UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1999
Commission file number 0-24710
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CD RADIO INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 52-1700207
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 AVENUE OF THE AMERICAS, 36TH FLOOR
NEW YORK, NEW YORK 10020
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(Address of principal executive offices)
(Zip code)
212-584-5100
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No______
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $.001 PAR VALUE 26,820,240 SHARES
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(Class) (Outstanding as of November 8, 1999)
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX
Part I - Financial Information
Page
Consolidated Statements of Operations (unaudited) for the three 1
and nine month periods ended September 30, 1999 and 1998 and for the
period May 17, 1990 (date of inception) to September 30, 1999
Consolidated Balance Sheets (unaudited) as of September 30, 1999 2
and December 31, 1998
Consolidated Statements of Cash Flows (unaudited) for the nine 3
month periods ended September 30, 1999 and 1998 and for the
period May 17, 1990 (date of inception) to September 30, 1999
Notes to Consolidated Financial Statements (unaudited) 4
Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
Part II - Other Information 15
Signatures 16
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative for
For the Three Months For the Nine Months the period
Ended Sept. 30 Ended Sept. 30, May 17, 1990
-------------------------------- ---------------------------------- (date of inception)
1999 1998 1999 1998 to Sept. 30, 1999
------------ ----------- ------------ ---------------- -------------------
Revenue $ - $ - $ - $ - $ -
Operating expenses:
Engineering, design and development (7,188,000) (681,000) (21,532,000) (1,455,000) (27,947,000)
General and administrative (5,744,000) (2,384,000) (17,162,000) (6,826,000) (47,707,000)
Special charges - - - (25,682,000) (27,682,000)
------------ ----------- ------------ ------------ -------------
Total operating expenses (12,932,000) (3,065,000) (38,694,000) (33,963,000) (103,336,000)
------------ ----------- ------------ ------------ -------------
Other income (expense):
Interest and investment income 3,809,000 1,866,000 10,209,000 5,769,000 21,861,000
Interest expense, net of
capitalized interest (4,000,000) (2,045,000) (7,683,000) (11,027,000) (24,067,000)
------------ ----------- ------------ ------------ -------------
(191,000) (179,000) 2,526,000 (5,258,000) (2,206,000)
------------ ----------- ------------ ------------ -------------
Income (loss) before income taxes (13,123,000) (3,244,000) (36,168,000) (39,221,000) (105,542,000)
Income taxes:
Federal - - - (38,000) (1,982,000)
State - - - - (313,000)
------------ ----------- ------------ ------------ -------------
Net loss (13,123,000) (3,244,000) (36,168,000) (39,259,000) (107,837,000)
------------ ----------- ------------ ------------ -------------
Preferred stock dividend (7,721,000) (4,344,000) (22,573,000) (13,563,000) (44,291,000)
Preferred stock deemed dividend (2,300,000) - (6,834,000) - (70,485,000)
Accretion of dividends in connection
with the issuance of warrants on
preferred stock (77,000) (62,000) (225,000) (6,434,000) (6,726,000)
------------ ----------- ------------ ------------ -------------
Net loss applicable to common
stockholders $(23,221,000) $(7,650,000) $(65,800,000) $(59,256,000) $(229,339,000)
------------ ----------- ------------ ------------ -------------
------------ ----------- ------------ ------------ -------------
Net loss per share applicable to common
stockholders (basic and diluted) $ (0.96) $ (0.43) $ (2.79) $ (3.51)
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Weighted average common shares
outstanding (basic and diluted) 24,095,000 17,686,000 23,575,000 16,859,000
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
The accompanying notes are an integral part of these consolidated financial statements.
1
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1999 1998
--------------- --------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 220,520,000 $ 204,753,000
Marketable securities, at market 172,855,000 60,870,000
Restricted investments, at amortized cost 80,832,000 -
Prepaid expense and other 605,000 166,000
--------------- ---------------
Total current assets 474,812,000 265,789,000
--------------- ---------------
Property and equipment, at cost:
Satellite construction in process 312,373,000 188,849,000
Launch construction in process 162,211,000 87,492,000
Broadcast studio equipment 11,791,000 87,000
Leasehold improvements 13,857,000 5,081,000
Terrestrial repeater network in process 4,702,000 1,990,000
Other 8,180,000 156,000
--------------- ---------------
513,114,000 283,655,000
Less accumulated depreciation (546,000) (21,000)
--------------- ---------------
512,568,000 283,634,000
--------------- ---------------
Other assets:
FCC license 83,368,000 83,368,000
Debt issue costs, net 24,227,000 9,313,000
Other 2,898,000 1,776,000
--------------- ---------------
Total other assets 110,493,000 94,457,000
--------------- ---------------
Total assets $ 1,097,873,000 $ 643,880,000
--------------- ---------------
--------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 28,152,000 $ 5,481,000
Satellite & launch construction payable - 8,479,000
Short-term notes payable 111,520,000 70,863,000
--------------- ---------------
Total current liabilities 139,672,000 84,823,000
Long-term notes payable and accrued interest 471,515,000 153,033,000
Deferred satellite payments and accrued interest 47,298,000 31,324,000
Deferred income taxes 2,237,000 2,237,000
--------------- ---------------
Total liabilities 660,722,000 271,417,000
--------------- ---------------
Commitments and contingencies
10 1/2% Series C Convertible Preferred Stock, no par value: 2,025,000
shares authorized, 1,465,916 and 1,467,416 shares issued and
outstanding at September 30, 1999 and December 31, 1998, respectively
(liquidation preferences of $146,591,600 and $146,741,600), at net
carrying value including accrued dividends 170,362,000 156,755,000
9.2% Series A Junior Cumulative Convertible Preferred Stock, $.001 par
value: 4,300,000 shares authorized, 1,350,000 shares issued and
outstanding at September 30, 1999 and December 31, 1998 (liquidation
preference of $135,000,000), at net carrying value including
accrued dividends 146,957,000 137,755,000
9.2% Series B Junior Cumulative Convertible Preferred Stock, $.001 par
value: 2,100,000 shares authorized, no shares issued or outstanding - -
Stockholders' equity:
Preferred stock, $.001 par value: 50,000,000 shares authorized - -
8,000,000 shares designated as 5% Delayed Convertible Preferred
Stock; none issued or outstanding
Common stock, $.001 par value: 200,000,000 shares authorized,
26,354,591 and 23,208,949 shares issued and outstanding at
September 30, 1999 and December 31, 1998, respectively 26,000 23,000
Additional paid-in capital 227,643,000 149,599,000
Deficit accumulated during the development stage (107,837,000) (71,669,000)
--------------- ---------------
Total stockholders' equity 119,832,000 77,953,000
--------------- ---------------
Total liabilities and stockholders' equity $ 1,097,873,000 $ 643,880,000
--------------- ---------------
--------------- ---------------
The accompanying notes are an integral part of these consolidated financial statements.
