RH (NYSE:RH)

The financial data for property, plant, and equipment exhibit several distinct trends over the six-year period under review. Overall, the net value of property and equipment has shown a consistent upward trajectory, reflecting ongoing investments and capital improvements.

Finance lease right-of-use assets

These assets have experienced a dramatic increase starting from fiscal 2020, rising sharply from US$9,343 thousand in 2019 to over US$1.3 million in 2023. This suggests a significant expansion in the company's lease commitments or a change in lease accounting standards impacting asset recognition.

Leasehold improvements

Leasehold improvements initially increased from US$556,443 thousand in 2018 to a peak near US$614,510 thousand in 2019 but then sharply declined to approximately US$318,313 thousand in 2020. After that, values gradually increased again, reaching US$391,912 thousand by 2023, indicating possible renovation or upgrade cycles within leased properties.

Computer software

Investment in computer software remains relatively stable, fluctuating slightly year-to-year. The values range between approximately US$122,552 thousand and US$147,553 thousand, showing moderate ongoing expenditure in intangible assets supporting operations.

Land

The land asset value shows a steady and pronounced increase from US$11,382 thousand in 2018 to nearly US$97,670 thousand in 2023, indicating acquisition of additional land holdings or revaluation increments over the period.

Building and building improvements

This category shows a strong upward trend, increasing nearly twentyfold from US$4,927 thousand in 2018 to US$94,508 thousand in 2023. This growth reflects significant investment in physical infrastructure and property enhancements.

Furniture, fixtures and equipment

Values for furniture, fixtures, and equipment are relatively stable, with minor fluctuations ranging around US$76,000 thousand to US$92,736 thousand, indicating steady replacement or incremental investment in operational assets.

Machinery, equipment and aircraft

The figures increase moderately from US$52,757 thousand in 2018 to US$79,836 thousand in 2023, suggesting ongoing capital expenditure in production and transportation assets.

Built-to-suit property

This asset class shows volatility, starting high at US$237,909 thousand in 2018, plunging drastically to US$2,882 thousand in 2020, then rebounding to approximately US$37,057 thousand by 2022 and remaining flat in 2023. This might indicate disposals or reclassification followed by new built-to-suit developments.

Property and equipment, gross

The total gross property and equipment value rises consistently year on year, from roughly US$1.08 billion in 2018 to over US$2.2 billion in 2023, demonstrating sustained capital investment and asset growth.

Accumulated depreciation and amortization

The accumulated depreciation and amortization amounts increase steadily in magnitude (more negative), from approximately US$283 million in 2018 to over US$602 million in 2023. This reflects the progressive consumption and aging of fixed assets over time.

Property and equipment, net

The net property and equipment balance shows a strong positive trend, growing from about US$801 million in 2018 to nearly US$1.64 billion in 2023. This indicates that new asset additions and revaluations comfortably exceed the annual depreciation expense, enhancing the company’s asset base.

In summary, the data reveal a company in expansion mode with substantial growth in leased assets, land, and buildings, supported by consistent investments in machinery, equipment, and software. The fluctuations in built-to-suit property and leasehold improvements suggest strategic asset management or changing lease structures. The steadily increasing net asset values indicate sustained capital expenditure exceeding asset depreciation, positioning the company for future operational capacity enhancements.

Average Age Ratio

The average age ratio showed a general increasing trend from 26.4% in 2018 to a peak of 31.39% in 2021. Following this peak, the ratio decreased to 29.85% in 2022 and further declined to 28.13% in 2023, indicating a slight reduction in the relative age of the property, plant, and equipment assets in recent years.

Estimated Total Useful Life

The estimated total useful life of the assets varied over the period, starting at 15 years in 2018, increasing to 16 years in 2019, then dropping to 14 years in 2020. Subsequently, it showed a steady increase, reaching 16 years in 2021, 18 years in 2022, and 20 years in 2023. This suggests a revised expectation of longer asset longevity over the latter years.

Estimated Age, Time Elapsed since Purchase

The estimated age of the assets remained relatively stable in the earlier years, holding at 4 years from 2018 through 2020, before incrementally increasing to 5 years in 2021 and 2022, and then 6 years in 2023, reflecting the natural aging of the asset base over time.

Estimated Remaining Life

The estimated remaining life of assets was generally stable or increasing over the period. It started at 11 years in 2018 and 2019, dropped slightly to 10 years in 2020, then increased again to 11 years in 2021, followed by a more pronounced increase to 13 years in 2022 and 14 years in 2023. This correlates with the extension observed in total useful life expectancy, indicating an asset base expected to be serviceable for longer periods going forward.

Property and Equipment, Gross

The gross value of property and equipment has demonstrated a consistent upward trend over the six-year period. Starting at approximately $1.08 billion in early 2018, it increased steadily each year, reaching approximately $2.24 billion by early 2023. This represents a substantial increase, indicating significant investments or acquisitions in property and equipment assets.

Accumulated Depreciation and Amortization

Accumulated depreciation and amortization also showed a continuous increase throughout the period, rising from approximately $283 million in early 2018 to about $602 million by early 2023. The growth in accumulated depreciation aligns with the rise in gross property and equipment values, reflecting ongoing usage and aging of assets. The acceleration in depreciation expenses seems consistent with asset additions over the years.

Land

The reported value of land exhibited variability rather than a steady trend. Initial values ranged between approximately $11.3 million and $11.5 million in 2018 and 2019, followed by a notable decline to about $6.1 million in 2020. Subsequently, land value increased sharply to approximately $20.6 million in 2022, and saw a significant jump to nearly $97.7 million in 2023. These fluctuations may result from land acquisitions, disposals, or revaluations occurring in the later years.

