Keurig Dr Pepper Inc. (NASDAQ:KDP)

The analysis of the property, plant, and equipment (PP&E) data reveals several notable trends over the four-year period.

Land

The value of land decreased steadily from US$138 million in 2018 to US$50 million by the end of 2021, indicating potential disposals or revaluations of land assets during this period.

Buildings and improvements

After a decline from US$723 million in 2018 to US$473 million in 2019, the value increased moderately in 2020 to US$520 million and saw a substantial rise to US$793 million in 2021. This suggests renewed investments or upgrades in building infrastructure in the later years.

Machinery and equipment

There is a consistent upward trend from US$1,412 million in 2018, rising steadily each year to reach US$2,369 million in 2021. This reflects ongoing capital expenditure on machinery and equipment, possibly to expand or modernize production capabilities.

Cold drink equipment

The value sharply decreased from US$276 million in 2018 to US$78 million in 2019, after which it remained relatively stable with slight increases to US$80 million in 2020 and US$89 million in 2021. This pattern may indicate a significant write-down or sale followed by maintenance of a core asset base in this category.

Software

Software assets showed consistent growth from US$231 million in 2018 to US$404 million in 2021, reflecting increased capitalization of software costs, possibly related to technological enhancements or digital transformation efforts.

Construction-in-progress

This asset fluctuated, increasing from US$206 million in 2018 to US$393 million in 2020, before decreasing substantially to US$138 million in 2021. This suggests a period of active construction or development that slowed down or completed in the final year.

Property, plant, and equipment, gross

Overall gross PP&E decreased from US$2,986 million in 2018 to US$2,757 million in 2019, then increased to US$3,232 million in 2020 and further to US$3,843 million in 2021. This trend supports the observations of increasing investments in machinery, buildings, and software.

Accumulated depreciation and amortization

Accumulated depreciation showed a growing negative balance from -US$676 million in 2018 to -US$1,349 million in 2021. The acceleration in depreciation expense is consistent with increases in asset bases and ageing of fixed assets.

Property, plant, and equipment, net

The net PP&E decreased from US$2,310 million in 2018 to US$2,028 million in 2019, followed by rises to US$2,212 million in 2020 and US$2,494 million in 2021. This indicates recovery and growth in the net asset base after an initial contraction, reflecting capital investments outpacing depreciation in recent years.

In summary, the data suggest a significant capital investment phase beginning around 2019, characterized by growth in machinery, buildings, and software assets, supported by a reduction in construction-in-progress by 2021 indicative of project completions. The land asset decline and cold drink equipment reduction may reflect strategic asset management decisions. The increase in accumulated depreciation corresponds to the expanded asset base and their usage over time, while the net PP&E ultimately shows overall growth in productive asset value by the end of the analyzed period.

Average Age Ratio

The average age ratio has shown a consistent upward trend over the four-year period. Starting at 23.74% in 2018, it increased to 26.98% in 2019, followed by a further rise to 32.1% in 2020, and reached 35.57% by 2021. This gradual increase indicates that the property, plant, and equipment (PPE) assets are aging over time, with a growing proportion of the assets' useful life having been utilized.

Estimated Total Useful Life

The estimated total useful life of the assets experienced a notable decrease from 12 years in 2018 to 8 years in 2019. Following this, it slightly increased to 9 years in both 2020 and 2021. This suggests a reassessment or change in the estimation methods or asset composition that led to a shorter expected useful life starting from 2019, which then stabilized.

Estimated Age, Time Elapsed Since Purchase

The estimated age of the assets shows minor fluctuations over the period. The average age decreased from 3 years in 2018 to 2 years in 2019, indicating recent acquisitions or asset replacements might have occurred. Subsequently, it rose back to 3 years in 2020 and remained stable at that level through 2021, implying no significant recent asset additions or retirements during the latter years.

Estimated Remaining Life

The estimated remaining life decreased from 9 years in 2018 to 6 years in 2019, and remained constant at 6 years through 2020 and 2021. The decrease corresponds with the observed reduction in total useful life during the same period, reflecting a shorter time frame for the assets to remain in service.

Property, Plant, and Equipment, Gross

The gross value of property, plant, and equipment exhibited an overall upward trend from 2018 to 2021. Starting at $2,986 million in 2018, there was a decline in 2019 to $2,757 million, followed by consistent growth reaching $3,232 million in 2020 and $3,843 million in 2021. This indicates investments in assets that potentially enhanced operational capacity or replaced older equipment.

Accumulated Depreciation and Amortization

Accumulated depreciation and amortization increased steadily across the four-year period, rising from $676 million in 2018 to $1,349 million in 2021. The rise suggests aging assets and ongoing depreciation consistent with the growing base of property, plant, and equipment. The relatively sharp increase between 2019 and 2020 may reflect asset additions or adjustments in depreciation methods.

Land

The book value of land showed a decreasing trend, declining from $138 million in 2018 to $50 million by 2021. The decline is gradual but consistent, indicating possible disposals or revaluations of land holdings over the period.

