McDonalds 2010 Annual Report Download - page 37

likely than not threshold for recognition. For tax positions that
meet the more likely than not threshold, a tax liability may be
recorded depending on management’s assessment of how the
tax position will ultimately be settled.
The Company records interest and penalties on unrecognized
tax benefits in the provision for income taxes.
PER COMMON SHARE INFORMATION
Diluted earnings per common share is calculated using net
income divided by diluted weighted-average shares. Diluted
weighted-average shares include weighted-average shares out-
standing plus the dilutive effect of share-based compensation
calculated using the treasury stock method, of (in millions of
shares): 2010–14.3; 2009–15.2; 2008– 19.4. Stock options
that were not included in diluted weighted-average shares
because they would have been antidilutive were (in millions of
shares): 2010–0.0; 2009–0.7; 2008–0.6.
The Company has elected to exclude the pro forma deferred
tax asset associated with share-based compensation in earnings
per share.
STATEMENT OF CASH FLOWS
The Company considers short-term, highly liquid investments with
an original maturity of 90 days or less to be cash equivalents.
SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date the
financial statements were issued and filed with the Securities and
Exchange Commission. There were no subsequent events that
required recognition or disclosure.
Property and Equipment
Net property and equipment consisted of:
In millions December 31, 2010 2009
Land $ 5,200.5 $ 5,048.3
Buildings and improvements
on owned land 12,399.4 12,119.0
Buildings and improvements
on leased land 11,732.0 11,347.9
Equipment, signs and seating 4,608.5 4,422.9
Other 542.0 502.4
34,482.4 33,440.5
Accumulated depreciation and
amortization (12,421.8) (11,909.0)
Net property and equipment $ 22,060.6 $ 21,531.5
Depreciation and amortization expense was (in millions): 2010–
$1,200.4; 2009–$1,160.8; 2008–$1,161.6.
Impairment and Other Charges (Credits), Net
In millions, except per share data 2010 2009 2008
Europe $ 1.6 $ 4.3 $ 6.0
APMEA 48.5 (0.2)
Other Countries & Corporate (21.0) (65.2)
Total $ 29.1 $(61.1) $ 6.0
After tax(1) $ 24.6 $(91.4) $ 3.5
Earnings per common share—diluted $ 0.02 $(0.08) $0.01
(1) Certain items were not tax effected.
In 2010, the Company recorded after tax charges of $39.3
million related to its share of restaurant closing costs in McDo-
nald’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, over-
all profitability and returns of the market. The Company also
recorded pretax income of $21.0 million related to the resolution
of certain liabilities retained in connection with the 2007 Latin
America developmental license transaction.
In 2009, the Company recorded pretax income of $65.2 mil-
lion 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
In millions 2010 2009 2008
Gains on sales of restaurant
businesses $ (79.4) $(113.3) $(126.5)
Equity in earnings of
unconsolidated affiliates (164.3) (167.8) (110.7)
Asset dispositions and other
expense 45.5 58.8 72.0
Total $(198.2) $(222.3) $(165.2)
• 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.
• 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
McDonald’s Corporation Annual Report 2010 35