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This excerpt taken from the SIRI 8-K filed Aug 1, 2008. UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined balance sheet
combines (i) the historical consolidated balance sheets of Sirius
Satellite Radio Inc. and its subsidiaries (“Sirius”)
and XM Satellite Radio Holdings Inc. (“Holdings”, and its
subsidiaries together with Holdings, “XM”), giving effect to the merger of
Holdings and Vernon Merger Corporation (the “merger”),
pursuant to which Holdings became a wholly-owned subsidiary of Sirius,
as well as the refinancing of a substantial portion of XM’s
existing indebtedness and raising of certain additional liquidity,
which we refer to as the “Refinancing Transactions”, as if they had
been consummated on March 31,
2008 and (ii) the unaudited pro forma condensed combined statements
of operations for the three months ended March 31, 2008 and
for the year ended December 31, 2007, giving effect to the
merger and the Refinancing Transactions as if they had occurred
on January 1, 2007. The historical consolidated financial
information has been adjusted to give effect to pro forma events
that are (i) directly attributable to the merger,
(ii) factually supportable, and (iii) with respect to
the statement of operations, expected to have a continuing
impact on the combined results. Intercompany transactions have
not been eliminated as the preliminary estimates are not
material to the unaudited pro forma condensed combined financial
statements.
The unaudited pro forma condensed
combined financial statements are not necessarily indicative of
the operating results or financial position that would have
occurred if the merger had been completed at the dates
indicated. It may be necessary to further reclassify XM’s
financial statements to conform to those classifications that
are determined by the combined company to be most appropriate.
While some reclassifications of prior periods have been included
in the unaudited pro forma condensed combined financial
statements, further reclassifications may be necessary.
The unaudited pro forma condensed combined financial statements
were prepared using the purchase method of accounting with
Sirius treated as the acquiring entity. Accordingly,
consideration paid by Sirius to complete the merger with XM will
be allocated to XM’s assets and liabilities based upon
their estimated fair values as of the date of completion of the
merger. The allocation is dependent upon certain valuations and
other studies that have not progressed to a stage where there is
sufficient information to make a definitive allocation.
Additionally, a final determination of the fair value of
XM’s assets and liabilities, which cannot be made prior to
the completion of the transaction, will be based on the actual
net tangible and intangible assets of XM that exist as of the
date of completion of the merger. Accordingly, the pro forma
purchase price adjustments are preliminary, subject to further
adjustments as additional information becomes available and as
additional analyses are performed and have been made solely for
the purpose of providing the unaudited pro forma condensed
combined financial information presented below. Sirius estimated
the fair value of XM’s assets and liabilities based on
discussions with XM’s management, due diligence and
information presented in public filings. Pending regulatory
approval from the FCC, both companies were limited in their
ability to share information. Therefore, certain valuations have
not been performed on tangible and intangible assets and
liabilities such as property and equipment and deferred revenue
and therefore an estimate of fair value is not included as a pro
forma adjustment. Upon completion of the merger, final
valuations will be performed. Increases or decreases in the fair
value of relevant balance sheet amounts including property and
equipment, deferred revenue, debt and intangibles will result in
adjustments to the balance sheet
and/or
statement of operations. There can be no assurance that the
final determination will not result in material changes.
These pro forma results reflect the impact of the following
Refinancing Transactions:
Sirius expects to incur significant costs associated with
integrating Sirius’ and XM’s businesses. The unaudited
pro forma condensed combined financial statements do not reflect
the cost of any integration activities or benefits that may
result from synergies that may be derived from any integration
activities. In addition, the unaudited pro forma combined
consolidated financial statements do not reflect one-time fees
and expenses of $25 million payable by Sirius as a result
of the merger or payments contemplated by the Consent Decrees.
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