Note 9.Property and Equipment

Property and equipment consisted of the following:

	Depreciable
	Life	As of December 31,
	(In Years)	2015			2014
		(In thousands)
Land	—	$	41,457		$	42,826
Buildings and improvements	1-40	367,947			375,920
Furniture, fixtures, equipment and other	1-12	1,254,325			1,223,807
Customer rental equipment	2-4	588,430			498,180
Satellites - owned	2-15	2,381,120			2,381,120
Satellites acquired under capital leases	10-15	665,518			935,104
Construction in progress	—	1,112,267			637,189

Total property and equipment		6,411,064			6,094,146
Accumulated depreciation		(2,998,074		)	(2,899,353		)

Property and equipment, net		$	3,412,990		$	3,194,793

As of December 31, 2015 and 2014, accumulated depreciation included amounts for satellites acquired under capital leases of $268.1 million and $481.5 million, respectively. In August 2014, our then existing capital lease agreements for the AMC-15 and AMC-16 satellites were extended and are being accounted for as operating leases for their extended terms.

In December 2015, we recognized an impairment loss of $2.4 million related to certain building and equipment in our EchoStar Technologies segment.

Construction in progress consisted of the following:

	As of December 31,
	2015		2014
	(In thousands)
Progress amounts for satellite construction, including prepayments under capital leases and launch services costs	$	963,103	$	583,877
Satellite related equipment	126,373		34,270
Other	22,791		19,042

Construction in progress	$	1,112,267	$	637,189

For the years ended December 31, 2015, 2014 and 2013, we recorded $63.8 million, $23.8 million and $4.0 million, respectively, of capitalized interest related to our satellites and satellite payloads under construction.

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

	For the Years Ended December 31,
	2015		2014		2013
	(In thousands)
Satellites	$	197,469	$	210,763	$	180,517
Furniture, fixtures, equipment and other	135,536		123,360		126,625
Customer rental equipment	105,725		116,685		98,076
Buildings and improvements	13,513		13,734		13,449

Total depreciation expense	$	452,243	$	464,542	$	418,667

Satellites depreciation expense includes amortization of satellites under capital lease agreements of $56.2 million, $59.7 million and $59.7 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Satellites

As of December 31, 2015, we utilized in support of our operations, 18 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. Two of our satellites are accounted for as capital leases and are depreciated on a straight-line basis over their respective lease terms. We utilized two satellites that were accounted for as operating leases and are not included in property and equipment as of December 31, 2015.

Our operating satellite fleet consists of both owned and leased satellites detailed in the table below as of December 31, 2015.

			Nominal Degree	Depreciable
		Launch	Orbital Location	Life
Satellites	Segment	Date	(Longitude)	(In Years)
Owned:
SPACEWAY 3 (1)	Hughes	August 2007	95 W	12
EchoStar XVII	Hughes	July 2012	107 W	15
EchoStar I (2)(3)(4)	ESS	December 1995	77 W	—
EchoStar III (4)	ESS	October 1997	61.5 W	12
EchoStar VI (4)	ESS	July 2000	96.2 W	12
EchoStar VII (2)(3)	ESS	February 2002	119 W	3
EchoStar VIII (2)(4)	ESS	August 2002	77 W	12
EchoStar IX (2)(4)	ESS	August 2003	121 W	12
EchoStar X (2)(3)	ESS	February 2006	110 W	7
EchoStar XI (2)(3)	ESS	July 2008	110 W	9
EchoStar XII (2)(4)(5)	ESS	July 2003	61.5 W	2
EchoStar XIV (2)(3)	ESS	March 2010	119 W	11
EchoStar XVI (2)	ESS	November 2012	61.5W	15
EUTELSAT 10A (“W2A”) (6)	Other	April 2009	10 E	—

Capital Leases:
Nimiq 5 (2)	ESS	September 2009	72.7 W	15
QuetzSat-1 (2)	ESS	September 2011	77 W	10

Operating Leases:
AMC-15	ESS	October 2004	105 W	—
AMC-16 (7)	ESS	December 2004	85 W	—

(1)

Depreciable life represents the remaining useful life as of June 8, 2011, the date EchoStar completed its acquisition of Hughes Communications, Inc. and its subsidiaries.

(2)

See Note 19 for discussion of related party transactions with DISH Network.

(3)

Depreciable life represents the remaining useful life as of March 1, 2014, the effective date of our receipt of the satellites from DISH Network as part of the Satellite and Tracking Stock Transaction (See Note 4).

(4)

Fully depreciated assets.

(5)

Depreciable life represents the remaining useful life as of June 30, 2013, the date the EchoStar XII satellite was impaired.

(6)

The Company acquired the S-band payload on this satellite, which prior to the acquisition in December 2013, experienced an anomaly at the time of the launch. As a result, the S-band payload is not fully operational.

(7)

Operating lease expired in February 2016.

Our owned and leased satellites under construction as of December 31, 2015 are presented below.

