UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 20162017
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  FOR THE TRANSITION PERIOD FROM __________ TO ________
COMMISSION FILE NUMBER 001-34295
 
SIRIUS XM HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
Delaware 
38-3916511

(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer Identification No.)
   
1290 Avenue of the Americas, 11th Floor  
New York, New York 10104
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (212) 584-5100
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ        No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ        No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer þ
 
Accelerated filer o
 
Non-accelerated filer o
Smaller reporting company o
   (Do not check if a smaller reporting company)
Smaller reporting company o
Emerging growth company o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

(Class) (Outstanding as of October 25, 2016)23, 2017)
COMMON STOCK, $0.001 PAR VALUE 4,824,886,0964,595,820,002SHARES

 

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

Item No. Description 
    
   
    
  
  
  
  
  
  
 
 
 
    
   
    
 
 
 
 
 
 
 
  


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands, except per share data)2016 2015 2016 20152017 2016 2017 2016
Revenue: 
  
     
  
    
Subscriber revenue$1,069,746
 $974,471
 $3,112,712
 $2,826,018
$1,136,027
 $1,069,746
 $3,325,295
 $3,112,712
Advertising revenue34,268
 33,131
 99,330
 88,843
41,462
 34,268
 117,656
 99,330
Equipment revenue31,306
 25,875
 86,285
 79,979
32,337
 31,306
 91,669
 86,285
Other revenue142,326
 136,235
 415,895
 379,072
169,770
 142,326
 486,611
 415,895
Total revenue1,277,646
 1,169,712
 3,714,222
 3,373,912
1,379,596
 1,277,646
 4,021,231
 3,714,222
Operating expenses: 
  
     
  
    
Cost of services: 
  
     
  
    
Revenue share and royalties272,823
 238,620
 788,952
 783,115
296,498
 272,823
 866,691
 788,952
Programming and content89,015
 75,707
 257,760
 216,223
98,239
 89,015
 290,038
 257,760
Customer service and billing94,923
 94,492
 285,502
 278,521
94,655
 94,923
 286,754
 285,502
Satellite and transmission22,224
 22,743
 80,609
 65,761
21,378
 22,224
 61,557
 80,609
Cost of equipment9,674
 9,246
 29,181
 29,021
8,254
 9,674
 24,537
 29,181
Subscriber acquisition costs120,111
 133,009
 381,516
 391,773
119,555
 120,111
 372,197
 381,516
Sales and marketing99,194
 90,541
 279,278
 255,778
114,519
 99,194
 318,135
 279,278
Engineering, design and development19,254
 16,132
 57,588
 47,180
29,433
 19,254
 81,033
 57,588
General and administrative90,369
 67,234
 249,052
 219,194
83,187
 90,369
 245,995
 249,052
Depreciation and amortization67,880
 70,404
 202,215
 202,527
79,913
 67,880
 230,136
 202,215
Total operating expenses885,467
 818,128
 2,611,653
 2,489,093
945,631
 885,467
 2,777,073
 2,611,653
Income from operations392,179
 351,584
 1,102,569
 884,819
433,965
 392,179
 1,244,158
 1,102,569
Other income (expense): 
  
     
  
    
Interest expense(89,092) (76,624) (250,888) (221,912)(92,634) (89,092) (257,085) (250,888)
Loss on extinguishment of debt(43,679) 
 (43,679) 
Other income2,370
 4,133
 15,733
 9,077
86,971
 2,370
 83,897
 15,733
Total other expense(86,722) (72,491) (235,155) (212,835)(49,342) (86,722) (216,867) (235,155)
Income before income taxes305,457
 279,093
 867,414
 671,984
384,623
 305,457
 1,027,291
 867,414
Income tax expense(111,556) (112,543) (326,108) (296,893)(108,901) (111,556) (342,387) (326,108)
Net income$193,901
 $166,550
 $541,306
 $375,091
$275,722
 $193,901
 $684,904
 $541,306
Foreign currency translation adjustment, net of tax(14) (91) 420
 (100)3,680
 (14) 6,426
 420
Total comprehensive income$193,887
 $166,459
 $541,726
 $374,991
$279,402
 $193,887
 $691,330
 $541,726
Net income per common share: 
  
     
  
    
Basic$0.04
 $0.03
 $0.11
 $0.07
$0.06
 $0.04
 $0.15
 $0.11
Diluted$0.04
 $0.03
 $0.11
 $0.07
$0.06
 $0.04
 $0.14
 $0.11
Weighted average common shares outstanding: 
  
     
  
    
Basic4,870,281
 5,297,797
 4,957,820
 5,436,378
4,618,368
 4,870,281
 4,660,041
 4,957,820
Diluted4,919,829
 5,346,438
 5,005,133
 5,487,116
4,704,571
 4,919,829
 4,734,841
 5,005,133
Dividends declared per common share$0.010

$
 $0.030
 $
 
See accompanying notes to the unaudited consolidated financial statements.


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
ASSETS(unaudited)


(unaudited)


Current assets: 
  
 
  
Cash and cash equivalents$572,382
 $111,838
$73,553
 $213,939
Receivables, net233,419
 234,782
225,001
 223,029
Inventory, net28,030
 22,295
22,469
 20,363
Related party current assets5,249
 5,941
12,375
 6,170
Prepaid expenses and other current assets202,289
 187,033
163,164
 179,148
Total current assets1,041,369
 561,889
496,562
 642,649
Property and equipment, net1,381,114
 1,415,401
1,427,614
 1,398,693
Intangible assets, net2,556,568
 2,593,346
2,528,709
 2,544,801
Goodwill2,205,107
 2,205,107
2,286,559
 2,205,107
Related party long-term assets6,163
 
1,017,350
 8,918
Deferred tax assets1,101,014
 1,115,731
777,002
 1,084,330
Other long-term assets131,492
 155,188
118,620
 119,097
Total assets$8,422,827
 $8,046,662
$8,652,416
 $8,003,595
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY 
  
 
  
Current liabilities: 
  
 
  
Accounts payable and accrued expenses$620,599
 $625,313
$736,782
 $713,034
Accrued interest108,370
 91,655
92,539
 114,633
Current portion of deferred revenue1,811,283
 1,771,915
1,846,285
 1,832,609
Current maturities of long-term debt358,701
 4,764
4,220
 5,485
Related party current liabilities3,015
 2,840
3,018
 2,840
Total current liabilities2,901,968
 2,496,487
2,682,844
 2,668,601
Deferred revenue170,662
 157,609
178,180
 176,319
Long-term debt5,743,389
 5,443,614
6,728,349
 5,842,764
Related party long-term liabilities8,665
 10,795
6,778
 7,955
Deferred tax liabilities6,681
 6,681
6,418
 6,418
Other long-term liabilities97,976
 97,967
99,948
 93,553
Total liabilities8,929,341
 8,213,153
9,702,517
 8,795,610
Commitments and contingencies (Note 13)

 

Commitments and contingencies (Note 14)

 

Stockholders’ (deficit) equity: 
  
 
  
Common stock, par value $0.001; 9,000,000 shares authorized; 4,846,154 and 5,153,451 shares issued; 4,843,154 and 5,147,647 outstanding at September 30, 2016 and December 31, 2015, respectively4,846
 5,153
Accumulated other comprehensive loss, net of tax(82) (502)
Common stock, par value $0.001; 9,000,000 shares authorized; 4,604,441 and 4,746,047 shares issued; 4,601,941 and 4,740,947 outstanding at September 30, 2017 and December 31, 2016, respectively4,604
 4,745
Accumulated other comprehensive income (loss), net of tax6,287
 (139)
Additional paid-in capital3,597,256
 4,783,795
2,159,239
 3,117,666
Treasury stock, at cost; 3,000 and 5,804 shares of common stock at September 30, 2016 and December 31, 2015, respectively(12,526) (23,727)
Treasury stock, at cost; 2,500 and 5,100 shares of common stock at September 30, 2017 and December 31, 2016, respectively(13,754) (22,906)
Accumulated deficit(4,096,008) (4,931,210)(3,206,477) (3,891,381)
Total stockholders’ (deficit) equity(506,514) (166,491)(1,050,101) (792,015)
Total liabilities and stockholders’ (deficit) equity$8,422,827
 $8,046,662
$8,652,416
 $8,003,595

See accompanying notes to the unaudited consolidated financial statements.

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY
(UNAUDITED)
 Common Stock Accumulated
Other
Comprehensive
(Loss) Income
 Additional
Paid-in
Capital
 Treasury Stock Accumulated
Deficit
 Total
Stockholders’ (Deficit) Equity
 Common Stock Accumulated
Other
Comprehensive
(Loss) Income
 Additional
Paid-in
Capital
 Treasury Stock Accumulated
Deficit
 Total
Stockholders’ (Deficit) Equity
(in thousands) Shares Amount Shares Amount  Shares Amount Shares Amount 
Balance at December 31, 2015 5,153,451
 $5,153
 $(502) $4,783,795
 5,804
 $(23,727) $(4,931,210) $(166,491)
Cumulative effect of change in accounting principle 






 
 
 293,896

293,896
Balance at December 31, 2016 4,746,047
 $4,745
 $(139) $3,117,666
 5,100
 $(22,906) $(3,891,381) $(792,015)
Comprehensive income, net of tax 
 
 420
 
 
 
 541,306
 541,726
 
 
 6,426
 
 
 
 684,904
 691,330
Issuance of common stock as part of investment in Sirius XM Canada 35,000
 35
 
 178,815
 
 
 
 178,850
Share-based payment expense 
 
 
 70,903
 
 
 
 70,903
 
 
 
 82,485
 
 
 
 82,485
Exercise of options and vesting of restricted
stock units
 10,558
 11
 
 337
 
 
 
 348
 20,318
 21
 
 753
 
 
 
 774
Minimum withholding taxes on net share
settlement of stock-based compensation
 
 
 
 (32,813) 
 
 
 (32,813) 
 
 
 (84,560) 
 
 
 (84,560)
Cash dividends paid on common stock 
 
 
 (139,854) 
 
 
 (139,854)
Common stock repurchased 
 
 
 
 315,051
 (1,214,083) 
 (1,214,083) 
 
 
 
 194,324
 (987,111) 
 (987,111)
Common stock retired (317,855) (318) 
 (1,224,966) (317,855) 1,225,284
 
 
 (196,924) (197) 
 (996,066) (196,924) 996,263
 
 
Balance at September 30, 2016 4,846,154
 $4,846
 $(82) $3,597,256
 3,000
 $(12,526) $(4,096,008) $(506,514)
Balance at September 30, 2017 4,604,441
 $4,604
 $6,287
 $2,159,239
 2,500
 $(13,754) $(3,206,477) $(1,050,101)

See accompanying notes to the unaudited consolidated financial statements.


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(in thousands)2016 20152017 2016
Cash flows from operating activities:      
Net income$541,306
 $375,091
$684,904
 $541,306
Adjustments to reconcile net income to net cash provided by operating activities: 
  
 
  
Depreciation and amortization202,215
 202,527
230,136
 202,215
Non-cash interest expense, net of amortization of premium6,571
 5,851
6,731
 6,571
Provision for doubtful accounts39,629
 34,031
42,329
 39,629
Amortization of deferred income related to equity method investment(2,082) (2,082)(2,082) (2,082)
Loss on extinguishment of debt43,679
 
Gain on unconsolidated entity investments, net(9,725) 
(7,541) (9,725)
Dividend received from unconsolidated entity investment7,160
 11,260
3,606
 7,160
Loss on disposal of assets12,912
 

 12,912
Share-based payment expense77,890
 62,334
94,588
 77,890
Deferred income taxes308,613
 285,478
318,190
 308,613
Other non-cash purchase price adjustments
 (1,394)
Changes in operating assets and liabilities: 
  
 
  
Receivables(38,266) (50,651)(43,665) (38,266)
Inventory(5,735) (7,346)(396) (5,735)
Related party, net(2,373) (14,020)(77,179) (2,373)
Prepaid expenses and other current assets(15,985) (70,758)16,698
 (15,985)
Other long-term assets26,668
 (51,842)7,559
 26,668
Accounts payable and accrued expenses(1,841) 26,584
1,951
 (1,841)
Accrued interest16,715
 14,923
(22,094) 16,715
Deferred revenue52,421
 81,626
9,955
 52,421
Other long-term liabilities11
 (658)6,395
 11
Net cash provided by operating activities1,216,104
 900,954
1,313,764
 1,216,104
Cash flows from investing activities: 
  
 
  
Additions to property and equipment(132,246) (90,943)(206,717) (132,246)
Purchases of restricted and other investments(4,168) (3,966)(7,595) (4,168)
Acquisition of business, net of cash acquired(107,736) 
Investment in convertible preferred stock of related party(480,000)

Loan to related party(130,794) 
Payments to acquire additional ownership in related party(132,205) 
Net cash used in investing activities(136,414) (94,909)(1,065,047) (136,414)
Cash flows from financing activities: 
  
 
  
Proceeds from exercise of stock options348
 259
774
 348
Taxes paid in lieu of shares issued for stock-based compensation(32,603) (39,622)(84,291) (32,603)
Proceeds from long-term borrowings and revolving credit facility, net of costs1,387,257
 1,579,323
Repayment of long-term borrowings and revolving credit facility(748,864) (693,456)
Net repayments related to revolving credit facility(100,000) (340,000)
Proceeds from long-term borrowings, net of costs2,473,506
 987,257
Principal payments of long-term borrowings(1,509,910) (8,864)
Payment of premiums on redemption of debt(33,065) 
Common stock repurchased and retired(1,225,284) (1,647,728)(996,263) (1,225,284)
Dividends paid(139,854)

Net cash used in financing activities(619,146) (801,224)(389,103) (619,146)
Net increase in cash and cash equivalents460,544
 4,821
Net (decrease) increase in cash and cash equivalents(140,386) 460,544
Cash and cash equivalents at beginning of period111,838
 147,724
213,939
 111,838
Cash and cash equivalents at end of period$572,382
 $152,545
$73,553
 $572,382
See accompanying notes to the unaudited consolidated financial statements.

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)
For the Nine Months Ended September 30,For the Nine Months Ended September 30,
(in thousands)2016 20152017 2016
Supplemental Disclosure of Cash and Non-Cash Flow Information      
Cash paid during the period for:      
Interest, net of amounts capitalized$222,110
 $192,927
$270,365
 $222,110
Income taxes paid$15,857
 $8,163
$16,647
 $15,857
Non-cash investing and financing activities:      
Capital lease obligations incurred to acquire assets$6,647
 $7,487
$
 $6,647
Treasury stock not yet settled$12,526
 $25,104
$13,754
 $12,526
Issuance of common stock as part of investment in Sirius XM Canada$178,850
 $
Accumulated other comprehensive income, net of tax benefit for loan to related party$6,426
 $

See accompanying notes to the unaudited consolidated financial statements.


6

Table of Contents
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)



(1)Business & Basis of Presentation
This Quarterly Report on Form 10-Q 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.  Subscribers can also receive music and other channels, plus features such as SiriusXM On Demand and MySXM, over our Internet radio service, including through applications for mobile devices.devices, home devices and other consumer electronic equipment.  We are also a leader in providing 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. We also acquire subscribers through marketing to owners and lessees of previously owned vehicles that include factory-installed satellite radios that are not currently subscribing to our services. Additionally, we distribute ourOur satellite radios are primarily distributed through retailers online and at locationsautomakers, retail stores nationwide, and through 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 on anto annual, semi-annual, quarterly or monthly plan.plans.  We offer discounts for prepaid, longer termlonger-term subscription plans, as well as a multiple subscription discount.  We also derive revenue from activation and other 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 certain cases, a subscription to our radio services is included in the sale or lease price 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.
During the nine months ended September 30, 2017, we entered into several strategic transactions:
On April 18, 2017, Sirius XM acquired Automatic Labs Inc. (“Automatic”). Refer to Note 2 for information on this transaction.
On May 25, 2017, Sirius XM completed a recapitalization of Sirius XM Canada Holdings Inc. (“Sirius XM Canada”). Refer to Note 10 for information on this transaction.
On September 22, 2017, Sirius XM completed a $480,000 investment in Pandora Media, Inc. (“Pandora”). Refer to Note 10 for information on this transaction.
As of September 30, 2016,2017, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 65%69% 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.  Liberty Media owns interests in a range of media, communications and entertainment businesses.
Recent Development
Recapitalization of Sirius XM Canada
On May 12, 2016, our subsidiary, Sirius XM Radio Inc. (“Sirius XM”), entered into an arrangement agreement (the “Arrangement Agreement”) with Sirius XM Canada Holdings Inc. ("Sirius XM Canada"), an entity in which Sirius XM currently holds an approximate 37% economic interest and 25% voting interest. Pursuant to the Arrangement Agreement, Sirius XM and certain Canadian shareholders will form a new company to acquire shares of Sirius XM Canada not already owned by them pursuant to a plan of arrangement (the “Transaction”). In connection with the Transaction, Sirius XM Canada’s shareholders will be entitled to elect to receive, for each share of Sirius XM Canada held, C$4.50 (U.S. $3.50 as of May 12, 2016) in (i) cash, (ii) shares of our common stock, (iii) a security exchangeable for shares of our common stock, or (iv) a combination thereof; provided that no more than 50% of the total consideration in the Transaction (or up to 35,000 shares) will be issued in our common stock and exchangeable shares. All of the obligations of Sirius XM under the Arrangement Agreement are guaranteed by us.
Following the Transaction, Sirius XM is expected to hold a 70% economic interest and 33% voting interest in Sirius XM Canada, with the remainder of the voting power and economic interest held by Slaight Communications and Obelysk Media, two of Sirius XM Canada’s current Canadian shareholders. Sirius XM expects to contribute to Sirius XM Canada approximately U.S. $275,000 in connection with the Transaction (assuming that all shareholders elect to receive cash in connection with the Transaction), which amount is expected to be used to pay the cash consideration to Sirius XM Canada’s shareholders and will be decreased proportionately if shareholders elect to receive consideration in shares of our common stock or securities exchangeable for our common stock.

7

Table of Contents
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

The Transaction has been approved by the stockholders of Sirius XM Canada and has received the required court approval. The Transaction remains subject to receipt of Canadian Radio-Television and Telecommunications Commission approval. Pending receipt of this approval, the Transaction is expected to close in the fourth quarter of 2016.
Basis of Presentation
This Quarterly Report on Form 10-Q presents information for Sirius XM Holdings Inc. (“Holdings”).  Holdings has no operations independent of its wholly-owned subsidiary Sirius XM.
The accompanying unaudited consolidated financial statements of Holdings and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the financial statements presented in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.
Certain numbers
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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in our prior period consolidated financial statements have been reclassified to conform to our current period presentation. thousands, except per share amounts)

All significant intercompany transactions have been eliminated in consolidation. In the opinion of our management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of September 30, 20162017 and for the three and nine months ended September 30, 20162017 and 20152016 have been made.
Interim results are not necessarily indicative of the results that may be expected for a full year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form 10-K for the year ended December 31, 2015,2016, which was filed with the SEC on February 2, 2016.2017.
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 makers 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 Quarterly Report on Form 10-Q for the three and nine months ended September 30, 20162017 and have determined that no events have occurred that would require adjustment to our unaudited consolidated financial statements.  For a discussion of subsequent events that do not require adjustment to our unaudited consolidated financial statements refer to Note 15.16.
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 unaudited consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense, and income taxes.