2
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative for
the period
For the Nine Months Ended Sept. 30, May 17, 1990
----------------------------------- (date of inception)
1999 1998 to Sept. 30, 1999
-------------- -------------- -------------------
Cash flows from development stage activities:
Net loss $ (36,168,000) $ (39,259,000) $ (107,837,000)
Adjustments to reconcile net loss to net cash provided by
(used in) development stage activities:
Depreciation and amortization 527,000 34,000 2,257,000
Unrealized (gain) loss on marketable securities 126,000 (96,000) (107,000)
(Gain) loss on disposal of assets 10,000 - 115,000
Special charges - 23,557,000 25,557,000
Accretion of notes payable charged as interest expense 4,212,000 17,302,000 32,078,000
Sales (purchases) of marketable securities and restricted
investments, net (191,386,000) 158,203,000 (252,023,000)
Compensation expense in connection with
issuance of common stock and stock options 695,000 41,000 4,031,000
Increase (decrease) in cash and cash equivalents
resulting from changes in assets and liabilities:
Prepaid expense and other (439,000) 302,000 (605,000)
Due to related party - - 351,000
Other assets (4,062,000) (2,069,000) (8,088,000)
Accounts payable and accrued expenses 14,864,000 2,111,000 20,416,000
Deferred taxes - - 2,237,000
-------------- -------------- ----------------
Net cash provided by (used in) development stage activities (211,621,000) 160,126,000 (281,618,000)
-------------- -------------- ----------------
Cash flows from investing activities:
Purchase of FCC license - - (83,368,000)
Payments for satellite construction (91,463,000) (63,470,000) (240,409,000)
Payments for launch services (68,357,000) (83,995,000) (178,212,000)
Other capital expenditures (31,228,000) (1,706,000) (38,928,000)
Acquisition of Sky-Highway Radio Corp. - - (2,000,000)
-------------- -------------- ----------------
Net cash used in investing activities (191,048,000) (149,171,000) (542,917,000)
-------------- -------------- ----------------
Cash flows from financing activities:
Proceeds from issuance of notes payable 159,657,000 60,421,000 230,520,000
Proceeds from issuance of common stock, net 67,994,000 - 251,437,000
Proceeds from issuance of preferred stock, net - - 250,068,000
Proceeds from exercise of stock options and warrants 785,000 99,000 5,725,000
Proceeds from issuance of promissory notes
and units, net 190,000,000 - 306,535,000
Proceeds from issuance of promissory notes to
related parties - - 2,965,000
Repayment of promissory notes - - (2,635,000)
Loan from officer - - 440,000
-------------- -------------- ----------------
Net cash provided by financing activities 418,436,000 60,520,000 1,045,055,000
-------------- -------------- ----------------
Net increase in cash and cash equivalents 15,767,000 71,475,000 220,520,000
Cash and cash equivalents at the beginning of period 204,753,000 900,000 -
-------------- -------------- ----------------
Cash and cash equivalents at the end of period $ 220,520,000 $ 72,375,000 $ 220,520,000
-------------- -------------- ----------------
-------------- -------------- ----------------
The accompanying notes are an integral part of these consolidated financial statements.
3
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
GENERAL
The accompanying consolidated financial statements and the notes
thereto do not include all of the information and disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles. In the opinion of management, all adjustments (consisting
only of normal, recurring adjustments) considered necessary to fairly state our
consolidated financial position and consolidated results of operations have been
included. These financial statements should be read in connection with our
consolidated financial statements and the notes thereto for the fiscal year
ended December 31, 1998 included in our Annual Report on Form 10-K as filed with
the Securities and Exchange Commission.
NET LOSS PER SHARE
Net loss per common share is based on the weighted average number of
common shares outstanding during such periods. Options and warrants granted by
us have not been included in the calculation of net loss per share because such
items were antidilutive.
The following is a reconciliation of net loss per common share, before
preferred stock dividend requirements, to net loss per share applicable to
common stockholders:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
-------- ------- ------- ------
Per common shares (basic and diluted):
Net loss $ (0.54) $ (0.18) $ (1.53) $ (2.33)
Preferred stock dividend requirements (0.42) (0.25) (1.25) (0.80)
Accretion of dividends in connection with the
issuance of warrants on preferred stock - - (0.01) (0.38)
--------- --------- ---------- ----------
Net loss applicable to common stockholders $ (0.96) $ (0.43) $ (2.79) $ (3.51)
--------- --------- ---------- ----------
MARKETABLE SECURITIES
Marketable securities consist of fixed income securities and are stated
at market value. Marketable securities are defined as trading securities under
the provision of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"), and unrealized holding gains and losses are
reflected in earnings. Unrealized holding gains were $107,000 and $232,000 at
September 30, 1999 and December 31, 1998, respectively.
RESTRICTED INVESTMENTS
Restricted investments consist of fixed income securities and are
stated at amortized cost plus accrued interest income. Restricted investments
are defined as held-to-maturity securities under the provision of SFAS No. 115
and unrealized holding gains and losses are not reflected in earnings.
Unrealized holding losses were $276,000 at September 30, 1999. The securities
included in restricted investments are restricted to provide for the first six
scheduled interest payments on our 14 1/2% Senior Secured Notes due 2009.
4
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and include interest on
funds borrowed to finance construction. Capitalized interest was $56,028,000 and
$16,243,000 at September 30, 1999 and December 31, 1998, respectively.
SHORT-TERM NOTES PAYABLE
We entered into a credit agreement with Bank of America and other
lenders in July 1998 under which Bank of America and other lenders agreed to
provide us a term loan facility of up to $115 million. This term loan facility
matures on the earlier of February 29, 2000 and ten days prior to the launch of
our second satellite. The proceeds of this facility are being used to fund
progress payments for the purchase of launch services and to pay interest, fees
and other related expenses. The amounts advanced under this facility bear
interest at a variable rate that we select.
DEFERRED SATELLITE PAYMENTS
Under an amended and restated contract (the "Loral Satellite Contract")
with Space Systems/Loral, Inc. ("Loral"), Loral has agreed to defer certain
amounts due under the Loral Satellite Contract. The amounts deferred bear
interest at 10% per year and are due in quarterly installments beginning in June
2002. We have the right to prepay any deferred payments together with accrued
interest, without penalty.
ENGINEERING, DESIGN AND DEVELOPMENT COSTS
We have entered into an agreement with Lucent Technologies, Inc.
("Lucent") pursuant to which Lucent has agreed to use commercially reasonable
efforts to deliver integrated circuits ("chip sets"), which will be used in
consumer electronic devices capable of receiving our broadcasts. In addition, we
have entered into agreements with Alpine, Panasonic, Recoton and Delphi-Delco to
design and develop equipment that will be used to receive our broadcasts,
pursuant to which we have agreed to pay certain development costs. We record
expenses under these contracts as the work is performed. Total expenses related
to these contracts were $5,831,000 and $18,279,000 in the three month period and
nine month period ended September 30, 1999, respectively.
SPECIAL CHARGES
During the quarter ended June 30, 1998, we decided to enhance our
satellite delivery system to include a third in-orbit satellite and to terminate
certain launch and orbit related contracts. We recorded special charges totaling
approximately $25,682,000 related primarily to the termination of such
contracts.
RECLASSIFICATIONS
Certain amounts in the prior period's financial statements have been
reclassified to conform to the current period presentation.
SUBSEQUENT EVENTS
On October 6, 1999, the underwriters of our 8 3/4 % Convertible
Subordinated Notes due 2009 and the underwriters of our offering of 3,000,000
shares of common stock, each of which offerings was consummated on September 29,
1999, exercised their respective options to purchase additional 8 3/4%
Convertible Subordinated Notes due 2009 in an aggregate principal amount of
$18,750,000 and an additional 450,000 shares of our common stock for
$11,375,000. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources - Sources of
Funding" for further information relating to the 8 3/4% Convertible Subordinated
Notes due 2009 and common stock offerings.
