Analysis of Property, Plant and Equipment
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Property, Plant and Equipment Disclosure
O’Reilly Automotive Inc., balance sheet: property, plant and equipment
US$ in thousands
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Land
- There is a consistent upward trend in the value of land assets, increasing steadily from approximately $696 million in 2017 to nearly $889 million by the end of 2021. This represents a cumulative growth of about 28%, indicating ongoing investments or appreciation in land holdings.
- Buildings and Building Improvements
- Values in this category grew substantially over the five-year period, rising from roughly $1.97 billion in 2017 to about $2.74 billion in 2021. The growth appears steady, with yearly increases ranging between 7% to 10%, reflecting ongoing capital expenditures or upgrades to facilities.
- Leasehold Improvements
- This category also shows a steady increase, from $627 million in 2017 to $864 million in 2021. The average annual growth rate is approximately 8%, suggesting continuous enhancement or expansion of leased property assets.
- Furniture, Fixtures, and Equipment
- There is a consistent rise in the value of furniture, fixtures, and equipment, moving from $1.25 billion to $1.70 billion over the five years. This growth underscores steady investment in operational assets supporting business activities.
- Vehicles
- Vehicle assets have increased moderately from $392 million in 2017 to $503 million in 2021. Growth is relatively modest compared to other asset classes but still indicates ongoing fleet expansion or renewal.
- Construction in Progress
- This category exhibits variability, increasing from $258 million in 2017 to a peak of $358 million in 2019, then declining to $255 million by 2021. The peak in 2019 may reflect heightened construction activity, followed by project completions or slowing capital projects in later years.
- Property and Equipment, at Cost
- Total property and equipment cost grew steadily each year, from approximately $5.19 billion in 2017 to nearly $6.95 billion in 2021. This represents strong capital investment, with an overall increase of around 34% over five years.
- Accumulated Depreciation and Amortization
- The accumulated depreciation and amortization balance increased in magnitude from about $1.85 billion in 2017 (negative value) to $2.73 billion in 2021 (negative value). This trend reflects the aging of fixed assets and corresponds logically with the expansion in total assets.
- Net Property and Equipment
- Net property and equipment, representing the book value after depreciation, increased steadily from approximately $3.34 billion in 2017 to $4.21 billion in 2021. The growth is steady but at a slower rate than the gross property and equipment, consistent with ongoing depreciation charges balancing capital additions.
Asset Age Ratios (Summary)
O’Reilly Automotive Inc., asset age ratios
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
- Average age ratio
- The average age ratio exhibits a gradual upward trend over the five-year period, increasing from 41.09% in 2017 to 45.13% in 2021. This indicates that, on average, the property, plant, and equipment assets are aging, with a higher proportion of the estimated useful life consumed as time progresses.
- Estimated total useful life
- The estimated total useful life remained mostly stable, initially increasing from 19 years in 2017 to 20 years in 2018 and 2019, before reverting to 19 years for 2020 and 2021. This suggests a consistent assumption regarding asset lifespan, with only minor adjustments during the period.
- Estimated age, time elapsed since purchase
- The estimated age of the assets remained constant at 8 years from 2017 through 2020, then increased to 9 years in 2021. This steady age reflects a relatively stable asset base with incremental aging toward the end of the period.
- Estimated remaining life
- The estimated remaining life of the assets shows a slight fluctuation. It increased from 11 years in 2017 to 12 years in 2018 and 2019, before decreasing back to 11 years in 2020 and further declining to 10 years in 2021. This pattern reflects adjustments in asset lifespan estimates or acquisitions and disposals impacting the overall fleet age profile.
Average Age
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Average age = 100 × Accumulated depreciation and amortization ÷ (Property and equipment, at cost – Land)
= 100 × ÷ ( – ) =
- Property and Equipment, at Cost
- The total cost of property and equipment has shown a consistent upward trend from 2017 to 2021. The value increased from approximately $5.19 billion in 2017 to about $6.95 billion in 2021, indicating ongoing investments in capital assets over the five-year period.
- Accumulated Depreciation and Amortization
- This balance also exhibited a steady increase, rising from approximately $1.85 billion in 2017 to nearly $2.73 billion in 2021. The growth in accumulated depreciation and amortization is consistent with the increase in property and equipment cost, reflecting the systematic allocation of asset costs over their useful lives.
- Land
- The value of land assets increased gradually each year, from around $696 million in 2017 to approximately $889 million in 2021. This suggests ongoing acquisitions or revaluation of land assets as part of the company's long-term asset base expansion.
