Domino’s (DPZ) recently made the news when it launched its pizza delivery vehicle, the Domino’s DXP™ (Delivery Expert). The DXP™ is a modified Chevy Spark electric automobile. At the October 2015 launch, there were 97 DXP™ in Domino’s nationwide fleet, with more to come.
Domino’s has several categories of Property, Plant and Equipment (PP&E) on its balance sheet. See the excerpts on the following pages from Domino’s 2014 Form 10-K and a related note for additional details about its PP&E.

Questions

1). What categories of PP&E does Domino’s have on its balance sheet? Give examples of assets that might be found in each of these PP&E categories. Where are the DXP™ vehicles likely to be categorized?
2). What is the largest category of PP&E on Domino’s balance sheet? Does this make sense to you? Why or why not?
3). What depreciation method(s) does Domino’s use for its PP&E?
4). Over how many years does Domino’s depreciate its various categories of PP&E? Why would it use different lives for different categories?
5). Look at the total balance of Property, Plant and Equipment and the related Accumulated Depreciation account at the end of 2014. What can you, in general, say about the age of the total portfolio of PP&E at Domino’s?

 

  

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DOMINO'S PIZZA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 28, 2014 December 29, 2013 ASSETS CURRENT ASSETS: Cash and cash equivalents Restricted cash and cash equivalents Accounts receivable, net of reserves of $3,361 in 2014 and $5,107 in 2013 $ 30,855 $ 14,383 120,954 125,453 118,395 37,944 105,779 Inventories Notes receivable, net of reserves of $534 in 2014 and $357 in 2013 30,321 1.996 1,823 18,376 Prepaid expenses and other Advertising fund assets, restricted Deferred income taxes Asset held-for-sale 30,573 72,055 9,857 44,695 10,710 5,732 Total current assets 428,361 351,540 PROPERTY, PLANT AND EQUIPMENT: Land and buildings Leasehold and other improvements Equipment Construction in progress 25,859 99,804 178,378 6,179 23,423 90,508 174,667 8,900 310,220 297,498 Accumulated depreciation and amortization (196,174) (199,914) Property, plant and equipment, net 114,046 97,584 OTHER ASSETS: Investments in marketable securities, restricted Notes receivable, less current portion, net of reserves of $397 in 2014 and $393 in 2013 Deferred financing costs, net of accumulated amortization of $17,041 in 2014 and $11,295 in 2013 Goodwill 4,586 3,269 894 22,947 16,297 28,693 16,598 Capitalized software, net of accumulated amortization of $54,552 in 2014 and $50,267 in 2013 Other assets, net of accumulated amortization of $776 in 2014 and $4,737 in 2013 Deferred income taxes 20,562 14,464 10,006 9,046 3,167 2,475 Total other assets 76,873 76,131 Total assets $ 619.280 $ 525,255 DOMINO'S PIZZA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 28, 2014 December 29, 2013 ASSETS CURRENT ASSETS: Cash and cash equivalents Restricted cash and cash equivalents Accounts receivable, net of reserves of $3,361 in 2014 and $5,107 in 2013 $ 30,855 $ 14,383 120,954 125,453 118,395 37,944 105,779 Inventories Notes receivable, net of reserves of $534 in 2014 and $357 in 2013 30,321 1.996 1,823 18,376 Prepaid expenses and other Advertising fund assets, restricted Deferred income taxes Asset held-for-sale 30,573 72,055 9,857 44,695 10,710 5,732 Total current assets 428,361 351,540 PROPERTY, PLANT AND EQUIPMENT: Land and buildings Leasehold and other improvements Equipment Construction in progress 25,859 99,804 178,378 6,179 23,423 90,508 174,667 8,900 310,220 297,498 Accumulated depreciation and amortization (196,174) (199,914) Property, plant and equipment, net 114,046 97,584 OTHER ASSETS: Investments in marketable securities, restricted Notes receivable, less current portion, net of reserves of $397 in 2014 and $393 in 2013 Deferred financing costs, net of accumulated amortization of $17,041 in 2014 and $11,295 in 2013 Goodwill 4,586 3,269 894 22,947 16,297 28,693 16,598 Capitalized software, net of accumulated amortization of $54,552 in 2014 and $50,267 in 2013 Other assets, net of accumulated amortization of $776 in 2014 and $4,737 in 2013 Deferred income taxes 20,562 14,464 10,006 9,046 3,167 2,475 Total other assets 76,873 76,131 Total assets $ 619.280 $ 525,255