UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURTIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-24710
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
Sirius Satellite Radio 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
SIRIUS SATELLITE RADIO 401(k) PLAN
Plan No. 001
EIN: 52-1700207
INDEX
Part I - Financial Statements Page
Report of Independent Registered Public Accounting Firm 1
Statements of Net Assets Available for Benefits as of December 31, 2003 2
and 2002
Statement of Changes in Net Assets Available for Benefits for the year 3
ended December 31, 2003
Notes to Financial Statements 4
Part II - Supplemental Schedules
Schedule H, line 4i - Schedule of Assets (Held at End of Year) 9
Schedule H, line 4j - Schedule of Reportable Transactions 10
Signatures 11
Exhibit 23.1 - Consent of Independent Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Plan Administrator of the Sirius Satellite Radio 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Sirius Satellite Radio 401(k) Savings Plan as of December 31, 2003 and
2002, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2003. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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 principles used and the
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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003 and 2002, and the changes in its net assets available for
benefits for the year ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2003 and reportable transactions for
the year then ended are presented for purposes of additional analysis and are
not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
ERNST & YOUNG LLP
New York, New York
June 6, 2004
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Plan No. 001
EIN: 52-1700207
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
As of December 31,
--------------------
2003 2002
------- -------
Investments, at market value
Mutual funds $ 5,036 $ 2,798
Sirius Satellite Radio Inc. Common Stock 5,164 571
Participant loans 95 35
------- -------
Total investments $10,295 $ 3,404
Employer contribution receivable 928 33
Participant contribution receivable 47 45
------- -------
NET ASSETS AVAILABLE FOR BENEFITS $11,270 $ 3,482
======= =======
The accompanying notes are an integral part of these financial statements.
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SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Plan No. 001
EIN: 52-1700207
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
For the year ended
December 31, 2003
-------------------
ADDITIONS:
Interest income $ 16
Net realized and unrealized appreciation
in fair value of investments 5,015
Contributions:
Employer 1,714
Participant 1,853
-------
Total additions 8,598
DEDUCTIONS:
Benefits paid to participants 767
Administrative expenses, net of forfeitures 43
-------
Total deductions 810
-------
Net increase in net assets available for benefits 7,788
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $ 3,482
-------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $11,270
=======
The accompanying notes are an integral part of these financial statements.
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SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
EIN 52-1700207
Plan No. 001
Notes to Financial Statements
1. Description of the Plan
Sirius Satellite Radio Inc. (the "Company") sponsors the Sirius
Satellite Radio 401(k) Savings Plan (the "Plan") to provide eligible employees
with a method of saving for their retirement and other needs. The Plan is a
defined contribution plan that is subject to the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
inception date of the Plan was September 1, 1998 and the Plan has a December 31
fiscal year end. The following description of the Plan provides only general
information. Participants should refer to the Plan document for a more complete
description of the Plan's provisions and information regarding eligibility,
contributions, distributions, vesting, withdrawals, loans, fund redistribution
and definitions of all terms.
Assets Held in Trust
All assets of the Plan were held by CIGNA Retirement & Investment
Services (the "Trustee") in 2003 and 2002. The Trustee is responsible for, among
other things, the custody and investing of the assets of the Plan and for the
payment of benefits to eligible participants. All contributions are invested by
the Trustee as designated by the Plan participants.
CIGNA Retirement & Investment Services is an operating division of
CIGNA Corporation. The operations of CIGNA Retirement & Investment Services are
conducted principally through Connecticut General Life Insurance Company
("CGLIC"), a wholly owned subsidiary of CIGNA Corporation.
The investment options available to the participants as of December 31,
2003 and their related investment objectives were as follows:
Alliancebernstein Balanced - Class A Fund. This fund seeks a
combination of income and capital appreciation by investing primarily
in equity securities of high quality, financially strong,
dividend-paying companies.
Alliance Growth & Income - Class A Fund. This fund seeks income and
capital appreciation by investing primarily in high quality,
dividend-paying common stocks. This fund offers investors
diversification potential among stocks, fixed income and convertible
securities.
American Century Heritage Fund. This fund seeks to provide long-term
growth of capital through investments in equity securities of small and
medium-sized companies.
CIGNA Lifetime Funds. This family of funds is comprised of five
distinct multi-asset class investment portfolios, which offer a range
of risk/return characteristics. The investment objective for each of
the five funds varies, in keeping with the investment time horizon and
associated asset allocation of the underlying portfolios.
