Property and Equipment

6 Months Ended

Jun. 30, 2020

Property and Equipment

Property and Equipment

7.Property and Equipment

Property and equipment consisted of the following:

	Depreciable			As of
	Life			June 30,		December 31,
	(In Years)			2020		2019
				(In thousands)
Equipment leased to customers	2	-	5	$	1,799,429	$	1,861,668
Satellites (1)	2	-	15		1,734,025		1,855,096
Satellites acquired under finance lease agreements	10	-	15		888,940		888,940
Furniture, fixtures, equipment and other	2	-	20		2,042,017		2,010,094
Buildings and improvements	5	-	40		354,274		349,347
Land		-			17,810		17,810
Construction in progress (1)		-			95,418		278,083
Total property and equipment					6,931,913		7,261,038
Accumulated depreciation					(4,660,488)		(4,554,856)
Property and equipment, net				$	2,271,425	$	2,706,182

(1) During the six months ended June 30, 2020, we wrote down the T1 satellite net book value of $48 million (net of accumulated depreciation of $18 million) and the D1 satellite net book value of $55 million to their estimated fair value of zero. In addition, during the six months ended June 30, 2020, we impaired $227 million for capitalized costs of equipment, labor and other assets related to the narrowband IoT deployment that would not be utilized in our 5G Network Deployment. As a result, we recorded a $330 million non-cash impairment charge in “Impairment of long-lived assets” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 2 for further information.

Construction in progress consisted of the following:

	As of
	June 30,		December 31,
	2020		2019
	(In thousands)
Software	$	48,862	$	51,493
Wireless (1)		28,028		207,814
Other		18,528		18,776
Total construction in progress	$	95,418	$	278,083

(1) During the six months ended June 30, 2020, we impaired the capitalized costs of equipment, labor and other assets related to the narrowband IoT deployment that would not be utilized in our 5G Network Deployment, resulting in a $227 million non-cash impairment charge in “Impairment of long-lived assets” on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). See Note 2 for further information.

Depreciation and amortization expense consisted of the following:

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
	(In thousands)
Equipment leased to customers	$	69,515	$	86,865	$	149,229	$	196,019
Satellites (1)		50,193		17,156		102,337		37,635
Buildings, furniture, fixtures, equipment and other		32,416		45,681		67,378		69,187
Total depreciation and amortization	$	152,124	$	149,702	$	318,944	$	302,841

(1) The increase resulted from the Master Transaction Agreement pursuant to which, on September 10, 2019, certain satellites were transferred to us. See Note 13 for further information.

Cost of sales and operating expense categories included in our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) do not include depreciation expense related to satellites or equipment leased to customers.

Pay-TV Satellites. We currently utilize 13 satellites in geostationary orbit approximately 22,300 miles above the equator, eight of which we own and depreciate over their estimated useful life. We currently utilize certain capacity on one satellite that we lease from EchoStar, which is accounted for as an operating lease. We also lease four satellites from third parties: Ciel II, which is accounted for as an operating lease, and Anik F3, Nimiq 5 and QuetzSat-1, which are accounted for as financing leases and are depreciated over their economic life.

As of June 30, 2020, our pay-TV satellite fleet consisted of the following:

		Degree	Lease
	Launch	Orbital	Termination
Satellites	Date	Location	Date
Owned:
EchoStar VII (1)	February 2002	119	N/A
EchoStar X (1)	February 2006	110	N/A
EchoStar XI (1)	July 2008	110	N/A
EchoStar XIV (1)	March 2010	119	N/A
EchoStar XV	July 2010	61.5	N/A
EchoStar XVI (1)	November 2012	61.5	N/A
EchoStar XVIII	June 2016	61.5	N/A
EchoStar XXIII (1)	March 2017	67.9	N/A
Leased from EchoStar (2):
EchoStar IX	August 2003	121	Month to month
Leased from Other Third Party:
Anik F3	April 2007	118.7	April 2022
Ciel II	December 2008	129	January 2021
Nimiq 5 (1)	September 2009	72.7	September 2024
QuetzSat-1 (1)	September 2011	77	November 2021

(1) Pursuant to the Master Transaction Agreement, on September 10, 2019, these satellites and satellite service agreements were transferred to us. See Note 13 for further information.

(2) See Note 13 for further information on our Related Party Transactions with EchoStar.

Effective September 10, 2019, pursuant to the Master Transaction Agreement, the EchoStar XII satellite was transferred to us. During October 2019, the EchoStar XII satellite was de-orbited.

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