McDonalds 2013 Annual Report Download - page 26

18 | McDonald’s Corporation 2013 Annual Report
OTHER OPERATING (INCOME) EXPENSE, NET
Other operating (income) expense, net
In millions 2013 2012 2011
Gains on sales of restaurant
businesses $(199) $(152) $ (82)
Equity in earnings of unconsolidated
affiliates (78) (144) (178)
Asset dispositions and other expense 30 52 23
Total $(247) $(244) $(237)
Gains on sales of restaurant businesses
The Company’s purchases and sales of businesses with its
franchisees are aimed at achieving an optimal ownership mix in
each market. Resulting gains or losses on sales of restaurant
businesses are recorded in operating income because these
transactions are a recurring part of our business. Gains on sales
of restaurant businesses increased in 2013 due primarily to more
stores sold in Australia. The increase in 2012 was due primarily to
sales of restaurants in China to developmental licensees, as well
as sales of restaurants in Europe and Canada.
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
partnerships in certain consolidated markets such as the U.S. is
reported before income taxes. These partnership restaurants are
operated under conventional franchise arrangements and,
therefore, are classified as conventional franchised restaurants.
Equity in earnings of unconsolidated affiliates decreased in 2013
and 2012 due to lower operating results, primarily 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 decreased in
2013 due to the favorable resolution of certain liabilities and lower
asset retirements, partly offset by lower gains on property sales
and unconsolidated partnership dissolutions. The increase in 2012
was primarily due to lower gains on unconsolidated partnership
dissolutions in the U.S.
OPERATING INCOME
Operating income
Amount Increase/(decrease)
Increase excluding
currency translation
Dollars in millions 2013 2012 2011 2013 2012 2013 2012
U.S. $3,779 $3,751 $3,666 1% 2% 1% 2%
Europe 3,371 3,196 3,227 5(1) 46
APMEA 1,480 1,566 1,526 (6) 303
Other Countries & Corporate 134 92 111 46 (17) 86 9
Total $8,764 $8,605 $8,530 2% 1% 3% 4%
In the U.S., results for 2013 increased due to lower selling,
general and administrative expenses and higher franchised
margin dollars, partly offset by lower Company-operated margin
dollars. Results for 2012 increased due to higher franchised
margin dollars, partly offset by lower other operating income and
Company-operated margin dollars.
In Europe, results for 2013 and 2012 were driven by higher
franchised and Company-operated margin dollars. Results in 2012
also benefited from higher gains on sales of restaurants, partly
offset by incremental selling, general and administrative expenses
related to the 2012 London Olympics.
In APMEA, results for 2013 reflected higher franchised margin
dollars, mostly offset by lower Company-operated margin dollars.
Results for 2012 increased primarily due to higher franchised
margin dollars and gains on sales of restaurants in China to
developmental licensees, partly offset by lower Company-operated
margin dollars and lower operating results in Japan.
Combined operating margin
Combined operating margin is defined as operating income as a
percent of total revenues. Combined operating margin was 31.2%
in 2013 and 2012, and 31.6% in 2011.