XM Satellite Radio 10-Q 2009 Q3 Quarterly report

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, 2009

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		I.R.S. Employer
File		Identification
Number	Exact name of registrant as specified in its charter	Number
000-27441	XM SATELLITE RADIO HOLDINGS INC.	54-1878819
333-39178	XM SATELLITE RADIO INC.	52-1805102

Delaware
(State or other jurisdiction of incorporation or organization of both registrants)

1500 Eckington Place, NE
Washington, DC
(Address of principal executive offices) 20002-2194
(Zip Code)

Registrant’s telephone number, including area code: (202) 380-4000

Indicate by check mark whether each 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. Yesþ Noo

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

Indicate by check mark whether each 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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

XM Satellite Radio Holdings Inc.	Large Accelerated Filerþ	Accelerated Filero
	Non-Accelerated Filero	Smaller Reporting Companyo
XM Satellite Radio Inc.	Large Accelerated Filero	Accelerated Filero
	Non-Accelerated Filerþ	Smaller Reporting Companyo

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Noþ

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 31, 2009)
XM SATELLITE RADIO HOLDINGS INC.
COMMON STOCK, $0.01 PAR VALUE
(all shares are issued to Sirius XM Radio Inc.)	100 SHARES
XM SATELLITE RADIO INC.
COMMON STOCK, $0.10 PAR VALUE
(all shares are issued to XM Satellite Radio Holdings Inc.)	125 SHARES

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

Item No.	Description
	PART I — Financial Information
Item 1.	Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2009 (Successor Entity) and for the period August 1, 2008 through September 30, 2008 (Successor Entity), the period July 1, 2008 through July 31, 2008 (Predecessor Entity) and the period January 1, 2008 through July 31, 2008 (Predecessor Entity)	1
	Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008	2
	Unaudited Consolidated Statements of Stockholders’ Deficit and Comprehensive Loss for the nine months ended September 30, 2009	3
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 (Successor Entity), the period August 1, 2008 through September 30, 2008 (Successor Entity) and the period January 1, 2008 through July 31, 2008 (Predecessor Entity)	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Material Risk	60
Item 4.	Controls and Procedures	60
	PART II — Other Information
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	61
Item 4.	Submission of Matters to a Vote of Security Holders	61
Item 5.	Other Information	61
Item 6.	Exhibits	62
	Signatures	69
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 31.4
Exhibit 32.1
Exhibit 32.2

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

	Successor Entity									Predecessor Entity
	Three Months			Nine Months			August 1, 2008			July 1, 2008			January 1, 2008
	Ended			Ended			Through			Through			Through
(in thousands)	September 30, 2009			September 30, 2009			September 30, 2008			July 31, 2008			July 31, 2008
Revenue:
Subscriber revenue, including effects of rebates	$	304,714		$	884,038		$	183,033		$	95,684		$	670,870
Advertising revenue, net of agency fees		4,147			13,475			5,165			3,193			22,743
Equipment revenue		5,657			17,681			3,351			1,585			13,397
Other revenue		10,955			19,344			4,054			4,242			24,184
Total revenue		325,473			934,538			195,603			104,704			731,194
Operating expenses (depreciation and amortization shown separately below) (1):
Cost of services:
Satellite and transmission		11,484			36,952			12,458			6,644			46,566
Programming and content		27,811			84,353			18,046			15,991			117,156
Revenue share and royalties		46,976			142,997			38,539			24,198			166,606
Customer service and billing		31,064			96,168			23,819			12,249			82,947
Cost of equipment		5,142			12,049			5,020			2,406			20,013
Sales and marketing		26,055			84,565			28,951			17,268			126,054
Subscriber acquisition costs		35,049			83,524			27,482			33,366			174,083
General and administrative		25,216			91,689			19,215			33,209			116,444
Engineering, design and development		5,413			16,798			5,191			2,611			23,045
Impairment of goodwill		—			—			5,026,838			—			—
Depreciation and amortization		41,587			146,462			34,620			10,828			88,749
Restructuring, impairments and related costs		3,029			29,614			—			—			—
Total operating expenses		258,826			825,171			5,240,179			158,770			961,663
Income (loss) from operations		66,647			109,367			(5,044,576	)		(54,066	)		(230,469	)
Other income (expense):
Interest and investment income		729			1,848			3,963			594			3,013
Interest expense, net of amounts capitalized		(70,616	)		(226,935	)		(47,798	)		(14,130	)		(73,937	)
Gain (loss) on change in value of embedded derivatives		(33,700	)		(111,703	)		242,223			—			—
Loss on extinguishment of debt and credit facilities, net		(3,787	)		(111,863	)		—			—			—
Loss on investments		(2,870	)		(6,660	)		(3,089	)		(4,460	)		(13,010	)
Other income (expense)		1,324			2,548			(4,074	)		5			900
Total other income (expense)		(108,920	)		(452,765	)		191,225			(17,991	)		(83,034	)
Loss before income taxes		(42,273	)		(343,398	)		(4,853,351	)		(72,057	)		(313,503	)
Income tax expense		(578	)		(1,733	)		(672	)		(508	)		(1,512	)
Net loss		(42,851	)		(345,131	)		(4,854,023	)		(72,565	)		(315,015	)
Add: net loss attributable to noncontrolling interests		—			—			—			(1,053	)		(7,443	)
Net loss — XM Satellite Radio Holdings Inc Inc and Subsidiaries	$	(42,851	)	$	(345,131	)	$	(4,854,023	)	$	(73,618	)	$	(322,458	)

(1) Amounts related to share-based payment expense included in operating expenses were as follows:

Satellite and transmission	$	273	$	1,073	$	570	$	305	$	2,745
Programming and content		859		3,368		961		586		4,949
Customer service and billing		345		1,077		332		228		1,869
Sales and marketing		1,261		3,862		1,038		770		7,047
General and administrative		4,355		21,122		2,000		1,634		13,200
Engineering, design and development		514		2,037		710		510		4,675
Total share-based payment expense	$	7,607	$	32,539	$	5,611	$	4,033	$	34,485

See accompanying Notes to the unaudited consolidated financial statements.

1

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2009			2008
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	326,022		$	206,740
Accounts receivable, net of allowance for doubtful accounts of $6,577 and $6,199, respectively		45,243			52,727
Inventory, net		2,923			4,489
Prepaid expenses		79,235			37,351
Related party current assets		105,674			112,363
Other current assets		57,320			50,412
Total current assets		616,417			464,082
Property and equipment, net		798,247			874,588
FCC license		2,000,000			2,000,000
Restricted investments		250			120,250
Deferred financing fees, net		27,309			30,303
Intangible assets, net		629,288			688,671
Related party long-term assets		114,073			124,607
Other long-term assets		41,560			34,284
Total assets	$	4,227,144		$	4,336,785
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	196,612		$	237,299
Accrued interest		52,258			50,543
Current portion of deferred revenue		472,723			419,707
Current portion of deferred credit on executory contracts		247,566			234,774
Current maturities of long-term debt		101,300			355,739
Related party current liabilities		187,101			83,930
Total current liabilities		1,257,560			1,381,992
Deferred revenue		165,901			131,255
Deferred credit on executory contracts		851,955			1,037,190
Long-term debt		1,636,868			1,439,102
Long-term related party debt		159,275			—
Deferred tax liability		899,889			886,475
Related party long-term liabilities		21,928			—
Other long-term liabilities		33,982			36,325
Total liabilities		5,027,358			4,912,339
Commitments and contingencies (Note 14)
Stockholder’s deficit:
Common stock, par value $0 01; 1,000 shares authorized; 100 shares issued and outstanding as of September 30, 2009 and December 31, 2008		—			—
Accumulated other comprehensive loss, net of tax		(6,598	)		(7,871	)
Additional paid-in capital		5,989,700			5,870,502
Accumulated deficit		(6,783,316	)		(6,438,185	)
Total stockholder’s deficit		(800,214	)		(575,554	)
Total liabilities and stockholder’s deficit	$	4,227,144		$	4,336,785

See accompanying Notes to the unaudited consolidated financial statements.

2

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S DEFICIT AND COMPREHENSIVE LOSS

										Accumulated
					Additional					Other			Total
	Common Stock				Paid-in		Accumulated			Comprehensive			Stockholder’s
(in thousands, except share data)	Shares		Amount		Capital		Deficit			Loss			Deficit
Balance at December 31, 2008		100	$	—	$	5,870,502	$	(6,438,185	)	$	(7,871	)	$	(575,554	)
Net loss — XM Satellite Radio Holdings Inc and Subsidiaries		—		—		—		(345,131	)		—			(345,131	)
Other comprehensive income:
Unrealized gain on available-for-sale securities, net of tax		—		—		—		—			579			579
Foreign currency translation adjustment, net of tax		—		—		—		—			694			694
Total comprehensive loss														(343,858	)
Non-cash capital contributions from SIRIUS XM		—		—		119,198		—			—			119,198
Balance at September 30, 2009		100	$	—	$	5,989,700	$	(6,783,316	)	$	(6,598	)	$	(800,214	)

See accompanying Notes to the unaudited consolidated financial statements.

3

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Successor Entity						Predecessor Entity
	Nine Months			August 1, 2008			January 1, 2008
	Ended			Through			Through
(in thousands)	September 30, 2009			September 30, 2008			July 31, 2008
Cash flows from operating activities:
Net loss — XM Satellite Radio Holdings Inc and Subsidiaries	$	(345,131	)	$	(4,854,023	)	$	(322,458	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		146,462			34,620			88,749
Impairment of goodwill		—			5,026,838			—
Non-cash interest expense		68,379			10,023			7,023
Provision for doubtful accounts		12,642			3,028			8,523
Amortization of deferred income related to equity method investment		(2,082	)		(471	)		(5,829	)
Loss on investments		6,660			3,089			13,010
Loss on extinguishment of debt and credit facilities, net		111,863			—			—
Restructuring, impairments and related costs		26,401			—			—
Share-based payment expense		32,539			5,611			34,485
(Gain) loss on change in value of embedded derivatives		111,703			(242,223	)		—
Deferred income taxes		1,733			672			1,512
Other non-cash purchase price adjustments		(142,487	)		(23,770	)		—
Other		—			1,644			7,412
Changes in operating assets and liabilities:
Accounts receivable		(5,158	)		(6,044	)		7,597
Inventory		1,566			(206	)		5,558
Related party assets		17,223			(1,357	)		2,050
Prepaid expenses and other current assets		9,278			(11,945	)		(20,599	)
Restricted investments		—			—			(120,000	)
Other long-term assets		47,465			29,590			378
Accounts payable and accrued expenses		(38,868	)		17,776			(30,477	)
Accrued interest		5,870			7,003			12,558
Deferred revenue		59,635			2,616			47,599
Related party liabilities		93,715			3,315			6,557
Other long-term liabilities		9,210			(183	)		5,266
Net cash provided by (used in) operating activities		228,618			5,603			(251,086	)
Cash flows from investing activities:
Additions to property and equipment		(38,811	)		(7,893	)		(30,843	)
Purchase of restricted and other investments		—			—			(34,825	)
Sale of restricted and other investments		—			25,400			—
Net cash (used in) provided by investing activities		(38,811	)		17,507			(65,668	)
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options		—			—			964
Long-term borrowings, net of costs		387,184			533,941			1,023,190
Related party long-term borrowings, net of costs		95,093			—			—
Payment of premiums on redemption of debt		(17,075	)		(18,693	)		—
Payments to minority interest holder		—			(61,880	)		(6,897	)
Repayment of long-term borrowings		(435,727	)		(1,080,553	)		(35,210	)
Repayment of long-term related party borrowings		(100,000	)		—			—
Other, net		—			(98	)		(2,458	)
Net cash (used in) provided by financing activities		(70,525	)		(627,283	)		979,589
Net increase in cash and cash equivalents		119,282			(604,173	)		662,835
Cash and cash equivalents at beginning of period		206,740			819,521			156,686
Cash and cash equivalents at end of period	$	326,022		$	215,348		$	819,521
Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized	$	148,106		$	37,704		$	54,626
Non-cash investing and financing activities:
Non-cash capital contributions from SIRIUS XM		119,198			—			—
Property acquired through capital leases		1,337			—			4,465
Release of restricted investments		120,000			—			—

See accompanying Notes to the unaudited consolidated financial statements.

4

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollar amounts in thousands, unless otherwise stated)

(1) Business

We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the United States on a subscription fee basis through our proprietary satellite radio system. Our system consists of four in-orbit satellites, over 650 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios. Subscribers can also receive certain of our music and other channels over the Internet.

On July 28, 2008 XM Satellite Radio Holdings Inc. (“XM Holdings”) merged with and into Vernon Merger Corporation, a wholly owned subsidiary of Sirius Satellite Radio Inc. (the “Merger”) and, as a result, XM Holdings is now a wholly owned subsidiary of SIRIUS. Sirius Satellite Radio Inc. was later renamed Sirius XM Radio Inc. (“SIRIUS”). The accounting for the Merger has been “pushed-down” in the accompanying unaudited consolidated financial statements. XM, together with its subsidiaries, is operated as an unrestricted subsidiary under SIRIUS’ existing indebtedness. As an unrestricted subsidiary, transactions between the companies are required to comply with various contractual provisions in our debt instruments. For purposes of these Notes to unaudited consolidated financial statements, “we,” “us,” “our,” “the company,” and similar terms refer to XM Satellite Radio Holdings Inc. and its consolidated subsidiaries.

Our satellite radios are primarily distributed through automakers (“OEMs”), retailers and our website. We have agreements with major automakers to offer our satellite radios as factory or dealer-installed equipment in their vehicles. Our radios are also offered to customers of rental car companies.

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 and dealers for prepaid subscriptions included in the sale or lease price of a vehicle; certain radios activated for daily rental fleet programs; subscribers to XM Radio Online, our Internet service; and certain subscribers to our weather, traffic and data services.

Our primary source of revenue is subscription fees, with most of our customers subscribing on an annual, semi-annual, quarterly or monthly basis. We offer discounts for prepaid and long-term subscriptions as well as discounts for multiple subscriptions. We also derive revenue from activation fees, the sale of advertising on select non-music channels, the direct sale of satellite radios, components and accessories, and other ancillary services, such as our data and weather services. In August 2009, we began charging our subscribers a U.S. Music Royalty Fee (the “MRF”).

In certain cases, automakers include a subscription to our radio services in the sale or lease price of vehicles. The length of these prepaid subscriptions varies, but is typically three months. We also reimburse various automakers for certain costs associated with satellite radios installed in their vehicles.

We also have an interest in a satellite radio service offered in Canada through our affiliate, Canadian Satellite Radio Holdings Inc. (“XM Canada”). Subscribers to the XM Canada service are not included in our subscriber count.

XM Satellite Radio Inc. (“XM”) was incorporated on December 15, 1992 in the State of Delaware. XM Satellite Radio Holdings Inc. was formed as a holding company for XM on May 16, 1997.

As of September 30, 2009, the principal differences between the financial conditions of XM Holdings and XM were:

• the ownership by XM Holdings of the corporate headquarters and data center buildings and the lease of these buildings to XM;

• XM-1, XM-2, and the transponders of XM-3 and XM-4 are owned by XM; and XM-5 and the bus portions of XM-3 and XM-4 are owned by XM Holdings;

• the presence at XM Holdings of additional indebtedness, primarily the 10% Convertible Senior Notes due 2009 and 10% Senior PIK Secured Notes due 2011, both of which are not guaranteed by XM;

• the investment by XM Holdings in XM Canada (including related revenue and deferred income); and

• the existence of additional cash balances at XM Holdings.

5

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Accordingly, the results of operations for XM and its subsidiaries are substantially the same as the results of operations for XM Holdings and its subsidiaries except that XM has:

• additional rent, less depreciation and amortization expense and less other income, in each case principally related to XM’s rental of its corporate headquarters and data center buildings from XM Holdings, which are intercompany transactions that have been eliminated in XM Holdings’ consolidated financial statements;

• less interest expense, principally related to the additional indebtedness at XM Holdings, and gains and losses on embedded derivatives;

• less revenue associated with the amortization of deferred income and equity in losses from XM Holdings’ investment in XM Canada;

• no gains or losses on XM Holdings’ investment in XM Canada; and

• less interest income because of additional cash balances at XM Holdings.

(2) Principles of Consolidation and Basis of Presentation

Principles of Consolidation

The accompanying unaudited consolidated financial statements of XM Satellite Radio Holdings Inc. and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles, 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. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. All intercompany transactions have been eliminated in consolidation.

Basis of Presentation

In presenting unaudited consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Additionally, estimates were used when recording the fair values of our assets acquired and liabilities assumed in the Merger. Estimates, by their nature, are based on judgment and available information. Actual results could differ from those estimates. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of September 30, 2009, the successor periods of the three and nine months ended September 30, 2009 and August 1, 2008 through September 30, 2008 and the predecessor periods of July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, have been made.

XM Holdings operates as an unrestricted subsidiary of SIRIUS under its existing indebtedness. As an unrestricted subsidiary, transactions between the companies are required to comply with various contractual restrictions in our existing debt instruments. SIRIUS allocates certain expenses to us based on the estimated costs incurred by SIRIUS that pertain to us. Additionally, certain costs incurred by us benefit SIRIUS and are allocated to SIRIUS based on estimated costs incurred by us pertaining to SIRIUS. We settle amounts due between the parties on a semi-monthly and monthly basis, except for share-based payment arrangements which are settled at times agreed to between us and SIRIUS. Our financial position, results of operations and cash flows could differ from those that might have resulted had we operated autonomously. As a result of the Merger, certain of our predecessor accounting policies were changed to conform with SIRIUS’ current accounting policies. These changes have not had, and are not expected to have, a significant impact on our unaudited consolidated financial statements.

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, 2008, filed with the SEC on March 13, 2009.

In connection with the Merger, our assets and liabilities were adjusted to fair value at the acquisition date by application of “push-down” accounting. Accordingly, our financial position and results of operations may not be comparable between the accompanying Successor and Predecessor periods.

We have evaluated events subsequent to the balance sheet date and prior to filing of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 through November 5, 2009 and determined there have not been any events that have occurred that would require adjustment to our unaudited consolidated financial statements.

6

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(3) Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and related disclosures.

Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include revenue recognition, asset impairment, useful lives of our satellites and valuation allowances against deferred tax assets. The financial market volatility and economic conditions in the United States have impacted our business and may continue to impact our business. Such conditions could have a material impact to our significant accounting estimates.

Inventory

Inventory consists of finished goods, refurbished goods, and other raw material components used in manufacturing radios. Inventory is stated at the lower of cost or market. We record an estimated allowance for inventory that is considered slow moving and obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for our direct to consumer distribution channel is reported as a component of Cost of equipment in our unaudited consolidated statements of operations. The remaining provision is reported as a component of Subscriber acquisition costs in our unaudited consolidated statements of operations.

Inventory, net, consists of the following:

	September 30,			December 31,
	2009			2008
Raw materials	$	6,303		$	5,781
Finished goods		4,987			6,898
Allowance for obsolescence		(8,367	)		(8,190	)
Total inventory, net	$	2,923		$	4,489

Reclassifications

Certain amounts in our prior period unaudited consolidated financial statements have been reclassified to conform to our current period presentation.

Recent Accounting Pronouncements

In September 2009, Accounting Standards Codification (“ASC”) became the source of authoritative U.S. GAAP recognized by the Financial Accounting Standards Board (“FASB”) for nongovernmental entities, except for certain FASB Statements not yet incorporated into ASC. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative U.S. GAAP for registrants. The discussion below includes the applicable ASC reference.

We adopted ASC 810-10-65,Transition and Open Effective Date Information, which requires a parent with one or more less-than-wholly-owned subsidiaries to disclose, on the face of the consolidated financial statements, the amount of consolidated net income attributable to the parent and noncontrolling interest. We adopted this guidance effective January 1, 2009, with no impact on our consolidated results of operations and financial position.

We adopted ASC 855,Subsequent Events, which requires disclosure of events occurring after the balance sheet date but before financial statements are issued or are available to be issued. We adopted this guidance effective April 1, 2009, with no impact on our consolidated results of operations or financial position.

In June 2009, the FASB issued Statement No. 167,Amendments to FASB Interpretation No. 46(R), to require an analysis to determine whether our variable interest(s) give us a controlling financial interest in a variable interest entity. Statement 167 has not been incorporated into ASC and is effective for fiscal years beginning after November 15, 2009. We are currently evaluating the impact, if any, the adoption of this guidance will have on our consolidated results of operations and financial position.

In June 2009, the FASB issued Statement No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which integrated existing accounting standards with other authoritative guidance to provide a single source of authoritative U.S. GAAP for nongovernmental entities. Statement 168 has not been incorporated into ASC and is effective for interim and annual periods ending after September 15, 2009. We adopted this guidance effective July 1, 2009, with no impact on our consolidated results of operations or financial position.

7

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(4) Intangible Assets

Intangible assets consisted of the following:

		September 30, 2009							December 31, 2008
	Weighted Average	Gross Carrying		Accumulated			Net Carrying		Gross Carrying		Accumulated			Net Carrying
	Useful Lives	Value		Amortization			Value		Value		Amortization			Value
Indefinite life intangible assets
FCC licenses	Indefinite	$	2,000,000	$	—		$	2,000,000	$	2,000,000	$	—		$	2,000,000
Trademark	Indefinite		250,000		—			250,000		250,000		—			250,000
Definite life intangible assets
Subscriber relationships	9 years	$	380,000	$	(76,670	)	$	303,330	$	380,000	$	(29,226	)	$	350,774
Proprietary software	6 years		16,552		(6,020	)		10,532		16,552		(2,285	)		14,267
Developed technology	10 years		2,000		(233	)		1,767		2,000		(83	)		1,917
Licensing agreements	9.1 years		75,000		(11,452	)		63,548		75,000		(4,090	)		70,910
Leasehold interests	7.4 years		132		(21	)		111		908		(105	)		803
Total intangible assets		$	2,723,684	$	(94,396	)	$	2,629,288	$	2,724,460	$	(35,789	)	$	2,688,671

Indefinite Life Intangible Assets

We have identified our FCC licenses and our trademark as indefinite life intangibles after considering the expected use of the assets, the regulatory and economic environment within which they are being used, and the effects of obsolescence on their use.

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. Our FCC licenses for our satellites expire in 2013 and 2014. Prior to the expirations, we will be 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. The FCC licenses authorize us to use the broadcast spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time.

In connection with the Merger, $250,000 of the purchase price was allocated to our trademark. As of September 30, 2009 there are no legal, regulatory or contractual limitations associated with our trademark.

We evaluate our indefinite life intangible assets for impairment on an annual basis.During the three and nine months ended September 30, 2009, no impairment loss was recorded for intangible assets with indefinite lives.

Definite Life Intangible Assets

Definite life intangible assets consist primarily of subscriber relationships of $380,000 that were fair valued as a result of the Merger. Subscriber relationships are amortized on an accelerated basis over 9 years, which reflects the estimated pattern in which the economic benefits will be consumed. Other definite life intangibles include certain licensing agreements of $75,000, which are being amortized over a weighted average useful life of 9.1 years on a straight-line basis.

8

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Amortization expense was $18,648 and $58,759 for the three and nine months ended September 30, 2009, respectively, and $9,232 for the period August 1, 2008 through September 30, 2008. Expected amortization expense for each of the fiscal years through December 31, 2013 and for periods thereafter is as follows:

Year ending December 31,	Amount
Remaining 2009	$	17,827
2010		65,916
2011		58,850
2012		53,420
2013		47,097
Thereafter		136,178
Total intangibles, net	$	379,288

(5)Subscriber Revenue

Subscriber revenue consists of subscription fees, non-refundable activation fees and the effects of rebates. Revenues received from automakers for prepaid subscriptions included in the sale or lease price of vehicles are also included in subscriber revenue over the service period upon activation and sale to the customer.

Subscriber revenue consists of the following:

	Successor Entity									Predecessor Entity
	Three Months			Nine Months			August 1, 2008			July 1, 2008			January 1, 2008
	Ended			Ended			Through			Through			Through
	September 30, 2009			September 30, 2009			September 30, 2008			July 31, 2008			July 31, 2008
Subscription fees	$	303,785		$	881,860		$	183,144		$	94,074		$	659,775
Activation fees		963			2,351			48			1,667			11,855
Effect of rebates		(34	)		(173	)		(159	)		(57	)		(760	)
Total subscriber revenue	$	304,714		$	884,038		$	183,033		$	95,684		$	670,870

(6)Interest Costs

We capitalize a portion of the interest on funds borrowed to finance the construction costs of our satellites. The following is a summary of our interest costs:

	Successor Entity						Predecessor Entity
	Three Months		Nine Months		August 1, 2008		July 1, 2008		January 1, 2008
	Ended		Ended		Through		Through		Through
	September 30, 2009		September 30, 2009		September 30, 2008		July 31, 2008		July 31, 2008
Interest costs charged to expense	$	70,616	$	226,935	$	47,798	$	14,130	$	73,937
Interest costs capitalized		7,495		25,053		3,927		1,009		6,852
Total interest costs incurred	$	78,111	$	251,988	$	51,725	$	15,139	$	80,789

9

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(7)Property and Equipment

Property and equipment, net, consists of the following:

	September 30,			December 31,
	2009			2008
Satellite system	$	490,126		$	490,126
Terrestrial repeater network		41,603			41,850
Leasehold improvements		6,852			6,762
Broadcast studio equipment		7,934			7,804
Capitalized software and hardware		53,768			53,986
Satellite telemetry, tracking and control facilities		32,958			33,542
Furniture, fixtures, equipment and other		27,269			26,076
Land		38,100			38,100
Building		53,803			53,887
Construction in progress — satellite system		194,980			181,856
Total property and equipment		947,393			933,989
Accumulated depreciation and amortization		(149,146	)		(59,401	)
Property and equipment, net	$	798,247		$	874,588

Depreciation and amortization expense on property and equipment was $22,939 and $87,703 for the three and nine months ended September 30, 2009, respectively, and $25,388, $10,828 and $88,749 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively.

Satellites

We own four orbiting satellites; two of which, XM-3 and XM-4, currently transmit our signal and two of which, XM-1 and XM-2, serve as in-orbit spares. Our satellites were launched in March 2001, May 2001, February 2005 and October 2006.