Satellites	Segment	Expected Launch Date
EUTELSAT 65 West A (1)	Hughes	First quarter of 2016
EchoStar XXI	Other	Second quarter of 2016
EchoStar XXIII	Other	Third quarter of 2016
EchoStar XIX	Other	Fourth quarter of 2016
EchoStar 105/SES-11	ESS	Fourth quarter of 2016
Telesat T19V (“63 West”) (1)	Hughes	Second quarter of 2018

(1)

We entered into satellite services agreements for certain capacity on these satellites once launched, but are not parties to the construction contracts.

Recent Developments

63 West Agreements. In September 2015, we entered into satellite services agreements pursuant to which affiliates of Telesat Canada (“Telesat”) will provide to us fixed broadband service into South America using the Ka-band capacity on a satellite to be located at the 63 degree west longitude orbital location for a 15-year term. The satellite services agreements require us to make prepayments while the satellite is under construction. We expect the satellite to be launched in the second quarter of 2018 to deliver consumer satellite broadband services into South America as well as create a platform to potentially allow for further development of our business in South America.

Satellite Construction — Launch Services Costs. In the third quarter of 2015, we mutually agreed with a vendor to cancel an existing launch services agreement for the launch of the EchoStar XIX satellite. Pursuant to the cancellation, we received a refund of prior payments related to the launch services, and credited the refund amount to construction in progress in the third quarter of 2015. Also in the third quarter of 2015, we entered into an agreement with a different vendor to provide for the launch of the satellite, which is expected to be launched in the fourth quarter of 2016.

AMC-15 and AMC-16. In August 2014, in connection with the execution of agreements related to the EchoStar 105/SES-11 satellite, we entered into amendments that extend the terms of our existing agreements with SES Americom Colorado, Inc. (“SES”) for satellite services on the AMC-15 and AMC-16 satellites. As amended, the term of our agreement for satellite services on certain transponders on the AMC-15 satellite was extended from December 2014 through the in-service date of the EchoStar 105/SES-11 satellite and is being accounted for as an operating lease. The amended agreement for the AMC-16 satellite services extended the term for the satellite’s entire communications capacity, subject to available power, for one year following expiration of the initial term in February 2015 and the agreement terminated according to its terms in February 2016.

As a result of anomalies that affected the operation of the AMC-15 and AMC-16 satellites, our monthly recurring payments were reduced under the related capital lease agreements. We have accounted for these lease modifications generally by reducing the carrying amounts of the satellite and related capital lease obligation by the present value of the payment reduction. In such instances where the carrying amount of the satellite had been reduced to zero as a result of accumulated depreciation or impairments, we have recognized the reductions in the capital lease obligations as gains in “Other, net” in our consolidated statements of operations and comprehensive income (loss). For the years ended December 31, 2015, 2014 and 2013, we recognized such gains of $4.5 million, zero, and $6.7 million, respectively.

Satellite Anomalies and Impairments

Our satellites may experience anomalies from time to time, some of which may have a significant adverse impact on their remaining useful lives, the commercial operation of the satellites or our operating results. We are not aware of any anomalies with respect to our owned or leased satellites that have had any such material adverse effect during the year ended December 31, 2015. There can be no assurance, however, that anomalies will not have any such adverse impacts 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.

We generally do not carry in-orbit insurance on our satellites or use commercial insurance to mitigate the potential financial impact of launch or in-orbit failures because we believe that the cost of insurance is uneconomical relative to the risk of such failures. Therefore, we generally bear the risk of any uninsured launch or 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 launch and in-orbit insurance for our SPACEWAY 3, EchoStar XVI, and EchoStar XVII satellites. In addition, although we were not required to maintain in-orbit insurance pursuant to our service agreement with DISH Network for the EchoStar XV satellite, we would have been liable for any damage caused by our use of the satellite and therefore we carried third-party insurance on the EchoStar XV satellite until the termination of our service agreement with DISH Network for the EchoStar XV satellite in November 2015.

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.

EchoStar XII. Prior to 2013, our EchoStar XII satellite experienced anomalies resulting in the loss of electrical power available from its solar arrays, which reduced the number of transponders that could be operated. The satellite is currently leased to DISH Network pursuant to an agreement that entitles DISH Network to a reduction in its monthly recurring lease payments in the event of a partial loss of satellite capacity or complete failure of the satellite. In the second quarter of 2013, we determined that the carrying amount of the satellite was not recoverable as a result of expected reductions in the monthly recurring lease payments due to future capacity loss. Consequently, in the second quarter of 2013, we recognized a $34.7 million impairment loss within our EchoStar Satellite Services segment to reduce the carrying amount of the satellite to its estimated fair value of $11.3 million as of June 30, 2013. Our fair value estimate was determined using probability weighted discounted cash flow techniques and is categorized within Level 3 of the fair value hierarchy. Our estimate included significant unobservable inputs related to predicted electrical power levels and the number of billable transponders that can be supported by predicted available power. In connection with our impairment analysis, we revised our estimate of the useful life of the satellite to reflect a remaining estimated useful life of 18 months. As of December 31, 2015 and 2014, the EchoStar XII satellite was fully depreciated.