(2)Acquisition
On April 18, 2017, Sirius XM acquired 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. Automatic has created and operates a data-driven platform that enables vehicle owners to be safer and drive smarter. The company's proprietary Automatic Pro and Automatic Lite connected car adapters provide, among other things, vehicle diagnostic alerts, emergency crash assistance, fuel monitoring, access to parking information and live vehicle location tracking.
During the three months ended September 30, 2017, we recorded an increase of $3,929 to the Deferred income tax asset, net, related to the acquired assets, which resulted in a decrease to Goodwill. During the three months ended September 30, 2017, the working capital calculation associated with this acquisition was finalized, resulting in an increase of $248 to the original purchase price and Goodwill. As of September 30, 2017, our Goodwill balance associated with the acquisition was $81,452. No other assets or liabilities have been adjusted.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

The condensed table below summarizes the fair value of the assets acquired and liabilities assumed:
Acquired Assets: 
Intangible assets subject to amortization$14,700
Goodwill81,452
Deferred income tax asset, net14,783
Other assets4,019
Trademark800
Total Assets$115,754
  
Assumed Liabilities: 
Deferred revenue(5,582)
Other liabilities(1,617)
Total Liabilities$(7,199)
Total Consideration$108,555
The transaction was accounted for using the acquisition method of accounting. The initial purchase price allocation is subject to change upon receipt of the final valuation analysis for Automatic. The fair value assessed for the majority of the assets acquired and liabilities assumed equaled their carrying value. The excess purchase price over identifiable net assets of $81,452 has been recorded to Goodwill in our unaudited consolidated balance sheets as of September 30, 2017. A total of $14,700 has been allocated to identifiable intangible assets subject to amortization and relates to the assessed fair value of software and technology and a total of $800 has been allocated to the Automatic trademark.
We recognized acquisition related costs of $913 that were expensed in General and administrative expenses in our unaudited consolidated statements of comprehensive income during the nine months ended September 30, 2017. Pro forma financial information related to this acquisition has not been provided as it is not material to our consolidated results of operations.

(2)(3)Summary of Significant Accounting Policies
Fair Value Measurements
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are based on unadjusted quoted prices in active markets for identical instruments. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. As of September 30, 20162017 and December 31, 2015,2016, the carrying amounts of cash and cash equivalents, receivables, and accounts payable approximated fair value due to the short-term nature of these instruments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Our assets and liabilities measured at fair value were as follows:
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Level 1 Level 2 Level 3 Total Fair
Value
 Level 1 Level 2 Level 3 Total Fair
Value
Level 1 Level 2 Level 3 Total Fair
Value
 Level 1 Level 2 Level 3 Total Fair
Value
Assets: 
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
Sirius XM Canada Holdings Inc. (“Sirius XM Canada”) - investment (a)
$171,297
 
 
 $171,297
 $141,850
 
 
 $141,850
Pandora - investment (a)

 $552,245
 
 $552,245
 
 
 
 $
Sirius XM Canada - investment (b)

 
 
 N/A $178,696
 
 
 $178,696
Liabilities: 
  
  
  
  
  
  
  
 
  
  
  
  
  
  
  
Debt (b)

 $6,422,566
 
 $6,422,566
 
 $5,649,173
 
 $5,649,173
Debt (c)

 $7,081,843
 
 $7,081,843
 
 $6,008,205
 
 $6,008,205
(a)This amount approximates fair value.  The carrying value of our
During the nine months ended September 30, 2017, Sirius XM completed a $480,000investment in Sirius XM Canada was $5,853 and $0 as of September 30, 2016 and December 31, 2015, respectively.
(b)ThePandora. We have elected the fair value option to account for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm.this investment. Refer to Note 10 for information related to the carrying value of our debt as of September 30, 2016 and December 31, 2015.on this transaction.
Recent Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. 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 amendments in this ASU are effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years, and early adoption is permitted. An entity that elects early adoption must adopt all of the amendments in the same period.
We elected to early adopt ASU 2016-09 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 primary impact of adoption of ASU 2016-09 was the recognition of excess tax benefits in our provision for income taxes of $1,101 and $1,950 for the three months ended March 31, 2016 and June 30, 2016, respectively. The adoption of this ASU impacted our previously reported quarterly results during fiscal year 2016 as follows:
 For the Three Months Ended
For the Six Months Ended
 March 31, 2016
June 30, 2016
June 30, 2016
Income statements:As reported As adjusted As reported As adjusted As reported
As adjusted
Income tax expense$(109,343) $(108,242) $(108,260)
$(106,310)
$(217,603)
$(214,552)
Net income$171,339

$172,440

$173,015

$174,965

$344,354

$347,405
Net income per common share - basic$0.03
 $0.03
 $0.04
 $0.04
 $0.07
 $0.07
Net income per common share - diluted$0.03
 $0.03
 $0.03
 $0.04
 $0.07
 $0.07
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, the cumulative effect in the amount of $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 unaudited consolidated balance sheets as a result of this cumulative effect of change in accounting principle.
Additional amendments to this ASU related to income taxes and minimum statutory withholding tax requirements had no impact to accumulated deficit, where the cumulative effect of these changes are required to be recorded. Further, there was no impact to our classification of awards as either equity or liabilities. We also elected to true-up forfeitures in the period of adoption and in the future will recognize forfeitures as they occur.
This ASU also required excess tax benefits to be separated from other income tax cash flows and classified as an operating activity, however there was no impact to the consolidated statement of cash flows as we have not had any excess tax

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

(b)During the nine months ended September 30, 2017, Sirius XM completed a recapitalization of Sirius XM Canada. Following this recapitalization, Sirius XM Canada ceased to be a publicly traded company. Refer to Note 10 for information on this transaction. The amount as of December 31, 2016 approximated fair value.  The carrying value of our investment in Sirius XM Canada was $323,593 and $8,615 as of September 30, 2017 and December 31, 2016, respectively. Additionally, as part of this transaction we loaned Sirius XM Canada $130,794. The carrying value of the loan as of September 30, 2017 was $141,189 and approximated its fair value.
(c)The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm.  Refer to Note 11 for information related to the carrying value of our debt as of September 30, 2017 and December 31, 2016.
benefits (windfalls)
Accumulated Other Comprehensive Income (Loss)
Accumulated other comprehensive income of $6,287 was primarily comprised of the cumulative foreign currency translation adjustments related to the loan to Sirius XM Canada (refer to Note 10 for additional information related to this loan). During the three and nine months ended September 30, 2017, we recorded a foreign currency translation adjustment gain of $3,680 and $6,426, respectively, which is recorded net of a tax benefit of $2,176 and $3,921, respectively.
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350).  This ASU eliminates Step 2 from the goodwill impairment test. Under the new guidance, entities 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 book purposes. The presentationthe amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, this ASU eliminates the requirements for cash flows relatedany reporting unit with a zero or negative carrying amount to employee taxes paid for withheld shares had no impactperform a qualitative assessment and, if it fails that qualitative test, to anyperform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods presented inwithin those fiscal years, and is applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of the adoption of this ASU. We do not believe that the adoption of this guidance will have a material impact on our consolidated statement of cash flows as such cash flows have historically been presented as a financing activity.financial statements.
In February 2016, the 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. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. This ASU must be adopted using a modified retrospective approach. We plan to adopt this ASU on January 1, 2019. We are currentlyin the process of evaluating the impact of the adoption of thisthe ASU on our consolidated financial statements. We currently believe the most significant changes will be related to the recognition of right-of-use assets and lease liability on our consolidated balance sheet for operating leases.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14 which amended the effective date of this ASU to fiscal years beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016. We plan to adopt this ASU on January 1, 2018.  In 2016, the FASB issued additional guidance which clarified principal versus agent considerations, identification of performance obligations and the implementation guidance for licensing. In addition, the FASB issued guidance regarding practical expedients related to disclosures of remaining performance obligations, as well as other amendments to the guidance on transition, collectibility, non-cash consideration and the presentation of sales and other similar taxes. Companies may use either aThe two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or athe modified retrospective approachmethod, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We currently plan to adopt this ASU.  ASU under the modified retrospective method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

We are currently evaluatinghave completed our evaluation of the impact this ASU will have on our primary revenue streams.  Based on our assessment of the impact of implementing this ASU on January 1, 2018 under the modified retrospective method, the most significant impact of the ASU relates to the classification of Revenue share and certain subsidy payments made to automakers associated with a paid promotional subscription.  Under the new standard, these payments associated with a paid promotional subscription will be treated as a reduction to the transaction price rather than as an expense as classified under ASC 605.  We expect this change to reduce Subscription revenue by less than 3% upon adoption along with a corresponding reduction to Revenue share and royalties and Subscriber acquisition costs, and as a result, we do not expect this change to have an impact to our Net income.  Additionally, within our consolidated balance sheets, upon adoption, the amount of revenue share and certain subsidy payments made to automakers associated with a paid promotional subscription will be classified as a liability separate from deferred revenue.
The adoption of this ASU will also have an impact to the timing of recognition of certain other ancillary revenue and expense streams, which we do not expect to have a material impact to our consolidated financial statements.
We expect to complete our implementation process, which includes the necessary changes to our business processes, systems and controls to support recognition and disclosure, prior to the adoption of this ASU on our consolidated financial statements.

January 1, 2018.

(3)(4)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 three and nine months ended September 30, 20162017 and 2015.

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

2016.
Common stock equivalents of 192,13454,555 and 162,433192,134 for the three months ended September 30, 20162017 and 2015,2016, respectively, and 239,20542,481 and 127,231239,205 for the nine months ended September 30, 20162017 and 2015,2016, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
2016 2015 2016 20152017 2016 2017 2016
Numerator: 
  
     
  
    
Net income available to common stockholders for basic and diluted net income per common share$193,901
 $166,550
 $541,306
 $375,091
$275,722
 $193,901
 $684,904
 $541,306
Denominator: 
  
  
   
  
  
  
Weighted average common shares outstanding for basic net income per common share4,870,281
 5,297,797
 4,957,820
 5,436,378
4,618,368
 4,870,281
 4,660,041
 4,957,820
Weighted average impact of dilutive equity instruments49,548
 48,641
 47,313
 50,738
86,203
 49,548
 74,800
 47,313
Weighted average shares for diluted net income per common share4,919,829
 5,346,438
 5,005,133
 5,487,116
4,704,571
 4,919,829
 4,734,841
 5,005,133
Net income per common share: 
  
  
   
  
  
  
Basic$0.04
 $0.03
 $0.11
 $0.07
$0.06
 $0.04
 $0.15
 $0.11
Diluted$0.04
 $0.03
 $0.11
 $0.07
$0.06
 $0.04
 $0.14
 $0.11

(4)(5)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, 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 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 unaudited consolidated statements of comprehensive income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

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:
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Gross customer accounts receivable$108,110
 $98,740
$105,875
 $105,737
Allowance for doubtful accounts(7,443) (6,118)(9,967) (8,658)
Customer accounts receivable, net$100,667
 $92,622
$95,908
 $97,079
Receivables from distributors107,172
 120,012
102,523
 98,498
Other receivables25,580
 22,148
26,570
 27,452
Total receivables, net$233,419
 $234,782
$225,001
 $223,029

(5)(6)Inventory, net
Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios.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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

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 unaudited consolidated statements of comprehensive income.  The provision related to inventory consumed in our OEM and retail distribution channel is reported as a component of Subscriber acquisition costs in our unaudited consolidated statements of comprehensive income.
Inventory, net, consists of the following:
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Raw materials$11,618
 $11,085
$6,649
 $10,219
Finished goods25,937
 21,159
23,962
 19,581
Allowance for obsolescence(9,525) (9,949)(8,142) (9,437)
Total inventory, net$28,030
 $22,295
$22,469
 $20,363

(6)(7)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.  If the carrying amount of a reporting unitgoodwill exceeds its fair value, an impairment loss is recognized. As a result of the acquisition of Automatic, we recorded additional goodwill of $81,452 during the nine months ended September 30, 2017.
As of September 30, 2016,2017, there were no indicators of impairment, and no impairment loss was recorded, for goodwill during the three and nine months ended September 30, 20162017 and 2015.2016.  As of September 30, 2016,2017, the cumulative balance of goodwill impairments recorded since the July 2008 merger (the “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.


(7)Intangible Assets
Our intangible assets include the following:
   September 30, 2016 December 31, 2015
 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 licensesIndefinite $2,083,654
 $
 $2,083,654
 $2,083,654
 $
 $2,083,654
TrademarkIndefinite 250,000
 
 250,000
 250,000
 
 250,000
Definite life intangible assets:   
  
  
  
  
  
Subscriber relationships9 years 380,000
 (358,140) 21,860
 380,000
 (336,822) 43,178
OEM relationships15 years 220,000
 (42,778) 177,222
 220,000
 (31,778) 188,222
Licensing agreements12 years 45,289
 (29,741) 15,548
 45,289
 (26,977) 18,312
Proprietary software8 years 27,215
 (19,298) 7,917
 27,215
 (17,752) 9,463
Developed technology10 years 2,000
 (1,633) 367
 2,000
 (1,483) 517
Leasehold interests7.4 years 
 
 
 132
 (132) 
Total intangible assets  $3,008,158
 $(451,590) $2,556,568
 $3,008,290
 $(414,944) $2,593,346


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

(8)Intangible Assets
Our intangible assets include the following:
   September 30, 2017 December 31, 2016
 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 licensesIndefinite $2,083,654
 $
 $2,083,654
 $2,083,654
 $
 $2,083,654
TrademarkIndefinite 250,800
 
 250,800
 250,000
 
 250,000
Definite life intangible assets:   
  
  
  
  
  
Subscriber relationships9 years 380,000
 (380,000) 
 380,000
 (364,893) 15,107
OEM relationships15 years 220,000
 (57,444) 162,556
 220,000
 (46,444) 173,556
Licensing agreements12 years 45,289
 (33,428) 11,861
 45,289
 (30,664) 14,625
Software and technology7 years 43,915
 (24,077) 19,838
 29,215
 (21,356) 7,859
Total intangible assets  $3,023,658
 $(494,949) $2,528,709
 $3,008,158
 $(463,357) $2,544,801

Indefinite Life Intangible Assets
We have identified our FCC licenses and the XM trademark 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 Automatic acquisition in April 2017, we have also identified $800 related to its trademark.
We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. The following table outlines the years in which each of our satellite licenses expires:
FCC satellite licenses Expiration year
SIRIUS FM-1*2017
SIRIUS FM-5 2025
SIRIUS FM-6 2022
XM-3 2021
XM-4 2022
XM-5 2018
* As of April 7, 2016, this satellite was no longer being used to transmit satellite radio.  We plan to complete the deorbiting of this satellite during the fourth quarter of 2016.
Prior to expiration, of our FCC licenses, we are required to apply for a renewal of our FCC licenses.  The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred.  Each of the FCC licenses authorizes us to use the radio spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time.
Our annual impairment assessment of our identifiable indefinite livedlife 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. As of September 30, 2016,2017, there were no indicators of impairment, and no impairment loss was recorded, for intangible assets with indefinite lives during the three and nine months ended September 30, 20162017 and 2015.
Definite Life Intangible Assets
Amortization expense for all definite life intangible assets was $12,080 and $12,824 for the three months ended September 30, 2016 and 2015, respectively, and $36,778 and $39,068 for the nine months ended September 30, 2016 and 2015, respectively. Expected amortization expense for the remaining period in 2016, each of the fiscal years 2017 through 2020 and for periods thereafter is as follows:
Years ending December 31, Amount
2016 (remaining) $11,767
2017 34,882
2018 19,463
2019 19,026
2020 18,446
Thereafter 119,330
Total definite life intangible assets, net $222,914


2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Definite Life Intangible Assets
As part of the Automatic acquisition in April 2017, $14,700 was allocated to identifiable intangible assets subject to amortization and relates to the assessed fair value of software and technology. Amortization expense for all definite life intangible assets was $7,966 and $12,080 for the three months ended September 30, 2017 and 2016, respectively, and $31,592 and $36,778 for the nine months ended September 30, 2017 and 2016, respectively. Expected amortization expense for the remaining period in 2017, each of the fiscal years 2018 through 2021 and for periods thereafter is as follows:
Years ending December 31, Amount
2017 (remaining) $5,863
2018 23,138
2019 22,701
2020 22,121
2021 16,678
Thereafter 103,754
Total definite life intangible assets, net $194,255

(8)(9)Property and Equipment
Property and equipment, net, consists of the following:
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Satellite system$1,845,173
 $2,388,000
$1,586,794
 $1,586,794
Terrestrial repeater network125,266
 117,127
123,584
 127,854
Leasehold improvements53,269
 49,407
55,090
 53,898
Broadcast studio equipment80,425
 70,888
91,181
 84,697
Capitalized software and hardware503,015
 466,464
579,075
 558,101
Satellite telemetry, tracking and control facilities76,376
 75,440
67,492
 77,290
Furniture, fixtures, equipment and other81,878
 81,871
90,817
 90,214
Land38,411
 38,411
38,411
 38,411
Building60,727
 60,487
61,810
 61,597
Construction in progress145,431
 101,324
280,614
 144,954
Total property and equipment3,009,971
 3,449,419
2,974,868
 2,823,810
Accumulated depreciation and amortization(1,628,857) (2,034,018)(1,547,254) (1,425,117)
Property and equipment, net$1,381,114
 $1,415,401
$1,427,614
 $1,398,693
Construction in progress consists of the following:
September 30, 2016 December 31, 2015September 30, 2017 December 31, 2016
Satellite system$19,313
 $12,912
$141,707
 $43,977
Terrestrial repeater network692
 25,578
2,215
 1,139
Capitalized software101,554
 37,064
112,561
 82,204
Other23,872
 25,770
24,131
 17,634
Construction in progress$145,431
 $101,324
$280,614
 $144,954
Depreciation and amortization expense on property and equipment was $55,800$71,947 and $57,580$55,800 for the three months ended September 30, 20162017 and 2015,2016, respectively, and $165,437$198,544 and $163,459$165,437 for the nine months ended September 30, 20162017 and 2015,2016, respectively.  We retired property and equipment of $583,562$77,040 and $12,774$583,562 during the nine months ended September 30, 2017 and 2016, and 2015, respectively, which included approximately $542,827 related to satellites during 2016.respectively. We recognized a loss on disposal of assets of $12,912, which has beenwas recorded in Satellite and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

transmission expense in our unaudited consolidated statements of comprehensive income, during the nine months ended September 30, 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 and launch vehicles. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs was $1,324 and $3,047 for the three and nine months ended September 30, 2017, respectively, and $107 for the three and nine months ended September 30, 2016, was $107, which related to the construction of our SXM-7 and SXM-8 satellites.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Satellites
As of September 30, 2016,2017, we owned a fleet of six satellites, of which five were operating.satellites.  The chart below provides certain information on our satellites as of September 30, 2016:2017:
Satellite Description Year Delivered Estimated End of
Depreciable Life
SIRIUS FM-1* 2000 2013
SIRIUS FM-5 2009 2024
SIRIUS FM-6 2013 2028
XM-3 2005 2020
XM-4 2006 2021
XM-5 2010 2025
* Satellite was fully depreciated as of September 30, 2016. As of April 7, 2016, this satellite was no longer being used to transmit satellite radio.  We plan to complete the deorbiting of this satellite during the fourth quarter of 2016.

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

(9)(10)
Related Party Transactions 
In the normal course of business, we enter into transactions with related parties.

Liberty Media
As of September 30, 2016,2017, Liberty Media beneficially owned, directly and indirectly, approximately 65%69% of the outstanding shares of our common stock and 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. We have not had any related party transactions with Liberty Media during the three and nine months ended September 30, 2016 and 2015.

Sirius XM Canada
We hold anOn 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 method investmentinterest and 33% voting interest in Sirius XM Canada.  We own approximately 47,300Canada, with the remainder of the voting power and equity interest held by two of Sirius XM Canada’s Class A shares on a converted basis, representing an approximate 37% equity interest and an approximate 25% voting interest.  We primarily provide programming and content servicesprevious shareholders. The total consideration from Sirius XM to Sirius XM Canada, excluding transaction costs, during the nine months ended September 30, 2017 was $308,526, which included $129,676 in cash and are reimbursed fromwe 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 for certain product development costs, productionacquired in the Transaction. Sirius XM received common stock, non-voting common stock and distributionpreferred stock of chipset radios, as well as for information technologySirius XM Canada. Sirius XM now owns 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 contribution in the form of a loan to Sirius XM Canada in the aggregate amount of $130,794 on May 25, 2017. The loan is denominated in Canadian dollars and streaming support costs. Referis considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. Such 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 Note 1 Business & BasisSirius XM Canada’s failure to maintain specified leverage ratios. In addition, the terms of Presentation for informationthe 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 pending transactionlast day of the financial year if all target dividends have been paid in full.
In connection with the Transaction, Sirius XM also entered into a Services Agreement and an Advisory Services Agreement with Sirius XM Canada.
We had Each agreement has a thirty year term. Pursuant to the following related party balances associated withServices Agreement, Sirius XM Canada:
 September 30, 2016 December 31, 2015
Related party current assets$5,249
 $5,941
Related party long-term assets$6,163
 $
Related party current liabilities$3,015
 $2,840
Related party long-term liabilities$8,665
 $10,795
Our related party current asset balances primarily consist of activation fees and streaming and chipset costs for which we are reimbursed.  Our related party long-term asset balance as of September 30, 2016 primarily included our investment balance in Sirius XM Canada. Our related party liabilities as of September 30, 2016 and December 31, 2015 included $2,776 for the current portion of deferred revenue and $8,557 and $10,639, respectively, for the long-term portion of deferred revenue recorded as of the Merger date related to agreements with XM Canada, now Sirius XM Canada.  These costs are being amortized on a straight line basis through 2020.

