McDonalds 2008 Annual Report Download - page 28

In addition to the consolidated operating results shown on the previous page, consolidated results for 2007 and adjusted growth
rates for 2008 and 2007 are presented in the following table excluding the impact of the Latam transaction. These results include the
effect of foreign currency translation further discussed in the section titled Impact of foreign currency translation on reported results.
While the Company has converted certain other markets to a developmental license arrangement, management believes the Latam
transaction and the associated charge are not indicative of ongoing operations due to the size and scope of the transaction. Management
believes that the adjusted operating results better reflect the underlying business trends relevant to the periods presented.
Dollars in millions, except per share data 2008 2007(1)
Latam
Transaction(1)
2007
Excluding
Latam
Transaction 2006
2008
Adjusted
% Inc
2007
Adjusted
% Inc
Operating income $6,443 $3,879 $(1,641) $5,520 $4,433 17 25
Income from continuing operations 4,313 2,335 (1,579) 3,914 2,866 10 37
Income from discontinued operations 60 60 678 nm nm
Net income 4,313 2,395 (1,579) 3,974 3,544 912
Income per common share – diluted
Continuing operations(2,3) 3.76 1.93 (1.30) 3.23 2.29 16 41
Discontinued operations 0.05 0.05 0.54 nm nm
Net income(2,3) 3.76 1.98 (1.30) 3.28 2.83 15 16
nm Not meaningful.
(1) The results for the full year 2007 included impairment and other charges of $1,665 million, partly offset by a benefit of $24 million due to eliminating depreciation on the assets in Latam
in mid-April 2007, and a tax benefit of $62 million.
(2) The following items impact the comparison of adjusted growth in diluted income per share from continuing operations and diluted net income per share for the year ended December 31,
2008 compared with 2007. On a net basis, these items negatively impact the comparison by 7 and 6 percentage points, respectively:
2008
• $0.09 per share gain on the sale of the Company’s minority interest in Pret A Manger.
2007
• $0.26 per share of income tax benefit resulting from the completion of an Internal Revenue Service (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.
(3) The following items impact the comparison of adjusted growth in diluted income per share from continuing operations and diluted net income per share for the year ended December 31,
2007 compared with 2006. On a net basis, these items positively impact the comparison by 15 and 12 percentage points, respectively:
2007
• $0.26 per share of income tax benefit resulting from the completion of an 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 profitability and improve returns; and
• $0.01 per share of 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 2008, net income and diluted net income per common share
were $4.3 billion and $3.76. Results benefited by a $109 million,
or $0.09 per share, gain on the sale of the Company’s minority
interest in Pret A Manger.
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 transaction.
This reflects an impairment charge of $1.32 per share, partly offset
by a $0.02 per share benefit due to eliminating depreciation on the
assets in Latam in mid-April 2007 in accordance with accounting
rules. In addition, 2007 results included a net tax benefit 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 operations 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 impairment and other
charges primarily related to strategic actions taken to enhance
overall profitability 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.
Refer to the Impairment and other charges, net and Dis-
continued operations sections for further discussion.
The Company repurchased 69.7 million shares of its stock for
$4.0 billion in 2008 and 77.1 million shares for $3.9 billion in
2007, driving reductions of over 4% and 3% of total shares out-
standing, respectively, net of stock option exercises.
26 McDonald’s Corporation Annual Report 2008