5
On October 13, 1999, we sold to Apollo Investment Fund IV, L.P., a
Delaware limited partnership ("AIF IV"), and Apollo Overseas Partners IV, L.P.,
a Cayman Islands limited partnership ("AOP IV" and, together with AIF IV, the
"Apollo Investors"), 650,000 shares of our 9.2% Series B Junior Cumulative
Convertible Preferred Stock (the "Series B Preferred Stock") for an aggregate
purchase price of $65 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources - Sources of Funding" for further information relating to this sale
of the Series B Preferred Stock.
6
CD RADIO INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), we are hereby providing
cautionary statements identifying important factors that could cause our actual
results to differ materially from those projected in forward-looking statements
(as such term is defined in the Reform Act) made in this report. Any statements
that express, or involve discussions as to, expectations, beliefs, plans,
objectives, assumptions or future events or performance (often, but not always,
through the use of words or phrases such as "will likely result," "are expected
to," "will continue," "is anticipated," "estimated," "intends," "plans,"
"projection" and "outlook") are not historical facts and may be forward-looking
and, accordingly, such statements involve estimates, assumptions and
uncertainties that could cause actual results to differ materially from those
expressed in the forward-looking statements. Accordingly, any such statements
are qualified in their entirety by reference to, and are accompanied by, the
factors discussed in our Annual Report on Form 10-K for the year ended December
31, 1998. Among the key factors that have a direct bearing on our future results
of operations are the potential risk of delay in implementing our business plan;
possible increased costs of construction and launch of necessary satellites; our
dependence on Loral, Lucent and consumer electronics manufacturers; the
unavailability of receivers and antennas; risk of launch failure; unproven
market for our proposed service; unproven applications of existing technology;
and our need for additional financing.
OVERVIEW
CD Radio was organized in May 1990 and is in its development stage. Our
principal activities to date have included developing our technology, developing
our terrestrial repeater network, arranging for the design and development of
chip sets and receivers, obtaining regulatory approval for the CD Radio service,
commencing the construction of four satellites, constructing our production and
broadcast facility, acquiring content for our programming, strategic planning,
market research, recruiting our management team and securing financing for
capital expenditures and working capital. We require additional capital to
complete development and commence operations of CD Radio. We cannot assure you
that we will ever commence operations, that we will attain any particular level
of revenues or that we will achieve profitability.
Each of the elements of the CD Radio system - satellites, terrestrial
repeater network, National Broadcast Studio and CD Radio receivers - is on
schedule to permit us to begin operations at the end of the fourth quarter of
2000. Loral plans to launch our satellites on Proton rockets. On each of July 5,
1999 and October 27, 1999, a Proton rocket carrying a Russian payload
malfunctioned during flight. As a result of the October 27th failure, Proton
rocket launches have been suspended and the Russian government has appointed
an investigatory commission. These developments may delay one or more of our
anticipated satellite launches, currently scheduled for January, March and
May 2000. Even if a launch delay were to occur, however, we do not currently
expect any delay in the introduction of our service.
7
Upon commencing operations, we expect our primary source of revenues to
be monthly subscription fees. We currently anticipate that our subscription fee
will be $9.95 per month to receive CD Radio broadcasts, with a one time, modest
activation fee per subscriber. In addition, we expect to derive revenues from
directly selling or bartering advertising on our non-music channels. We do not
expect to recognize revenues from operations until the first quarter of 2001,
at the earliest. We do not intend to manufacture the receivers necessary to
receive CD Radio and thus we will not receive any revenues from their sale.
Although we hold patents covering some of the technology which will be used in
these receivers, we expect to license our technology to manufacturers at no
charge.
We expect that the operating expenses associated with our service will
consist primarily of marketing, sales, programming, maintenance of our satellite
and broadcasting system and general and administrative costs. Costs to acquire
programming are expected to include payments to build and maintain an extensive
music library and royalty payments for broadcasting music (calculated based on a
percentage of revenues). Marketing, sales, general and administrative costs are
expected to consist primarily of advertising costs, salaries of employees, rent
and other administrative expenses. As of November 8, 1999, we had 84 employees
and 19 part-time consultants. We expect to have approximately 150 employees by
the time we commence operations.
In addition to funding initial operating losses, we require funds for
working capital, interest and financing costs on borrowings and capital
expenditures in the near term.
8
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1998
We recorded net losses of $13,123,000 and $3,244,000 for the three
months ended September 30, 1999 and 1998, respectively. Our total operating
expenses were $12,932,000 and $3,065,000 for the three months ended September
30, 1999 and 1998, respectively.
Engineering, design and development costs were $7,188,000 and $681,000
for the three months ended September 30, 1999 and 1998, respectively.
Engineering costs increased in the 1999 quarter primarily due to payments to
Lucent in connection with the chip set development effort and payments to
consumer electronic manufacturers in connection with receiver development
efforts.
General and administrative expenses increased for the three months
ended September 30, 1999 to $5,744,000 from $2,384,000 for the three months
ended September 30, 1998. General and administrative expenses increased due to
the occupancy of our new offices and National Broadcast Studio and the growth of
our management team and workforce. The major components of general and
administrative expenses in the 1999 quarter were salaries and employment related
costs (29%), rent and occupancy costs (22%) and legal and regulatory fees (10%),
while in the 1998 quarter the major components were salaries and employment
related costs (36%), rent and occupancy costs (13%) and legal and regulatory
fees (22%). The remaining portion of general and administrative expenses (39% in
the 1999 quarter and 29% in the 1998 quarter) consisted of other costs such as
insurance, market research, consulting, travel, depreciation and supplies, with
no such amount exceeding 10% of the total in the 1999 quarter and the 1998
quarter.
The increase in interest and investment income to $3,809,000 for the
three months ended September 30, 1999, from $1,866,000 in the three months ended
September 30, 1998, was the result of higher average balances of cash,
marketable securities and restricted investments during the 1999 quarter. The
higher average balances of cash, marketable securities and restricted
investments during the quarter were due to the proceeds from the issuance of
securities during the second and third quarters of 1999 and the fourth quarter
of 1998 exceeding the amount of expenditures for satellite and launch vehicle
construction, other capital expenditures and operating expenses.
Interest expense, net of capitalized interest, was $4,000,000 for the
three months ended September 30, 1999 and was $2,045,000 in the three months
ended September 30, 1998. This increase in net interest expense was due to
interest expense increasing by an amount ($13,070,000) greater than the
corresponding increase in capitalized interest ($11,115,000).
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1998
We recorded net losses of $36,168,000 and $39,259,000 for the nine
months ended September 30, 1999 and 1998, respectively. Our total operating
expenses were $38,694,000 and $33,963,000 for the nine months ended September
30, 1999 and 1998, respectively. Excluding the special charges totaling
$25,682,000 recorded in the 1998 second quarter, we recorded a net loss of
$13,577,000 and operating expenses of $8,281,000 for the nine months ended
September 30, 1998.
