| Notes to Financial Statements | |
| 6 Months Ended
Jun. 30, 2009
USD / shares
|
| Notes to Financial Statements [Abstract] | |
| Basis of Presentation |
Basis of Presentation
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Companys December31, 2008 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. The results for the quarter and six months ended June30, 2009 do not necessarily indicate the results that may be expected for the full year.
The results of operations of McDonalds restaurant businesses purchased and sold were not material to the condensed consolidated financial statements for periods prior to purchase and sale. |
| Restaurant Information |
Restaurant Information
The following table presents restaurant information by ownership type:
Restaurants at June30, 2009 2008
Conventional franchised 18,645 17,899
Developmental licensed 3,084 2,811
Affiliated 4,072 4,089
Total Franchised 25,801 24,799
Company-operated 6,357 6,690
Systemwide restaurants 32,158 31,489 |
| Comprehensive Income |
Comprehensive Income
The following table presents the components of comprehensive income for the quarters and six months ended June30, 2009 and 2008:
QuartersEnded
June30,
Six MonthsEnded
June30,
In millions 2009 2008 2009 2008
Net income $1,093.7 $1,190.5 $2,073.2 $2,136.6
Other comprehensive income:
Foreign currency translation adjustments 715.6 52.9 317.2 474.7
Deferred hedging adjustments (17.5 ) (16.5 ) (24.3 ) 15.0
Pension liability adjustment 0.7 0.8 1.0 (14.1 )
Total other comprehensive income 698.8 37.2 293.9 475.6
Total comprehensive income $1,792.5 $1,227.7 $2,367.1 $2,612.2 |
| Per Common Share Information |
Per Common Share Information
Diluted net income per common share is calculated using net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation calculated using the treasury stock method, of 14.1million shares and 19.9million shares for the second quarter 2009 and 2008, respectively, and 14.8million shares and 19.9million shares for the six months ended June30, 2009 and 2008, respectively. Stock options that were not included in diluted weighted-average shares because they would have been antidilutive were 10.2million shares for the quarter ended June30, 2009 and 10.3million shares and 5.1million shares for the six months ended June30, 2009 and 2008, respectively. |
| Fair Value Measurements |
Fair Value Measurements
In 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.157, Fair Value Measurements (SFAS No.157). SFAS No.157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. This statement does not require any new fair value measurements; rather, it applies to other accounting pronouncements that require or permit fair value measurements. The provisions of SFAS No.157, as issued, were effective January1, 2008. However, in February 2008, the FASB deferred the effective date of SFAS No.157 for one year for certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (i.e., at least annually). The Company adopted the required provisions of SFAS No.157 related to debt and derivatives as of January1, 2008 and adopted the remaining required provisions for non-financial assets and liabilities as of January1, 2009. The effect of adopting this standard was not significant in either period.
Fair value is defined under SFAS No.157 as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. SFAS No.157 also establishes a three-level hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.
Level 2 inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.
Certain of the Companys derivatives are valued using various pricing models or discounted cash flow analyses that incorporate observable market parameters, such as interest rate yield curves, option volatilities and currency rates, classified as Level 2 within the valuation hierarchy. In accordance with the requirements of SFAS No.157, derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by the counterparty or the Company.
The following table presents financial assets and liabilities measured at fair value on a recurring basis as of June30, 2009 by SFAS No.157 valuation hierarchy:
In millions Level1 Level2 Level3
Carrying
Value
Cash equivalents $ 662.8 $ 662.8
Invest |
| Derivative Instruments and Hedging Activities |
Derivative Instruments and Hedging Activities
In March 2008, the FASB issued Statement of Financial Accounting Standards No.161, Disclosures about Derivative Instruments and Hedging Activities (SFAS No.161). SFAS No.161 amends and expands the previous disclosure requirements of Statement of Financial Accounting Standards No.133, Accounting for Derivative Instruments and Hedging Activities (SFAS No.133), to provide more qualitative and quantitative information on how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No.133 and its related interpretations, and how derivative instruments and related hedged items affect an entitys financial position, financial performance and cash flows. The Company adopted SFAS No.161 as of January1, 2009 on a prospective basis; accordingly, disclosures related to interim periods prior to the date of adoption have not been presented. The adoption had no impact on our consolidated financial statements, besides the additional disclosures.
