 
$
2,287

Acquisition
3

 

 
3

Balance at December 31, 2018
2,290

 

 
2,290

Acquisition

 
1,553

 
1,553

Balance at December 31, 2019
$
2,290

 
$
1,553

 
$
3,843


v3.19.3.a.u2
Intangible Assets
12 Months Ended
Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Intangible Assets
Our intangible assets include the following:
 
 
 
December 31, 2019
 
December 31, 2018
 
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
 
$
2,084

 
$

 
$
2,084

 
$
2,084

 
$

 
$
2,084

Trademarks
Indefinite
 
251

 

 
251

 
251

 

 
251

Definite life intangible assets:
 
 
 

 
 

 
 

 
 

 
 

 
 

OEM relationships
15 years
 
220

 
(90
)
 
130

 
220

 
(76
)
 
144

Licensing agreements
12 years
 
45

 
(42
)
 
3

 
45

 
(38
)
 
7

Software and technology
7 years
 
35

 
(25
)
 
10

 
35

 
(20
)
 
15

Due to Pandora Acquisition:



















Indefinite life intangible assets:



















Trademarks
Indefinite

$
331


$


$
331


$


$


$

Definite life intangible assets:



















Customer relationships
8 years

403


(49
)

354







Software and technology
5 years

373


(69
)

304







Total intangible assets
 
 
$
3,742

 
$
(275
)
 
$
3,467

 
$
2,635

 
$
(134
)
 
$
2,501



Indefinite Life Intangible Assets
We have identified our FCC licenses and XM, Pandora 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. As part of the Pandora Acquisition, we also identified $331 related to its trademarks, for which the fair value was determined using the relief from royalty method as of the acquisition date.
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, Pandora and Automatic trademarks during the fourth quarter of 2019, 2018 and 2017. As of the date of our annual assessment for 2019, 2018 and 2017, our qualitative impairment assessment of the fair value of our indefinite intangible assets indicated that the fair value of such assets substantially exceeded their carrying value and therefore was not at risk of impairment. No impairment loss was recognized for intangible assets with indefinite lives during the years ended December 31, 2019, 2018 and 2017.
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, 2019, 2018 and 2017.
Amortization expense for all definite life intangible assets was $141, $23 and $38 for the years ended December 31, 2019, 2018 and 2017, respectively. We retired definite lived intangible assets of $390 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, 2019 and 2017. As part of the Pandora Acquisition, $776 was allocated to identifiable intangible assets subject to amortization and related to the assessed fair value of customer relationships and software and technology, which was determined by using the multi-period excess earnings method and the relief from royalty method, respectively, as of the acquisition date.
The expected amortization expense for each of the fiscal years 2020 through 2024 and for periods thereafter is as follows:
Years ending December 31,
 
Amount
2020
 
$
152

2021
 
146

2022
 
144

2023
 
134

2024
 
69

Thereafter
 
156

Total definite life intangible assets, net
 
$
801


v3.19.3.a.u2
Property and Equipment
12 Months Ended
Dec. 31, 2019
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, 2019, 2018 and 2017.
Property and equipment, net, consists of the following:
 
December 31, 2019
 
December 31, 2018
Satellite system
$
1,587

 
$
1,587

Terrestrial repeater network
100

 
98

Leasehold improvements
105

 
58

Broadcast studio equipment
137

 
111

Capitalized software and hardware
1,086

 
824

Satellite telemetry, tracking and control facilities
87

 
76

Furniture, fixtures, equipment and other
89

 
97

Land
38

 
38

Building
63

 
63

Construction in progress
505

 
412

Total property and equipment
3,797

 
3,364

Accumulated depreciation and amortization
(2,171
)
 
(1,851
)
Property and equipment, net
$
1,626

 
$
1,513


Construction in progress consists of the following:
 