- Average Age Ratio
- The average age ratio percentage increased from 41.09% in 2017 to 45.13% in 2021. This incremental growth reflects that the assets are aging, with the proportion of accumulated depreciation relative to the total asset cost increasing over time. The rise in the average age ratio may imply that while new assets are acquired, a significant portion of the asset base is maturing, potentially impacting maintenance or replacement strategies.
Estimated Total Useful Life
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Estimated total useful life = (Property and equipment, at cost – Land) ÷ Depreciation and amortization expense related to property and equipment
= ( – ) ÷ =
- Property and Equipment, at Cost
- The value of property and equipment at cost exhibited a consistent upward trajectory over the five-year period. Beginning at approximately $5.19 billion in 2017, the figure increased annually, reaching nearly $6.95 billion by the end of 2021. This steady growth indicates ongoing investments and expansions in the company's fixed assets, likely reflecting the company's commitment to expanding its operational capacity.
- Land
- The value of land also showed a continuous increase from 2017 through 2021. Starting at about $695.7 million in 2017, it rose each year to approximately $888.6 million by 2021. This increase suggests acquisitions or revaluations of land holdings, which may be associated with strategic growth initiatives or repositioning of the company’s asset base.
- Depreciation and Amortization Expense Related to Property and Equipment
- Depreciation and amortization expense related to property and equipment consistently rose throughout the period analyzed. The expense increased from $232.7 million in 2017 to $320.4 million in 2021. This trend corresponds with the growth in the asset base, reflecting the increasing allocation of cost over the useful lives of the assets and suggesting ongoing asset utilization.
- Estimated Total Useful Life
- The estimated total useful life of property and equipment remained relatively stable, fluctuating slightly between 19 and 20 years over the five years. This stability implies a consistent approach in estimating asset longevity and depreciation schedules.
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Time elapsed since purchase = Accumulated depreciation and amortization ÷ Depreciation and amortization expense related to property and equipment
= ÷ =
- Accumulated Depreciation and Amortization
- There is a consistent upward trend in accumulated depreciation and amortization over the five-year period. The balance increased from approximately 1.85 billion USD at the end of 2017 to around 2.73 billion USD by the end of 2021. This reflects the ongoing allocation of asset costs over their useful lives, indicating continued aging and usage of property, plant, and equipment.
- Depreciation and Amortization Expense
- The annual depreciation and amortization expense exhibited a steady increase each year. Starting at 232.7 million USD in 2017, it rose to 320.4 million USD by 2021. This growth suggests either incremental capital expenditures on property and equipment or adjustments in depreciation methods or asset lives leading to higher yearly charges.
- Time Elapsed Since Purchase
- The average age of property, plant, and equipment remained steady at 8 years from 2017 through 2020, increasing slightly to 9 years in 2021. This indicates that the asset base is aging gradually, with possibly limited turnover or replacement of assets during the earlier years, and a slight aging in the last recorded year.
- Overall Analysis
- The data reveals a consistent accumulation of depreciation, pointing to sustained use of long-lived assets. Increasing annual depreciation expenses align with either asset base expansion or changing asset usage patterns. The relatively stable average asset age until 2020, followed by a modest increase in 2021, suggests a degree of asset longevity without substantial recent additions or retirements in the earlier years.
Estimated Remaining Life
Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Estimated remaining life = (Net property and equipment – Land) ÷ Depreciation and amortization expense related to property and equipment
= ( – ) ÷ =
- Net Property and Equipment
- The net property and equipment balance shows a consistent upward trajectory over the five-year period. Beginning at approximately $3.34 billion in 2017, it increased steadily each year, reaching about $4.21 billion by the end of 2021. This indicates ongoing investment and capital expenditure in fixed assets.
- Land
- Land value also exhibits a continual rise from around $695.7 million in 2017 to nearly $888.6 million in 2021. The steady increase suggests acquisitions or revaluation of land assets contributing to the company's property base expansion.
- Depreciation and Amortization Expense Related to Property and Equipment
- This expense has grown each year, climbing from $232.7 million in 2017 to $320.4 million in 2021. The increasing depreciation expense correlates with the rising net property and equipment balance, reflecting higher asset base and the associated systematic allocation of cost over asset useful lives.
- Estimated Remaining Life
- The estimated remaining useful life of property and equipment fluctuated slightly, moving from 11 years in 2017 to a peak of 12 years in 2018 and 2019, before declining to 10 years by 2021. This decrease in estimated life in later years could imply accelerated asset aging or revisions in asset life assumptions.
- Overall Assessment
- The data collectively indicate a strategy favoring increased investment in property and equipment, with asset base growth reflected in net book values and land holdings. The rising depreciation expense aligns with this growth, serving as a natural consequence of expanding fixed assets. The modest decline in estimated asset life toward the end of the period warrants attention, as it may affect future depreciation charges and capital expenditure planning.