Analysis of Property, Plant and Equipment
Property, Plant and Equipment Disclosure
General Mills Inc., balance sheet: property, plant and equipment
US$ in thousands
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
An analysis of the asset base reveals a general increase in gross property, plant, and equipment from May 2014 through May 2019. Gross assets rose from US$ 9.39 billion to US$ 10.08 billion, indicating a trend of sustained capital investment over the five-year period.
- Fixed Asset Composition
- Equipment constitutes the largest component of the asset portfolio and demonstrates a consistent upward trajectory, increasing from US$ 5.98 billion in 2014 to US$ 6.55 billion in 2019. Buildings also showed growth, rising from US$ 2.23 billion to US$ 2.48 billion. In contrast, land holdings experienced a steady decline, decreasing from US$ 106.9 million to US$ 73.6 million.
- Technological Infrastructure
- Capitalized software showed a continuous and steady increase throughout the period, growing from US$ 468 million to US$ 631.6 million. This suggests a strategic emphasis on enhancing digital capabilities and software-driven operational efficiency.
- Capital Project Cycles
- Construction in progress exhibited significant volatility, reaching a peak of US$ 702.7 million in 2016 before declining sharply to US$ 343.8 million by May 2019. This pattern indicates the cyclical nature of capital expenditures and the completion of major infrastructure projects toward the end of the observed period.
- Depreciation and Net Valuation
- Accumulated depreciation rose steadily from US$ 5.45 billion to US$ 6.29 billion. The growth in accumulated depreciation effectively offset the increase in gross asset acquisitions, resulting in a net book value for property, plant, and equipment of US$ 3.79 billion in 2019, which is lower than the US$ 3.94 billion reported in 2014.
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Asset Age Ratios (Summary)
General Mills Inc., asset age ratios
| May 26, 2019 | May 27, 2018 | May 28, 2017 | May 29, 2016 | May 31, 2015 | May 25, 2014 | ||
|---|---|---|---|---|---|---|---|
| Average age ratio | 62.89% | 60.01% | 61.81% | 61.21% | 61.17% | 58.70% |
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
The average age ratio of property, plant, and equipment demonstrates a general upward trend between 2014 and 2019. This progression indicates that a larger portion of the asset base is progressing further through its estimated useful life, reflecting a gradual increase in the average age of fixed assets relative to their depreciation schedules.
- Long-term Trajectory
- The average age ratio rose from 58.70% in 2014 to a period peak of 62.89% by 2019, representing an overall increase of 4.19 percentage points over the six-year window.
- Period of Relative Stability
- Between 2015 and 2017, the ratio remained remarkably consistent, moving within a narrow range from 61.17% to 61.81%, suggesting a balance between asset depreciation and new capital acquisitions during this interval.
- Short-term Variance
- A temporary reduction to 60.01% was observed in 2018. This deviation from the upward trend suggests a potential infusion of new assets or the disposal of older equipment, which effectively lowered the average age of the asset portfolio before the ratio climbed to its highest point in 2019.
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Average Age
Based on: 10-K (reporting date: 2019-05-26), 10-K (reporting date: 2018-05-27), 10-K (reporting date: 2017-05-28), 10-K (reporting date: 2016-05-29), 10-K (reporting date: 2015-05-31), 10-K (reporting date: 2014-05-25).
2019 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Land, buildings, and equipment, gross – Land)
= 100 × 6,293,300 ÷ (10,080,500 – 73,600) = 62.89%
The financial data indicates a gradual aging of the property, plant, and equipment asset base between 2014 and 2019. While total gross assets experienced overall growth, the increase in accumulated depreciation suggests that a significant portion of the operational infrastructure is moving toward the end of its useful life.
- Average Age Ratio Trends
- The average age ratio exhibited a general upward trend, rising from 58.70% in 2014 to 62.89% in 2019. A period of relative stability was observed between 2015 and 2017, where the ratio fluctuated minimally between 61.17% and 61.81%. A slight contraction to 60.01% occurred in 2018, suggesting a temporary increase in capital expenditures or the disposal of older assets, before returning to a peak in 2019.
- Accumulated Depreciation and Gross Assets
- Accumulated depreciation increased steadily from US$ 5,451.2 million in 2014 to US$ 6,293.3 million in 2019. Concurrently, gross property, plant, and equipment grew from US$ 9,393.1 million to US$ 10,080.5 million. The simultaneous rise in both metrics confirms that while new investments are being made, they are not sufficient to offset the depreciation of existing assets, thereby increasing the average age of the asset portfolio.
- Land Valuation
- A consistent downward trend is noted in the valuation of land, which decreased from US$ 106.9 million in 2014 to US$ 73.6 million in 2019. This persistent decline suggests strategic divestment of land holdings over the analyzed period.
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