CAPEX Smaller than Depreciation
Quick question,
I'm working on a DCF for General Motors and currently trying to figure out how to forecast PPE.
PPE(net) grew on the BS from last year, however, the depreciation that shows up on the CFS is actually bigger than CAPEX. In other words, CAPEX on the CFS is smaller than depreciation, but net PPE still grew. Even after subtracting amortization, CAPEX
Time for you to do more diligence into their business plan. Go through management calls and presentations for the past 5-10 years and find out what changed in their strategy. It’s likely that they did a large capital project / acq and then now they are in a cash cow phase. Maintenance CAPEX doesn’t need to be > depreciation all the time.
Maybe some of that depreciation in that CFS is also attributable to the Equipment on operating leases on their balance sheet. According to their 10K:
"Depreciation expense related to equipment on operating leases, net was $6.7 billion"
In other words, that 12.26b is not all going to Property, about 6.7 billion of it is going to "Equipment on Operating Leases." Look in Note 7.
Thanks a lot
Note 9 on the 10-K: Property
Lays out the change in gross PP&E as well as the change in accumulated depreciation.
As mentioned above, the general "depreciation/amortization/impairment" category can't be assumed to only relate to PP&E. Nor can you assume that's necessarily equal to "maintenance" capex.
Thanks, a lot. But since its an operating lease, wouldn't depreciation still be lumped into PPE since GM still owns the PPE(vs a finance lease where they don't)?
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