Sirius XM Radio (SIRI)

In the fourth quarter of 2009, the company maintained positive pro forma adjusted income from operations of $115 million compared to a pro forma adjusted income from operations of $32 million for the fourth quarter of 2008 (refer to the reconciliation table of net loss to adjusted income (loss) from operations). The improvement was driven by the increase in total revenue of $40 million and a $44 million, or 7%, decrease in expenses included in pro forma adjusted income from operations.

Satellite and transmission costs increased 10%, or $2 million, in the three months ended December 31, 2009 compared to the same period in 2008 due to non-cash repeater lease charges and an increase in in-orbit insurance expense, partially offset by reductions in repeater maintenance and personnel costs.

Programming and content costs decreased 12%, or $12 million, in the three months ended December 31, 2009 compared to the same period in 2008 due mainly to reductions in personnel and on-air talent costs as well as savings on certain content arrangements.

Revenue share and royalties increased 1%, or $2 million, in the three months ended December 31, 2009 compared to the same period in 2008, due mainly to the increase in the company’s revenues and the statutory royalty rate for the performance of sound recordings offset in part by a reduction in the revenue share rate paid to an automaker.

Customer service and billing costs decreased 12%, or $8 million, in the three months ended December 31, 2009 compared to the same period in 2008 due primarily to reductions in personnel and customer call center expenses.

Cost of equipment decreased 33%, or $6 million, in the three months ended December 31, 2009 compared to the same period in 2008 as a result of a decrease in the company’s direct to customer sales and lower inventory write-downs.

Sales and marketing costs decreased 2%, or $2 million, and decreased as a percentage of revenue to 12% from 13% in the three months ended December 31, 2009 compared to the same period in 2008. The decrease in Sales and marketing costs was due to reduced personnel costs and third party distribution support expenses.

Subscriber acquisition costs decreased 4%, or $5 million, and decreased as a percentage of revenue to 19% from 21% in the three months ended December 31, 2009 compared to the same period in 2008. SAC per gross addition declined by 9%, to $64, from $70 in the year ago period. This improvement in the 2009 quarter was driven by lower OEM subsidies, chipset costs and aftermarket acquisition costs, partially offset by higher aftermarket inventory related charges as compared to the three months ended December 31, 2008. Subscriber acquisition costs also decreased despite the 10% increase in gross additions during the three months ended December 31, 2009 compared to the three months ended December 31, 2008.

General and administrative costs decreased 24%, or $12 million, mainly due to the absence of certain legal and regulatory charges incurred in 2008 and lower personnel costs.

period. This improvement was driven by fewer OEM installations relative to gross subscriber additions, decreased production of certain radios, lower OEM subsidies and lower aftermarket inventory reserves as compared to the three months ended June 30, 2008. Subscriber acquisition costs also decreased as a result of the 35% decline in gross additions during the three months ended June 30, 2009 compared to the three months ended June 30, 2008.

General and administrative costs decreased 33%, or $22 million, mainly due to the absence of certain legal and regulatory charges incurred in 2008 and lower personnel costs.

Engineering, design and development costs decreased 35%, or $6 million, in the three months ended June 30, 2009 compared to the same period in 2008, due to lower costs associated with the manufacturing of radios, OEM tooling and manufacturing, and personnel.

Restructuring, impairments and related costs increased $27 million mainly due to a loss of $24 million on capitalized installment payments for the launch of a satellite, which are expected to provide no future benefits due to the counterparty’s bankruptcy filing.

Other expenses increased 285%, or $147 million, in the three months ended June 30, 2009 compared to the same period in 2008 driven mainly by the loss on extinguishment of debt and credit facilities of $108 million, and an increase in interest expense of $53 million, offset by an increase of $13 million in gain on investments. The loss on the extinguishment of debt and credit facilities was incurred on the full repayment of XM’s Amended and Restated Credit Agreement and its Second-Lien Credit Agreement. Interest expense increased due primarily to the issuance of XM’s 13% Senior Notes due 2013 and the 7% Exchangeable Senior Subordinated Notes due 2014 in the third quarter of 2008.

31, 2009 compared to the same period in 2008 due to reductions in maintenance costs, repeater lease expense, and personnel costs.

Programming and content costs decreased 10%, or $11,244, in the three months ended March 31, 2009 compared to the same period in 2008, mainly due to reductions in personnel and on-air talent costs as well as savings on various content agreements.

Revenue share and royalties increased by 9%, or $10,119, while maintaining relatively flat as a percentage of revenue in the three months ended March 31, 2009 compared to the same period in 2008.

Customer service and billing costs decreased by $805 in the three months ended March 31, 2009 compared to the same period in 2008, due to scale efficiencies over a larger subscriber base.

Cost of equipment decreased by 50%, or $8,146, in the three months ended March 31, 2009 compared to the same period in 2008 as a result of a decrease in our direct to customer sales and lower inventory write-downs.

Sales and marketing costs decreased 35%, or $28,072, and decreased as a percentage of revenue from 14% to 8% in the three months ended March 31, 2009 compared to the same period in 2008. The decrease in Sales and Marketing costs was due to reduced advertising and cooperative marketing spend as well as reductions to personnel costs and third party distribution support expenses.

Subscriber acquisition costs decreased 48%, or $77,624, and decreased as a percentage of revenue from 28% to 14% in the three months ended March 31, 2009 compared to the same period in 2008. This improvement was primarily driven by a 26% improvement in SAC, as adjusted, per gross addition due to fewer OEM installations relative to gross subscriber additions, improved OEM subsidies and higher one time aftermarket inventory reserves in the first quarter of 2008 compared to the first quarter of 2009. Subscriber acquisition costs also decreased as a result of the 34% decline in gross additions during the three months ended March 31, 2009.

General and administrative costs decreased 32%, or $22,903, mainly due to the absence of onetime charges related to certain legal and regulatory matters incurred in 2008 and lower personnel costs.

Engineering, design and development costs decreased 48%, or $7,654, in the three months ended March 31, 2009 compared to the same period in 2008, due to lower costs associated with manufacturing of radios, OEM tooling and manufacturing, and personnel.

Other expenses increased 93%, or $46,802, in the three months ended March 31, 2009 compared to the same period in 2008 driven mainly by an increase in interest expense of $25,390 and loss from redemption of debt of $17,957. Interest expense increased due primarily to XM’s issuance of the 13% Senior Notes due 2013 and the 7% Exchangeable Senior Subordinated Notes due 2014 in the third quarter of 2008.