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FS, MCDFinancial Statements, McDonalds ($millions)As of Dec 31, 20.docx
- 1. FS, MCDFinancial Statements, McDonalds ($millions)As of Dec 31, 2012:INCOME STATEMENT20132012Total Revenues$28,106$27,567Restaurant expenses17,20316,75120142013201220112010Gross profit$10,903$10,816SG & A expenses2,3862,455Sales1816918875186031829316233Impairm ent charges(credits)08Net Income47585586546555034946Other operating (income)expense(247)(252)EBIT$8,764$8,605Interest expense$522$517Other (income)expense$38$9Before-tax earnings$8,204$8,079Taxes2,6182,614Net income$5,586$5,465EPS$5.60$5.41BALANCE SHEET, as of Dec 3120132012ASSETSCash & equivalents$2,798$2,336Accounts & notes receivable1,3201,375Inventory124122Prepaid expenses8081,089Current assets$5,050$4,922Gross Prop & Equip40,35538,491Less Accum Depreciation(14,608)(13,814)Net Prop & Equip$25,747$24,677Goodwill2,8732,804Other Assets2,9562,983Total assets$36,626$35,387LIABILITIES AND EQUITIESAccounts payable$1,086$1,142Accrued payroll and other liabilities1,2641,375Other current liabilities820886Current liabilities$3,170$3,403Long-term debt$14,130$13,633Deferred taxes1,6481,531Other liabilities1,6691,526Total liabilities$20,617$20,093Common stock1717Additional paid-in capital5,9945,779Retained earnings41,75139,278Treasury stock and other(31,752)(29,780)Total equity$16,009$15,294Total liabilities & Equity$36,626$35,387Common shares out9981,010Common stock price*:20132012Jan 3, 2013, Jan 3, 2012$86.32$91.22Dec 30, 2013, Dec 31, 2012$95.44$84.02Average$90.88$87.62* Adjusted close, per Yahoo FinanceBook value per share$16.04$15.14 Going from 0 to 100 percent payout would have two possible effects. First, it might affect the price of the stock causing a
- 2. change in the formula value of the warrant; however, it is not at all clear that the stock price would change, let alone what the change would be. Second, and more important here, the increase in the payout ratio drastically lowers the expected growth rate. This reduces the chance of the stock going up in the future. This lowers the expected value of the warrant, hence the premium and the price of the warrant. FS, WENFinancial Statements, The Wendy's Company ($thousands)INCOME STATEMENT20132012Total revenues$2,487,410$2,505,242Cost of sales1,839,7401,881,248Gross profit$647,670$623,994SG & A expenses293,792287,808Depreciation182,359146,976Impairmen t & other expenses36,37766,463EBIT$135,142$122,747Interest expense69,01298,604Other (income)expense6,48937,268Before- tax earnings$59,641($13,125)Taxes and other (income)expense14,154(20,208)Net income$45,487$7,083EPS$0.096694$0.015057BALANCE SHEET20132012ASSETSCash & equivalents$580,152$453,361Accounts & notes receivable62,88561,164Inventory10,22613,805Prepaid expenses & other81,75924,231Deferred Taxes120,20691,489Advertising funds restricted assets67,18365,777Current assets$922,411$709,827Gross Prop & EquipLess Accum DepreciationNet Prop & Equip$1,165,487$1,250,338Goodwill842,544876,201Other intangibles1,305,7801,301,537Other Assets126,818165,296Total assets$4,363,040$4,303,199LIABILITIES AND EQUITIESAccounts payable$83,700$70,826Accrued Liabilities160,100137,348ST & current portion of LT debt38,54312,911Advertising funds restricted liabs67,18365,777Current liabilities$349,526$286,862Long- term debt1,425,2851,444,651Deferred taxes482,499438,217Other liabilities176,244147,614Total liabilities$2,433,554$2,317,344Common stock47,04247,042Additional paid-in
- 3. capital2,794,4452,782,765Retained earnings(492,215)(467,007)Treasury stock and other(419,786)(376,945)Total equity$1,929,486$1,985,855Total liabilities & Equity$4,363,040$4,303,199Common shares out470,424470,424Common stock price*:20132012Jan 2, 2013, Jan 3, 2012$4.53$4.96Dec 31, 2013, Dec 31, 2012$8.62$4.53Average$6.58$4.75* Adjusted close, per Yahoo Finance Going from 0 to 100 percent payout would have two possible effects. First, it might affect the price of the stock causing a change in the formula value of the warrant; however, it is not at all clear that the stock price would change, let alone what the change would be. Second, and more important here, the increase in the payout ratio drastically lowers the expected growth rate. This reduces the chance of the stock going up in the future. This lowers the expected value of the warrant, hence the premium and the price of the warrant. MCDONALDS CORP NYSE/MCD ONE MCDONALD'S PLAZAOAK BROOK IL 60523 630-623-3000 NAME