Average Age Ratio

The average age ratio of property, plant, and equipment expressed as a percentage showed an increasing trend from 26.4% in 2018 to a peak of 31.39% in 2021. After 2021, this ratio slightly declined to 29.85% in 2022 and further to 28.13% in 2023. The initial rise suggests an aging asset base until 2021, followed by a modest rejuvenation of assets which may indicate recent investments in newer equipment or disposals of older assets.

Overall Analysis

The data reveals a growing asset base in terms of gross property and equipment values alongside accumulating depreciation, indicating continued investment and asset utilization. The marked increase in land value in recent years stands out and may reflect strategic acquisitions or accounting adjustments. The average age ratio trend suggests the asset base grew older until 2021 but has slightly improved in terms of age profile since then, potentially reflecting capital expenditure focused on modernization or replacement of assets.

Property and equipment, gross

The gross value of property and equipment has exhibited a consistent upward trend across the reported periods. Beginning at approximately $1.08 billion in early 2018, the value increased steadily each year, reaching over $2.23 billion by early 2023. This more than doubling of the asset base suggests significant investments or acquisitions over the six-year span.

Land

The value attributed to land assets showed fluctuations throughout the period. Initially stable around $11-12 million from 2018 to 2019, the amount sharply decreased to about $6 million in 2020, before moderately recovering to roughly $9 million in 2021. A substantial increase occurred in 2022 and 2023, culminating in a value close to $98 million, indicating possible strategic land purchases or revaluations in recent years.

Depreciation and amortization of property and equipment

Depreciation and amortization expenses related to property and equipment demonstrated variability but generally increased over time. Starting at $70 million in 2018, the expense rose to over $100 million in 2020, then dipped slightly in the following years before reaching about $108 million in 2023. This pattern reflects both the expanding asset base and changes in estimated useful lives.

Estimated total useful life

The company's estimation of the total useful life of its property and equipment has gradually increased from 15 years in 2018 to 20 years in 2023. This trend indicates a shift toward longer depreciation periods, possibly reflecting changes in asset composition, improvements in asset durability, or revised accounting policies.

Summary and Insights

Overall, the data reveal a strong growth in the company's property and equipment assets over the six-year period, supported by substantial increases in both gross asset values and land holdings. Concurrently, the estimated useful life extension suggests a strategic reassessment of asset longevity, which may contribute to optimizing depreciation expenses. Depreciation charges have increased but not proportionally to the asset base, likely influenced by the extended useful life estimates. The significant jump in land value, particularly in the later years, merits further inquiry into the nature of these acquisitions or revaluations to understand their impact on the company’s operational capacity and financial structure.

Accumulated Depreciation and Amortization

The accumulated depreciation and amortization balance shows a consistent upward trend over the six-year period. Beginning at $283,139 thousand in early 2018, the amount increased steadily each year, reaching $602,141 thousand by early 2023. This indicates a continuous recognition of depreciation charges, reflecting the aging and usage of property, plant, and equipment assets.

Depreciation and Amortization Expense

The annual depreciation and amortization expense experienced fluctuations but generally shows an increasing trend. It started at $70,000 thousand in 2018, rose moderately to approximately $74,300 thousand in 2019, and then increased significantly to over $100,000 thousand in 2020. Slight decreases were observed in 2021 and 2022, with expenses around $99,992 thousand and $95,964 thousand respectively, before increasing again to $108,346 thousand in 2023. These variations may reflect changes in asset additions, disposals, or revisions in depreciation methods or estimates.

Time Elapsed Since Purchase

The time elapsed since asset purchase generally ranged between 4 and 6 years over the period analyzed, increasing as expected with the passage of time. This gradual increase aligns logically with the ongoing accumulation of depreciation, as older assets contribute more to the total accumulated depreciation. The consistency of the time elapsed values suggests a stable asset base with regular additions or retirements that maintain average asset age within this range.

Overall Analysis

The data demonstrates a clear pattern of increasing accumulated depreciation, consistent with asset aging and ongoing depreciation expense recognition. The fluctuation in annual depreciation expense likely corresponds to varying capital expenditure cycles or adjustments in asset valuation methodologies. The steady increase in asset age supports the understanding that the company’s property, plant, and equipment are maturing, which has significant implications for maintenance, replacement planning, and capital budgeting.

Property and Equipment, Net

The net value of property and equipment shows a clear upward trend over the six-year period. Starting at $800,698 thousand in 2018, it rises consistently each year, reaching $1,635,984 thousand by 2023. This indicates substantial investment or capital improvements in these assets over time, nearly doubling the net book value.

Land

The recorded value of land demonstrates significant volatility and a strong increase in the last two years. Initially stable around $11,382 thousand in 2018 and $11,518 thousand in 2019, it dropped considerably to $6,061 thousand in 2020 before recovering to $9,059 thousand in 2021. From there, it surged sharply, reaching $20,614 thousand in 2022 and a substantial $97,670 thousand in 2023. This sharp rise likely reflects substantial land acquisitions or revaluation adjustments toward the end of the period.

Depreciation and Amortization of Property and Equipment

Depreciation and amortization expense increased from $70,000 thousand in 2018 to a peak of $100,691 thousand in 2020, showing accelerated expense recognition or asset base growth. After a slight decrease in 2021 to $99,992 thousand and a further decline to $95,964 thousand in 2022, the expense rose again in 2023 to $108,346 thousand. These fluctuations suggest varying asset additions, disposals, or changes in depreciation methods or useful lives over the years.

Estimated Remaining Life (Years)

The estimated remaining life of property and equipment remained relatively stable around 11 years from 2018 to 2021. Notably, it increased to 13 years in 2022 and further to 14 years in 2023. This increase could reflect the addition of newer assets with longer useful lives or reassessment of asset longevity, contributing positively to the asset base and capital expenditure strategy.