This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Balance Sheets 101: Who Made the Grade

Editor's note: Last earnings season, Scott Rothbort graded several corporate balance sheets. As the current earnings season starts to wind down, Rothbort evaluates a new set of balance sheets, plus takes an updated look at Sirius Satellite Radio's balance sheet.

Sirius Passed -- Barely

Let's start off by taking a second look at Sirius Satellite Radio (SIRI), which recently merged with XM Satellite Radio (XMSR).

Last earnings season, I gave this combination an incomplete grade. The merger of these two companies was a long and arduous process. Missed opportunities -- especially for the new 2009 automobile production cycle -- and uncertainty over the merger have left the combined company in a capital and cash shortage. These companies have burned a huge amount of cash, while still carrying large amounts of debt. As a result, this week, Sirius issued hundreds of millions of dollars of stock and sold hundreds of millions of convertible debt in a private placement offering.

The motivation for the merger was to expand offerings to consumers and save about $400 million in 2009. The hopes are that the savings will increase earnings and pay down debt in the future.

However, this multibillion-dollar debt-riddled company is going to have an uphill battle to survive in its current form. The cost savings will go a long way to helping, but the interest on the low-graded debt is going to handcuff the company, leaving very little margin for error or operational shortfalls. Continued economic weakness could result in lost subscribers or failure to add new subscribers.

My prediction is that Sirius will have to reorganize in the future in a Charter 11 bankruptcy that would result in wiping out the shareholders and leaving the company to its creditors. Thus, owning Sirius debt may be a better investment than owning the equity.

Sirius' Balance Sheet Grade: D- (but at risk of failing).

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs