Quarterly report pursuant to Section 13 or 15(d)

Property and Equipment

v3.21.2
Property and Equipment
 6 Months Ended
Jun. 30, 2021
Property, Plant and Equipment [Abstract]  
Property and Equipment Property and Equipment
Property and equipment, net, consists of the following:
  June 30, 2021 December 31, 2020
Satellite system $ 1,591  $ 1,587 
Terrestrial repeater network 106  105 
Leasehold improvements 108  111 
Broadcast studio equipment 106  100 
Capitalized software and hardware 1,411  1,372 
Satellite telemetry, tracking and control facilities 99  96 
Furniture, fixtures, equipment and other 92  92 
Land 38  38 
Building 63  63 
Construction in progress 417  510 
Total property and equipment 4,031  4,074 
Accumulated depreciation and amortization (2,626) (2,445)
Property and equipment, net $ 1,405  $ 1,629 
Construction in progress consists of the following:
  June 30, 2021 December 31, 2020
Satellite system $ 229  $ 429 
Terrestrial repeater network 10  8 
Capitalized software and hardware 146  52 
Other 32  21 
Construction in progress $ 417  $ 510 
Depreciation and amortization expense on property and equipment was $93 and $86 for the three months ended June 30, 2021 and 2020, respectively, and $186 and $180 for the six months ended June 30, 2021 and 2020, respectively.  We retired property and equipment of $3 and $8 during the three and six months ended June 30, 2021, respectively.  Property and equipment of $36 and $65, which included a loss of $13 related to the termination of the Automatic service, was retired during the three and six months ended June 30, 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 and $2 and $4 for the three months ended June 30, 2021 and 2020, respectively, and $5 and $9 for the six months ended June 30, 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 $3 and $5 for the three months ended June 30, 2021 and 2020, respectively, and $6 and $8 for the six months ended June 30, 2021 and 2020, respectively.
Satellites
As of June 30, 2021, we operated a fleet of six 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 June 30, 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
SXM-8 2021 2036 (b)
(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.
(b)SXM-8 will not be licensed until we notify the FCC that the satellite has been successfully placed into orbit at its assigned orbital location and that its operations conform to the terms and conditions of its authorization, which is expected in the third quarter.
On December 13, 2020, our SXM-7 satellite was 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 six months ended June 30, 2021. SXM-7 remains in-orbit and has been moved to its assigned orbital location, but is not being used to provide satellite radio service.
We 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 policies with respect to SXM-7 is $225. We filed insurance claims with the insurers with respect to SXM-7 in May 2021. During the three and six months ended June 30, 2021 we recorded insurance recoveries of $140 which have been recorded as a reduction to Impairment, restructuring and acquisition costs in our unaudited consolidated statements of comprehensive income. We collected $17 of insurance recoveries through June 30, 2021 and the remaining $123 is recorded as a receivable in Prepaid expenses and other current assets in our unaudited consolidated balance sheet. At this time, we are unable to reliably estimate the timing and amount of the remaining 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. Our SXM-8 satellite was successfully launched into a geostationary orbit on June 6, 2021 and is expected to be placed into service during the third quarter of 2021 following the completion of in-orbit testing.