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    McDonald's Â.doc McDonald's Â.doc Document Transcript

    • McDonald’s Corporation 1 Summer 2003, Group Project McDonald’s Corporation (MCD) Jones Asia; Massinde Joan Patil Maya; Poletayeva Tatyana Romney Antonio; Tran De
    • McDonald’s Corporation 2 Table of Contest: 1. Background Analysis_______________________________________________3 a. Company’s Financial Ratios____________________________________4 b. Company’s Stock Information__________________________________6 c. Board of Directors____________________________________________7 2. Free Cash Flow and Cost of Equity____________________________________9 3. Market Efficiency_________________________________________________10 4. Risk Analysis____________________________________________________13 5. Cost of Capital and Optimal Capital Structure___________________________14 6. Conclusion______________________________________________________17 7. Charts__________________________________________________________19 a. Competitors: Fast-food Sales b. Worldwide Sales 8. Appendixes______________________________________________________20 a. Income Statement___________________________________________21 b. Balance Sheet______________________________________________22 c. Statement of Cash Flow______________________________________23
    • McDonald’s Corporation 3 McDonald’s Corporation (MCD) 1. Background Analysis: McDonald's is the world's leading food service retailer with more than 30,000 restaurants in 118 countries serving 46 million customers daily. It was founded by a man named Ray Kroc in 1955. Ray opened the first McDonald's in Des Plaines, Illinois in 1955 and its first day revenue was $366.12! The Des Plaines building is no longer a functioning restaurant but is now a museum containing McDonald's memorabilia and artifacts. McDonald’s operates in the food service industry and primarily operates and franchises quick-service restaurant businesses under the McDonald's brand. Approximately 80% of McDonald's restaurants and about 75% of the total revenues of McDonald's restaurants are in nine markets: Australia, Brazil, Canada, China, France, Germany, Japan, the United Kingdom and the United States. The Company also operates other restaurant concepts under its Partner Brands: Boston Market, Chipotle Mexican Grill and Donatos Pizzeria. In addition, the Company has a minority ownership in Pret A Manger. In March 2002, the Company sold its Aroma Café business in the U.K. It holds a leading share in the globally branded quick service restaurant segment of the informal eating-out market in virtually every country in which they do business. McDonald's has a people promise which is to “be the best employer in each community around the world.” McDonald's believes in developing and maintaining a diverse workforce that will strengthen the McDonald's system. Furthermore, McDonald's is, by choice, an equal opportunity franchiser, with a proven track record of franchising to all segments of society. In the United States, minorities and women currently represent over 34% of the franchises and 70% of all applicants in training. The world's leading food service organization is headquartered outside of Chicago, in Oak Brook, Illinois
    • McDonald’s Corporation 4 a. Company’s Financial Ratio: Valuation The current P/E ratio of 27.44 for McDonald’s is a good rating compared to 25.26 of industry standard and 25.55 of sector average, and excellent in comparison to the S&P 500. However, the P/E high of 41.12 for the last 5 yrs is only better than the industry average of 34.63. Another weakness is found in comparing Price to Book or book value. Here, the company is below all other comparisons with a book price of 2.52. Growth Ratios Surprisingly, this was a poor category for the company given its size and revenue for domestic as well as international markets. A major weakness was found in sales in quarter 1 vs. industry sales a year ago. The company rated poorly with 5.62 compared to 11.41%. Also, the 5 yr. Sales Growth rate was only 6.19% well below the industry average of 10.48%. Earnings per share, and a year a ago, also proved poorly versus industry stand. Financial Strength This is an important category for companies and McDonald’s is no exception. They had an excellent quick ratio of .56 compared to the industry standard of .67. The current ratio also proved to be satisfactory with .79 compared to 1.01. Profitability ratios As far as profits, the company needs to improve in this field if they want to continue to be the #1 fast food chain. The strengths in this category were found in the 5 yr. net profit margin, the company had a higher (npm) of 11.70, above industry, sector, and S&P 500. Another positive sign was a lower effective tax rate of 33.35, again below
    • McDonald’s Corporation 5 industry average. Weakness included gross margin and 5yr. gross margins. Management Effectiveness Ratios This again proved to be another poor or weak category for the company. In comparing return on assets to the industry, sector or the S&P 500, the company failed miserably. It also has a weakness in 5yr. Return averages and return on investment. The only strength found here was in return on equity of 17.17% above industry average of 14.95, 14.72 for the sector, but below S&P average of 20.72. Efficiency Ratios The company needs to make substantial improvements in becoming more efficient to increase profits. Currents this is a major weakness for the company; a poor receivable turnover of 18.25 compared to the rest of the categories. Another weakness was the asset turnover at .66, below 1.25 industry average and 1.14 sector averages, and .93 S&P average. Net income along with employee income was also at a low. Conclusion Overall McDonald’s corporation had significant low ratios or “bad” ratings in the course of our analysis. However, we feel the company, like the industry as a whole, has had a poor year relative to sales and profits. We feel that based on the fundamentals alone, the company would not be among our first choices in purchasing the stock. Nevertheless, we feel optimistic on McDonald’s outlook since their introducing new products such as salads, McGriddle breakfast sandwiches, and reinvesting in existing restaurants to improve their product. These factors, along with the fundamentals, would make McDonalds a good buy.
