McDonald’s
Presentation
Yan Huang
Sourabh Verma
Yee Man Suen
Stacey Carter
Agenda
Company Profile: Yan
Financial Statements: Sourabh
Ratios and Other Analysis: Yee Man
Key Developments: Stacey
Earnings Prediction: Stacey
McDonalds
120 Countries and Territories
Serve Nearly 54 million Customers a
day
Predominantly Products
Hamburgers, Sandwiches, French Fries, etc
Other Localized fare (salads, Wraps,
vegetarian
Other Restaurant Brands
Piles Café & Boston Market
Chipotle Mexican Grill (until 10/2006)
Donatos Pizza
Redbox
DVD Rental Machines
Company or Franchisees
Franchise arrangements, Foreign affiliated
markets and developmental licensees
Largest of these affiliates is Japan (3755
restaurants)
Not in the Practice of Franchising to
passive investors.
McDonald’s Around the
World
McDonald's has become emblematic of
globalization, sometimes referred as the
"McDonaldization" of society .
Global Location
Global Locations
“First” McDonalds
Now a Museum In Des
Plaines, IL; A replica of
the original
The Original
McDonalds, But the
Ninth
Marked the beginning
of future CEO Kroc‟s
involvement with the
firm
50th Anniversary
Rock „N‟ Roll in
Chicago, IL
Celebrated its 50th
anniversary
Stores Around the World
Meknes,
Morocco
South Korea
Stores Around the World
“Forever Young” Look
In Pennsylvania
Portsmouth, England
Being refurbished rather
Than rebuilt.
Stores Around the World
With a Playplace
in Moncton,
Canada
Riga, Latvia
Segment and Geographic
Breakdown
Segment and Geographic
Breakdown
Segment and Geographic
Breakdown
Debt Ratings
McDonald has debt in the form of long
term and notes payable.
Fitch, S&P and Moody‟s rate the
commercial paper as F1, A1 and P-2
respectively.
Similarly, long term debt is rated as
A,A and A3 respectively.
Companies key metrics for the credit
structure is show on the table next.
Debt
McDonalds Growth
Company has paid dividends on its common stock
for 33 years
And has increased the amount every year.
In 2008, company paid the dividend of $1.625
annually on the quarterly basis.
In 2007, company increased the annual dividend
50% to $1.5 per share.
At $1.5 per share, companies dividend is six times
more than $0.235 per share paid in 2002.
Reflects the companies confidence in the ongoing
strength and reliability of its cash flow.
Cash flow from Operations
Cash flow from operations totaled $5.9 billion and
exceeded capital expenditure by $3.8 billion in
2008.
Similarly for 2007,CFO totaled $4.9 billion and
exceeded capital expenditure by $2.9 billion.
CFO increased from 2007 to 2008 by $1.0 billion
primarily due to increased operating results and
lower income tax payments.
Whereas CFO from 2006 to 2007 was increased by
$535 million because of the operating results and
lower income tax.
Cash flow from
Investment
CFI totaled $1.6 billion in 2008, an increase of
$475 million compared with 2007.
Capital expenditure increased by $189 million in
2008, primarily driven by increase in Europe and
APMEA.
Higher Capital expenditure in 2007 offset the
LATAM transaction and sale of Boston market
decreasing the CFI by $125 million to $1.2 billion
in 2007.
Cash Flow from Financing
CFF totaled 4.1 billion in 2008, an increase of $118
million compared with 2007.
Financing activities reflected lower proceeds from
stock option exercises, mostly offset by higher debt
issuance.
Higher net debt issuance decreased the CFF by $1.5
billion to $4.0 billion, which is partly offset by higher
treasury stock purchase and increase in common
stock dividends.
As a result from all these activities companies cash
and equivalent increased by $82 million in 2008 to
$2.1 billion.
Liquidity Ratios
Current Ratio = 1.39 times
Quick Ratio = 1.18 times
Cash Ratio = 0.81 times
Receivable Turnover = 36.32 times
Average Days Sales Outstanding =
15.4 Days
Liquidity Ratios
Inventory Turnover = 36.32 times
Average Days Turnover = 9.97 Days
Payables Turnover = 6.89 times
Average Days Payables Outstanding = 52.98 Days
Profitability Ratios
Profit Margin = 18.34%
Assets Turnover = 0.81 times
Fixed Assets Turnover = 1.16 times
ROA=23%
ROE=30%
Long-Term Solvency &
Cash Flow Ratio
Debt to Equity = 0.76
Times Interest Earned = 12.78 times
Cash Flow from Operation Ratio = 2.33 times
Sales by Regions
US
6%
18% 34% Europe
APMEX
42% Other
Countries
Franchised vs Company
Operated
17.60%
Company operated
margins
Franshise Margins
82.40%
Systemwide sales
Increases
External Comparison
$23,522
$25,000
$20,000
Revenue
$15,000
$11,279
Income from
$10,000 operation
$6,443
$4,313
Net Income
$5,000 $2,455
$1,506
$964 $354 $190
$0
McDonald's Yum! Burger King
External Comparison
200% 187%
150%
Profit Margin
100%
ROA
ROE
50% 30%
18% 23% 14% 24%
9% 8% 7%
0%
McDonald's Yum! Burger King
External Comparison
10
1.13 1.39 2.33 0.55 0.88 2.18 0.89 0.53
0
-10 McDonald's Yum! Burger King
-20 Debt to Equity
Ratio
-30 Current Ratio
-40 Cash Flow From
-50 Operation
-60
-61.44
-70
Two Sides to McDonald’s
Story
Criticism Response
Removed super-sized fries and
“Super-size Me” effect drink from menu
“Adult” happy meals and
Accused of promoting healthy food alternatives
unhealthy food
Requires restaurant managers
Exploits workers by not to enroll in 401(k)
paying overtime rates
Conserves natural resources
Damages the and minimizes pollution
environment
McDonald’s and the
Economy
Growing sales while
industry as a whole
struggles
Raised prices during
recession
Added new
products
Menu Mistakes
Hulaburger
McPizza
Arch Deluxe
Salad shakers
Dinner menu
Roast beef sandwiches
McLean Deluxe
Earnings Prediction
Buy stock in Stock Snapshot
McDonald‟s
April 15th open $54.05
Earnings estimated to
be 0.82 and 0.95 per April 15th close $53.95
share for first two
quarters of 2009
Shares Outstanding:
$1.1 billion
Able to sustain despite
tough economic
conditions