The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not use derivatives with a level of complexity or with a risk higher than the exposures to be hedged and does not hold or issue derivatives for trading purposes.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking hedging transactions. The Companys derivatives that are designated as hedging instruments under SFAS No.133 consist mainly of interest rate exchange agreements, forward foreign currency exchange agreements and foreign currency options. Interest rate exchange agreements are entered into to manage the interest rate risk associated with the Companys fixed and floating-rate borrowings. Forward foreign currency exchange agreements and foreign currency options are entered into to mitigate the risk that forecasted foreign currency cash flows (such as royalties denominated in foreign currencies) will be adversely affected by changes in foreign currency exchange rates. Certain foreign currency denominated debt is used, in part, to protect the value of the Companys investments in certain foreign subsidiaries and affiliates from changes in foreign currency exchange rates.
The Company also enters into certain derivatives that are not designated as hedging instruments under SFAS No.133. The Company has entered into derivative contracts to hedge market-driven changes in certain of its supplemental benefit plan liabilities. Changes in the fair value of these derivatives are recorded in selling, general administrative expenses. In addition, the Company uses forward foreign currency exchange agreements to mitigate the change in fair value of certain foreign denominated assets and liabilities. Since these derivatives are not designated as hedging instruments under SFAS No.133, the changes in the fair value of these hedges |
| Gain on Sale of Investment |
Gain on Sale of Investment
In February 2009, the Company sold its minority ownership interest in Redbox Automated Retail, LLC (Redbox) to Coinstar, Inc., the majority owner, for a value of at least $134 million. In connection with the sale, the Company received initial consideration valued at $51.6 million consisting of 1.5million shares of Coinstar common stock at an agreed to value of $41.6 million and $10 million in cash with the balance of the purchase price deferred. In April, the Company sold all of its holdings in the Coinstar common stock for $46.8 million. In second quarter, the Company received $78.4 million in cash from Coinstar as deferred consideration. As of June30, 2009 there was a receivable of approximately $9 million remaining from Coinstar for additional deferred consideration due by October30, 2009.
As a result of the transaction, the Company recognized a nonoperating pretax gain of $17.8 million in the second quarter 2009 and $94.3 million for the six months.
In second quarter 2008, the Company sold its minority ownership interest in U.K.-based Pret A Manger. As a result of the sale, the Company received cash proceeds of $229.4 million and recognized a nonoperating pretax gain of $160.1 million. |
| Segment Information |
Segment Information
The Company franchises and operates McDonalds restaurants in the food service industry. The following table presents the Companys revenues and operating income by geographic segment. The APMEA segment represents operations in Asia/Pacific, Middle East and Africa. Other Countries Corporate represents operations in Canada and Latin America, as well as Corporate activities.
Quarters Ended
June30,
Six Months Ended
June30,
In millions 2009 2008 2009 2008
Revenues
U.S. $ 2,044.2 $ 2,066.2 $ 3,920.6 $ 3,962.8
Europe 2,264.0 2,606.2 4,212.2 4,981.8
APMEA 1,047.9 1,057.9 2,057.0 2,090.3
Other Countries Corporate 291.1 345.0 534.8 655.2
Total revenues $ 5,647.2 $ 6,075.3 $ 10,724.6 $ 11,690.1
Operating income
U.S. $ 834.9 $ 796.3 $ 1,560.4 $ 1,478.8
Europe 618.9 671.8 1,108.8 1,249.0
APMEA 230.6 191.3 444.2 408.8
Other Countries Corporate (2.9 ) (5.2 ) (31.5 ) (19.6 )
Total operating income $ 1,681.5 $ 1,654.2 $ 3,081.9 $ 3,117.0 |
| Subsequent Events |
Subsequent Events
The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission, which was August6, 2009. There were no subsequent events that required recognition or disclosure. |
