McDonalds 2007 Annual Report Download - page 31

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DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA
2007
2006
Operating income $3,879 $(1,641)* $5,520 $4,433** 25
Income from continuing operations 2,335 (1,579)* 3,914 2,866 37
Income from discontinued operations 60 60 678 nm
Net income 2,395 (1,579) 3,974 3,544 12
Income per common share – diluted
Continuing operations*** 1.93 (1.30) 3.23 2.29 41
Discontinued operations 0.05 0.05 0.54 nm
Net income*** 1.98 (1.30) 3.28 2.83 16
* The results for the full year 2007 included impairment and other charges of $1,665 million associated with the Latam transaction, partly offset by a benefi t of $24 million due to
eliminating depreciation on the assets in Latam in mid-April 2007 in accordance with accounting rules. The tax benefi t of $62 million was minimal due to the Company’s inability
to utilize most of the capital losses generated by this transaction.
** The results for the full year 2006 included impairment and other charges of $134 million of operating expenses primarily related to strategic actions taken to enhance overall
profi tability and improve returns.
*** The following items positively impacted the growth in diluted income per share from continuing operations and diluted income per share by 15 percentage points and
12 percentage points, respectively, for the year ended December 31, 2007 compared with 2006:
2007
• $0.26 per share of income tax benefi t resulting from the completion of the Internal Revenue Service’s (IRS) examination of the Company’s 2003-2004 U.S. federal income tax
returns; partly offset by
• $0.02 per share of income tax expense related to the impact of a tax law change in Canada.
2006
• $0.08 per share of operating expenses primarily related to strategic actions taken to enhance overall profi tability and improve returns; and
• $0.01 per share of net incremental income tax expense primarily related to the impact of a tax law change in Canada.
Net income and diluted net income per common share
In 2007, net income and diluted net income per common share
were $2.4 billion and $1.98. Income from continuing operations
was $2.3 billion or $1.93 per share, which included $1.6 billion
or $1.30 per share of net expense related to the Latam transac-
tion. This refl ects an impairment charge of $1.32 per share,
partly offset by a $0.02 per share benefi t due to eliminating depre-
ciation on the assets in Latam in mid-April 2007 in accordance
with accounting rules. In addition, 2007 results included a net
tax benefi t of $288 million or $0.24 per share resulting from the
completion of an IRS examination of the Company’s 2003-2004
U.S. federal income tax returns, partly offset by the impact of a
tax law change in Canada. Income from discontinued opera-
tions was $60 million or $0.05 per share.
In 2006, net income and diluted net income per common
share were $3.5 billion and $2.83. Income from continuing
operations was $2.9 billion or $2.29 per share, which included
$134 million ($98 million after tax or $0.08 per share) of impair-
ment and other charges primarily related to strategic actions
taken to enhance overall profi tability and improve returns, as
well as $0.01 per share of net incremental income tax expense
primarily related to the impact of a tax law change in Canada.
Income from discontinued operations was $678 million or
$0.54 per share.
In 2005, net income and diluted net income per common
share were $2.6 billion and $2.04. Income from continuing
operations was $2.6 billion or $2.02 per share, while income
from discontinued operations was $24 million or $0.02 per
share. The 2005 results from continuing operations included
a net tax benefi t of $73 million or $0.05 per share comprised
of $179 million or $0.14 per share tax benefi t resulting from the
completion of an IRS examination of the Company’s 2000-2002
U.S. federal income tax returns, partly offset by $106 million
or $0.09 per share of incremental tax expense resulting from
the decision to repatriate certain foreign earnings under
the Homeland Investment Act (HIA). In addition, 2005 results
included impairment and other charges (credits), net of $28
million pretax income ($12 million after tax or $0.01 per share).
Refer to the Impairment and other charges (credits), net
and Discontinued operations sections for further discussion.
In 2007, the Company repurchased 77.1 million shares for
$3.9 billion, driving a reduction of over 3% of total shares
outstanding compared with year-end 2006, after considering
stock option exercises.
In 2006, the Company acquired 98.4 million shares or
$3.7 billion, through both shares repurchased and shares
accepted in connection with the Chipotle exchange, driving a
reduction of about 5% of total shares outstanding compared
with year-end 2005, after considering stock option exercises.
Latam
Transaction
2007
Excluding
Latam
Transaction
Adjusted
% Inc
The following table presents a reconciliation of the consolidated operating results for the year ended December 31, 2007 to the
operating results excluding the impact of the Latam transaction, compared to 2006 results.
29