1. McDonalds Corporation 1Summer 2003, Group ProjectMcDonalds Corporation (MCD) Jones Asia; Massinde Joan Patil Maya; Poletayeva Tatyana Romney Antonio; Tran De

2. McDonalds Corporation 2Table of Contest: 1. Background Analysis_______________________________________________3 a. Companys Financial Ratios____________________________________4 b. Companys 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 3. McDonalds Corporation3 McDonalds Corporation (MCD) 1. Background Analysis:McDonald's is the world's leading food service retailer with more than 30,000restaurants in 118 countries serving 46 million customers daily. It was founded by a mannamed Ray Kroc in 1955. Ray opened the first McDonald's in Des Plaines, Illinois in1955 and its first day revenue was $366.12! The Des Plaines building is no longer afunctioning restaurant but is now a museum containing McDonald's memorabilia andartifacts. McDonalds operates in the food service industry and primarily operates andfranchises quick-service restaurant businesses under the McDonald's brand.Approximately 80% of McDonald's restaurants and about 75% of the total revenues ofMcDonald's restaurants are in nine markets: Australia, Brazil, Canada, China, France,Germany, Japan, the United Kingdom and the United States. The Company also operatesother restaurant concepts under its Partner Brands: Boston Market, Chipotle MexicanGrill and Donatos Pizzeria. In addition, the Company has a minority ownership in Pret AManger. In March 2002, the Company sold its Aroma Caf business in the U.K. It holdsa leading share in the globally branded quick service restaurant segment of the informaleating-out market in virtually every country in which they do business. McDonald's has apeople 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 willstrengthen the McDonald's system. Furthermore, McDonald's is, by choice, an equalopportunity franchiser, with a proven track record of franchising to all segments ofsociety. In the United States, minorities and women currently represent over 34% of thefranchises and 70% of all applicants in training.The world's leading food serviceorganization is headquartered outside of Chicago, in Oak Brook, Illinois 4. McDonalds Corporation 4a. Companys Financial Ratio: Valuation The current P/E ratio of 27.44 for McDonalds is a good rating compared to 25.26of industry standard and 25.55 of sector average, and excellent in comparison to the S&P500. However, the P/E high of 41.12 for the last 5 yrs is only better than the industryaverage 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 revenuefor domestic as well as international markets. A major weakness was found in sales inquarter 1 vs. industry sales a year ago. The company rated poorly with 5.62 compared to11.41%. Also, the 5 yr. Sales Growth rate was only 6.19% well below the industryaverage of 10.48%. Earnings per share, and a year a ago, also proved poorly versusindustry stand. Financial Strength This is an important category for companies and McDonalds is no exception.They had an excellent quick ratio of .56 compared to the industry standard of .67. Thecurrent 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 tocontinue to be the #1 fast food chain. The strengths in this category were found in the 5yr. 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 5. McDonalds Corporation5 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. Incomparing return on assets to the industry, sector or the S&P 500, the company failedmiserably. It also has a weakness in 5yr. Return averages and return on investment. Theonly strength found here was in return on equity of 17.17% above industry average of14.95, 14.72 for the sector, but below S&P average of 20.72. Efficiency Ratios The company needs to make substantial improvements in becoming moreefficient to increase profits. Currents this is a major weakness for the company; a poorreceivable turnover of 18.25 compared to the rest of the categories. Another weaknesswas 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 McDonalds corporation had significant low ratios or bad ratings in thecourse of our analysis. However, we feel the company, like the industry as a whole, hashad a poor year relative to sales and profits. We feel that based on the fundamentalsalone, the company would not be among our first choices in purchasing the stock.Nevertheless, we feel optimistic on McDonalds outlook since their introducing newproducts such as salads, McGriddle