Analysis of Property, Plant and Equipment
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Property, Plant and Equipment Disclosure
Cummins Inc., balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
The analysis of the property, plant, and equipment financial data over the five-year period reveals several distinct trends and developments. Overall, there is a clear pattern of growth in both the gross value and the net book value of these assets, indicating ongoing investment and capital expenditure activities.
- Land and Buildings
- The value of land and buildings has shown consistent year-over-year growth. Starting at $2,487 million in 2019, it increased modestly each year to reach $3,039 million by the end of 2023. This steady upward trend suggests steady expansion or valuation appreciation of real estate holdings.
- Machinery, Equipment, and Fixtures
- This category also demonstrated persistent growth, with its value ascending from $5,618 million in 2019 to $7,245 million in 2023. Growth was gradual in the earlier years but showed a more pronounced increase in the latter years, particularly between 2021 and 2023, reflecting intensified investment in operational assets.
- Construction in Process
- The amount invested in construction in process has exhibited the most significant rate of growth among all components, rising from $594 million in 2019 to $1,390 million in 2023. This trend indicates escalating capital projects underway, which likely represent expansions or upgrades yet to be capitalized as fixed assets.
- Property, Plant and Equipment, Gross
- The gross property, plant and equipment balance, aggregating the previously mentioned assets, steadily increased each year, escalating from $8,699 million in 2019 to $11,674 million in 2023. This progression aligns with the increases in individual asset categories, underscoring ongoing capital expenditure and asset base enlargement.
- Accumulated Depreciation
- Accumulated depreciation increased from negative $4,454 million in 2019 to negative $5,425 million in 2023, reflecting the wear and tear and usage of assets over time. The rate of increase in accumulated depreciation slowed somewhat after 2021, remaining relatively stable between 2021 and 2022, before rising again in 2023.
- Property, Plant and Equipment, Net
- The net value of property, plant, and equipment, which accounts for depreciation, increased gradually from $4,245 million in 2019 to $4,422 million in 2021, then showed more substantial growth in the subsequent years, rising to $5,521 million in 2022 and further to $6,249 million in 2023. This improvement points toward not only increased capital investments but also an enhanced net asset base despite asset depreciation.
In summary, the data illustrate sustained investment in property, plant, and equipment, with the highest growth rates seen in construction in process and machinery, equipment, and fixtures. The net asset values have grown significantly in the last two years, indicating successful capital expansion strategies that have outpaced the accumulation of depreciation. This suggests a strengthening of the company's productive capacity and long-term operational capability.
Asset Age Ratios (Summary)
Cummins Inc., asset age ratios
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
- Average Age Ratio
- The average age ratio demonstrates a gradual decline over the years, starting at 51.2% in 2019 and increasing slightly in 2020 and 2021 to approximately 52.7%. However, it then declines more notably to 47.45% in 2022 and further to 46.47% in 2023. This suggests a trend toward a relatively younger property, plant, and equipment base in the most recent years.
- Estimated Total Useful Life
- The estimated total useful life remains stable at 18 years from 2019 through 2021. It rises slightly to 19 years in 2022 before decreasing to 17 years in 2023, indicating some revision in the expected longevity of assets. This fluctuation may reflect changes in asset types, usage patterns, or maintenance practices over time.
- Estimated Age, Time Elapsed Since Purchase
- The estimated age of assets shows a generally stable pattern, starting at 9 years in 2019 and 2020, increasing to 10 years in 2021, and then decreasing again to 9 years in 2022 and 8 years in 2023. The dip in recent years suggests either asset replacement or acquisition of newer equipment, contributing to lowering the average asset age.
- Estimated Remaining Life
- The estimated remaining life varies slightly but overall remains fairly consistent, fluctuating between 8 to 10 years across the observed period. It begins at 9 years in 2019, decreases to 8 years in 2020, increases to 9 years in 2021, peaks at 10 years in 2022, and ends at 9 years in 2023. This variation aligns with the changes in total useful life and asset age, reflecting maintenance of remaining asset value.
Average Age
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Accumulated depreciation | ||||||
| Property, plant and equipment, gross | ||||||
| Asset Age Ratio | ||||||
| Average age1 | ||||||
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 Average age = 100 × Accumulated depreciation ÷ Property, plant and equipment, gross
= 100 × ÷ =
- Property, Plant, and Equipment (Gross)
- The gross value of property, plant, and equipment demonstrates a consistent upward trend over the five-year period. Starting at 8,699 million US dollars in 2019, it increased steadily each year, reaching 11,674 million US dollars by the end of 2023. This growth indicates ongoing investments or acquisitions of physical assets.
- Accumulated Depreciation
- Accumulated depreciation also shows a consistent increase from 4,454 million US dollars in 2019 to 5,425 million US dollars in 2023. The steady rise reflects continuous wear, usage, and aging of the assets over time, which is expected with expanding asset base but at a relatively slower pace compared to gross property, plant, and equipment values.
