McDonalds 2000 Annual Report Download

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McDonald’s
Corporation
Annual Report
2000

Table of contents

  • Page 1
    McDonald's Corporation Annual Report 2000

  • Page 2
    ...victory sign 8 News and notes 22 Social responsibility 24 Commitment to quality & safety 25 CFO review 26 Year in review 27 Financial statements 36 Financial comments 40 Directors and corporate officers 48 Investor information 48 McDonald's, the Web and you Back cover > when your teacher worked the...

  • Page 3
    ... annual letter by thanking you, our shareholders, for investing in Company employees-has created a remarkable history of innovation in menu, brand building, technology, operations and restaurant development. In the area of social responsibility, McDonald's commitment to giving back to communities...

  • Page 4
    ... branded category, similar to our Extra Value Meal approach. We also are developing aggressive plans to double our sales in the U.S. over the next 10 years, and triple owner/operator cash flow-primarily through our existing restaurants. In Europe, we are increasing menu variety with pork and chicken...

  • Page 5
    ...3 example, we're not on your list of options. So, we are developing new concepts to leverage our expertise in building best-in-class brands and to capture additional meal occasions around the world. These brands include Boston Market, Chipotle Mexican Grill and Donatos Pizza in the U.S.; and United...

  • Page 6
    ...number of countries in which we operate to 120. McDonald's ranked #1 in social responsibility in Fortune magazine's 2000 listing of America's Most Admired Companies. $2.6 Total assets in billions 2000 $3.3 $21.7 $17.4 Europe Asia/Pacific Latin America Other Corporate 1996 U.S. Cumulative share...

  • Page 7
    ...by operations Capital expenditures Free cash flow Treasury stock purchases Financial position at year end Net property and equipment Total assets Total debt Total shareholders' equity Per common share Net income Net income-diluted Dividends declared Market price at year end Systemwide restaurants at...

  • Page 8
    6 Vision statement McDonald's vision is > being the world's best quick-service restaurant experience this means being the restaurant experience that makes each and every customer smile on each and every visit

  • Page 9
    ...-tasting food, outstanding service, exciting promotions, inviting restaurants and reliable value > expanding our powerful brand by using innovation and technology to enhance customer experiences for years to come > leveraging the System's strengths in social by developing new business concepts...

  • Page 10
    a smile

  • Page 11
    ... the best quick-service restaurant experience in the world. Members of the McDonald's System are pursuing our vision with an unrelenting passion. They are finding new and different ways to create brand-loyal customers. Clearly, the power of our decentralized approach to managing the business is that...

  • Page 12
    10 Smile the right price

  • Page 13
    ... menu offerings by leveraging the Made For You food preparation system. They built their breakfast business by opening some restaurants earlier to serve people getting an early start on their busy days. With a focused and committed effort, they also increased the speed and quality of McDonald...

  • Page 14
    ...great food they want and providing the fast, friendly service they deserve. We are expanding proven McDonald's products into new markets and adding new tastes to the menu. Now, for example, Guatemala, Malaysia, the Netherlands, Poland, Taiwan and the U.K. are among the many countries where customers...

  • Page 15
    Smile 13 foods you crave

  • Page 16
    The manager sets the tone for his or her restaurant. This manager in Thornleigh, Australia, is demonstrating what it takes to serve up smiles with every order.

  • Page 17
    ... Ahmad Afshari, the manager of the Tyson's Corner, Virginia, McDonald's. His restaurant, which generates $3 million in sales annually, rates an impressive 98 percent in customer satisfaction. That kind of rating doesn't happen by accident. Ahmad's leadership and operational skills have enabled him...

  • Page 18
    16 Smile sterling service

  • Page 19
    ...comparable sales increases in China last year with an ongoing focus on value and two innovative chicken products-Spicy McWings and the Spicy Chicken Filet Burger. Building on this opportunity, we are in the process of establishing a center of excellence for menu management and product development in...

