McDonalds 2010 Annual Report Download

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2010 Annual Report

Table of contents

  • Page 1
    2010 Annual Report

  • Page 2
    2010 Highlights: Global Comparable Sales Growth Earnings Per Share Growth Average Number of Customers Served Every Day 5.0 11 % % 64 Million

  • Page 3
    ... for McDonald's. Global comparable sales increased 5% in 2010 - our eighth consecutive year of same store sales growth. Operating income grew 9% and we continued to gain market share around the world. In addition, we returned $5.1 billion to shareholders through share repurchases and dividends paid...

  • Page 4
    ... world through new technology, better training, and service enhancements that will make it easier for our managers and crew to quickly and accurately serve the customer. At the same time, our brand is more contemporary and convenient and provides great value with menus that feature all of our iconic...

  • Page 5
    ... in McDonald's. I appreciate your support and look forward to sharing further success with you. Sincerely, Combined Operating Margin Earnings Per Share ' ' ' $ . $ . $ . Dividends Paid (In billions) ' ' ' $ . $ . $ . Jim Skinner Vice Chairman and CEO McDonald's Corporation Annual Report 2010...

  • Page 6
    ... vision-and the right people and strategies in place-for building our business even further and delivering profitable growth into the future. As to our Board responsibilities, we remain committed to overseeing the company's direction and promoting strong corporate governance principles and effective...

  • Page 7
    2010 Financial Report

  • Page 8
    ... Reporting Report of Independent Registered Public Accounting Firm Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting Executive Management & Business Unit Officers Board of Directors Investor Information 6 McDonald's Corporation Annual Report 2010

  • Page 9
    ... stock cash dividends Financial position at year end: Total assets Total debt Total shareholders' equity Shares outstanding in millions Per common share: Income from continuing operations-diluted Net income-diluted Dividends declared Market price at year end Company-operated restaurants Franchised...

  • Page 10
    ...- ingful revenues and income outside the U.S. and some manage global brands. Thus, we believe that the use of the DJIA companies as the group for comparison purposes is appropriate. The following performance graph shows McDonald's cumulative total shareholder returns (i.e., price appreciation and...

  • Page 11
    ...this report and comprise approximately 70% of total revenues. The Company continues to focus its management and financial resources on the McDonald's restaurant business as we believe significant opportunities remain for long-term growth. Accordingly, in 2009, the Company sold its minority ownership...

  • Page 12
    ... 10 McDonald's Corporation Annual Report 2010 was attributed to several factors including core menu items like Chicken McNuggets and burgers, everyday affordability and value options, such as the Breakfast Dollar Menu, additions to the McCafé beverage line, new snack offerings and limited time...

  • Page 13
    ... Company returned $5.1 billion to shareholders through share repurchases and dividends paid. OUTLOOK FOR 2011 We will continue to drive success in 2011 and beyond by enhancing customer relevance across all elements of our Plan to Win- People, Products, Place, Price and Promotion. Our global System...

  • Page 14
    ... limited-time offerings to present a balanced mix of products to our customers. Value will continue to be a key growth driver as we reinforce the affordability of our menu to consumers and build on our successful Value Lunch platforms. We will invest in our business primarily by opening over 600 new...

  • Page 15
    ... 2010 Dollars in millions, except per share data Amount Increase/ (decrease) Amount 2009 Increase/ (decrease) 2008 Amount Revenues Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues Operating costs and expenses Company-operated restaurant expenses Franchised...

  • Page 16
    ... coffees and the Angus Third Pounder. Refranchising activity negatively impacted revenue growth in both years. Europe's constant currency increases in revenues in 2010 and 2009 were primarily driven by comparable sales increases in 14 McDonald's Corporation Annual Report 2010 the U.K., France...

  • Page 17
    ... & Corporate is higher relative to the U.S. and Europe due to a larger proportion of developmental licensed and/or affiliated restaurants where the Company receives royalty income with no corresponding occupancy costs. • Company-operated margins Company-operated margin dollars represent sales by...

  • Page 18
    ...U.S. Europe APMEA Other Countries & Corporate Total 21.3% 19.8 17.8 17.2 19.6% 19.4% 18.4 16.8 15.2 18.2% 18.5% 18.0 15.9 15.3 17.6% In the U.S., the Company-operated margin percent increased in 2010 due to lower commodity costs and positive comparable sales, partly offset by higher labor costs...

