Analysis of Property, Plant and Equipment
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Reynolds American Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Debt
- Aggregate Accruals
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Property, Plant and Equipment Disclosure
Reynolds American Inc., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Land and Land Improvements
- The value of land and land improvements remained relatively stable over the period from 2012 to 2016, with a slight increase from 93 million USD in 2012 to 95 million USD in 2016, indicating minimal change or investment in this category.
- Buildings and Leasehold Improvements
- This category shows some fluctuation over the years. The value decreased from 758 million USD in 2012 to a low of 717 million USD in 2013, followed by minor variations and returning to 757 million USD in 2016, suggesting limited net change over the five-year span.
- Machinery and Equipment
- Machinery and equipment exhibited a clear upward trend. Starting at 1,758 million USD in 2012, values slightly declined in 2013, then increased steadily each year to reach 2,064 million USD in 2016. This indicates ongoing investment and growth in this asset category.
- Construction-in-Process
- Values for construction-in-process showed variability, with a significant increase from 46 million USD in 2012 to 105 million USD in 2013, followed by fluctuations through 2016. The ending figure of 94 million USD in 2016 suggests continued but inconsistent capital projects underway.
- Property, Plant and Equipment, at Cost
- The total cost of property, plant, and equipment increased gradually from 2,655 million USD in 2012 to 3,010 million USD in 2016. This overall growth aligns with the increases seen in machinery and equipment as well as construction-in-process.
- Accumulated Depreciation
- Accumulated depreciation increased steadily in absolute terms (noting the negative values), starting at -1,618 million USD in 2012 and reaching -1,662 million USD by 2016. This consistent increase reflects ongoing depreciation expense associated with the asset base.
- Property, Plant and Equipment, Net
- The net property, plant, and equipment values showed a positive and consistent upward trend, growing from 1,037 million USD in 2012 to 1,348 million USD in 2016. This rise indicates that asset additions and capital investments have outpaced depreciation expenses during this period.
Asset Age Ratios (Summary)
Reynolds American Inc., asset age ratios
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
- Average Age Ratio (%)
- The average age ratio shows a consistent downward trend over the five-year period, decreasing from 63.15% in 2012 to 57.02% in 2016. This decline indicates that, proportionally, the company's property, plant, and equipment assets are becoming relatively younger over time.
- Estimated Total Useful Life (in years)
- The estimated total useful life of the assets exhibits fluctuations throughout the period. Starting at 23 years in 2012, it increases to 26 years in 2013 and further to 29 years in 2014. Although there is a slight decrease to 27 years in 2015, it returns to 29 years by 2016. This pattern suggests revisions in asset lifespan estimations, possibly due to changes in asset composition or reassessments of asset durability.
- Estimated Age, Time Elapsed Since Purchase (in years)
- The estimated age of the assets generally increases year-over-year, moving from 15 years in 2012 up to 17 years in 2016. The exception is a slight decrease from 17 years in 2014 to 16 in 2015 before rising again. This gradual increase aligns with the aging of assets, though the minor dip in 2015 could indicate asset turnover or additions that impact the average age.
- Estimated Remaining Life (in years)
- The estimated remaining life of the assets shows an overall upward trend, starting at 9 years in 2012 and increasing to 13 years by 2016. There is a steady increase through 2014, a slight decrease in 2015, and then a rise again in 2016. This suggests improvements in the anticipated usability of assets, possibly due to asset renewals, replacements, or extended asset maintenance.
- Summary
- Overall, the data reveals an improvement in the age profile of the company's property, plant, and equipment. The decreasing average age ratio coupled with increasing estimated remaining life indicates that the assets are becoming comparatively newer and expected to be operational for longer periods. Fluctuations in estimated total useful life and estimated age suggest active management of asset use and valuation methodologies during the period.
Average Age
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
2016 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, at cost – Land and land improvements)
= 100 × ÷ ( – ) =
The financial data for property, plant, and equipment exhibits several noteworthy trends over the five-year period ending December 31, 2016.
- Accumulated Depreciation
- Accumulated depreciation fluctuated slightly, starting at 1618 million USD in 2012, decreasing to 1579 million USD in 2013, and subsequently increasing each year to reach 1662 million USD in 2016. This pattern suggests a temporary reduction in depreciation recorded in 2013, followed by a steady buildup of depreciation expense consistent with asset aging and usage.
- Property, Plant, and Equipment at Cost
- The cost basis of property, plant, and equipment demonstrated a consistent upward trend from 2655 million USD in 2012 to 3010 million USD in 2016. This increase indicates ongoing capital investments or acquisitions of assets over the period, reflecting expansion or replacement activities within the company.