    • McDonald’s Corporation 6 b. Company’s stock information: Company’s share price on 03 June 2003 is 19.17 Average daily trading volume is 7.616 Mil Trading volume on 03 June 2003 is 4.46 Mil Market capitalization is 24.22 Bil Holding Period Return: 2003 2002 2001 2000 1.Background Analysis: . HPR = Ending Price – Beginning Price + Distributions 0.240049751 -0.375143623 Beginning Price Dividend 0.24 0.235 0.225 0.215 Price 19.7 16.08 26.11 34 HPR 0.240049751 -0.375143623 (expected)
    • McDonald’s Corporation 7 c. Board of Directors: Officer Name Age Since Current Position Details Adams, Jr., Hall 69 1993 Director Profile Trading Activity Babrowski, Claire 45 — President - Asia/Pacific, Middle East and Profile H. Africa Trading Activity Bell, Charlie H. 42 2003 President, Chief Operating Officer, Profile Director Trading Activity Brennan, Edward 69 2002 Director Profile A. Trading Activity Cantalupo, James 59 — Chairman of the Board, Chief Executive Profile R. Officer Trading Activity Fenton, Tim — 2003 Division President, McDonald's U.S.A. Profile East Division Trading Activity Hernandez, Jr., 47 1996 Director Profile Enrique Trading Activity Jackson, Jeanne P. 51 1999 Director Profile Trading Activity Lederhausen, Mats 39 — President - Business Development Group Profile Trading Activity Light, M. Lawrence 61 2002 Executive Vice President and Global Chief Profile Marketing Officer Trading Activity Lubin, Donald G. 69 1967 Director Profile Trading Activity Massey, Walter E. 64 1998 Director Profile Trading Activity McKenna, Andrew 73 1991 Director Profile J. Trading Activity Paull, Matthew H. 51 2001 Chief Financial Officer, Executive Vice Profile President Trading Activity Pojman, David M. 43 — Senior Vice President, Controller Profile Trading Activity Roberts, Michael J. 52 — President - McDonald's USA Profile Trading Activity Sanchez, Eduardo 45 — President - Latin America and Canada Profile Group Trading Activity Santona, Gloria 52 — Senior Vice President, General Counsel, Profile Secretary Trading Activity Savage, Terry L. 58 1990 Director Profile Trading Activity Skinner, James A. 58 — Vice Chairman Profile Trading Activity Smyth, Russell P. 46 — President - McDonald's Europe Profile Trading Activity Stein, Stanley R. 60 — Executive Vice President, Global Human Profile Resources Trading Activity Stone, Roger W. 68 1989 Director Profile Trading Activity Thurston, Robert N. 70 1974 Director Profile Trading Activity
    • McDonald’s Corporation 8 Turner, Fred L. 70 1968 Senior Chairman and Director Profile Trading Activity Recommendations to the Board: The board constitutes of officers and directors who most of own some McDonalds stock. From the list provided, there are no family relations based on the fact that no two people on the board share a last name. Other corporations mainly own McDonalds or mutual fund companies so this really removes most of the power from the board even if they own stock. I would assume that the same pressure managers get from the board is the same pressure the board gets from this corporation in order to get maximum value for their shares. The board is well established I think because when you look at McDonalds, it’s a worldwide corporation. The company has directors and officers who represent the different regions that the corporation is in, for example Africa, Latin America, Asia e.t.c. The only improvement that I think would be good is that some of the people on the board have been there for over twenty years. With the changes that take place every day, I think that having a time limit of how long one should serve on the board would be advisable. Also many of the board members own other stocks in other corporations and they are also board members. This might reduce the loyalty of the corporation that they represent. But at the end of the day it’s all about buying and selling stock and making the most money
