McDonalds 2007 Annual Report Download - page 35

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U.S. Europe
DOLLARS IN MILLIONS
2007 2006 2005 2007 2006 2005
As reported
Number of Company-operated
restaurants at year end 2,090 2,104 2,097 2,177 2,253 2,382
Sales by Company-operated
restaurants $4,682 $4,410 $4,098 $6,817 $5,885 $5,465
Company-operated margin $ 876 $ 843 $ 768 $1,205 $ 960 $ 817
Store operating margin
Company-operated margin $ 876 $ 843 $ 768 $1,205 $ 960 $ 817
Plus:
Outside rent expense
(1)
82 82 79 248 229 225
Depreciation – buildings &
leasehold improvements
(1)
78 74 68 107 98 97
Less:
Rent & royalties
(2)
(691) (651) (605) (1,294) (1,099) (1,048)
Store operating margin $ 345 $ 348 $ 310 $ 266 $ 188 $ 91
Brand/real estate margin
Rent & royalties
(2)
$ 691 $ 651 $ 605 $1,294 $1,099 $1,048
Less:
Outside rent expense
(1)
(82) (82) (79) (248) (229) (225)
Depreciation – buildings &
leasehold improvements
(1)
(78) (74) (68) (107) (98) (97)
Brand/real estate margin $ 531 $ 495 $ 458 $ 939 $ 772 $ 726
(1) Represents certain costs recorded as occupancy & other operating expenses in the Consolidated statement of income – rent payable by McDonald’s to third parties on leased
sites and depreciation for buildings and leasehold improvements. This adjustment made to refl ect these occupancy costs in Brand/real estate margin. The relative percentage
of sites that are owned versus leased varies by country.
(2) Refl ects average Company–operated rent and royalties (as a percentage of 2007 sales: U.S. – 14.8% and Europe – 19.0%). This adjustment made to refl ect charge in Store
operating margin and income in Brand/real estate margin. Countries within Europe have varying economic profi les and a wide range of rent and royalties as a percentage
of sales.
Selling, general & administrative expenses
Consolidated selling, general & administrative expenses increased 3% (fl at in constant currencies) in 2007 and 8% (7% in constant
currencies) in 2006. In 2007, higher employee-related costs were offset by a reduction in costs due to the Latam transaction.
In 2006, the increase was due to higher employee-related costs, including performance-based compensation expense.
Selling, general & administrative expenses
DOLLARS IN MILLIONS
2007 2006 2005 2007 2006
2007 2006
U.S. $ 744 $ 727 $ 697 2% 4% 2% 4%
Europe 689 610 556 13 10 4 8
APMEA 276 238 218 16 9 11 9
Other Countries & Corporate
(1)
658 721 647 (9) 11 (10) 10
Total $2,367 $2,296 $2,118 3% 8% –% 7%
(1) Included in Other Countries & Corporate are home offi ce support costs in areas such as facilities, fi nance, human resources, information technology, legal,
marketing, restaurant operations, supply chain and training.
Selling, general & administrative expenses as a percent of revenues were 10.4% in 2007 compared with 11.0% in 2006 and
11.1% in 2005, and selling, general & administrative expenses as a percent of Systemwide sales were 3.7% in 2007 compared
with 4.0% in both 2006 and 2005. Management believes that analyzing selling, general & administrative expenses as a percent
of Systemwide sales, as well as revenues, is meaningful because these costs are incurred to support Systemwide restaurants.
Amount
Increase/
(decrease)
Increase/(decrease)
excluding currency
translation
33