Space Systems/Loral has constructed our fifth satellite, XM-5, for use in our system. In 2006, we entered into an agreement with Sea Launch to secure a launch for XM-5. In June 2009, Sea Launch filed for bankruptcy protection under Title 11 of the United States Code and as a result, we recorded a charge of $24,196 to Restructuring, impairments and related costs in our unaudited consolidated statements of operations for amounts previously paid, including capitalized interest. In October 2009, XM Holdings terminated its satellite launch agreement with Sea Launch with the consent of the Bankruptcy Court. In October 2009, SIRIUS entered into an agreement with International Launch Services (“ILS”) to secure a satellite launch for XM-5 on a Proton rocket. We currently expect to launch XM-5 in the second or third quarter of 2010.

(8) Related Party Transactions

Liberty Media

Liberty Media Corporation and its affiliate, Liberty Media, LLC (collectively, “Liberty Media”) is the holder of SIRIUS’ Convertible Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), has representatives on SIRIUS’ board of directors and is considered a related party. See Note 11, Debt, to our unaudited consolidated financial statements for further information regarding indebtedness previously owed to Liberty Media.

Investment Agreement

On February 17, 2009, SIRIUS entered into an Investment Agreement (the “Investment Agreement”) with Liberty Media. Pursuant to the Investment Agreement, SIRIUS agreed to issue to Liberty Radio, LLC 12,500,000 shares of Series B Preferred Stock with a liquidation preference of $0.001 per share in partial consideration for certain loan investments. The Series B Preferred Stock was issued on March 6, 2009.

As a result of SIRIUS’ issuance of Series B Preferred Stock to Liberty Radio, LLC, we recorded a $113,280 increase to additional paid-in capital.

Loan Investments

On February 17, 2009, XM entered into a Credit Agreement with Liberty Media Corporation, as administrative agent and collateral agent, and Liberty Media, LLC, as lender. On March 6, 2009, XM amended and restated that credit agreement (the “Second-Lien Credit Agreement”) with Liberty Media Corporation. In June 2009, XM repaid all amounts due and terminated the Second-Lien Credit Agreement in connection with the issue and sale of our 11.25% Senior Secured Notes due 2013.

10

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

On March 6, 2009, XM amended and restated the $100,000 Term Loan, dated as of June 26, 2008 and the $250,000 Credit Agreement, dated as of May 5, 2006. These facilities were combined as term loans into the Amended and Restated Credit Agreement, dated as of March 6, 2009. Liberty Media, LLC, purchased $100,000 aggregate principal amount of such loans from the existing lenders. In June 2009, XM used a portion of the net proceeds from the sale of our 11.25% Senior Secured Notes due 2013 to extinguish the Amended and Restated Credit Agreement.

In June 2009, Liberty Media Corporation purchased $100,000 aggregate principal amount of our 11.25% Senior Secured Notes due 2013 as part of the offering of such notes. As of September 30, 2009, we recorded $159,275 as Long-term related party debt related to the 11.25% Notes. This amount included the following principal amounts; $87,000 of our 11.25% Senior Secured Notes due 2013, $76,000 of our 13% Senior Notes due 2013 and $11,000 of our 7% Exchangeable Senior Subordinated Notes due 2014. As of September 30, 2009, we recorded $4,350 related to accrued interest with Liberty Media to Related party current liabilities.

We recognized Interest expense related to Liberty Media of $6,609 and $33,651 for the three and nine months ended September 30, 2009, respectively.

XM Canada

In 2005, we entered into agreements to provide XM Canada with the right to offer XM satellite radio service in Canada. The agreements have an initial term of ten years and XM Canada has the unilateral option to extend the term of the agreements for an additional five years at no additional cost beyond the current financial arrangements. XM Canada has expressed its intent to exercise this option at the end of the initial term of the agreements. We have the right to receive a 15% royalty for all subscriber fees earned by XM Canada each month for its basic service and a nominal activation fee for each gross activation of an XM Canada subscriber on XM’s system. XM Canada is obligated to pay us a total of $71,800 for the rights to broadcast and market National Hockey League (“NHL”) games for the 10-year term of our contract with the NHL. We recognize these payments on a gross basis as a principal obligor pursuant to the provisions of ASC 605,Revenue Recognition.

The estimated fair value of deferred revenue from XM Canada as of the Merger date was approximately $34,000, and is being amortized on a straight-line basis over the remaining expected term of the agreements. Subsequent to the Merger date, we began to record additional deferred revenue on our agreements with XM Canada involving royalties on subscriber and activation fees. As of September 30, 2009 and December 31, 2008, the carrying value of Deferred revenue related to XM Canada was $39,566 and $36,002, respectively.

We have extended a Cdn$45,000 standby credit facility to XM Canada which can be utilized to purchase terrestrial repeaters or finance the payment of subscription fees. The facility matures on December 31, 2012 and bears interest at a rate of 17.75% per annum. We have the right to convert unpaid principal amounts into Class A subordinate voting shares of XM Canada at the price of Cdn$16.00 per share. As of September 30, 2009 and December 31, 2008, amounts drawn by XM Canada on this facility in lieu of payment of subscription fees recorded in Related party long-term assets were $15,522 and $8,311, respectively.

In connection with the deferred income related to XM Canada, we recorded amortization of $694 and $2,082 for the three and nine months ended September 30, 2009, respectively, and $1,665, $833 and $5,829 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. The royalty fees we earn related to subscriber and activation fees are reported as a component of Other revenue in our unaudited consolidated statements of operations. We recorded royalty fees of $225 and $499 for the three and nine months ended September 30, 2009, respectively, and $146, $76 and $523 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. XM Canada pays us a licensing fee and reimburses us for advertising, both of which are reported as a component of Other revenue in our unaudited consolidated statements of operations. We recognized licensing fee revenue of $1,500 and $4,500 for the three and nine months ended September 30, 2009, respectively, and $1,000, $500 and $3,500 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. We recognized advertising reimbursements of $0 and $733 for the three and nine months ended September 30, 2009, respectively, and $0, $0 and $833 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. As of September 30, 2009 and December 31, 2008, amounts due from XM Canada recorded in Related party current assets were $3,408 and $5,594, respectively. As of September 30, 2009 and December 31, 2008, amounts due from XM Canada (in addition to the amounts drawn on the standby credit facility) recorded in Related party long-term assets were $6,000 and $0, respectively.

11

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

General Motors

We have a long-term distribution agreement with General Motors Company (“GM”). GM has a representative on SIRIUS’ board of directors and is considered a related party. During the term of the agreement, GM has agreed to distribute the XM service. We subsidize a portion of the cost of XM radios and make incentive payments to GM when the owners of GM vehicles with installed XM radios become subscribers to XM’s service. We also share with GM a percentage of the subscriber revenue attributable to GM vehicles with installed XM radios. As part of the agreement, GM provides certain call-center related services directly to XM subscribers who are also GM customers for which we reimburse GM.

XM makes bandwidth available to OnStar Corporation for audio and data transmissions to owners of XM-enabled GM vehicles, regardless of whether the owner is an XM subscriber. OnStar’s use of our bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with our business, and must meet our quality standards. We also granted to OnStar a certain amount of time to use our studios on an annual basis and agreed to provide certain audio content for distribution on OnStar’s services.

We recorded total revenue from GM, primarily consisting of subscriber revenue, of $8,831 and $22,087 for the three and nine months ended September 30, 2009, respectively, and $6,733, $4,041 and $25,394 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively.

We recognized Sales and marketing expense with GM of $7,720 and $23,387 for the three and nine months ended September 30, 2009, respectively, and $8,539, $4,220 and $28,377 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. We recognized Revenue share and royalties expense with GM of $15,008 and $46,664 for the three and nine months ended September 30, 2009, respectively, and $26,021, $12,172 and $79,869 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. We recognized Subscriber acquisition costs with GM of $9,035 and $25,066 for the three and nine months ended September 30, 2009, respectively, and $29,530, $11,692 and $88,300 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively.

As of September 30, 2009, amounts due from GM and prepaid expenses with GM recorded in Related party current assets were $8,089 and $91,902, respectively. As of September 30, 2009, prepaid expenses with GM recorded in Related party long-term assets were $92,551. As of December 31, 2008, amounts due from GM and prepaid expenses with GM recorded in Related party current assets were $10,132 and $94,444, respectively. As of December 31, 2008, prepaid expenses with GM recorded in Related party long-term assets were $116,296. As of September 30, 2009 and December 31, 2008, amounts due to GM recorded in Related party current liabilities were $79,813 and $63,023, respectively.

As of September 30, 2009 and December 31, 2008, amounts due to GM recorded in Related party long-term liabilities were $21,928 and $0, respectively.

American Honda

We have an agreement to make a certain amount of our bandwidth available to American Honda. American Honda has a representative on SIRIUS’ board of directors and is considered a related party. American Honda’s use of our bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with our business, and must meet our quality standards. This agreement remains in effect so long as American Honda holds a certain amount of its investment in SIRIUS. We make incentive payments to American Honda for each purchaser of a Honda or Acura vehicle that becomes a self-paying XM subscriber and shares with American Honda a portion of the subscriber revenue attributable to Honda and Acura vehicles with installed XM radios.

We recorded total revenue from American Honda, primarily consisting of subscriber revenue, of $3,374 and $9,201 for the three and nine months ended September 30, 2009, respectively, and $3,321, $1,738 and $10,599 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively.

We recognized Sales and marketing expense with American Honda of $1,647 and $4,391 for the three and nine months ended September 30, 2009, respectively, and $1,848, $1,046 and $5,330 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. We recognized Revenue share and royalties expense with American Honda of $1,636 and $4,601 for the three and nine months ended September 30, 2009, respectively, and $747, $376 and $1,901 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively.

As of September 30, 2009 and December 31, 2008, amounts due from American Honda recorded in Related party current assets were $2,274 and $2,194, respectively.

12

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

As of September 30, 2009 and December 31, 2008, amounts due to American Honda recorded in Related party current liabilities were $4,014 and $4,190, respectively.

SIRIUS

SIRIUS allocates certain expenses to us based on the estimated costs incurred by SIRIUS that pertain to us. Additionally, certain costs incurred by us benefit SIRIUS and are allocated to SIRIUS based on estimated costs incurred by us pertaining to SIRIUS. We settle amounts due between the parties on a semi-monthly and monthly basis, except for share-based payment arrangements which are settled at times agreed to between us and SIRIUS. Our financial position, results of operations and cash flows could differ from those that might have resulted had we operated autonomously.

We recorded total advertising revenue allocated from SIRIUS of $2,473 and $7,321 for the three and nine months ended September 30, 2009, respectively, and $0 for the period August 1, 2008 through September 30, 2008.

We recognized total allocated net operating expenses with SIRIUS of $39,532 and $129,502 for the three and nine months ended September 30, 2009, respectively, and $773 for the period August 1, 2008 through September 30, 2008.

As of September 30, 2009 and December 31, 2008, net costs attributable to these costs (in addition to direct payments made by SIRIUS on our behalf) recorded in Related party current liabilities were $98,924 and $16,717, respectively.

(9) Investments

Investments consist of the following:

	September 30,		December 31,
	2009		2008
Marketable securities	$	11,555	$	10,525
Restricted investments		250		120,250
Embedded derivative accounted for separately from the host contract		26		2
Equity method investments		2,679		8,873
Total investments	$	14,510	$	139,650

XM Canada

We have a 23.33% economic interest in XM Canada. The amount of the Merger purchase price allocated to the fair value of our investment in XM Canada was $41,188. Our investment in XM Canada is recorded using the equity method (on a one-month lag) since we have significant influence, but less than a controlling voting interest in XM Canada. Under this method, our investment in XM Canada is adjusted quarterly to recognize our share of net earnings or losses as they occur, rather than at the time dividends or other distributions are received, limited to the extent of our investment in, advances to, and commitments to fund XM Canada. Our share of net earnings or losses of XM Canada is recorded to Loss on investments in our unaudited consolidated statements of operations. We recorded $2,870 and $1,926 for the three and nine months ended September 30, 2009, respectively, for our share of XM Canada’s net loss and $3,089, $1,835 and $10,385 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively, for our share of XM Canada’s net loss. During the three and nine months ended September 30, 2009, we reduced the carrying value of our investment in XM Canada due to decreases in fair value that were considered to be other than temporary and recorded impairment charges of $0 and $4,734, respectively. In addition, during the three and nine months ended September 30, 2009, we recorded ($35) and $466, respectively, as a foreign exchange gain (loss) to Accumulated other comprehensive loss, net of tax.

We hold an investment in Cdn$4,000 face value of 8% convertible unsecured subordinated debentures issued by XM Canada for which the embedded conversion feature is bifurcated from the host contract. The host contract is accounted for as an available-for-sale security at fair value with changes in fair value recorded to Accumulated other comprehensive loss, net of tax. The embedded conversion feature is accounted for as a derivative at fair value with changes in fair value recorded in earnings as Interest and investment income. As of September 30, 2009, the carrying value of our equity method investment in XM Canada was $2,679, while the carrying values of the host contract and embedded derivative related to our investment in the debentures was $2,967 and $26, respectively. As of December 31, 2008, the carrying value of our equity method investment in XM Canada was $8,873, while the carrying values of the host contract and embedded derivative related to our investment in the debentures was $2,540 and $2, respectively.

13

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Auction Rate Certificates

Auction rate certificates are long-term securities structured to reset their coupon rates by means of an auction. We account for our investment in auction rate certificates as available-for-sale securities. As of September 30, 2009 and December 31, 2008, the carrying value of these securities was $8,588 and $7,985, respectively.

Restricted Investments

Restricted investments relate to deposits placed into escrow for the benefit of third parties pursuant to programming agreements. As of September 30, 2009 and December 31, 2008, the carrying value of our long-term restricted investments was $250 and $120,250, respectively.

(10) Fair Value

The following table summarizes the fair value of our financial instruments at September 30, 2009:

	Fair Value Measurements Using
	Quoted Prices in Active				Significant
	Markets for Identical		Significant Other		Unobservable
(in thousands)	Assets (Level 1)		Observable Inputs (Level 2)		Inputs (Level 3)		Carrying Value
Assets:
Auction rate securities		N/A		N/A	$	8,588	$	8,588
Debentures and embedded derivatives		N/A		N/A		2,993		2,993
Total assets					$	11,581	$	11,581
Liabilities:
Debt-related embedded derivatives	$	—	$	—	$	134,361	$	134,361
Total liabilities	$	—	$	—	$	134,361	$	134,361

The following table presents the changes in the Level 3 fair-value category for the nine months ended September 30, 2009. We classify financial instruments in Level 3 of the fair-value hierarchy when there is reliance on at least one significant unobservable input to the valuation model. In addition to these unobservable inputs, the valuation models for Level 3 financial instruments typically also rely on a number of inputs that are readily observable either directly or indirectly. Thus, the gains and losses presented below include changes in the fair value related to both observable and unobservable inputs. Fair values are determined using lattice models or market quotes. We recognized net unrealized (losses) gains in earnings of ($33,666) and ($111,609) for the three and nine months ended September 30, 2009, respectively, and $241,847, $14 and ($551) for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Debentures and		Debt-Related
	Auction Rate Securities		Embedded Derivatives		Embedded Derivatives
Balance at December 31, 2008	$	7,985	$	2,542	$	22,658
Total gains and losses (realized /unrealized)		—		118		111,703
Included in other comprehensive income		603		333		—
Balance at September 30, 2009	$	8,588	$	2,993	$	134,361

As of September 30, 2009 and December 31, 2008, the aggregate carrying value of our long-term debt was $1,763,082 and $1,772,183 (excludes embedded derivatives), respectively; while the aggregate fair value approximated $1,993,820 and $760,897, respectively.

14

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(11) Debt

Our debt consists of the following:

	Conversion		Long-term debt
	Price (per		September 30,			December 31,
	(SIRIUS share)		2009			2008
10% Convertible Senior Notes due 2009	$	10.87		48,450			400,000
Less: discount				(404	)		(17,367	)
10% Senior Secured Discount Convertible Notes due 2009	$	0.69		33,249			33,249
Less: discount				(1,519	)		(5,471	)
10% Senior PIK Secured Notes due 2011		N/A		172,485			—
Less: discount				(13,460	)		—
11.25% Senior Secured Notes due 2013		N/A		525,750			—
Less: discount				(34,525	)		—
13% Senior Notes due 2013		N/A		778,500			778,500
Less: discount				(66,538	)		(74,986	)
9.75% Senior Notes due 2014		N/A		5,260			5,260
7% Exchangeable Senior Subordinated Notes due 2014	$	1.875		550,000			550,000
Less: discount				(252,056	)		(270,368	)
Senior Secured Term Loan due 2009		N/A		—			100,000
Senior Secured Revolving Credit Facility due 2009		N/A		—			250,000
Add: premium				—			151
Other debt:
Capital leases		N/A		17,890			23,215
Embedded derivatives				134,361			22,658
Total debt				1,897,443			1,794,841
Less: current maturities				101,300			355,739
Total long-term				1,796,143			1,439,102
Less: related party				159,275			—
Total long-term, excluding related party			$	1,636,868		$	1,439,102

10% Convertible Senior Notes due 2009

We have issued $400,000 aggregate principal amount of 10% Convertible Senior Notes due 2009 (the “10% Convertible Notes”). Interest is payable semi-annually at a rate of 10% per annum. The 10% Convertible Notes mature on December 1, 2009. The 10% Convertible Notes may be converted by the holder, at its option, into shares of SIRIUS’ common stock at a conversion rate of 92.0 shares of SIRIUS common stock per $1,000 principal amount, which is equivalent to a conversion price of $10.87 per share of SIRIUS common stock (subject to adjustment in certain events). As a result of the fair valuation at the acquisition date, we recognized an initial discount of $23,700.

In February 2009, we exchanged $172,485 aggregate principal amount of the outstanding 10% Convertible Notes for a like principal amount of XM Holdings’ 10% Senior PIK Secured Notes due 2011. We accounted for the exchange as a modification of debt and recorded $2,008 to General and administrative expense in our unaudited consolidated statements of operations and $10,990 of additional debt discount in our unaudited consolidated balance sheets.

In July 2009, we used a portion of the net proceeds received from the issuance of our 11.25% Senior Secured Notes due 2013 plus cash on hand to purchase at par $179,065 aggregate principal amount of the 10% Convertible Notes. We recorded a loss of $3,285 related to the unamortized discount to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations as a result of this transaction.

10% Senior Secured Discount Convertible Notes due 2009

XM Holdings (with XM as co-obligors) have outstanding $33,249 aggregate principal amount of 10% Senior Secured Discount Convertible Notes due 2009 (the “10% Discount Convertible Notes”). Interest is payable semi-annually at a rate of 10% per annum. The 10% Discount Convertible Notes mature on December 31, 2009. At any time, a holder of the notes may convert all or part of the accreted value of the notes at a conversion price of $0.69 per share of SIRIUS common stock. As a result of the fair valuation at the acquisition date, we recognized an initial discount of $7,324.

15

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

10% Senior PIK Secured Notes due 2011

In February 2009, we exchanged $172,485 aggregate principal amount of outstanding 10% Convertible Notes for a like principal amount of XM Holdings’ 10% Senior PIK Secured Notes due 2011 (the “PIK Notes”). Interest is payable on the PIK Notes semiannually in arrears on June 1 and December 1 of each year at a rate of 10% per annum paid in cash from December 1, 2008 to December 1, 2009; at a rate of 10% per annum paid in cash and 2% per annum paid in kind from December 1, 2009 to December 1, 2010; and at a rate of 10% per annum paid in cash and 4% per annum paid in kind from December 1, 2010 to the maturity date.

The PIK Notes are fully and unconditionally guaranteed by XM 1500 Eckington LLC and XM Investment LLC (together, the “Subsidiary Guarantors”) and are secured by a first-priority lien on substantially all of the property of the Subsidiary Guarantors. XM Holdings may, at its option, redeem some or all of the PIK Notes at any time at 100% of the principal amount prepaid, together with accrued and unpaid interest, if any.

We paid a fee equal to, at each exchanging noteholders’ election, either (i) 833 shares of SIRIUS’ common stock (the “Structuring Fee Shares”) for every $1 principal amount of 10% Convertible Notes exchanged or (ii) an amount in cash equal to $0.05 for every $1 principal amount of 10% Convertible Notes exchanged. The total number of Structuring Fee Shares delivered was 59,178,819, and the aggregate cash delivered was approximately $5,100.

In October 2009, we purchased $58,800 aggregate principal amount of the PIK Notes at a price of $60,499, which included accrued interest of $2,287. We will record a net loss of $3,869, related to the unamortized discount and the discount on the purchase, to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations as a result of this transaction.

Amended and Restated Credit Agreement due 2011

In March 2009, we amended and restated the $100,000 Senior Secured Term Loan due 2009, dated as of June 26, 2008 and the $250,000 Senior Secured Revolving Credit Facility due 2009, dated as of May 5, 2006. These facilities were combined as term loans into the Amended and Restated Credit Agreement, dated as of March 6, 2009. Liberty Media LLC (“Liberty”) purchased $100,000 aggregate principal amount of such loans from the lenders.

In June 2009, we used net proceeds from the sale of our 11.25% Senior Secured Notes due 2013 to repay amounts due under and extinguish the Amended and Restated Credit Agreement. We paid a repayment premium of $6,500. We recorded an aggregate loss on extinguishment of the Amended and Restated Credit Agreement of $49,786 consisting primarily of the unamortized discount, deferred financing fees and unaccreted portion of the repayment premium to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations.

11.25% Senior Secured Notes due 2013

In June 2009, XM issued $525,750 aggregate principal amount of 11.25% Senior Secured Notes due 2013 (the “11.25% Notes”). Interest is payable semi-annually in arrears on June 15 and December 15 of each year at a rate of 11.25% per annum. The 11.25% Notes mature on June 15, 2013. The 11.25% Notes were issued for $489,952, resulting in an aggregate original issuance discount, including fees, of $35,798.

XM Holdings and the domestic subsidiaries of XM that guarantee certain of the indebtedness of XM and its restricted subsidiaries guarantee XM’s obligations under the 11.25% Notes. The 11.25% Notes and related guarantees are secured by first-priority liens on substantially all of the assets of XM Holdings, XM and the guarantors.

In June 2009, XM used a portion of the net proceeds from the sale of the 11.25% Notes to repay in full $325,000 principal amount outstanding under the Amended and Restated Credit Agreement. In connection with the sale of the 11.25% Notes, XM terminated the Second-Lien Credit Agreement and repaid all amounts due thereunder.

13% Senior Notes due 2013

In July 2008, XM issued $778,500 aggregate principal amount of 13% Senior Notes due 2013 (the “13% Notes”). Interest is payable semi-annually in arrears on February 1 and August 1 of each year at a rate of 13% per annum. The 13% Notes were issued for $700,105, resulting in an original issuance discount of $78,395. The 13% Notes are unsecured and mature on August 1, 2013.

16

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

9.75% Senior Notes due 2014

XM has outstanding $5,260 aggregate principal amount of 9.75% Senior Notes due 2014 (the “9.75% Notes”). Interest on the 9.75% Notes is payable semi-annually on May 1 and November 1 at a rate of 9.75% per annum. The 9.75% Notes are unsecured and mature on May 1, 2014. XM, at its option, may redeem the 9.75% Notes at declining redemption prices at any time on or after May 1, 2010, subject to certain restrictions. Prior to May 1, 2010, XM may redeem the 9.75% Notes, in whole or in part, at a price equal to 100% of the principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the date of redemption.

In March 2009, XM executed and delivered a Third Supplemental Indenture (the “9.75% Notes Supplemental Indenture”). The 9.75% Notes Supplemental Indenture amended the indenture to eliminate substantially all of the restrictive covenants, eliminated certain events of default and modified or eliminated certain other provisions contained in the indenture and the 9.75% Notes.

7% Exchangeable Senior Subordinated Notes due 2014

In August 2008, XM issued $550,000 aggregate principal amount of 7% Exchangeable Senior Subordinated Notes due 2014 (the “Exchangeable Notes”). The Exchangeable Notes are senior subordinated obligations of XM and rank junior in right of payment to its existing and future senior debt and equally in right of payment with its existing and future senior subordinated debt. XM Holdings, XM Equipment Leasing LLC and XM Radio Inc. have guaranteed the Exchangeable Notes on a senior subordinated basis. Interest is payable semi-annually in arrears on June 1 and December 1 of each year at a rate of 7% per annum. The Exchangeable Notes mature on December 1, 2014. The Exchangeable Notes are exchangeable at any time at the option of the holder into shares of SIRIUS’ common stock at an initial exchange rate of 533.3333 shares of SIRIUS common stock per $1,000 principal amount of Exchangeable Notes, which is equivalent to an approximate exchange price of $1.875 per share of SIRIUS common stock.

Second-Lien Credit Agreement

In February 2009, we entered into a Credit Agreement (the “Credit Agreement”) with Liberty Media Corporation, as administrative agent and collateral agent. The Credit Agreement provided for a $150,000 term loan. On March 6, 2009, we amended and restated the Credit Agreement (the “Second-Lien Credit Agreement”) with Liberty Media.

In June 2009, we terminated the Second-Lien Credit Agreement in connection with the sale of the 11.25% Notes and repaid all amounts due thereunder. We recorded a loss on termination of the Second-Lien Credit Agreement of $57,663 related to deferred financing fees to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations.

Embedded Derivatives

We issued convertible debt securities, including the 10% Convertible Senior Notes due 2009, the 10% Senior Secured Discount Convertible Notes due 2009 and 7% Exchangeable Senior Subordinated Notes due 2014 containing non-detachable conversion or exchange features. Upon completion of the Merger, these debt agreements were amended such that the settlement of conversion features is into shares of SIRIUS common stock.

The convertible and exchangeable features are embedded derivatives, and subsequent to the Merger are required to be separated from the host contract for accounting purposes in accordance with SFAS No. 133,Accounting for Hedging and Derivative Instruments. The embedded derivatives are recorded as derivative liabilities and included in our debt balances in our statement of financial position and the changes in fair value of those derivatives are reported as a realized investment gain or loss in the period in which the fair value changes.

