EXHIBIT 99.1
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Satellite CD Radio, Inc.
We have audited the accompanying balance sheets of Satellite CD Radio, Inc.
(the 'Company') as of December 31, 2003 and 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2003
and 2002 in conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
New York, New York
January 23, 2004
SATELLITE CD RADIO, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<Table>
<Caption>
AS OF DECEMBER 31,
-------------------
2003 2002
---- ----
ASSETS
FCC license............................................... $83,654 $83,654
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Total assets........................................ $83,654 $83,654
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STOCKHOLDERS' EQUITY
Stockholders' equity:
Common stock, no par value: 200 shares issued and
outstanding......................................... $ -- $ --
Additional paid-in capital............................ 83,654 83,654
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Total stockholders' equity.......................... $83,654 $83,654
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</Table>
The accompanying notes are an integral part of these financial statements.
SATELLITE CD RADIO, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE STATED)
1. BUSINESS
Satellite CD Radio, Inc. (the 'Company') is a wholly owned subsidiary of
Sirius Satellite Radio Inc. ('Sirius') which broadcasts over 100 streams of
digital-quality entertainment: 61 streams of 100% commercial-free music and over
40 streams of news, sports, talk, entertainment, traffic, weather and children's
programming for an effective monthly subscription fee of $11.15 for a three year
plan and up to $12.95 for a monthly plan. Sirius also offers discounts for
pre-paid and long-term subscriptions as well as discounts for those subscribers
that purchase multiple subscriptions. Approximately 65% of its subscriber base
is on an annual plan with an effective monthly subscription fee of $11.87.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying balance sheets have been prepared in accordance with
accounting principles generally accepted in the United States. No statements of
operations, stockholders' equity or cash flows have been presented for each of
the three years in the period ended December 31, 2003 as the Company has had no
operational activity for those years. The Company does not charge Sirius a fee
for the use of its license.
FCC License
In June 2001, the FASB issued SFAS No. 142, 'Goodwill and Other Intangible
Assets.' SFAS No. 142 requires that goodwill and intangible assets with
indefinite useful lives be tested for impairment at least annually. In
accordance with SFAS No. 142, the Company determined that its FCC license has an
indefinite life and is evaluated for impairment on an annual basis. Upon
adoption of SFAS No. 142, the Company completed an impairment analysis during
the first half of the year ended December 31, 2002, and concluded that there was
no impairment loss related to its FCC license. In November 2003 and 2002, the
Company updated its impairment test and determined that there was no impairment.
The Company uses projections of estimated future cash flows and other factors in
assessing the fair value of its FCC license. If these estimates or projections
change in the future, it may be required to record an impairment charge related
to its FCC license. To date, the Company has not recorded any amortization
expense related to its FCC license.
3. LIEN ON THE COMPANY'S COMMON STOCK
Sirius' obligations under its 14 1/2% Senior Secured Notes due 2009 and 15%
Senior Secured Discount Notes due 2007 are secured by a lien on the Company's
common stock.