    • McDonald’s Corporation 9 2. Free Cash Flow and Cost of Equity: 2.FCFE 2002 2001 2000 1999 NI 894 1,637 $1,977 1,947.90 (+)Deprecitaion 1,051 1,086 1010.7 956.3 (-)Capital Expenditures 1,634 1,530 1,642.3 -1,702 (-)∆ in working capital -278 270 1,004 -514 (+) ∆ in long-term debt 1,149 712 2,212 -556 FCFE 1,737 1,635 2,553 4,564 (Mil) Note: Capital Expenditures 1,634 1,530 1,642.3 Additions to property, plant, and equipment 2003.8 1906.2 1945.1 (-) Disposition of property and equipment 369.5 375.9 302.8 1998 ∆ in wc = [(CA 02)-(CA01)]-[(CL02)-(CL01)] -278 270 1,004 -514 CA 1,715 1,819.30 1662.4 1572.3 1,309.40 CL 2,422 2,248.30 2360.9 3274.3 2,497.10 ∆ in long-term debt =LTD02-LTD01 1,149 712 2,212 -556 LTD 9,704 8,555.50 7843.9 5632.4 6,188.60 .K (DCF model) P=(FCFE/Shares)/K-G FCFE 1,737,200,000 k=(FCFE/shares)/P +G shares outstanding 3,500,000,000 G -0.0076 P 18.96 (6/4/03) K(required return on equity) 0.018578421 The backed out estimate of the discount rates is not realistic. This is because the growth rate is assumed to be constant but in truth this is not so. Another reason this is not realistic is because we used 2002 not 2003 figures to estimate the"G".
    • McDonald’s Corporation 10 3. Market Efficiency: (Announcement that James Cantalupo becomes CEO) On December 5, 2002, after watching McDonald’s stock slide 60% in three years, the board ousted Chief Executive Jack M. Greenberg. His tenure was marked by the introduction of 40 new menu items, none of which caught on big, and the purchase of a handful of non-burger chains, none of which were rolled out widely enough to make much difference. Critics say that by trying so many different things and executing them
    • McDonald’s Corporation 11 poorly, Greenberg let the burger business deteriorate. The company’s solution was to bring back retired Vice-Chairman James Cantalupo, who had overseen McDonald’s successful international expansion in the 80’s and 90’s. Unfortunately seven weeks later, the company reported the first quarterly loss in its 47 year history! The question now is whether or not Cantalupo can reverse the long slide at McDonald’s. Cantalupo says, “We have to rebuild the foundation. It’s fruitless to add growth if the foundation is weak.” He is concentrating on getting the basics of service and quality right, in part by reinstituting a tough “up or out” grading system that will kick out underperforming franchisees. But the problems at McDonald’s go way beyond cleaning up restaurants and freshening the menu. The chain is being squeezed by long-term trends that threaten to leave it marginalized. It faces a rapidly fragmenting market, where America’s recent immigrants have made once exotic foods like sushi and burritos everyday options, and quick meals of all sorts can be found in supermarkets, convenience stores, even vending machines. For investors, they have already accepted that the growth days are over and will happily settle for steady dividends. (MAD COW DISEASE)
    • McDonald’s Corporation 12 Shares fell sharply on Tuesday, May 19, 2003 after Canada said it has confirmed a case of mad cow disease. The fatal brain-wasting disease has never been detected in U.S. cattle, but a case so close to the U.S. border scared investors. A cow in Alberta, Canada’s top cattle-producing province, tested positive for the disease. Shares of McDonald’s sank $1.21, or nearly 7 percent, to close at $16.95 on NYSE, making the stock the top loser in the Dow Jones Industrial Average. McDonald’s said in a statement that it does not import any raw beef or hamburger patties from Canada for use in the United States. Its Canadian operations only buy beef from facilities that are federally inspected and approved by the Canadian Food Inspection Agency. The United States suspended shipments of meat and livestock from Canada after this news. Some Analysts said that the concern over mad cow in Canada could affect consumer beef buying in the U.S. market. The price fell sharply the first day that the mad cow disease was announced, but then it gradually rose again. This news did not hurt McDonald’s as much in the United States. After analyzing graphs and news we decided that McDonald’s has a Weak Market form. The decision was based on the fact that both graphs were affected by the news not rapidly, which means that information was first available between insiders and only after this knowledge spread between the public. (The chart above is the prices for McDonald’s over a ten year period.)