breakfast sandwiches, and reinvesting in existingrestaurants to improve their product. These factors, along with the fundamentals, wouldmake McDonalds a good buy. 6. McDonalds Corporation6b. Companys stock information: Companys 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 20022001 20001.Background Analysis: . HPR = Ending Price Beginning Price + Distributions 0.240049751 -0.375143623 Beginning Price Dividend 0.24 0.235 0.225 0.215Price19.7 16.08 26.1134 HPR0.240049751 -0.375143623 (expected) 7. McDonalds Corporation7c. Board of Directors:Officer NameAge Since Current PositionDetails Adams, Jr., Hall69 1993 DirectorProfile Trading Activity Babrowski, Claire 45 President - Asia/Pacific, Middle East and Profile H.AfricaTrading Activity Bell, Charlie H.42 2003 President, Chief Operating Officer, Profile DirectorTrading Activity Brennan, Edward 69 2002 DirectorProfile A.Trading Activity Cantalupo, James59 Chairman of the Board, Chief ExecutiveProfile R.Officer Trading Activity Fenton, Tim 2003 Division President, McDonald's U.S.A. Profile East Division Trading Activity Hernandez, Jr., 47 1996 DirectorProfile Enrique Trading Activity Jackson, Jeanne P.51 1999 DirectorProfile Trading Activity Lederhausen, Mats 39 President - Business Development GroupProfile Trading Activity Light, M. Lawrence61 2002 Executive Vice President and Global Chief Profile Marketing Officer Trading Activity Lubin, Donald G.69 1967 DirectorProfile Trading Activity Massey, Walter E. 64 1998 DirectorProfile Trading Activity McKenna, Andrew 73 1991 DirectorProfile 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 USAProfile Trading Activity Sanchez, Eduardo45 President - Latin America and CanadaProfile Group Trading Activity Santona, Gloria 52 Senior Vice President, General Counsel, Profile Secretary Trading Activity Savage, Terry L.58 1990 DirectorProfile 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 HumanProfile Resources Trading Activity Stone, Roger W. 68 1989 DirectorProfile Trading Activity Thurston, Robert N. 70 1974 DirectorProfile Trading Activity 8. McDonalds Corporation 8 Turner, Fred L. 701968Senior Chairman and Director ProfileTrading Activity Recommendations to the Board: The board constitutes of officers and directors who most of own some McDonaldsstock. From the list provided, there are no family relations based on the fact that no twopeople on the board share a last name. Other corporations mainly own McDonalds ormutual fund companies so this really removes most of the power from the board even ifthey own stock. I would assume that the same pressure managers get from the board isthe same pressure the board gets from this corporation in order to get maximum value fortheir shares. The board is well established I think because when you look at McDonalds,its a worldwide corporation. The company has directors and officers who represent thedifferent 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 boardhave been there for over twenty years. With the changes that take place every day, I thinkthat 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 alsoboard members. This might reduce the loyalty of the corporation that they represent. Butat the end of the day its all about buying and selling stock and making the most money 9. McDonalds Corporation9 2. Free Cash Flow and Cost of Equity:2.FCFE200220012000 1999NI 8941,637 $1,9771,947.90(+)Deprecitaion1,0511,086 1010.7956.3(-)Capital Expenditures1,6341,530 1,642.3 -1,702(-) in working capital -2782701,004-514(+) in long-term debt1,1497122,212 -556FCFE 1,7371,6352,5534,564 (Mil)Note:Capital Expenditures 1,6341,530 1,642.3Additions to property, plant, and equipment 2003.81906.21945.1(-) Disposition of property and equipment369.5375.9302.81998 in wc = [(CA 02)-(CA01)]-[(CL02)-(CL01)]-2782701,004 -514CA 1,715 1,819.30 1662.4 1572.31,309.40CL 2,422 2,248.30 2360.9 3274.32,497.10 in long-term debt =LTD02-LTD01 1,1497122,212 -556LTD9,704 8,555.50 7843.9 5632.46,188.60.K (DCF model) P=(FCFE/Shares)/K-GFCFE1,737,200,000 k=(FCFE/shares)/P +G shares outstanding3,500,000,000G -0.0076P18.96 (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". 