Property, Plant and Equipment (PP&E)

What belongs in PP&E

Typical PP&E categories include:

• land
• buildings
• machinery
• manufacturing equipment
• furniture and fixtures
• leasehold improvements
• capitalized software in some presentations
• construction in progress

A 2026 SEC filing showed land, buildings, machinery, furniture, construction in progress and finance-lease right-of-use assets inside its PP&E table.^[2]

Gross PP&E vs. net PP&E

A simplified relationship is:

Gross PP&E − accumulated depreciation = Net PP&E

Assume:

• gross PP&E: $1.0 billion
• accumulated depreciation: $400 million

Net PP&E:

$600 million

Net book value does not equal current market value or replacement cost.

It reflects historical accounting cost after recognized depreciation and other adjustments.

Land is generally different

Land usually is not depreciated because it does not have a finite useful life in the same way as buildings or machinery.

Buildings and equipment are generally depreciated over estimated useful lives.

That makes asset mix important.

A property-heavy company can have substantial gross PP&E with very different depreciation dynamics across categories.

Construction in progress

Assets being built but not yet ready for intended use can sit in:

construction in progress

Depreciation generally begins when the asset is placed in service under the applicable accounting policy.

A rising construction-in-progress balance can indicate:

• expansion
• major projects
• delayed completion

The future earnings contribution may lag the cash spending.

Real 2026 example

One filing reported:

• gross PP&E: about $320.2 million
• accumulated depreciation: about $77.4 million
• net PP&E: about $242.8 million.^[2]

The table also disclosed useful lives such as:

• buildings: 20–30 years
• machinery: 5–15 years
• furniture: 3–5 years.^[2]

Those assumptions directly affect future depreciation expense.

PP&E and capital expenditures

Capital expenditures generally add to the long-lived asset base.

Cash can leave before the new asset contributes meaningfully to revenue.

That is why heavy expansion can:

• reduce free cash flow now
• increase PP&E now
• increase depreciation later
• increase revenue later if successful

ROIStreet’s GLS-078 — Capital Expenditures covers the spending side.

PP&E and depreciation

Depreciation allocates PP&E cost across periods.

A 2026 filing showed gross PP&E of about $500.9 million and accumulated depreciation of about $296.2 million, leaving net PP&E of about $204.7 million.^[3]

A company with old assets can have low net PP&E because much of historical cost has already been depreciated.

That does not mean the productive assets have disappeared.

Old assets can flatter efficiency ratios

Suppose two factories have similar capacity.

Factory A was built 20 years ago and has a low net book value.

Factory B is new and carries a much higher accounting value.

Factory A can show stronger:

• asset turnover
• ROA
• ROIC

partly because its denominator is smaller.

Replacement economics can tell a different story.

PP&E and impairment

If an asset’s carrying amount is no longer recoverable under applicable rules, impairment can reduce PP&E.

A write-down can lower:

• assets
• equity
• current-period earnings

without an equivalent current-period cash payment.

The economic deterioration usually occurred before the accounting charge.

Asset-heavy vs. asset-light businesses

Utilities, manufacturers, railroads and telecom companies often require substantial PP&E.

Consulting and software businesses can operate with much less tangible capital.

That makes:

• asset turnover
• capex
• depreciation
• free cash flow

very different across industries.

Cross-industry PP&E comparisons are usually weak.

Leased assets complicate comparison

Two companies can use identical equipment while one owns it and the other leases it.

Modern lease accounting puts many right-of-use assets on the balance sheet, but classification and cash-flow effects differ from outright PP&E ownership.

Capital-intensity analysis should consider both owned and leased productive assets.

PP&E is not liquidation value

Historical-cost PP&E can be worth:

• more than book value
• less than book value

in the market.

Specialized equipment can have poor resale value.

Prime real estate can be worth far more than historical cost.

Book value is not an appraisal.

Common mistakes

"Net PP&E is what the assets are worth today."

No. It is an accounting carrying amount.

"Fully depreciated assets are worthless."

No. They can remain productive.

"High PP&E means a stronger company."

Not automatically. Returns on the capital matter.

"Capex and depreciation should always be equal."

No. Growth, asset age and replacement costs can create large differences.

Break PP&E into asset categories, useful lives, construction in progress and accumulated depreciation. Compare capex with depreciation and revenue growth. A large tangible asset base only creates value when utilization, margins and returns justify the capital committed.