    • McDonald’s Corporation 13 4. Risk Analysis: 2002 4. Risk Analysis: Beta MCD 0.692717 Beta= COV(Rmcd, RS&P500)/VAR(RS&P500) Unlevered Beta 0.385958 [Equity/(Equity +((1-T)Debt))]* BetaEquity=Beta_unlevered Equity 10,280.90 Debt 13,689.60 Tax rate 0.403105 Income form continuing operations before income taxes 1,662.1 Provision for income tax 670.0 .K (CAPM) K= Rf + Beta(Rm-Rf) K(required return on equity) 0.08349 we assume Rf=3.5% and Rm-Rf=7%, and use Beta=.692717 The company is currently overpriced because K(CAPM)> K( DCF model)
    • McDonald’s Corporation 14 5. Cost of Capital and Optimal Capital Structure: The Capital structure of McDonald’s can be described as almost being a type I capital structure. In this type of model, there is 50% debt and 50% equity. However, McDonald’s figures are 49% debt and 51% equity for 2002 (see fig.1.1). This type of capital structure has remained relatively stable since 2000 (see fig. 1.2) as McDonalds manages its debt portfolio in response to changes in interest rates and foreign currency rates by periodically retiring, redeeming and repurchasing debt, terminating exchange agreements and using derivatives. This relates to the M&M Proposition, by proving one of the three models correct. Model 1 of the M&M Proposition takes into account no optimal structure and no taxes, the likes of which are not applicable to real-world situations. Model 2 takes tax into consideration but, has complete debt as a capital structure, which in the real-world is termed bankruptcy. Model 3 was the only model we deemed useful or correct since the market value of the leveraged firm was found by considering tax, distress costs, and agency costs. Plus, the capital structure was comprised of debt and equity, exactly like the McDonalds capital structure. Fig. 1.1 Capital Structure 1 49% Debt 51% Equity
    • McDonald’s Corporation 15 Fig. 1.2 Capital Structure 2002 2001 2000 Debt %: 49 48 48 Equity %: 51 52 52 5. Cost of Capital & Optimal Capital Structure: .WACC=We*Ke + Wd*kd*(1-T)+ Wp* Kp We= Equity/(Equity+Debt+Preferred Stock) 0.4289 0.4211 0.6347 Wd=Debt/(Equity+Debt+Preferred Stock) 0.5711 0.5789 0.3653 Wp=Pref stock/(Eq+DR+Pref Stock) 0 0 0 Ke 0.00759995 0.0076 0.007599952 Kd 0.04991507 0.0434756 0.05938746 Kp 0 0 0 WACC 0.0203 0.0347 0.0197 1.kd 2002 2001 2000 LTD LTD LTD 0.052 35659.4 0.062 3293.8 0.068 2793.2 0.052 -995.4 0.053 -1829.9 0.061 -351.5 0.013 793.1 0.023 2364.8 0.066 914.1 0.055 677.8 0.057 629.7 0.057 679.1 0.031 1954.7 0.035 1724.9 0.048 1609.6 0.062 1152.6 0.061 698.8 0.062 524.6 0.055 186.1 0.056 150.3 0.072 233.3 0.062 156 0.045 276.9 0.055 346.5 0.019 237.3 0.062 58.9 0.067 25.7 0.019 900.4 0.023 584 0.027 589 0.072 455.8 0.001 227.9 0.005 262.4 0.048 415.7 0.071 317.6 0.086 322 0.048 3.2 0.062 300 0.076 453.5 0.032 17.9 0.058 3.2 0.056 4.1 0.049915 0.155 23.2 0.128 68.3 kd2002 0.043476 0.059387 kd2002 kd2000
    • McDonald’s Corporation 16 MM Proposition 0.04 0.035 0.0347 0.03 0.025 WACC 0.02 0.0197 0.0203 0.015 0.01 0.005 0 0.3617 0.3797 0.4048 D/TA MM Propositions D/TA WACC 2000 0.3617 0.0197 2001 0.3797 0.0347 2002 0.4048 0.0203