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Canada will pay 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 will pay Sirius XM 5% of its gross revenues on a monthly basis. These agreements supersede and replace the existing 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. We do 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.
We had the following related party balances associated with Sirius XM Canada:

September 30, 2017
December 31, 2016
Related party current assets$12,375
 $6,170
Related party long-term assets$465,105
 $8,918
Related party current liabilities$3,018
 $2,840
Related party long-term liabilities$6,778
 $7,955
Under the legacy agreement with Sirius XM Canada, as of December 31, 2016, our related party current assets balance primarily consisted of activation fees and streaming and chipset costs for which we were reimbursed. As of September 30, 2017, our related party current asset balance included amounts due under the new services arrangements and certain amounts related to transactions outside the scope of the new services arrangements. Our related party long-term assets balance as of September 30, 2017 and December 31, 2016 included the carrying value of our investment balance in Sirius XM Canada of $323,593 and $8,615, respectively, and, as of September 30, 2017, also included $141,189 for the current value of the outstanding loan to Sirius XM Canada. Our related party liabilities as of each of September 30, 2017 and December 31, 2016 included $2,776 for the current portion of deferred revenue and $5,782 and $7,867, respectively, for the long-term portion of deferred revenue recorded as of the Merger date 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 unaudited consolidated statements of comprehensive income:
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
2016 2015 2016 20152017 2016 2017 2016
Revenue (a)(b)
$11,551
 $17,941
 $32,129

$44,437
$23,141
 $11,551
 $63,486

$32,129
Other income 
  
 




 
  
 




Share of net earnings (b)
$1,274
 $
 $9,725

$
$9,725
 $1,274
 $7,542

$9,725
Dividends (c)
$
 $3,891
 $3,575

$8,880
$
 $
 $

$3,575
Interest income (d)
$2,718

$

$3,521

$
(a)UnderPrior to the Transaction, under our legacy agreements with Sirius XM Canada, we currently receivereceived a percentage-based royaltyfee of 10% and 15% for certain types of subscription revenue earned by Sirius XM Canada for the use of Sirius and XM platforms, respectively;respectively, and additional royaltiesfees for premium services and royaltiesfees for activation fees and reimbursements for other charges.  We record revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income.  The current license and services agreement entered into with Sirius Canada will expire in 2017.  The current license agreement entered into with XM Canada will expire in 2020.
(b)We recognizePrior to the Transaction, we recognized our proportionate share of revenue and earnings or losses ofattributable to Sirius XM Canada as they occuroccurred as Other revenue and as a component of Other income, respectively, in our unaudited consolidated statements of comprehensive income on a one month lag. As a result of the Transaction, there is no longer a one-month lag for recognizing our proportionate share of revenue and earnings or losses attributable to Sirius XM Canada.
(c)Pursuant to the Arrangement Agreement,
Sirius XM Canada did not pay any dividends to us during the three months ended September 30, 2017 and 2016. Sirius XM Canada paid gross dividends to us of $3,891 during the three months ended September 30, 2015$3,796 and $7,548 and $11,881$7,548 during the nine months ended September 30, 20162017 and 2015,2016, respectively.  These dividends were first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance existed and then as Other income for the remaining portion.

(d)This interest income relates to the loan to Sirius XM Canada and is recorded as Other income in our unaudited consolidated statements of comprehensive income.


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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Pandora
On September 22, 2017, Sirius XM completed a $480,000 investment in Pandora. Pursuant to an Investment Agreement with Pandora, Sirius XM purchased 480 shares of Pandora’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $480,000. The Series A preferred stock represents a stake of approximately 19% of Pandora's currently outstanding common stock, and approximately a 16% 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 adjustments for accrued but unpaid dividends and 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. During the three and nine months ended September 30, 2017, we recognized $2,991 and $3,595, respectively, related to the dividend declared by Pandora, which was recorded to Other income in our unaudited consolidated statements of comprehensive income and Long-term investment within our unaudited consolidated balance sheets. 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 the Initial Closing.
The investment includes a mandatory redemption feature on any date from and after September 22, 2022 whereby Sirius XM, at its option, may require Pandora to purchase the Series A Preferred Stock at a price equal to 100% of the liquidation preference plus accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, and as such the investment qualifies as a debt security under ASC 320. 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 unaudited consolidated statements of comprehensive income. A $68,650 unrealized gain was recognized during the three and nine months ended September 30, 2017 as Other income in our unaudited consolidated statements of comprehensive income associated with this investment. The fair value of our investment as of September 30, 2017 was $552,245 and is recorded as a related party long-term asset within our unaudited 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.
Pursuant to the Investment Agreement, we have appointed three of our senior executives or members of our Board of Directors to Pandora’s Board of Directors, one of whom serves as the Chairman of Pandora's Board of Directors.
Our right to designate directors will fall away once we and our affiliates fail to beneficially own shares of Series A Preferred Stock and/or Pandora Common Stock issued upon conversion thereof equal to (on an as-converted basis) at least 50% of the number of shares of Pandora Common Stock issuable upon conversion of the Series A Preferred Stock purchased under the Investment Agreement. Following the earlier to occur of (i) September 22, 2019 and (ii) the date on which we and our affiliates fail to beneficially own shares of Series A Preferred Stock and/or Pandora Common Stock that were issued upon conversion of Series A Preferred Stock equal to (on an as-converted basis) at least 75% of the number of shares of Pandora Common Stock issuable upon conversion of the Series A Preferred Stock purchased under the Investment Agreement, we have the right to designate only two directors.
We are subject to certain standstill restrictions, including, among other things, that we are restricted from acquiring additional securities of Pandora until December 9, 2018.
Except as to matters that may be voted upon separately by holders of the Series A Preferred Stock, we are entitled to vote as a single class with the holders of Pandora Common Stock on an as-converted basis (up to a maximum of 19.99% of the Pandora Common Stock outstanding on June 9, 2017, unless stockholder approval has been received). We are also entitled to a separate class vote with respect to certain amendments to Pandora’s organizational documents, issuances by Pandora of securities that are senior to, or equal in priority with, the Series A Preferred Stock and the incurrence of certain indebtedness by Pandora.

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Upon certain change of control events involving Pandora, Pandora is required to repurchase all of the Series A Preferred Stock at a price equal to the greater of (1) an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends through June 9, 2022 (assuming such shares of Series A Preferred Stock remain outstanding through such date) and (2) the consideration the holders would have received if they had converted their shares of Series A Preferred Stock into Pandora Common Stock immediately prior to the change of control event (disregarding the 19.99% cap).
Beginning on September 22, 2020, if the volume weighted average price per share of Pandora Common Stock exceeds $18.375, as may be adjusted, for at least 20 trading days in any period of 30 consecutive trading days, Pandora may redeem all of the outstanding Series A Preferred Stock at a price equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, provided that, unless stockholder approval has been received, Pandora may not settle the redemption for shares of Pandora Common Stock to the extent the 19.99% cap would be exceeded.
Pursuant to a registration rights agreement entered into with Pandora, we have certain customary registration rights with respect to the Series A Preferred Stock and Pandora Common Stock issued upon conversion thereof.

(10)(11)Debt
Our debt as of September 30, 20162017 and December 31, 20152016 consisted of the following:
           
Carrying value(a) at
           
Carrying value(a) at
Issuer / Borrower Issued Debt Maturity Date Interest Payable Principal Amount at September 30, 2016 September 30, 2016 December 31, 2015 Issued Debt Maturity Date Interest Payable Principal Amount at September 30, 2017 September 30, 2017 December 31, 2016
Sirius XM
(b)(e)
 May 2013 4.25% Senior Notes
(the "4.25% Notes")
 May 15, 2020 semi-annually on May 15 and November 15 $500,000
 $496,869
 $496,282
 May 2013 4.25% Senior Notes
(the "4.25% Notes")
 May 15, 2020 semi-annually on May 15 and November 15 $
 $
 $497,069
Sirius XM
(b)(f)
 September 2013 5.875% Senior Notes
(the "5.875% Notes")
 October 1, 2020 semi-annually on April 1 and October 1 650,000
 645,456
 644,720
 August 2013 5.75% Senior Notes
(the "5.75% Notes")
 August 1, 2021 semi-annually on February 1 and August 1 
 
 596,386
Sirius XM
(b)(h)
 July 2017 3.875% Senior Notes
(the "3.875% Notes")
 August 1, 2022 semi-annually on February 1 and August 1 1,000,000
 991,617
 
Sirius XM
(b)
 August 2013 5.75% Senior Notes
(the "5.75% Notes")
 August 1, 2021 semi-annually on February 1 and August 1 600,000
 596,216
 595,720
 May 2013 4.625% Senior Notes
(the "4.625% Notes")
 May 15, 2023 semi-annually on May 15 and November 15 500,000
 496,510
 496,111
Sirius XM
(b)
 May 2013 4.625% Senior Notes
(the "4.625% Notes")
 May 15, 2023 semi-annually on May 15 and November 15 500,000
 495,982
 495,602
 May 2014 6.00% Senior Notes
(the "6.00% Notes")
 July 15, 2024 semi-annually on January 15 and July 15 1,500,000
 1,487,632
 1,486,556
Sirius XM
(b)
 May 2014 6.00% Senior Notes
(the "6.00% Notes")
 July 15, 2024 semi-annually on January 15 and July 15 1,500,000
 1,486,208
 1,485,196
 March 2015 5.375% Senior Notes
(the "5.375% Notes due 2025")
 April 15, 2025 semi-annually on April 15 and October 15 1,000,000
 991,044
 990,340
Sirius XM
(b)
 March 2015 5.375% Senior Notes
(the "5.375% Notes due 2025")
 April 15, 2025 semi-annually on April 15 and October 15 1,000,000
 990,112
 989,446
 May 2016 5.375% Senior Notes
(the "5.375% Notes due 2026")
 July 15, 2026 semi-annually on January 15 and July 15 1,000,000
 989,914
 989,259
Sirius XM
(b)(c)
 May 2016 5.375% Senior Notes
(the "5.375% Notes due 2026")
 July 15, 2026 semi-annually on January 15 and July 15 1,000,000
 989,047
 
Sirius XM
(d)(h)
 August 2012 5.25%Senior Secured
Notes (the "5.25% Notes")
 August 15, 2022 semi-annually on February 15 and August 15 400,000
 396,090
 395,675
 July 2017 5.00% Senior Notes
(the "5.00% Notes")
 August 1, 2027 semi-annually on February 1 and August 1 1,500,000
 1,485,884
 
Sirius XM
(e)(g)
 December 2012 Senior Secured
Revolving Credit Facility (the "Credit Facility")
 June 16, 2020 variable fee paid quarterly 1,750,000
 
 340,000
 August 2012 5.25% Senior Secured Notes (the "5.25% Notes") August 15, 2022 semi-annually on February 15 and August 15 
 
 396,232
Sirius XM(d) Various Capital leases Various  n/a  n/a
 14,192
 12,892
 December 2012 Senior Secured Revolving Credit Facility (the "Credit Facility") June 16, 2020 variable fee paid quarterly 1,750,000
 290,000
 390,000
Sirius XM Various Capital leases Various  n/a  n/a
 8,718
 13,559
Total DebtTotal Debt 6,110,172
 5,455,533
Total Debt 6,741,319
 5,855,512
Less: total current maturities (f) 358,701
 4,764
Less: total current maturitiesLess: total current maturities 4,220
 5,485
Less: total deferred financing costs for NotesLess: total deferred financing costs for Notes 8,082
 7,155
Less: total deferred financing costs for Notes 8,750
 7,263
Total long-term debtTotal long-term debt $5,743,389
 $5,443,614
Total long-term debt $6,728,349
 $5,842,764
(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.

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(c)In May 2016, Sirius XM issued $1,000,000 aggregate principal amount of 5.375% Senior Notes due 2026, with an original issuance discount of $11,250.
(d)The liens securingthat secured the 5.25% Notes arewere equal and ratable to the liens granted to secure the Credit Facility.  
(e)(d)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%0.30% per annum as of September 30, 2016.2017.  Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our unaudited consolidated balance sheets due to the long-term maturity of this debt. For
(e)On July 27, 2017, Sirius XM redeemed $500,000 in outstanding principal amount of the 4.25% Notes for an aggregate purchase price, including premium and interest, of $509,565. We recognized $8,393 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and repayment premium, as a discussionresult of subsequent events refer to Note 15.this redemption.
(f)On August 25, 2016, we called for the redemption of $650,0004, 2017, Sirius XM redeemed $600,000 in outstanding principal balanceamount of the 5.875%5.75% Notes for an aggregate purchase price, including premium and interest, of $617,538. We recognized $20,964 to Loss on Octoberextinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and repayment premium, as a result of this redemption.
(g)On September 1, 2016. As of September 30, 2016, $353,9652017, Sirius XM redeemed $400,000 in outstanding principal amount of the 5.875%5.25% Notes which isfor an aggregate purchase price, including premium and interest, of $411,433. We recognized $14,322 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and repayment premium, as a result of this redemption. In addition, all security interests and other liens securing the 5.25% Notes were released.
(h)In July 2017, Sirius XM issued $1,000,000 aggregate principal amount of the 3.875% Notes and $1,500,000 aggregate principal amount of the 5.00% Notes with a net of $5,132 of original issueissuance discount and deferred financing costs was classified as current maturitiesin the aggregate of long-term debt$10,291 and $290,903 of principal amount was classified as long-term debt within our unaudited consolidated balance sheets. For a discussion of subsequent events refer to Note 15.$16,638, respectively.
Covenants and Restrictions
Under the Credit Facility, Sirius XM, our wholly-owned subsidiary, must comply with a debt maintenance covenant that it notcannot 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,

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

(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 September 30, 20162017 and December 31, 2015,2016, we were in compliance with our debt covenants.


(11)(12)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 4,846,1544,604,441 and 5,153,4514,746,047 shares of common stock issued and 4,843,1544,601,941 and 5,147,6474,740,947 shares outstanding on September 30, 20162017 and December 31, 2015,2016, respectively. As part of the recapitalization of Sirius XM Canada, we issued 35,000 shares of our common stock to the holders of the shares of Sirius XM Canada.
As of September 30, 2016,2017, there were 374,087321,868 shares of common stock reserved for issuance in connection with outstanding stock based awards and common stock to be granted to members of our board of directors, employees and third parties.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Quarterly Dividends, $0.010 per share
On July 11, 2017, our board of directors declared a dividend on our common stock in the amount of $0.010 per share of common stock to stockholders of record as of the close of business on August 8, 2017. The dividend was paid in cash on August 31, 2017 in the aggregate amount of $46,216. We also paid a dividend in cash on February 28, 2017 and April 25, 2017 in the aggregate amount of $47,137 and $46,501, respectively. For a discussion of subsequent events refer to Note 16.
Stock Repurchase Program
As of September 30, 2016,2017, our board of directors had approved for repurchase an aggregate of $8,000,000$10,000,000 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 September 30, 2016,2017, our cumulative repurchases since December 2012 under our stock repurchase program totaled 2,098,5482,397,932 shares for $7,515,223,$8,960,948, and $484,777$1,039,052 remained available under our stock repurchase program.
The following table summarizes our total share repurchase activity for the nine months ended:
 September 30, 2016 September 30, 2015 September 30, 2017 September 30, 2016
Share Repurchase Type Shares Amount Shares Amount Shares Amount Shares Amount
Open Market (a)
 315,051
 $1,214,083
 432,616
 $1,646,798
 194,324
 $987,111
 315,051
 $1,214,083
(a)As of September 30, 2016, $12,5262017, $13,754 of common stock repurchases had not settled, nor been retired, and were recorded as Treasury stock within our unaudited consolidated balance sheets and unaudited consolidated statements of stockholders’ (deficit) equity. For a discussion of subsequent events refer to Note 16.
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 September 30, 20162017 and December 31, 2015.2016.



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(Dollars and shares in thousands, except per share amounts)

(12)(13)
Benefit Plans 
We recognized share-based payment expense of $30,020$34,891 and $23,393$30,020 for the three months ended September 30, 20162017 and 2015,2016, respectively, and $77,890$94,588 and $62,334$77,890 for the nine months ended September 30, 20162017 and 2015,2016, respectively.
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 deem 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, and may include performance requirements.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 three-year anniversary of the grant date. Each restricted stock unit entitles the holder to receive one share of common stock upon vesting.  As of September 30, 2016, 181,7112017, 167,055 shares of common stock were available for future grants under the 2015 Plan.
Other Plans
We maintain fourthree other share-based benefit plans — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, the XM 2007 Stock Incentive Plan and the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan and the XM 1998 Shares Award Plan. NoExcluding 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 Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2015 2016 2015
Risk-free interest rate1.1% 1.4% 1.1% 1.4%
Expected life of options — years4.48 4.22 4.27 4.20
Expected stock price volatility22% 26% 22% 26%
Expected dividend yield0% 0% 0% 0%
There were no options granted to third parties during the three and nine months ended September 30, 2016 and 2015.  Since we have not historically paid dividends on our common stock, the dividend yield used in the Black-Scholes-Merton option value was zero for all periods.
The following table summarizes stock option activity under our share-based plans for the nine months ended September 30, 2016:
 Options Weighted-
Average
Exercise
Price Per Share
 Weighted-
Average
Remaining
Contractual
Term (Years)
 Aggregate
Intrinsic
Value
Outstanding as of December 31, 2015338,481
 $3.29
    
Granted53,346
 $4.13
    
Exercised(36,824) $2.58
    
Forfeited, cancelled or expired(9,992) $4.32
    
Outstanding as of September 30, 2016345,011
 $3.47
 7.49 $244,220
Exercisable as of September 30, 2016137,541
 $2.80
 6.14 $188,511
The weighted average grant date fair value per share of options granted during the nine months ended September 30, 2016 was $0.83.  The total intrinsic value of stock options exercised during the nine months ended September 30, 2016 and 2015 was $59,531 and $85,387, respectively.  During the nine months ended September 30, 2016, the number of net settled shares which were issued as a result of stock option exercises was 8,171.