Due to the change in fair value of these embedded derivatives, we recognized $33,700 and $111,703 of Loss on change in value of embedded derivatives during the three and nine months ended September 30, 2009, respectively, and $242,223 of Gain on change in value of embedded derivatives for the period August 1, 2008 through September 30, 2008. The balance of derivative liabilities was $134,361 and $22,658 as of September 30, 2009 and December 31, 2008, respectively.

Covenants and Restrictions

Our non-convertible debt generally requires compliance with certain covenants that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions. XM Holdings operates as an unrestricted subsidiary of SIRIUS for purposes of compliance with the covenants contained in our debt instruments. If we fail to comply with these covenants, our debt could become immediately payable.

At September 30, 2009, we were in compliance with all financial covenants.

17

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(12) Benefit Plans

During the second quarter of 2009, we merged the XM Satellite Radio 401(k) Savings Plan (the “Savings Plan”) into the Sirius Satellite Radio 401(k) Savings Plan (the “Sirius Plan”), which is sponsored by SIRIUS. Eligible employees under the Savings Plan became subject to the contribution, matching and vesting rules of the Sirius Plan.

The Sirius Plan allows eligible employees to voluntarily contribute from 1% to 50% of their pre-tax salary subject to certain defined limits. SIRIUS matches 50% of an employee’s voluntary contributions, up to 6% of an employee’s pre-tax salary, in the form of shares of SIRIUS common stock. Matching contributions under the Sirius Plan vest at a rate of 33¹/3% for each year of employment and are fully vested after three years of employment.

(13) Income Taxes

We recorded income tax expense of $578 and $1,733 for the three and nine months ended September 30, 2009, respectively, and $672, $508 and $1,512 for the periods August 1, 2008 through September 30, 2008, July 1, 2008 through July 31, 2008 and January 1, 2008 through July 31, 2008, respectively. Such expense primarily represents the recognition of a deferred tax liability related to the difference in accounting for the FCC license intangible asset, which is amortized over 15 years for tax purposes but is not amortized for book purposes.

(14) Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of September 30, 2009:

	Remaining
(in thousands)	2009		2010		2011		2012		2013		Thereafter		Total
Long-term debt obligations	$	85,121	$	11,242	$	175,389	$	166	$	1,304,406	$	555,260	$	2,131,584
Cash interest payments		59,707		217,466		208,148		199,403		169,811		38,756		893,291
Lease obligations		8,268		18,109		7,247		4,033		1,680		2,069		41,406
Satellite and transmission		12,087		29,609		—		—		—		8,635		50,331
Programming and content		30,249		56,470		110,021		100,326		20,683		14,350		332,099
Satellite performance incentive payments		1,051		4,384		4,695		5,030		5,392		42,831		63,383
Marketing and distribution		15,574		10,198		9,272		9,033		3,000		4,500		51,577
Other		568		883		337		45		—		—		1,833
Total	$	212,625	$	348,361	$	515,109	$	318,036	$	1,504,972	$	666,401	$	3,565,504

Long-term debt obligations.Long-term debt obligations include principal payments on outstanding debt.

Cash interest payments.Cash interest payments include interest due on outstanding debt 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 network. We have also entered into various agreements to design and construct satellites for use in our systems and to launch those satellites.

Space Systems/Loral has constructed a fifth satellite, XM-5, for use in our system. In 2006, we entered into an agreement with Sea Launch to secure a launch for XM-5. In June 2009, Sea Launch filed for bankruptcy protection under Title 11 of the United States Code. In October 2009, XM Holdings terminated its satellite launch agreement with Sea Launch with the consent of the Bankruptcy Court. In October 2009, SIRIUS entered into an agreement with International Launch Services (“ILS”) to secure a satellite launch for XM-5 on a Proton rocket. We currently expect to launch XM-5 in the second or third quarter of 2010.

Programming and content.We have entered into various programming agreements. Under the terms of these agreements, we are obligated to provide payments to other entities that may include fixed payments, advertising commitments and revenue sharing arrangements.

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 vehicles they manufacture. In addition, in the event certain new products are not shipped by a distributor to its customers within 90 days of the distributor’s receipt of goods, we have agreed to purchase and take title to the product.

18

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Satellite incentive payments.Boeing Satellite Systems International, Inc., the manufacturer of our four in-orbit satellites, may be entitled to future in-orbit performance payments with respect to two of our four satellites. As of September 30, 2009, we have accrued $28,655 related to contingent in-orbit performance payments for XM-3 and XM-4 based on expected operating performance over their fifteen year design life. Boeing may also be entitled to an additional $10,000 if XM-4 continues to operate above baseline specifications during the five years beyond the satellite’s fifteen year design life.

Operating lease obligations.We have entered into 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 that have options to renew. The effect of the rent holidays and rent concessions are recognized on a straight-line basis over the lease term.

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, including subscriber growth, 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 provisions.

We are required under the terms of certain agreements to deposit monies in escrow, which place restrictions on cash and cash equivalents. As of September 30, 2009 and December 31, 2008, $250 and $120,250, respectively, were classified as Restricted investments as a result of obligations under these escrow deposits.

We do not have any other significant off-balance sheet 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

FCC Merger Order.On July 25, 2008, the FCC adopted an order approving the Merger. The order became effective immediately upon adoption. In September 2008, Mt. Wilson FM Broadcasters, Inc. filed a Petition for Reconsideration of this order. This Petition for Reconsideration remains pending.

Atlantic Recording Corporation, BMG Music, Capital Records, Inc., Elektra Entertainment Group Inc., Interscope Records, Motown Record Company, L.P., Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records, Inc. and Warner Bros. Records Inc. v. XM Satellite Radio Inc.In May 2006, the plaintiffs filed this action in the United States District Court for the Southern District of New York. The complaint seeks monetary damages and equitable relief, and alleges that XM radios that include advanced recording functionality infringe upon plaintiffs’ copyrighted sound recordings. XM filed a motion to dismiss this matter, and that motion was denied in January 2007. XM has resolved the lawsuit with respect to Universal Music Group, Warner Music Group, Sony BMG Music Entertainment and EMI Group, and each of these parties has withdrawn as a party to the lawsuit, and this lawsuit has been dismissed with respect to such parties.

Music publishing companies and certain other record companies also have filed lawsuits, purportedly on a class basis, with similar allegations. We believe these allegations are without merit and that our products comply with applicable copyright law, including the Audio Home Recording Act. We intend to vigorously defend this matter. There can be no assurance regarding the ultimate outcome of these matters, or the significance, if any, to our business, consolidated results of operations or financial position.

Other Matters. In the ordinary course of business, we are a defendant in various lawsuits and arbitration proceedings, including actions filed by former employees, parties to contracts or leases and owners of patents, trademarks, copyrights or other intellectual property. None of these actions are, in our opinion, likely to have a material adverse effect on our cash flows, financial position or results of operations.

(15) Condensed Consolidating Financial Information

XM 1500 Eckington LLC, XM Investment LLC, XM Satellite Radio Inc. and its wholly owned subsidiaries, XM Radio Inc. and XM Equipment Leasing LLC (collectively, the “XM Holdings Guarantor Subsidiaries”) are wholly owned subsidiaries of XM Holdings. The XM Holdings Guarantor Subsidiaries have fully and unconditionally, jointly and severally, directly or indirectly, guaranteed, on an unsecured basis, certain of the debt issued by XM Holdings.

XM Radio Inc. and XM Equipment Leasing LLC (collectively, the “XM Guarantor Subsidiaries”) are wholly owned subsidiaries of XM. The XM Guarantor Subsidiaries have fully and unconditionally, jointly and severally, directly or indirectly, guaranteed, on an unsecured basis, the debt issued by XM in connection with certain of XM’s financings.

19

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements of XM Satellite Radio Holdings Inc. and Subsidiaries.

Basis of Presentation

In presenting our condensed consolidating financial statements of XM Holdings and XM, the equity method of accounting has been applied to (i) XM Holdings’ interests in the XM Holdings Guarantor Subsidiaries, (ii) XM’s interests in the XM Guarantor Subsidiaries and (iii) XM’s interests in the XM Non-Guarantor Subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S. generally accepted accounting principles. All intercompany balances and transactions between XM Holdings, the XM Holdings Guarantor Subsidiaries, XM Guarantor Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column “Eliminations.”

Our accounting bases in all subsidiaries, including goodwill and identified intangible assets, have been “pushed down” to the applicable subsidiaries.

20

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 2009

							XM																							Consolidated
							Equipment			XM Non-					Consolidated			XM Satellite			XM 1500			XM						XM Satellite
		XM Satellite					Leasing			Guarantor					XM Satellite			Radio			Eckington			Investment						Radio Holdings
(in thousands)		Radio Inc.			XM Radio Inc.		LLC			Subsidiaries		Eliminations			Radio Inc.			Holdings Inc.			LLC			LLC			Eliminations			Inc.
Current assets:
Cash and cash equivalents		$	497,692		$	—	$	10		$	—	$	—		$	497,702		$	2,873		$	3,848		$	664		$	(179,065	)	$	326,022
Accounts receivable, net			45,243			—		—			—		—			45,243			—			—			—			—			45,243
Due from subsidiaries/affiliates			4,820			737,886		61,062			759,655		(1,563,480	)		(57	)		—			46,669			5,994			(52,606	)		—
Inventory, net			2,923			—		—			—		—			2,923			—			—			—			—			2,923
Prepaid expenses			79,235			—		—			—		—			79,235			—			—			—			—			79,235
Related party current assets			132,169			—		(105	)		—		—			132,064			—			(1,317	)		(221	)		(24,852	)		105,674
Other current assets			56,972			—		64			—		—			57,036			—			395			(111	)		—			57,320
Total current assets			819,054			737,886		61,031			759,655		(1,563,480	)		814,146			2,873			49,595			6,326			(256,523	)		616,417
Property and equipment, net			487,633			—		(51	)		—		—			487,582			240,127			58,038			12,500			—			798,247
Investment in subsidiaries/affiliates			2,804,547			—		—			—		(2,804,547	)		—			(530,523	)		—			—			530,523			—
FCC license			—			2,000,000		—			—		—			2,000,000			—			—			—			—			2,000,000
Restricted investments			250			—		—			—		—			250			—			—			—			—			250
Deferred financing fees, net			27,309			—		—			—		—			27,309			—			—			—			—			27,309
Intangible assets, net			629,288			—		—			—		—			629,288			—			—			—			—			629,288
Related party long-term assets			114,073			—		—			—		—			114,073			—			—			—			—			114,073
Other long-term assets			25,250			—		—			—		—			25,250			14,260			2,050			—			—			41,560
Total assets		$	4,907,404		$	2,737,886	$	60,980		$	759,655	$	(4,368,027	)	$	4,097,898		$	(273,263	)	$	109,683		$	18,826		$	274,000		$	4,227,144
Current liabilities:
Accounts payable and accrued expenses		$	226,264		$	—	$	104		$	—	$	(40,946	)	$	185,422		$	11,596		$	(3	)	$	168		$	(571	)	$	196,612
Accrued interest			43,249			—		—			—		—			43,249			9,009			—			—			—			52,258
Due to subsidiaries/affiliates			1,528,898			—		—			—		(1,522,534	)		6,364			44,808			3,493			491			(55,156	)		—
Current portion of deferred revenue			469,947			—		—			—		—			469,947			2,776			—			—			—			472,723
Current portion of deferred credit
on executory contracts			247,566			—		—			—		—			247,566			—			—			—			—			247,566
Current maturities of long-term debt	��		46,247			—		—			—		—			46,247			55,053			—			—			—			101,300
Current maturities of long-term related party debt			—			—		—			—		—			—			177,572			—			—			(177,572	)		—
Related party current liabilities			168,081			—		—			—		—			168,081			38,961			4			5			(19,950	)		187,101
Total current liabilities			2,730,252			—		104			—		(1,563,480	)		1,166,876			339,775			3,494			664			(253,249	)		1,257,560
Deferred revenue			137,915			—		—			—		—			137,915			27,986			—			—			—			165,901
Deferred credit on executory contracts			851,955			—		—			—		—			851,955			—			—			—			—			851,955
Long-term debt			1,477,843			—		—			—		—			1,477,843			159,025			—			—			—			1,636,868
Long-term related party debt			159,275			—		—			—		—			159,275			—			—			—			—			159,275
Deferred tax liability			145,854			753,870		—			—		—			899,724			165			—			—			—			899,889
Related party long-term liability			21,928			—		—			—		—			21,928			—			—			—			—			21,928
Other long-term liabilities			38,571			—		—			—		—			38,571			—			(1,315	)		—			(3,274	)		33,982
Total liabilities			5,563,593			753,870		104			—		(1,563,480	)		4,754,087			526,951			2,179			664			(256,523	)		5,027,358
Commitments and contingencies
Stockholder’s equity (deficit):
Capital stock			—			—		—			—		—			—			—			—			—			—			—
Accumulated other comprehensive loss			—			—		—			—		—			—			(6,598	)		—			—			—			(6,598	)
Additional paid-in-capital			(563,335	)		1,781,641		57,853			691,811		(2,531,305	)		(563,335	)		5,989,700			99,348			17,615			446,372			5,989,700
Retained earnings (deficit)			(92,854	)		202,375		3,023			67,844		(273,242	)		(92,854	)		(6,783,316	)		8,156			547			84,151			(6,783,316	)
Total stockholder’s equity (deficit)			(656,189	)		1,984,016		60,876			759,655		(2,804,547	)		(656,189	)		(800,214	)		107,504			18,162			530,523			(800,214	)
Total liabilities and stockholder’s equity (deficit)		$	4,907,404		$	2,737,886	$	60,980		$	759,655	$	(4,368,027	)	$	4,097,898		$	(273,263	)	$	109,683		$	18,826		$	274,000		$	4,227,144

21

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2008

																												Consolidated
							XM		XM Non-					Consolidated			XM Satellite			XM 1500			XM					XM Satellite
	XM Satellite						Equipment		Guarantor					XM Satellite			Radio			Eckington			Investment					Radio Holdings
(in thousands)	Radio Inc.			XM Radio Inc.			Leasing LLC		Subsidiaries		Eliminations			Radio Inc.			Holdings Inc.			LLC			LLC		Eliminations			Inc.
Current assets:
Cash and cash equivalents	$	199,938		$	—		$	15	$	—	$	—		$	199,953		$	5,923		$	760		$	104	$	—		$	206,740
Accounts receivable, net		52,727			—			—		—		—			52,727			—			—			—		—			52,727
Due from subsidiaries/affiliates		554,882			605,231			55,425		742,499		(1,957,994	)		43			—			42,213			5,337		(47,593	)		—
Inventory, net		4,489			—			—		—		—			4,489			—			—			—		—			4,489
Prepaid expenses		37,351			—			—		—		—			37,351			—			—			—		—			37,351
Related party current assets		112,232			—			—		—		—			112,232			131			—			—		—			112,363
Other current assets		50,090			—			64		—		—			50,154			155			258			—		(155	)		50,412
Total current assets		1,011,709			605,231			55,504		742,499		(1,957,994	)		456,949			6,209			43,231			5,441		(47,748	)		464,082
Property and equipment, net		577,368			—			3,912		—		—			581,280			221,011			59,454			12,843		—			874,588
Investment in subsidiaries/affiliates		2,625,148			—			—		—		(2,625,148	)		—			(351,193	)		—			—		351,193			—
FCC license		—			2,000,000			—		—		—			2,000,000			—			—			—		—			2,000,000
Restricted investments		120,250			—			—		—		—			120,250			—			—			—		—			120,250
Deferred financing fees, net		30,303			—			—		—		—			30,303			—			—			—		—			30,303
Intangible assets, net		688,671			—			—		—		—			688,671			—			—			—		—			688,671
Related party long-term assets		124,607			—			—		—		—			124,607			—			—			—		—			124,607
Other long-term assets		12,830			—			—		—		—			12,830			19,400			2,054			—		—			34,284
Total assets	$	5,190,886		$	2,605,231		$	59,416	$	742,499	$	(4,583,142	)	$	4,014,890		$	(104,573	)	$	104,739		$	18,284	$	303,445		$	4,336,785
Current liabilities:
Accounts payable and accrued expenses	$	237,139		$	—		$	97	$	—	$	—		$	237,236		$	153		$	268		$	84	$	(442	)	$	237,299
Accrued interest		47,118			—			—		—		—			47,118			3,425			—			—		—			50,543
Due to subsidiaries/affiliates		1,929,803			271			3,121		26,373		(1,957,994	)		1,574			—			3,669			493		(5,736	)		—
Current portion of deferred revenue		416,931			—			—		—		—			416,931			2,776			—			—		—			419,707
Current portion of deferred credit on executory contracts		234,774			—			—		—		—			234,774			—			—			—		—			234,774
Current portion of long-term debt		135,257			—			—		—		—			135,257			220,482			—			—		—			355,739
Related party current liabilities		83,930			—			—		—		—			83,930			4,057			—			—		(4,057	)		83,930
						��
Total current liabilities		3,084,952			271			3,218		26,373		(1,957,994	)		1,156,820			230,893			3,937			577		(10,235	)		1,381,992
Deferred revenue		101,187			—			—		—		—			101,187			30,068			—			—		—			131,255
Deferred credit on executory contracts		1,037,190			—			—		—		—			1,037,190			—			—			—		—			1,037,190
Long-term debt		1,274,149			—			—		—		—			1,274,149			164,953			—			—		—			1,439,102
Deferred tax liability		134,301			752,174			—		—		—			886,475			—			—			—		—			886,475
Other long-term liabilities		32,805			(38	)		—		—		—			32,767			45,067			(1,315	)		—		(40,194	)		36,325
Total liabilities		5,664,584			752,407			3,218		26,373		(1,957,994	)		4,488,588			470,981			2,622			577		(50,429	)		4,912,339
Commitments and contingencies
Stockholder’s equity (deficit):
Capital stock		—			—			—		—		—			—			—			—			—		—			—
Accumulated other comprehensive loss		—			—			—		—		—			—			(7,871	)		—			—		—			(7,871	)
Additional paid-in-capital		(673,156	)		1,781,641			55,262		691,811		(2,528,715	)		(673,157	)		5,870,502			99,347			17,557		556,253			5,870,502
Retained earnings (deficit)		199,458			71,183			936		24,315		(96,433	)		199,459			(6,438,185	)		2,770			150		(202,379	)		(6,438,185	)
Total stockholder’s equity (deficit)		(473,698	)		1,852,824			56,198		716,126		(2,625,148	)		(473,698	)		(575,554	)		102,117			17,707		353,874			(575,554	)
										��
Total liabilities and stockholder’s equity (deficit)	$	5,190,886		$	2,605,231		$	59,416	$	742,499	$	(4,583,142	)	$	4,014,890		$	(104,573	)	$	104,739		$	18,284	$	303,445		$	4,336,785

22

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009 (SUCCESSOR ENTITY)

							XM																					Consolidated
	XM						Equipment			XM Non-					Consolidated			XM Satellite			XM 1500		XM					XM Satellite
	Satellite			XM Radio			Leasing			Guarantor					XM Satellite			Radio			Eckington		Investment					Radio
(in thousands)	Radio Inc.			Inc.			LLC			Subsidiaries		Eliminations			Radio Inc.			Holdings Inc.			LLC		LLC		Eliminations			Holdings Inc.
Revenue	$	324,779		$	—		$	—		$	—	$	—		$	324,779		$	694		$	2,605	$	333	$	(2,938	)	$	325,473
Cost of services		122,703			—			(12	)		—		(214	)		122,477			—			—		—		—			122,477
Sales and marketing		26,055			—			—			—		—			26,055			—			—		—		—			26,055
Subscriber acquisition costs		35,049			—			—			—		—			35,049			—			—		—		—			35,049
General and administrative		26,668			—			30			—		320			27,018			128			292		87		(2,309	)		25,216
Engineering, design and development		5,413			—			—			—		—			5,413			—			—		—		—			5,413
Depreciation and amortization		38,769			—			1,114			—		—			39,883			1,093			508		103		—			41,587
Restructuring, impairments and related costs		3,029			—			—			—		—			3,029			—			—		—		—			3,029
Total operating expenses		257,686			—			1,132			—		106			258,924			1,221			800		190		(2,309	)		258,826
Income (loss) from operations		67,093			—			(1,132	)		—		(106	)		65,855			(527	)		1,805		143		(629	)		66,647
Other income (expense):
Interest and investment income		4,250			—			—			—		—			4,250			160			—		—		(3,681	)		729
Interest expense, net of amounts capitalized		(68,476	)		—			—			—		—			(68,476	)		(7,612	)		—		—		5,472			(70,616	)
Gain (loss) on change in value of embedded derivative		(33,700	)		—			—			—		—			(33,700	)		—			—		—		—			(33,700	)
Loss on extinguishment of debt and credit facilities, net		(502	)		—			—			—		—			(502	)		—			—		—		(3,285	)		(3,787	)
Gain (loss) on investments		—			—			—			—		—			—			(2,870	)		—		—		—			(2,870	)
Other income (expense)		(1,000	)		46,185			2,872			14,637		(61,878	)		816			(31,424	)		—		—		31,932			1,324
Net income (loss) before income taxes		(32,335	)		46,185			1,740			14,637		(61,984	)		(31,757	)		(42,273	)		1,805		143		29,809			(42,273	)
Benefit from (provision for) income taxes		—			(578	)		—			—		—			(578	)		(578	)		—		—		578			(578	)
Net income (loss)		(32,335	)		45,607			1,740			14,637		(61,984	)		(32,335	)		(42,851	)		1,805		143		30,387			(42,851	)
Add: net loss attributable to noncontrolling interests		—			—			—			—		—			—			—			—		—		—			—
Net income (loss): XM Satellite Radio Holdings and Subsidiaries	$	(32,335	)	$	45,607		$	1,740		$	14,637	$	(61,984	)	$	(32,335	)	$	(42,851	)	$	1,805	$	143	$	30,387		$	(42,851	)

23

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 (SUCCESSOR ENTITY)

							XM																					Consolidated
							Equipment			XM Non-					Consolidated			XM Satellite			XM 1500		XM					XM Satellite
	XM Satellite			XM Radio			Leasing			Guarantor					XM Satellite			Radio			Eckington		Investment					Radio
(in thousands)	Radio Inc.			Inc.			LLC			Subsidiaries		Eliminations			Radio Inc.			Holdings Inc.			LLC		LLC		Eliminations			Holdings Inc.
Revenue	$	932,457		$	—		$	—		$	—	$	—		$	932,457		$	2,082		$	7,740	$	997	$	(8,738	)	$	934,538
Cost of services		372,513			—			6			—		—			372,519			—			—		—		—			372,519
Sales and marketing		84,565			—			—			—		—			84,565			—			—		—		—			84,565
Subscriber acquisition costs		83,524			—			—			—		—			83,524			—			—		—		—			83,524
General and administrative		95,552			—			30			—		320			95,902			1,515			938		259		(6,925	)		91,689
Engineering, design and development		16,798			—			—			—		—			16,798			—			—		—		—			16,798
Depreciation and amortization		134,958			—			6,554			—		—			141,512			3,192			1,416		342		—			146,462
Restructuring, impairments and related costs		5,418			—			—			—		—			5,418			24,196			—		—		—			29,614
Total operating expenses		793,328			—			6,590			—		320			800,238			28,903			2,354		601		(6,925	)		825,171
Income (loss) from operations		139,129			—			(6,590	)		—		(320	)		132,219			(26,821	)		5,386		396		(1,813	)		109,367
Other income (expense):
Interest and investment income		5,087			—			—			—		—			5,087			442			—		—		(3,681	)		1,848
Interest expense, net of amounts capitalized		(212,907	)		—			—			—		—			(212,907	)		(19,500	)		—		—		5,472			(226,935	)
Gain (loss) on change in value of embedded derivative		(111,703	)		—			—			—		—			(111,703	)		—			—		—		—			(111,703	)
Loss on extinguishment of debt and credit facilities, net		(104,373	)		—			—			—		—			(104,373	)		(4,205	)		—		—		(3,285	)		(111,863	)
Gain (loss) on investments		—			—			—			—		—			—			(6,660	)		—		—		—			(6,660	)
Other income (expense)		(7,544	)		132,925			8,676			43,530		(176,488	)		1,099			(286,654	)		—		—		288,103			2,548
Net income (loss) before income taxes		(292,311	)		132,925			2,086			43,530		(176,808	)		(290,578	)		(343,398	)		5,386		396		284,796			(343,398	)
Benefit from (provision for) income taxes		—			(1,733	)		—			—		—			(1,733	)		(1,733	)		—		—		1,733			(1,733	)
Net income (loss)		(292,311	)		131,192			2,086			43,530		(176,808	)		(292,311	)		(345,131	)		5,386		396		286,529			(345,131	)
Add: net loss attributable to noncontrolling interests		—			—			—			—		—			—			—			—		—		—			—
Net income (loss): XM Satellite Radio Holdings and Subsidiaries	$	(292,311	)	$	131,192		$	2,086		$	43,530	$	(176,808	)	$	(292,311	)	$	(345,131	)	$	5,386	$	396	$	286,529		$	(345,131	)

24

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD JULY 1, 2008 THROUGH JULY 31, 2008 (PREDECESSOR ENTITY)