    • McDonald’s Corporation 17 6. Conclusion In the course of analysis the company we found more weaknesses than strengths; however, in the year 2002 and 2003 company had a significant improvement. This year the relative price strength increasing, which means that stocks tend to continue to outperform other stocks. The stock is clearly moving up fast in the rankings. MCD's P/E ratio is well above industry average and it’s mean that sooner or later the stock price reflects its earning power, so a big jump in quarterly profits, particularly one that exceeds a company's long-term growth rate, which is good news if you own its shares. For the three months ended 03/03, total revenues increased 6% to $3.8 billion. Net income before accounting change rose 4% to $364.2 million. Revenues reflect higher sales from company-operated restaurants. Earnings were partially offset by higher restaurants operating expenses. McDonald's Corporation, a large-cap growth company in the consumer services sector, is expected to significantly outperform the market over the next six months with less than average risk. Stock closing price for the last days is significantly growing and consistency is very high, which is very positive sigh for the company. Recommendation for the stock for the period is to hold, may be buy but not to sell. Talking about cash flow, in addition to its cash provided by operations, the company can meet short-term funding needs through commercial paper borrowings and line of credit agreements. Operating income for both years, foreign currency translation had a minimal impact on the revenue growth rate as the stronger Euro and British Pound were offset by weaker Latin American currencies. Another good sign for the company is low Beta, which mean the low risk for the company. Disadvantages that found by us in the process were that the price-to-earnings multiple is higher than the average for all stocks.
    • McDonald’s Corporation 18 Shares are neither being accumulated heavily nor sold heavily by financial institutions. The company is currently overpriced because K(CAPM)> K( DCF model) and the backed out estimate of the discount rates is not realistic. Accordingly, the Company purposefully maintains a relatively low current ratio, which was .71 at year-end 2002. Consolidated operating income decreased $584 mln. (22%) in 2002; however, significant charges of $853 million in 2002 were included in operating income. P/E to growth ratio suggests stock may be overvalued - company's price-earnings multiple has risen at least 25% above the average for its industry. Company sporting a P/E ratio substantially higher than the average for its industry is presumably seen by investors as offering greater value than its peers. But a higher-than-average P/E also can mean greater risk, because if something goes wrong with either the company or the industry, the stock price may have farther to fall. Overall McDonald’s corporation had significant low ratios or “bad” ratings in the course of our analysis. However, we feel that company will be stable and profitable for the recent future and stock prices will be rising or stay about the same.
