Quarterly report pursuant to Section 13 or 15(d)

Property and Equipment

v3.21.1
Property and Equipment
 3 Months Ended
Mar. 31, 2021
Property, Plant and Equipment [Abstract]  
Property and Equipment Property and Equipment
Property and equipment, net, consists of the following:
  March 31, 2021 December 31, 2020
Satellite system $ 1,587  $ 1,587 
Terrestrial repeater network 105  105 
Leasehold improvements 108  111 
Broadcast studio equipment 105  100 
Capitalized software and hardware 1,404  1,372 
Satellite telemetry, tracking and control facilities 98  96 
Furniture, fixtures, equipment and other 92  92 
Land 38  38 
Building 63  63 
Construction in progress 338  510 
Total property and equipment 3,938  4,074 
Accumulated depreciation and amortization (2,535) (2,445)
Property and equipment, net $ 1,403  $ 1,629 
Construction in progress consists of the following:
  March 31, 2021 December 31, 2020
Satellite system $ 213  $ 429 
Terrestrial repeater network 10  8 
Capitalized software and hardware 90  52 
Other 25  21 
Construction in progress $ 338  $ 510 
Depreciation and amortization expense on property and equipment was $94 for each of the three months ended March 31, 2021 and 2020.  We retired property and equipment of $5 and $29 during the three months ended March 31, 2021 and 2020, respectively.
We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were $3 and $5 for the three months ended March 31, 2021 and 2020, respectively, which related to the construction of our SXM-8 satellite. We also capitalize a portion of share-based compensation related to employee time for capitalized software projects. Capitalized share-based compensation costs were $4 for each of the three months ended March 31, 2021 and 2020.
Satellites
As of March 31, 2021, we operated a fleet of five satellites.  Each satellite requires an FCC license, and prior to the expiration of each license, we are required to apply for a renewal of the FCC satellite license.  The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. The chart below provides certain information on our satellites as of March 31, 2021:
Satellite Description Year Delivered Estimated End of
Depreciable Life		 FCC License Expiration Year
SIRIUS FM-5 2009 2024 2025
SIRIUS FM-6 2013 2028 2022
XM-3 2005 2020
2021(a)
XM-4 2006 2021 2022
XM-5 2010 2025 2026
(a)We filed an application with the FCC to extend the license for the XM-3 satellite on February 26, 2021 and expect it to be granted routinely.
On December 13, 2020, our SXM-7 satellite was successfully launched and in-orbit testing of SXM-7 began on January 4, 2021. During in-orbit testing of SXM-7, events occurred which caused failures of certain SXM-7 payload units. The evaluation of SXM-7 concluded that the satellite will not function as intended, which we considered to be a triggering event prompting the assessment as to whether the asset's carrying value of $220 was recoverable. In determining recoverability of SXM-7, we compared the asset's carrying value to the undiscounted cash flows derived from the satellite. SXM-7 was determined to be a total loss and therefore, we determined that the carrying value of the satellite is not recoverable and an impairment charge of $220 was recorded to Impairment, restructuring and acquisition costs in our unaudited consolidated statements of comprehensive income for the three months ended March 31, 2021.
We have procured insurance for SXM-7 to cover the risks associated with the satellite's launch and first year of in-orbit operation. The aggregate coverage under the insurance policy with respect to SXM-7 is $225. We have notified the underwriters of this policy of a potential claim with respect to SXM-7 and expect to file an insurance claim in the second quarter of 2021. At this time, we are unable to reliably estimate the timing and amount of insurance recoveries and will record the insurance recoveries when they are probable and estimable.
We do not expect our satellite radio service to be impacted by these adverse SXM-7 events. Our XM-3 and XM-4 satellites continue to operate and are expected to support our satellite radio service for several years. In addition, our XM-5 satellite remains available as an in-orbit spare. Construction of our SXM-8 satellite is underway and that satellite is expected to be launched into a geostationary orbit in 2021.