							XM															Satellite										Consolidated
							Equipment			XM Non-						Consolidated			XM Satellite			Leasing			XM 1500		XM					XM Satellite
	XM Satellite			XM Radio			Leasing			Guarantor						XM Satellite			Radio			(702-4),			Eckington		Investment					Radio
(in thousands)	Radio Inc.			Inc.			LLC			Subsidiaries			Eliminations			Radio Inc.			Holdings Inc.			LLT			LLC		LLC		Eliminations			Holdings Inc.
Revenue	$	103,821		$	17,031		$	913		$	—		$	(17,944	)	$	103,821		$	833		$	2,976		$	856	$	109	$	(3,891	)	$	104,704
Cost of services		61,453			—			—			—			35			61,488			—			—			—		—		—			61,488
Sales and marketing		17,268			—			—			—			—			17,268			—			—			—		—		—			17,268
Subscriber acquisition costs		33,366			—			—			—			—			33,366			—			—			—		—		—			33,366
General and administrative		33,647			—			—			—			—			33,647			149			—			110		26		(723	)		33,209
Engineering, design and development		2,611			—			—			—			—			2,611			—			—			—		—		—			2,611
Depreciation and amortization		10,337			—			997			—			—			11,334			16			—			116		51		(689	)		10,828
Total operating expenses		158,682			—			997			—			35			159,714			165			—			226		77		(1,412	)		158,770
Income (loss) from operations		(54,861	)		17,031			(84	)		—			(17,979	)		(55,893	)		668			2,976			630		32		(2,479	)		(54,066	)
Other income (expense):
Interest and investment income		506			—			50			4,977			(5,027	)		506			88			—			—		—		—			594
Interest expense, net of amounts capitalized		(16,739	)		—			—			(50	)		5,025			(11,764	)		(2,924	)		(1,923	)		—		—		2,481			(14,130	)
Loss on extinguishment of debt and credit facilities, net		—			—			—			—			—			—			—			—			—		—		—			—
Gain (loss) on investments		—			—			—			—			—			—			(4,460	)		—			—		—		—			(4,460	)
Other income (expense)		3,615			—			1			—			(3,752	)		(136	)		(66,482	)		—			—		—		66,623			5
						��
Net income (loss) before income taxes		(67,479	)		17,031			(33	)		4,927			(21,733	)		(67,287	)		(73,110	)		1,053			630		32		66,625			(72,057	)
Benefit from (provision for) income taxes		—			(192	)		—			—			—			(192	)		(508	)		—			—		—		192			(508	)
Net income (loss)		(67,479	)		16,839			(33	)		4,927			(21,733	)		(67,479	)		(73,618	)		1,053			630		32		66,817			(72,565	)
Add: net loss attributable to noncontrolling interests		—			—			—			—			—			—			—			—			—		—		(1,053	)		(1,053	)
Net income (loss): XM Satellite Radio Holdings and Subsidiaries	$	(67,479	)	$	16,839		$	(33	)	$	4,927		$	(21,733	)	$	(67,479	)	$	(73,618	)	$	1,053		$	630	$	32	$	65,764		$	(73,618	)

25

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2008 THROUGH JULY 31, 2008 (PREDECESSOR ENTITY)

							XM															Satellite
							Equipment			XM Non-						Consolidated			XM Satellite			Leasing			XM 1500		XM					Consolidated
	XM Satellite			XM Radio			Leasing			Guarantor						XM Satellite			Radio			(702-4),			Eckington		Investment					XM Satellite
(in thousands)	Radio Inc.			Inc.			LLC			Subsidiaries			Eliminations			Radio Inc.			Holdings Inc.			LLT			LLC		LLC		Eliminations			Radio Holdings Inc.
Revenue	$	725,314		$	104,112		$	6,394		$	—		$	(110,506	)	$	725,314		$	5,829		$	21,001		$	7,676	$	757	$	(29,383	)	$	731,194
Cost of services		433,011			—			21			—			256			433,288			—			—			—		—		—			433,288
Sales and marketing		126,054			—			—			—			—			126,054			—			—			—		—		—			126,054
Subscriber acquisition costs		174,083			—			—			—			—			174,083			—			—			—		—		—			174,083
General and administrative		120,349			—			—			—			—			120,349			287			—			611		181		(4,984	)		116,444
Engineering, design and development		23,045			—			—			—			—			23,045			—			—			—		—		—			23,045
Depreciation and amortization		85,302			—			6,990			—			—			92,292			112			—			811		360		(4,826	)		88,749
Total operating expenses		961,844			—			7,011			—			256			969,111			399			—			1,422		541		(9,810	)		961,663
Income (loss) from operations		(236,530	)		104,112			(617	)		—			(110,762	)		(243,797	)		5,430			21,001			6,254		216		(19,573	)		(230,469	)
Other income (expense):
Interest and investment income		2,618			—			369			34,193			(34,562	)		2,618			395			—			—		—		—			3,013
Interest expense, net of amounts capitalized		(108,239	)		—			—			(369	)		34,560			(74,048	)		(3,950	)		(13,558	)		—		—		17,619			(73,937	)
Loss on extinguishment of debt and credit facilities, net		—			—			—			—			—			—			—			—			—		—		—			—
Gain (loss) on investments		—			—			—			—			—			—			(13,010	)		—			—		—		—			(13,010	)
Other income (expense)		25,362			—			152			—			(25,728	)		(214	)		(309,811	)		—			—		—		310,925			900
Net income (loss) before income taxes		(316,789	)		104,112			(96	)		33,824			(136,492	)		(315,441	)		(320,946	)		7,443			6,254		216		308,971			(313,503	)
Benefit from (provision for) income taxes		—			(1,348	)		—			—			—			(1,348	)		(1,512	)		—			—		—		1,348			(1,512	)
Net income (loss)		(316,789	)		102,764			(96	)		33,824			(136,492	)		(316,789	)		(322,458	)		7,443			6,254		216		310,319			(315,015	)
Add: net loss attributable to noncontrolling interests		—			—			—			—			—			—			—			—			—		—		(7,443	)		(7,443	)
Net income (loss): XM Satellite Radio Holdings and Subsidiaries	$	(316,789	)	$	102,764		$	(96	)	$	33,824		$	(136,492	)	$	(316,789	)	$	(322,458	)	$	7,443		$	6,254	$	216	$	302,876		$	(322,458	)

26

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD AUGUST 1, 2008 THROUGH SEPTEMBER 30, 2008 (SUCCESSOR ENTITY)

							XM																									Consolidated
							Equipment			XM Non-						Consolidated			XM Satellite			Satellite			XM 1500		XM					XM Satellite
	XM Satellite			XM Radio			Leasing			Guarantor						XM Satellite			Radio Holdings			Leasing (702-4),			Eckington		Investment					Radio
(in thousands)	Radio Inc.			Inc.			LLC			Subsidiaries			Eliminations			Radio Inc.			Inc.			LLT			LLC		LLC		Eliminations			Holdings Inc.
Revenue	$	195,183		$	31,095		$	1,827		$	—		$	(32,923	)	$	195,182		$	471		$	4,409		$	1,608	$	219	$	(6,286	)	$	195,603
Cost of services		97,804			—			7			—			71			97,882			—			—			—		—		—			97,882
Sales and marketing		28,951			—			—			—			—			28,951			—			—			—		—		—			28,951
Subscriber acquisition costs		27,482			—			—			—			—			27,482			—			—			—		—		—			27,482
General and administrative		20,296			—			—			—			—			20,296			153			—			166		52		(1,452	)		19,215
Engineering, design and development		5,191			—			—			—			—			5,191			—			—			—		—		—			5,191
Impairment of goodwill		—			—			—			—			—			—			5,026,838			—			—		—		—			5,026,838
Depreciation and amortization		32,667			—			1,957			—			—			34,624			194			—			232		103		(533	)		34,620
Total operating expenses		212,391			—			1,964			—			71			214,426			5,027,185			—			398		155		(1,985	)		5,240,179
Income (loss) from operations		(17,208	)		31,095			(137	)		—			(32,994	)		(19,244	)		(5,026,714	)		4,409			1,210		64		(4,301	)		(5,044,576	)
Other income (expense):
Interest and investment income		4,219			—			99			9,792			(9,891	)		4,219			(256	)		—			—		—		—			3,963
Interest expense, net of amounts capitalized		(55,146	)		—			—			(99	)		9,892			(45,353	)		(6,115	)		—			—		—		3,670			(47,798	)
Gain (loss) on change in value of embedded derivative		241,431			—			—			—			—			241,431			792			—			—		—		—			242,223
Loss on extinguishment of debt and credit facilities, net		—			—			—			—			—			—			—			—			—		—		—			—
Gain (loss) on investments		—			—			—			—			—			—			(3,089	)		—			—		—		—			(3,089	)
Other income (expense)		7,284			—			—			—			(7,372	)		(88	)		182,031			(2,821	)		—		—		(183,196	)		(4,074	)
Net income (loss) before income taxes		180,580			31,095			(38	)		9,693			(40,365	)		180,965			(4,853,351	)		1,588			1,210		64		(183,827	)		(4,853,351	)
Benefit from (provision for) income taxes		—			(385	)		—			—			—			(385	)		(672	)		—			—		—		385			(672	)
Net income (loss)		180,580			30,710			(38	)		9,693			(40,365	)		180,580			(4,854,023	)		1,588			1,210		64		(183,442	)		(4,854,023	)
Add: net loss attributable to noncontrolling interests		—			—			—			—			—			—			—			—			—		—		—			—
Net income (loss): XM Satellite Radio Holdings and Subsidiaries	$	180,580		$	30,710		$	(38	)	$	9,693		$	(40,365	)	$	180,580		$	(4,854,023	)	$	1,588		$	1,210	$	64	$	(183,442	)	$	(4,854,023	)

27

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF STOCKHOLDER’S DEFICIT AND COMPREHENSIVE LOSS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

						XM		XM Non-					Consolidated XM													Consolidated XM
	XM Satellite			XM Radio		Equipment		Guarantor					Satellite Radio			XM Satellite Radio			XM 1500		XM Investment					Satellite Radio
(in thousands)	Radio Inc.			Inc.		Leasing LLC		Subsidiaries		Eliminations			Inc.			Holdings Inc.			Eckington LLC		LLC		Eliminations			Holdings Inc.
Balance at December 31, 2008	$	(473,697	)	$	1,852,825	$	56,198	$	716,125	$	(2,625,148	)	$	(473,697	)	$	(575,554	)	$	102,117	$	17,707	$	353,873		$	(575,554	)
Net income (loss)		(292,311	)		131,192		2,086		43,530		(176,808	)		(292,311	)		(345,131	)		5,386		396		286,529			(345,131	)
Other comprehensive loss:
Unrealized loss on available-for-sale securities		—			—		—		—		—			—			579			—		—		—			579
Foreign currency translation adjustment		—			—		—		—		—			—			694			—		—		—			694
Comprehensive loss																	(343,858	)									(343,858	)
Contributions (distributions) to (from) paid-in capital		109,819			—		2,592		—		(2,591	)		109,819			119,198			—		59		(109,878	)		119,198
Balance at September 30, 2009	$	(656,189	)	$	1,984,017	$	60,876	$	759,655	$	(2,804,547	)	$	(656,189	)	$	(800,214	)	$	107,503	$	18,162	$	530,524		$	(800,214	)

28

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 (SUCCESSOR ENTITY)

						XM																				Consolidated
						Equipment			XM Non-				Consolidated XM			XM Satellite			XM 1500							XM Satellite
	XM Satellite			XM Radio		Leasing			Guarantor				Satellite Radio			Radio Holdings			Eckington		XM Investment					Radio
(in thousands)	Radio Inc.			Inc.		LLC			Subsidiaries		Eliminations		Inc.			Inc.			LLC		LLC		Eliminations			Holdings Inc.
Net cash (used in) provided by operating activities	$	195,359		$	—	$	(5	)	$	—	$	—	$	195,354		$	29,616		$	3,088	$	560	$	—		$	228,618
Cash flows from investing activities:
Additions to property and equipment		(11,217	)		—		—			—		—		(11,217	)		(27,594	)		—		—		—			(38,811	)
Sale of restricted and other investments		—			—		—			—		—		—			—			—		—		—			—
Net cash used in investing activities		(11,217	)		—		—			—		—		(11,217	)		(27,594	)		—		—		—			(38,811	)
Cash flows from financing activities:
Long-term borrowings, net of costs		387,184			—		—			—		—		387,184			—			—		—		—			387,184
Related party long-term borrowings, net of costs		95,093			—		—			—		—		95,093			—			—		—		—			95,093
Repayment of long-term borrowings		(256,662	)		—		—			—		—		(256,662	)		—			—		—		(179,065	)		(435,727	)
Repayment of long-term related party borrowings		(100,000	)		—		—			—		—		(100,000	)		—			—		—		—			(100,000	)
Payment of premiums on redemption of debt		(12,003	)		—		—			—		—		(12,003	)		(5,072	)		—		—		—			(17,075	)
Net cash provided by (used in) financing activities		113,612			—		—			—		—		113,612			(5,072	)		—		—		(179,065	)		(70,525	)
Net increase (decrease) in cash and cash equivalents		297,754			—		(5	)		—		—		297,749			(3,050	)		3,088		560		(179,065	)		119,282
Cash and cash equivalents at beginning of period		199,938			—		15			—		—		199,953			5,923			760		104		—			206,740
Cash and cash equivalents at end of period	$	497,692		$	—	$	10		$	—	$	—	$	497,702		$	2,873		$	3,848	$	664	$	(179,065	)	$	326,022

29

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 2008 THROUGH JULY 31, 2008 (PREDECESSOR ENTITY)

						XM												Satellite									Consolidated
						Equipment		XM Non-				Consolidated			XM Satellite			Leasing			XM 1500		XM				XM Satellite
	XM Satellite			XM Radio		Leasing		Guarantor				XM Satellite			Radio Holdings			(702-4),			Eckington		Investment				Radio
(in thousands)	Radio Inc.			Inc.		LLC		Subsidiaries		Eliminations		Radio Inc.			Inc.			LLT			LLC		LLC		Eliminations		Holdings Inc.
Net cash (used in) provided by operating activities	$	(278,970	)	$	—	$	22	$	—	$	—	$	(278,948	)	$	20,961		$	6,897		$	4	$	—	$	—	$	(251,086	)
Cash flows from investing activities:
Additions to property and equipment		(23,854	)		—		—		—		—		(23,854	)		(6,989	)		—			—		—		—		(30,843	)
Purchases of restricted and other investments		—			—		—		—		—		—			(34,825	)		—			—		—		—		(34,825	)
Sale of restricted and other investments		—			—		—		—		—		—			—			—			—		—		—		—
Net cash used in investing activities		(23,854	)		—		—		—		—		(23,854	)		(41,814	)		—			—		—		—		(65,668	)
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options		—			—		—		—		—		—			964			—			—		—		—		964
Capital contributions from Holdings		13,125			—		—		—				13,125			(13,125	)		—			—		—		—		—
Long-term borrowings, net of costs		1,023,190			—		—		—		—		1,023,190			—			—			—		—		—		1,023,190
Payments to minority interest holder		—			—		—		—		—		—			—			(6,897	)		—		—		—		(6,897	)
Repayment of long-term borrowings		(35,210	)		—		—		—		—		(35,210	)		—			—			—		—		—		(35,210	)
Other, net		—			—		—		—		—		—			(2,458	)		—			—		—		—		(2,458	)
Net cash provided by (used in) financing activities		1,001,105			—		—		—		—		1,001,105			(14,619	)		(6,897	)		—		—		—		979,589
Net increase (decrease) in cash and cash equivalents		698,281			—		22		—		—		698,303			(35,472	)		—			4		—		—		662,835
Cash and cash equivalents at beginning of period		100,111			—		11		—		—		100,122			56,554			—			10		—		—		156,686
Cash and cash equivalents at end of period	$	798,392		$	—	$	33	$	—	$	—	$	798,425		$	21,082		$	—		$	14	$	—	$	—	$	819,521

30

XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE PERIOD AUGUST 1, 2008 THROUGH SEPTEMBER 30, 2008 (PREDECESSOR ENTITY)

						XM													Satellite										Consolidated
						Equipment			XM Non-				Consolidated XM			XM Satellite			Leasing										XM Satellite
	XM Satellite			XM Radio		Leasing			Guarantor				Satellite Radio			Radio Holdings			(702-4),			XM 1500			XM Investment				Radio
(in thousands)	Radio Inc.			Inc.		LLC			Subsidiaries		Eliminations		Inc.			Inc.			LLT			Eckington LLC			LLC		Eliminations		Holdings Inc.
Net cash (used in) provided by operating activities	$	8,391		$	—	$	(15	)	$	—	$	—	$	8,376		$	(4,249	)	$	1,479		$	(3	)	$	—	$	—	$	5,603
Cash flows from investing activities:
Additions to property and equipment		(7,727	)		—		—			—		—		(7,727	)		(166	)		—			—			—		—		(7,893	)
Purchases of restricted and other investments		—			—		—			—		—		—			—			—			—			—		—		—
Sale of restricted and other investments		—			—		—			—		—		—			25,400			—			—			—		—		25,400
Net cash (used in) provided by investing activities		(7,727	)		—		—			—		—		(7,727	)		25,234			—			—			—		—		17,507
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options		—			—		—			—		—		—			—			—			—			—		—		—
Capital contributions from Holdings		—			—		—			—				—			—			—			—			—		—		—
Long-term borrowings, net of costs		533,941			—		—			—		—		533,941			—			—			—			—		—		533,941
Payments to minority interest holder		(60,401	)		—		—			—		—		(60,401	)		—			(1,479	)		—			—		—		(61,880	)
Repayment of long-term borrowings		(1,080,553	)		—		—			—		—		(1,080,553	)		—			—			—			—		—		(1,080,553	)
Payment of premiums on redemption of debt		—			—		—			—		—		—			(18,693	)		—			—			—		—		(18,693	)
Other, net		—			—		—			—		—		—			(98	)		—			—			—		—		(98	)
Net cash used in financing activities		(607,013	)		—		—			—		—		(607,013	)		(18,791	)		(1,479	)		—			—		—		(627,283	)
Net increase (decrease) in cash and cash equivalents		(606,349	)		—		(15	)		—		—		(606,364	)		2,194			—			(3	)		—		—		(604,173	)
Cash and cash equivalents at beginning of period		798,392			—		33			—		—		798,425			21,082			—			14			—		—		819,521
Cash and cash equivalents at end of period	$	192,043		$	—	$	18		$	—	$	—	$	192,061		$	23,276		$	—		$	11		$	—	$	—	$	215,348

31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All dollar amounts referenced in this Item 2 are in thousands, unless otherwise stated)

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 our Annual Report on Form 10-K for the year ended December 31, 2008 (the “Form 10-K”), and in other reports and documents published by us from time to time, particularly the risk factors described under “Business — Risk Factors” in Item 1A of the Form 10-K.

Among the significant factors that could cause our actual results to differ materially from those expressed in the forward-looking statements are:

• the substantial indebtedness of XM Holdings and XM;

• the useful life of our satellites, which have experienced component failures including, with respect to a number of satellites, failures on their solar arrays and in certain cases, are not insured;

• our dependence upon automakers, many of which have experienced a dramatic drop in sales and are in financial distress, and other third parties, such as manufacturers and distributors of satellite radios, retailers and programming providers; and

• our competitive position versus other forms of audio and video entertainment including terrestrial radio, HD radio, internet radio, mobile phones, iPods and other MP3 devices, and emerging next-generation networks and technologies.

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. 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 broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the United States on a subscription fee basis through our proprietary satellite radio system. On July 28, 2008, XM Satellite Radio Holdings Inc. merged with and into Vernon Merger Corporation, a wholly owned subsidiary of SIRIUS; and as a result, XM Satellite Radio Holdings Inc. is now a wholly owned subsidiary of SIRIUS. Our system consists of four in-orbit satellites, over 650 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios. Subscribers can also receive certain of our music and other channels over the Internet, including through an app on the Apple iPhone.

Our satellite radios are primarily distributed through automakers (“OEMs”), retailers and through our website. We have agreements with major automakers to offer satellite radios as factory or dealer-installed equipment in their vehicles. Our radios are also offered to customers of rental car companies.

As of September 30, 2009, we had 9,704,886 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 and dealers for prepaid subscriptions included in the sale or lease price of a vehicle; certain radios activated for daily rental fleet programs; subscribers to XM Radio Online, our Internet service; and certain subscribers to our weather, traffic and data services.

Our primary source of revenue is subscription fees, with most of our customers subscribing on an annual, semi-annual, quarterly or monthly basis. We offer discounts for pre-paid and long-term subscriptions as well as discounts for multiple subscriptions. In 2009, we increased the discounted price for additional subscriptions from $6.99 per month to $8.99 per month. We also derive revenue from activation fees, the sale of advertising on select non-music channels, the direct sale of satellite radios, components and accessories, and other ancillary services, such as data and weather services.

32

In August 2009, we began charging our subscribers a U.S. Music Royalty Fee (the “MRF”). The MRF is $1.98 a month on our base subscriptions and $.97 for plans that are eligible for a second radio discount. The MRF also varies depending upon subscriber package and plan term. Amounts we collect through the MRF are included in Other revenue on our unaudited consolidated statements of operations. The FCC decision approving the Merger permits us to pass through to subscribers increases in music royalties since March 20, 2007, the date we asked the FCC to approve the Merger. The MRF is the implementation of that FCC decision.

In certain cases, automakers include a subscription to our radio services in the sale or lease price of vehicles. The length of these prepaid subscriptions varies, but is typically three months. We also reimburse various automakers for certain costs associated with satellite radios installed in their vehicles.

We also have an interest in a satellite radio service offered in Canada. Subscribers to the Canadian Satellite Radio Holdings Inc. (“XM Canada”) service are not included in our subscriber count.

XM Satellite Radio Holdings Inc., together with its subsidiaries, now operates as an unrestricted subsidiary under the agreements governing SIRIUS’ existing indebtedness. As an unrestricted subsidiary, transactions between the companies are required to comply with various contractual provisions in our respective debt instruments.

Unaudited Actual and Pro Forma Information

Our discussion of our unaudited pro forma information includes non-GAAP financial results that assume the Merger occurred on January 1, 2008. These financial results exclude the impact of purchase price accounting adjustments and refinancing transactions related to the Merger. The discussion also includes the following non-GAAP financial measures: average self-pay monthly churn; conversion rate; average monthly revenue per subscriber, or ARPU; subscriber acquisition cost, or SAC, as adjusted, per gross subscriber addition; customer service and billing expenses, as adjusted, per average subscriber; free cash flow; and adjusted income (loss) from operations. We believe this non-GAAP financial information provides meaningful supplemental information regarding our operating performance and is used for internal management purposes, when publicly providing the business outlook, and as a means to evaluate period-to-period comparisons. Please refer to the footnotes (pages 49 through 59) following our discussion of results of operations for the definitions and a further discussion of the usefulness of such non-GAAP financial information and reconciliation to GAAP.

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Subscriber and Key Operating Metrics.The following tables contain our actual and pro forma subscriber and key operating metrics for the three and nine months ended September 30, 2009 and 2008, respectively:

Unaudited Actual and Pro Forma Quarterly Subscribers and Metrics:

	Unaudited
	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Beginning subscribers		9,641,800			9,850,741			9,652,691			9,026,837
Gross subscriber additions		833,684			2,289,360			1,041,242			3,161,844
Deactivated subscribers		(770,598	)		(2,435,215	)		(797,861	)		(2,292,609	)
Net additions		63,086			(145,855	)		243,381			869,235
Ending subscribers		9,704,886			9,704,886			9,896,072			9,896,072
Retail		3,777,646			3,777,646			4,418,746			4,418,746
OEM		5,840,637			5,840,637			5,387,851			5,387,851
Rental		86,603			86,603			89,475			89,475
Ending subscribers		9,704,886			9,704,886			9,896,072			9,896,072
Retail		(175,144	)		(541,986	)		(90,392	)		(179,260	)
OEM		237,950			397,913			333,906			1,020,215
Rental		280			(1,782	)		(133	)		28,280
Net additions		63,086			(145,855	)		243,381			869,235
Self-pay		8,897,480			8,897,480			8,916,700			8,916,700
Paid promotional		807,406			807,406			979,372			979,372
Ending subscribers		9,704,886			9,704,886			9,896,072			9,896,072
Self-pay		(23,551	)		(198,099	)		229,857			728,418
Paid promotional		86,637			52,244			13,524			140,817
Net additions		63,086			(145,855	)		243,381			869,235
Daily weighted average number of subscribers		9,691,620			9,682,252			9,779,397			9,481,219

	Unaudited
	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Average self-pay monthly churn (1)(7)		2.0	%		2.1	%		1.7	%		1.7	%
Conversion rate (2)(7)		50.4	%		48.9	%		49.7	%		51.9	%
ARPU (3)(7)	$	10.94		$	10.77		$	10.41		$	10.55
SAC, as adjusted, per gross subscriber addition (4)(7)	$	65		$	53		$	73		$	70
Customer service and billing expenses, as adjusted, per average subscriber (5)(7)	$	1.06		$	1.09		$	1.21		$	1.23
Total revenue	$	336,424		$	980,998		$	319,936		$	946,426
Free cash flow (6)(7)	$	92,524		$	189,807		$	(21,758	)	$	(284,194	)
Adjusted income (loss) from operations (8)	$	66,327		$	191,184		$	(36,449	)	$	(104,479	)
Net loss	$	(26,303	)	$	(242,382	)	$	(142,958	)	$	(391,798	)

Note: See pages 49 through 59 for footnotes.

Subscribers.At September 30, 2009 we had 9,704,886 subscribers, a decrease of 191,186 subscribers, or 2%, from the 9,896,072 subscribers as of September 30, 2008. The decrease was principally the result of 171,966 fewer paid promotional trials due to the decline in the North American auto sales and 19,220 fewer self-pay subscribers compared to September 30, 2008. Gross subscriber additions decreased approximately 20% and 28% during the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008. OEM gross subscriber additions decreased due to the decline in the North American automobile sales and retail gross subscriber additions decreased due to declines in consumer spending. Deactivation rates for self-pay subscriptions in the quarter increased to 2.0% per month reflecting reductions in consumer discretionary spending, subscriber response to our increase in prices for multi-subscription accounts, channel line-up changes in 2008, the institution of a monthly charge for our streaming service and the introduction of U.S. Music Royalty Fee.

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ARPU.ARPU is derived from total earned subscriber revenue and net advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. See accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, total ARPU was $10.94 and $10.41, respectively. The increase was driven mainly by the sale of “Best of” programming, increased rates on our multi-subscription packages and revenues earned on our internet packages, partially offset by lower ad revenue.

• Nine Months: For the nine months ended September 30, 2009 and 2008, total ARPU was $10.77 and $10.55, respectively. Increases in subscriber revenue were driven mainly by the sale of “Best of” programming, increased rates on our multi-subscription packages and revenues earned on our internet packages, partially offset by lower ad revenue.

SAC, As Adjusted, Per Gross Subscriber Addition.SAC, as adjusted, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding share-based payment expense divided by the number of gross subscriber additions for the period. See accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, SAC, as adjusted, per gross subscriber addition was $65 and $73, respectively. The decrease in SAC was primarily driven by fewer OEM installations relative to gross subscriber additions, lower aftermarket inventory settlements and lower OEM subsidies compared to the three months ended September 30, 2008.

