8-KEarnings & ResultsFinancial EventsExhibits & Filings

MCDONALDS CORP 8-K Report, Financial Results (Apr 20, 2007)

Filed April 20, 2007For Securities:MCD

Summary

This 8-K filing from McDonald's Corporation on April 20, 2007, primarily reports on the company's strong first-quarter 2007 financial results and a significant strategic decision regarding its Latin America operations. The company announced robust revenue and earnings growth for the first quarter. However, a substantial event disclosed is the agreement to sell its existing operations in Brazil, Argentina, Mexico, Puerto Rico, Venezuela, and other Latin American and Caribbean countries to a developmental licensee. This transaction has led McDonald's to classify these assets as "held for sale" and will result in a substantial non-cash impairment charge of approximately $1.6 billion to be recorded in the second quarter of 2007. The majority of this charge relates to the difference between the book value of the assets and their estimated sale proceeds, along with historical foreign currency translation losses.

Key Highlights

  • 1McDonald's Corporation reported strong revenue and earnings growth for the first quarter of 2007.
  • 2The company has agreed to sell its existing operations in Brazil, Argentina, Mexico, Puerto Rico, Venezuela, and 13 other Latin American/Caribbean countries to a developmental licensee.
  • 3This transaction has led McDonald's to classify these Latam operations as assets 'held for sale' as of April 17, 2007.
  • 4A significant non-cash impairment charge of approximately $1.6 billion will be recorded in the second quarter of 2007 related to this sale.
  • 5The impairment charge includes approximately $800 million for the difference between the net book value and estimated cash proceeds, plus historical foreign currency translation losses of approximately $825 million.
  • 6Only a minor portion of the impairment charge, estimated at $15 million to $20 million, represents cash expenditures (transaction costs).

Frequently Asked Questions

The filing indicates that McDonald's announced strong revenue and earnings growth for the first quarter of 2007, as detailed in their investor release filed as Exhibit 99.1.

McDonald's has agreed to sell its existing operations in numerous Latin American and Caribbean countries, including Brazil, Argentina, Mexico, and Puerto Rico, to a developmental licensee organization.

The impairment charge of approximately $1.6 billion is being recorded because the company has decided to sell its Latin America operations. This charge reflects the difference between the assets' net book value and the expected sale proceeds, as well as historical foreign currency translation losses, in accordance with accounting standards for assets held for sale.

No, the impairment charge is largely non-cash. Only an estimated $15 million to $20 million is expected to result in actual cash expenditures, primarily for transaction costs. The bulk of the charge relates to accounting adjustments for asset values and currency translation.