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

We recognized share-based payment expense associated with stockThe following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees and members of $21,484 and $19,418 forour board of directors:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2017 2016 2017 2016
Risk-free interest rate1.8% 1.1% 1.8% 1.1%
Expected life of options — years4.66 4.48 4.60 4.27
Expected stock price volatility24% 22% 24% 22%
Expected dividend yield0.7% 0.0% 0.7% 0.0%
There were no options granted to third parties during the three months ended September 30, 2016 and 2015, respectively, and $59,510 and $52,662 for the nine months ended September 30, 2017 and 2016.  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 option pricing model was zero for the three and 2015, respectively.nine months ended September 30, 2016.
The following table summarizes the restricted stock unit, including performance-based restricted stock units ("PRSUs"), and stock awardoption activity under our share-based plans for the nine months ended September 30, 2016:2017:
 Shares Grant Date
Fair Value
Per Share
Nonvested as of December 31, 201516,088
 $3.73
Granted17,453
 $4.21
Vested(4,009) $3.66
Forfeited(456) $3.71
Nonvested as of September 30, 201629,076
 $4.02
 Options Weighted-
Average
Exercise
Price Per Share
 Weighted-
Average
Remaining
Contractual
Term (Years)
 Aggregate
Intrinsic
Value
Outstanding as of December 31, 2016332,648
 $3.50
    
Granted27,218
 $5.49
    
Exercised(65,413) $3.20
    
Forfeited, cancelled or expired(4,551) $3.90
    
Outstanding as of September 30, 2017289,902
 $3.75
 6.87 $513,625
Exercisable as of September 30, 2017128,288
 $3.16
 5.67 $302,230
The weighted average grant date fair value per share of options granted during the nine months ended September 30, 2017 was $1.17.  The total intrinsic value of stock options exercised during the nine months ended September 30, 2017 and 2016 was $148,133 and $59,531, respectively.  During the nine months ended September 30, 2017, the number of net settled shares which were issued as a result of stock option exercises was 15,092.
We recognized share-based payment expense associated with stock options of $21,454 and $21,484 for the three months ended September 30, 2017 and 2016, respectively, and $61,091 and $59,510 for the nine months ended September 30, 2017 and 2016, respectively.
The following table summarizes the restricted stock unit, including PRSUs, activity under our share-based plans for the nine months ended September 30, 2017:
 Shares Grant Date
Fair Value
Per Share
Nonvested as of December 31, 201629,893
 $4.03
Granted11,618
 $5.38
Vested(8,561) $3.91
Forfeited(984) $4.23
Nonvested as of September 30, 201731,966
 $4.55
The total intrinsic value of restricted stock units and stock awards vesting during the nine months ended September 30, 2017 and 2016 was $46,920 and 2015 was $16,890, and $9,565, respectively. During the nine months ended September 30, 2016,2017 the number of net settled shares which were issued as a result of restricted stock units vesting totaled 5,226. During the nine months ended September 30, 2017, we

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(Dollars and the number of shares issued from stock awards in thousands, except per share amounts)

granted totaled 2,387.
On August 5, 2016, we granted 3,036929 PRSUs to certain employees, the vesting of which is subject to the employee's continuing employment and our achievement of certain performance goals. The awards cliff vest on the three-year anniversary of the grant date.employees. We believe it is probable that the performance target applicable to these and previously granted PRSUs will be achieved.
In connection with the cash dividends paid during the nine months ended September 30, 2017, we granted 162 restricted stock units, including PRSUs, in accordance with the terms of existing award agreements. This grant did not result in any additional incremental share-based payment expense being recognized during the nine months ended September 30, 2017.
We recognized share-based payment expense associated with restricted stock units, including PRSUs, of $13,437 and stock awards of $8,536 and $3,975 duringfor the three months ended September 30, 20162017 and 2015,2016, respectively, and $18,380$33,497 and $9,672$18,380 for the nine months ended September 30, 2017 and 2016, and 2015, respectively. The three months ended September 30, 2016 included $669 of compensation expense related to PRSUs.
Total unrecognized compensation costs related to unvested share-based payment awards for stock options and restricted stock units granted to employees, members of our board of directors and third parties at September 30, 20162017 and December 31, 20152016 were $281,678$281,311 and $261,628,$266,045, respectively.  The total unrecognized compensation costs at September 30, 20162017 are expected to be recognized over a weighted-average period of 2.72.5 years.
401(k) Savings Plan
Sirius XM sponsors the Sirius XM Radio Inc. 401(k) Savings Plan (the “Sirius XM Plan”) for eligible employees. The Sirius XM Plan allows eligible employees to voluntarily contribute from 1% to 50% of their pre-tax eligible earnings, subject to certain defined limits. We match 50% of an employee’s voluntary contributions per pay period on the first 6% of an employee’s pre-tax salary up to a maximum of 3% of eligible compensation.  We may also make additional discretionary matching, true-up matching and non-elective contributions to the Sirius XM Plan.  Employer matching contributions under the Sirius XM Plan vest at a rate of 33.33% for each year of employment and are fully vested after three years of employment for all current and future contributions.  Our cash employer matching contributions are not used to purchase shares of our common stock on the open market, unless the employee elects our common stock as their investment option for this contribution.  We recognized $1,640$1,775 and $1,486$1,640 in expense during the three months ended September 30, 20162017 and 2015,2016, respectively, and $4,857$5,292 and $6,026$4,857 in expense during nine months ended September 30, 2017 and 2016, and 2015, respectively.respectively, in connection with the Sirius XM Plan.
Sirius XM Holdings Inc. Deferred Compensation Plan
In 2015, we adopted the Sirius XM Holdings Inc. Deferred Compensation Plan (the “DCP”).  The DCP allows members of our board of directors and certain eligible employees to defer all or a portion of their base salary, cash incentive compensation and/or board of directors’ cash compensation, as applicable, each plan year starting in 2016.applicable.  Pursuant to the terms of the DCP, we may elect to make additional contributions beyond amounts deferred by participants, but we are under no obligation to do so.  We have established a grantor (or “rabbi”) trust to facilitate the payment of our obligations under the DCP.

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TableContributions to the DCP, net of Contents
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollarswithdrawals, for the three months ended September 30, 2017 and shares in thousands, except per share amounts)

2016, were $240 and $215, respectively, and for the nine months ended September 30, 2017 and 2016, were $7,595 and $4,169, respectively. As of September 30, 2016,2017, the fair value of the investments held in the trust was $4,625,$13,890, which is included in Other long-term assets in our unaudited consolidated balance sheets and is classified as trading securities.  Trading gains and losses associated with the trustthese investments are recorded in Other income within our unaudited consolidated statements of comprehensive income.  The associated liability is recorded within Other long-term liabilities in our unaudited consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administration expense within our unaudited consolidated statements of comprehensive income.  For the three and nine months ended September 30, 2017 and 2016, we recorded an immaterial amount of unrealized gains on investments held in the trust.


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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

(13)(14)
Commitments and Contingencies 
The following table summarizes our expected contractual cash commitments as of September 30, 2016:2017:
2016
2017
2018
2019
2020
Thereafter
Total2017 2018 2019 2020 2021
Thereafter
Total
Debt obligations$359,733

$5,485

$4,477

$3,169

$791,328

$5,000,000

$6,164,192
$647

$4,477

$3,169

$290,425

$

$6,500,000

$6,798,718
Cash interest payments69,363

348,034

340,140

340,041

328,098

1,058,688

2,484,364
42,020

356,691

348,377

342,211

334,375

1,250,313

2,673,987
Satellite and transmission29,594

94,416

68,300

51,927

25,721

24,756

294,714
23,358

133,938

86,810

43,699

4,296

6,667

298,768
Programming and content58,968

302,814

279,001

260,155

222,332

356,825

1,480,095
74,742

323,499

298,920

252,648

173,689

214,037

1,337,535
Marketing and distribution9,163

17,304

15,744

12,986

7,445

7,400

70,042
7,166

17,436

12,813

8,620

7,801

1,608

55,444
Satellite incentive payments3,176

13,296

14,302

10,652

9,310

79,785

130,521
3,415

14,302

10,652

10,197

8,574

70,324

117,464
Operating lease obligations7,620

44,917

43,425

39,279

36,764

180,791

352,796
7,604

43,266

39,639

37,391

31,560

153,449

312,909
Other21,175

25,515

8,519

1,209

380

40

56,838
24,362

30,429

16,421

2,672

527

30

74,441
Total (1)
$558,792

$851,781

$773,908

$719,418

$1,421,378

$6,708,285

$11,033,562
$183,314

$924,038

$816,801

$987,863

$560,822

$8,196,428

$11,669,266
(1)The table does not include our reserve for uncertain tax positions, which at September 30, 20162017 totaled $5,427,$9,730, as the specific timing of any cash payments cannot be projected with reasonable certainty.
Debt obligations.    Debt obligations include principal payments on outstanding debt and capital lease obligations.
Cash interest payments.    Cash interest payments include interest due on outstanding debt and capital lease payments through maturity.
Satellite and transmission.    We have entered into agreements with third parties to operate and maintain the off-site satellite telemetry, tracking and control facilities and certain components of our terrestrial repeater networks. During the quarteryear ended September 30,December 31, 2016, we entered into an agreement with Space Systems/Loral to design and build two replacement satellites, SXM-7 and SXM-8, for our service. We also have entered into agreements with third parties to operate and maintain satellite telemetry, tracking and control facilities and certain components of our terrestrial repeater networks.
Programming and content.    We have entered into various programming agreements. Under the terms of these agreements, our obligations include fixed payments, advertising commitments and revenue sharing arrangements. Our future revenue sharing costs are dependent upon many factors and are difficult to estimate; therefore, they are not included in our minimum contractual cash commitments.
Marketing and distribution.    We have entered into various marketing, sponsorship and distribution agreements to promote our brand and are obligated to make payments to sponsors, retailers, automakers and radio manufacturers under these agreements. Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors. We also reimburse automakers for certain engineering and development costs associated with the incorporation of satellite radios into new vehicles they manufacture.
Satellite incentive payments.    Boeing Satellite Systems International, Inc., the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments with respect to XM-3 and XM-4 meeting their fifteen-year design life, which we expect to occur.  Boeing may also be entitled to up to $10,000 of additional incentive payments up to $10,000 if our XM-4 satellite continues to operate above baseline specifications during the five years beyond the satellite’s fifteen-year design life.
Space Systems/Loral, the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments with respect to XM-5, SIRIUS FM-5 and SIRIUS FM-6 meeting their fifteen-year design life, which we expect to occur.

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Operating lease obligations.    We have entered into both cancelable and non-cancelable operating leases for office space, equipment and terrestrial repeaters. These leases provide for minimum lease payments, additional operating expense charges, leasehold improvements and rent escalations that have initial terms ranging from one to fifteen years, and certain leases have options to renew. The effect of the rent holidays and rent concessions are recognized on a straight-line basis over the lease term, including reasonably assured renewal periods.

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Other.    We have entered into various agreements with third parties for general operating purposes. In addition to the minimum contractual cash commitments described above, we have entered into agreements with other variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate; however, these costs may be substantial. We may enter into additional programming, distribution, marketing and other agreements that contain similar variable cost provisions.  The cost of our common stock acquired in our capital return program but not paid for as of September 30, 2016is2017 was alsoincluded in this category.
We do not have any other significant off-balance sheet financing arrangements that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
Legal Proceedings
In the ordinary course of business, we are a defendant or party to various claims and lawsuits, including those discussed below.
We record a liability when we believe that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. We evaluate developments in legal matters that could affect the amount of liability that has been previously accrued and make adjustments as appropriate.  Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss.  We may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others, because: (i) the damages sought are indeterminate; (ii) the proceedings are in the relative early stages; (iii) there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) there remain significant factual issues to be determined or resolved; (vi) the relevant law is unsettled; or (vii) the proceedings involve novel or untested legal theories.  In such instances, there may be considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any.
Telephone Consumer Protection Act Suits.  We are a defendant in several purported class action suits that allege that we, or call center vendors acting on our behalf, made calls which violate provisions of the Telephone Consumer Protection Act of 1991 (the “TCPA”).  The plaintiffs in these actions allege, among other things, that we called mobile phones using an automatic telephone dialing system without the consumer’s prior consent or, alternatively, after the consumer revoked his or her prior consent.  In one of the actions, the plaintiff also alleges that we violated the TCPA’s call time restrictions and, in one of the other actions, the plaintiff also alleges that we violated the TCPA’s do not call restrictions. These purported class action cases are titled Erik Knutson v. Sirius XM Radio Inc., No. 12-cv-0418-AJB-NLS (S.D. Cal.), Francis W. Hooker v. Sirius XM Radio Inc., No. 4:13-cv-3 (E.D. Va.), Yefim Elikman v. Sirius XM Radio Inc. and Career Horizons, Inc., No. 1:15-cv-02093 (N.D. Ill.), and Anthony Parker v. Sirius XM Radio Inc., No. 8:15-cv-01710-JSM-EAJ (M.D. Fla), and are described in Item 3., Legal Proceedings, in our Annual Report on Form 10-K for the year ended December 31, 2015.
We have entered into an agreement to settle these purported class action suits. The settlement is expected to resolve the claims of consumers beginning in February 2008 relating to telemarketing calls to their mobile telephones. As part of this settlement, we have made a $35,000 payment to a settlement fund (from which notice, administration and other costs and attorneys’ fees will be paid), and are offering participating class members the option of receiving three months of our Select service for no charge, and will enter into agreements to make modifications to the practices of certain call center vendors. The settlement is subject to final court approval, which cannot be assured.
Pre-1972 Sound Recording MattersSoundExchange Royalty Claims. In August 2013, SoundExchange, Inc. filed a complaint in the United States District Court for the District of Columbia alleging that we underpaid royalties for statutory licenses during the 2007-2012 period in violation of the regulations established by the Copyright Royalty Board for thatthe 2007-2012 period. SoundExchange principally alleges that we improperly reduced our calculation of gross revenues on which the royalty payments are based,applicable to royalties by improperly deducting non-recognized revenue attributable to pre-1972 recordings and Premier package revenue that is not “separately charged” as required by the regulations. We believe that we properly applied the gross revenue exclusions contained in the regulations established by the Copyright Royalty Board. SoundExchange is seeking compensatory damages of not less than $50,000 and up to $100,000 or more, payment of late fees and interest, and attorneys’ fees and costs.

In August 2014, the United States District Court for the District of Columbia, in response to our motion to dismiss the complaint, stayed the case on the grounds that it properly should be pursued in the first instance before the Copyright Royalty Board rather than the District Court.  In its opinion, the District Court concluded that the gross revenue exclusions in the regulations established by the Copyright Royalty Board for the 2007-2012 period were ambiguous and did not, on their face, make clear whether our royalty calculation approaches were permissible under the regulations. In December 2014, SoundExchange filed a petition with the Copyright Royalty Board requesting an order interpreting the applicable regulations.
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On September 11, 2017, the Copyright Royalty Board issued a ruling concluding that we correctly interpreted the revenue exclusions applicable to pre-1972 recordings. Given the limitations on its jurisdiction, the Copyright Royalty Board deferred to further proceedings in the District Court the question of whether we properly applied those pre-1972 revenue exclusions. The Judges also concluded that we improperly claimed a revenue exclusion based on our Premier package upcharge, because, in the Judges’ view, the portion of the package that contained programming that did not include sound recordings was not offered for a “separate charge.”

Rulings by the Copyright Royalty Board, including its September 11, 2017 ruling, are subject to limited legal review by the Register of Copyrights. Following a review by the Register of Copyrights and publication in the Federal Register, we expect that the ultimate ruling by the Copyright Royalty Board in this matter will be transmitted back to the District Court for further proceedings, such as adjudication claims relating to damages and defenses. We believe we have substantial defenses to SoundExchange claims that can be asserted, including in proceedings in the District Court, and will continue to defend this action vigorously.

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(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

required by the regulations.  SoundExchange is seeking compensatory damages of not less than $50,000 and up to $100,000 or more, payment of late fees and interest, and attorneys’ fees and costs.
In August 2014, the United States District Court for the District of Columbia granted our motion to dismiss the complaint without prejudice on the grounds that the case properly should be pursued before the Copyright Royalty Board rather than the district court.  In December 2014, SoundExchange filed a petition with the Copyright Royalty Board requesting an order interpreting the applicable regulations. We have submitted legal briefs and other evidence supporting our position that our payments and practices complied with the regulations established by the Copyright Royalty Board for statutory licenses during the 2007-2012 period or, in the event that the Judges should find that the applicable regulations were unclear, that the Judges should clarify the regulations and confirm that our payments and practices complied with the regulations for that period. Briefing in this matter is complete and a decision from the Copyright Royalty Board is pending.
This matter is titled SoundExchange, Inc. v. Sirius XM Radio, Inc., No.13-cv-1290-RJL (D.D.C.), and Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, United States Copyright Royalty Board, No. 2006-1 CRB DSTRA.  Information concerning the action is publicly available in filings under the docket numbers. The outcome of thisThis matter is inherently unpredictablenot related to certain claims under state law brought by owners of pre-1972 recording copyrights arising out of our use and subjectperformance of those recordings.

At December 31, 2016, we concluded that a loss, in excess of our recorded liabilities, was reasonably possible in connection with the SoundExchange royalty claims. At September 30, 2017, the estimable portion of such possible loss ranged from $0 to significant uncertainties, many$85,000, plus any related interest or late fees. Based on our defenses, such a loss is not considered probable at this time and no liability for such additional loss has been recorded. The matters underlying this estimated range and the estimable portion of which are beyond our control. No provision was made forreasonably possible losses may change from time to time and the extent such are not probable and estimable. We believe we have substantial defenses to the claims asserted, and intend to defendactual possible loss may vary from this action vigorously.estimate.

Other Matters.  In the ordinary course of business, we are a defendant in various other lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property.  None of these other matters, in our opinion, is likely to have a material adverse effect on our business, financial condition or results of operations.


(14)(15)Income Taxes
We file a consolidated federal income tax return for all of our wholly-owned subsidiaries, including Sirius XM.  For the three months ended September 30, 20162017 and 2015,2016, income tax expense was $108,901 and $111,556, respectively, and $112,543, respectively. For$342,387 and $326,108 for the nine months ended September 30, 20162017 and 2015, income tax expense was $326,108 and $296,893,2016, respectively.
Our effective tax rate for the three months ended September 30, 2017 and 2016 was 28.3% and 36.5%, respectively. Our effective tax rate for the nine months ended September 30, 2017 and 2016 was 33.3% and 37.6%, respectively. The effective tax rate for the three and nine months ended September 30, 2017 was impacted by the recognition of excess tax benefits related to stock compensation and a benefit related to a federal tax credit under the Protecting Americans from Tax Hikes Act of 2015 for research and development activities. The effective tax rate for the three and nine months ended September 30, 2016 was 36.5% and 37.6%, respectively.impacted by the recognition of tax shortfalls related to stock compensation. Our adjusted effective tax rate for the three and nine months ended September 30, 2015 was 40.3% and 44.2%, respectively. Our effective tax rate for the nine months ended September 30, 2015 was impacted by tax law changes in the District of Columbia and New York City. The tax law change in the District of Columbia will reduce our future tax and thus we will use less of certain net operating losses in the future which resulted in a $44,392 increase in our valuation allowance during the three months ended Marchyear ending December 31, 2015. The tax law change in New York City will increase certain net operating losses2017 is anticipated to be utilized in the future which resulted in a $14,831 increase in our deferred tax asset during the three months ended June 30, 2015.approximately 34%.
As of September 30, 20162017 and December 31, 2015,2016, we had a valuation allowance related to deferred tax assets of $49,257$44,828 and $49,095,$47,682, respectively, that were not likely to be realized due to certain net operating loss limitations and acquired net operating losses that were not more likely than not going to be utilized.


(15)(16)Subsequent Events
Debt Redemption
On October 1, 2016, we redeemed $650,000 in principal amount of our outstanding 5.875% Notes for an approximate purchase price of $669,097, including premium, which will result in the recognition of a Loss on extinguishment of debt and credit facilities, net, of approximately $24,229 in the fourth quarter of 2016. This redemption was funded with $359,097 of Cash and cash equivalents and $310,000 of additional borrowings under our Credit Facility.

23

Table of Contents
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in thousands, except per share amounts)

Capital Return Program
For the period from October 1, 20162017 to October 25, 2016,23, 2017, we repurchased 18,5486,452 shares of our common stock on the open market for an aggregate purchase price of $76,791,$36,388, including fees and commissions.
On October 26, 2016,3, 2017, our board of directors approved an additional $2,000,000 for repurchase of our common stock.  The new approval increases the amount of common stock that we have been authorized to repurchase to an aggregate of $10,000,000. Shares of common stock may be purchased from time to time on the open market and in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates. We intend to fund the additional repurchases throughdeclared a combination of cash on hand, cash generated by operations and future borrowings.
On October 26, 2016, our board of directors also declared the first quarterly dividend on our common stock in the amount of $0.01$0.011 per share of common stock payable on November 30, 20162017 to stockholders of record as of the close of business on November 9, 2016. Our board of directors expects that this dividend will be the first of regular quarterly dividends, in an aggregate annual amount of $0.04 per share of common stock.2017.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
All amounts referenced in this Item 2 are in thousands, except per subscriber and per installation amounts, unless otherwise stated.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2015.2016.
This Quarterly Report on Form 10-Q 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.