• Nine Months: For the nine months ended September 30, 2009 and 2008, SAC, as adjusted, per gross subscriber addition was $53 and $70, respectively. The decrease was primarily driven by lower aftermarket inventory settlements, fewer OEM installations relative to gross subscriber additions, and lower OEM subsidies in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008.

Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber.Customer service and billing expenses, as adjusted, per average subscriber is derived from total customer service and billing expenses, excluding 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 accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, customer service and billing expenses, as adjusted, per weighted average subscriber was $1.06 and $1.21, respectively. The decline was primarily due to decreases in personnel costs and customer call center expenses.

• Nine Months: For the nine months ended September 30, 2009 and 2008, customer service and billing expenses, as adjusted, per weighted average subscriber was $1.09 and $1.23, respectively. The decline was primarily due to decreases in personnel costs and customer call center expenses.

Adjusted Income (Loss) from Operations.We refer to net loss before interest and investment income; interest expense, net of amounts capitalized; income tax expense, loss on extinguishment of debt and credit facilities, net; gain (loss) on investments, other expense (income), restructuring, impairments and related costs, depreciation and amortization, and share-based payment expense as adjusted income (loss) from operations. See accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, our adjusted income (loss) from operations was $66,327 and ($36,449), respectively. Adjusted income (loss) from operations was favorably impacted by an increase of 5%, or $16,488, in revenues and a decrease of 24%, or $86,288, in total expenses included in adjusted income (loss) from operations. The increase in revenue was due mainly to increased rates on multi-subscription packages, the introduction of the U.S. Music Royalty Fee, revenues earned on internet packages and the sale of “Best of” programming. The decreases in expenses were primarily driven by lower Subscriber acquisition costs, lower Sales and marketing discretionary spend, lower legal and consulting costs in General and administrative expenses.

• Nine Months: For the nine months ended September 30, 2009 and 2008, our adjusted income (loss) from operations was $191,184 and ($104,479), respectively. Adjusted income (loss) from operations was favorably impacted by an increase of 4%, or $34,572, in revenues and a decrease of 25%, or $261,091, in total expenses included in adjusted income (loss) from operations. The increase in revenue was due mainly to an increase in weighted average subscribers as well as increased rates on multi-subscription packages, the introduction of the U.S. Music Royalty Fee, revenues earned on internet packages and the sale of “Best of” programming. The decreases in expenses were primarily driven by lower Subscriber acquisition costs, lower Sales and marketing discretionary spend, lower legal and consulting costs in General and administrative expenses.

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Unaudited Pro Forma Results of Operations.Set forth below are certain pro forma items that give effect to the Merger as if it had occurred on January 1, 2008. The pro forma information below does not give effect to any adjustments as a result of the purchase price accounting for the Merger. See footnote 8 (pages 50 to 51) for a reconciliation of net loss to adjusted income (loss) from operations.

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Revenue:
Subscriber revenue, including effects of rebates	$	313,852		$	925,060		$	297,151		$	872,337
Advertising revenue, net of agency fees		4,147			13,475			8,358			27,908
Equipment revenue		5,657			17,681			4,936			16,748
Other revenue		12,768			24,782			9,491			29,433
Total revenue		336,424			980,998			319,936			946,426
Operating expenses:
Satellite and transmission		11,431			36,541			18,829			56,311
Programming and content		44,904			135,192			46,207			143,009
Revenue share and royalties		69,949			208,605			73,747			216,155
Customer service and billing		30,719			95,090			35,508			104,565
Cost of equipment		5,142			12,049			7,426			25,033
Sales and marketing		27,813			90,176			46,126			148,635
Subscriber acquisition costs		54,379			126,833			73,343			214,060
General and administrative		20,861			70,567			48,790			120,459
Engineering, design and development		4,899			14,761			6,409			22,678
Depreciation and amortization		17,484			60,434			31,957			109,878
Share-based payment expense		8,732			36,287			11,415			41,867
Restructuring, impairments and related costs		3,029			29,614			—			—
Total operating expenses		299,342			916,149			399,757			1,202,650
Income (loss) from operations		37,082			64,849			(79,821	)		(256,224	)
Other expense		(62,807	)		(305,498	)		(60,904	)		(125,947	)
Loss before income taxes		(25,725	)		(240,649	)		(140,725	)		(382,171	)
Income tax expense		(578	)		(1,733	)		(1,180	)		(2,184	)
Net loss		(26,303	)		(242,382	)		(141,905	)		(384,355	)
Add: net loss attributable to noncontrolling interests		—			—			(1,053	)		(7,443	)
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(26,303	)	$	(242,382	)	$	(142,958	)	$	(391,798	)

Highlights for the Three Months Ended September 30, 2009. Our revenue grew 5%, or $16,488, in the three months ended September 30, 2009 compared to the same period in 2008. Subscriber revenue increased 6%, or $16,701, in the three months ended September 30, 2009 compared to the same period in 2008. The increase in subscriber revenue was driven by the sale of “Best of” programming and the rate increases to our multi-subscription and internet packages. Advertising revenue decreased 50%, or $4,211, in the three months ended September 30, 2009 compared to the same period in 2008. The decrease in advertising revenue was driven by the current economic environment. Equipment revenue increased 15%, or $721, in the three months ended September 30, 2009 compared to the same period in 2008. The increase in equipment revenue was driven by increase in royalties. Other revenue increased 35%, or $3,277, in the three months ended September 30, 2009 compared to the same period in 2008. The increase in other revenue was driven by the U.S. Music Royalty Fee introduced this quarter. The overall increase in revenue, combined with a decrease of 24%, or $86,288, in adjusted operating costs (total operating expense excluding restructuring, impairments and related costs, depreciation and amortization, impairment of goodwill and share-based payment expense), resulted in improved adjusted income (loss) from operations of $66,327 in the three months ended September 30, 2009 compared to ($36,449) in the same three month period in 2008.

Satellite and transmission costs decreased 39%, or $7,398, in the three months ended September 30, 2009 compared to the same period in 2008 due to reductions in maintenance costs, repeater lease expense and personnel costs. Programming and content costs decreased 3%, or $1,303, in the three months ended September 30, 2009 compared to the same period in 2008, due mainly to reductions in personnel and on-air talent costs as well as savings on content agreements. Revenue share and royalties decreased 5%, or $3,798, primarily due to decreases in our royalties due to certain OEM partners, partially offset by an increase in the statutory royalty rate for the performance of sound recordings. Customer service and billing costs decreased 13%, or $4,789, in the three months ended September 30, 2009 compared to the same period in 2008 primarily due to decreases in personnel costs and customer call center expenses across a larger subscriber base. Cost of equipment decreased 31%, or $2,284, in the three months ended September 30, 2009 compared to the same period in 2008 as a result of a decrease in our direct to customer sales and lower inventory write-downs.

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Sales and marketing costs decreased 40%, or $18,313, and decreased as a percentage of revenue to 8% from 14% in the three months ended September 30, 2009 compared to the same period in 2008 due to reduced advertising and cooperative marketing spend, as well as reductions to personnel costs and third party distribution support expenses. Subscriber acquisition costs decreased 26%, or $18,964, and decreased as a percentage of revenue to 16% from 23% in the three months ended September 30, 2009 compared to the same period in 2008. This improvement was driven by fewer OEM installations relative to gross subscriber additions, decreased production of certain radios, lower OEM subsidies and lower aftermarket inventory reserves compared to the three months ended September 30, 2008. Subscriber acquisition costs also decreased as a result of the 20% decline in gross additions during the three months ended September 30, 2009.

General and administrative costs decreased 57%, or $27,929, mainly due to the absence of certain legal and regulatory costs incurred in 2008 and lower personnel costs. Engineering, design and development costs decreased 24%, or $1,510, in the three months ended September 30, 2009 compared to the same period in 2008, due to lower costs associated with manufacturing of radios, OEM tooling and manufacturing, and personnel.

Restructuring, impairments and related costs were $3,029 mainly due to charges related to revisions in estimated cash flows for vacated leases.

Other expenses increased 3%, or $1,903, in the three months ended September 30, 2009 compared to the same period in 2008 driven mainly by increases from losses on extinguishment of debt and credit facilities and increases in interest expense, offset by increases in gains on investments. The loss on the extinguishment of debt and credit facilities was incurred on the repayment of our 10% Convertible Senior Notes due 2009. Interest expense increased due primarily to the issuance of the 13% Senior Notes due 2013 and the 7% Exchangeable Senior Subordinated Notes due 2014 in the third quarter of 2008 and the Amended and Restated Credit Agreement in the first quarter of 2009.

Highlights for the Nine Months Ended September 30, 2009. Our subscriber revenue grew 6%, or $52,723, in the nine months ended September 30, 2009 compared to the same period in 2008. This revenue growth was driven by the sale of “Best of” programming, rate increases on our multi-subscription and Internet packages, as well as a 2% growth in weighted average subscribers. Advertising revenue decreased 52%, or $14,433, in the nine months ended September 30, 2009 compared to the same period in 2008. The decrease in advertising revenue was driven by the current economic environment. Equipment revenue increased 6%, or $933, in the nine months ended September 30, 2009 compared to the same period in 2008. The increase in equipment revenue was primarily due to the reduction in incentives offered at the time of purchase. Other revenue decreased 16%, or $4,651, in the nine months ended September 30, 2009 compared to the same period in 2008. Total revenue increased 4%, or $34,572, and combined with a decrease of 25%, or $261,091, in adjusted operating costs (total operating expenses excluding restructuring, impairments and related costs, depreciation and amortization, impairment of goodwill and share-based payment expense), resulted in improved adjusted income (loss) from operations of $191,184 in the nine months ended September 30, 2009 compared to ($104,479) in the same period in 2008.

Satellite and transmission costs decreased 35%, or $19,770, in the nine months ended September 30, 2009 compared to the same period in 2008 due to reductions in maintenance costs, repeater lease expense, and personnel costs. Programming and content costs decreased 5%, or $7,817, in the nine months ended September 30, 2009 compared to the same period in 2008, due mainly to reductions in personnel and on-air talent costs as well as savings on certain content agreements. Revenue share and royalties decreased 3%, or $7,550, in the nine months ended September 30, 2009 compared to the same period in 2008. Customer service and billing costs decreased 9%, or $9,475, in the nine months ended September 30, 2009 compared to the same period in 2008 due to scale efficiencies over a larger subscriber base. Cost of equipment decreased 52%, or $12,984, in the nine months ended September 30, 2009 compared to the same period in 2008 as a result of a decrease in direct to customer sales and lower inventory write-downs.

Sales and marketing costs decreased 39%, or $58,459, and have decreased as a percentage of revenue to 9% from 16% in the nine months ended September 30, 2009 compared to the same period in 2008 due to reduced advertising and cooperative marketing spend as well as reductions to personnel costs and third party distribution support expenses. Subscriber acquisition costs decreased 41%, or $87,227, and decreased as a percentage of revenue to 13% from 23% in the nine months ended September 30, 2009 compared to the same period in 2008. This decrease was driven by a 24% improvement in SAC, as adjusted, per gross addition due to fewer OEM installations relative to gross subscriber additions, decreased production of certain radios, lower OEM subsidies and lower aftermarket inventory reserves in the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008. Subscriber acquisition costs also decreased as a result of the 28% decline in gross additions during the nine months ended September 30, 2009.

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General and administrative costs decreased 41%, or $49,892, mainly due to the absence of certain legal and regulatory charges incurred in 2008 and lower personnel costs. Engineering, design and development costs decreased 35%, or $7,917, in the nine months ended September 30, 2009 compared to the same period in 2008, due to lower costs associated with manufacturing of radios, OEM tooling and manufacturing, and personnel.

Restructuring, impairments and related costs increased $29,614, mainly due to a loss of $24,196 on capitalized installment payments, which are expected to provide no future benefit due to the counterparty’s bankruptcy filing, for the launch of a satellite, and to charges related to revisions in estimated cash flows for vacated leases.

Other expenses increased 143%, or $179,551, in the nine months ended September 30, 2009 compared to the same period in 2008 driven mainly by the loss on extinguishment of debt and credit facilities of $111,863 and an increase in interest expense of $77,721. The loss on the extinguishment of debt and credit facilities was incurred on the full repayment of our Amended and Restated Credit Agreement and termination of our Second-Lien Credit Agreement. Interest expense increased due primarily to the issuance of the 13% Senior Notes due 2013 and the 7% Exchangeable Senior Subordinated Notes due 2014 in the third quarter of 2008 and the issuance of Amended and Restated Credit Agreement in the first quarter of 2009.

Unaudited Actual Results of Operations

Our discussion of our results of operations, along with the selected financial information in the tables that follow, includes the following non-GAAP financial measures: average self-pay monthly churn; conversion rate; average monthly revenue per subscriber, or ARPU; subscriber acquisition cost, or SAC, as adjusted, per gross subscriber addition; customer service and billing expenses, as adjusted, per average subscriber; free cash flow; and adjusted income (loss) from operations. We believe these non-GAAP financial measures provide meaningful supplemental information regarding our operating performance and are used for internal management purposes, when publicly providing the business outlook, and as a means to evaluate period-to-period comparisons. Please refer to the footnotes (pages 49 through 59) following our discussion of results of operations for the definitions and a further discussion of the usefulness of such non-GAAP financial measures.

Subscriber and Key Operating Metrics:

The following tables contain our subscriber and key operating metrics for the three and nine months ended September 30, 2009 and 2008:

Unaudited Actual Quarterly Subscribers and Metrics:

	Unaudited
	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Beginning subscribers		9,641,800			9,850,741			9,652,691			9,026,837
Gross subscriber additions		833,684			2,289,360			1,041,242			3,161,844
Deactivated subscribers		(770,598	)		(2,435,215	)		(797,861	)		(2,292,609	)
Net additions		63,086			(145,855	)		243,381			869,235
Ending subscribers		9,704,886			9,704,886			9,896,072			9,896,072
Retail		3,777,646			3,777,646			4,418,746			4,418,746
OEM		5,840,637			5,840,637			5,387,851			5,387,851
Rental		86,603			86,603			89,475			89,475
Ending subscribers		9,704,886			9,704,886			9,896,072			9,896,072
Retail		(175,144	)		(541,986	)		(90,392	)		(179,260	)
OEM		237,950			397,913			333,906			1,020,215
Rental		280			(1,782	)		(133	)		28,280
Net additions		63,086			(145,855	)		243,381			869,235
Self-pay		8,897,480			8,897,480			8,916,700			8,916,700
Paid promotional		807,406			807,406			979,372			979,372
Ending subscribers		9,704,886			9,704,886			9,896,072			9,896,072
Self-pay		(23,551	)		(198,099	)		229,857			728,418
Paid promotional		86,637			52,244			13,524			140,817
Net additions		63,086			(145,855	)		243,381			869,235
Daily weighted average number of subscribers		9,691,620			9,682,252			9,779,397			9,481,219

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	Unaudited
	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Average self-pay monthly churn (1)(7)		2.0	%		2.1	%		1.7	%		1.7	%
Conversion rate (2)(7)		50.4	%		48.9	%		49.7	%		51.9	%
ARPU (7)(10)	$	10.62		$	10.30		$	9.79		$	10.33
SAC, as adjusted, per gross subscriber addition (7)(11)	$	41		$	34		$	61		$	66
Customer service and billing expenses, as adjusted, per average subscriber (7)(12)	$	1.06		$	1.09		$	1.21		$	1.23
Total revenue	$	325,473		$	934,538		$	300,307		$	926,797
Free cash flow (7)(13)	$	92,524		$	189,807		$	(21,758	)	$	(284,194	)
Adjusted income (loss) from operations (14)	$	118,870		$	317,982		$	(16,712	)	$	(84,742	)
Net loss	$	(42,851	)	$	(345,131	)	$	(4,927,641	)	$	(5,176,481	)

Note: See pages 49 through 59 for footnotes.

Subscribers.At September 30, 2009 we had 9,704,886 subscribers, a decrease of 191,186 subscribers, or 2%, from the 9,896,072 subscribers as of September 30, 2008. The decrease was principally the result of 171,966 fewer paid promotional trials due to the decline in North American auto sales and 19,220 fewer self-pay subscribers compared to September 30, 2008. Gross subscriber additions decreased approximately 20% and 28% during the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008. OEM gross subscriber additions decreased due to the decline in North American automobile sales and retail gross subscriber additions decreased due to declines in consumer spending. Deactivation rates for self-pay subscriptions in the quarter increased to 2.0% per month reflecting reductions in consumer discretionary spending, subscriber response to our increase in prices for multi-subscription accounts, channel line-up changes in 2008 and the institution of a monthly charge for our streaming service.

ARPU.ARPU is derived from total earned subscriber revenue and net advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. See accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, total ARPU was $10.62 and $9.79, respectively. The increase was driven by the revenue earned for “Best of” programming, increased rates on multi-subscription packages and internet subscriptions.

• Nine Months: For the nine months ended September 30, 2009 and 2008, total ARPU was $10.30 and $10.33, respectively. The decrease was driven by the effect of purchase accounting adjustments, offset partially by the revenue earned for “Best of” programming, increased rates on multi-subscription packages and internet subscriptions.

We expect ARPU to fluctuate based on the growth of our subscriber base, promotions, rebates offered to subscribers and corresponding take-rates, plan mix, subscription prices, advertising sales and the identification of additional revenue from subscribers.

SAC, As Adjusted, Per Gross Subscriber Addition.SAC, as adjusted, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding share-based payment expense, divided by the number of gross subscriber additions for the period. See accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, SAC, as adjusted, per gross subscriber addition was $41 and $61, respectively. The decrease was primarily driven by the effect of purchase price accounting adjustments, lower aftermarket inventory settlements, lower OEM subsidies and improved equipment margins.

• Nine Months: For the nine months ended September 30, 2009 and 2008, SAC, as adjusted, per gross subscriber addition was $34 and $66, respectively. The decrease was primarily driven by the effect of purchase price accounting adjustments, lower aftermarket inventory settlements, lower OEM subsidies and improved equipment margins.

We expect SAC, as adjusted, per gross subscriber addition to decline as the costs of subsidized components of XM radios decrease in the future. Our SAC, as adjusted, per gross subscriber addition will continue to be impacted by changes in our mix of OEM and retail additions.

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Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber.Customer service and billing expenses, as adjusted, per subscriber is derived from total customer service and billing expenses, excluding 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 accompanying footnotes for more details.

• Three Months: For the three months ended September 30, 2009 and 2008, customer service and billing expenses, as adjusted, per weighted average subscriber was $1.06 and $1.21, respectively. The decline was primarily due to decreases in personnel costs and customer call center expenses.

• Nine Months: For the nine months ended September 30, 2009 and 2008, customer service and billing expenses, as adjusted, per weighted average subscriber was $1.09 and $1.23, respectively. The decline was primarily due to decreases in personnel costs and customer call center expenses.

We expect customer service and billing expenses, as adjusted, per average subscriber to decrease on an annual basis as our subscriber base grows due to scale efficiencies in our call centers and other customer care and billing operations.

Adjusted Income (Loss) from Operations.We refer to net loss before interest and investment income, interest expense net of amounts capitalized, income tax expense, gain (loss) on change in value of embedded derivative, loss on extinguishment of debt and credit facilities, net, loss on investments, other expense (income), restructuring, impairments and related cost, depreciation and amortization, and share related payment expense as adjusted income (loss) from operations.

• Three Months: For the three months ended September 30, 2009 and 2008, our adjusted income (loss) from operations was $118,870 and ($16,712), respectively, an increase of $135,582. The increase was primarily driven by improvements in each operating expense area, excluding restructuring, impairments and related cost, depreciation and amortization, impairment of goodwill and share-based payment expense, totaling $110,416 and an increase in total revenue of $25,166.

• Nine Months: For the nine months ended September 30, 2009 and 2008, our adjusted income (loss) from operations was $317,982 and ($84,742), respectively, an increase of $402,724. The increase was primarily driven by improvements in each operating expense area, excluding restructuring, impairments and related cost, depreciation and amortization, impairment of goodwill and share-based payment expense, totaling $394,983 and an increase in total revenue of $7,741.

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Unaudited Actual Results of Operations.As a result of the consummation of the Merger, the financial results have been presented separately for the three months ended September 30, 2008 for the “Predecessor Entity” for the period July 1, 2008 through July 31, 2008 and for the “Successor Entity” for the period August 1, 2008 through September 30, 2008 and for the nine months ended September 30, 2008 for the “Predecessor Entity” for the period January 1, 2008 through July 31, 2008 and for the “Successor Entity” for the period August 1, 2008 through September 30, 2008. For comparative purposes, we combined the “Predecessor Entity” and “Successor Entity” periods above in our discussion of the three and nine months ended September 30, 2009 and September 30, 2008 below, as we believe this combination is useful to provide the reader a more accurate comparison. This combination is not a U.S. GAAP measure and it is provided to enhance the reader’s understanding of the results of operations for the periods presented. See footnote 14 (pages 56 to 57) for a reconciliation of net loss to adjusted income (loss) from operations.

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Revenue:
Subscriber revenue, including effects of rebates	$	304,714		$	884,038		$	278,717		$	853,903
Advertising revenue, net of agency fees		4,147			13,475			8,358			27,908
Equipment revenue		5,657			17,681			4,936			16,748
Other revenue		10,955			19,344			8,296			28,238
Total revenue		325,473			934,538			300,307			926,797
Operating expenses:
Satellite and transmission		11,484			36,952			19,102			59,024
Programming and content		27,811			84,353			34,037			135,202
Revenue share and royalties		46,976			142,997			62,737			205,145
Customer service and billing		31,064			96,168			36,068			106,766
Cost of equipment		5,142			12,049			7,426			25,033
Sales and marketing		26,055			84,565			46,219			155,005
Subscriber acquisition costs		35,049			83,524			60,848			201,565
General and administrative		25,216			91,689			52,424			135,659
Engineering, design and development		5,413			16,798			7,802			28,236
Impairment of goodwill		—			—			5,026,838			5,026,838
Depreciation and amortization		41,587			146,462			45,448			123,369
Restructuring, impairments and related costs		3,029			29,614			—			—
Total operating expenses		258,826			825,171			5,398,949			6,201,842
Income (loss) from operations		66,647			109,367			(5,098,642	)		(5,275,045	)
Other income (expense)
Interest and investment income		729			1,848			4,557			6,976
Interest expense, net of amounts capitalized		(70,616	)		(226,935	)		(61,928	)		(121,735	)
Gain (loss) on change in value of embedded derivatives		(33,700	)		(111,703	)		242,223			242,223
Loss on extinguishment of debt and credit facilities, net		(3,787	)		(111,863	)		—			—
Loss on investments		(2,870	)		(6,660	)		(7,549	)		(16,099	)
Other income (expense)		1,324			2,548			(4,069	)		(3,174	)
Total other income (expense)		(108,920	)		(452,765	)		173,234			108,191
Loss before income taxes		(42,273	)		(343,398	)		(4,925,408	)		(5,166,854	)
Income tax expense		(578	)		(1,733	)		(1,180	)		(2,184	)
Net loss		(42,851	)		(345,131	)		(4,926,588	)		(5,169,038	)
Add: net loss attributable to noncontrolling interests		—			—			(1,053	)		(7,443	)
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(42,851	)	$	(345,131	)	$	(4,927,641	)	$	(5,176,481	)

Three and Nine Months Ended September 30, 2009 Compared with Three and Nine Months Ended September 30, 2008 — Actual

Total Revenue

Subscriber Revenue. Subscriber revenue includes subscription fees, activation fees and the effects of rebates.

• Three Months: For the three months ended September 30, 2009 and 2008, subscriber revenue was $304,714 and $278,717, respectively, an increase of 9% or $25,997. The increase was attributable to the sale of “Best of” programming and increased internet and multi-subscription rates.

• Nine Months: For the nine months ended September 30, 2009 and 2008, subscriber revenue was $884,038 and $853,903, respectively, an increase of 4% or $30,135. The increase was attributable to the sale of “Best of” programming, increased internet and multi-subscription rates and higher average subscribers, offset partially by the effect from purchase price accounting adjustments.

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The following table contains a breakdown of our subscriber revenue for the periods presented:

	Successor Entity									Predecessor Entity
	Three Months			Nine Months			August 1, 2008			July 1, 2008			January 1, 2008
	Ended			Ended			Through			Through			Through
	September 30, 2009			September 30, 2009			September 30, 2008			July 31, 2008			July 31, 2008
Subscription fees	$	303,785		$	881,860		$	183,144		$	94,074		$	659,775
Activation fees		963			2,351			48			1,667			11,855
Effect of rebates		(34	)		(173	)		(159	)		(57	)		(760	)
Total subscriber revenue	$	304,714		$	884,038		$	183,033		$	95,684		$	670,870

Future subscriber revenue will be dependent upon, among other things, the growth of our subscriber base, promotions, rebates offered to subscribers and corresponding take-rates, plan mix, subscription prices and the identification of additional revenue streams from subscribers.

Advertising Revenue.Advertising revenue includes the sale of advertising on our non-music channels, net of agency fees. Agency fees are based on a contractual rate applied to gross billing revenue.

• Three Months: For the three months ended September 30, 2009 and 2008, net advertising revenue was $4,147 and $8,358, respectively, which represents a decrease of 50% or $4,211. The decrease was driven by the current economic environment.

• Nine Months: For the nine months ended September 30, 2009 and 2008, net advertising revenue was $13,475 and $27,908, respectively, which represents a decrease of 52% or $14,433. The decrease was driven by the current economic environment.

Our advertising revenue is subject to fluctuation based on the national economic environment. We believe general economic conditions have negatively affected our advertising revenue in recent quarters. We expect advertising revenue to grow as our subscribers increase, as we continue to improve brand awareness and content, and as we increase the size and effectiveness of our advertising sales force.

Equipment Revenue.Equipment revenue includes revenue and royalties from the sale of radios, components and accessories.

• Three Months: For the three months ended September 30, 2009 and 2008, equipment revenue was $5,657 and $4,936, respectively, an increase of 15% or $721. The increase was primarily due to an increase in royalties partially offset by a decrease in the number of radios sold through our direct to consumer distribution channel.

