McDonalds 2010 Annual Report Download - page 20

IMPAIRMENT AND OTHER CHARGES (CREDITS), NET
The Company recorded impairment and other charges (credits),
net of $29 million in 2010, ($61) million in 2009 and $6 million
in 2008. Management does not include these items when review-
ing 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 2010 2009 2008
Europe $1$4$6
APMEA 49
Other Countries & Corporate (21) (65)
Total $29 $ (61) $ 6
After tax(1) $25 $ (91) $ 4
Earnings per common share – diluted $0.02 $(0.08) $0.01
(1) Certain items were not tax effected.
In 2010, the Company recorded expense of $29 million pri-
marily related 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 con-
nection with the 2007 Latin America developmental license
transaction.
In 2009, the Company recorded income of $61 million
related primarily to the resolution of certain liabilities retained in
connection with the 2007 Latin America developmental license
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.
OTHER OPERATING (INCOME) EXPENSE, NET
Other operating (income) expense, net
In millions 2010 2009 2008
Gains on sales of restaurant
businesses $ (79) $(113) $(126)
Equity in earnings of
unconsolidated affiliates (164) (168) (111)
Asset dispositions and other
expense 45 59 72
Total $(198) $(222) $(165)
• 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 lower gains on sales of restaurant busi-
nesses in 2010 compared with 2009 and 2008 primarily as a
result of selling less Company-operated restaurants to franchi-
sees.
• 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. is
reported before income taxes. These partnership restaurants are
operated under conventional franchise arrangements and, there-
fore, are classified as conventional franchised restaurants.
Results in 2010 reflected a reduction in the number of uncon-
solidated affiliate restaurants worldwide partly offset by improved
operating performance in Japan. Results in 2009 also reflected
improved operating performance in Japan and 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
restaurant closings and uncollectible receivables, asset write-offs
due to restaurant reinvestment, and other miscellaneous income
and expenses.
18 McDonald’s Corporation Annual Report 2010