Core Bond Fund. This fund invests in high quality domestic fixed income
securities, including actively managed separate accounts of
investment-grade corporate bonds, mortgage-backed and asset-backed
securities and government issues.
Fidelity Advisor Equity Growth Fund. This fund seeks to achieve capital
appreciation through investments in stocks of companies that have
above-average growth potential. These growth characteristics are often
associated with companies that have new products, technologies,
distribution channels or that have a strong relative market position.
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Franklin Balance Sheet Investment Fund - Class A. This fund seeks
income and capital appreciation by investing primarily in equity
securities of small or relatively new companies that are believed to be
under priced at the time of purchase, but have the potential for
significant capital growth.
International Growth/Artisan Partner Fund. This fund invests primarily
in common stocks, preferred stocks and convertible securities of
companies incorporated or domiciled outside the United States and
securities traded on foreign stock exchanges with market capitalization
of $2 billion and larger.
Janus Adviser Balanced Fund. This fund seeks long-term capital growth,
consistent with preservation of capital, balanced by current income.
Oakmark Select II Fund. This fund seeks long-term capital appreciation
by investing in a non-diversified portfolio of equity securities
consisting primarily of common stocks of U.S. companies.
Small Cap Growth/TimesSquare Fund. This fund seeks to achieve long-term
capital appreciation through investments in the common and preferred
stocks of U.S. companies with market capitalization between $30 million
and $3 billion. It focuses on growth companies with new product
developments and technological breakthroughs.
Templeton Growth Fund. This fund seeks to provide long-term capital
growth by investing primarily in debt and equity securities of domestic
and foreign companies, including companies in emerging markets.
Guaranteed Income Fund. This fund offers safety of principal and seeks
to provide competitive yields relative to comparable guaranteed fixed
income investment funds. It invests in a diversified portfolio of high
quality, fixed income instruments within Connecticut General Life
Insurance Company's general account.
Sirius Satellite Radio Inc. Common Stock. This option allows
participants to invest in the common stock of Sirius Satellite Radio
Inc.
Eligibility
Participation in the Plan begins on the first day of the calendar month
following the date in which an employee attained the age of 21 and completed one
full month of service, as defined in the Plan document.
Contributions
Participants may elect to contribute from 1% to 16% of their
compensation, as defined, provided their contributions do not exceed maximum
allowable amounts under the Internal Revenue Code, as amended (the "Code").
Under the Code, individual contributions for which taxes may be deferred were
limited to $12,000 in 2003 and $11,000 in 2002. The Plan also allows
participants age 50 and over to make an extra "catch-up" contribution on a
pre-tax basis, which may not exceed $2,000 and $1,000 for the calendar years
ended December 31, 2003 and 2002, respectively. Participants may also contribute
amounts representing distributions from other qualified defined benefit or
defined contribution plans. Participants' contributions vest immediately and can
only be withdrawn pursuant to the appropriate provisions of the Code.
The Plan provides for discretionary employer matching contributions
based on participant elective deferral percentages. The Company made employer
matching contributions equal to 75% of participant elective deferrals from
January 1, 2002 through March 31, 2003. Effective April 1, 2003, the Company
reduced the amount of employer matching contributions to 50% of participant
elective deferrals up to 6% of their compensation. The total matching
contribution for the year ended December 31, 2003 was approximately $801,000,
which was paid in the form of 798,314 shares of common stock of the Company.
The Company may also elect to contribute to the profit sharing portion
of the Plan based upon the total compensation of all employees eligible to
receive an allocation. These additional contributions, referred to as regular
employer contributions, are limited to profits as determined by the Company's
compensation committee. Employees are only eligible to share in regular employer
contributions during any year in which
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they are employed on the last day of the year. For the year ended December 31,
2003, the Company contributed an annualized 2.82% of pay to each employee's plan
account, or an aggregate of approximately $913,000, which was paid in February
2004 in the form of 317,134 shares of common stock of the Company. Such amount
is included in employer contribution receivable as of December 31, 2003.
Loans
The Plan provides for loans to active participants. Participants may
borrow the lesser of $50,000 or 50% of the vested portions of the participant's
account balance. The amount available for future borrowings by participants is
reduced by the amount of their highest outstanding loan balance during the
previous one-year period. Loans are secured by the balance in the participants'
account and bear interest at the prime interest rate plus 1%. The term of any
loan is no greater than five years, except in the case of a loan used to acquire
a principal residence. Repayment of any loan is required to be completed not
less frequently than quarterly.