• Nine Months: For the nine months ended September 30, 2009 and 2008, equipment revenue was $17,681 and $16,748, respectively, an increase of 6% or $933. The increase was primarily due to an increase in royalties partially offset by a decrease in the number of radios sold through our direct to consumer distribution channel.

We expect equipment revenue to increase as we introduce new products and as sales grow through our direct to consumer distribution channel.

Other Revenue.Other revenue consists primarily of revenue related to various agreements with XM Canada, as well as other miscellaneous revenue that includes content licensing fees, technology licensing fees and billing fees.

• Three Months: For the three months ended September 30, 2009 and 2008, other revenue was $10,955 and $8,296, respectively, an increase of 32% or $2,659. The increase was primarily due to the U.S. Music Royalty Fee introduced this quarter, offset partially by the effect of purchase price accounting and decreases in content licensing fees and recording revenue.

• Nine Months: For the nine months ended September 30, 2009 and 2008, other revenue was $19,344 and $28,238, respectively, a decrease of 31% or $8,894. The decrease was primarily due to the effect of purchase price accounting and decreases in content licensing fees and recording revenue, partially offset by the U.S. Music Royalty Fee introduced this quarter.

Future other revenue will be dependent upon, among other things, the growth of subscriber base, new content and technology agreements and the development of other sources of revenue.

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Operating Expenses

Satellite and Transmission.Satellite and transmission expenses consist of costs associated with the operation and maintenance of our satellites; satellite telemetry, tracking and control system; terrestrial repeater network; satellite uplink facility; and broadcast studios.

• Three Months: For the three months ended September 30, 2009 and 2008, satellite and transmission expenses were $11,484 and $19,102, respectively, a decrease of 40% or $7,618. The decrease was primarily due to lower maintenance and repeater network expenses as well as lower personnel costs.

• Nine Months: For the nine months ended September 30, 2009 and 2008, satellite and transmission expenses were $36,952 and $59,024, respectively, a decrease of 37% or $22,072. The decrease was primarily due to lower maintenance and repeater network expenses as well as lower personnel costs.

We expect satellite and transmission expenses, excluding share-based payment expense, to increase as we add to our in-orbit satellite fleet.

Programming and Content.Programming and content expenses include costs to acquire, create and produce content and on-air talent costs. We have entered into various agreements with third parties for music and non-music programming that require us to pay license fees, share advertising revenue, purchase advertising on media properties owned or controlled by the licensor and pay other guaranteed amounts. Purchased advertising is recorded as a sales and marketing expense and the cost of sharing advertising revenue is recorded as Revenue share and royalties in the period the advertising is broadcast.

• Three Months: For the three months ended September 30, 2009 and 2008, programming and content expenses were $27,811 and $34,037, respectively, a decrease of 18% or $6,226. The decrease was primarily attributable to the lower costs recognized subsequent to the Merger due to the impact of purchase price accounting adjustments, reductions in personnel and on-air talent costs, as well as savings on various content agreements.

• Nine Months: For the nine months ended September 30, 2009 and 2008, programming and content expenses were $84,353 and $135,202, respectively, a decrease of 38% or $50,849. The decrease was primarily attributable to the lower costs recognized subsequent to the Merger due to the impact of purchase price accounting adjustments, reductions in personnel and on-air talent costs, as well as savings on various content agreements.

Our programming and content expenses, excluding share-based payment expenses, are expected to decrease as a result of the Merger, as we reduce duplicate programming and content costs.

Revenue Share and Royalties.Revenue share and royalties include distribution and content provider revenue share, residuals and broadcast and web streaming royalties. Residuals are monthly fees paid based upon the number of subscribers using radios purchased from retailers. Advertising revenue share is recorded to revenue share and royalties in the period the advertising is broadcast.

• Three Months: For the three months ended September 30, 2009 and 2008, revenue share and royalties were $46,976 and $62,737, respectively, a decrease of 25% or $15,761. This decrease was primarily attributable to the effect of purchase price accounting, offset by an increase in our revenues and an increase in the statutory royalty rate due for the performance of sound recordings.

• Nine Months: For the nine months ended September 30, 2009 and 2008, revenue share and royalties were $142,997 and $205,145, respectively, a decrease of 30% or $62,148. This decrease was primarily attributable to the effect of purchase price accounting, offset by an increase in our revenues and an increase in the statutory royalty rate due for the performance of sound recordings.

We expect these costs to increase as our revenues grow, as we expand our distribution of radios through automakers and retailers, and as a result of increases in the royalty for the performance of sound recordings.

Customer Service and Billing.Customer service and billing expenses include costs associated with the operation of our customer service centers and subscriber management system as well as bad debt expense.

• Three Months: For the three months ended September 30, 2009 and 2008, customer service and billing expenses were $31,064 and $36,068, respectively, a decrease of 14% or $5,004. The decline was primarily due to decreases in personnel costs and customer call center expenses.

• Nine Months: For the nine months ended September 30, 2009 and 2008, customer service and billing expenses were $96,168 and $106,766, respectively, a decrease of 10% or $10,598. The decline was primarily due to decreases in personnel costs and customer call center expenses.

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We expect our customer care and billing expenses to decrease on a per subscriber basis, but increase overall as our subscriber base grows due to increased call center operating costs, transaction fees and bad debt expense.

Cost of Equipment.Cost of equipment includes costs from the sale of our radios, components and accessories.

• Three Months: For the three months ended September 30, 2009 and 2008, cost of equipment was $5,142 and $7,426, respectively, a decrease of 31% or $2,284. The decrease was primarily attributed to fewer radios sold through our direct to consumer distribution channel and lower inventory related charges for obsolescence.

• Nine Months: For the nine months ended September 30, 2009 and 2008, cost of equipment was $12,049 and $25,033, respectively, a decrease of 52% or $12,984. The decrease was primarily attributed to fewer radios sold through our direct to consumer distribution channel and lower inventory related charges for obsolescence.

We expect cost of equipment to vary in the future with changes in sales through our direct to consumer distribution channel.

Sales and Marketing.Sales and marketing expenses include costs for advertising, media and production, including promotional events and sponsorships; cooperative marketing; customer retention and compensation. Cooperative marketing costs include fixed and variable payments to reimburse retailers and automakers for the cost of advertising and other product awareness activities.

• Three Months: For the three months ended September 30, 2009 and 2008, sales and marketing expenses were $26,055 and $46,219, respectively, a decrease of 44% or $20,164. This decrease was primarily attributable to lower consumer advertising, reduced cooperative marketing spend with our distributors, reduced personnel costs and the effect of purchase price accounting.

• Nine Months: For the nine months ended September 30, 2009 and 2008, sales and marketing expenses were $84,565 and $155,005, respectively, a decrease of 45% or $70,440. This decrease was primarily attributable to lower consumer advertising, reduced cooperative marketing spend with our distributors, reduced personnel costs and the effect of purchase price accounting.

We expect sales and marketing expenses, excluding share-based payment expense, to decrease as we consolidate our advertising and promotional activities with SIRIUS, gain efficiencies in marketing management and eliminate overlapping distribution support costs.

Subscriber Acquisition Costs.Subscriber acquisition costs include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include our radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chip sets and certain other components used in manufacturing radios; commissions paid to retailers and automakers as incentives to purchase, install and activate our radios; product warranty obligations; and compensation costs associated with stock-based awards granted in connection with certain distribution agreements. The majority of subscriber acquisition costs are incurred and expensed in advance or concurrent with acquiring a subscriber. Subscriber acquisition costs do not include advertising, loyalty payments to distributors and dealers of our radios and revenue share payments to automakers and retailers of our radios.

• Three Months: For the three months ended September 30, 2009 and 2008, subscriber acquisition costs were $35,049 and $60,848, respectively, a decrease of 42% or $25,799. This decrease was primarily driven by purchase price accounting adjustments associated with the Merger, lower aftermarket inventory settlements, lower retail and OEM subsidies due to better product economics and fewer OEM installations due to the weakening automotive market.

• Nine Months: For the nine months ended September 30, 2009 and 2008, subscriber acquisition costs were $83,524 and $201,565, respectively, a decrease of 59% or $118,041. This decrease was primarily driven by purchase price accounting adjustments associated with the Merger, lower aftermarket inventory settlements, lower retail and OEM subsidies due to better product economics and fewer OEM installations due to the weakening automotive market.

We expect total subscriber acquisition costs to fluctuate as increases or decreases in our gross subscriber additions are accompanied by continuing declines in the costs of subsidized components of our radios. We intend to continue to offer subsidies, commissions and other incentives to acquire subscribers.

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General and Administrative.General and administrative expenses include rent and occupancy, finance, legal, human resources, information technology and investor relations costs.

• Three Months: For the three months ended September 30, 2009 and 2008, general and administrative expenses were $25,216 and $52,424, respectively, a decrease of 52% or $27,208. This decrease was the result of lower costs for certain Merger, litigation and regulatory matters.

• Nine Months: For the nine months ended September 30, 2009 and 2008, general and administrative expenses were $91,689 and $135,659, respectively, a decrease of 32% or $43,970. This decrease was the result of lower costs for certain Merger, litigation and regulatory matters.

We expect total general and administrative expenses, excluding share-based payment expense, to decrease in future periods as we gain efficiencies in staff, facilities, and information technology costs.

Engineering, Design and Development.Engineering, design and development expenses include costs to develop our future generation of chip sets and new products, research and development for broadcast information, and costs associated with the incorporation of radios into vehicles manufactured by automakers.

• Three Months: For the three months ended September 30, 2009 and 2008, engineering, design and development expenses were $5,413 and $7,802, respectively, a decrease of 31% or $2,389. This decrease was primarily attributable to reduced OEM and product development costs and personnel costs.

• Nine Months: For the nine months ended September 30, 2009 and 2008, engineering, design and development expenses were $16,798 and $28,236, respectively, a decrease of 41% or $11,438. This decrease was primarily attributable to reduced OEM and product development costs and personnel costs.

We expect engineering, design and development expenses, excluding share-based payment expense, to increase in future periods as we increase development of our next generation chipsets.

Other Income (Expense)

Interest and Investment Income.Interest and investment income includes realized gains and losses, dividends and interest income, including amortization of the premium and discount arising at purchase.

• Three Months: For the three months ended September 30, 2009 and 2008, interest and investment income was $729 and $4,557, respectively, a decrease of 84% or $3,828. The decrease was primarily attributable to a lower average cash balance and lower interest rates in 2009.

• Nine Months: For the nine months ended September 30, 2009 and 2008, interest and investment income was $1,848 and $6,976, respectively, a decrease of 74% or $5,128. The decrease was primarily attributable to a lower average cash balance and lower interest rates in 2009.

Interest Expense.Interest expense includes interest on outstanding debt, reduced by interest capitalized in connection with the construction of our new satellite and launch vehicle.

• Three Months: For the three months ended September 30, 2009 and 2008, interest expense was $70,616 and $61,928, respectively, an increase of 14% or $8,688. Interest expense increased significantly due to the additional debt issuances in July and August 2008 as a result of the Merger, the financing transactions in February and March 2009, and the impact of the purchase price adjustments which set the existing debt at fair value and caused interest expense to increase.

• Nine Months: For the nine months ended September 30, 2009 and 2008, interest expense was $226,935 and $121,735, respectively, an increase of 86%, or $105,200. Interest expense increased significantly due to the additional debt issuances in July and August 2008 as a result of the Merger, the financing transactions in February and March 2009, and the impact of the purchase price adjustments which set the existing debt at fair value and caused interest expense to increase.

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Gain (loss) on change in value of embedded derivative.We are required to account for the conversion feature of our exchangeable debt, which is exchangeable into SIRIUS common stock, separately and recognize the changes in the fair value of these embedded derivatives in earnings. The fair value of the derivative will be impacted by the value of the underlying SIRIUS common shares.

• Three Months: For the three months ended September 30, 2009, we recorded a loss on change in value of embedded derivative of $33,700, and for the three months ended September 30, 2008, we recorded a gain on change in value of embedded derivative of $242,223. As a result of the Merger, we recorded derivative liabilities reflecting the fair value of the embedded derivative as of the Merger date. Subsequent to July 28, 2008, the SIRIUS stock price decreased significantly resulting in a decreased fair value and a gain on the change in value of the derivative. During the three months ended September 30, 2009, the SIRIUS stock price increased resulting in an increased fair value and a loss on the change in value of the derivative.

• Nine Months: For the nine months ended September 30, 2009, we recorded a loss on change in value of embedded derivative of $111,703, and for the nine months ended September 30, 2008, we recorded a gain on change in value of embedded derivative of $242,223. As a result of the Merger, we recorded derivative liabilities reflecting the fair value of the embedded derivative as of the Merger date. Subsequent to July 28, 2008, the SIRIUS stock price decreased significantly resulting in a decreased fair value and a gain on the change in value of the derivative. During the nine months ended September 30, 2009, the SIRIUS stock price increased resulting in an increased fair value and a loss on the change in value of the derivative.

Loss on extinguishment of debt and credit facilities, net.Loss on extinguishment of debt and credit facilities, net includes losses incurred as a result of the conversion of certain of our debt instruments.

• Three Months: For the three months ended September 30, 2009 and 2008, Loss on extinguishment of debt and credit facilities, net was $3,787 and $0, respectively.

• Nine Months: For the nine months ended September 30, 2009 and 2008, Loss on extinguishment of debt and credit facilities, net was $111,863 and $0, respectively.

Gain (loss) on investments.Gain (loss) on investments includes our share of XM Canada’s net losses and losses recorded from our investment in XM Canada when the decrease in fair value was determined to be other than temporary.

• Three Months: For the three months ended September 30, 2009 and 2008, loss on investments was $2,870 and $7,549, respectively, a decrease of 62% or $4,679. The decrease was primarily attributable to a decrease in our share of XM Canada’s net loss for the three months ended September 30, 2009 compared to the three months ended September 30, 2008.

• Nine Months: For the nine months ended September 30, 2009 and 2008, loss on investments was $6,660 and $16,099, respectively, a decrease of 59% or $9,439. The decrease was primarily attributable to the inclusion of our share of XM Canada’s net income for the nine months ended September 30, 2009, net of impairments versus our share of XM Canada’s net loss for the nine months ended September 30, 2008.

Income Taxes

Income Tax Expense.Income tax expense primarily represents the recognition of a deferred tax liability related to the difference in accounting for our FCC license and trade name, which is amortized over 15 years for tax purposes but not amortized for book purposes in accordance with U.S. generally accepted accounting principles.

• Three Months: We recorded income tax expense of $578 and $1,180 for the three months ended September 30, 2009 and 2008, respectively.

• Nine Months: We recorded income tax expense of $1,733 and $2,184 for the nine months ended September 30, 2009 and 2008, respectively.

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Liquidity and Capital Resources

Cash Flows for the Nine Months Ended September 30, 2009 Compared with the Nine Months Ended September 30, 2008

As of September 30, 2009 and 2008, we had $326,022 and $215,348, respectively, in cash and cash equivalents and $206,740 as of December 31, 2008.

The following table presents a summary of our cash flow activity for the periods set forth below.

	Successor Entity						Predecessor Entity			Combined
	Nine Months			August 1, 2008			January 1, 2008			Nine Months
	Ended			Through			Through			Ended
	September 30, 2009			September 30, 2008			July 31, 2008			September 30, 2008			Variance
Net cash provided by (used in) operating activities	$	228,618		$	5,603		$	(251,086	)	$	(245,483	)	$	474,101
Net cash (used in) provided by investing activities		(38,811	)		17,507			(65,668	)		(48,161	)		9,350
Net cash (used in) provided by financing activities		(70,525	)		(627,283	)		979,589			352,306			(422,831	)
Net increase in cash and cash equivalents		119,282			(604,173	)		662,835			58,662			60,620
Cash and cash equivalents at beginning of period		206,740			819,521			156,686			156,686			50,054
Cash and cash equivalents at end of period	$	326,022		$	215,348		$	819,521		$	215,348		$	110,674

Cash Flows Provided by (Used in) Operating Activities

Net cash provided by operating activities increased $474,101 to $228,618 for the nine months ended September 30, 2009 from net cash used in operating activities of $245,483 for the nine months ended September 30, 2008. The increase was primarily the result of a decreased net loss, net of non-cash operating activities of $231,217, and a decrease in cash used in other operating assets and liabilities of $242,884.

Cash Flows Used in Investing Activities

Net cash used in investing activities decreased $9,350 to $38,811 for the nine months ended September 30, 2009 from $48,161 for the nine months ended September 30, 2008. The decrease was primarily the result of a decrease of $9,425 in net restricted and other investment activity.

We will incur significant capital expenditures to construct and launch our new satellites and improve our terrestrial repeater network and broadcast and administrative infrastructure. These capital expenditures will support our growth and the resiliency of our operations, and will also support the delivery of future new revenue streams.

Cash Flows (Used in) Provided by Financing Activities

Net cash used in financing activities increased $422,831 to $70,525 for the nine months ended September 30, 2009 from net cash provided by financing activities of $352,306 for the nine months ended September 30, 2008. The increase in cash used in financing activities was primarily due to a decrease of $1,074,854 in net proceeds from the issuance of debt, offset partially by a decrease in debt payment of $580,036 and a decrease of $68,777 in payments to a minority interest holder.

Financings and Capital Requirements

We have historically financed our operations through the sale of debt and equity securities. The Certificate of Designations for SIRIUS’ Series B Preferred Stock provides that so long as Liberty beneficially owns at least half of its initial equity investment, we need the consent of Liberty for certain actions, including the grant or issuance of SIRIUS’ equity securities and the incurrence of debt in amounts greater than a stated threshold.

Future Liquidity and Capital Resource Requirements

Based upon our current plans we believe that we have sufficient cash, cash equivalents and marketable securities to cover the estimated funding needs through cash flow breakeven, the point at which revenues are sufficient to fund expected operating expenses, capital expenditures, working capital requirements, interest payments and taxes. The 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 have the ability and intend to manage the timing and related expenditures of certain activities, including the launch of satellites, the deferral of capital projects, as well as the deferral of other discretionary expenses. Our financial projections are based on assumptions, which we believe are reasonable but contain significant uncertainties. There can be no assurance that our plan will be successful.

We operate as unrestricted subsidiaries under the agreements governing SIRIUS’ existing indebtedness. Under certain circumstances, SIRIUS may be unwilling or unable to contribute or loan us capital to support our operations. To the extent our funds are insufficient to support our business, we may be required to seek additional financing, which may not be available on favorable terms, or at all. If we are unable to secure additional financing, our business and results of operations may be adversely affected.

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We regularly evaluate our plans and strategy. These evaluations often result in changes to our plans and strategy, some of which may be material and significantly change our cash requirements. These changes in our plans or strategy may include: the acquisition of unique or compelling programming; the introduction of new features or services; significant new or enhanced distribution arrangements; investments in infrastructure, such as satellites, equipment or radio spectrum; and acquisitions of third parties that own programming, distribution, infrastructure, assets, or any combination of the foregoing. In addition, our operations will also be affected by the FCC order approving the Merger which imposed certain conditions upon, among other things, our program offerings and our ability to increase prices. Our future liquidity also may be adversely affected by, among other things, the nature and extent of the benefits we achieve as a wholly owned unrestricted subsidiary of SIRIUS.

Off-Balance Sheet Arrangements

We are required under the terms of certain agreements to deposit monies in escrow, which place restrictions on our cash and cash equivalents. As of December 31, 2008, $120,000 was classified as restricted investments as a result of obligations under escrow deposits. In February 2009, we released to a programming provider $120,000 held in escrow in satisfaction of future obligations under our agreement with them.

We do not have any significant off-balance sheet arrangements other than those disclosed in Note 14 to our unaudited consolidated financial statements in Item 1 of this 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 14 to our unaudited consolidated financial statements in Item 1 of this Form 10-Q.

Related Party Transactions

For a discussion of “Related Party Transactions” refer to Note 8 to our unaudited consolidated financial statements in Item 1 of this Form 10-Q.

Critical Accounting Policies and Estimates

For a discussion of our “Critical Accounting Policies and Estimates” refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Annual Report on Form 10-K for the year ended December 31, 2008 and Note 3 to our unaudited consolidated financial statements in Item 1 of this Form 10-Q.

48

Footnotes to Results of Operations

(1)	Average self-pay monthly churn represents the monthly average of self-pay deactivations by the quarter divided by the average self-pay subscriber balance for the quarter.
(2)	We measure the percentage of subscribers that receive our service and convert to self-paying after the initial promotion period. We refer to this as the “conversion rate.” At the time of sale, vehicle owners generally receive a three month prepaid trial subscription and we receive a subscription fee from the OEM. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. We measure conversion rate three months after the period in which the trial service ends. Based on our experience it may take up to 90 days after the trial service ends for subscribers to respond to our marketing communications and become self-paying subscribers.
(3)	ARPU is derived from total earned subscriber revenue and net advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. ARPU is calculated as follows (in thousands, except for per subscriber amounts):

	Three Months		Nine Months		Three Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2009		September 30, 2009		September 30, 2008		September 30, 2008
Subscriber revenue	$	313,852	$	925,060	$	297,151	$	872,337
Net advertising revenue		4,147		13,475		8,358		27,908
Total subscriber and net advertising revenue	$	317,999	$	938,535	$	305,509	$	900,245
Daily weighted average number of subscribers		9,691,620		9,682,252		9,779,397		9,481,219
ARPU	$	10.94	$	10.77	$	10.41	$	10.55

(4) SAC, as adjusted, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding share-based payment expense, divided by the number of gross subscriber additions for the period. SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

	Three Months			Nine Months			Three Months		Nine Months
	Ended			Ended			Ended		Ended
	September 30, 2009			September 30, 2009			September 30, 2008		September 30, 2008
Subscriber acquisition cost	$	54,379		$	126,833		$	73,343	$	214,060
Less: share-based payment expense granted to third parties and employees		—			—			—		—
Less/Add: margin from direct sales of radios and accessories		(515	)		(5,632	)		2,490		8,285
SAC, as adjusted	$	53,864		$	121,201		$	75,833	$	222,345
Gross subscriber additions		833,684			2,289,360			1,041,242		3,161,844
SAC, as adjusted, per gross subscriber addition	$	65		$	53		$	73	$	70

(5) Customer service and billing expenses, as adjusted, per average subscriber is derived from total customer service and billing expenses, excluding 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. Customer service and billing expenses, as adjusted, per average subscriber is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Customer service and billing expenses	$	31,179		$	96,526		$	36,173		$	106,871
Less: share-based payment expense		(460	)		(1,436	)		(665	)		(2,306	)
Customer service and billing expenses, as adjusted	$	30,719		$	95,090		$	35,508		$	104,565
Daily weighted average number of subscribers		9,691,620			9,682,252			9,779,397			9,481,219
Customer service and billing expenses, as adjusted, per average subscriber	$	1.06		$	1.09		$	1.21		$	1.23

49

(6) Free cash flow is calculated as follows (in thousands):

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Net cash provided by (used in) operating activities	$	127,214		$	228,618		$	(10,469	)	$	(245,483	)
Additions to property and equipment		(34,690	)		(38,811	)		(11,289	)		(38,736	)
Restricted and other investment activity		—			—			—			25
Free cash flow	$	92,524		$	189,807		$	(21,758	)	$	(284,194	)

(7)	Average self-pay monthly churn; conversion rate; ARPU; SAC, as adjusted, per gross subscriber addition; customer service and billing expenses, as adjusted, per average subscriber; and free cash flow are not measures of financial performance under U.S. generally accepted accounting principles (“GAAP”). We believe these non-GAAP financial measures provide meaningful supplemental information regarding our operating performance and are used by us for budgetary and planning purposes; when publicly providing our business outlook; as a means to evaluate period-to-period comparisons; and to compare our performance to that of our competitors. We believe that investors also use our current and projected metrics to monitor the performance of our business and to make investment decisions.
	We believe the exclusion of share-based payment expense in our calculations of SAC, as adjusted, per gross subscriber addition and customer service and billing expenses, as adjusted, per average subscriber is useful given the significant variation in expense that can result from changes in the fair market value of SIRIUS’ common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our subscriber acquisition costs and customer service and billing expenses. Specifically, the exclusion of share-based payment expense in our calculation of SAC, as adjusted, per gross subscriber addition is critical in being able to understand the economic impact of the direct costs incurred to acquire a subscriber and the effect over time as economies of scale are reached.
	These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP. These non-GAAP financial measures 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.
(8)	We refer to net loss before interest and investment income; interest expense net of amounts capitalized; income tax expense; loss from redemption of debt; loss on investments; other expense (income); restructuring, impairments and related costs; depreciation and amortization; and share related payment expense as adjusted income (loss) from operations. Adjusted income (loss) from operations is not a measure of financial performance under U.S. GAAP. We believe adjusted income (loss) from operations is a useful measure of our operating performance. We use adjusted income (loss) from operations for budgetary and planning purposes; to assess the relative profitability and on-going performance of our consolidated operations; to compare our performance from period-to-period; and to compare our performance to that of our competitors. We also believe adjusted income (loss) from operations is useful to investors to compare our operating performance to the performance of other communications, entertainment and media companies. We believe that investors use current and projected adjusted income (loss) from operations to estimate our current or prospective enterprise value and to make investment decisions.
	Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for interest and depreciation expense. We believe adjusted income (loss) from operations provides useful information about the operating performance of our business apart from the costs associated with our capital structure and physical plant. The exclusion of interest and depreciation and amortization expense is useful given fluctuations in interest rates and significant variation in depreciation and amortization expense that can result from the amount and timing of capital expenditures and potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of taxes is appropriate for comparability purposes as the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. We believe the exclusion of restructuring, impairments and related costs is useful given the non-recurring nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair market value of Sirius’ common stock. To compensate for the exclusion of taxes, other (expense) income, depreciation and amortization and share-based payment expense, we separately measure and budget for these items.