Special Note Regarding Forward-Looking Statements
The following cautionary statements identify important factors that could cause our actual results to differ materially from those projected in forward-looking statements made in this Quarterly Report on Form 10-Q and in other reports and documents published by us from time to time. Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intend,” “plan,” “projection” and “outlook.” Any forward-looking statements are qualified in their entirety by reference to the factors discussed throughout this Quarterly Report on Form 10-Q and in other reports and documents published by us from time to time, particularly the risk factors described under “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 20152016 and “Management’s Discussion and Analysis of Financial Condition and Results orof Operations” herein and in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 20152016.

Among the significant factors that could cause our actual results to differ materially from those expressed in the forward-looking statements are:
we face substantial competition and that competition is likely to increase over time;
our ability to attract and retain subscribers in the future is uncertain;
our service may experience harmful interference from new wireless operations;
consumer protection laws and their enforcement could damage our business;
the unfavorable outcome of pending or future litigation;litigation could have a material adverse impact on our operations and financial condition;
the market for music rights is changing and is subject to significant uncertainties;
our business depends in large part upon the auto industry;
general economic conditions can affect our business;
if we fail to protect the security of personal information about our customers, we could be subject to costly government enforcement actions and private litigation and our reputation could suffer;
other existing or future government laws and regulations could harm our business;
failure of our satellites would significantly damage our business;
interruption or failure of our information technology and communications systems could negatively impact our results and our brand;
we may not realize the benefits of acquisitions or other strategic investments and initiatives;
rapid technological and industry changes could adversely impact our services;
failure of third parties to perform could adversely affect our business;
our service may experience harmful interference from new and existing wireless operations;
failure to comply with FCC requirements could damage our business;

we may from time to time modify our business plan, and these changes could adversely affect us and our financial condition;
we have a significant amount of indebtedness, and our revolving credit facilitydebt contains certain covenants that restrict our current and future operations;

our studios, terrestrial repeater networks, satellite uplink facilities or other ground facilities could be damaged by natural catastrophes or terrorist activities;
our principal stockholder has significant influence, including over actions requiring stockholder approval, and its interests may differ from the interests of other holders of our common stock;
we are a “controlled company” within the meaning of the NASDAQ listing rules and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements; and
our business may be impaired by third-party intellectual property rights.rights; and
while we currently pay a quarterly cash dividend to holders of our common stock, we may change our dividend policy at any time.

Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any of these forward-looking statements. In addition, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which the statement is made, to reflect the occurrence of unanticipated events or otherwise, except as required by law. New factors emerge from time to time, and it is not possible for us to predict which will arise or to assess with any precision the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Executive Summary
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.  Subscribers can also receive music and other channels, plus features such as SiriusXM On Demand and MySXM, over our Internet radio service, including through applications for mobile devices.devices, home devices and other consumer electronic equipment.  We are also a leader in providing 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.  We also acquire subscribers through marketing to owners and lessees of previously owned vehicles that include factory-installed satellite radios that are not currently subscribing to our services.  Additionally, we distribute ourOur satellite radios are primarily distributed through retailers online and at locations nationwideautomakers; retail stores nationwide; and through our website. Satellite radio services are also offered to customers of certain rental car companies.
As of September 30, 2016,2017, we had approximately 31.032.2 million subscribers of which approximately 25.527.0 million were self-pay subscribers and approximately 5.55.2 million were paid promotional subscribers. Our subscriber totals include subscribers under our regular pricing plans; discounted pricing plans; subscribers that have prepaid, including payments either made or due from automakers for subscriptions included in the sale or lease price of a vehicle; subscribers to our Internet services who do not also have satellite radio subscriptions; and certain subscribers to our weather, traffic, and data services who do not also have satellite radio subscriptions.  Subscribers and subscription related revenues and expenses associated with our connected vehicle services and the Sirius XM Canada service are not included in our subscriber count or subscriber-based operating metrics.
Our primary source of revenue is subscription fees, with most of our customers subscribing on anto annual, semi-annual, quarterly or monthly plan.plans.  We offer discounts for prepaid, longer term subscription plans, as well as a multiple subscription discount.  We also derive revenue from activation and other 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 certain cases, a subscription to our radio services is included in the sale or lease price of new vehicles 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.
As of September 30, 2016,2017, Liberty Media beneficially owned, directly and indirectly, approximately 65%69% 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.  Liberty Media owns interests in a range of media, communications and entertainment businesses.

Recent DevelopmentTransactions

During the nine months ended September 30, 2017, we entered into several strategic transactions.

Acquisition of Automatic Labs. 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.

Recapitalization of Sirius XM Canada
. On May 12, 2016, our subsidiary,25, 2017, Sirius XM Radio Inc. (“Sirius XM”), entered into an arrangement agreementcompleted a recapitalization (the “Arrangement Agreement”“Transaction”) withof Sirius XM Canada Holdings Inc. ("(“Sirius XM Canada"Canada”), an entity in which Sirius XM currently holds an approximate 37% economic interest and 25% voting interest. Pursuant to the Arrangement Agreement, Sirius XM and certain Canadian shareholders will formis now a new company to acquire shares of Sirius XM Canada not already owned by them pursuant to a plan of arrangement (the “Transaction”). In connection with the Transaction, Sirius XM Canada’s shareholders will be entitled to elect to receive, for each share of Sirius XM Canadaprivately held C$4.50 (U.S. $3.50 as of May 12, 2016) in (i) cash, (ii) shares of our common stock, (iii) a security exchangeable for shares of our common stock, or (iv) a combination thereof; provided that no more than 50% of the total consideration in the Transaction (or up to 35,000 shares) will be issued in our common stock and exchangeable shares. All of the obligations of Sirius XM under the Arrangement Agreement are guaranteed by us.corporation.

Following the Transaction, Sirius XM is expected to holdholds a 70% economicequity interest and 33% voting interest in Sirius XM Canada, with the remainder of the voting power and economicequity interest held by Slaight Communications and Obelysk Media, two of Sirius XM Canada’s current Canadianprevious shareholders. The total consideration from Sirius XM expects to contribute to Sirius XM Canada, approximately U.S. $275,000excluding transaction costs, during the nine months ended September 30, 2017 was $308,526, which included $129,676 in connection with the Transaction (assuming that all shareholders elect to receive cash in connection with the Transaction), which amount is expected to be used to pay the cash consideration to Sirius XM Canada’s shareholders and will be decreased proportionately if shareholders elect to receive consideration inwe issued 35,000 shares of our common stock or securities exchangeable for our common stock.
The Transaction has been approved bywith an aggregate value of $178,850 to the stockholdersholders 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. Sirius XM now owns 590,950 shares of preferred stock of Sirius XM Canada, which has receiveda liquidation preference of one Canadian dollar per share. Future dividends on the required court approval.common stock of Sirius XM Canada are expected to be declared on a 6.0% annual basis.

In connection with the Transaction, Sirius XM also made a contribution in the form of a loan to Sirius XM Canada in the aggregate amount of $130,794 on May 25, 2017. 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. Such 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. In addition, 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.

In connection with the Transaction, remainsSirius 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 will pay 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 will pay Sirius XM 5% of its gross revenues on a monthly basis. These agreements supersede and replace the existing 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. We do 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.

Investment in Pandora Media, Inc. On September 22, 2017, Sirius XM completed a $480,000 investment in Pandora. Pursuant to an Investment Agreement with Pandora Media, Inc. (“Pandora”), Sirius XM purchased 480 shares of Pandora’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $480,000. The Series A preferred stock represents a stake of approximately 19% of Pandora's currently outstanding common stock, and approximately a 16% 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 receiptadjustments for accrued but unpaid dividends and certain customary anti-dilution adjustments. Holders of Canadian Radio-Televisionthe Series A Preferred Stock are entitled to a cumulative dividend at the rate of 6.0% per annum, payable quarterly in arrears, if and Telecommunications Commission approval. Pending receiptwhen declared. During the

three and nine months ended September 30, 2017, we recognized $2,991 and $3,595, respectively, related to the dividend declared by Pandora, which was recorded to Other income in our unaudited consolidated statements of comprehensive income and Long-term investment within our unaudited consolidated balance sheets. 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 the Initial Closing.
The investment includes a mandatory redemption feature on any date from and after September 22, 2022 whereby Sirius XM, at its option, may require Pandora to purchase the Series A Preferred Stock at a price equal to 100% of the liquidation preference plus accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, and as such the investment qualifies as a debt security under ASC 320. As the investment includes a conversion option, we have elected to account for this approval,investment under the Transaction is expectedfair value option to closereduce the accounting asymmetry that would otherwise arise when recognizing the changes in the fourth quarterfair value of 2016.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 unaudited consolidated statements of comprehensive income. A $68,650 unrealized gain was recognized during the three and nine months ended September 30, 2017 as Other income in our unaudited consolidated statements of comprehensive income associated with this investment. The fair value of our investment as of September 30, 2017 was $552,245 and is recorded as a related party long-term asset within our unaudited 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.
We have appointed three of our senior executives or members of our Board of Directors to Pandora’s Board of Directors, one of whom serves as the Chairman of Pandora's Board of Directors.
Our right to designate directors will fall away once we and our affiliates fail to beneficially own shares of Series A Preferred Stock and/or Pandora Common Stock issued upon conversion thereof equal to (on an as-converted basis) at least 50% of the number of shares of Pandora Common Stock issuable upon conversion of the Series A Preferred Stock purchased under the Investment Agreement. Following the earlier to occur of (i) September 22, 2019 and (ii) the date on which we and our affiliates fail to beneficially own shares of Series A Preferred Stock and/or Pandora Common Stock that were issued upon conversion of Series A Preferred Stock equal to (on an as-converted basis) at least 75% of the number of shares of Pandora Common Stock issuable upon conversion of the Series A Preferred Stock purchased under the Investment Agreement, we have the right to designate only two directors.
We are subject to certain standstill restrictions, including, among other things, that we are restricted from acquiring additional securities of Pandora until December 9, 2018.
Except as to matters that may be voted upon separately by holders of the Series A Preferred Stock, we are entitled to vote as a single class with the holders of Pandora Common Stock on an as-converted basis (up to a maximum of 19.99% of the Pandora Common Stock outstanding on June 9, 2017, unless stockholder approval has been received). We are also entitled to a separate class vote with respect to certain amendments to Pandora’s organizational documents, issuances by Pandora of securities that are senior to, or equal in priority with, the Series A Preferred Stock and the incurrence of certain indebtedness by Pandora.
Upon certain change of control events involving Pandora, Pandora is required to repurchase all of the Series A Preferred Stock at a price equal to the greater of (1) an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends through June 9, 2022 (assuming such shares of Series A Preferred Stock remain outstanding through such date) and (2) the consideration the holders would have received if they had converted their shares of Series A Preferred Stock into Pandora Common Stock immediately prior to the change of control event (disregarding the 19.99% cap).
Beginning on September 22, 2020, if the volume weighted average price per share of Pandora Common Stock exceeds $18.375, as may be adjusted, for at least 20 trading days in any period of 30 consecutive trading days, Pandora may redeem all of the outstanding Series A Preferred Stock at a price equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, provided that, unless stockholder approval has been received, Pandora may not settle the redemption for shares of Pandora Common Stock to the extent the 19.99% cap would be exceeded.
Pursuant to a registration rights agreement entered into with Pandora, we have certain customary registration rights with respect to the Series A Preferred Stock and Pandora Common Stock issued upon conversion thereof.


Results of Operations
Set forth below are our results of operations for the three and nine months ended September 30, 20162017 compared with the three and nine months ended September 30, 2015.2016.

 2016 vs 2015 Change        2017 vs 2016 Change
For the Three Months Ended September 30, For the Nine Months Ended September 30, Three Months Nine MonthsFor the Three Months Ended September 30, For the Nine Months Ended September 30, Three Months Nine Months
2016 2015 2016 2015 Amount % Amount %2017 2016 2017 2016 Amount % Amount %
Revenue:                              
Subscriber revenue$1,069,746
 $974,471
 $3,112,712

$2,826,018
 $95,275
 10 % $286,694
 10 %$1,136,027
 $1,069,746
 $3,325,295

$3,112,712
 $66,281
 6 % $212,583
 7 %
Advertising revenue34,268
 33,131
 99,330

88,843
 1,137
 3 % 10,487
 12 %41,462
 34,268
 117,656

99,330
 7,194
 21 % 18,326
 18 %
Equipment revenue31,306
 25,875
 86,285

79,979
 5,431
 21 % 6,306
 8 %32,337
 31,306
 91,669

86,285
 1,031
 3 % 5,384
 6 %
Other revenue142,326
 136,235
 415,895

379,072
 6,091
 4 % 36,823
 10 %169,770
 142,326
 486,611

415,895
 27,444
 19 % 70,716
 17 %
Total revenue1,277,646
 1,169,712
 3,714,222

3,373,912
 107,934
 9 % 340,310
 10 %1,379,596
 1,277,646
 4,021,231

3,714,222
 101,950
 8 % 307,009
 8 %
Operating expenses:    


            


        
Cost of services:    


            


        
Revenue share and royalties272,823
 238,620
 788,952

783,115
 34,203
 14 % 5,837
 1 %296,498
 272,823
 866,691

788,952
 23,675
 9 % 77,739
 10 %
Programming and content89,015
 75,707
 257,760

216,223
 13,308
 18 % 41,537
 19 %98,239
 89,015
 290,038

257,760
 9,224
 10 % 32,278
 13 %
Customer service and billing94,923
 94,492
 285,502

278,521
 431
 0 % 6,981
 3 %94,655
 94,923
 286,754

285,502
 (268)  % 1,252
  %
Satellite and transmission22,224
 22,743
 80,609

65,761
 (519) (2)% 14,848
 23 %21,378
 22,224
 61,557

80,609
 (846) (4)% (19,052) (24)%
Cost of equipment9,674
 9,246
 29,181

29,021
 428
 5 % 160
 1 %8,254
 9,674
 24,537

29,181
 (1,420) (15)% (4,644) (16)%
Subscriber acquisition costs120,111
 133,009
 381,516

391,773
 (12,898) (10)% (10,257) (3)%119,555
 120,111
 372,197

381,516
 (556)  % (9,319) (2)%
Sales and marketing99,194
 90,541
 279,278

255,778
 8,653
 10 % 23,500
 9 %114,519
 99,194
 318,135

279,278
 15,325
 15 % 38,857
 14 %
Engineering, design and development19,254
 16,132
 57,588

47,180
 3,122
 19 % 10,408
 22 %29,433
 19,254
 81,033

57,588
 10,179
 53 % 23,445
 41 %
General and administrative90,369
 67,234
 249,052

219,194
 23,135
 34 % 29,858
 14 %83,187
 90,369
 245,995

249,052
 (7,182) (8)% (3,057) (1)%
Depreciation and amortization67,880
 70,404
 202,215

202,527
 (2,524) (4)% (312) 0 %79,913
 67,880
 230,136

202,215
 12,033
 18 % 27,921
 14 %
Total operating expenses885,467
 818,128
 2,611,653

2,489,093
 67,339
 8 % 122,560
 5 %945,631
 885,467
 2,777,073

2,611,653
 60,164
 7 % 165,420
 6 %
Income from operations392,179
 351,584
 1,102,569

884,819
 40,595
 12 % 217,750
 25 %433,965
 392,179
 1,244,158

1,102,569
 41,786
 11 % 141,589
 13 %
Other income (expense):    


            


        
Interest expense(89,092) (76,624) (250,888)
(221,912) (12,468) (16)% (28,976) (13)%(92,634) (89,092) (257,085)
(250,888) (3,542) (4)% (6,197) (2)%
Loss on extinguishment of debt(43,679) 
 (43,679) 
 (43,679)  % (43,679)  %
Other income2,370
 4,133
 15,733

9,077
 (1,763) (43)% 6,656
 73 %86,971
 2,370
 83,897

15,733
 84,601
 nm
 68,164
 nm
Total other expense(86,722) (72,491) (235,155)
(212,835) (14,231) (20)% (22,320) (10)%(49,342) (86,722) (216,867)
(235,155) 37,380
 43 % 18,288
 8 %
Income before income taxes305,457
 279,093
 867,414

671,984
 26,364
 9 % 195,430
 29 %384,623
 305,457
 1,027,291

867,414
 79,166
 26 % 159,877
 18 %
Income tax expense(111,556) (112,543) (326,108)
(296,893) 987
 1 % (29,215) (10)%(108,901) (111,556) (342,387)
(326,108) 2,655
 2 % (16,279) (5)%
Net income$193,901
 $166,550
 $541,306

$375,091
 $27,351
 16 % $166,215
 44 %$275,722
 $193,901
 $684,904

$541,306
 $81,821
 42 % $143,598
 27 %
nm - not meaningful
Total Revenue
Subscriber Revenue includes subscription, activation and other fees.

For the three months ended September 30, 20162017 and 2015,2016, subscriber revenue was $1,069,746$1,136,027 and $974,471,$1,069,746, respectively, an increase of 10%6%, or $95,275.$66,281. For the nine months ended September 30, 20162017 and 2015,2016, subscriber revenue was $3,112,712$3,325,295 and $2,826,018,$3,112,712, respectively, an increase of 10%7%, or $286,694.$212,583. The period over period increase wasincreases were primarily attributable to a 7%4% and 8% increase5% increases in the daily weighted average number of subscribers for the three and

nine monthsmonth periods ended September 30, 2016,2017, respectively, as well as a 3% increase in average monthly revenue per subscriber resultingthat resulted from our price changes and mix of plans.certain rate increases implemented in 2016.
We expect subscriber revenues to increase based on the growth of our subscriber base, the effects of increases in certain of our subscription rates and the sale of additional services to subscribers.
Advertising Revenue includes the sale of advertising on certain non-music channels.
For the three months ended September 30, 20162017 and 2015,2016, advertising revenue was $34,268$41,462 and $33,131,$34,268, respectively, an increase of 3%21%, or $1,137.$7,194. For the nine months ended September 30, 20162017 and 2015,2016, advertising revenue was $99,330$117,656 and $88,843,$99,330, respectively, an increase of 12%18%, or $10,487. For the three months ended September 30, 2016, the increase was primarily due to a greater number of advertising spots sold and transmitted, partially offset by the loss of a significant advertiser due to state regulatory activities surrounding the fantasy sports industry. For the nine months ended September 30, 2016, the increase was$18,326. The increases were primarily due to a greater number of advertising spots sold and transmitted as well as increasedincreases in rates charged per spot.
We expect our advertising revenue to continue to grow as more advertisers are attracted to our national platform and growing subscriber base and as we launch additional non-music channels.
Equipment Revenue includes revenue and royalties from the sale of satellite radios, components and accessories.accessories as well as the sale of connected vehicle devices and royalty revenue on chipset modules.
For the three months ended September 30, 20162017 and 2015,2016, equipment revenue was $31,306$32,337 and $25,875,$31,306, respectively, an increase of 21%3%, or $5,431.$1,031. For the nine months ended September 30, 20162017 and 2015,2016, equipment revenue was $86,285$91,669 and $79,979,$86,285, respectively, an increase of 8%6%, or $6,306.$5,384. The period over period increase for the three months and nine months ended September 30, 2016month period was driven by an increase in OEM production and an increase in royalty revenue on certain modules starting early in the second quarter of 2016 due to our transition to a new generation of chipsets and revenue from the sales of connected vehicle devices since the acquisition of Automatic, partially offset by lower satellite radio sales through our aftermarketto distributors and direct to consumer businesses.consumers.
We expect equipment revenue to fluctuate based on OEM production for which we receiveincrease due to the increases in royalty payments forrevenues associated with certain modules related to our technology and,transition to a lesser extent, on the volumenew generation of equipment sales in our aftermarket and direct to consumer businesses.chipsets.
Other Revenue includes amounts earned from subscribers for the U.S. Music Royalty Fee, and service and advisory revenue from our Canadian affiliate, our connected vehicle services, our Canadian affiliate and ancillary revenues.
For the three months ended September 30, 20162017 and 2015,2016, other revenue was $142,326$169,770 and $136,235,$142,326, respectively, an increase of 4%19%, or $6,091.$27,444. For the nine months ended September 30, 20162017 and 2015,2016, other revenue was $415,895$486,611 and $379,072,$415,895, respectively, an increase of 10%17%, or $36,823.$70,716. The period over period increase wasincreases were primarily driven by higher revenue from the new Sirius XM Canada service and advisory agreements, additional revenues from the U.S. Music Royalty Fee due to an increase in the number of subscribers and subscribers paying at a higher rate. These increases were offset by lower activation revenuesrate of 13.9% and a change in a programming contract in the third quarter of 2015 related to our Canadian affiliate and the timing of non-recurring engineering feeshigher revenue generated from our connected vehicle services.
We expect otherOther revenue is expected to increase as our growing subscriber base drives higherdue to an increase in U.S. Music Royalty Fees.Fees as our subscriber base continues to grow and an increase in revenue from Sirius XM Canada due to the new service and advisory agreements.
Operating Expenses
Revenue Share and Royalties include distribution and content provider revenue share, royalties for transmitting content and web streaming as well as automaker, content provider and advertising revenue share.
For the three months ended September 30, 20162017 and 2015,2016, revenue share and royalties were $272,823$296,498 and $238,620,$272,823, respectively, an increase of 14%9%, or $34,203,$23,675, and increased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, revenue share and royalties were $788,952$866,691 and $783,115,$788,952, respectively, an increase of 1%10%, or $5,837, but decreased$77,739, and increased as a percentage of total revenue. The increase for the three and nine month period wasincreases were due to overall greater revenues subject to royaltyroyalties for transmitting content and revenue sharing arrangements,share to automakers and a 5% increase in the statutory royalty rate applicable to our use of post-1972 recordings. The increaserecordings, which increased from 10.5% in the nine month period was mitigated by the impact of $116,6392016 to 11% in expense recorded during the nine months ended September 30, 2015 for the portion of the $210,000 settlement of the Capitol Records LLC et al. v. Sirius XM Radio Inc. lawsuit related to our use of pre-1972 sound recordings through September 30, 2015. We have recorded approximately $29,654 related to this settlement through the nine months ended September 30, 2016.2017.