    • McDonald’s Corporation 19 7 Charts: a. 2002 Fastfood Sales (millions) McDonald's 15.4 5% 8% Yumi (KFC, Pizza Hut,Taco Bell) 7.8 17% 47% Subway 5.7 Wendy's 2.7 Burger King 1.7 23% b. 2003 2002 U.S. $1,924.90 $1,765.00 Europe 1,057.00 855.5 APMEA*** 569.1 548 Annual Sales Worldwide U.S. Europe APMEA*** 16% 54% 30%
    • McDonald’s Corporation 20 9. Appendixes: a. Income Statement Annual Income Statement (Values in Millions) 12/2002 12/2001 12/2000 12/1999 12/1998 Sales 15,405.7 14,870.0 14,243.0 13,259.3 12,421.4 Cost of Sales 6,617.7 6,323.8 5,821.5 5,192.7 4,838.2 Gross Operating Profit 8,788.0 8,546.2 8,421.5 8,066.6 7,583.2 Selling, General & Admin. Expense 4,791.0 4,562.9 4,277.5 3,895.9 3,678.8 Other Taxes 0.0 0.0 0.0 0.0 0.0 EBITDA 3,997.0 3,983.3 4,144.0 4,170.7 3,904.4 Depreciation & Amortization 1,050.8 1,086.3 1,010.7 956.3 881.1 EBIT 2,946.2 2,897.0 3,133.3 3,214.4 3,023.3 Other Income, Net -910.0 -52.0 178.9 84.9 19.5 Total Income Avail for Interest Exp. 2,036.2 2,782.1 3,312.2 3,280.4 2,721.2 Interest Expense 374.1 452.4 429.9 396.3 413.8 Minority Interest 0.0 0.0 0.0 0.0 0.0 Pre-tax Income 1,662.1 2,329.7 2,882.3 2,884.1 2,307.4 Income Taxes 670.0 693.1 905.0 936.2 757.3 Special Income/Charges 0.0 -62.9 0.0 -18.9 -321.6 Net Income from Cont. Operations 992.1 1,636.6 1,977.3 1,947.9 1,550.1 Net Income from Discont. Opers. 0.0 0.0 0.0 0.0 0.0 Net Income from Total Operations 992.1 1,636.6 1,977.3 1,947.9 1,550.1 Normalized Income 992.1 1,699.5 1,977.3 1,966.8 1,871.7 Extraordinary Income 0.0 0.0 0.0 0.0 0.0 Income from Cum. Eff. of Acct. Chg. -98.6 0.0 0.0 0.0 0.0 Income from Tax Loss Carryforward 0.0 0.0 0.0 0.0 0.0 Other Gains (Losses) 0.0 0.0 0.0 0.0 0.0 Total Net Income 893.5 1,636.6 1,977.3 1,947.9 1,550.1 Dividends Paid per Share 0.24 0.23 0.22 0.20 0.18 Preferred Dividends 0.00 0.00 0.00 0.00 0.00 Basic EPS from Cont. Operations 0.78 1.27 1.49 1.44 1.14 Basic EPS from Discont. Operations 0.00 0.00 0.00 0.00 0.00 Basic EPS from Total Operations 0.78 1.27 1.49 1.44 1.14 Diluted EPS from Cont. Operations 0.77 1.25 1.46 1.39 1.11
    • McDonald’s Corporation 21 Diluted EPS from Discont. Operations 0.00 0.00 0.00 0.00 0.00 Diluted EPS from Total Operations 0.77 1.25 1.46 1.39 1.11 b. Balance Sheet Annual Balance Sheet (Values in Millions) 12/2002 12/2001 12/2000 12/1999 12/1998 Assets Current Assets Cash and Equivalents 330.4 418.1 421.7 419.5 299.2 Receivables 855.3 881.9 796.5 708.1 609.4 Inventories 111.7 105.5 99.3 82.7 77.3 Other Current Assets 418.0 413.8 344.9 362.0 323.5 Total Current Assets 1,715.4 1,819.3 1,662.4 1,572.3 1,309.4 Non-Current Assets Property, Plant & Equipment, Gross 26,218.6 24,106.0 23,569.0 22,486.8 21,758.0 Accum. Depreciation & Depletion 7,635.2 6,816.5 6,521.4 6,162.3 5,716.4 Property, Plant & Equipment, Net 18,583.4 17,289.5 17,047.6 16,324.5 16,041.6 Intangibles 1,559.8 1,419.8 1,443.4 1,261.8 0.0 Other Non-Current Assets 2,111.9 2,005.9 1,530.1 1,824.6 2,433.4 Total Non-Current Assets 22,255.1 20,715.2 20,021.1 19,410.9 18,475.0 Total Assets 23,970.5 22,534.5 21,683.5 20,983.2 19,784.4 Liabilities & Shareholder's Equity Current Liabilities Accounts Payable 635.8 689.5 684.9 585.7 621.3 Short Term Debt 275.8 362.5 