50

There are material limitations associated with the use of adjusted income (loss) from operations in evaluating our company compared with net loss, which reflects overall financial performance, including the effects of taxes, other income (expense), depreciation and amortization, restructuring, impairments and related costs and share-based payment expense. We use adjusted income (loss) from operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net loss as disclosed in our unaudited consolidated statements of operations. Since adjusted income (loss) from operations is a non-GAAP financial measure, our calculation of adjusted income (loss) from operations 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 the pro forma unadjusted net loss to the pro forma adjusted income (loss) from operations is calculated as follows (see footnotes for reconciliation of the pro forma amounts to their respective GAAP amounts):

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
(in thousands)	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Reconciliation of Net loss to Adjusted income (loss) from operations:
Net loss	$	(26,303	)	$	(242,382	)	$	(141,905	)	$	(384,355	)
Add back Net loss items excluded from Adjusted income (loss) from operations:
Interest and investment income		(729	)		(1,848	)		(4,557	)		(6,976	)
Interest expense, net of amounts capitalized		58,203			191,371			53,843			113,650
Income tax expense		578			1,733			1,180			2,184
Loss on extinguishment of debt and credit facilities, net		3,787			111,863			—			—
Loss on investments		2,870			6,660			7,549			16,099
Other (income) expense		(1,324	)		(2,548	)		4,069			3,174
Income (loss) from operations		37,082			64,849			(79,821	)		(256,224	)
Restructuring, impairments and related costs		3,029			29,614			—			—
Depreciation and amortization		17,484			60,434			31,957			109,878
Share-based payment expense		8,732			36,287			11,415			41,867
Adjusted income (loss) from operations	$	66,327		$	191,184		$	(36,449	)	$	(104,479	)

There are material limitations associated with the use of a pro forma unadjusted results of operations in evaluating our company compared with our GAAP Results of operations, which reflects overall financial performance. We use pro forma unadjusted results of operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to Results of operations as disclosed in our unaudited consolidated statements of operations. Since pro forma unadjusted results of operations is a non-GAAP financial measure, our 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.

51

(9) The following tables reconcile our GAAP Results of operations to our non-GAAP pro forma unadjusted results of operations:

	Unaudited For the Three Months Ended September 30, 2009
				Purchase Price			Allocation of
				Accounting			Share-based Payment
	As Reported			Adjustments			Expense			Pro Forma
Revenue:
Subscriber revenue, including effects of rebates	$	304,714		$	9,138		$	—		$	313,852
Advertising revenue, net of agency fees		4,147			—			—			4,147
Equipment revenue		5,657			—			—			5,657
Other revenue		10,955			1,813			—			12,768
Total revenue		325,473			10,951			—			336,424
Operating expenses (excludes depreciation and amortization shown separately below) (1)
Cost of services:
Satellite and transmission		11,484			331			(384	)		11,431
Programming and content		27,811			18,117			(1,024	)		44,904
Revenue share and royalties		46,976			22,973			—			69,949
Customer service and billing		31,064			115			(460	)		30,719
Cost of equipment		5,142			—			—			5,142
Sales and marketing		26,055			3,155			(1,397	)		27,813
Subscriber acquisition costs		35,049			19,330			—			54,379
General and administrative		25,216			374			(4,729	)		20,861
Engineering, design and development		5,413			224			(738	)		4,899
Depreciation and amortization		41,587			(24,103	)		—			17,484
Share-based payment expense		—			—			8,732			8,732
Restructuring, impairments and related costs		3,029			—			—			3,029
Total operating expenses		258,826			40,516			—			299,342
Income (loss) from operations		66,647			(29,565	)		—			37,082
Other income (expense)
Interest and investment income		729			—			—			729
Interest expense, net of amounts capitalized		(70,616	)		12,413			—			(58,203	)
Gain (loss) on change in value of embedded derivatives		(33,700	)		33,700			—			—
Loss on extinguishment of debt and credit facilities, net		(3,787	)		—			—			(3,787	)
Loss on investments		(2,870	)		—			—			(2,870	)
Other income		1,324			—			—			1,324
Total other income (expense)		(108,920	)		46,113			—			(62,807	)
Loss before income taxes		(42,273	)		16,548			—			(25,725	)
Income tax expense		(578	)		—			—			(578	)
Net loss		(42,851	)		16,548			—			(26,303	)
Add: net loss attributable to noncontrolling interests		—			—			—			—
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(42,851	)	$	16,548		$	—		$	(26,303	)
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission	$	273		$	111		$	—		$	384
Programming and content		859			165			—			1,024
Customer service and billing		345			115			—			460
Sales and marketing		1,261			136			—			1,397
Subscriber acquisition costs		—			—			—			—
General and administrative		4,355			374			—			4,729
Engineering, design and development		514			224			—			738
Total share-based payment expense	$	7,607		$	1,125		$	—		$	8,732

52

	Unaudited For the Nine Months Ended September 30, 2009
				Purchase Price			Allocation of
				Accounting			Share-based Payment
	As Reported			Adjustments			Expense			Pro Forma
Revenue:
Subscriber revenue, including effects of rebates	$	884,038		$	41,022		$	—		$	925,060
Advertising revenue, net of agency fees		13,475			—			—			13,475
Equipment revenue		17,681			—			—			17,681
Other revenue		19,344			5,438			—			24,782
Total revenue		934,538			46,460			—			980,998
Operating expenses (excludes depreciation and amortization shown separately below) (1)
Cost of services:
Satellite and transmission		36,952			1,013			(1,424	)		36,541
Programming and content		84,353			54,708			(3,869	)		135,192
Revenue share and royalties		142,997			65,608			—			208,605
Customer service and billing		96,168			358			(1,436	)		95,090
Cost of equipment		12,049			—			—			12,049
Sales and marketing		84,565			9,986			(4,375	)		90,176
Subscriber acquisition costs		83,524			43,309			—			126,833
General and administrative		91,689			1,252			(22,374	)		70,567
Engineering, design and development		16,798			772			(2,809	)		14,761
Depreciation and amortization		146,462			(86,028	)		—			60,434
Share-based payment expense		—			—			36,287			36,287
Restructuring, impairments and related costs		29,614			—			—			29,614
Total operating expenses		825,171			90,978			—			916,149
Income (loss) from operations		109,367			(44,518	)		—			64,849
Other income (expense)
Interest and investment income		1,848			—			—			1,848
Interest expense, net of amounts capitalized		(226,935	)		35,564			—			(191,371	)
Gain (loss) on change in value of embedded derivatives		(111,703	)		111,703			—			—
Loss on extinguishment of debt and credit facilities, net		(111,863	)		—			—			(111,863	)
Loss on investments		(6,660	)		—			—			(6,660	)
Other income		2,548			—			—			2,548
Total other income (expense)		(452,765	)		147,267			—			(305,498	)
Loss before income taxes		(343,398	)		102,749			—			(240,649	)
Income tax expense		(1,733	)		—			—			(1,733	)
Net loss		(345,131	)		102,749			—			(242,382	)
Add: net loss attributable to noncontrolling interests		—			—			—			—
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(345,131	)	$	102,749		$	—		$	(242,382	)
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission	$	1,073		$	351		$	—		$	1,424
Programming and content		3,368			501			—			3,869
Customer service and billing		1,077			359			—			1,436
Sales and marketing		3,862			513			—			4,375
Subscriber acquisition costs		—			—			—			—
General and administrative		21,122			1,252			—			22,374
Engineering, design and development		2,037			772			—			2,809
Total share-based payment expense	$	32,539		$	3,748		$	—		$	36,287

53

	Unaudited For the Three Months Ended September 30, 2008
	As Reported
	July 1, 2008			August 1, 2008			Purchase Price			Allocation of
	Through July 31,			Through September			Accounting			Share-based Payment
	2008			30, 2008			Adjustments (a)			Expense			Pro Forma
Revenue:
Subscriber revenue, including effects of rebates	$	95,684		$	183,033		$	18,434		$	—		$	297,151
Advertising revenue, net of agency fees		3,193			5,165			—			—			8,358
Equipment revenue		1,585			3,351			—			—			4,936
Other revenue		4,242			4,054			1,195			—			9,491
Total revenue		104,704			195,603			19,629			—			319,936
Operating expenses (excludes depreciation and amortization shown separately below) (1)
Cost of services:
Satellite and transmission		6,644			12,458			638			(911	)		18,829
Programming and content		15,991			18,046			13,912			(1,742	)		46,207
Revenue share and royalties		24,198			38,539			11,010			—			73,747
Customer service and billing		12,249			23,819			105			(665	)		35,508
Cost of equipment		2,406			5,020			—			—			7,426
Sales and marketing		17,268			28,951			2,081			(2,174	)		46,126
Subscriber acquisition costs		33,366			27,482			12,495			—			73,343
General and administrative		33,209			19,215			777			(4,411	)		48,790
Engineering, design and development		2,611			5,191			119			(1,512	)		6,409
Impairment of goodwill		—			5,026,838			(5,026,838	)		—			—
Depreciation and amortization		10,828			34,620			(13,491	)		—			31,957
Share-based payment expense		—			—			—			11,415			11,415
Total operating expenses		158,770			5,240,179			(4,999,192	)		—			399,757
Loss from operations		(54,066	)		(5,044,576	)		5,018,821			—			(79,821	)
Other income (expense)
Interest and investment income		594			3,963			—			—			4,557
Interest expense, net of amounts capitalized		(14,130	)		(47,798	)		8,085			—			(53,843	)
Gain (loss) on change in value of embedded derivatives		—			242,223			(242,223	)		—			—
Loss on extinguishment of debt and credit facilities, net		—			—			—			—			—
Loss on investments		(4,460	)		(3,089	)		—			—			(7,549	)
Other income (expense)		5			(4,074	)		—			—			(4,069	)
Total other income (expense)		(17,991	)		191,225			(234,138	)		—			(60,904	)
Loss before income taxes		(72,057	)		(4,853,351	)		4,784,683			—			(140,725	)
Income tax expense		(508	)		(672	)		—			—			(1,180	)
Net loss		(72,565	)		(4,854,023	)		4,784,683			—			(141,905	)
Add: net loss attributable to noncontrolling interests		(1,053	)		—			—			—			(1,053	)
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(73,618	)	$	(4,854,023	)	$	4,784,683		$	—		$	(142,958	)
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission	$	305		$	570		$	36		$	—		$	911
Programming and content		586			961			195			—			1,742
Customer service and billing		228			332			105			—			665
Sales and marketing		770			1,038			366			—			2,174
Subscriber acquisition costs		—			—			—			—			—
General and administrative		1,634			2,000			777			—			4,411
Engineering, design and development		510			710			292			—			1,512
Total share-based payment expense	$	4,033		$	5,611		$	1,771		$	—		$	11,415

(a) Includes impairment of goodwill.

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	Unaudited For the Nine Months Ended September 30, 2008
	As Reported
	January 1, 2008			August 1, 2008			Purchase Price			Allocation of
	Through July 31,			Through September			Accounting			Share-based Payment
	2008			30, 2008			Adjustments (a)			Expense			Pro Forma
Revenue:
Subscriber revenue, including effects of rebates	$	670,870		$	183,033		$	18,434		$	—		$	872,337
Advertising revenue, net of agency fees		22,743			5,165			—			—			27,908
Equipment revenue		13,397			3,351			—			—			16,748
Other revenue		24,184			4,054			1,195			—			29,433
Total revenue		731,194			195,603			19,629			—			946,426
Operating expenses (excludes depreciation and amortization shown separately below) (1)
Cost of services:
Satellite and transmission		46,566			12,458			638			(3,351	)		56,311
Programming and content		117,156			18,046			13,912			(6,105	)		143,009
Revenue share and royalties		166,606			38,539			11,010			—			216,155
Customer service and billing		82,947			23,819			105			(2,306	)		104,565
Cost of equipment		20,013			5,020			—			—			25,033
Sales and marketing		126,054			28,951			2,081			(8,451	)		148,635
Subscriber acquisition costs		174,083			27,482			12,495			—			214,060
General and administrative		116,444			19,215			777			(15,977	)		120,459
Engineering, design and development		23,045			5,191			119			(5,677	)		22,678
Impairment of goodwill		—			5,026,838			(5,026,838	)		—			—
Depreciation and amortization		88,749			34,620			(13,491	)		—			109,878
Share-based payment expense		—			—			—			41,867			41,867
Total operating expenses		961,663			5,240,179			(4,999,192	)		—			1,202,650
Loss from operations		(230,469	)		(5,044,576	)		5,018,821			—			(256,224	)
Other income (expense)
Interest and investment income		3,013			3,963			—			—			6,976
Interest expense, net of amounts capitalized		(73,937	)		(47,798	)		8,085			—			(113,650	)
Gain (loss) on change in value of embedded derivatives		—			242,223			(242,223	)		—			—
Loss on extinguishment of debt and credit facilities, net		—			—			—			—			—
Loss on investments		(13,010	)		(3,089	)		—			—			(16,099	)
Other income (expense)		900			(4,074	)		—			—			(3,174	)
Total other income (expense)		(83,034	)		191,225			(234,138	)		—			(125,947	)
Loss before income taxes		(313,503	)		(4,853,351	)		4,784,683			—			(382,171	)
Income tax expense		(1,512	)		(672	)		—			—			(2,184	)
Net loss		(315,015	)		(4,854,023	)		4,784,683			—			(384,355	)
Add: net loss attributable to noncontrolling interests		(7,443	)		—			—			—			(7,443	)
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(322,458	)	$	(4,854,023	)	$	4,784,683		$	—		$	(391,798	)
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission	$	2,745		$	570		$	36		$	—		$	3,351
Programming and content		4,949			961			195			—			6,105
Customer service and billing		1,869			332			105			—			2,306
Sales and marketing		7,047			1,038			366			—			8,451
Subscriber acquisition costs		—			—			—			—			—
General and administrative		13,200			2,000			777			—			15,977
Engineering, design and development		4,675			710			292			—			5,677
Total share-based payment expense	$	34,485		$	5,611		$	1,771		$	—		$	41,867

(a)	Includes impairment of goodwill.
(10)	ARPU is derived from total earned subscriber revenue and net advertising revenue, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. ARPU is calculated as follows (in thousands, except for per subscriber amounts):

	Three Months		Nine Months		Three Months		Nine Months
	Ended		Ended		Ended		Ended
	September 30, 2009		September 30, 2009		September 30, 2008		September 30, 2008
Subscriber revenue	$	304,714	$	884,038	$	278,717	$	853,903
Net advertising revenue		4,147		13,475		8,358		27,908
Total subscriber and net advertising revenue	$	308,861	$	897,513	$	287,075	$	881,811
Daily weighted average number of subscribers		9,691,620		9,682,252		9,779,397		9,481,219
ARPU	$	10.62	$	10.30	$	9.79	$	10.33

55

(11) SAC, as adjusted, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding share-based payment expense, divided by the number of gross subscriber additions for the period. SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

	Three Months			Nine Months			Three Months		Nine Months
	Ended			Ended			Ended		Ended
	September 30, 2009			September 30, 2009			September 30, 2008		September 30, 2008
Subscriber acquisition cost	$	35,049		$	83,524		$	60,848	$	201,565
Less: share-based payment expense granted to third parties and employees		—			—			—		—
Add: margin from direct sales of radios and accessories		(515	)		(5,632	)		2,490		8,285
SAC, as adjusted	$	34,534		$	77,892		$	63,338	$	209,850
Gross subscriber additions		833,684			2,289,360			1,041,242		3,161,844
SAC, as adjusted, per gross subscriber addition	$	41		$	34		$	61	$	66

(12) Customer service and billing expenses, as adjusted, per average subscriber is derived from total customer service and billing expenses, excluding 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. Customer service and billing expenses, as adjusted, per average subscriber is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Customer service and billing expenses	$	31,064		$	96,168		$	36,068		$	106,766
Less: share-based payment expense		(345	)		(1,077	)		(560	)		(2,201	)
Customer service and billing expenses, as adjusted	$	30,719		$	95,091		$	35,508		$	104,565
Daily weighted average number of subscribers		9,691,620			9,682,252			9,779,397			9,481,219
Customer service and billing expenses, as adjusted, per average subscriber	$	1.06		$	1.09		$	1.21		$	1.23

(13) Free cash flow is calculated as follows (in thousands):

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Net cash provided by (used in) operating activities	$	127,214		$	228,618		$	(10,469	)	$	(245,483	)
Additions to property and equipment		(34,690	)		(38,811	)		(11,289	)		(38,736	)
Restricted and other investment activity		—			—			—			25
Free cash flow	$	92,524		$	189,807		$	(21,758	)	$	(284,194	)

(14) We refer to net loss before interest and investment income; interest expense net of amounts capitalized; income tax expense; gain on change in value of embedded derivative; loss on extinguishment of debt and credit facilities, net; loss on investments; other expense (income); depreciation and amortization; and share-based payment expense as adjusted income (loss) from operations. Adjusted income (loss) from operations is not a measure of financial performance under U.S. GAAP. We believe adjusted income (loss) from operations is a useful measure of our operating performance. We use adjusted income (loss) from operations for budgetary and planning purposes; to assess the relative profitability and on-going performance of our consolidated operations; to compare our performance from period-to-period; and to compare our performance to that of our competitors. We also believe adjusted income (loss) from operations is useful to investors to compare our operating performance to the performance of other communications, entertainment and media companies. We believe that investors use current and projected adjusted income (loss) from operations to estimate our current or prospective enterprise value and make investment decisions.

56

Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for interest and depreciation expense. We believe adjusted income (loss) from operations provides useful information about the operating performance of our business apart from the costs associated with our capital structure and physical plant. The exclusion of interest and depreciation and amortization expense is useful given fluctuations in interest rates and significant variation in depreciation and amortization expense that can result from the amount and timing of capital expenditures and potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of taxes is appropriate for comparability purposes as the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. We believe the exclusion of restructuring, impairments and related costs is useful given the non-recurring nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair market value of Sirius’ common stock. To compensate for the exclusion of taxes, other (expense) income, depreciation and amortization and share-based payment expense, we separately measure and budget for these items.

There are material limitations associated with the use of adjusted income (loss) from operations in evaluating our company compared with net loss, which reflects overall financial performance, including the effects of taxes, other income (expense), depreciation and amortization and share-based payment expense. We use adjusted income (loss) from operations to supplement GAAP results to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net loss as disclosed in our unaudited consolidated statements of operations. Since adjusted income (loss) from operations is a non-GAAP financial measure, our calculation of adjusted income (loss) from operations 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.

Adjusted income (loss) from operations is calculated as follows:

	Three Months			Nine Months			Three Months			Nine Months
	Ended			Ended			Ended			Ended
	September 30, 2009			September 30, 2009			September 30, 2008			September 30, 2008
Reconciliation of Net loss to Adjusted income (loss) from operations:
Net loss as reported	$	(42,851	)	$	(345,131	)	$	(4,926,588	)	$	(5,169,038	)
Add back Net loss items excluded from Adjusted income (loss) from operations:
Interest and investment income		(729	)		(1,848	)		(4,557	)		(6,976	)
Interest expense, net of amounts capitalized		70,616			226,935			61,928			121,735
Income tax expense		578			1,733			1,180			2,184
(Gain) loss on change in value of embedded derivatives		33,700			111,703			(242,223	)		(242,223	)
Loss on extinguishment of debt and credit facilities, net		3,787			111,863			—			—
Loss on investments		2,870			6,660			7,549			16,099
Other (income) expense		(1,324	)		(2,548	)		4,069			3,174
Income (loss) from operations		66,647			109,367			(5,098,642	)		(5,275,045	)
Impairment of goodwill		—			—			5,026,838			5,026,838
Restructuring, impairments and related costs		3,029			29,614			—			—
Depreciation and amortization		41,587			146,462			45,448			123,369
Share-based payment expense		7,607			32,539			9,644			40,096
Adjusted income (loss) from operations	$	118,870		$	317,982		$	(16,712	)	$	(84,742	)

57

(15) The following tables combine our Predecessor and Successor GAAP Results of operations for the three and nine September 30, 2009 and 2008:

	Successor Entity						Predecessor Entity			Combined
	Three Months			August 1, 2008			July 1, 2008			Three Months
	Ended			Through			Through			Ended
	September 30, 2009			September 30, 2008			July 31, 2008			September 30, 2008
Revenue:
Subscriber revenue, including effects of rebates	$	304,714		$	183,033		$	95,684		$	278,717
Advertising revenue, net of agency fees		4,147			5,165			3,193			8,358
Equipment revenue		5,657			3,351			1,585			4,936
Other revenue		10,955			4,054			4,242			8,296
Total revenue		325,473			195,603			104,704			300,307
Operating expenses (excludes depreciation and amortization shown separately below) (1)
Cost of services:
Satellite and transmission		11,484			12,458			6,644			19,102
Programming and content		27,811			18,046			15,991			34,037
Revenue share and royalties		46,976			38,539			24,198			62,737
Customer service and billing		31,064			23,819			12,249			36,068
Cost of equipment		5,142			5,020			2,406			7,426
Sales and marketing		26,055			28,951			17,268			46,219
Subscriber acquisition costs		35,049			27,482			33,366			60,848
General and administrative		25,216			19,215			33,209			52,424
Engineering, design and development		5,413			5,191			2,611			7,802
Impairment of goodwill		—			5,026,838			—			5,026,838
Depreciation and amortization		41,587			34,620			10,828			45,448
Restructuring, impairments and related costs		3,029			—			—			—
Total operating expenses		258,826			5,240,179			158,770			5,398,949
Income (loss) from operations		66,647			(5,044,576	)		(54,066	)		(5,098,642	)
Other income (expense)
Interest and investment income		729			3,963			594			4,557
Interest expense, net of amounts capitalized		(70,616	)		(47,798	)		(14,130	)		(61,928	)
Gain (loss) on change in value of embedded derivatives		(33,700	)		242,223			—			242,223
Loss on extinguishment of debt and credit facilities, net		(3,787	)		—			—			—
Loss on investments		(2,870	)		(3,089	)		(4,460	)		(7,549	)
Other income (expense)		1,324			(4,074	)		5			(4,069	)
Total other income (expense)		(108,920	)		191,225			(17,991	)		173,234
Loss before income taxes		(42,273	)		(4,853,351	)		(72,057	)		(4,925,408	)
Income tax expense		(578	)		(672	)		(508	)		(1,180	)
Net loss		(42,851	)		(4,854,023	)		(72,565	)		(4,926,588	)
Add: net loss attributable to noncontrolling interests		—			—			(1,053	)		(1,053	)
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(42,851	)	$	(4,854,023	)	$	(73,618	)	$	(4,927,641	)
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission	$	273		$	570		$	305		$	875
Programming and content		859			961			586			1,547
Customer service and billing		345			332			228			560
Sales and marketing		1,261			1,038			770			1,808
Subscriber acquisition costs		—			—			—			—
General and administrative		4,355			2,000			1,634			3,634
Engineering, design and development		514			710			510			1,220
Total share-based payment expense	$	7,607		$	5,611		$	4,033		$	9,644

58

	Successor Entity						Predecessor Entity			Combined
	Nine Months			August 1, 2008			January 1, 2008			Nine Months
	Ended			Through			Through			Ended
	September 30, 2009			September 30, 2008			July 31, 2008			September 30, 2008
Revenue:
Subscriber revenue, including effects of rebates	$	884,038		$	183,033		$	670,870		$	853,903
Advertising revenue, net of agency fees		13,475			5,165			22,743			27,908
Equipment revenue		17,681			3,351			13,397			16,748
Other revenue		19,344			4,054			24,184			28,238
Total revenue		934,538			195,603			731,194			926,797
Operating expenses (excludes depreciation and amortization shown separately below) (1)
Cost of services:
Satellite and transmission		36,952			12,458			46,566			59,024
Programming and content		84,353			18,046			117,156			135,202
Revenue share and royalties		142,997			38,539			166,606			205,145
Customer service and billing		96,168			23,819			82,947			106,766
Cost of equipment		12,049			5,020			20,013			25,033
Sales and marketing		84,565			28,951			126,054			155,005
Subscriber acquisition costs		83,524			27,482			174,083			201,565
General and administrative		91,689			19,215			116,444			135,659
Engineering, design and development		16,798			5,191			23,045			28,236
Impairment of goodwill		—			5,026,838			—			5,026,838
Depreciation and amortization		146,462			34,620			88,749			123,369
Restructuring, impairments and related costs		29,614			—			—			—
Total operating expenses		825,171			5,240,179			961,663			6,201,842
Income (loss) from operations		109,367			(5,044,576	)		(230,469	)		(5,275,045	)
Other income (expense)
Interest and investment income		1,848			3,963			3,013			6,976
Interest expense, net of amounts capitalized		(226,935	)		(47,798	)		(73,937	)		(121,735	)
Gain (loss) on change in value of embedded derivatives		(111,703	)		242,223			—			242,223
Loss on extinguishment of debt and credit facilities, net		(111,863	)		—			—			—
Loss on investments		(6,660	)		(3,089	)		(13,010	)		(16,099	)
Other income (expense)		2,548			(4,074	)		900			(3,174	)
Total other income (expense)		(452,765	)		191,225			(83,034	)		108,191
Loss before income taxes		(343,398	)		(4,853,351	)		(313,503	)		(5,166,854	)
Income tax expense		(1,733	)		(672	)		(1,512	)		(2,184	)
Net loss		(345,131	)		(4,854,023	)		(315,015	)		(5,169,038	)
Add: net loss attributable to noncontrolling interests		—			—			(7,443	)		(7,443	)
Net loss — XM Satellite Radio Holdings Inc. and Subsidiaries	$	(345,131	)	$	(4,854,023	)	$	(322,458	)	$	(5,176,481	)
(1) Amounts related to share-based payment expense included in operating expenses were as follows:
Satellite and transmission	$	1,073		$	570		$	2,745		$	3,315
Programming and content		3,368			961			4,949			5,910
Customer service and billing		1,077			332			1,869			2,201
Sales and marketing		3,862			1,038			7,047			8,085
Subscriber acquisition costs		—			—			—			—
General and administrative		21,122			2,000			13,200			15,200
Engineering, design and development		2,037			710			4,675			5,385
Total share-based payment expense	$	32,539		$	5,611		$	34,485		$	40,096

59

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2009, we did not hold or issue any free-standing derivatives. Upon completion of the Merger, the convertible and exchangeable features in the 10% Senior Secured Discount Convertible Notes due 2009, and the 10% Convertible Senior Notes due 2009 became settleable in SIRIUS common stock and were subsequently accounted for as embedded derivatives. In the event the debt holders exercise their conversion or exchange option, SIRIUS intends to issue common stock to fulfill the obligation.

