Property and Equipment

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property and equipment consisted of the following (amounts in thousands):



	Depreciable Life In Years	As of
	Depreciable Life In Years	June 30, 2019			December 31, 2018

Land	—	$	33,600		$	33,606
Buildings and improvements	1 to 40	174,260			174,227
Furniture, fixtures, equipment and other	1 to 12	830,040			812,566
Customer premises equipment	2 to 4	1,270,959			1,159,977
Satellites - owned	2 to 15	2,816,628			2,816,628
Satellites - acquired under finance leases	10 to 15	1,052,592			1,051,110
Construction in progress	—	368,345			307,026
Total property and equipment		6,546,424			6,355,140
Accumulated depreciation		(3,216,630		)	(2,940,232		)
Property and equipment, net		$	3,329,794		$	3,414,908

Construction in progress consisted of the following (amounts in thousands):



	As of
	June 30, 2019		December 31, 2018

Progress amounts for satellite construction	$	332,772	$	277,583
Satellite related equipment	18,904		13,001
Other	16,669		16,442
Construction in progress	$	368,345	$	307,026

Construction in progress as of June 30, 2019 included our EchoStar XXIV satellite. In August 2017, we entered into a contract for the design and construction of the EchoStar XXIV satellite, a new, next-generation, high throughput geostationary satellite, with a planned 2021 launch. The EchoStar XXIV satellite is primarily intended to provide additional capacity for our HughesNet service in North, Central and South America as well as aeronautical and enterprise broadband services. In June 2019, the Federal Communications Commission amended our existing authorization that allowed us to construct, deploy and operate the EchoStar XXIV satellite to now include all of the frequency bands included in our current design plans. In the first quarter of 2019, Maxar Technologies Inc. (“Maxar”), the parent company of Space Systems/Loral, LLC (“SSL”), the manufacturer of our EchoStar XXIV satellite, announced that, although it will continue to operate its geostationary communications satellite business, it intends to adjust its organization to better align costs with revenue. SSL has indicated to us that it intends to meet its contractual obligations regarding the timely manufacture and delivery of the EchoStar XXIV satellite. However, if SSL fails to meet or is delayed in meeting these obligations for any reason, including if Maxar decides to significantly modify its geostationary communications satellite business, such failure could have a material adverse impact on our business operations, future revenues, financial position and prospects, the completion of the manufacture of the EchoStar XXIV satellite and our planned expansion of satellite broadband services throughout North, South and Central America. Capital expenditures associated with the construction and launch of the EchoStar XXIV satellite are included in Corporate and Other in our segment reporting.

We recorded capitalized interest related to our satellites, satellite payloads and related ground facilities under construction of $5 million and $5 million for the three months ended June 30, 2019 and 2018, respectively, and $10 million and $9 million for the six months ended June 30, 2019 and 2018, respectively.

Depreciation expense associated with our property and equipment consisted of the following (amounts in thousands):



	For the three months ended June 30,				For the six months ended June 30,
	2019		2018		2019		2018

Buildings and improvements	$	3,882	$	4,376	$	7,369	$	6,085
Furniture, fixtures, equipment and other	19,955		19,517		40,605		41,213
Customer premises equipment	47,275		42,875		93,467		86,323
Satellites	73,404		71,042		146,896		139,203
Total depreciation expense	$	144,516	$	137,810	$	288,337	$	272,824

Satellites depreciation expense includes amortization of satellites under finance lease agreements of $20 million and $18 million for the three months ended June 30, 2019 and 2018, respectively, and $41 million and $36 million for the six months ended June 30, 2019 and 2018, respectively.

Satellites

As of June 30, 2019, our satellite fleet consisted of 18 satellites, 13 of which are owned and five of which are leased. They are all 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. We depreciate our leased satellites on a straight-line basis over their respective lease terms. If the BSS Transaction is consummated, seven of our owned satellites and the leases for two of our leased satellites will be transferred to DISH Network.

Recent Developments

EchoStar XII. We expect to remove the EchoStar XII satellite from its orbital location and retire it from commercial service in the third quarter of 2019. The retirement of this satellite is not expected to have a material impact on our results of operations or financial position.

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, 2019. 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 satellites were to fail.

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. 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.