Engineering, design and development costs were $21,532,000 and
$1,455,000 for the nine months ended September 30, 1999 and 1998, respectively.
Engineering costs increased in the 1999 period primarily due to payments to
Lucent in connection with the chip set development effort and payments to
consumer electronic manufacturers in connection with receiver development
efforts.
9
General and administrative expenses increased for the nine months ended
September 30, 1999 to $17,162,000 from $6,826,000 for the nine months ended
September 30, 1998. General and administrative expenses increased due to the
occupancy of our new offices and National Broadcast Studio and the growth of our
management team and workforce. The major components of general and
administrative expenses in the 1999 period were salaries and employment related
costs (30%), rent and occupancy costs (24%) and legal and regulatory fees (13%),
while in the 1998 period the major components were salaries and employment
related costs (30%), rent and occupancy costs (15%) and legal and regulatory
fees (17%). The remaining portion of general and administrative expenses (33% in
the 1999 period and 38% in the 1998 period) consisted of other costs such as
insurance, market research, consulting, travel, depreciation and supplies, with
no such amount exceeding 10% of the total in the 1999 period and only consulting
(14%) exceeding 10% of the total in the 1998 period.
The increase of interest income to $10,209,000 for the nine months
ended September 30, 1999, from $5,769,000 in the nine months ended September 30,
1998, was the result of higher average balances of cash, marketable securities
and restricted investments during the 1999 period. The higher average balances
of cash, marketable securities and restricted investments during the period were
due to the proceeds from the issuance of securities during the second and third
quarters of 1999 and the fourth quarter of 1998 exceeding the amount of
expenditures for satellite and launch vehicle construction, other capital
expenditures and operating expenses.
Interest expense, net of capitalized interest, decreased to $7,683,000
for the nine months ended September 30, 1999, from $11,027,000 in the 1998
period. This decrease in net interest expense was due to capitalized interest
increasing by an amount ($31,478,000) greater than the corresponding increase
in interest expense ($28,134,000).
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, we had a total of cash, cash equivalents,
marketable securities and restricted investments of $474,207,000 and working
capital of $335,140,000 compared with cash, cash equivalents and marketable
securities of approximately $265,623,000 and working capital of $180,966,000 at
December 31, 1998. The increases in the respective balances are due to the
proceeds from the issuance of units consisting of our 14 1/2% Senior Secured
Notes due 2009 and related warrants during the second quarter of 1999, the
proceeds from the issuance of our 8 3/4% Convertible Subordinated Notes due
2009 during the third quarter of 1999 and the proceeds from our issuance of
common stock during the third quarter of 1999 (see - Sources of Funding)
exceeding capital expenditures and operating expenses for the first nine months
of 1999. As part of the issuance of the 15% Senior Secured Notes due 2007 in
the 1999 second quarter, we were required to place approximately $79 million
of government securities in a restricted account to be used only to pay the
interest on these notes during their first three years.
10
FUNDING REQUIREMENTS
We require near-term funding to continue building our CD Radio system.
We believe we can fund our planned operations and the construction of our
satellite system into the second quarter of 2000 from our existing working
capital at September 30, 1999 and from the proceeds of the sale of our Series B
Preferred Stock to the Apollo Investors and sale of our 8 3/4% Convertible
Subordinated Notes due 2009 and common stock in connection with the exercise of
the underwriters over-allotment options in October 1999. We estimate that we
will require a total of approximately $1,170 million to develop and commence
operations by the end of the fourth quarter of 2000. We have raised and
identified sources of approximately $1,216 million (which includes $115 million
of debt financing that must be repaid by the earlier of February 29, 2000 and
ten days prior to the launch of our second satellite), leaving expected excess
cash of approximately $46 million to fund our operations after the fourth
quarter of 2000. However, if Bank of America is unable to arrange a new credit
facility for us, we will need to raise $115 million to refinance the existing
credit facility in the first quarter of 2000 and an additional $60 million to
fund our operations through the end of the fourth quarter of 2000. In addition,
we anticipate cash requirements of approximately $150 million to fund our
operating costs during the first full year of operations. We expect to finance
the remainder of our funding requirements through the future issuance of debt or
equity securities, or a combination of debt and equity securities.
To build and launch the satellites necessary for the operations of CD
Radio we entered into the Loral Satellite Contract. The Loral Satellite Contract
provides for Loral to construct, launch and deliver three satellites in-orbit
and checked-out, to construct for us a fourth satellite for use as a ground
spare and to become our launch service provider. We are committed to make
aggregate payments of approximately $736 million under the Loral Satellite
Contract, which includes $15 million of long-lead time parts for a fifth
satellite and $3 million for integration analysis of the viability of using the
Sea Launch platform as an alternative launch vehicle for our satellites. As of
September 30, 1999, $377 million of this obligation had been satisfied. Under
the Loral Satellite Contract, with the exception of a payment made to Loral in
March 1993, payments are made in installments that commenced in April 1997 and
will end in December 2003. Approximately half of these payments are contingent
upon Loral meeting specified milestones in the construction of our satellites.
We also will require funds for working capital, interest on borrowings,
acquisition of programming, financing costs and operating expenses until some
time after the commencement of operations of CD Radio. We expect our interest
expense will increase significantly when compared to our 1998 interest expense;
however, our 15% Senior Secured Discount Notes due 2007 will not require cash
payments of interest until June 2003. In addition, a portion of the net proceeds
of the issuance of our 14 1/2% Senior Secured Notes due 2009 was used to
purchase a portfolio of U.S. government securities in an amount sufficient to
pay the first six payments of interest on these notes. We currently expect to
fund interest payments on our 8 3/4% Convertible Subordinated Notes due 2009
beginning in March 2000 through proceeds from the issuance of equity. We cannot
assure you that any such issuances will be accomplished on terms advantageous to
us, or at all.
We cannot assure that we will be able to obtain additional financing on
favorable terms, or at all, or that we will be able to do so in a timely
fashion. The indentures governing our 15% Senior Secured Discount Notes due
2007, our 14 1/2% Senior Secured Notes due 2009 and our bank credit facility
contain, and documents governing any indebtedness incurred in the future are
expected to contain, provisions limiting our ability to incur additional
indebtedness. If additional financing were not available on a timely basis, we
would be required to delay satellite and/or launch vehicle construction to
conserve cash and to fund continued operations, which would cause delays in the
commencement of operations and increase costs.
11
The amount and timing of our actual cash requirements will depend upon
numerous factors, including costs associated with the construction and
deployment of our satellite system and terrestrial repeater network, costs
associated with the design and development of chip sets and receivers, the rate
of growth of our business after commencing service, costs of financing and the
possibility of unanticipated costs. We will require additional funds if there
are delays, cost overruns, unanticipated expenses, launch failures, launch
services or satellite system change orders, or any shortfalls in estimated
levels of operating cash flow.
