10-KPeriod: FY2008

MCDONALDS CORP Annual Report, Year Ended Dec 31, 2008

Filed February 25, 2009For Securities:MCD

Summary

McDonald's Corporation's 2008 10-K filing reveals a year of robust performance characterized by strong comparable sales growth and a strategic shift towards a more heavily franchised business model. Despite a challenging economic environment, the company achieved a 6.9% increase in comparable sales and a 3.1% rise in comparable guest counts. This growth was fueled by successful initiatives across key markets, including the U.S. (breakfast, chicken, beverages), Europe (tiered menus, reimaging), and APMEA (convenience, breakfast, value). The company continued its commitment to returning capital to shareholders, returning $5.8 billion in 2008 through dividends and share repurchases, and maintained strong financial discipline. The company's strategic direction emphasizes "being better, not just bigger," focusing on understanding customer needs, sharing best practices, and optimizing operations. The ongoing transition to a more franchised model is expected to enhance cash flow stability and returns. Looking ahead to 2009, McDonald's plans to continue investing in restaurant improvements, expanding its beverage offerings, and focusing on core menu favorites, while navigating expected commodity cost increases and potential negative impacts from foreign currency translation.

Financial Highlights

49 data points
Beta

Revenue

$23.52B

Net Income

$4.31B

18.3% Net Margin

EPS (Diluted)

$3.76

Total Assets

$28.46B

Cash & Equivalents

$2.06B

Free Cash Flow

$3.78B

Financial Statements
Beta
Revenue$23.52B
SG&A Expenses$2.36B
Operating Expenses$17.08B
Operating Income$6.44B
Interest Expense$522.60M
Net Income$4.31B
EPS (Basic)$3.83
EPS (Diluted)$3.76
Shares Outstanding (Basic)1.13B
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Achieved 6.9% comparable sales growth and 3.1% comparable guest count increase in 2008, building on strong 2007 performance.
  • 2Systemwide sales increased by 11% (9% in constant currencies).
  • 3Company-operated restaurant margins improved to 17.6%, and franchised margins improved to 82.3%.
  • 4Net income per diluted share from continuing operations was $3.76, a 16% increase after adjusting for the Latam transaction.
  • 5Returned $5.8 billion to shareholders in 2008 through share repurchases ($4.0 billion) and dividends ($1.8 billion), including a 33% increase in the quarterly cash dividend.
  • 6Continued strategic shift towards a more franchised model, increasing the percentage of franchised restaurants to 80% by year-end 2008.
  • 7Achieved strong ROIIC of 38.9% for one-year and 37.5% for three-year periods in 2008.

Frequently Asked Questions

In 2008, McDonald's demonstrated strong financial performance with a 6.9% increase in comparable sales and a 3.1% increase in comparable guest counts. Net income was $4.3 billion, or $3.76 per diluted share. The company also returned significant capital to shareholders through dividends and share repurchases, totaling $5.8 billion.

McDonald's strategy is centered around 'being better, not just bigger.' This involves enhancing customer understanding, sharing best practices globally, and optimizing operations. A key part of this evolution is the ongoing shift towards a more heavily franchised business model, which is intended to improve cash flow stability and shareholder returns. The company is also investing in restaurant reimaging and expanding its beverage offerings.

Key risks and challenges highlighted include intense competition in the informal eating out market, global and local economic conditions, increasing regulatory complexity (particularly around nutrition and environmental matters), and potential impacts from food safety issues or adverse publicity. The company also notes risks related to managing commodity prices, labor costs, and navigating operations in developing markets.

The sale of McDonald's businesses in 18 Latin American and Caribbean markets (Latam) in August 2007 significantly impacted the 2007 financial results. The company recorded a substantial impairment charge of $1.7 billion related to this transaction. While it affected reported numbers, the company views this as a strategic move towards a more franchised model, and adjusted figures are provided to better reflect underlying business trends.