10. McDonalds Corporation103. Market Efficiency: (Announcement that James Cantalupo becomes CEO) On December 5, 2002, after watching McDonalds stock slide 60% in three years,the board ousted Chief Executive Jack M. Greenberg. His tenure was marked by theintroduction of 40 new menu items, none of which caught on big, and the purchase of ahandful of non-burger chains, none of which were rolled out widely enough to makemuch difference. Critics say that by trying so many different things and executing them 11. McDonalds Corporation11 poorly, Greenberg let the burger business deteriorate. The companys solution was tobring back retired Vice-Chairman James Cantalupo, who had overseen McDonaldssuccessful international expansion in the 80s and 90s. Unfortunately seven weeks later,the company reported the first quarterly loss in its 47 year history! The question now iswhether or not Cantalupo can reverse the long slide at McDonalds. Cantalupo says, Wehave to rebuild the foundation. Its fruitless to add growth if the foundation is weak. Heis concentrating on getting the basics of service and quality right, in part by reinstituting atough up or out grading system that will kick out underperforming franchisees. But theproblems at McDonalds go way beyond cleaning up restaurants and freshening themenu.The chain is being squeezed by long-term trends that threaten to leave itmarginalized. It faces a rapidly fragmenting market, where Americas recent immigrantshave made once exotic foods like sushi and burritos everyday options, and quick meals ofall sorts can be found in supermarkets, convenience stores, even vending machines. Forinvestors, they have already accepted that the growth days are over and will happily settlefor steady dividends. (MAD COW DISEASE) 12. McDonalds Corporation12 Shares fell sharply on Tuesday, May 19, 2003 after Canada said it has confirmed acase 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, Canadastop cattle-producing province, tested positive for the disease. Shares of McDonalds sank$1.21, or nearly 7 percent, to close at $16.95 on NYSE, making the stock the top loser inthe Dow Jones Industrial Average. McDonalds said in a statement that it does notimport any raw beef or hamburger patties from Canada for use in the United States. ItsCanadian operations only buy beef from facilities that are federally inspected andapproved by the Canadian Food Inspection Agency. The United States suspendedshipments of meat and livestock from Canada after this news. Some Analysts said thatthe 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, butthen it gradually rose again. This news did not hurt McDonalds as much in the UnitedStates.After analyzing graphs and news we decided that McDonalds has a Weak Marketform. The decision was based on the fact that both graphs were affected by the news notrapidly, which means that information was first available between insiders and only afterthis knowledge spread between the public. (The chart above is the prices for McDonalds over a ten year period.) 13. McDonalds Corporation134. 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 tax670.0.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) 14. McDonalds Corporation 145. Cost of Capital and Optimal Capital Structure: The Capital structure of McDonalds can be described as almost being a type Icapital structure. In this type of model, there is 50% debt and 50% equity. However,McDonalds figures are 49% debt and 51% equity for 2002 (see fig.1.1). This type ofcapital structure has remained relatively stable since 2000 (see fig. 1.2) as McDonaldsmanages its debt portfolio in response to changes in interest rates and foreign currencyrates by periodically retiring, redeeming and repurchasing debt, terminating exchangeagreements and using derivatives. This relates to the M&M Proposition, by proving oneof the three models correct. Model 1 of the M&M Proposition takes into account nooptimal structure and no taxes, the likes of which are not applicable to real-worldsituations. Model 2 takes tax into consideration but, has complete debt as a capitalstructure, which in the real-world is termed bankruptcy. Model 3 was the only model wedeemed useful or correct since the market value of the leveraged firm was found byconsidering tax, distress costs, and agency costs. Plus, the capital structure wascomprised of debt and equity, exactly like the McDonalds capital structure.Fig. 1.1Capital Structure 1 49% Debt 51% Equity 15. McDonalds Corporation15 Fig. 1.2Capital Structure 20022001 2000 Debt %: 4948 48 Equity %: 5152 52 5. Cost of Capital & Optimal Capital Structure: .WACC=We*Ke + Wd*kd*(1-T)+ Wp* Kp We= Equity/(Equity+Debt+Preferred Stock)0.42890.4211 0.6347 Wd=Debt/(Equity+Debt+Preferred Stock) 0.57110.5789 0.3653 Wp=Pref