Property and Equipment

6 Months Ended

Jun. 30, 2018

Property, Plant and Equipment [Abstract]

Property and Equipment

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	Depreciable Life In Years	As of
		June 30, 2018			December 31, 2017
		(In thousands)
Land	—	$	33,641		$	33,713
Buildings and improvements	1 to 40	184,932			185,148
Furniture, fixtures, equipment and other	1 to 12	758,588			736,533
Customer rental equipment	2 to 4	1,032,591			929,775
Satellites - owned	2 to 15	2,816,628			3,064,391
Satellites - acquired under capital leases	10 to 15	899,310			916,820
Construction in progress	—	349,023			260,220
Total property and equipment		6,074,713			6,126,600
Accumulated depreciation		(2,678,097		)	(2,661,129		)
Property and equipment, net		$	3,396,616		$	3,465,471

Construction in progress consisted of the following:

	As of
	June 30, 2018		December 31, 2017
	(In thousands)
Progress amounts for satellite construction, including prepayments under capital leases and launch services costs	$	288,212	$	211,765
Satellite related equipment	25,738		28,358
Other	35,073		20,097
Construction in progress	$	349,023	$	260,220

Construction in progress included the following owned and leased satellites under construction as of June 30, 2018.

Satellites	Segment	Expected Launch Date
Telesat T19V	Hughes	July 2018
EchoStar XXIV	Corporate and Other	2021

Depreciation expense associated with our property and equipment consisted of the following:

	For the three months ended June 30,				For the six months ended June 30,
	2018		2017		2018		2017
	(In thousands)
Satellites	$	71,042	$	60,072	$	139,203	$	112,215
Furniture, fixtures, equipment and other	19,517		16,784		41,213		34,662
Customer rental equipment	42,875		34,081		86,323		64,677
Buildings and improvements	4,376		5,901		6,085		7,651
Total depreciation expense	$	137,810	$	116,838	$	272,824	$	219,205

Satellites

As of June 30, 2018, our satellite fleet consisted of 17 of our owned and leased satellites in geosynchronous orbit, approximately 22,300 miles above the equator. We depreciate our owned satellites on a straight-line basis over the estimated useful life of each satellite. As of June 30, 2018, four of our satellites are accounted for as capital leases and are depreciated on a straight-line basis over their respective lease terms.

Recent Developments

EchoStar I and EchoStar VI. The EchoStar I and EchoStar VI satellites were removed from their orbital locations and retired from commercial service in January 2018 and May 2018, respectively. The retirement of these satellites has not had, and is not expected to have, a material impact on our results of operations or financial position.

EchoStar 105/SES-11. The EchoStar 105/SES-11 satellite was launched in October 2017 and was placed into service in November 2017 at the 105 degree west longitude orbital location. Pursuant to agreements that we entered into in August 2014, we funded substantially all construction, launch and other costs associated with the EchoStar 105/SES-11 satellite and transferred the C-, Ku- and Ka-band payloads to two affiliates of SES Americom, Inc. (“SES”) after the launch date, while retaining the right to use the entire Ku-band payload on the satellite for an initial ten-year term, with an option for us to renew the agreement on a year-to-year basis. In October 2017, we recorded a $77.5 million receivable from SES in Other current assets, representing capitalized costs allocable to certain satellite payloads controlled by SES, and we reduced our carrying amount of the satellite by such amount. In January 2018, we received payment from SES for the receivable plus accrued interest. Our leased Ku-band payload on the EchoStar 105/SES-11 satellite has replaced the capacity we had on the AMC-15 satellite.

Telesat T19V. In September 2015, we entered into agreements pursuant to which affiliates of Telesat Canada will provide to us the Ka-band capacity on the Telesat T19V satellite at the 63 degree west longitude orbital location for a 15-year term. We were not party to the construction contract. The Telesat T19V satellite was launched in July 2018. We expect this satellite to be placed into service during the fourth quarter of 2018 and to augment the capacity being provided by the EUTELSAT 65 West A and EchoStar XIX satellites in Central and South America.

Satellite Anomalies and Impairments

Our satellites may experience anomalies from time to time, some of which may have a significant adverse effect on their remaining useful lives, the commercial operation of the satellites or our operating results or financial position. We are not aware of any anomalies with respect to our owned or leased satellites that have had any such significant adverse effect during the six months ended June 30, 2018. There can be no assurance, however, that anomalies will not have any such adverse effects in the future. In addition, there can be no assurance that we can recover critical transmission capacity in the event one or more of our in-orbit satellites were to fail.

The EchoStar X satellite experienced anomalies in the past which affected seven solar array circuits. In December 2017, the satellite experienced anomalies which affected one additional solar array circuit reducing the number of functional solar array circuits to 16. As a result of these anomalies, we had a reduction in revenue of $1.1 million and $2.3 million for the three and six months ended June 30, 2018 as compared to the same period in 2017, respectively.

We historically have not carried in-orbit insurance on our satellites because we have assessed that the cost of insurance is not economical relative to the risk of failures. Therefore, we generally bear the risk of any in-orbit failures. Pursuant to the terms of the agreements governing certain portions of our indebtedness, we are required, subject to certain limitations on coverage, to maintain in-orbit insurance for our SPACEWAY 3, EchoStar XVI and EchoStar XVII satellites. Based on economic analysis of the current insurance market we obtained launch plus one year in-orbit insurance, subject to certain limitations, for the EchoStar XXI and EchoStar XXIII satellites. Our other satellites, either in orbit or under construction, are not covered by launch or in-orbit insurance. We will continue to assess circumstances going forward and make insurance decisions on a case-by-case basis.

We evaluate our satellites for impairment and test for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Certain of the anomalies previously disclosed may be considered to represent a significant adverse change in the physical condition of a particular satellite. However, based on the redundancy designed within each satellite, certain of these anomalies are not necessarily considered to be significant events that would require a test of recoverability.