630.0 1,619.9 854.8 Other Current Liabilities 1,510.7 1,196.3 1,046.0 1,068.7 1,021.0 Total Current Liabilities 2,422.3 2,248.3 2,360.9 3,274.3 2,497.1 Non-Current liabilites Long Term Debt 9,703.6 8,555.5 7,843.9 5,632.4 6,188.6 Deferred Income Taxes 1,003.7 1,112.2 1,084.9 1,173.6 1,081.9 Other Non-Current Liabilities 560.0 1,130.1 1,189.4 1,263.8 552.1 Minority Interest 0.0 0.0 0.0 0.0 0.0 Total Non-Current Liabilities 11,267.3 10,797.8 10,118.2 8,069.8 7,822.6 Total Liabilities 13,689.6 13,046.1 12,479.1 11,344.1 10,319.7 Shareholder's Equity Preferred Stock Equity 0.0 0.0 0.0 0.0 0.0
    • McDonald’s Corporation 22 Common Stock Equity 10,280.9 9,488.4 9,204.4 9,639.1 9,464.7 Total Equity 10,280.9 9,488.4 9,204.4 9,639.1 9,464.7 Total Liabilities & Stock Equity 23,970.5 22,534.5 21,683.5 20,983.2 19,784.4 Total Common Shares Outstanding 1.3 Bil 1.3 Bil 1.3 Bil 1.4 Bil 1.4 Bil Preferred Shares 0.0 0.0 0.0 0.0 0.0 Treasury Shares 392.4 Mil 379.9 Mil 355.7 Mil 309.8 Mil 304.4 Mil c. Cash Flow Annual Cash Flow (in Millions) 12/2002 12/2001 12/2000 12/1999 12/1998 Cash Flow from Operating Activities Net Income (Loss) 893.5 1,636.6 1,977.3 1,947.9 1,550.1 Depreciation and Amortization 1,050.8 1,086.3 1,010.7 956.3 881.1 Deferred Income Taxes -44.6 -87.6 60.5 52.9 35.4 Operating (Gains) Losses 98.6 0.0 0.0 0.0 0.0 Extraordinary (Gains) Losses 0.0 0.0 0.0 0.0 0.0 Change in Working Capital (Increase) Decr. in Receivables 1.6 -104.7 -67.2 -81.9 -29.9 (Increase) Decr. in Inventories -38.1 -62.9 -29.6 -47.7 -18.1 (Increase) Decr. in Other Curr. Assets 0.0 0.0 0.0 0.0 0.0 (Decrease) Incr. in Payables -11.2 10.2 89.7 -23.9 -12.7 (Decrease) Incr. in Other Curr. Liabs. 448.0 160.0 -45.8 270.4 337.5 Other Non-Cash Items 491.5 50.4 -244.1 -65.1 22.9 Net Cash from Cont. Operations 2,890.1 2,688.3 2,751.5 3,008.9 2,766.3 Net Cash from Discont. Operations 0.0 0.0 0.0 0.0 0.0 Net Cash from Operating Activities 2,890.1 2,688.3 2,751.5 3,008.9 2,766.3 Cash Flow from Investing Activities Cash Flow Provided by: Sale of Property, Plant, Equipment 369.5 375.9 302.8 262.4 191.5 Sale of Short Term Investments 0.0 0.0 0.0 0.0 0.0 Cash Used by: Purchase of Property, Plant, Equipmt. -2,552.2 -2,237.8 -2,370.6 -2,208.5 -1,997.7 Purchase of Short Term Investments 0.0 0.0 0.0 0.0 0.0 Other Investing Changes Net -283.9 -206.3 -144.8 -315.7 -142.0 Net Cash from Investing Activities -2,466.6 -2,068.2 -2,212.6 -2,261.8 -1,948.2 Cash Flow from Financing Activities Cash Flow Provided by: Issuance of Debt 1,502.6 1,694.7 2,440.4 1,019.2 1,461.5 Issuance of Capital Stock 0.0 0.0 0.0 0.0 0.0 Cash Used for: Repayment of Debt -1,357.1 -1,167.4 -761.9 -682.8 -1,199.1
    • McDonald’s Corporation 23 Repurchase of Capital Stock -670.2 -1,068.1 -2,023.4 -891.5 -1,089.8 Payment of Cash Dividends -297.4 -287.7 -280.7 -264.7 -240.5 Other Financing Charges, Net 310.9 204.8 88.9 193.0 207.6 Net Cash from Financing Activities -511.2 -623.7 -536.7 -626.8 -860.3 Effect of Exchange Rate Changes 0.0 0.0 0.0 0.0 0.0 Net Change in Cash & Cash Equivalents -87.7 -3.6 2.2 120.3 -42.2 Cash at Beginning of Period 418.1 421.7 419.5 299.2 341.4 Free Cash Flow 40.5 162.8 100.2 535.7 528.1