- 4. Company Overview Description/Structure The McDonald’s Corporation consists of approximately 420,000 as of year-end 2014 and operates in more than 100 Counties providing relevant food and drinks at reasonable competitive prices. The organization is owned and operated as company owned and 80% franchised restaurants franchisees which contribute to the Company’s revenue. The company maintains a mixture of both company and franchise restaurants in an effort to maintain optimal performance economic, financial, geographical factors and ability to maintain the McDonalds Brand are all considered when determining property ownership and franchise opportunities. McDonald’s Cooperation relies on franchisees for innovative ideas and the franchisees rely on the strength of the McDonald’s name. The business structure allows McDonald’s to capitalize on cash flow from the franchisees and according the business narrative, the Company requires franchisees to meet rigorous standards and ideal candidates are aggressive investors. Of the 36,258 restaurants in 119 countries at year-end 2014, 29,544 were franchised (including 20,774 franchised to conventional franchisees, 5,228 licensed to developmental licensees and 3,542 licensed to foreign affiliates ("affiliates"). The largest developmental licensee operates approximately 2,100 restaurants in 19 countries in Latin America and the Caribbean. Royalties from a percent of sales, net results in equity in earnings are received from foreign market affiliates with Japan being the largest affiliate with 3,100 restaurants. Main Products McDonald’s menu primarily focuses on hamburgers and cheeseburgers, Big Mac, Quarter Pounder with Cheese, Filet-O- Fish, several chicken sandwiches, Chicken McNuggets, wraps,
- 5. french fries, salads, oatmeal, shakes, McFlurry desserts, sundaes, soft serve cones, pies, soft drinks, coffee, McCafé beverages and other beverages. In addition, the restaurants sell a variety of seasonal food and drink selections as promotional offers. In addition to burgers the restaurant also offers a limited breakfast menu that includes McDonald’s restaurants in the U.S. and many international markets offer a full or limited breakfast menu that includes but not limited to Egg McMuffin, Sausage McMuffin with Egg, McGriddles, biscuit and bagel sandwiches and hotcakes. Geographic Operations According the SEC annual report McDonald’s is geographically located in the United States ("U.S."), Europe, and Asia/Pacific, Middle East and Africa ("APMEA"), Canada and Latin America. The U.S., Europe and APMEA segments account for 32%, 40% and 23% of total revenues. The United Kingdom ("U.K."), France, Russia and Germany, collectively, account for 68% of Europe’s revenues; and China, Australia and Japan (a 50%-owned affiliate accounted for under the equity method), collectively, account for 52% of APMEA’s revenues. These seven markets along with the U.S. and Canada are “major markets” and comprise 75% of total revenues. Recent Developments Challenges for the cooperation include rising competition of fast food restaurants and coffee shops and food safety incidents. The cooperation is currently facing severe food safety concerns that can have negative impact on business. Although, food safety remains a top priority for McDonalds, recent food safety incidents, including instances of food-borne illness, have occurred in the food industry in the past, and could occur in the future. In 2014, food quality issues were discovered at a supplier to McDonald’s and other food companies in China that affected markets in both China and Japan. A continuation of food safety issues will affect the brand, decrease in sales/revenue and a loss of loyalty in customers.
