McDonalds 2015 Annual Report Download - page 42

40 McDonald's Corporation 2015 Annual Report
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 outstanding plus
the dilutive effect of share-based compensation calculated using
the treasury stock method, of (in millions of shares): 2015–5.2;
2014–5.8; 2013–7.6. Stock options that were not included in
diluted weighted-average shares because they would have been
antidilutive were (in millions of shares): 2015–1.0; 2014–5.3;
2013–4.7.
In the first quarter of 2016, the Company paid $2.7 billion
under an Accelerated Share Repurchase agreement and received
an initial delivery of 18.5 million shares, which represents 80% of
the total shares the Company expects to receive based on the
market price at the time of initial delivery. The final number of
shares delivered upon settlement of the agreement, between April
1, 2016 and May 13, 2016, will be determined with reference to
the volume weighted average price per share of the Company's
common stock over the term of the agreement, less a negotiated
discount. The transaction is accounted for as an equity transaction
and is included in Treasury stock when the shares are received, at
which time there is an immediate reduction in the weighted
average common shares calculation for basic and diluted earnings
per share.
CASH AND EQUIVALENTS
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 U.S. Securities
and Exchange Commission ("SEC"). There were no subsequent
events that required recognition or disclosure.
Property and Equipment
Net property and equipment consisted of:
In millions December 31, 2015 2014
Land $ 5,582.5 $ 5,788.4
Buildings and improvements
on owned land 14,011.7 14,322.4
Buildings and improvements
on leased land 12,892.9 13,284.0
Equipment, signs and
seating 4,658.5 5,113.8
Other 546.8 617.5
37,692.4 39,126.1
Accumulated depreciation
and amortization (14,574.8) (14,568.6)
Net property and equipment $ 23,117.6 $24,557.5
Depreciation and amortization expense for property and
equipment was (in millions): 2015–$1,438.0; 2014–$1,539.3;
2013–$1,498.8.
Other Operating (Income) Expense, Net
In millions 2015 2014 2013
Gains on sales of restaurant
businesses $ (145.9) $ (137.4) $ (199.4)
Equity in (earnings) losses of
unconsolidated affiliates 146.8 8.9 (78.2)
Asset dispositions and other
(income) expense, net (26.6) 108.2 30.4
Impairment and other charges 235.1 38.9 0.0
Total $209.4 $ 18.6 $ (247.2)
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.
Equity in (earnings) losses 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) losses from these entities
representing McDonald’s share of results. For foreign affiliated
markets—primarily Japan—results are reported after interest
expense and income taxes.
Asset dispositions and other (income) expense, net
Asset dispositions and other (income) expense, net 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.
Impairment and other charges
Impairment and other charges include the losses that result from
the write down of goodwill and long-lived assets from their carrying
value to their fair value. In addition, these charges include costs
associated with strategic initiatives, such as refranchising and
restructuring activities.
Contingencies
In the ordinary course of business, the Company is subject to
proceedings, lawsuits and other claims primarily related to
competitors, customers, employees, franchisees, government
agencies, intellectual property, shareholders and suppliers. The
Company is required to assess the likelihood of any adverse
judgments or outcomes to these matters as well as potential
ranges of probable losses. A determination of the amount of
accrual required, if any, for these contingencies is made after
careful analysis of each matter. The required accrual may change
in the future due to new developments in each matter or changes
in approach such as a change in settlement strategy in dealing
with these matters. The Company does not believe that any such
matter currently being reviewed will have a material adverse effect
on its financial condition or results of operations.