SOURCES OF FUNDING
To date, we have funded our capital needs through the issuance of debt
and equity securities and borrowings under our bank credit facility. As of
September 30, 1999, we had identified or received a total of $582 million in net
equity capital, which includes the net proceeds from the sale of our Series B
Preferred Stock to the Apollo Investors and the sale of 450,000 shares of common
stock to the underwriters in connection with the exercise of their
over-allotment option, both in October 1999. In 1997 we received a total of $192
million as a result of the issuance of 5,400,000 shares of 5% Delayed
Convertible Preferred Stock, resulting in net proceeds of $121 million, and the
issuance of 4,955,488 shares of common stock, resulting in net proceeds of $71
million. In November 1997, we exchanged 1,846,799 shares of our newly issued 10
1/2% Series C Cumulative Convertible Preferred Stock (the "Series C Preferred
Stock") for all of the outstanding shares of 5% Delayed Convertible Preferred
Stock. On November 2, 1998, we sold 5,000,000 shares of common stock to Prime 66
Partners, L.P., resulting in net proceeds of $98 million and on December 23,
1998, we sold 1,350,000 shares of the 9.2% Series A Junior Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock") to the Apollo
Investors resulting in net proceeds of $129 million. In September 1999, we
issued 3,000,000 shares of our common stock in an underwritten public offering
resulting in net proceeds of $68 million. In October 1999, we issued 450,000
shares of our common stock to the underwriters of our September 1999 common
stock offering in connection with the exercise of their over-allotment option,
resulting in net proceeds of $10 million, and issued 650,000 shares of our
Series B Junior Preferred Stock to the Apollo Investors for net proceeds of $63
million.
Shares of our Series A Preferred Stock and our Series B Preferred Stock
(collectively, the "Junior Preferred Stock") are convertible into shares of
common stock at a price of $30 per share. The Junior Preferred Stock is callable
by us beginning November 15, 2001 if the current market price, as defined in the
Certificate of Designation of the Junior Preferred Stock, of our common stock
exceeds $60 per share for a period of 20 consecutive trading days, and in all
events will be callable beginning November 15, 2003 at a price 100% and must be
redeemed by us on November 15, 2011. Dividends on the Junior Preferred Stock are
payable-in-kind or cash annually, at our option. Holders of the Junior Preferred
Stock have the right to vote, on an as-converted basis, on matters in which the
holders of our common stock have the right to vote.
In September 1999, we issued $125,000,000 aggregate principal amount of
our 8 3/4% Convertible Subordinated Notes due 2009 in an underwritten public
offering resulting in net proceeds of $119 million. In October 1999, we issued
an additional $18,750,000 aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009 to satisfy the underwriters' over-allotment option,
resulting in net proceeds of $18 million. Interest on our 8 3/4% Convertible
Subordinated Notes due 2009 is payable semi-annually in cash beginning March
2000. In May 1999, we received net proceeds of approximately $190 million from
the issuance of 200,000 units, each consisting of $1,000 aggregate principal
amount of 14 1/2% Senior Secured Notes due 2009 and three warrants, each to
purchase 3.65 shares of our common stock. Interest on the 14 1/2% Senior Secured
Notes due 2009 is payable semi-annually in cash beginning November 15, 1999. We
invested approximately $79.3 million of the net proceeds of the 14 1/2% Senior
Secured Notes due 2009 in a portfolio of U.S. government securities, which we
pledged as security for the payment in full of interest on the 14 1/2% Senior
Secured Notes due 2009 through May 15, 2002. As required by the terms of the
warrants, we adjusted the number of shares for which each warrant may be
exercised to 3.792 shares and the exercise price per share to $27.53 per share
in connection with our issuance of 3,000,000 shares of common stock and
$125,000,000 principal amount of 8 3/4% Convertible Subordinated Notes due 2009
on September 29, 1999.
12
In November 1997, we received net proceeds of $116 million from the
issuance of 12,910 units, each consisting of $20,000 aggregate principal amount
at maturity of our 15% Senior Secured Discount Notes due 2007 and a warrant to
purchase additional 15% Senior Secured Discount Notes due 2007 with an aggregate
principal amount at maturity of $3,000. All these warrants were exercised in
1997. The aggregate value at maturity of the 15% Senior Secured Discount Notes
due 2007 is $297 million. The 15% Senior Secured Discount Notes due 2007 mature
on November 15, 2007 and the first cash interest payment is due in June 2003.
The indentures governing the 15% Senior Secured Discount Notes due 2007 and the
14 1/2% Senior Secured Notes due 2009 contain some limitations on our ability to
incur additional indebtedness. The 15% Senior Secured Discount Notes due 2007
and the 14 1/2% Senior Secured Notes due 2009 are secured by a pledge of the
stock of Satellite CD Radio Inc., our subsidiary that holds our FCC license.
On July 28, 1998, we entered into a credit agreement (the "Tranche A
Facility") with a group of financial institutions (the "Lenders"), including
Bank of America as agent and a lender, under which the Lenders agreed to provide
us a term loan facility in an aggregate principal amount of up to $115 million
(the "Tranche A Loans"). The proceeds of the Tranche A Loans are being used to
fund a portion of the progress payments required to be made by us under the
Loral Satellite Contract for the purchase of launch services and to pay
interest, fees and other expenses related to the Tranche A Facility. The Tranche
A Loans are due on the earlier of February 29, 2000 and ten days prior to the
launch of our second satellite. As of September 30, 1999, we had borrowed
approximately $112 million under the Tranche A Facility, substantially all of
which was used to make progress payments under the Loral Satellite Contract.
In connection with the Tranche A Facility, Loral agreed with Bank of
America that at maturity of the Tranche A Loans (including maturity as a result
of an acceleration), upon the occurrence of our bankruptcy or upon the
occurrence of an event of default by Loral under its agreement with Bank of
America, Loral will repurchase from the Lenders the Tranche A Loans at a price
equal to the principal amount of the Tranche A Loans plus accrued and unpaid
interest. In exchange for providing this credit support, we pay Loral a fee
equal to 1.25% per annum of the outstanding amount of the Tranche A Loans from
time to time.
We have also entered into an agreement with Bank of America under which
Bank of America has agreed to attempt to arrange a syndicate of lenders to
provide a term loan facility for us in the aggregate principal amount of $225
million. It is anticipated that a portion of the proceeds of these loans would
be used to repay the amounts outstanding under the Tranche A Facility and for
other general corporate purposes. Bank of America has not committed to provide
this term loan facility. The availability of these loans when required to repay
the amounts outstanding at maturity under the Tranche A Facility will be
influenced by a variety of factors, some of which, including the market for
syndicated bank loans generally, are outside of our control. The closing of this
term loan facility is expected to be conditioned on the satisfaction of
significant conditions and there is no assurance that these loans will be
arranged or that the proposed terms of these loans will be acceptable to us. If
we are unable to close this facility, we will seek to repay the Tranche A Loans
from the proceeds of the sale of debt securities, equity securities or a
combination of debt and equity securities.
Loral has agreed to defer a total of $50 million of the payments under
the Loral Satellite Contract originally scheduled for payment in 1999. These
deferred amounts bear interest at 10% per annum and all interest on these
deferred amounts will accrue until December 2001, at which time interest will be
payable quarterly in cash. The principal amounts of the deferred payments under
the Loral Satellite Contract are required to be paid in six installments between
June 2002 and December 2003. As collateral security for these deferred payments,
we have agreed to grant Loral a security interest in our terrestrial repeater
network. If there is a satellite or launch failure, we will be required to pay
Loral the deferred amount for the affected satellite no later than 120 days
after the date of the failure. If we elect to put one of our first three
satellites into ground storage, rather than having it shipped to the launch
site, the deferred amount for that satellite will become due within 60 days of
this election.