December 31, 2019
 
December 31, 2018
Satellite system
$
371

 
$
296

Terrestrial repeater network
7

 
5

Capitalized software and hardware
107

 
77

Other
20

 
34

Construction in progress
$
505

 
$
412


Depreciation and amortization expense on property and equipment was $327, $278 and $261 and for the years ended December 31, 2019, 2018 and 2017, respectively.  We retired property and equipment of $9, $35 and $79 during the years ended December 31, 2019, 2018 and 2017, respectively.
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 $17, $12 and $5 for the years ended December 31, 2019, 2018 and 2017, respectively, which related to the construction of our SXM-7 and SXM-8 satellites. We also capitalize a portion of share-based compensation related to employee time for capitalized software projects. Capitalized share-based compensation costs were $13 for the year ended December 31, 2019. We did not capitalize any share-based compensation for the years ended December 31, 2018 and 2017.
Satellites
As of December 31, 2019, we owned a fleet of five satellites.  The chart below provides certain information on our satellites as of December 31, 2019:
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

v3.19.3.a.u2
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases
Leases
We have operating and finance leases for offices, terrestrial repeaters, data centers and certain equipment. Our leases have remaining lease terms of less than 1 year to 18 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. We elected the practical expedient to account for the lease and non-lease components as a single component. Additionally, we elected the practical expedient to not recognize right-of-use assets or lease liabilities for short-term leases, which are those leases with a term of twelve months or less at the lease commencement date.
The components of lease expense were as follows:
 
For the Year Ended December 31,
 
2019
Operating lease cost
$
80

Finance lease cost
4

Sublease income
(3
)
Total lease cost
$
81

Supplemental cash flow information related to leases was as follows:
 
For the Year Ended December 31,
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
70

Financing cash flows from finance leases
$
3

 
 
Right-of-use assets obtained in exchange for lease obligations:

Operating leases
$
83


Supplemental balance sheet information related to leases was as follows:
 
December 31, 2019
Operating Leases
 
Operating lease right-of-use assets
$
466

 
 
Operating lease current liabilities
46

Operating lease liabilities
456

Total operating lease liabilities
$
502

 
December 31, 2019
Finance Leases
 
Property and equipment, gross
$
15

Accumulated depreciation
(12
)
Property and equipment, net
$
3

 
 
Current maturities of debt
$
1

Long-term debt
1

Total finance lease liabilities
$
2

 
December 31, 2019
Weighted Average Remaining Lease Term

Operating leases
9 years
Finance leases
2 years
 
December 31, 2019
Weighted Average Discount Rate

Operating leases
5.3
%
Finance leases
1.7
%

Maturities of lease liabilities were as follows:
 
Operating Leases
 
Finance Leases
Year ending December 31,



2020
$
69


$
1

2021
74


1

2022
71



2023
68



2024
59



Thereafter
303



Total future minimum lease payments
644


2

Less imputed interest
(142
)


Total
$
502


$
2



Leases
Leases
We have operating and finance leases for offices, terrestrial repeaters, data centers and certain equipment. Our leases have remaining lease terms of less than 1 year to 18 years, some of which may include options to extend the leases for up to 5 years, and some of which may include options to terminate the leases within 1 year. We elected the practical expedient to account for the lease and non-lease components as a single component. Additionally, we elected the practical expedient to not recognize right-of-use assets or lease liabilities for short-term leases, which are those leases with a term of twelve months or less at the lease commencement date.
The components of lease expense were as follows:
 
For the Year Ended December 31,
 
2019
Operating lease cost
$
80

Finance lease cost
4

Sublease income
(3
)
Total lease cost
$
81

Supplemental cash flow information related to leases was as follows:
 
For the Year Ended December 31,
 
2019
Cash paid for amounts included in the measurement of lease liabilities:
 
Operating cash flows from operating leases
$
70

Financing cash flows from finance leases
$
3

 
 
Right-of-use assets obtained in exchange for lease obligations:

Operating leases
$
83


Supplemental balance sheet information related to leases was as follows:
 
December 31, 2019
Operating Leases
 
Operating lease right-of-use assets
$
466

 
 
Operating lease current liabilities
46

Operating lease liabilities
456

Total operating lease liabilities
$
502

 
December 31, 2019
Finance Leases
 
Property and equipment, gross
$
15

Accumulated depreciation
(12
)
Property and equipment, net
$
3

 
 
Current maturities of debt
$
1

Long-term debt
1

Total finance lease liabilities
$
2