  • Page 19
    ...Other Countries & Corporate are home office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Selling, general & administrative expenses as a percent of revenues were 9.7% in 2010 compared...

  • Page 20
    ... to its share of restaurant closing costs in McDonald's Japan in conjunction with the first quarter strategic review of the market's restaurant portfolio, partly offset by income related to the resolution of certain liabilities retained in connection with the 2007 Latin America developmental license...

  • Page 21
    ... Company's share of impairment charges related to restaurant closings in Japan negatively impacted the growth rate by 4 percentage points for the year. Results for 2009 were driven primarily by strong results in Australia and expansion in China. In Other Countries & Corporate, results for 2010 and...

  • Page 22
    ... Company can meet short-term funding needs through its continued access to commercial paper borrowings and line of credit agreements. RESTAURANT DEVELOPMENT AND CAPITAL EXPENDITURES In 2010, the Company opened 957 traditional restaurants and 35 satellite restaurants (small, limited-menu restaurants...

  • Page 23
    ... of shares repurchased and dividends paid. Shares repurchased and dividends In millions, except per share data Number of shares repurchased Shares outstanding at year end Dividends declared per share Dollar amount of shares repurchased Dividends paid Total returned to shareholders 2010 37...

  • Page 24
    ... committed line of credit agreements as well as authority to issue commercial paper in the U.S. and Global market (see Debt financing note to the consolidated financial statements). Debt maturing in 2011 is approximately $601 million of long-term corporate debt. In 2011, the Company expects to issue...

  • Page 25
    ... Minimum rent under franchise arrangements The Company reviews its financial reporting and disclosure practices and accounting policies quarterly to ensure that they provide accurate and transparent information relative to the current economic and business environment. The Company believes that of...

  • Page 26
    ... strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition or results of operations. • Income taxes The Company records a valuation allowance to reduce its deferred tax assets...

  • Page 27
    ...879.0 Depreciation and 1,276.2 1,192.8 amortization(4) Latin America developmental 1,665.3 license transaction(5) Currency translation(6) Incremental adjusted operating income plus depreciation and amortization (at constant foreign exchange rates) DENOMINATOR: Weighted-average adjusted cash used for...

  • Page 28
    ... Statement of Income In millions, except per share data Years ended December 31, 2010 $16,233.3 7,841.3 24,074.6 2009 $15,458.5 7,286.2 22,744.7 2008 $16,560.9 6,961.5 23,522.4 REVENUES Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues OPERATING COSTS...

  • Page 29
    ...1,660.6 million shares Additional paid-in capital Retained earnings Accumulated other comprehensive income Common stock in treasury, at cost; 607.0 and 583.9 million shares Total shareholders' equity Total liabilities and shareholders' equity See Notes to consolidated financial statements. $ 2,387...

  • Page 30
    ... activities Net short-term borrowings Long-term financing issuances Long-term financing repayments Treasury stock purchases Common stock dividends Proceeds from stock option exercises Excess tax benefit on share-based compensation Other Cash used for financing activities Effect of exchange rates...

  • Page 31
    ... to pensions (including taxes of $3.5) Comprehensive income Common stock cash dividends ($2.26 per share) (2,408.1) Treasury stock purchases Share-based compensation 83.1 Stock option exercises and other (including tax benefits of $146.1) 259.4 2.7 Balance at December 31, 2010 1,660.6 $16.6 $5,196...

  • Page 32
    ... licensees under license agreements. The following table presents restaurant information by ownership type: Restaurants at December 31, Sales by Company-operated restaurants are recognized on a cash basis. The Company presents sales net of sales tax and other sales-related taxes. Revenues...

  • Page 33
    ... significantly impacted the consolidated financial statements. The following table presents the 2010 activity in goodwill by segment: U.S. Europe APMEA(1) Other Countries & Corporate(2) Consolidated Balance at December 31, 2009 Net restaurant purchases (sales) Acquisition of subsidiaries/affiliates...