stock/(Eq+DR+Pref Stock) 0 00 Ke 0.00759995 0.00760.007599952 Kd 0.04991507 0.0434756 0.05938746 Kp 0 00 WACC0.02030.0347 0.0197 1.kd 20022001 2000 LTD LTDLTD0.052 35659.40.062 3293.80.0682793.20.052-995.40.053-1829.90.061-351.50.013 793.10.023 2364.80.066 914.10.055 677.80.057629.70.057 679.10.0311954.70.035 1724.90.0481609.60.0621152.60.061698.80.062 524.60.055 186.10.056150.30.072 233.30.062156 0.045276.90.055 346.50.019 237.30.062 58.90.06725.70.019 900.40.023 584 0.0275890.072 455.80.001227.90.005 262.40.048 415.70.071317.60.0863220.048 3.20.062 300 0.076 453.50.03217.90.0583.20.056 4.10.049915 0.155 23.20.12868.3kd20020.043476 0.059387kd2002 kd2000 16. McDonalds Corporation16 MM Proposition0.040.0350.0347 0.030.025WACC 0.02 0.01970.02030.015 0.010.0050 0.36170.3797 0.4048 D/TAMM PropositionsD/TAWACC 2000 0.3617 0.0197 2001 0.3797 0.0347 2002 0.4048 0.0203 17. McDonalds Corporation176. 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 yearthe relative price strength increasing, which means that stocks tend to continue tooutperform other stocks. The stock is clearly moving up fast in the rankings. MCD's P/Eratio is well above industry average and its mean that sooner or later the stock pricereflects its earning power, so a big jump in quarterly profits, particularly one that exceedsa company's long-term growth rate, which is good news if you own its shares. For thethree months ended 03/03, total revenues increased 6% to $3.8 billion. Net income beforeaccounting change rose 4% to $364.2 million. Revenues reflect higher sales fromcompany-operated restaurants. Earnings were partially offset by higher restaurantsoperating expenses. McDonald's Corporation, a large-cap growth company in theconsumer services sector, is expected to significantly outperform the market over the nextsix months with less than average risk. Stock closing price for the last days issignificantly growing and consistency is very high, which is very positive sigh for thecompany. Recommendation for the stock for the period is to hold, may be buy but not tosell. Talking about cash flow, in addition to its cash provided by operations, the companycan meet short-term funding needs through commercial paper borrowings and line ofcredit agreements. Operating income for both years, foreign currency translation had aminimal impact on the revenue growth rate as the stronger Euro and British Pound wereoffset by weaker Latin American currencies. Another good sign for the company is lowBeta, which mean the low risk for the company. Disadvantages that found by us in theprocess were that the price-to-earnings multiple is higher than the average for all stocks. 18. McDonalds 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 thebacked out estimate of the discount rates is not realistic. Accordingly, the Companypurposefully maintains a relatively low current ratio, which was .71 at year-end 2002.Consolidated operating income decreased $584 mln. (22%) in 2002; however, significantcharges of $853 million in 2002 were included in operating income. P/E to growth ratiosuggests stock may be overvalued - company's price-earnings multiple has risen at least25% above the average for its industry. Company sporting a P/E ratio substantially higherthan the average for its industry is presumably seen by investors as offering greater valuethan its peers. But a higher-than-average P/E also can mean greater risk, because ifsomething goes wrong with either the company or the industry, the stock price may havefarther to fall. Overall McDonalds corporation had significant low ratios or bad ratingsin the course of our analysis.However, we feel that company will be stable andprofitable for the recent future and stock prices will be rising or stay about the same. 19. McDonalds Corporation 197 Charts:a. 2002 Fastfood Sales (millions)McDonald's 15.45% 8%Yumi (KFC, PizzaHut,Taco Bell) 7.8 17% 47%Subway 5.7 Wendy's 2.7 Burger King 1.7 23%b.20032002U.S.