McDonalds 2010 Annual Report Download - page 39

property taxes, insurance and maintenance; however, for fran-
chised sites, the Company requires the franchisees to pay these
costs. In addition, the Company is the lessee under non-
cancelable leases covering certain offices and vehicles.
Future minimum payments required under existing operating
leases with initial terms of one year or more are:
In millions Restaurant Other Total
2011 $ 1,124.1 $ 76.4 $ 1,200.5
2012 1,054.7 60.9 1,115.6
2013 986.7 47.5 1,034.2
2014 885.5 40.4 925.9
2015 797.4 29.6 827.0
Thereafter 5,823.6 194.5 6,018.1
Total minimum payments $10,672.0 $449.3 $11,121.3
The following table provides detail of rent expense:
In millions 2010 2009 2008
Company-operated
restaurants:
U.S. $ 60.4 $ 65.2 $ 73.7
Outside the U.S. 545.0 506.9 532.0
Total 605.4 572.1 605.7
Franchised restaurants:
U.S. 409.7 393.9 374.7
Outside the U.S. 463.5 431.4 409.4
Total 873.2 825.3 784.1
Other 98.1 98.9 101.8
Total rent expense $1,576.7 $1,496.3 $1,491.6
Rent expense included percent rents in excess of minimum
rents (in millions) as follows–Company-operated restaurants:
2010–$142.5; 2009–$129.6; 2008–$130.2. Franchised
restaurants: 2010–$167.3; 2009–$154.7; 2008–$143.5.
Income Taxes
Income before provision for income taxes, classified by source of
income, was as follows:
In millions 2010 2009 2008
U.S. $2,763.0 $2,700.4 $2,769.4
Outside the U.S. 4,237.3 3,786.6 3,388.6
Income before provision for
income taxes $7,000.3 $6,487.0 $6,158.0
The provision for income taxes, classified by the timing and
location of payment, was as follows:
In millions 2010 2009 2008
U.S. federal $1,127.1 $ 792.0 $ 808.4
U.S. state 161.1 152.1 134.7
Outside the U.S. 841.5 788.9 800.2
Current tax provision 2,129.7 1,733.0 1,743.3
U.S. federal (66.8) 186.9 75.6
U.S. state 13.8 8.6 28.7
Outside the U.S. (22.7) 7.5 (2.8)
Deferred tax provision (benefit) (75.7) 203.0 101.5
Provision for income taxes $2,054.0 $1,936.0 $1,844.8
Net deferred tax liabilities consisted of:
In millions December 31, 2010 2009
Property and equipment $ 1,655.2 $ 1,609.4
Other 489.8 419.1
Total deferred tax liabilities 2,145.0 2,028.5
Property and equipment (352.4) (287.7)
Employee benefit plans (356.4) (311.0)
Intangible assets (268.6) (289.3)
Deferred foreign tax credits (310.7) (152.8)
Capital loss carryforwards (37.5) (50.9)
Operating loss carryforwards (56.8) (65.7)
Indemnification liabilities (36.5) (43.5)
Other (284.0) (334.3)
Total deferred tax assets
before valuation
allowance (1,702.9) (1,535.2)
Valuation allowance 104.7 118.1
Net deferred tax liabilities $ 546.8 $ 611.4
Balance sheet presentation:
Deferred income taxes $ 1,332.4 $ 1,278.9
Other assets–miscellaneous (590.4) (541.2)
Current assets–prepaid
expenses and other current
assets (195.2) (126.3)
Net deferred tax liabilities $ 546.8 $ 611.4
The statutory U.S. federal income tax rate reconciles to the
effective income tax rates as follows:
2010 2009 2008
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of related
federal income tax benefit 1.6 1.6 1.8
Benefits and taxes related to foreign
operations (6.9) (6.3) (6.4)
Other, net (0.4) (0.5) (0.4)
Effective income tax rates 29.3% 29.8% 30.0%
As of December 31, 2010 and 2009, the Company’s gross
unrecognized tax benefits totaled $572.6 million and $492.0 mil-
lion, respectively. After considering the deferred tax accounting
impact, it is expected that about $390 million of the total as of
December 31, 2010 would favorably affect the effective tax rate
if resolved in the Company’s favor.
McDonald’s Corporation Annual Report 2010 37