We expect our revenue share and royalty costs to increase as our revenues growgrow. Our revenue share and royalty costs may also increase as the statutory royaltya result of a rate applicable to post-1972 sound recordings increases. For the remainder of 2016 and in 2017, we expect to recognize $10,154 and $43,442, respectively, in expense related to the settlement relating to the use of pre-1972 sound recordings. As determined bysetting proceeding currently pending before the Copyright Royalty Board we have paid or will pay royalties for(“CRB”). The CRB initiated a proceeding in January 2016 to set the use of certain post-1972 sound recordings onrates and terms by which our satellite radio service may perform sound recordings by digital transmission and make ephemeral reproductions during the 2018-2022 period. As part of 10.0%, 10.5%this proceeding, SoundExchange, on behalf of the recording industry, proposed a new rate structure and 11%a number of material changes to the governing regulations, including relating to the applicable revenue base for the percent-of-revenue royalty calculations and fees for trial subscriptions. If the CRB adopts the proposals made by SoundExchange, the ruling would further increase, possibly in 2015, 2016 and 2017, respectively.a material manner, the sound recording royalties payable by us. The CRB is expected to issue its final ruling in this proceeding no later than December 15, 2017.
Programming and Content includes costs to acquire, create, promote and produce content. We have entered into various agreements with third parties for music and non-music programming that require us to pay license fees and other amounts.
For the three months ended September 30, 20162017 and 2015,2016, programming and content expenses were $89,015$98,239 and $75,707,$89,015, respectively, an increase of 18%10%, or $13,308,$9,224, and increased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, programming and content expenses were $257,760$290,038 and $216,223,$257,760, respectively, an increase of 19%13%, or $41,537,$32,278, and increased as a percentage of total revenue. The period over period increases were primarily due to renewed programming licensesthe addition of video content rights, payment for which started during the third quarter of 2016, as well as increased personnel relatedtalent and personnel-related costs.
We expect our programming and content expenses to increase as we offer additional programming, and renew or replace expiring agreements.
Customer Service and Billing includes costs associated with the operation and management of internal and third party customer service centers, and our subscriber management systems as well as billing and collection costs, bad debt expense, and transaction fees.
For the three months ended September 30, 20162017 and 2015,2016, customer service and billing expenses were $94,655 and $94,923, and $94,492, respectively, an increasea decrease of less than 1%, or $431, but$268, and decreased as a percentage of total revenue. For the nine months ended September 30, 2017 and 2016, and 2015, customer servicesservice and billing expenses were $285,502$286,754 and $278,521,$285,502, respectively, an increase of 3%less than 1%, or $6,981,$1,252, but decreased as a percentage of total revenue. The period over period increases were primarilyFor both the three and nine month periods, customer service and billing expense reflected lower call center costs due to costs associated withlower agent rates and lower contact rates, partially offset by increased transaction fees and bad debt expense from a higher subscriber base driving greater bad debt expenses, transaction fees, and call center costs, partially offset by lower personnel related costs and classifying wireless transmission costs related to our connected vehicle services to Satellite and transmission expense in 2016.base.
We expect our customer service and billing expenses to increase as our subscriber base grows.
Satellite and Transmission consists of costs associated with the operation and maintenance of our terrestrial repeater networks; satellites; satellite telemetry, tracking and control systems; satellite uplink facilities; studios; and delivery of our Internet streaming and connected vehicle services.
For the three months ended September 30, 20162017 and 2015,2016, satellite and transmission expenses were $22,224$21,378 and $22,743,$22,224, respectively, a decrease of 2%4%, or $519,$846, and decreased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, satellite and transmission expenses were $61,557 and $80,609, and $65,761, respectively, an increasea decrease of 23%24%, or $14,848,$19,052, and increaseddecreased as a percentage of total revenue. The decrease indecreases for the three and nine month period wasperiods were driven primarily by lower web streamingwireless costs from insourcing certain activities and repeater costs, offset by the inclusion of wireless transmission costs related toassociated with our connected vehicle services, that were previously recorded to Customer service and billing expense in 2015. The increase forlower terrestrial repeater costs as a result of the elimination of duplicative repeater sites; partially offset by increased Internet streaming costs. In addition, the nine month period was primarily due to theended September 30, 2016 included a loss on disposal of certain obsolete satellite parts of $12,912, recorded in the three months ended June 30, 2016.
We expect satellite and transmission expenses net of losses on disposals of assets, to remain relatively flat.increase as costs associated with our investment in Internet streaming services increase.
Cost of Equipment includes costs from the sale of satellite radios, components and accessories as well as connected vehicle and devices, and provisions for inventory allowance attributable to products purchased for resale in our direct to consumer distribution channels.
For the three months ended September 30, 20162017 and 2015,2016, cost of equipment was $8,254 and $9,674, and $9,246, respectively, an increasea decrease of 5%15%, or $428, but$1,420, and decreased as a percentage of equipment revenue. For the nine months ended September 30, 20162017 and 2015,2016, cost of equipment was $24,537 and $29,181, and $29,021, respectively, an increasea decrease of 1%16%, or $160, but$4,644,

and decreased as a percentage of equipment revenue. The decreases were primarily due to lower sales to distributors and consumers, partially offset by the incremental costs associated with the sale of connected vehicle devices since the acquisition of Automatic.
We expect cost of equipment to fluctuate with changes in sales and inventory valuations.sales.
Subscriber Acquisition Costs include hardware subsidies paid to radio manufacturers, distributors and automakers; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and

chipsets; commissions paid to automakers and retailers; product warranty obligations; freight; and provisions for inventory allowances attributable to inventory consumed in our OEM and retail distribution channels.freight. The majority of subscriber acquisition costs are incurred and expensed in advance of, or concurrent with, acquiring a subscriber. Subscriber acquisition costs do not include advertising costs, marketing, loyalty payments to distributors and dealers of satellite radios or revenue share payments to automakers and retailers of satellite radios.
For the three months ended September 30, 20162017 and 2015,2016, subscriber acquisition costs were $120,111$119,555 and $133,009,$120,111, respectively, a decrease of 10%less than 1%, or $12,898,$556, and decreased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, subscriber acquisition costs were $381,516$372,197 and $391,773,$381,516, respectively, a decrease of 3%2%, or $10,257,$9,319, and decreased as a percentage of total revenue. The period over period decrease for the three months ended September 30, 2016 wasdecreases were driven by lowerreductions to OEM hardware subsidies, a contractual reduction to a subsidy rate, andrates, lower subsidized costs related to the transition of chipsets, partially offset by higher radioand a decrease in the volume of installations. The three month period over period decrease for the nine months ended September 30, 2016 was driven bybenefited from a one-time true-up from a contractual reduction to a subsidy rate, and lower subsidized costs related to the transition of chipsets, partially offset by higher radio installations and related OEM hardware subsidies.rate.
We expect subscriber acquisition costs to fluctuate with OEM installations and aftermarket volume; however, the cost of subsidized radio componentschipsets cost is expected to decline.decline as we transition to a new generation of chipsets.  We intend to continue to offer subsidies commissions and other incentives to acquire subscribers.
Sales and Marketing includes costs for marketing, advertising, media and production, including promotional events and sponsorships; cooperative marketing; and personnel. Marketing costs include expenses related to direct mail, outbound telemarketing and email communications.
For the three months ended September 30, 20162017 and 2015,2016, sales and marketing expenses were $99,194$114,519 and $90,541,$99,194, respectively, an increase of 10%15%, or $8,653,$15,325, and increased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, sales and marketing expenses were $279,278$318,135 and $255,778,$279,278, respectively, an increase of 9%14%, or $23,500, but decreased$38,857, and increased as a percentage of total revenue. The period over period increases for the three and nine months ended September 30, 2016 were primarily due to increasedadditional subscriber communications, retention programs and acquisition campaigns, related to our subscriber growth as well as higher personnel costs.personnel-related costs; partially offset by the timing of OEM marketing campaigns.
We anticipate that sales and marketing expenses will increase as we expand programs to retain our existing subscribers, win back former subscribers, and attract new subscribers.
Engineering, Design and Development consists primarily of compensation and related costs to develop chipsets and new products and services, including streaming and connected vehicle services, research and development for broadcast information systems and costs associated with the incorporation of our radios into new vehicles manufactured by automakers.
For the three months ended September 30, 20162017 and 2015,2016, engineering, design and development expenses were $19,254$29,433 and $16,132,$19,254, respectively, an increase of 19%53%, or $3,122,$10,179, and increased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, engineering, design and development expenses were $57,588$81,033 and $47,180,$57,588, respectively, an increase of 22%41%, or $10,408,$23,445, and increased as a percentage of total revenue. The period over period increases for the three and nine months ended September 30, 2016 were driven primarily by additional costs associated with the inclusiondevelopment of personnel related costs fromour audio and video streaming products and increased development of our connected vehicle services that were previously recorded in Sales and marketing and General and administrative expense in 2015, partially offset by lower research and development costs.services.
We expect engineering, design and development expenses to increase in future periods as we continue to develop our infrastructure, products and services.
General and Administrative primarily consists of compensation and related costs for personnel and facilities, and include costs related to our finance, legal, human resources and information technologies departments.
For the three months ended September 30, 20162017 and 2015,2016, general and administrative expenses were $83,187 and $90,369, and $67,234, respectively, an increasea decrease of 34%8%, or $23,135,$7,182, and increaseddecreased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, general and administrative expenses were $245,995 and $249,052, and $219,194, respectively, an increasea

decrease of 14%1%, or $29,858,$3,057, and increaseddecreased as a percentage of total revenue. The period over period increases for the three and nine months ended September 30, 2016decreases were primarily driven by higher consulting andlower legal costs. Costs incosts due to insurance recoveries recorded during the three months ended September 30, 2015, benefited from insurance recoveries related to a legal settlement.

2017, lower consulting costs, and lower rent expense.
We expect our general and administrative expenses to increase in future periods as a result of, among other things, enhanced information technology, on-going legal costs and personnel costs to support the growth of our business.
Depreciation and Amortization represents the recognition in earnings of the cost of assets used in operations, including our satellite constellations, property, equipment and intangible assets, over their estimated service lives.
For the three months ended September 30, 20162017 and 2015,2016, depreciation and amortization expense was $79,913 and $67,880, and $70,404, respectively, a decreasean increase of 4%18%, or $2,524,$12,033, and decreasedincreased as a percentage of total revenue. For the nine months ended September 30, 20162017 and 2015,2016, depreciation and amortization expense was $230,136 and $202,215, and $202,527, respectively, a decreasean increase of less than 1%14%, or $312,$27,921, and decreasedincreased as a percentage of total revenue. The decrease for the three month period wasincreases were driven by acceleration of amortization related to a shorter useful life of certain satellites and software reaching the end of their estimated lives in 2015, partially offset byas well as additional software and terrestrial repeater assets placed in service.in-service.
Other Income (Expense)
Interest Expense includes interest on outstanding debt.
For the three months ended September 30, 20162017 and 2015,2016, interest expense was $89,092$92,634 and $76,624,$89,092, respectively, an increase of 16%4%, or $12,468.$3,542. For the nine months ended September 30, 20162017 and 2015,2016, interest expense was $250,888$257,085 and $221,912,$250,888, respectively, an increase of 13%2%, or $28,976.$6,197. The increase wasincreases were primarily due to higher average debt during the three and nine months ended September 30, 20162017 compared to the three and nine months ended September 30, 2015.2016.
Loss on Extinguishment of Debt, includes losses incurred as a result of the redemption of certain debt.
For the three and nine months ended September 30, 2017 and 2016, loss on extinguishment of debt, net, was $43,679 and $0, respectively. We expect interest expense to increase in future periodsrecorded losses on extinguishment of debt during the three and nine months ended September 30, 2017 due to the extentredemption of our total4.25% Senior Notes due 2020, 5.75% Senior Notes due 2021, and 5.25% Senior Secured Notes due 2022. There was no loss on extinguishment of debt outstanding increases.during the three and nine months ended September 30, 2016.
Other Income primarily includes realized and unrealized gains and losses, interest and dividend income, and our share of the income or loss of Sirius XM Canada.Canada, and transaction costs related to non-operating investments.
For the three and nine months ended September 30, 2017, other income was $86,971 and $83,897, respectively. For the three and nine months ended September 30, 2017, we recorded an unrealized gain of $68,650 from a fair value adjustment of our investment in Pandora, interest earned on our loan to Sirius XM Canada, dividends accrued from Pandora, and our share of Sirius XM Canada's net income or loss, partially offset by transaction costs associated with our investment in Pandora. For the three months ended September 30, 2016, and 2015, interest and investmentother income was $2,370 and $4,133, respectively.driven by our share of Sirius XM Canada's net income. For the nine months ended September 30, 2016, and 2015, interest and investmentother income was $15,733 and $9,077, respectively. The income for the three and nine months ended September 30, 2016 was driven by our share of Sirius XM Canada’s net income. The nine months ended September 30, 2016 also included dividends received from Sirius XM Canada in excess of our investment. Pursuant to the Arrangement Agreement, Sirius XM Canada did not pay any dividends during the three months ended September 30, 2016. The income for the three and nine months ended September 30, 2015 was driven by the dividends received from Sirius XM Canada in excess of our investment.
Income Taxes
Income Tax Expense includes the change in our deferred tax assets, foreign withholding taxes and current federal and state tax expenses.
For the three months ended September 30, 20162017 and 2015,2016, income tax expense was $108,901 and $111,556, respectively, and $112,543, respectively. For$342,387 and $326,108 for the nine months ended September 30, 20162017 and 2015, income tax expense was $326,108 and $296,893,2016, respectively.
Our effective tax rate for the three months ended September 30, 2017 and 2016 was 28.3% and 36.5%, respectively. Our effective tax rate for the nine months ended September 30, 2017 and 2016 was 33.3% and 37.6%, respectively. The effective tax rate for the three and nine months ended September 30, 2017 was impacted by the recognition of excess tax benefits related to stock compensation and a benefit related to a federal tax credit under the Protecting Americans from Tax Hikes Act of 2015 for research and development activities. The effective tax rate for the three and nine months ended September 30, 2016 was 36.5% and 37.6%, respectively. We estimate our annualimpacted by the recognition of tax shortfalls related to stock compensation. Our adjusted effective tax rate for the year ending December 31, 2016 will2017 is anticipated to be approximately 32% as we expect to recognize a Federal R&D tax credit in the fourth quarter of 2016 relating to the Protecting Americans from Tax Hikes Act of 2015. Our effective tax rate for the three and nine months ended September 30, 2015 was 40.3% and 44.2%, respectively. Our effective tax rate for the nine months ended September 30, 2015 was impacted by tax law changes in the District of Columbia and New York City. The tax law change in the District of Columbia will reduce our future tax and thus we will use less of certain net operating losses in the future which resulted in a $44,392 increase in our valuation allowance during the three months ended March 31, 2015. The tax law change in New York City will increase certain net operating losses to be utilized in the future which resulted in a $14,831 increase in our deferred tax asset during the three months ended June 30, 2015.34%.

Key Financial and Operating Performance Metrics
In this section, we present certain financial performance measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States (“Non-GAAP”), which include free cash flow and adjusted

EBITDA. We also present certain operating performance measures, which include average monthly revenue per subscriber, or ARPU; customer service and billing expenses, per average subscriber; and subscriber acquisition cost, or SAC, per installation. To the extent applicable, these measures excludeOur adjusted EBITDA excludes the impact of share-based payment expense and certain purchase price accounting adjustments related to the merger of Sirius and XM (the "Merger"“Merger”).  Additionally, when applicable, our adjusted EBITDA and free cash flow metrics exclude the effect of significant items that do not relate to the on-going performance of our business.  We use these Non-GAAP financial and operating performance measures to manage our business, to set operational goals and as a basis for determining performance-based compensation for our employees. See accompanying glossary on pages 3940 through 4143 for more details and for the reconciliation to the most directly comparable GAAP measure (where applicable).
We believe these Non-GAAP financial and operating performance measures provide useful information to investors regarding our financial condition and results of operations. We believe investors find these Non-GAAP financial and operating performance measures useful in evaluating our core trends because they provide a direct view of our underlying contractual costs. We believe investors use our adjusted EBITDA to estimate our current enterprise value and to make investment decisions. We believe free cash flow provides useful supplemental information to investors regarding our cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders. By providing these Non-GAAP financial and operating performance measures, together with the reconciliations to the most directly comparable GAAP measure (where applicable), we believe we are enhancing investors' understanding of our business and our results of operations.
Our Non-GAAP financial measures should be viewed in addition to, and not as an alternative for or superior to, our reported results prepared in accordance with GAAP.  In addition, our Non-GAAP financial measures may not be comparable to similarly-titled measures by other companies.  Please refer to the glossary (pages 3940 through 41)43) for a further discussion of such Non-GAAP financial and operating performance measures and reconciliations to the most directly comparable GAAP measure (where applicable).  Subscribers and subscription related revenues and expenses associated with our connected vehicle services and Sirius XM Canada are not included in our subscriber count or subscriber-based operating metrics.