13
OTHER MATTERS - THE YEAR 2000 ISSUE
The Year 2000 Issue will test the capability of business processes to
function correctly. We have undertaken an effort to identify and mitigate The
Year 2000 Issue in our information systems, product, suppliers and facilities.
Our approach to The Year 2000 Issue can be separated into four phases: (1)
define/measure-identify and inventory possible sources of Year 2000 Issues; (2)
analyze-determine the nature and extent of Year 2000 Issues and develop project
plans to address those issues; (3) improve-execute project plans and perform a
majority of the testing; and (4) control-complete testing, continue monitoring
readiness and complete necessary contingency plans. The first three phases of
the program have been completed for a substantial majority of our
mission-critical activities. Management plans to have nearly all significant
information systems and facilities through the control phase of the program by
the end of November 1999.
We have also communicated with our significant vendors and suppliers to
determine the extent to which we are vulnerable to the failure of these parties
to remedy Year 2000 Issues. These parties have indicated that they have
implemented Year 2000 remediation projects. However, we can give no assurance
that failure to address The Year 2000 Issues by third parties on whom our
systems and business processes rely would not have a material adverse effect on
our operations or financial condition.
Our total Year 2000 Issue remediation expenditures are expected to be
approximately $100,000. As of September 30, 1999 we have completed approximately
70% of our Year 2000 remediation project. Substantially all of the remainder is
expected to be completed by the end of November 1999. The activities involved
in The Year 2000 effort necessarily involve estimates and projections of
activities and resources that will be required in the future. These estimates
and projections could change as work progresses.
14
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) On September 29, 1999, we issued (i) $125,000,000 aggregate
principal amount of our 8 3/4% Convertible Subordinated Notes due 2009 and (ii)
3,000,000 shares of our common stock in offerings (the "Offerings") made
pursuant to a Registration Statement on Form S-3 (File No. 333-86003) under the
Securities Act of 1933, as amended. On October 6, 1999, we issued an additional
(i) $18,750,000 aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009 and (ii) 450,000 shares of our common stock, in
each case to the underwriters of the Offerings in connection with their
exercise of the respective over-allotment options granted to them.
In connection with the sales of our 8 3/4% Convertible Subordinated
Notes due 2009 and common stock described above, we paid an aggregate of $14.1
million in underwriting discounts, selling concessions and fees to investment
banking firms. The proceeds from the sale of our 8 3/4% Convertible Subordinated
Notes due 2009 and common stock will be used to finance the construction and
launch of our satellites and for general corporate purposes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
See Exhibit Index attached hereto.
(b) Reports on Form 8-K:
On September 27, 1999, we filed a Current Report on Form 8-K
to report that, in accordance with Section 305(b) of the Trust
Indenture Act of 1939 and the rules under this act, we filed a
Statement of Eligibility and Qualification on Form T-1 of U.S. Trust
Company of Texas, N.A. to act as trustee with respect to our 8 3/4%
Convertible Subordinated Notes due 2009.
On October 1, 1999, we filed a Current Report on Form 8-K to
report (i) that we had amended the Rights Agreement, dated October 22,
1997, between us and Continental Stock Transfer & Trust Company, as
rights agent, to permit Ford Motor Company to purchase up to 808,081
shares of our common stock from the underwriters of our public offering
of such shares on September 29, 1999, and to permit Everest Capital
Management Ltd. ("Everest") and any investment partnership or similar
investment fund managed or advised by Everest to purchase up to
$50,000,000 aggregate principal amount of our 8 3/4% Convertible
Subordinated Notes due 2009 from the underwriters of our public
offering of our 8 3/4% Convertible Subordinated Notes due 2009 and
(ii) that in connection with our issuance of our 8 3/4% Convertible
Subordinated Notes due 2009 we entered into (a) an Indenture, dated as
of September 29, 1999 (the "Indenture"), between us and the U.S. Trust
Company of Texas, N.A. and (b) a First Supplemental Indenture, dated
September 29, 1999, to the Indenture, between us and U.S. Trust Company
of Texas, N.A.
15
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.
CD RADIO INC.
By: /s/ Edward Weber, Jr.
__________________________________
Edward Weber, Jr.
Controller
(Principal Accounting Officer)
November 15, 1999
16
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Certificate of Amendment, dated June 16, 1997, to the CD Radio
Inc. (the "Company") Certificate of Incorporation and the
Company's Amended and Restated Certificate of Incorporation,
dated January 31, 1994 (incorporated by reference to Exhibit 3.1
to the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1999).
3.2 Amended and Restated By-Laws (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-1
(File No. 33-74782) (the "S-1 Registration Statement")).
3.3 Certificate of Designations of 5% Delayed Convertible Preferred
Stock (incorporated by reference to Exhibit 10.24 to the
Company's Form 10-K/A for the year ended December 31, 1996 (the
"1996 Form 10-K")).
3.4 Form of Certificate of Designations of Series B Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 1 to the
Company's Registration Statement on Form 8-A, filed with the
Commission on October 30, 1997 (the "Form 8-A")).
3.5.1 Form of Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of 10 1/2%
Series C Convertible Preferred Stock (the "Series C Certificate
of Designations") (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-4 (File No.
333-34761)).
3.5.2 Certificate of Correction to Series C Certificate of
Designations (incorporated by reference to Exhibit 3.5.2 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997 (the "1997 Form 10-K")).
3.5.3 Certificate of Increase of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 3.5.3 to
the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998).
3.6 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series A Junior Cumulative Convertible
Preferred Stock (filed herewith).
3.7 Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of the
Company's 9.2% Series B Junior Cumulative Convertible Preferred
Stock (filed herewith).
17
EXHIBIT DESCRIPTION
- ------- -----------
4.1 Form of Certificate for Shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the S-1 Registration Statement).
4.2 Form of Certificate for Shares of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-4 (File No.
333-34761)).
4.3.1 Rights Agreement, dated as of October 22, 1997, between the
Company and Continental Stock Transfer & Trust Company, as
rights agent (incorporated by reference to Exhibit 1 to the Form
8-A).
4.3.2 Form of Right Certificate (incorporated by reference to Exhibit
B to Exhibit 1 to the Form 8-A).
4.3.3 Amendment to Rights Agreement, dated as of October 22, 1997,
between the Company and Continental Stock Transfer & Trust
Company, as rights agent, dated as of October 13, 1998
(incorporated by reference to Exhibit 99.2 to the Company's
Current Report on Form 8-K dated October 13, 1998).
4.3.4 Amendment to Rights Agreement, dated as of October 22, 1997,
between the Company and Continental Stock Transfer & Trust
Company, as rights agent, dated as of November 13, 1998
(incorporated by reference to Exhibit 99.7 to the Company's
Current Report on Form 8-K dated November 17, 1998).
4.3.5 Amended and Restated Amendment to Rights Agreement, dated as of
October 22, 1997, between the Company and Continental Stock
Transfer & Trust Company, as rights agent, dated as of December
22, 1998 (incorporated by reference to Exhibit 6 to the
Amendment No. 1 to the Form 8-A filed with the Commission on
January 6, 1999).