Participant Accounts
Each participant's account is credited with participant contributions,
employer matching and regular employer contributions and allocations of Plan
earnings. Allocations of Plan earnings are based on participant account
balances. A participant is entitled to the benefit that can be provided from the
participant's vested account balance.
Vesting
Participants are immediately vested in their contributions plus
earnings thereon. Vesting in employer matching and regular employer
contributions begins one year after vesting service begins at a rate of 331/3%
per year until the completion of the third year, when 100% is vested. In
addition, a participant becomes fully vested in his or her employer matching and
regular employer contributions upon his or her normal retirement date (age 65),
disability or death, or if there is a partial or full termination of the Plan.
Distributions of Benefits
Upon termination of employment due to death, disability, and retirement
or upon attaining age 59 1/2, a participant may receive a lump sum amount equal
to the value of the participant's vested interest in his or her account. In
addition, participants may elect to withdraw funds from their respective
accounts in the event of hardship, as defined by the plan document.
Forfeitures
Non-vested employer matching contributions are forfeited upon
termination of employment or a participant's withdrawal from the Plan.
Forfeitures are used to pay Plan expenses and to reduce employer matching
contributions. Forfeitures for the year ended December 31, 2003 were
approximately $40,000. Unallocated non-vested assets were approximately $28,000
and $3,000 as of December 31, 2003 and 2002, respectively.
Administrative Expenses
Administrative expenses are paid through participant forfeitures or by
the Company.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP"). The
preparation of financial statements in conformity with GAAP requires the Plan
administrator to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual
results may differ from those estimates.
-6-
Investment Valuation and Income Recognition
Investments in funds are valued based on the Plan's pro rata share of
fund equity as determined by the Trustee, based on market quotes. Investments in
Sirius Satellite Radio Inc. common stock are valued based on market quotes.
Realized gains and losses from the sale of investments are computed using the
participant's cost basis in the investment aggregated at the Plan level. Net
unrealized appreciation/depreciation in investments represents the difference
between the fair value of investments held at year-end and the cost of
investments purchased in the current fiscal year or the fair value of
investments held at the end of the preceding year. Participant loans are stated
at cost, and the difference between cost and fair value is not material to the
Plan's financial statements.
The Plan provides for various investments in funds containing debt and
equity securities. Investments in securities are generally exposed to various
risks, such as interest rate, credit and overall market volatility risks. Due to
the level of risk associated with certain investment securities, changes in the
values of investment securities may occur in the near term.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
3. Tax Status
The Plan has received a determination letter from the Internal Revenue
Service dated September 13, 2002, stating that the Plan is qualified under
Section 401(a) of the Code and, therefore, the related trust is exempt from
taxation. The Plan administrator believes the Plan is being operated in
compliance with the applicable requirements of the Code and, therefore, believes
that the Plan is qualified and the related trust is tax exempt. The Plan
administrator has indicated that it will take the necessary steps, if any, to
maintain the Plan's qualified status.
4. Plan Termination
Although it has not expressed any intention to do so, the Company
reserves the right to terminate the Plan, in whole or in part, at any time,
subject to the provisions of ERISA. In the event that such termination occurs,
all amounts credited to participant accounts will become 100% vested and the
Trustee, in accordance with the Plan document, will distribute the net assets of
the Plan in a uniform and non-discretionary manner.
5. Investments
The fair values of investments that individually represent 5% or more
of the Plan's net assets are as follows:
December 31,
----------------------------------
2003 2002
-------- --------
(In thousands)
Sirius Satellite Radio Inc. Common Stock - $4,056 $ 461
Non-participant Directed
Sirius Satellite Radio Inc. Common Stock - 1,108 110
Participant Directed
Alliance Growth & Income - Class A Fund 1,931 1,247
Fidelity Advisor Equity Growth Fund 576 282
Guaranteed Income Fund 534 409
Templeton Growth Fund 426 220
Core Bond Fund 358 262
-7-
During 2003 the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) increased in value
by $5,015 as follows:
December 31,
2003
--------------
(In thousands)
Sirius Satellite Radio Inc. Common Stock $ 4,142
Mutual funds 873
---------
Total increase in fair value of investments $ 5,015
=========
6. Non-participant Directed Investments
Non-participant directed funds invested solely in Sirius Satellite
Radio Inc. common stock totaled $4,056 and $461 as of December 31, 2003 and
2002, respectively. The components of the change in net assets relating to
non-participant directed investments are as follows:
December 31,
2003
--------------
(In thousands)
Contributions $ 818
Net increase in fair value of investments 3,295
Benefits paid to participants (106)
Forfeitures (37)
Administrative expenses (11)
Transfers to participant-directed investments (364)
---------
Change in non-participant directed funds $ 3,595
=========
7. Risks and Uncertainties
The Plan may invest in various types of investments securities.
