McDonalds 2011 Annual Report Download - page 20

IMPAIRMENT AND OTHER CHARGES (CREDITS), NET
The Company recorded impairment and other charges (credits),
net of ($4) million in 2011, $29 million in 2010 and ($61) million
in 2009. 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 2011 2010 2009
Europe $ 1 $ 4
APMEA $ (4) 49
Other Countries & Corporate (21) (65)
Total $ (4) $ 29 $ (61)
After tax(1) $17 $ 25 $ (91)
Earnings per common share-diluted $0.01 $0.02 $(0.08)
(1) Certain items were not tax affected.
In 2010, the Company recorded expense of $29 million primar-
ily related to its share of restaurant closing costs in McDonald’s
Japan in conjunction with the 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 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 2011 2010 2009
Gains on sales of restaurant
businesses $ (82) $ (79) $(113)
Equity in earnings of unconsolidated
affiliates (178) (164) (168)
Asset dispositions and other expense 27 45 59
Total $(233) $(198) $(222)
• 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 facilities lease
arrangements (arrangements where the Company leases the
businesses, including equipment, to franchisees who generally
have options to purchase the businesses). The Company’s pur-
chases 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 businesses in 2010
compared with 2009 primarily as a result of selling fewer
Company-operated restaurants to franchisees.
• 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 2011 reflected a benefit from stronger foreign curren-
cies partly offset by the decline in the number of unconsolidated
partnerships in the U.S. Results in 2010 reflected a reduction in
the number of unconsolidated partnerships worldwide partly
offset by improved operating performance in Japan.
• 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. Asset dispositions and other expense declined in
2011 primarily due to higher gains on unconsolidated partnership
dissolutions in the U.S.
OPERATING INCOME
Operating income
Amount Increase/(decrease)
Increase/(decrease)
excluding currency
translation
Dollars in millions 2011 2010 2009 2011 2010 2011 2010
U.S. $3,666 $3,446 $3,232 6% 7% 6% 7%
Europe 3,227 2,797 2,588 15 810 12
APMEA 1,526 1,200 989 27 21 17 11
Other Countries & Corporate 111 30 32 nm (6) nm (43)
Total $8,530 $7,473 $6,841 14% 9% 10% 9%
nm Not meaningful.
In the U.S., 2011 and 2010 results increased primarily due to
higher combined restaurant margin dollars, primarily franchised
margin dollars.
In Europe, results for 2011 and 2010 were driven by stronger
operating performance in France, the U.K., Russia and Germany.
The increases in 2011 and 2010 were driven by higher combined
18 McDonald’s Corporation Annual Report 2011