$1,924.90 $1,765.00Europe 1,057.00 855.5APMEA***569.1 548Annual Sales Worldwide U.S. EuropeAPMEA***16%54% 30% 20. McDonalds Corporation20 9. Appendixes:a. Income StatementAnnual Income Statement (Values in Millions) 12/2002 12/2001 12/2000 12/1999 12/1998 Sales15,405.7 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 Profit8,788.0 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 EBITDA3,997.0 3,983.3 4,144.0 4,170.7 3,904.4 Depreciation & Amortization 1,050.8 1,086.3 1,010.7956.3 881.1 EBIT2,946.2 2,897.0 3,133.3 3,214.4 3,023.3 Other Income, Net-910.0 -52.0178.984.919.5 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 Income1,662.1 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/Charges0.0 -62.9 0.0 -18.9-321.6 Net Income from Cont. Operations 992.11,636.6 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 992.11,636.6 1,977.3 1,947.9 1,550.1 Normalized Income992.11,699.5 1,977.3 1,966.8 1,871.7 Extraordinary Income0.0 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 893.51,636.6 1,977.3 1,947.9 1,550.1 Dividends Paid per Share0.240.230.220.200.18 Preferred Dividends 0.000.000.000.000.00 Basic EPS from Cont. Operations 0.781.271.491.441.14 Basic EPS from Discont. Operations0.000.000.000.000.00 Basic EPS from Total Operations 0.781.271.491.441.14 Diluted EPS from Cont. Operations 0.771.251.461.391.11 21. McDonalds Corporation21 Diluted EPS from Discont. Operations 0.00 0.00 0.000.000.00 Diluted EPS from Total Operations0.77 1.25 1.461.391.11 b. Balance SheetAnnual Balance Sheet (Values in Millions) 12/2002 12/200112/200012/1999 12/1998 Assets Current Assets Cash and Equivalents330.4 418.1421.7419.5 299.2 Receivables 855.3 881.9796.5708.1 609.4 Inventories 111.7 105.5 99.3 82.777.3 Other Current Assets418.0 413.8344.9362.0 323.5Total Current Assets 1,715.41,819.31,662.41,572.3 1,309.4Non-Current Assets Property, Plant & Equipment, Gross26,218.6 24,106.0 23,569.0 22,486.8 21,758.0 Accum. Depreciation & Depletion7,635.2 6,816.5 6,521.4 6,162.3 5,716.4 Property, Plant & Equipment, Net18,583.4 17,289.5 17,047.6 16,324.5 16,041.6 Intangibles1,559.8 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 2,433.4Total Non-Current Assets22,255.1 20,715.2 20,021.1 19,410.9 18,475.0Total Assets23,970.5 22,534.5 21,683.5 20,983.2 19,784.4 Liabilities & Shareholder's Equity Current Liabilities Accounts Payable 635.8689.5684.9585.7 621.3 Short Term Debt275.8362.5630.01,619.9 854.8 Other Current Liabilities1,510.71,196.31,046.01,068.7 1,021.0Total Current Liabilities2,422.32,248.32,360.93,274.3 2,497.1Non-Current liabilites Long Term Debt 9,703.68,555.57,843.95,632.4 6,188.6 Deferred Income Taxes1,003.71,112.21,084.91,173.6 1,081.9 Other Non-Current Liabilities560.01,130.11,189.41,263.8 552.1 Minority Interest0.00.00.00.0 0.0Total Non-Current Liabilities 11,267.3 10,797.8 10,118.28,069.8 7,822.6Total Liabilities 13,689.6 13,046.1 12,479.1 11,344.1 10,319.7Shareholder's Equity Preferred Stock Equity 0.00.00.00.0 0.0 22. McDonalds Corporation 22 Common Stock Equity10,280.9 9,488.49,204.4 9,639.1 9,464.7Total Equity 10,280.9 9,488.49,204.4 9,639.1 9,464.7Total Liabilities & Stock Equity 23,970.5 22,534.5 21,683.5 20,983.2 19,784.4Total Common Shares Outstanding1.3 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 Shares392.4 Mil 379.9 Mil 355.7 Mil 309.8 Mil 304.4 Milc. Cash FlowAnnual Cash Flow (in Millions) 12/2002 12/2001 12/2000 12/1999 12/1998 Cash Flow from Operating Activities Net Income (Loss) 893.51,636.6 1,977.3 1,947.9 1,550.1 Depreciation and Amortization 1,050.81,086.3 1,010.7 956.3 881.1 Deferred Income Taxes -44.6-87.660.552.935.4 Operating (Gains) Losses 98.60.0 0.0 0.0 0.0 Extraordinary (Gains) Losses0.00.0 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. Assets0.00.0 0.0 0.0 0.0 (Decrease) Incr. in Payables-11.2 10.289.7 -23.9 -12.7 (Decrease) Incr. in Other Curr. Liabs.448.0160.0 -45.8 270.4 337.5 Other Non-Cash Items491.5 50.4-244.1 -65.122.9 Net Cash from Cont. Operations2,890.12,688.3 2,751.5 3,008.9 2,766.3 Net Cash from Discont. Operations 0.00.0 0.0 0.0 0.0Net Cash from Operating Activities2,890.12,688.3 2,751.5 3,008.9 2,766.3 Cash Flow from Investing Activities Cash Flow Provided by: Sale of Property, Plant, Equipment 369.5375.9302.8 262.4191.5 Sale of Short Term Investments 0.00.00.0 0.00.0 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 Investments0.00.00.00.00.0 Other Investing Changes Net-283.9 -206.3 -144.8 -315.7 -142.0Net 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 Debt1,502.61,694.7 2,440.4 1,019.2 1,461.5 Issuance of Capital Stock 0.00.0 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 23. McDonalds 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 310.9204.8 88.9193.0207.6Net Cash from Financing Activities-511.2 -623.7 -536.7 -626.8 -860.3Effect of Exchange Rate Changes 0.00.00.00.00.0 Net Change in Cash & Cash Equivalents -87.7 -3.62.2120.3-42.2 Cash at Beginning of Period 418.1421.7419.5299.2341.4 Free Cash Flow 40.5162.8100.2535.7528.1