Sirius XM Radio Inc (SIRI) Profit Narrows After Paying Down Debt

Sirius XM Radio Inc (NASDAQ:SIRI) reported a decline in the third quarter profits on Thursday, after a $107.1 million debt payment crippled earnings.

Sirius XM Radio Inc (SIRI) Profit Narrows After Paying Down Debt

The largest U.S. satellite-radio company’s net income for the quarter fell to $74.5 million, or 1 cent a share, from $104.2 million, or 2 cents a share, a year earlier. Revenue for the quarter jumped 14 percent to $867.4 million, meeting the analyst expectations of $866.1 million. The company’s cash flow improved by 159 percent to 195 million.

Creating Strategic Value With Joseph Calandro Jr.

InvestingValueWalk's Raul Panganiban interviews Joseph Calandro Jr., Managing Director of a global consulting firm and fellow of the Gabelli Center for Global Security Analysis at Fordham University. Q2 2020 hedge fund letters, conferences and more Interview with Joseph Calandro Jr. ValueWalk's . . . SORRY! This content is exclusively for paying members. SIGN UP HERE Read More

“Following the repurchase of approximately $868 million of our debt in the third quarter of 2012, Sirius XM Radio Inc (NASDAQ:SIRI) ended the quarter with $556 million of cash.  The company’s leverage has improved dramatically in the past year, ending the third quarter at just 2.8x our adjusted EBITDA, down from 4.3x at the end of the third quarter of 2011,” said EVP/CFO David Frear.  “By eliminating our two most expensive debt instruments in the third quarter, we will reduce our interest costs significantly, and with no debt maturing in the next two years we now have more flexibility to pursue strategic initiatives”.

The New York-based company, added 446,000 subscribers in the quarter, the best ever third quarter growth for the company since the merger of Sirius Satellite Radio and XM Satellite Radio in 2008. Subscriber self-pay monthly churn stayed flat at 2 percent.

According to its Chief Executive Officer, Mel Karmazin, increased auto sales have helped the company a lot as its radios come pre-installed in about two-thirds of new cars.  “Growth in the fourth quarter will continue,” Karmazin said today in the statement. “We continue to make investments across our business, particularly in R&D, customer care, infrastructure and programming”.

The company also revised its 2012 outlook, now it expects earnings before interest, taxes, depreciation and amortization of about $900 million on revenues of $3.4 billion, with subscriber growth of as much as 1.8 million.

“Our increased subscriber guidance of approximately 1.8 million net additions shows we remain confident about growth in the fourth quarter,” added Karmazin.  “We were pleased to raise our subscriber guidance for the third time this year”.

Liberty Media Corp, owned by billionaire John Malone, owns almost 50 percent of Sirius XM Radio Inc (NASDAQ:SIRI), and plans take control of the company once the Federal Communications Commission (FCC) grants approval. Liberty requires FCC approval to gain majority, because Sirius holds airwave licenses issued by the agency. Amid the transition, Karmazin said on Oct. 23 that he would step down as CEO in February.

Sirius XM Radio Inc (NASDAQ:SIRI) shares fell 0.7 percent to $2.80 yesterday in New York. Shares have gained 54 percent this year till yesterday.