  • Page 34
    ... balance sheet at fair value and classified based on the instruments' maturity date. Changes in the fair value measurements of the derivative instruments are reflected as adjustments to other comprehensive income (OCI) and/or current earnings. 32 McDonald's Corporation Annual Report 2010

  • Page 35
    ... from accumulated OCI into income is recorded in interest expense. (2) The amount of (gain) loss recognized in income on the derivatives used to hedge the supplemental benefit plan liabilities is recorded in selling, general & administrative expenses. McDonald's Corporation Annual Report 2010 33

  • Page 36
    ... audited by federal, state and foreign tax authorities, and tax assessments may arise several years after tax returns have been filed. Accordingly, tax liabilities are recorded when, in management's judgment, a tax position does not meet the more 34 McDonald's Corporation Annual Report 2010

  • Page 37
    ... closing costs in McDonald's Japan (a 50%-owned affiliate) in conjunction with the first quarter strategic review of the market's restaurant portfolio. These actions were designed to enhance the brand image, overall profitability and returns of the market. The Company also recorded pretax income...

  • Page 38
    ... of these liabilities. The Company believes any other matters currently being reviewed will not have a material adverse effect on its financial condition or results of operation. 36 McDonald's Corporation Annual Report 2010 2011 2012 2013 2014 2015 Thereafter Total minimum payments $ 1,244.4 1,213...

  • Page 39
    ... benefit plans Intangible assets Deferred foreign tax credits Capital loss carryforwards Operating loss carryforwards Indemnification liabilities Other Total deferred tax assets before valuation allowance Valuation allowance Net deferred tax liabilities Balance sheet presentation: Deferred income...

  • Page 40
    ...Other Countries & Corporate and consist of home office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Corporate assets include corporate cash and equivalents, asset portions of financial...

  • Page 41
    ... on the Consolidated balance sheet. The increase in debt obligations from December 31, 2009 to December 31, 2010 was primarily due to (in millions): net issuances ($787.4) and changes in exchange rates on foreign currency denominated debt ($140.1). McDonald's Corporation Annual Report 2010 39

  • Page 42
    .... Cash received from stock options exercised during 2010 was $463.1 million and the actual tax benefit realized for tax deductions from stock options exercised totaled $139.0 million. The Company uses treasury shares purchased under the Company's share repurchase program to satisfy share-based...

  • Page 43
    .... Changes in fair value of the derivatives indexed to the Company's stock are recorded in the income statement because the contracts provide the counterparty with a choice to settle in cash or shares. Total U.S. costs for the Profit Sharing and Savings Plan, including nonqualified benefits and...

  • Page 44
    ...per share data Quarters ended September 30 Quarters ended June 30 Quarters ended March 31 2010 2009 2010 2009 2010 2009 2010 2009 Revenues Sales by Company-operated restaurants Revenues from franchised restaurants Total revenues Company-operated margin Franchised margin Operating income Net...

  • Page 45
    ... of December 31, 2010, management believes that the Company's internal control over financial reporting is effective. Ernst & Young, LLP, independent registered public accounting firm, has audited the financial statements of the Company for the fiscal years ended December 31, 2010, 2009 and 2008 and...

  • Page 46
    ... Registered Public Accounting Firm The Board of Directors and Shareholders of McDonald's Corporation We have audited the accompanying consolidated balance sheets of McDonald's Corporation as of December 31, 2010 and 2009, and the related consolidated statements of income, shareholders' equity, and...

  • Page 47
    ... of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of McDonald's Corporation as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010, and our report dated February 25, 2011 expressed an unqualified...

  • Page 48
    ... East 46 McDonald's Corporation Annual Report 2010 Gloria Santona* Corporate EVP - General Counsel & Secretary James Skinner* Vice Chairman & Chief Executive Officer Jeffrey Stratton* Corporate EVP - Chief Restaurant Officer Donald Thompson* President and Chief Operating Officer *Executive Officer

  • Page 49
    ... Thompson President and Chief Operating Officer McDonald's Corporation Miles D. White2, 6 Chairman and Chief Executive Officer Abbott Laboratories McDonald's Corporation Annual Report 2010 47 1. Audit Committee 2. Compensation Committee 3. Corporate Responsibility Committee 4. Executive Committee...

  • Page 50
    ....governance.mcdonalds.com Corporate social responsibility www.crmcdonalds.com General information www.aboutmcdonalds.com Key phone numbers Shareholder Services 1.630.623.7428 MCDirect Shares (direct stock purchase plan) 1.800.228.9623 U.S. customer comments/inquiries 1.800.244.6227 Financial media...

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    McDonald's Corporation One McDonald's Plaza Oak Brook, IL 60523 www.aboutmcdonalds.com