- Land and Land Improvements
- The value assigned to land and land improvements remained relatively stable, with minor year-over-year increases from 93 million USD in 2012 to 95 million USD in 2016. This stability is typical, as land is not subject to depreciation and is generally less susceptible to significant valuation fluctuations.
- Average Age Ratio
- The average age ratio declined steadily from 63.15% in 2012 to 57.02% in 2016. This decrease indicates that the asset base is becoming relatively newer, suggesting that recent capital expenditures have effectively replaced older assets, reducing the average age of the property, plant, and equipment.
Overall, the data indicates a strategic commitment to asset renewal and investment, as evidenced by the increasing asset cost base contrasted with a decreasing average age ratio. The variations in accumulated depreciation align with these changes, reflecting depreciation policies and asset turnover during the timeframe observed.
Estimated Total Useful Life
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
2016 Calculations
1 Estimated total useful life = (Property, plant and equipment, at cost – Land and land improvements) ÷ Depreciation expense
= ( – ) ÷ =
- Property, Plant and Equipment, at Cost
- The value of property, plant, and equipment at cost showed a general upward trend over the five-year period. Starting at $2,655 million in 2012, it slightly decreased to $2,653 million in 2013, followed by a steady increase each subsequent year, reaching $3,010 million by the end of 2016. This growth suggests ongoing capital investments or acquisitions of assets during this period.
- Land and Land Improvements
- Land and land improvements exhibited minimal changes throughout the years. The value remained relatively stable, fluctuating marginally between $92 million and $95 million. This stability indicates that there were no significant transactions or revaluations related to land assets during this timeframe.
- Depreciation Expense
- Depreciation expense experienced a decline from $110 million in 2012 to $95 million in 2014. It then increased again to $104 million in 2015 before decreasing slightly to $100 million in 2016. These fluctuations could reflect changes in the asset base's composition, depreciation methods, or adjustments in estimated useful lives.
- Estimated Total Useful Life
- The estimated total useful life of assets showed a generally positive trend, increasing from 23 years in 2012 to 29 years in 2016. This increase may imply re-assessment of asset longevity or acquisitions of assets with longer useful lives, which could impact depreciation expense and asset valuation.
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
2016 Calculations
1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= ÷ =
The accumulated depreciation of the company’s property, plant, and equipment shows a relatively stable trend over the five-year period. An initial slight decrease is observed from 1,618 million US dollars in 2012 to 1,579 million US dollars in 2013, followed by a consistent increase each subsequent year, reaching 1,662 million US dollars by the end of 2016. This indicates ongoing depreciation recognition on the company's assets, reflecting the aging and usage of the property, plant, and equipment.
Depreciation expense fluctuates moderately throughout the years under review. It starts at 110 million US dollars in 2012, declines to its lowest point of 95 million US dollars in 2014, then rises again to 104 million US dollars in 2015 before slightly decreasing to 100 million US dollars in 2016. This pattern suggests variations in the company's depreciation charges, which could be influenced by changes in capital expenditures, asset disposals, or updated asset valuations.
The time elapsed since purchase of assets remains fairly constant with slight fluctuations, ranging from 15 to 17 years over the period. Notably, there is an increase from 15 years in 2012 to 16 years in 2013 and 17 years in 2014, followed by a minor decrease back to 16 years in 2015 and return to 17 years in 2016. This stability suggests the company has a relatively consistent asset base age, without significant additions of newer assets or disposals that would substantially alter the average asset age.
Overall, the data reflects a mature asset portfolio with steady depreciation patterns and a generally stable asset age profile, indicating consistent asset management and utilization over the analyzed timeframe.
Estimated Remaining Life
Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).
2016 Calculations
1 Estimated remaining life = (Property, plant and equipment, net – Land and land improvements) ÷ Depreciation expense
= ( – ) ÷ =
- Property, Plant, and Equipment, Net
- The net value of property, plant, and equipment shows a consistent upward trend over the five-year period. Starting at 1037 million US dollars in 2012, it increases steadily each year, reaching 1348 million US dollars by the end of 2016. This growth suggests ongoing investments or acquisitions in tangible assets.
- Land and Land Improvements
- The value of land and land improvements remains relatively stable throughout the period, fluctuating marginally between 92 and 95 million US dollars. This indicates minimal changes in land holdings or related enhancements, pointing to a stable asset base in this category.
- Depreciation Expense
- Depreciation expense exhibits a slight decline from 110 million US dollars in 2012 to 100 million US dollars in 2016, with a minor increase to 104 million in 2015. The general downward trend may reflect adjustments in asset mix, improvements in depreciation methods, or changes in asset utilization.
- Estimated Remaining Life
- The estimated remaining life of the assets increases over the period, starting at 9 years in 2012 and rising to 13 years by 2016. This extension suggests asset renewals, replacements, or reassessments that effectively prolong the useful life of property, plant, and equipment.