Set forth below are our subscriber balances as of September 30, 20162017 compared to September 30, 2015:2016:

As of September 30,
2016 vs 2015 ChangeAs of September 30, 2017 vs 2016 Change

2016
2015
Amount
%2017
2016 Amount
%
Self-pay subscribers25,528

23,816

1,712

7%26,986

25,528
 1,458

6 %
Paid promotional subscribers5,463

5,143

320

6%5,181

5,463
 (282)
(5)%
Ending subscribers (a)
30,991

28,960

2,031

7%32,167

30,991
 1,176

4 %
(a)Amounts may not sum as a result of rounding.
The following table contains our Non-GAAP financial and operating performance measures which are based on our adjusted results of operations for the three and nine months ended September 30, 20162017 and 2015:2016:

 
 2016 vs 2015 Change        2017 vs 2016 Change
For the Three Months Ended September 30, For the Nine Months Ended September 30, Three Months Nine MonthsFor the Three Months Ended September 30, For the Nine Months Ended September 30, Three Months Nine Months
2016 2015 2016
2015 Amount % Amount %2017 2016 2017
2016 Amount % Amount %
Self-pay subscribers385
 381
 1,240

1,293
 4
 1 % (53) (4)%311
 385
 1,035

1,240
 (74) (19)% (205) (17)%
Paid promotional subscribers(39) 145
 157

355
 (184) (127)% (198) (56)%(191) (39) (214)
157
 (152) (390)% (371) (236)%
Net additions (a)
345
 525
 1,397

1,649
 (180) (34)% (252) (15)%119
 345
 821

1,397
 (226) (66)% (576) (41)%
Daily weighted average number of subscribers30,776
 28,649
 30,290

28,033
 2,127
 7 % 2,257
 8 %32,029
 30,776
 31,717

30,290
 1,253
 4 % 1,427
 5 %
Average self-pay monthly churn1.9% 1.9% 1.8%
1.8% 0 % 0 % 0 % 0 %1.9% 1.9% 1.8%
1.8% 0% 0 % 0% 0 %
New vehicle consumer conversion rate40% 41% 39%
41% (1)% (2)% (2)% (5)%40% 40% 40%
39% 0% 0 % 1% 3 %
    


            


        
ARPU$13.04
 $12.67
 $12.83

$12.45
 $0.37
 3 % $0.38
 3 %$13.41
 $13.04
 $13.19

$12.83
 $0.37
 3 % $0.36
 3 %
SAC, per installation$28
 $34
 $31

$33
 $(6) (18)% $(2) (6)%$30
 $28
 $30

$31
 $2
 7 % $(1) (3)%
Customer service and billing expenses, per average subscriber$0.97
 $1.00
 $0.98

$1.00
 $(0.03) (3)% $(0.02) (2)%$0.92
 $0.97
 $0.94

$0.98
 $(0.05) (5)% $(0.04) (4)%
Adjusted EBITDA$491,892
 $447,194
 $1,401,024

$1,261,382
 $44,698
 10 % $139,642
 11 %$550,582
 $491,892
 $1,574,320

$1,401,024
 $58,690
 12 % $173,296
 12 %
Free cash flow$356,527
 $368,899
 $1,079,690

$1,016,045
 $(12,372) (3)% $63,645
 6 %$433,788
 $356,527
 $1,099,452

$1,079,690
 $77,261
 22 % $19,762
 2 %
Diluted weighted average common shares outstanding (GAAP)4,919,829
 5,346,438
 5,005,133
 5,487,116
 (426,609) (8)% (481,983) (9)%4,704,571
 4,919,829
 4,734,841
 5,005,133
 (215,258) (4)% (270,292) (5)%
(a)Amounts may not sum as a result of rounding.
Subscribers. At September 30, 2016,2017, we had approximately 31.032.2 million subscribers, an increase of 2.01.2 million subscribers, or 7%4%, from the approximately 29.031.0 million subscribers as of September 30, 2015.2016. The increase in total subscribers was primarily due to growth in our self-pay subscriber base, which increased 1.7 million.1.5 million, partially offset by a 282 thousand decrease in paid promotional subscribers. The increase in self-pay subscribers is primarily from original and subsequent owner trial conversions and subscriber win back programs, partially offset by deactivations. Our increase in paid promotional subscribers of 320 thousand subscribers resulted from the shipment of additional vehicles by OEMs offering paid trials.
For the three months ended September 30, 20162017 and 2015,2016, net additions were 345119 thousand and 525345 thousand, respectively, a decrease of 34%66%. For the nine months ended September 30, 20162017 and 2015,2016, net additions were 1,397821 thousand and 1,6491,397 thousand, respectively, a decrease of 15%41%. The period over period decrease for the three and nine months ended September 30, 2016 was due to a decreasedecline in net additions of paid promotional subscribers as a result of slower growth in vehicle sales. Self-pay net additions increased slightly during the three months ended September 30, 2016 and decreased 4% for the nine months ended September 30, 2016. For the nine months ended September 30, 2016, the decrease in self-pay net additions was due to increases in deactivationspaid promotional subscription ends out-pacing paid promotional subscription starts as a result of lower shipments from automakers offering paid promotional subscriptions. Self-pay net additions declined due to higher vehicle turnover of our larger subscriber base which were largely offsetmitigated by increasesgrowth in trial conversions and subscriber win back programs.gross additions.
Average Self-pay Monthly Churn is derived by dividing the monthly average of self-pay deactivations for the period by the average number of self-pay subscribers for the period. (See accompanying glossary on pages 3940 through 4143 for more details.)

For the three months ended September 30, 20162017 and 2015,2016, our average self-pay monthly churn rate was 1.9%. For the nine months ended September 30, 20162017 and 2015,2016, our average self-pay monthly churn rate was 1.8%.

New Vehicle Consumer Conversion Rate is the percentage of owners and lessees of new vehicles that receive our service and convert to become self-paying subscribers after an initial promotional period. The metric excludes rental and fleet vehicles. (See accompanying glossary on pages 3940 through 4143 for more details).details.)
For the three months ended September 30, 2017 and 2016, our new vehicle consumer conversion rate was 40%.  For the nine months ended September 30, 2017 and 2015,2016, our new vehicle consumer conversion rate was 40% and 41%39%, respectively.  For the nine months ended September 30, 2016 and 2015, ourThe increase in new vehicle consumer conversion rate was 39% and 41%, respectively. The period over period decrease for the three and nine months ended September 30, 2016month period was primarily due to an increased vehicle penetration rate as well as lowerdriven by improvements in conversion of first-time buyers and lessees of satellite radio enabled cars. paid promotional subscribers who are also existing self-pay subscribers.
ARPU is derived from total earned subscriber revenue (excluding revenue derived from our connected vehicle services), net advertising revenue and other subscription-related revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. (See the accompanying glossary on pages 3940 through 4143 for more details.)
For the three months ended September 30, 20162017 and 2015,2016, ARPU was $13.04$13.41 and $12.67,$13.04, respectively.  For the nine months ended September 30, 20162017 and 2015,2016, ARPU was $12.83$13.19 and $12.45,$12.83, respectively. The period over period increase for the three and nine months ended September 30, 2016 wasincreases were driven primarily by increases in certain of our subscription and other subscription-related rates in 2016, partially offset by growth in subscription discounts offered through customer acquisition and retention programs.
SAC, Per Installation, is derived from subscriber acquisition costs and margins from the sale of radios, components and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period. (See the accompanying glossary on pages 3940 through 4143 for more details.)
For the three months ended September 30, 20162017 and 2015,2016, SAC, per installation, was $28$30 and $34,$28, respectively.  For the nine months ended September 30, 20162017 and 2015,2016, SAC, per installation, was $31$30 and $33,$31, respectively. The period over period decrease for the three months and nine monthsmonth periods ended September 30, 2016 was driven by lower OEM hardware subsidy rates as well as lower subsidized costs related to the transition of chipsets. Additionally, for the three months ended September 30, 2016, subscriber acquisition costs benefited approximately $2.00 per installation from a contractual reduction to a subsidy rate. Adjusted for this one-time benefit, the three and nine months ended September 30, 2017 decreased primarily driven by our transition to a new generation of chipsets.
Customer Service and Billing Expenses, Per Average Subscriber, is derived from total customer service and billing expenses, excluding connected vehicle customer service and billing expenses and share-based payment expense, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. (See the accompanying glossary on pages 3940 through 4143 for more details.)
For the three months ended September 30, 20162017 and 2015,2016, customer service and billing expenses, per average subscriber, was $0.97$0.92 and $1.00,$0.97, respectively. For the nine months ended September 30, 20162017 and 2015,2016, customer service and billing expenses, per average subscriber, was $0.98$0.94 and $1.00,$0.98, respectively. The period over period decrease for the three months and nine months ended September 30, 2016 wasdecreases were primarily related to efficiencies achieved fromlower call center process enhancementscosts due to lower contact rates and lower personnel related costs,agent rates, partially offset by increased bad debt expense andhigher transaction fees per subscriber.fees.
Adjusted EBITDA. EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization.  Adjusted EBITDA excludes the impact of other income, loss on extinguishment of debt, other non-cash charges, such as certain purchase price accounting adjustments, share-based payment expense and loss on disposal of assets and settlements related to the historical use of pre-1972 sound recordings.assets. (See the accompanying glossary on pages 3940 through 4143 for a reconciliation to GAAP and for more details.)
For the three months ended September 30, 20162017 and 2015,2016, adjusted EBITDA was $491,892$550,582 and $447,194,$491,892, respectively, an increase of 10%12%, or $44,698.$58,690.  For the nine months ended September 30, 20162017 and 2015,2016, adjusted EBITDA was $1,401,024$1,574,320 and $1,261,382,$1,401,024, respectively, an increase of 11%12%, or $139,642.$173,296. The increase wasincreases were due to growth in revenues primarily as a result of the increase in our subscriber base and certain of our subscription rates and an increase in other revenue from higher revenue from the new Sirius XM Canada service and advisory agreements and additional revenues from the U.S. Music Royalty Fee, as well as lower general and administrative costs. These increases were partially offset by higher revenue share and royaltiesroyalty costs due to growth in our revenues higherand royalty rates, programming and content, costs associated with renewed agreements, higher sales and marketing costs associated with growth in our subscriber base, and higher generalengineering, design and administrativedevelopment costs.

Free Cash Flow includes cash provided by operations, net of additions to property and equipment, and restricted and other investment activity, and excluding the $210,000 pre-1972 sound recordings legal settlement payment made in 2015.activity. (See the accompanying glossary on pages 3940 through 4143 for a reconciliation to GAAP and for more details.)
For the three months ended September 30, 20162017 and 2015,2016, free cash flow was $433,788 and $356,527, and $368,899, respectively, a decreasean increase of $12,372,$77,261, or 3%22%.  For the nine months ended September 30, 20162017 and 2015,2016, free cash flow was $1,079,690$1,099,452 and $1,016,045,$1,079,690, respectively, an increase of $63,645$19,762, or 6%2%. The decreaseincrease for the three month period ended September 30, 2016 was driven by additions to property and equipment resulting primarily from new satellite construction, and a payment of approximately $22,400, net of insurance recoveries, in connection with the settlement of class action suits alleging violations of the Telephone Consumer Protection Act of 1991, partially offset by higher net cash provided by operating activities. The increase for the nine month period ended September 30, 2016 was primarily driven by higher net cash provided by operating activities resulting from higher collections from subscribers;improved operating performance, partially offset by an increase in additions to property and equipment resulting primarily from new satellite construction, and timing of interest

payments. The increase for the nine month period was driven by higher net cash provided by operating activities resulting from improved operating performance; partially offset by an increase in additions to property and equipment resulting from new satellite construction and a payment of approximately $22,400, neta legal settlement during the first quarter of insurance recoveries, in connection with the settlement2017 and timing of class action suits alleging violations of the Telephone Consumer Protection Act of 1991.interest payments.

Liquidity and Capital Resources
Cash Flows for the nine months ended September 30, 20162017 compared with the nine months ended September 30, 20152016.
The following table presents a summary of our cash flow activity for the periods set forth below:
For the Nine Months Ended September 30, 
For the Nine Months Ended September 30, 
2016 2015 2016 vs 20152017 2016 2017 vs 2016
Net cash provided by operating activities$1,216,104
 $900,954
 $315,150
$1,313,764
 $1,216,104
 $97,660
Net cash used in investing activities(136,414) (94,909) (41,505)(1,065,047) (136,414) (928,633)
Net cash used in financing activities(619,146) (801,224) 182,078
(389,103) (619,146) 230,043
Net increase in cash and cash equivalents460,544
 4,821
 455,723
Net (decrease) increase in cash and cash equivalents(140,386) 460,544
 (600,930)
Cash and cash equivalents at beginning of period111,838
 147,724
 (35,886)213,939
 111,838
 102,101
Cash and cash equivalents at end of period$572,382
 $152,545
 $419,837
$73,553
 $572,382
 $(498,829)
Cash Flows Provided by Operating Activities
Cash flows provided by operating activities increased by $315,150$97,660 to $1,313,764 for the nine months ended September 30, 2017 from $1,216,104 for the nine months ended September 30, 2016 from $900,9542016. The increase was driven by improved operating performance, partially offset by the timing of interest payments and a payment for the nine months ended September 30, 2015.a legal settlement.
Our largest source of cash provided by operating activities is generated by subscription and subscription-related revenues.  We also generate cash from the sale of advertising on certain non-music channels and the sale of satellite radios, components and accessories.  Our primary uses of cash from operating activities include revenue share and royalty payments to distributors, programming and content providers, and payments to radio manufacturers, distributors and automakers. In addition, uses of cash from operating activities include payments to vendors to service, maintain and acquire subscribers, general corporate expenditures, and compensation and related costs.
Cash Flows Used in Investing Activities
Cash flows used in investing activities arein the nine months ended September 30, 2017 were primarily due to our investment in Pandora of $480,000, loans to related parties of $130,794, payments to acquire additional ownership in related parties (inclusive of transaction costs) of $132,205, the acquisition of Automatic for $107,736 (net of cash and restricted cash acquired), and additional spending of $78,852 to construct replacement satellites, improve our terrestrial repeater network, and for capitalized software.  In 2015,2016, our cash flows used in investing activities also included an increasewere primarily due to additional spending to improve our letters of credit issuedterrestrial repeater network and for the benefit of lessors of certain of our office space.capitalized software.
Cash Flows Used in Financing Activities
Cash flows used in financing activities consists of the issuance and repayment of long-term debt, cash used in our stock option program and the purchase of common stock under our share repurchase program.program and the payment of cash dividends.  Proceeds from long-term debt related party debt and equity issuances have been used to fund our operations, construct and launch new satellites, and invest in other infrastructure improvements.improvements and purchase shares of our common stock.
Cash flows used in financing activities in the nine months ended September 30, 2017 were primarily due to the redemption of $1,500,000 aggregate principal amount of then-outstanding notes, the purchase and retirement for $996,263 of shares of our common stock under our repurchase program, the payment of cash dividends of $139,854, and net repayments of $100,000 under the Credit Facility. Cash flows provided by financing activities in the nine months ended September 30, 20162017 were primarily due to the issuance of $1,000,000$2,500,000 aggregate principal amount of 5.375% Senior Notes due 2026 and borrowings under the Credit Facility.notes. Cash flows used in financing activities in the nine months ended September 30, 2016 were primarily due to the purchase and

retirement for $1,225,284 of shares of our common stock under our repurchase program, for $1,225,284 and repaymentspartially offset by net borrowings of borrowings under the Credit Facility. Cash flows provided by financing activities in the nine months ended September 30, 2015 were due to the issuance of $1,000,000 aggregate principal amount of 5.375% Senior Notes due 2025 and borrowings under the Credit Facility.  Cash flows used in financing activities in the nine months ended September 30, 2015 were primarily due to the purchase and retirement of shares of our common stock under our repurchase program for $1,647,728 and repayments of borrowings under the Credit Facility.$638,393.

Future Liquidity and Capital Resource Requirements
Based upon our current business plans, we expect to fund operating expenses, capital expenditures, including the construction of replacement satellites, working capital requirements, legal settlements, interest payments, taxes and scheduled maturities of our debt with existing cash, cash flow from operations and borrowings under our Credit Facility.  As of September 30, 2016, $1,750,0002017, $1,460,000 was available for future borrowing under our Credit Facility.  On October 3, 2016, we redeemed $650,000 in principal amount of our outstanding 5.875% Notes for an approximate purchase price of $669,097, including premium. This redemption was funded with $359,097 of Cash and cash equivalents and $310,000 of borrowings under our Credit Facility.  We believe that we have sufficient cash and cash equivalents as well as debt capacity to cover our estimated short-term and long-term funding needs, as well as fund stock repurchases, future dividend payments and strategic opportunities.
Our ability to meet our debt and other obligations depends on our future operating performance and on economic, financial, competitive and other factors. We continually review our operations for opportunities to adjust the timing of expenditures to ensure that sufficient resources are maintained.
We regularly evaluate our business plans and strategy. These evaluations often result in changes to our business plans and strategy, some of which may be material and significantly change our cash requirements. These changes in our business plans or strategy may include: the acquisition of unique or compelling programming; the development and introduction of new features or services; significant new or enhanced distribution arrangements; investments in infrastructure, such as satellites, equipment or radio spectrum; and acquisitions and investments, including acquisitions and investments that are not directly related to our satellite radio business.
Capital Return Program
As of September 30, 2016,2017, our board of directors had approvedauthorized for repurchase an aggregate of $8,000,000$10,000,000 of our common stock.  As of September 30, 2016,2017, our cumulative repurchases since December 2012 under our stock repurchase program totaled 2,098,5482,397,932 shares for $7,515,223,$8,960,948, and $484,777$1,039,052 remained available under our stock repurchase program.
On October 26, 2016,3, 2017, our board of directors approved an additional $2,000,000 for repurchase of our common stock.  The new approval increases the amount of common stock that we have been authorized to repurchase to an aggregate of $10,000,000. Shares of common stock may be purchased from time to time on the open market and in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates. We intend to fund the additional repurchases throughdeclared a combination of cash on hand, cash generated by operations and future borrowings.
On October 26, 2016, our board of directors also declared the first quarterly dividend on our common stock in the amount of $0.01$0.011 per share of common stock payable on November 30, 20162017 to stockholders of record as of the close of business on November 9, 2016.2017. Our board of directors expects that this dividend will be the first ofto declare regular quarterly dividends, in an aggregate annual amount of $0.04$0.044 per share of common stock.
Debt Covenants
The indentures governing Sirius XM's senior notes and the agreement governing the Credit Facility include restrictive covenants.  As of September 30, 2016,2017, we were in compliance with such covenants.  For a discussion of our “Debt Covenants,” refer to Note 1011 to our unaudited consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements other than those disclosed in Note 1314 to our unaudited consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Contractual Cash Commitments
For a discussion of our “Contractual Cash Commitments,” refer to Note 1314 to our unaudited consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.
Related Party Transactions
For a discussion of “Related Party Transactions,” refer to Note 910 to our unaudited consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
For a discussion of our Critical“Critical Accounting Policies and Estimates,” refer to Management's“Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2015.2016. There have been no material changes to our critical accounting policies and estimates since December 31, 2015.2016.

Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14 which amended the effective date of this ASU to fiscal years beginning after December 15, 2017, and early adoption is permitted only for fiscal years beginning after December 15, 2016. In 2016, the FASB issued additional guidance which clarified principal versus agent considerations, identification of performance obligations and the implementation guidance for licensing. In addition, the FASB issued guidance regarding practical expedients related to disclosures of remaining performance obligations, as well as other amendments to the guidance on transition, collectibility, non-cash consideration and the presentation of sales and other similar taxes. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We currently plan to adopt this ASU under the modified retrospective method.

