McDonalds 2009 Annual Report Download - page 21

IMPAIRMENT AND OTHER CHARGES (CREDITS), NET
On a pretax basis, the Company recorded impairment and other
charges (credits), net of ($61) million in 2009, $6 million in 2008
and $1.7 billion in 2007. 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 2009 2008 2007
Europe $4 $ 6 $ (11)
APMEA —
Other Countries & Corporate (65) 1,681
Total $ (61) $ 6 $1,670
After tax(1) $ (91) $ 4 $1,606
Income from continuing operations
per common share – diluted $(.08) $.01 $ 1.32
(1) Certain items were not tax affected.
In 2009, the Company recorded pretax income of $65 million
related primarily to the resolution of certain liabilities retained in
connection with the 2007 Latam transaction. The Company also
recognized a tax benefit in 2009 in connection with this income,
mainly related to the release of a tax valuation allowance.
In 2007, the Company recorded $1.7 billion of pretax impair-
ment charges related to the Company’s sale of its Latam
businesses to a developmental licensee organization.
OTHER OPERATING (INCOME) EXPENSE, NET
Other operating (income) expense, net
In millions 2009 2008 2007
Gains on sales of restaurant
businesses $(113) $(126) $ (89)
Equity in earnings of
unconsolidated affiliates (168) (111) (116)
Asset dispositions and other
expense 59 72 194
Total $(222) $(165) $ (11)
• 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 facili-
ties lease arrangements (arrangements where the Company
leases the businesses, including equipment, to franchisees who
generally have options to purchase the businesses). The Compa-
ny’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 busi-
nesses in 2009 and 2008 compared with 2007 primarily as a
result of selling more Company-operated restaurants in con-
nection with the 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 Company records equity in earnings from these entities
representing McDonald’s share of results. For foreign affiliated
markets – primarily Japan – results are reported after interest
expense and income taxes. McDonald’s share of results for part-
nerships in certain consolidated markets such as the U.S. are
reported before income taxes. These partnership restaurants are
operated under conventional franchise arrangements and, there-
fore, are classified as conventional franchised restaurants.
Results in 2009 and 2008 reflected improved results from our
Japanese affiliate. 2009 results also benefited from the stronger
Japanese Yen.
• 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, uncollectible receivables and other miscellaneous
income and expenses. Asset dispositions in 2009 and 2008
reflected lower losses on restaurant closings and property dis-
posals compared with 2007.
McDonald’s Corporation Annual Report 2009 19