Investment securities are exposed to various risks, such as interest rate,
market, and/or credit risks. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes in the
values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statement of assets
available for plan benefits.
8. Subsequent Events (Unaudited)
Effective January 1, 2004, the Company amended the Plan to allow
participants to contribute up to 50% of their compensation, provided their
contributions do not exceed the maximum allowable amounts under the Code. The
Plan was also amended to allocate excess forfeited non-vested balance among the
accounts of participants who are eligible employees during the plan year in
which the forfeiture is being allocated.
- 8 -
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Schedule H, line 4i-Schedule of Assets (Held at End of Year)
As of December 31, 2003
(In thousands)
-----------------------------------------------------------------------------------------------------------
(a) (b) (c) (e) Current
Identity of Issuer, Borrower, Description of Investment, Including Maturity Date, Value
Lessor or Similar Party Rate of Interest, Collateral, Par or Maturity Value
-----------------------------------------------------------------------------------------------------------
* Connecticut General Life Janus Adviser Balanced Fund: $ 114
Insurance Company 4,149 shares in participation
* Connecticut General Life Alliancebernstein Balanced - Class A Fund: 23
Insurance Company 1,373 shares in participation
* Connecticut General Life CIGNA Lifetime20: 35
Insurance Company 2,725 shares in participation
* Connecticut General Life CIGNA Lifetime30: 158
Insurance Company 12,123 shares in participation
* Connecticut General Life CIGNA Lifetime40: 49
Insurance Company 3,795 shares in participation
* Connecticut General Life CIGNA Lifetime50: 12
Insurance Company 945 shares in participation
* Connecticut General Life CIGNA Lifetime60: 3
Insurance Company 207 shares in participation
* Connecticut General Life Oakmark Select II Fund: 312
Insurance Company 10,292 shares in participation
* Connecticut General Life American Century Heritage Fund: 74
Insurance Company 3,278 shares in participation
* Connecticut General Life Franklin Balance Sheet Investment - Class A Fund: 225
Insurance Company 4,455 shares in participation
* Connecticut General Life Small Cap Growth/TimesSquare Fund: 130
Insurance Company 7,346 shares in participation
* Connecticut General Life International Growth/Artisan Partner Fund: 76
Insurance Company 8,462 shares in participation
* Connecticut General Life Alliance Growth & Income - Class A Fund: 1,931
Insurance Company 541,874 shares in participation
* Connecticut General Life Core Bond Fund: 358
Insurance Company 26,030 shares in participation
* Connecticut General Life Fidelity Advisor Equity Growth Fund: 576
Insurance Company 7,875 shares in participation
* Connecticut General Life Guaranteed Income Fund: 534
Insurance Company 19,090 shares in participation
* CIGNA Financial Services, Inc. Sirius Satellite Radio Inc. Common Stock: 5,164 **
1,634,229 shares in participation
* Connecticut General Life Templeton Growth Fund: 426
Insurance Company 11,467 shares in participation
* Participant Loans 5.00% - 5.75% 95
-----------
Total Assets $ 10,295
-----------------------------------------------------------------------------------------------------------
* Represents a party-in-interest
** Balances consist of participant and non-participant directed investments. The
cost of these investments were $3,178.
- 9 -
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Schedule H, line 4j - Schedule of Reportable Transactions
Year Ended December 31, 2003
(In thousands)
(h) (i)
Current Value Net
(a) (b) (c) (d) (g) of Asset on Gain
Identity of Party Description Number of Purchase Selling Cost of Transaction or
Involved of Asset Transactions Price Price Asset Date (Loss)
-----------------------------------------------------------------------------------------------------------------------------
Category (iii) - series of transactions in excess of 5 percent of plan assets.*
**Sirius Satellite Radio Common Stock 25 $818 N/A $818 $818 N/A
Inc.
Non-participant
Directed
* There were no category (i), (ii), or (iv) reportable transactions
during 2003.
** Represents a party-in-interest
- 10 -
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange
Act of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
By: /s/ DAVID J. FREAR
------------------
David J. Frear
Executive Vice President and
Chief Financial Officer
June 28, 2004
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