- Average Age Ratio
- The average age ratio displays a decreasing trend, starting from 51.2% in 2019 and declining gradually to 46.47% by 2023. This reduction suggests that the average age of the asset base is becoming younger relative to total asset life, which may point to recent additions of newer assets, replacements of older equipment, or accelerated depreciation of aging assets.
- Overall Insight
- The simultaneous growth in gross property, plant, and equipment and accumulated depreciation combined with a declining average age ratio suggests a dynamic asset management strategy involving significant reinvestment in new assets. The decrease in asset age ratio, despite increasing accumulated depreciation, indicates a strengthening asset base with newer components, potentially enhancing operating efficiency and capacity over the observed periods.
Estimated Total Useful Life
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 Estimated total useful life = Property, plant and equipment, gross ÷ Depreciation expense
= ÷ =
- Gross Property, Plant, and Equipment
- The gross value of property, plant, and equipment exhibits a consistent upward trajectory over the five-year period examined. Starting at US$8,699 million at the end of 2019, it steadily increased each year, reaching US$11,674 million by the end of 2023. This progression indicates ongoing capital investment and expansion in the company’s fixed asset base.
- Depreciation Expense
- Depreciation expense similarly shows an increasing trend, rising from US$494 million in 2019 to US$691 million in 2023. The increase appears gradual from 2019 to 2022, with expenses increasing by roughly 10-50 million annually. The jump to US$691 million in 2023 represents a sharper rise, which may reflect accelerated depreciation or additions of property, plant, and equipment assets with shorter useful lives.
- Estimated Total Useful Life
- The estimated total useful life of the property, plant, and equipment has remained relatively stable but shows some minor variation. It was constant at 18 years from 2019 through 2021, increased slightly to 19 years in 2022, and then decreased to 17 years in 2023. This fluctuation may suggest adjustments in asset composition, possibly due to new asset acquisitions with different expected lifespans or revisions in asset management policies.
- Overall Insights
- The data reveals a clear pattern of significant capital investment, evidenced by the steadily increasing gross property, plant, and equipment values. The parallel increase in depreciation expense aligns with this trend, as more assets are placed in service and consequently depreciated. Variations in the estimated total useful life imply periodic re-evaluation of asset durations, perhaps to better match the economic realities or technological changes affecting the company's asset base. The notable rise in depreciation expense in the final year examined may warrant further investigation to understand underlying causes.
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= ÷ =
- Accumulated Depreciation
- The accumulated depreciation increased consistently from US$4,454 million in 2019 to US$5,425 million in 2023. This steady rise over the five-year period indicates ongoing usage and aging of the property, plant, and equipment assets. The rate of accumulation appears relatively stable, with no abrupt changes, suggesting consistent asset depreciation policies.
- Depreciation Expense
- The depreciation expense revealed a gradual upward trend from US$494 million in 2019 to US$691 million in 2023. Of particular note is the more pronounced increase between 2022 and 2023, where the expense rose by approximately 24%. This acceleration could indicate increasing asset base, changes in the asset mix, or alterations in depreciation methods or useful life estimates.
- Time Elapsed Since Purchase
- The average time elapsed since purchase of the assets remained around 9 to 10 years from 2019 to 2022, but decreased to 8 years in 2023. This reduction suggests that newer assets were added to the portfolio in 2023, potentially reflecting recent capital investments or asset replacements. This infusion of newer assets may contribute to the higher depreciation expense observed in 2023 despite the relatively stable accumulated depreciation growth.
Estimated Remaining Life
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
2023 Calculations
1 Estimated remaining life = Property, plant and equipment, net ÷ Depreciation expense
= ÷ =
- Property, Plant, and Equipment, Net
- The net value of property, plant, and equipment demonstrated a consistent upward trajectory over the five-year period. Starting at $4,245 million at the end of 2019, it increased marginally to $4,255 million in 2020, followed by a more notable increase to $4,422 million in 2021. The growth accelerated significantly in 2022 and 2023, reaching $5,521 million and $6,249 million respectively. This pattern indicates substantial investment or capital expansion activities, particularly during the last two years, underpinning an expansion or modernization of fixed assets.
- Depreciation Expense
- Depreciation expense exhibited a rising trend throughout the period in a manner generally consistent with the increase in net property, plant, and equipment. Beginning at $494 million in 2019, it showed a moderate annual increase through 2021, reaching $514 million. Subsequently, depreciation expenses rose more sharply in 2022 and 2023, reaching $557 million and $691 million respectively. This increase aligns with higher asset values and possibly reflects either accelerated depreciation methods or additions of newer assets with higher depreciation charges.
- Estimated Remaining Life
- The estimated remaining life of the company’s property, plant, and equipment remained relatively stable, fluctuating slightly between 8 and 10 years. It started at 9 years in 2019, dropped to 8 years in 2020, returned to 9 years in 2021, increased to 10 years in 2022, and reverted again to 9 years in 2023. These minor fluctuations suggest periodic re-assessment of asset lifespans, potentially in response to changes in asset composition or maintenance practices, but overall indicate a stable asset age profile.