We have completed our evaluation of the impact this ASU will have on our primary revenue streams.  Based on our assessment of the impact of implementing this ASU on January 1, 2018 under the modified retrospective method, the most significant impact of the ASU relates to the classification of Revenue share and certain subsidy payments made to automakers associated with a paid promotional subscription.  Under the new standard, these payments associated with a paid promotional subscription will be treated as a reduction to the transaction price rather than as an expense as classified under ASC 605.  We expect this change to reduce Subscription revenue by less than 3% upon adoption along with a corresponding reduction to Revenue share and royalties and Subscriber acquisition costs, and as a result, we do not expect this change to have an impact to our Net income, or our key financial performance metrics, Adjusted EBITDA and Free Cash Flow. We expect this change will impact certain of our operating performance metrics, specifically a reduction in ARPU by less than 3% and to a lesser extent SAC, Per Installation. Additionally, within our consolidated balance sheets, upon adoption, the amount of revenue share and certain subsidy payments made to automakers associated with a paid promotional subscription will be classified as a liability separate from deferred revenue.
The adoption of this ASU will also have an impact to the timing of recognition of certain other ancillary revenue and expense streams, which we do not expect to have a material impact to our consolidated financial statements or our key financial or operating performance metrics.
We expect to complete our implementation process, which includes the necessary changes to our business processes, systems and controls to support recognition and disclosure, prior to the adoption of this ASU on January 1, 2018.
Glossary
Adjusted EBITDA - EBITDA is defined as net income before interest expense, income tax expense and depreciation and amortization. We adjust EBITDA to exclude the impact of other income as well as certain other charges discussed below. Adjusted EBITDA is one of the primary Non-GAAP financial measures we use to (i) evaluate the performance of our on-going core operating results period over period, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the Merger, (ii) share-based payment expense and (iii) other significant operating expense (income) that do not relate to the on-going performance of our business. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our resultspast operating performance with our current performance and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use adjusted EBITDA to estimate our current enterprise value and to make investment decisions. Because of large capital investments in our satellite radio system our results of operations reflect significant charges for depreciation expense. We believe the exclusion of share-based payment expense is useful as it is not directly related to the operational conditions of our business. We also believe the exclusion of the legal settlements and reserves related to the historical use of pre-1972 sound recordings, loss on extinguishment of debt and loss on disposal of assets, to the extent they occur during the period, is useful as it doesthey are significant expenses not represent an expense incurred as part of our normal operations for the period.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the Merger. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure.  Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our unaudited consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows:

For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,

2016 2015 2016 20152017 2016 2017 2016
Net income:$193,901
 $166,550
 $541,306

$375,091
$275,722
 $193,901
 $684,904

$541,306
Add back items excluded from Adjusted EBITDA:    




    




Purchase price accounting adjustments:    




    




Revenues1,813
 1,813
 5,438

5,438
1,813
 1,813
 5,438

5,438
Operating expenses
 
 

(1,394)
Pre-1972 sounds recordings legal settlements
 
 
 107,658
Loss on disposal of assets
 
 12,912
 

 
 
 12,912
Share-based payment expense30,020

23,393
 77,890

62,334
34,891
 30,020
 94,588

77,890
Depreciation and amortization67,880
 70,404
 202,215

202,527
79,913
 67,880
 230,136

202,215
Interest expense89,092
 76,624
 250,888

221,912
92,634
 89,092
 257,085

250,888
Loss on extinguishment of debt43,679
 
 43,679
 
Other income(2,370) (4,133) (15,733)
(9,077)(86,971) (2,370) (83,897)
(15,733)
Income tax expense111,556
 112,543
 326,108

296,893
108,901
 111,556
 342,387

326,108
Adjusted EBITDA$491,892
 $447,194
 $1,401,024

$1,261,382
$550,582
 $491,892
 $1,574,320

$1,401,024
ARPU - is derived from total earned subscriber revenue, advertising revenue and other subscription-related revenue, excluding revenue associated with our connected vehicle services, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee.  ARPU is calculated as follows:
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
2016 2015 2016 20152017 2016 2017 2016
Subscriber revenue, excluding connected vehicle$1,048,033
 $949,301
 $3,044,438

$2,752,993
Subscriber revenue, excluding connected vehicle services$1,115,383
 $1,048,033
 $3,263,793

$3,044,438
Add: advertising revenue34,268
 33,131
 99,330

88,843
41,462
 34,268
 117,656

99,330
Add: other subscription-related revenue122,013
 106,483
 353,606

299,437
131,831
 122,013
 384,478

353,606
$1,204,314
 $1,088,915
 $3,497,374
 $3,141,273
$1,288,676
 $1,204,314
 $3,765,927
 $3,497,374
Daily weighted average number of subscribers30,776
 28,649
 30,290

28,033
32,029
 30,776
 31,717

30,290
ARPU$13.04
 $12.67
 $12.83

$12.45
$13.41
 $13.04
 $13.19

$12.83
Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Customer service and billing expenses, per average subscriber - is derived from total customer service and billing expenses, excluding connected vehicle customer service and billing expenses and share-based payment expense, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, per average subscriber, is useful as share-based payment expense is not directly related to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Customer service and billing expenses, per average subscriber, is calculated as follows:
For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
2016 2015 2016 20152017 2016 2017 2016
Customer service and billing expenses, excluding connected vehicle$90,582
 $86,840
 $270,964
 $255,105
Customer service and billing expenses, excluding connected vehicle services$89,463
 $90,582
 $271,971
 $270,964
Less: share-based payment expense(1,069) (793) (2,694) (2,164)(1,171) (1,069) (3,211) (2,694)

$89,513
 $86,047
 $268,270
 $252,941
$88,292
 $89,513
 $268,760
 $268,270
Daily weighted average number of subscribers30,776
 28,649
 30,290
 28,033
32,029
 30,776
 31,717
 30,290
Customer service and billing expenses, per average subscriber$0.97
 $1.00
 $0.98
 $1.00
$0.92
 $0.97
 $0.94
 $0.98
Free cash flow - is derived from cash flow provided by operating activities, net of additions to property and equipment, restricted and other investment activity and the return of capital from investment in unconsolidated entity. Free cash flow is a metric that our management and board of directors use to evaluate the cash generated by our operations, net of capital expenditures and other investment activity and significant items that do not relate to the on-going performance of our business.activity. In a capital intensive business, with significant investments in satellites, we look at our operating cash flow, net of these investing cash outflows, to determine cash available for future subscriber acquisition and capital expenditures, to repurchase or retire debt, to acquire other companies and to evaluate our ability to return capital to stockholders. We exclude from free cash flow certain items that do not relate to the on-going performance of our business such as cash outflows for acquisitions, strategic investments and loans to related parties. We believe free cash flow is an indicator of the long-term financial stability of our business.  Free cash flow, which is reconciled to “Net cash provided by operating activities,” is a Non-GAAP financial measure.  This measure can be calculated by deducting amounts under the captions “Additions to property and equipment” and deducting or adding Restricted and other investment activity from “Net cash provided by operating activities” from the unaudited consolidated statements of cash flows, adjusted for any significant legal settlements. We have excluded the $210,000 payment related to the pre-1972 sound recordings legal settlement from our free cash flow calculation in the three and nine months ended September 30, 2015. Free cash flow should be used in conjunction with other GAAP financial performance measures and may not be comparable to free cash flow measures presented by other companies.  Free cash flow should be viewed as a supplemental measure rather than an alternative measure of cash flows from operating activities, as determined in accordance with GAAP.  Free cash flow is limited and does not represent remaining cash flows available for discretionary expenditures due to the fact that the measure does not deduct the payments required for debt maturities. We believe free cash flow provides useful supplemental information to investors regarding our current cash flow, along with other GAAP measures (such as cash flows from operating and investing activities), to determine our financial condition, and to compare our operating performance to other communications, entertainment and media companies. Free cash flow is calculated as follows:

For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,

2016
2015 2016 20152017 2016 2017 2016
Cash Flow information

 

           
Net cash provided by operating activities$421,816
 $188,613
 $1,216,104
 $900,954
$521,228
 $421,816
 $1,313,764
 $1,216,104
Net cash used in investing activities$(65,289) $(29,714) $(136,414) $(94,909)$(397,367) $(65,289) $(1,065,047) $(136,414)
Net cash used in financing activities$(260,598) $(300,407) $(619,146) $(801,224)$(93,046) $(260,598) $(389,103) $(619,146)
Free Cash Flow

 

           
Net cash provided by operating activities$421,816
 $188,613
 $1,216,104
 $900,954
$521,228
 $421,816
 $1,313,764
 $1,216,104
Additions to property and equipment(65,074) (29,714) (132,246) (90,943)(87,200) (65,074) (206,717) (132,246)
Purchases of restricted and other investments(215) 
 (4,168) (3,966)(240) (215) (7,595) (4,168)
Pre-1972 sound recordings legal settlement
 210,000
 
 210,000
Free cash flow$356,527
 $368,899
 $1,079,690
 $1,016,045
$433,788
 $356,527
 $1,099,452
 $1,079,690
New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our satellite radio service and convert to become self-paying subscribers after the initial promotion period. At

the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial subscriptions ranging from three to twelve months. We measure conversion rate three months after the period in which the trial service ends. The metric excludes rental and fleet vehicles.
Subscriber acquisition cost, per installation - or SAC, per installation, is derived from subscriber acquisition costs and margins from the sale of radios and accessories (excluding connected vehicle services), divided by the number of satellite radio installations in new vehicles and shipments of aftermarket radios for the period.  SAC, per installation, is calculated as follows:

For the Three Months Ended September 30, For the Nine Months Ended September 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,

2016 2015 2016 20152017 2016 2017 2016
Subscriber acquisition costs$120,111
 $133,009
 $381,516
 $391,773
Less: margin from sales of radios and accessories(21,632) (16,629) (57,104) (50,958)
Subscriber acquisition costs, excluding connected vehicle services$119,544
 $120,111
 $372,186
 $381,516
Less: margin from sales of radios and accessories, excluding connected vehicle services(23,862) (21,632) (66,893) (57,104)

$98,479
 $116,380
 $324,412
 $340,815
$95,682
 $98,479
 $305,293
 $324,412
Installations3,498
 3,429
 10,404
 10,305
3,221
 3,498
 10,167
 10,404
SAC, per installation$28
 $34
 $31
 $33
$30
 $28
 $30
 $31

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
As of September 30, 2016,2017, we did not hold or issue any free-standing derivatives.  We hold investments in money market funds and certificates of deposit.  These securities are consistent with the objectives contained within our investment policy.  The basic objectives of our investment policy are the preservation of capital, maintaining sufficient liquidity to meet operating requirements and maximizing yield. As of September 30, 2017, we also held the following investments:
Pandora Media, Inc. ("Pandora") Series A Preferred Stock, which we have elected to account for this investment under the fair value option. As of September 30, 2017, the fair value of this investment was $552.2 million which was based on a Black-Scholes option pricing model and an income approach - discounted cash flow analysis. Had the market price of Pandora's common stock been 10% lower as of September 30, 2017, the value of this investment would have been approximately $23.7 million lower.
In connection with the recapitalization of Sirius XM Canada Holdings Inc. ("Sirius XM Canada") on May 25, 2017, we loaned Sirius XM Canada $130.8 million. 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. Such 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 carrying value of the loan as of September 30, 2017 was $141.2 million and approximates its fair value. As the loan is denominated in Canadian dollars it is subject to changes in foreign currency. Had the Canadian to U.S. dollar exchange rate been 10% lower as of September 30, 2017, the value of this loan would have been approximately $14.1 million lower.
Our debt includes fixed rate instruments and the fair market value of our debt is sensitive to changes in interest rates. Sirius XM's borrowings under the Credit Facility carry a variable interest rate based on LIBOR plus an applicable rate based on its debt to operating cash flow ratio.  We currently do not use interest rate derivative instruments to manage our exposure to interest rate fluctuations.
ITEM 4.CONTROLS AND PROCEDURES
Controls and Procedures
We maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. The design of any disclosure controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all

potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives.

As of September 30, 2016,2017, an evaluation was performed under the supervision and with the participation of our management, including James E. Meyer, our Chief Executive Officer, and David J. Frear, our Senior Executive Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of September 30, 2016.2017.
    
There has been no change in our internal control over financial reporting (as that term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the quarter ended September 30, 20162017 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II — OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
In the ordinary course of business, we are a defendant or party to various claims and lawsuits, including those discussed below.
Telephone Consumer Protection Act Suits.  We are a defendant in several purported class action suits that allege that we, or call center vendors acting on our behalf, made calls which violate provisions of the Telephone Consumer Protection Act of 1991 (the “TCPA”).  The plaintiffs in these actions allege, among other things, that we called mobile phones using an automatic telephone dialing system without the consumer’s prior consent or, alternatively, after the consumer revoked his or her prior consent.  In one of the actions, the plaintiff also alleges that we violated the TCPA’s call time restrictions and, in one of the other actions, the plaintiff, also alleges that we violated the TCPA’s do not call restrictions. These purported class action cases are titled Erik Knutson v. Sirius XM Radio Inc., No. 12-cv-0418-AJB-NLS (S.D. Cal.), Francis W. Hooker v. Sirius XM Radio Inc., No. 4:13-cv-3 (E.D. Va.), Yefim Elikman v. Sirius XM Radio Inc. and Career Horizons, Inc., No. 1:15-cv-02093 (N.D. Ill.), and Anthony Parker v. Sirius XM Radio Inc., No. 8:15-cv-01710-JSM-EAJ (M.D. Fla), and are described in Item 3., Legal Proceedings, in our Annual Report on Form 10-K for the year ended December 31, 2015.
We have entered into an agreement to settle these purported class action suits. The settlement is expected to resolve the claims of consumers beginning in February 2008 relating to telemarketing calls to their mobile telephones. As part of this settlement, we have made a $35 million payment to a settlement fund (from which notice, administration and other costs and attorneys’ fees will be paid), and are offering participating class members the option of receiving three months of our Select service for no charge, and will enter into agreements to make modifications to the practices of certain call center vendors. The settlement is subject to final court approval, which cannot be assured.
Pre-1972 Sound Recording MattersSoundExchange Royalty Claims. In August 2013, SoundExchange, Inc. filed a complaint in the United States District Court for the District of Columbia alleging that we underpaid royalties for statutory licenses during the 2007-2012 period in violation of the regulations established by the Copyright Royalty Board for thatthe 2007-2012 period. SoundExchange principally alleges that we improperly reduced our calculation of gross revenues on which the royalty payments are based,applicable to royalties by improperly deducting non-recognized revenue attributable to pre-1972 recordings and Premier package revenue that is not “separately charged” as required by the regulations. We believe that we properly applied the gross revenue exclusions contained in the regulations established by the Copyright Royalty Board. SoundExchange is seeking compensatory damages of not less than $50 million and up to $100 million or more, payment of late fees and interest, and attorneys’ fees and costs.

In August 2014, the United States District Court for the District of Columbia, grantedin response to our motion to dismiss the complaint, without prejudicestayed the case on the grounds that the caseit properly should be pursued in the first instance before the Copyright Royalty Board rather than the district court.District Court.  In its opinion, the District Court concluded that the gross revenue exclusions in the regulations established by the Copyright Royalty Board for the 2007-2012 period were ambiguous and did not, on their face, make clear whether our royalty calculation approaches were permissible under the regulations. In December 2014, SoundExchange filed a petition with the Copyright Royalty Board requesting an order interpreting the applicable regulations. We have submitted legal briefs and other evidence supporting

On September 11, 2017, the Copyright Royalty Board issued a ruling concluding that we correctly interpreted the revenue exclusions applicable to pre-1972 recordings. Given the limitations on its jurisdiction, the Copyright Royalty Board deferred to further proceedings in the District Court the question of whether we properly applied those pre-1972 revenue exclusions. The Judges also concluded that we improperly claimed a revenue exclusion based on our positionPremier package upcharge, because, in the Judges’ view, the portion of the package that our payments and practices complied with the regulations establishedcontained programming that did not include sound recordings was not offered for a “separate charge.”

Rulings by the Copyright Royalty Board, for statutory licenses duringincluding its September 11, 2017 ruling, are subject to limited legal review by the 2007-2012 period or,Register of Copyrights. Following a review by the Register of Copyrights and publication in the eventFederal Register, we expect that the Judges should find that the applicable regulations were unclear, that the Judges should clarify the regulations and confirm that our payments and practices complied with the regulations for that period. Briefing in this matter is complete and a decision fromultimate ruling by the Copyright Royalty Board is pending.in this matter will be transmitted back to the District Court for further proceedings, such as adjudication claims relating to damages and defenses. We believe we have substantial defenses to SoundExchange claims that can be asserted, including in proceedings in the District Court, and will continue to defend this action vigorously.

This matter is titled SoundExchange, Inc. v. Sirius XM Radio, Inc., No.13-cv-1290-RJL (D.D.C.), and Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, United States Copyright Royalty Board, No. 2006-1 CRB DSTRA.  Information concerning the action is publicly available in filings under the docket numbers. The outcome of thisThis matter is inherently unpredictablenot related to certain claims under state law brought by owners of pre-1972 recording copyrights arising out of our use and subjectperformance of those recordings.

At December 31, 2016, we concluded that a loss, in excess of our recorded liabilities, was reasonably possible in connection with the SoundExchange royalty claims. At September 30, 2017, the estimable portion of such possible loss ranged from $0 to significant uncertainties, many$85 million, plus any related interest or late fees. Based on our defenses, such a loss is not considered probable at this time and no liability for such additional loss has been recorded. The matters underlying this estimated range and the estimable portion of which are beyond our control. No provision was made forreasonably possible losses may change from time to time and the extent such are not probable and estimable. We believe we have substantial defenses to the claims asserted, and intend to defendactual possible loss may vary from this action vigorously.estimate.

Other Matters.  In the ordinary course of business, we are a defendant in various other lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property.  None of these other matters, in our opinion, is likely to have a material adverse effect on our business, financial condition or results of operations.

ITEM 1A.RISK FACTORS
There have been no material changes to the risk factors previously disclosed in response to Part 1, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2015.2016.


ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
As of September 30, 2016,2017, our board of directors had approvedauthorized for repurchase an aggregate of $8.0$10.0 billion of our common stock.  On October 26, 2016, our board of directors approved an additional $2.0 billion for repurchase 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 September 30, 2016,2017, our cumulative repurchases since December 2012 under our stock repurchase program totaled 2.12.4 billion shares for $7.5$9.0 billion, and $0.5$1.0 billion remained available under our stock repurchase program. The size and timing of these purchases will be based on a number of factors, including price and business and market conditions.
    
The following table provides information about our purchases of equity securities registered pursuant to Section 12 of the Securities Exchange Act, of 1934, as amended, during the quarter ended September 30, 2016:2017:
Period Total Number of Shares Purchased Average Price Paid Per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
July 1, 2016 - July 31, 2016 12,179,019
 $4.07
 12,179,019
 $657,911,907
August 1, 2016 - August 31, 2016 19,893,860
 $4.20
 19,893,860
 $574,297,398
September 1, 2016 - September 30, 2016 21,527,629
 $4.16
 21,527,629
 $484,776,920
Total 53,600,508
 $4.16
 53,600,508
  
Period Total Number of Shares Purchased Average Price Paid Per Share (a) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a)
July 1, 2017 - July 31, 2017 14,252,939
 $5.42
 14,252,939
 $1,173,207,778
August 1, 2017 - August 31, 2017 3,039,163
 $5.55
 3,039,163
 $1,156,336,225
September 1, 2017 - September 30, 2017 21,321,097
 $5.50
 21,321,097
 $1,039,052,453
Total 38,613,199
 $5.48
 38,613,199
  
(a)These amounts include fees and commissions associated with the shares repurchased.

Recent Sales of Unregistered Securities
On May 25, 2017, in connection with the recapitalization of Sirius XM Canada, we issued 35 million shares of our common stock to the holders of the shares of Sirius XM Canada acquired in the transaction. The issuance of such shares of common stock was not registered under the Securities Act, because the shares were offered and sold in an exchange of securities exempt from the registration under Section 3(a)(10) of the Securities Act.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

See Exhibit Index attached hereto, which is incorporated herein by reference.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 27th day of October 2016.

SIRIUS XM HOLDINGS INC.
By:
/s/     DAVID J. FREAR
David J. Frear
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)


EXHIBIT INDEX

Exhibit Description
   
31.1 
   
 
   
 
   
 
   
101.1 
The following financial information from our Quarterly Report on Form 10-Q for the quarter ended September 30, 20162017 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Statements of Comprehensive Income (Unaudited) for the three and nine months ended September 30, 20162017 and 2015;2016; (ii) Consolidated Balance Sheets as of September 30, 20162017 (Unaudited) and December 31, 2015;2016; (iii) Consolidated Statements of Stockholders’ (Deficit) Equity for the nine months ended September 30, 20162017 (Unaudited); (iv) Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 20162017 and 2015;2016; and (v) Notes to Consolidated Financial Statements (Unaudited).
 ____________________

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 25th day of October 2017.

46
SIRIUS XM HOLDINGS INC.
By:
/s/     DAVID J. FREAR
David J. Frear
Senior Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and Authorized Officer)


48