We hold investments in marketable securities, which consist of auction rate certificates and a debt security. We classify our marketable securities as available-for-sale. We hold an investment in auction rate certificates which are classified as available-for-sale. These securities are consistent with the investment 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.

Our debt includes fixed and variable rate instruments and the fair market value of our debt is sensitive to changes in interest rates. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate fluctuations.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

As of September 30, 2009, an evaluation was performed under the supervision and with the participation of our management, including Mel Karmazin, our President, and David J. Frear, our Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including our President and our Treasurer, concluded that our disclosure controls and procedures were effective as of September 30, 2009. There has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting during the three months ended September 30, 2009.

60

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

FCC Merger Order.On July 25, 2008, the FCC adopted an order approving the Merger. The order became effective immediately upon adoption. Inc September 2008, Mt. Wilson FM Broadcasters, Inc. filed a Petition for Reconsideration of this order. This Petition for Reconsideration remains pending.

Atlantic Recording Corporation, BMG Music, Capital Records, Inc., Elektra Entertainment Group Inc., Interscope Records, Motown Record Company, L.P., Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records, Inc. and Warner Bros. Records Inc. v. XM Satellite Radio Inc.In May 2006, the plaintiffs filed this action in the United States District Court for the Southern District of New York. The complaint seeks monetary damages and equitable relief, and alleges that XM radios that include advanced recording functionality infringe upon plaintiffs’ copyrighted sound recordings. XM filed a motion to dismiss this matter, and that motion was denied in January 2007. XM has resolved the lawsuit with respect to Universal Music Group, Warner Music Group, Sony BMG Music Entertainment and EMI Group, and each of these parties has withdrawn as a party to the lawsuit, and this lawsuit has been dismissed with respect to such parties.

Music publishing companies and certain other record companies also have filed lawsuits, purportedly on a class basis, with similar allegations. We believe these allegations are without merit and that our products comply with applicable copyright law, including the Audio Home Recording Act. We intend to vigorously defend this matter. There can be no assurance regarding the ultimate outcome of these matters, or the significance, if any, to our business, consolidated results of operations or financial position.

Other Matters. In the ordinary course of business, we are a defendant in various lawsuits and arbitration proceedings, including actions filed by former employees, parties to contracts or leases and owners of patents, trademarks, copyrights or other intellectual property. None of these actions are, in our opinion, likely to have a material adverse effect on our cash flows, financial position or results of operations.

ITEM 1A. RISK FACTORS

Except as disclosed in our Quarterly Report on Form 10-Q for the three months ended March 31, 2009, 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, 2008.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

61

ITEM 6. EXHIBITS

See Exhibits Index attached hereto.

EXHIBIT INDEX

Exhibit			Description
	2.1	—	Agreement and Plan of Merger, dated as of February 19, 2007, among Sirius Satellite Radio Inc., Vernon Merger Corporation and XM Satellite Radio Holdings Inc. (incorporated by reference to Exhibit 2.1 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K dated February 21, 2007).
	3.1	—	Restated Certificate of Incorporation of XM Satellite Radio Holdings Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 4 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-83619).
	3.2	—	Bylaws of Vernon Merger Corporation (incorporated by reference to Exhibit 3.2 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed July 30, 2008).****
	3.3	—	Certificate of Amendment of Restated Certificate of Incorporation of XM Satellite Radio Holdings Inc. (incorporated by reference to Exhibit 3.5 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-3, File No. 333-89132).
	3.4	—	Certificate of Amendment of Restated Certificate of Incorporation of XM Satellite Radio Holdings Inc. (incorporated by reference to Exhibit 3.6 to XM Satellite Radio Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2002).
	3.5	—	Restated Certificate of Incorporation of XM Satellite Radio Inc. (incorporated by reference to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-4, File No. 333-391789).
	3.6	—	Amended and Restated Bylaws of XM Satellite Radio Inc. (incorporated by reference to Exhibit 3.10 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	3.7	—	Amendments to the Amended and Restated By-Laws of XM Satellite Radio Holdings Inc. (incorporated by reference to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed December 7, 2007).
	3.8	—	Certificate of Ownership and Merger, dated August 5, 2008 (incorporated by reference to Exhibit 3.1 to Sirius XM Radio Inc.’s Current Report on Form 8-K dated August 5, 2008).
	4.1	—	Form of certificate for shares of Sirius XM Radio Inc.’s Common Stock (incorporated by reference to Exhibit 4.3 to Sirius XM Radio Inc.’s Registration Statement on Form S-1 (File No. 33-74782)).
	4.2	—	Form of certificate for shares of XM Satellite Radio Holdings Inc.’s Class A common stock (incorporated by reference to Exhibit 3 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form 8-A filed on September 23, 1999).
	4.3	—	Warrant Agreement, dated March 15, 2000, between XM Satellite Radio Holdings Inc., as Issuer, and United States Trust Company of New York, as Warrant Agent (incorporated by reference to Amendment No. 1 to Exhibit 4.5 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-39176).
	4.4	—	Warrant Registration Rights Agreement, dated March 15, 2000, among XM Satellite Radio Holdings Inc., Bear, Stearns & Co., Inc., Donaldson, Lufkin and Jenrette Securities Corporation, Salomon Smith Barney Inc. and Lehman Brothers Inc. (incorporated by reference to Exhibit 4.6 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-39176).
	4.5	—	Form of Warrant (incorporated by reference to Exhibit 4.7 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-39176).
	4.6	—	Security Agreement, dated as of January 28, 2003, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC, and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).
	4.7	—	Amended and Restated Security Agreement, dated as of January 28, 2003, between XM Satellite Radio Inc. and The Bank of New York (incorporated by reference to Exhibit 4.3 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).

62

Exhibit			Description
	4.8	—	Warrant Agreement, dated as of January 28, 2003, between XM Satellite Radio Holdings Inc. and The Bank of New York (incorporated by reference to Exhibit 4.6 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).
	4.9	—	Second Amended and Restated Registration Rights Agreement, dated as of January 28, 2003, among XM Satellite Radio Holdings Inc. and certain shareholders and noteholders named therein (incorporated by reference to Exhibit 10.5 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed with the SEC on January 29, 2003).
	4.10	—	Form of 10% Senior Secured Discount Convertible Note due 2009 (incorporated by reference to Exhibit 4.9 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).
	4.11	—	Global Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.11 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).
	4.12	—	First Amendment to Security Agreement, dated as of June 12, 2003, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC and The Bank of New York (incorporated by reference to Exhibit 4.9 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-4, File No. 333-106823).
	4.13	—	Third Amended and Restated Shareholders and Noteholders Agreement, dated as of June 16, 2003, among XM Satellite Radio Holdings Inc. and certain shareholders and noteholders named therein (incorporated by reference to Exhibit 10.1 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).
	4.14	—	Amended and Restated Note Purchase Agreement, dated as of June 16, 2003, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc. and certain investors named therein (incorporated by reference to Exhibit 10.40 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).
	4.15	—	Form of Amendment to Third Amended and Restated Shareholders and Noteholders Agreement, dated as of January 13, 2004, among XM Satellite Radio Holdings Inc. and the parties thereto (incorporated by reference to Exhibit 10.61 to XM Satellite Radio Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003).
	4.17	—	Indenture, dated as of May 1, 2006, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc. and The Bank of New York, as trustee, relating to the 9.75% Senior Notes due 2014 (incorporated by reference to Exhibit 4.1 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on May 5, 2006).
	4.18	—	Form of 9.75% Senior Note due 2014 (incorporated by reference to Exhibit 4.3 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on May 5, 2006).
	4.19	—	Form of 10% senior secured note (incorporated by reference to Exhibit 10.6 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed February 14, 2007).
	4.20	—	Agreement, dated as of June 26, 2008, among XM Satellite Radio Holdings Inc., the undersigned holders of XM’s 1.75% Convertible Senior Notes due 2009, Brown Rudnick LLP and Sirius Satellite Radio Inc. (incorporated by reference to Exhibit 10.7 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
	4.21	—	First Supplemental Indenture, dated July 24, 2008, between XM Satellite Radio Holdings Inc. and The Bank of New York Mellon, relating to the 1.75% Convertible Senior Notes due 2009 (incorporated by reference to Exhibit 4.64 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.22	—	Purchase Agreement, dated as of July 24, 2008, among XM Escrow LLC, XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC, XM Radio Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC, relating to the 13% Senior Notes due 2013 (incorporated by reference to Exhibit 4.65 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.23	—	Purchase Agreement, dated as of July 28, 2008, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC, XM Radio Inc., Sirius Satellite Radio Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC, relating to the 7% Exchangeable Senior Subordinated Notes due 2014 (incorporated by reference to Exhibit 4.66 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.24	—	First Supplemental Warrant Agreement, dated July 28, 2008, among Sirius Satellite Radio Inc., XM Satellite Radio Holdings Inc. and The Bank of New York Mellon relating to the Warrants, dated March 15, 2000, with the United States Trust Company of New York (incorporated by reference to Exhibit 4.67 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.25	—	First Supplemental Warrant Agreement, dated July 28, 2008, among Sirius Satellite Radio Inc., XM Satellite Radio Holdings Inc. and The Bank of New York Mellon, relating to the Warrants, dated January 28, 2003, with The Bank of New York Mellon as warrant agent (incorporated by reference to Exhibit 4.68 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).

63

Exhibit			Description
	4.26	—	Written instrument, dated July 28, 2008, between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. relating to the Warrant Agreement with Space Systems /Loral, dated June 3, 2005 (incorporated by reference to Exhibit 4.69 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.27	—	Written instrument, dated July 28, 2008, between Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. relating to the Warrant Agreement with Boeing Satellite Systems International Inc., dated July 31, 2003 and assigned to Bank of America, N.A. on May 24, 2006 (incorporated by reference to Exhibit 4.70 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.28	—	Second Supplemental Indenture, dated July 28, 2008, between XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc., relating to the 1.75% Convertible Senior Notes due 2009 (incorporated by reference to Exhibit 4.71 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.29	—	First Supplemental Indenture, dated July 28, 2008, among XM Satellite Radio Inc., as issuer, XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC, XM Radio Inc. and The Bank of New York Mellon, relating to the 9.75% Senior Notes due 2014 (incorporated by reference to Exhibit 4.72 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.30	—	Second Supplemental Indenture, dated July 28, 2008, among XM Satellite Radio Inc., as issuer, XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC, XM Radio Inc. and The Bank of New York Mellon, relating to the 9.75% Senior Notes due 2014 (incorporated by reference to Exhibit 4.73 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.31	—	Notice from XM Satellite Radio Holdings Inc., dated July 28, 2008, relating to the 10% Senior Discount Convertible Notes due 2009 (incorporated by reference to Exhibit 4.75 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.32	—	Indenture, dated as of July 31, 2008, among XM Escrow LLC and The Bank of New York Mellon, relating to the 13% Senior Notes due 2013 (incorporated by reference to Exhibit 4.77 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.33	—	Supplemental Indenture, dated as of July 31, 2008, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., XM Equipment Leasing LLC, XM Radio Inc., and The Bank of New York Mellon, relating to the 13% Senior Notes due 2013 (incorporated by reference to Exhibit 4.78 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.34	—	Supplemental Indenture, dated as of July 31, 2008, among XM Satellite Radio Holdings Inc., XM Escrow LLC and The Bank of New York Mellon, relating to the 13% Senior Notes due 2013 (incorporated by reference to Exhibit 4.79 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.35	—	Indenture, dated as of August 1, 2008 among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., XM Equipment LLC, XM Radio Inc., Sirius Satellite Radio Inc. and The Bank of New York Mellon, as trustee, relating to the 7% Exchangeable Senior Subordinated Notes due 2014 (incorporated by reference to Exhibit 4.80 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.36	—	Registration Rights Agreement, dated August 1, 2008, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., XM Equipment Leasing LLC, XM Radio Inc., Sirius Satellite Radio Inc., J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC, relating to the 7% Exchangeable Senior Subordinated Notes due 2014 (incorporated by reference to Exhibit 4.81 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008).
	4.38	—	Note Purchase Agreement, dated as of February 13, 2009, among Sirius XM Radio Inc., XM Satellite Radio Holdings Inc., XM 1500 Eckington LLC, XM Investment LLC and the purchasers listed on schedule I thereto, relating to XM Satellite Radio Holdings Inc.’s 10% Senior PIK Secured Notes due 2011 (incorporated by reference to Exhibit 4.1 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on February 17, 2009).
	4.39	—	Indenture, dated as of February 13, 2009, among Sirius XM Radio Inc., XM Satellite Radio Holdings Inc., XM 1500 Eckington LLC, XM Investment LLC and U.S. Bank National Association, as trustee and collateral trustee, relating to XM Satellite Radio Holdings Inc.’s 10% Senior PIK Secured Notes due 2011 (incorporated by reference to Exhibit 4.2 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on February 17, 2009).

64

Exhibit			Description
	4.40	—	Security Agreement, dated as of February 13, 2009, among XM 1500 Eckington LLC, XM Investment LLC and U.S. Bank National Association, as collateral trustee, relating to XM Satellite Radio Holdings Inc.’s 10% Senior PIK Secured Notes due 2011 (incorporated by reference to Exhibit 4.3 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on February 17, 2009).
	4.41	—	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of February 13, 2009, from XM 1500 Eckington LLC, as grantor, to Stewart Title of Maryland Inc., as trustee for the benefit of U.S. Bank National Association as collateral agent, as beneficiary (incorporated by reference to Exhibit 4.4 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on February 17, 2009).
	4.42	—	Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of February 13, 2009, from XM Investment LLC, as grantor, to Stewart Title of Maryland Inc., as trustee for the benefit of U.S. Bank National Association as collateral agent, as beneficiary (incorporated by reference to Exhibit 4.5 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on February 17, 2009).
	4.43	—	Registration Rights Agreement, dated as of February 13, 2009, among Sirius XM Radio Inc., XM Satellite Radio Holdings Inc., XM 1500 Eckington LLC, XM Investment LLC and the purchasers signatory thereto, relating to XM Satellite Radio Holdings Inc.’s 10% Senior PIK Secured Notes due 2011 (incorporated by reference to Exhibit 4.6 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on February 17, 2009).
	4.44	—	Third Supplemental Indenture, dated as of March 6, 2009, among XM Satellite Radio Inc., XM Equipment Leasing LLC, XM Radio Inc. and the Bank of New York Mellon, as trustee, relating to the 9.75% Senior Notes due 2014 (incorporated by reference to Exhibit 4.56 to Sirius XM Radio Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008).
	4.45	—	Indenture, dated June 30, 2009, between XM Satellite Radio Inc. and U.S. Bank National Association relating to the 11.25% Senior Secured Notes due 2013 (incorporated by reference to Exhibit 4.59 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
	4.46	—	Third Amendment to Security Agreement, dated June 30, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., certain subsidiaries thereof, and U.S. Bank National Association (incorporated by reference to Exhibit 4.60 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
	*10.1	—	Operational Assistance Agreement, dated as of June 7, 1999, between XM Satellite Radio Inc. and Clear Channel Communications, Inc. (incorporated by reference to Exhibit 10.10 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-83619).
	**10.2	—	Technology Licensing Agreement among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc., WorldSpace Management Corporation and American Mobile Satellite Corporation, dated as of January 1, 1998, amended by Amendment No. 1 to Technology Licensing Agreement, dated June 7, 1999 (incorporated by reference to Exhibit 10.3 to XM Satellite Radio Holdings Inc.’s Annual Report on Form 10-K for the period year December 31, 2007).
	***10.3	—	Third Amended and Restated Distribution and Credit Agreement, dated as of February 6, 2008, among General Motors Corporation, XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. (incorporated by reference to Exhibit 10.63 to XM Satellite Radio Holdings Inc.’s Annual Report on Form 10-K for the period year December 31, 2007).
	**10.5	—	Third Amended and Restated Satellite Purchase Contract for In-Orbit Delivery, dated as of May 15, 2001, between XM Satellite Radio Inc. and Boeing Satellite Systems International Inc. (incorporated by reference to Exhibit 10.36 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-3, File No. 333-89132).
	10.6	—	Assignment and Novation Agreement, dated as of December 5, 2001, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc. and Boeing Satellite Systems International Inc. (incorporated by reference to Exhibit 10.3 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on December 6, 2001).
	**10.7	—	Amendment to the Satellite Purchase Contract for In-Orbit Delivery, dated as of December 5, 2001, between XM Satellite Radio Inc. and Boeing Satellite Systems International Inc. (incorporated by reference to Exhibit 10.4 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on December 6, 2001).
	10.8	—	GM/DIRECTV Director Designation Agreement, dated as of January 28, 2003, among XM Satellite Radio Holdings Inc., General Motors Corporation and DIRECTV Enterprises LLC (incorporated by reference to Exhibit 10.43 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).

65

Exhibit			Description
	10.9	—	Amended and Restated Assignment and Use Agreement, dated as of January 28, 2003, between XM Satellite Radio Inc. and XM Radio Inc. (incorporated by reference to Exhibit 10.7 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed on January 29, 2003).
	10.10	—	Amended and Restated Director Designation Agreement, dated as of February 1, 2003, among XM Satellite Radio Holdings Inc. and the shareholders and noteholders named therein (incorporated by reference to Exhibit 10.42 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).
	**10.11	—	Amended and Restated Amendment to the Satellite Purchase Contract for In-Orbit Delivery, dated May 23, 2003, among XM Satellite Radio Inc. and XM Satellite Radio Holdings Inc. and Boeing Satellite Systems International, Inc. (incorporated by reference to Exhibit 10.53 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).
	**10.12	—	July 2003 Amendment to the Satellite Purchase Contract for In-Orbit Delivery, dated July 31, 2003, among XM Satellite Radio Inc. and XM Satellite Radio Holdings Inc. and Boeing Satellite Systems International, Inc. (incorporated by reference to Exhibit 10.54 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).
	**10.13	—	Contract for Launch Services, dated August 5, 2003, between Sea Launch Limited Partnership and XM Satellite Radio Holdings Inc. (incorporated by reference to Exhibit 10.55 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).
	10.14	—	Amendment No. 1 to Amended and Restated Director Designation Agreement, dated as of September 9, 2003, among XM Satellite Radio Holdings Inc. and the shareholders and noteholders named therein (incorporated by reference to Exhibit 10.56 to XM Satellite Radio Holdings Inc.’s Quarterly Report in Form 10-Q for the quarter ended September 30, 2003).
	10.15	—	December 2003 Amendment to the Satellite Purchase Contract for In-Orbit Delivery, dated December 19, 2003, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc. and Boeing Satellite Systems International, Inc. (incorporated by reference to Exhibit 10.57 to XM Satellite Radio Holdings Inc.’s Annual Report on Form 10-K for the year ended December 31, 2003).
	10.16	—	First Amendment dated as of June 26, 2008 to the Intercreditor Agreement dated as of May 5, 2006 among The Bank of New York, in its capacity as collateral agent under certain intercreditor agreements dated as of January 28, 2003, JP Morgan Chase Bank, National Association, in its capacity as administrative agent under the Original Facility, JP Morgan Chase Bank, National Association, as new collateral agent for the secured parties under that certain Collateral Agency Agreement dated as of June 26, 2008 and General Motors Corporation, acknowledged and agreed to by XM Satellite Radio Inc., XM Satellite Radio Holdings Inc. and certain other parties (incorporated by reference to Exhibit 10.4 to XM Satellite Radio Holding Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
	10.17	—	Consent and Amendment Agreement, dated as of July 10, 2008, among XM Satellite Radio Holdings Inc. and the undersigned holders of XM Satellite Radio Holdings Inc.’s 1.75% Convertible Senior Notes due 2009 (incorporated by reference to Exhibit 10.8 to XM Satellite Radio Holding’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
	10.18	—	Waiver and Letter Agreement, dated as of July 14, 2008, among XM Satellite Radio Inc., XM Satellite Radio Holdings Inc. and certain beneficial owners of XM Satellite Radio Inc.’s 9.75% Senior Notes due 2014 (incorporated by reference to Exhibit 10.6 to XM Satellite Radio Inc.’s Current Report on Form 8-K filed on July 17, 2008).
	10.19	—	Credit Agreement, dated as of February 17, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., the lender parties thereto and Liberty Media Corporation, as administrative agent (incorporated by reference to Exhibit 10.29 to Sirius XM Radio Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2009).
	10.20	—	Amended and Restated Credit Agreement, dated as of March 6, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., the lender parties thereto and Liberty Media Corporation, as administrative agent (incorporated by reference to Exhibit 10.26 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).
	10.21	—	Guarantee and Collateral Agreement, dated as of March 6, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., the subsidiary guarantors named therein and Liberty Media Corporation, as administrative agent (incorporated by reference to Exhibit 10.27 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).

66

Exhibit			Description
	10.22	—	Amended and Restated Credit Agreement, dated as of March 6, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., the lender parties thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.28 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).
	10.23	—	Intercreditor Agreement, dated as of March 6, 2009, among XM Satellite Radio Inc., JPMorgan Chase Bank, N.A. and Liberty Media Corporation agent (incorporated by reference to Exhibit 10.29 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).
	10.24	—	Second Amendment to Security Agreement, dated as of March 6, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., XM Equipment Leasing LLC and JPMorgan Chase Bank, N.A., as collateral agent (incorporated by reference to Exhibit 10.30 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).
	10.25	—	Joinder Agreement, dated as of March 6, 2009, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc., XM Equipment Leasing LLC and JPMorgan Chase Bank, N.A., as collateral agent (incorporated by reference to Exhibit 10.31 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).
	10.26	—	Amended and Restated Guarantee Agreement, dated as of March 6, 2009, among XM Satellite Radio Holdings Inc., certain of its subsidiaries named therein and certain subsidiaries of XM Satellite Radio Inc. and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.32 to XM Satellite Radio Inc.’s Registration Statement on Form S-1, File No. 333-158079).
	*10.27	—	Form of Employee Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.19 to Amendment No. 1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-83619).
	*10.28	—	Non-Qualified Stock Option Agreement between Gary Parsons and XM Satellite Radio Holdings Inc., dated July 16, 1999 (incorporated by reference to Exhibit 10.23 to Amendment No. 5 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-83619).
	*10.29	—	Form of Director Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.25 to Amendment No. 5 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-1, File No. 333-83619).
	*10.30	—	XM Satellite Radio Holdings Inc. Talent Option Plan (incorporated by reference to Exhibit 99. to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-8, File No. 333-65022).
	*10.31	—	Form of 2003 Executive Stock Option Agreement (incorporated by reference to Exhibit 10.52 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).
	*10.32	—	1998 Shares Award Plan (incorporated by reference to Exhibit 4.1 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-8, File No. 333-106827).
	*10.33	—	Employee Stock Purchase Plan (incorporated by reference to Exhibit 4.2 to XM Satellite Radio Holdings Inc.’s Registration Statement on Form S-8, File No. 333-106827).
	*10.34	—	Form of Employment Agreement, dated as of August 6, 2004, among XM Satellite Radio Holdings Inc., XM Satellite Radio Inc. and Gary Parsons (incorporated by reference to Exhibit 10.40 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	*10.35	—	Form of 2004 Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.42 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).
	*10.36	—	Form of Restricted Stock Agreement for executive officers (incorporated by reference to Exhibit 10.39 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005).
	*10.37	—	Amendment No. 1 to Employment Agreement, dated as of April 4, 2007, among Gary Parsons, XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. (incorporated by reference to Exhibit 10.1 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed April 10, 2007).
	*10.38	—	Form of Severance Agreement for executive officers other than Chairman, CEO, President and COO (incorporated by reference to Exhibit 10.4 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed April 10, 2007).
	*10.39	—	Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.2 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed June 1, 2007).

67

Exhibit			Description
	*10.40	—	Form of Restricted Stock Agreement (incorporated by reference to Exhibit 10.3 to XM Satellite Radio Holdings Inc.’s Current Report on Form 8-K filed June 1, 2007).
	*10.41	—	XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to XM Satellite Radio Holdings Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
	*10.42	—	Amendment No. 2 to Employment Agreement, dated as of February 27, 2008, among Gary Parsons, XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. (incorporated by reference to Exhibit 10.64 to XM Satellite Radio Holdings Inc.’s Annual Report on Form 10-K for the period year December 31, 2007)
	*10.43	—	Amendment No. 3 to Employment Agreement, dated as of June 26, 2008, among Gary Parsons, XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. (incorporated by reference to Exhibit 10.5 to XM Satellite Radio Holding Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008).
	*10.44	—	Letter agreement dated June 30, 2009 amending the Employment Agreement dated November 18, 2004 between Mel Karmazin and Sirius XM Radio Inc. (incorporated by reference to Exhibit 10.1 to Sirius XM Radio Inc.’s Current Report on Form 8-K filed on July 1, 2009).
	31.1	—	Certificate of Mel Karmazin, President of XM Satellite Radio Holdings Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	31.2	—	Certificate of Mel Karmazin, President of XM Satellite Radio Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	31.3	—	Certificate of David J. Frear, Treasurer of XM Satellite Radio Holdings Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	31.4	—	Certificate of David J. Frear, Treasurer of XM Satellite Radio Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	32.1	—	Certificate of Mel Karmazin, President and David J. Frear, Treasurer of XM Satellite Radio Holdings Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
	32.2	—	Certificate of Mel Karmazin, President and David J. Frear, Treasurer of XM Satellite Radio Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

*	This document has been identified as a management contract or compensatory plan or arrangement.
**	Pursuant to the Commission’s Orders Granting Confidential Treatment under Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the Securities Exchange Act of 1934, certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text.
***	Confidential treatment has been requested with respect to portions of this Exhibit that have been omitted by redacting a portion of the text.
****	In accordance with the Agreement and Plan of Merger, dated as of February 17, 2007, entered into by and among XM Satellite Radio Holdings Inc., Sirius Satellite Radio Inc. and Vernon Merger Corporation (filed as Exhibit 2.1 herewith), the bylaws of Vernon Merger Corporation became the bylaws of XM Satellite Radio Holdings Inc. upon the effectiveness of the Merger.

68

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	XM SATELLITE RADIO HOLDINGS INC .
	By:	/s/ DAVID J. FREARDavid J. Frear
		Treasurer
		(Principal Financial Officer)
November 5, 2009
	XM SATELLITE RADIO INC.
	By:	/s/ DAVID J. FREAR
		David J. Frear
		Treasurer
		(Principal Financial Officer)
November 5, 2009

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