- 6. PART 2, FINANCIAL OVERVIEW: a. Sales and Income Record: ------------- Fiscal Years ------------- 2014 2013 2012 2011 2010 Sales 18,169 18,875 18,603 18,293 16,233 Percent change in sales each year 3.9% (1%) 1.7% (11%) Net Income 4,758 5586 5465 5503 4946 Percent change in net income each year 14.8% ( 2%) .7% (10%) GRAPH OF SALES & NET INCOME, FY 2010 – 2014 COMMENTS: Comment on the trends you see in your numbers and on the graph. Be sure to include comments! The numbers and the chart are meaningless by themselves. Comment on what you see. b. Expense Distribution: FY 2012 Major Expenses:
- 7. Company-operated restaurant expenses Food & paper 6,318.2 Payroll & employee benefits 4,710.3 Occupancy & other operating expenses 4,195.2 Franchised restaurants-occupancy expenses 1,527.0 Selling, general & administrative expenses 2,455.2 Other operating (income) expense, net (243.5)
- 8. PIE CHART OF EXPENSES, FY 2012 Note – Do not “explode” the pie slices COMMENTS: Comment on the company’s expense distribution. c. Assets Distribution: Year-end FY 2013 Assets: Cash 2,798.7 Accounts receivable 1,319.8 Inventory 123.7 Prepaid expenses and other current assets 807.9 5050.1 Other assets: 5,828.9 Property and Equipment : 25,747.3 PIE CHART OF ASSETS, Year-end FY 2013
- 9. COMMENTS: Comment on the company’s asset distribution. c. Capital Structure: Year-end FY 2012 Capital Structure: Current Liabilities Accounts payable 1086. Income taxes 215.5 Other taxes 383.1 Accrued interest 221.6 Accrued payroll and other liabilities 1,263.8 Long-term debt 14,129.8 Other Liabilities 1,669.1 Deferred income taxes 1,647.7 Common Equity 16.6 CAPITAL STRUCTURE PIE CHART, Year-end FY 2012 COMMENTS: Comment on the company’s capital structure. PART 3, RATIO ANALYSIS:
- 10. (1) LIQUIDITY: FY 2011 FY 2012 Current Ratio: McDonalds ____ ____ Wendy’s ____ ____ Quick Ratio: McDonalds ____ ____ Wendy’s ____ ____ Comments On McDonalds Liquidity: Be sure to include comments! The numbers are meaningless by themselves. Comment on what you see. What story do the numbers tell? (2) ASSET MANAGEMENT FY 2011 FY 2012 Total Asset Turnover: McDonalds ____ ____ Wendy’s ____ ____ Average Collection Period: McDonalds ____ ____ Wendy’s ____ ____
- 11. Comments On McDonalds Asset Management: (3) DEBT MANAGEMENT: FY 2011 FY 2012 Total Debt to Total Assets: McDonalds ____ ____ Wendy’s ____ ____ Times Interest Earned: McDonalds ____ ____ Wendy’s ____ ____ Comments On McDonalds Debt Management: (4) PROFITABILITY: FY 2011 FY 2012 Net profit Margin: McDonalds ____ ____ Wendy’s ____ ____ Return on Assets: McDonalds ____ ____ Wendy’s ____ ____ Return on Equity: McDonalds ____ ____ Wendy’s ____ ____ Modified Du Pont Equation, FY 2012:
- 12. McDonalds Wendy’s Net Profit Margin ____ ____ Total Asset Turnover ____ ____ Equity Multiplier ____ ____ Comments On McDonalds Profitability: (5) MARKET VALUE RATIOS: FY 2011 FY 2012 PE Ratio: McDonalds ____ ____ Wendy’s ____ ____ Market to Book Ratio: McDonalds ____ ____ Wendy’s ____ ____ Comments On McDonalds Market Value Ratios: PART 4, CONCLUSIONS AND RECOMMENDATIONS Summarize your analysis. Review your comments in the financial analysis section and provide your assessment of the overall status of the firm. Include any recommendations you think are appropriate. List any other recommendations you have for the firm in view of your analysis.
- 13. Sales 2014 2013 2012 2011 2010 18169 18875 18603 18293 16233 Net Income 2014 2013 2012 2011 2010 4758 5586 5465 5503 4946