  • Page 20
    ... Doing what comes naturally For Martin Hoban, a McDonald's owner/operator with two restaurants in County Kerry, Ireland, good deeds come naturally. Children just seem to know we care. After all, where else can kids enjoy Ronald's PlayPlace and a Happy Meal? Active in his community, Martin often...

  • Page 21
    Smile 19 community care

  • Page 22
    ... to speed service and build higher average checks, while making visits to McDonald's more convenient. At a number of our U.S. restaurants, customers can pay for their food with small electronic devices placed on car windshields or key chains. And, at many McDonald's restaurants in Australia, Denmark...

  • Page 23
    like a smile-or two

  • Page 24
    ... Chicken sandwiches and Cheesy Boomerangs (mozzarella sticks). By offering customers gold-medal winning tastes, these promotions helped build sales in these markets. We will continue to leverage the Olympic spirit to enhance our brand and excite customers as a global sponsor of the 2002 Winter Games...

  • Page 25
    ... McDonald's ranked second in the Far Eastern Economic Review's annual corporate leadership survey of multinationals doing business in Asia. Beyond this, we're working to build our share of the eatingout market by operating several Other Brands-Aroma Café, Boston Market, Chipotle Mexican Grill...

  • Page 26
    ...we serve is critical to McDonald's ongoing success. Just as McDonald's, our owner/ operators and suppliers work together to create exceptional restaurant experiences, we also work to strengthen relationships with our communities and enhance McDonald's brand by being a leader in social responsibility...

  • Page 27
    ... our customers can have confidence in McDonald's. We are aligned with world-class suppliers that share our high standards, and our restaurant staffs are equipped to deliver on them every day. Safe fun for children Parents can be confident that our Happy Meal toys and PlayPlaces are safe. For years...

  • Page 28
    .... McDonald's is a leader in the global food service industry. We serve 45 million customers every day in 29,000 restaurants in 120 countries around the world. We are part of customers' everyday lives, and we have the leading market position in virtually every market in which we operate. Our global...

  • Page 29
    ... The Company operates in the food service industry and primarily operates quick-service restaurant businesses under the McDonald's brand. Approximately 80% of McDonald's restaurants and more than 80% of the Systemwide sales of McDonald's restaurants are in eight markets: Australia, Brazil, Canada...

  • Page 30
    ... increased due to selective expansion in higher volume locations and the development of larger facilities that support higher average sales. In 2000, average sales for new traditional restaurants in Europe and Latin America declined due to a higher proportion of openings in lower volume markets...

  • Page 31
    ... 1999 average annual sales of restaurants opened more than 25 months increased over the prior year in constant currencies. Argentina and Indonesia for financial reporting purposes. In 1999, total revenues increased at a greater rate than sales due to the higher unit growth rate of Company-operated...

  • Page 32
    ... Corporate general & administrative expenses benefited in 2000, 1999 and 1998 from savings resulting from the home office productivity initiative. Company-operated margins were 16.9% of sales in 2000, 17.7% in 1999 and 18.4% in 1998. Operating cost trends as a percent of sales were as follows: food...

  • Page 33
    ... from the home office productivity initiative. As a result of the initiative, which benefited both the U.S. and corporate segments, the Company reached its goal of saving about $100 million annually beginning in 2000. Gains on sales of restaurant businesses Equity in earnings of unconsolidated...

  • Page 34
    ... in 1999 and a high number of restaurant closings in 1998. Made For You costs and the special charge related to the 1998 home office productivity initiative are discussed on pages 42 and 43. Cash flows The Company generates significant cash from operations and has substantial credit capacity...

  • Page 35
    ..., the Company maintains long-term occupancy rights for the land and receives related rental income. For new Company-operated restaurants, the Company generally leases the land and owns the restaurant building and equipment. Average development costs outside the U.S. vary widely by market depending...

  • Page 36
    ...of new sites, the U.S. building program that began in 1998, and the use of free cash flow for share repurchases. Also contributing to the increases in return on average common equity in 2000 and 1999 were increases in the average amount of common equity put options outstanding, which reduced average...