Average Age Ratio

The average age ratio, representing the proportion of accumulated depreciation relative to gross property, plant, and equipment, increased steadily from 23.74% in 2018 to 35.57% in 2021. This rising ratio suggests that the asset base is aging overall, which may imply an increasing need for reinvestment or replacement to maintain operational efficiency.

The data reveals several noteworthy trends in property, plant, and equipment (PP&E) and related metrics over a four-year period ending December 31, 2021.

Property, plant and equipment, gross

The gross PP&E value experienced a decline from 2018 to 2019, decreasing from $2,986 million to $2,757 million. However, this metric reversed direction starting in 2020, showing an increase to $3,232 million and further growth in 2021 to $3,843 million. This suggests a period of divestment or reduced capital expenditure in 2019 followed by significant reinvestment or acquisitions in the subsequent years.

Land

The value of land shows a consistent decline across the four years, dropping from $138 million in 2018 to $50 million in 2021. This steady decrease may indicate disposal of land assets or a reclassification of land within the asset base.

Depreciation expense

Depreciation expense rose sharply from $233 million in 2018 to $358 million in 2019, representing a substantial increase. From 2019 onward, depreciation continued to grow but at a more gradual pace, reaching $410 million in 2021. The initial jump might reflect changes in asset base or accounting estimates, while the continuing rise aligns with increasing gross PP&E figures.

Estimated total useful life

The estimated total useful life of PP&E decreased from 12 years in 2018 to 8 years in 2019, then slightly increased to 9 years in 2020 and 2021. This downward adjustment in useful life could suggest changes in asset composition or revisions in depreciation policies, resulting in higher annual depreciation charges.

In summary, the data illustrates a dynamic period for the PP&E portfolio characterized by initial contraction followed by growth, accompanied by a decreasing land asset value and rising depreciation expenses. The reduction in estimated useful life corroborates the trend of increasing depreciation, reflecting potentially accelerated asset consumption or changes in accounting estimates.

Accumulated Depreciation and Amortization

The accumulated depreciation and amortization figures show a consistent upward trend over the four-year period. The values rose from 676 million USD at the end of 2018 to 1,349 million USD by the end of 2021, nearly doubling. This steady increase indicates ongoing recognition of asset wear and tear or usage, reflecting continuous allocation of costs related to property, plant, and equipment.

Depreciation Expense

Depreciation expense exhibits a general increase throughout the period analyzed. Starting at 233 million USD in 2018, the expense rose to 410 million USD by 2021. The most significant increase occurred between 2018 and 2019, where depreciation expense increased by 125 million USD, suggesting either the addition of substantial new assets or changes in depreciation policies or useful life estimations.

Time Elapsed Since Purchase

The average age of the assets, measured in years since purchase, remained fairly consistent, fluctuating slightly between 2 and 3 years. This stability suggests a relatively consistent asset replacement or acquisition strategy, without sharp shifts toward either older or newer asset bases.

Overall Insights

The upward trends in both accumulated depreciation and depreciation expense imply ongoing capital investment coupled with steady asset utilization. The increasing depreciation expense might reflect new asset acquisitions or accelerated depreciation practices. Meanwhile, the stable average asset age indicates a balanced asset management strategy without unusual aging or rapid turnover. Collectively, these patterns suggest disciplined asset management and a continuous investment in property, plant, and equipment.

Property, Plant, and Equipment, Net

The net value of property, plant, and equipment exhibited fluctuations over the observed period. It decreased from 2310 million USD at the end of 2018 to 2028 million USD in 2019, indicating a significant reduction in net asset value. In 2020, the value increased to 2212 million USD, showing partial recovery, and continued to rise to 2494 million USD by the end of 2021, reaching the highest point in the period under review. This trend suggests an initial divestment or depreciation impact followed by reinvestment or asset additions in subsequent years.

Land

The recorded value of land assets showed a marked decline throughout the four years. Starting from 138 million USD in 2018, the value dropped sharply to 55 million USD in 2019. It remained relatively stable around this level thereafter, with minimal decreases to 54 million USD in 2020 and 50 million USD in 2021. This downward trend may indicate disposals or revaluation adjustments impacting land holdings.

Depreciation Expense

Depreciation expense experienced a consistent upward trend across the reporting periods. Beginning at 233 million USD in 2018, there was a substantial jump to 358 million USD in 2019. It slightly increased to 362 million USD in 2020 and further climbed to 410 million USD by 2021. The continuous increase in depreciation expense reflects either the addition of new depreciable assets or adjustments in depreciation methods or rates.

Estimated Remaining Life

The estimated remaining life of the property, plant, and equipment decreased from 9 years in 2018 to 6 years from 2019 onward, maintaining this level through 2021. This reduction indicates a shorter expected useful life for the assets, which could be the result of accelerated depreciation schedules, aging assets, or revised estimates due to changes in asset utilization or maintenance strategies.