4.3.6 Amendment to the Rights Agreement, dated as of October 22, 1997,
between the Company and Continental Stock Transfer & Trust
Company, as rights agent, dated as of June 11, 1999
(incorporated by reference to Exhibit 4.1.8 to the Company's
Registration Statement on Form S-4 (File No. 333-82303) filed on
July 2, 1999 (the "1999 Units Registration Statement")).
4.3.7 Amendment to the Rights Agreement, dated as of October, 22,
1997, between the Company and Continental Stock Transfer & Trust
Company, as rights agent, dated as of September 29,1999
(incorporated by reference to Exhibit 4.1 to the Company's
Current Report on Form 8-K filed with the Commission on October
13, 1999).
4.4 Indenture, dated as of November 26, 1997, between the Company
and IBJ Schroder Bank & Trust Company, as Trustee (incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3 (File No. 333-34769) (the "1997 Units
Registration Statement")).
4.5 Form of Note (incorporated by reference to Exhibit 4.2 to the
1997 Units Registration Statement).
18
EXHIBIT DESCRIPTION
- ------- -----------
4.6.1 Warrant Agreement, dated as of November 26, 1997, between the
Company and IBJ Schroder Bank & Trust Company, as warrant agent
(incorporated by reference to Exhibit 4.3 to the 1997 Units
Registration Statement).
4.6.2 Form of Warrant (incorporated by reference to Exhibit 4.4 to the
1997 Units Registration Statement).
4.7 Form of Preferred Stock Warrant Agreement, dated as of April
9, 1997, between the Company and each warrantholder thereof
(incorporated by reference to Exhibit 4.12 to the 1997 Form
10-K).
4.8 Form of Common Stock Purchase Warrant granted by the Company to
Everest Capital Master Fund, L.P. and to The Ravich Revocable
Trust of 1989 (incorporated by reference to Exhibit 4.11 to the
1997 Form 10-K).
4.9.1 Form of Certificate for shares of 9.2% Series A Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.10.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 (the "1998 Form
10-K")).
4.9.2 Form of Certificate for shares of 9.2% Series B Junior
Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 4.10.2 to the 1998 Form 10-K).
4.10 Notes Registration Rights Agreement, dated as of May 13, 1999,
among the Company and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc., Bear,
Stearns & Co. Inc., NationsBanc Montgomery Securities LLC and
U.S. Bancorp Libra (incorporated by reference to Exhibit 4.4.1
to the 1999 Units Registration Statement).
4.11 Indenture between the Company and United States Trust Company of
New York, as trustee, dated as of May 15, 1999, relating to the
Company's 14 1/2% Senior Secured Notes due 2009 (incorporated by
reference to Exhibit 4.4.2 to the 1999 Units Registration
Statement).
4.12 Form of Certificate for 8 3/4% Convertible Subordinated Notes
due 2009 (incorporated by reference to Article VII to Exhibit
4.01 to the Company's Current Report on Form 8-K filed with the
Commission on October 11, 1999)
4.13 Indenture between the Company and United States Trust Company of
Texas, N.A., dated as of September 29, 1999, with respect to the
Company's 8 3/4% Convertible Subordinated Notes due 2009
(incorporated by reference to Exhibit 4.2 to the Company's
Current Report on Form 8-K filed with the Commission on October
13, 1999).
4.14 First Supplemental Indenture, dated as of September 29, 1999,
between the Company and United States Trust Company of Texas,
N.A., with respect to the Company's 8 3/4% Convertible
Subordinated Notes due 2009 (incorporated by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K filed
with the Commission on October 11, 1999).
19
EXHIBIT DESCRIPTION
- ------- ------------
4.15 Form of 14 1/2% Senior Secured Notes due 2009 (incorporated by
reference to Exhibit 4.4.2 to the 1999 Units Registration
Statement).
4.16 Warrant Agreement, dated as of May 15, 1999, between the Company
and United States Trust Company of New York, as warrant agent
(incorporated by reference to Exhibit 4.4.4 to the 1999 Units
Registration Statement).
4.17 Amended and Restated Pledge Agreement, dated as of May 15, 1999,
among the Company, as pledgor, IBJ Whitehall Bank & Trust
Company, as trustee, United States Trust Company of New York, as
trustee, and IBJ Whitehall Bank & Trust Company, as collateral
agent (incorporated by reference to Exhibit 4.4.5 to the 1999
Units Registration Statement).
4.18 Collateral Pledge and Security Agreement, dated as of May 15,
1999, between the Company, as pledgor, and United States Trust
Company of New York, as trustee (incorporated by reference to
Exhibit 4.4.6 to the 1999 Units Registration Statement).
4.19 Intercreditor Agreement, dated May 15, 1999, by and between IBJ
Whitehall Bank & Trust Company, as trustee, and United States
Trust Company of New York, as trustee (incorporated by reference
to Exhibit 4.4.7 to the 1999 Units Registration Statement).
4.20 Common Stock Purchase Warrant granted by the Company to Ford
Motor Company, dated June 11, 1999 (incorporated by reference to
Exhibit 4.4.2 to the 1999 Units Registration Statement).
9.1 Voting Trust Agreement, dated as of August 26, 1997, by and
among Darlene Friedland, as Grantor, David Margolese, as
Trustee, and the Company (incorporated by reference to Exhibit
(c) to the Company's Issuer Tender Offer Statement on Form
13E-4, filed with the Commission on October 16, 1997).
10.1 Lease Agreement, dated as of March 31, 1998, between
Rock-McGraw, Inc. and the Company (incorporated by reference to
Exhibit 10.1.2 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1998).
10.2.1 Engagement Letter Agreement, dated November 18, 1992, between
the Company and Batchelder & Partners, Inc. (incorporated by
reference to Exhibit 10.4 to the S-1 Registration Statement).
10.2.2 Engagement Termination Letter Agreement, dated December 4, 1997,
between the Company and Batchelder & Partners, Inc.
(incorporated by reference to Exhibit 10.2.2 to the 1997 Form
10-K).
*10.3.1 Proprietary Information and Non-Competition Agreement, dated
February 9, 1993, for Robert D. Briskman (incorporated by
reference to Exhibit 10.8.1 to the S-1 Registration Statement).
*10.3.2 Amendment No. 1 to Proprietary Information and Non-Competition
Agreement between the Company and Robert D. Briskman
(incorporated by reference to Exhibit 10.8.2 to the S-1
Registration Statement).
20
EXHIBIT DESCRIPTION
- ------- -----------
10.4.1 Amended and Restated Contract, dated as of June 30, 1998,
between the Company and Space Systems/Loral, Inc. (incorporated
by reference to Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q/A for the period ended June 30, 1998).
10.5.1 Assignment of Technology Agreement, dated April 15, 1993,
between Robert D. Briskman and the Company (incorporated by
reference to Exhibit 10.10 to the S-1 Registration Statement).
*10.5.2 Stock Option Agreement, dated as of October 15, 1997, between
the Company and Robert D. Briskman (incorporated by reference to
Exhibit 10.6.2 to the 1997 Form 10-K).
*10.5.3 Amended and Restated Option Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.13
to the S-1 Registration Statement).
*10.6 Employment Agreement, dated as of January 1, 1999, between the
Company and David Margolese (incorporated by reference to
Exhibit 10.6 to the 1998 Form 10-K).
*10.7.1 Employment and Non-Competition Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.1
to the S-1 Registration Statement).
*10.7.2 First Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.19.2
to the S-1 Registration Statement).