  • Page 37
    ... Euro. McDonald's has restaurants located in all member countries and has been preparing for the introduction of the Euro for the past several years. The Company currently is addressing the issues involved with the new currency, which include converting information technology systems, recalculating...

  • Page 38
    ... of income Years ended December 31, 2000 1999 1998 IN MILLIONS, EXCEPT PER SHARE DATA Revenues Sales by Company-operated restaurants Revenues from franchised and affiliated restaurants Total revenues Operating costs and expenses Food and packaging Payroll and employee benefits Occupancy and...

  • Page 39
    ... 31, 2000 1999 IN MILLIONS, EXCEPT PER SHARE DATA Assets Current assets Cash and equivalents Accounts and notes receivable Inventories, at cost, not in excess of market Prepaid expenses and other current assets Total current assets Other assets Investments in and advances to affiliates Intangible...

  • Page 40
    ...in operating working capital items Accounts receivable Inventories, prepaid expenses and other current assets Accounts payable Taxes and other liabilities Other Cash provided by operations Investing activities Property and equipment expenditures Purchases of restaurant businesses Sales of restaurant...

  • Page 41
    ... Shares Amount Additional paid-in capital Unearned ESOP compensation Retained earnings Common stock in treasury Shares Amount Total shareholders' equity Balance at December 31, 1997 Net income Translation adjustments (including tax benefits of $84.2) Comprehensive income Common stock cash...

  • Page 42
    ... significant accounting policies Nature of business The Company operates in the food service industry and primarily operates quick-service restaurant businesses under the McDonald's brand. In addition, the Company operates other restaurant concepts: Aroma Café, Boston Market, Chipotle Mexican Grill...

  • Page 43
    ... investments to be cash equivalents. The impact of fluctuating foreign currencies on cash and equivalents was not material. Segment and geographic information The Company operates in the food service industry. Substantially all revenues result from the sale of menu products at restaurants operated...

  • Page 44
    ... Company recorded a $160.0 million pretax special charge related to the Company's home office productivity initiative. The productivity plan was designed to improve staff alignment, focus and productivity and to reduce ongoing selling, general & administrative expenses in both the U.S. and corporate...

  • Page 45
    ...of lease cancellation and other facilities-related costs, $18.3 million of costs for the write-off of technology investments made obsolete as a result of the productivity initiative and $15.1 million of other cash payments made in 1998. The initiatives identified in the home office productivity plan...

  • Page 46
    ... net effects of foreign currency and interest-rate exchange agreements Short-term obligations supported by long-term line of credit agreements Net asset positions of foreign currency exchange agreements (included in miscellaneous other assets) Total debt obligations 8,434.3 7,046.8 1,874.7 (1,250...

  • Page 47
    ... minimum payments required under existing operating leases with initial terms of one year or more are: IN MILLIONS ing contributions and ESOP allocations are generally invested in McDonald's common stock. Total U.S. costs for the Profit Sharing Program, including related nonqualified benefits, were...

  • Page 48
    ... restaurants Total revenues Company-operated margin Franchised margin Operating income Net income Net income per common share Net income per common share-diluted Dividends per common share (1) Weighted-average shares Weighted-average shares-diluted Market price per common share High Low Close...

  • Page 49
    ... The system includes a documented organizational structure and appropriate division of responsibilities; established policies and procedures that are communicated throughout the Company; careful selection, training and development of our people; and utilization of an internal audit program. Policies...

  • Page 50
    ..., New Tastes Menu, PlayPlace, RMH, RMHC, Ronald McDonald, Ronald McDonald Care Mobile, Ronald McDonald House, Ronald McDonald House Charities, Ronald McDonald House Charities logo, 1-800-Mc1-STCK, Spicy McWings, The Golden Arches, The Golden Arches logo, We Love To See You Smile. The Annual Report...

  • Page 51

  • Page 52
    ...Click on Ronald & Friends for games and more, find a restaurant in the U.S. or U.K. or learn about McDonald's in other countries. You also can get information about nutrition, franchising, U.S. career opportunities, Company history, promotions in many parts of the world and much more on our website.