McDonalds 2008 Annual Report Download - page 33

Impairment and other charges, net
On a pretax basis, the Company recorded impairment and other charges, net of $6 million in 2008, $1.7 billion in 2007 and $134 million
in 2006. McDonald’s management does not include these items when reviewing business performance trends because we do not
believe these items are indicative of expected ongoing results.
Impairment and other charges (credits), net
In millions, except per share data 2008 2007 2006
U.S.
Europe $6 $ (11) $ 62
APMEA 48
Other Countries & Corporate 1,681 24
Total $6 $1,670 $134
After tax(1) $4 $1,606 $ 98
Income from continuing operations per common share – diluted $.01 $ 1.32 $ .08
(1) Certain items were not tax affected.
In 2008, the charges primarily related to market restructuring costs in Greece.
In 2007, the Company recorded $1.7 billion of pretax impairment charges primarily related to the Company’s sale of its Latam busi-
nesses to a developmental licensee organization. In addition, the Company recorded a $16 million write-off of assets associated with the
Toasted Deli Sandwich products in Canada and a net gain of $14 million as a result of the transfer of the Company’s ownership interest
in three European markets to a developmental licensee, partly offset by a loss on the transfer of a small market in Europe to a devel-
opmental licensee.
In 2006, the charges primarily related to losses of $36 million incurred on the transfers of the Company’s ownership interest in cer-
tain markets, primarily in APMEA and Europe, to developmental licensees, costs of $35 million related to the closing of certain
restaurants in the U.K. in conjunction with an overall restaurant portfolio review, costs of $29 million to buy out certain litigating franchi-
sees in Brazil, asset write-offs and other charges in APMEA of $18 million, and a loss of $13 million related to the decision to dispose of
supply chain operations in Russia.
Other operating (income) expense, net
Other operating (income) expense, net
In millions 2008 2007 2006
Gains on sales of restaurant businesses $(126) $ (89) $ (38)
Equity in earnings of unconsolidated affiliates (111) (116) (77)
Asset dispositions and other expense 72 194 184
Total $(165) $ (11) $ 69
• Gains on sales of restaurant businesses
Gains on sales of restaurant businesses include gains from sales
of Company-operated restaurants as well as gains from exercises
of purchase options by franchisees with business facilities lease
arrangements (arrangements where the Company leases the busi-
nesses, including equipment, to franchisees who generally have
options to purchase the businesses). The Company’s purchases
and sales of businesses with its franchisees are aimed at achieving
an optimal ownership mix in each market. Resulting gains or losses
are recorded in operating income because the transactions are a
recurring part of our business. The Company realized higher gains
on sales of restaurant businesses in 2008 and 2007 primarily as a
result of selling more Company-operated restaurants in connection
with our refranchising strategy in the Company’s major markets.
• Equity in earnings of unconsolidated affiliates
Unconsolidated affiliates and partnerships are businesses in which
the Company actively participates but does not control. The Com-
pany records equity in earnings from these entities representing
McDonald’s share of results. For foreign affiliated markets – primar-
ily Japan – results are reported after interest expense and income
taxes. McDonald’s share of results for partnerships in certain
consolidated markets such as the U.S. are reported before income
taxes. These partnership restaurants are operated under conven-
tional franchise arrangements and are included in conventional
franchised restaurant counts. Results in 2008 and 2007 reflected
improved results from our Japanese affiliate.
• Asset dispositions and other expense
Asset dispositions and other expense consists of gains or losses
on excess property and other asset dispositions, provisions for
store closings, contingencies and uncollectible receivables, and
other miscellaneous expenses. Asset dispositions in 2008
reflected lower losses on restaurant closings and property dis-
posals compared with 2007. In addition, 2008 results included
income of $18 million due to the partial recovery of prior years’
sales taxes in the U.K. Results for 2006 reflected a gain of
$26 million related to the sale of an office building in Russia.
McDonald’s Corporation Annual Report 2008 31