*10.7.3 Second Amendment to Employment Agreement between the Company and
Robert D. Briskman (incorporated by reference to Exhibit 10.12.3
to the 1996 Form 10-K).
*10.8 Employment and Non-Competition Agreement, dated as of April 16,
1997, between the Company and Joseph S. Capobianco (incorporated
by reference to Exhibit 10.17 to the Company's Quarterly Report
on Form 10-Q/A for the period ended March 31, 1997).
*10.9.1 Employment and Non-Competition Agreement, dated as of April 28,
1997, between the Company and Keno V. Thomas (incorporated by
reference to Exhibit 10.18 to the Company's Quarterly Report on
Form 10-Q/A for the period ended March 31, 1997).
*10.9.2 Separation Agreement, dated as of July 6, 1998, between the
Company and Keno V. Thomas (incorporated by reference to Exhibit
10.11.2 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1998).
21
EXHIBIT DESCRIPTION
- ------- -----------
*10.10 Employment and Non-Competition Agreement, dated as of May 18,
1998, between the Company and Patrick L. Donnelly (incorporated
by reference to Exhibit 10.12 to the Company's Quarterly Report
on Form 10-Q for the period ended June 30, 1998).
10.11 Registration Agreement, dated January 2, 1994, between the
Company and M.A. Rothblatt and B.A. Rothblatt (incorporated by
reference to Exhibit 10.20 to the S-1 Registration Statement).
*10.12 1994 Stock Option Plan (incorporated by reference to Exhibit
10.21 to the S-1 Registration Statement).
*10.13 Amended and Restated 1994 Directors' Nonqualified Stock Option
Plan (incorporated by reference to Exhibit 10.22 to the Annual
Report on Form 10-K for the year ended December 31, 1995).
10.14.1 Option Agreement, dated as of October 21, 1992, between the
Company and Batchelder & Partners, Inc. (incorporated by
reference to Exhibit 10.24 to the S-1 Registration Statement).
10.14.2 Form of Option Agreement, dated as of December 29, 1997, between
the Company and each Optionee (incorporated by reference to
Exhibit 10.16.2 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1998).
10.15 Settlement Agreement, dated as of April 1, 1994, among the
Company, M.A. Rothblatt, B.A. Rothblatt and Marcor, Inc.
(incorporated by reference to Exhibit 10.27 to the S-1
Registration Statement).
10.16.1 Preferred Stock Investment Agreement dated October 23, 1996
between the Company and certain investors (incorporated by
reference to Exhibit 10.24 to the 1996 Form 10-K).
10.16.2 First Amendment to Preferred Stock Investment Agreement dated
March 7, 1997 between the Company and certain investors
(incorporated by reference to Exhibit 10.24.1 to the 1996 Form
10-K).
10.16.3 Second Amendment to Preferred Stock Investment Agreement dated
March 14, 1997 between the Company and certain investors
(incorporated by reference to Exhibit 10.24.2 to the 1996 Form
10-K).
10.17 Stock Purchase Agreement, dated as of August 5, 1997, between
the Company, David Margolese and Loral Space & Communications
Ltd. (incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K filed on August 19, 1997).
10.18 Letter, dated May 29, 1998, terminating Launch Services
Agreement dated July 22, 1997 between the Company and
Arianespace S.A.; Arianespace Customer Loan Agreements dated
July 22, 1997 for Launches #1 and #2 between the Company and
Arianespace Finance S.A.; and the Multiparty Agreements dated
July 22, 1997 for Launches #1 and #2 among the Company,
Arianespace S.A. and
22
EXHIBIT DESCRIPTION
- ------- -----------
Arianespace Finance S.A. (incorporated by reference to Exhibit
10.21 to the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 1998).
10.19 Credit Agreement, dated as of June 30, 1998 (the "Credit
Agreement"), among the Company, the financial institutions from
time to time parties thereto and Bank of America National Trust
and Savings Association, as Administrative Agent (incorporated
by reference to Exhibit 10.22 to the Company's Quarterly Report
on Form 10-Q for the period ended June 30, 1998).
10.20 First Amendment, dated as of May 4, 1999, to the Credit
Agreement (incorporated by reference to Exhibit 10.21 to the
Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1999).
10.21 Pledge Agreement, dated as of June 30, 1998, made by the Company
in favor of Bank of America National Trust and Savings
Association, as Administrative Agent (incorporated by reference
to Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1998).
10.22 Summary Term Sheet/Commitment, dated June 15, 1997, among the
Company and Everest Capital International, Ltd., Everest Capital
Fund, L.P. and The Ravich Revocable Trust of 1989 (incorporated
by reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K filed on July 8, 1997).
10.23.1 Engagement Letter Agreement, dated June 14, 1997, between the
Company and Libra Investments, Inc. (incorporated by reference
to Exhibit 10.26.1 to the 1997 Form 10-K).
10.23.2 Engagement Letter Agreement, dated August 6, 1997, between the
Company and Libra Investments, Inc. (incorporated by reference
to Exhibit 10.26.2 to the 1997 Form 10-K).
10.24 Radio License Agreement, dated January 21, 1998 between the
Company and Bloomberg Communications Inc. (incorporated by
reference to Exhibit 10.28 to the Company's Quarterly Report on
Form 10-Q for the period ended March 31, 1998).
10.25 Amended and Restated Agreement, dated as of February 1, 1999,
between Lucent Technologies Inc. and the Company (incorporated
by reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K filed with the Commission on February 4, 1999).
*10.26 CD Radio Inc. 401(k) Savings Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8
(File No. 333-65473)).
10.27 Stock Purchase Agreement, dated as of October 8, 1998, between
the Company and Prime 66 Partners, L.P. (incorporated by
reference to Exhibit 99.1 to the Company's Current Report on
Form 8-K dated October 8, 1998).
10.28.1 Stock Purchase Agreement, dated as of November 13, 1998 (the
"Apollo Stock Purchase Agreement"), by and among the Company,
Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV,
L.P. (incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated November 17, 1998).
23
EXHIBIT DESCRIPTION
- ------- -----------
10.28.2 Amendment No. 1, dated as of December 23, 1998, to the Apollo
Stock Purchase Agreement (filed herewith).
10.29 Voting Agreement, dated as of November 13, 1998, by and among
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV,
L.P. and David Margolese (incorporated by reference to Exhibit
99.5 to the Company's Current Report on Form 8-K dated November
17, 1998).
10.30 Tag-Along Agreement, dated as of November 13, 1998, by and among
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV,
L.P., the Company and David Margolese (incorporated by reference
to Exhibit 99.6 to the Company's Current Report on Form 8-K
dated November 17, 1998).
10.31* CD Radio 1999 Long-Term Stock Incentive Plan (incorporated by
reference to Appendix I of the Company's definitive Schedule 14A
filed with the Commission on May 26, 1999).
10.32 Agreement, dated as of June 11, 1999, between the Company and
Ford Motor Company (incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the period ended June 30,
1999).
27.1 Financial Data Schedule (filed herewith).
- --------------
* This document has been identified as a management contract or compensatory
plan or arrangement.
'D' Portions of these exhibits have been omitted pursuant to Applications for
Confidential treatment filed by the Company with the Securities and
Exchange Commission.
24
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as.....................................'D'