Stock Analysis on Net

McDonald’s Corp. (NYSE:MCD)

Analysis of Operating Leases

Microsoft Excel LibreOffice Calc

An operating lease is treated like a rental contract. Neither the leased asset nor the associated liability is reported on the lessee balance sheet, but the rights may be very similar to the rights of an owner. The lessee only records the lease payments as a rental expense in income statement.


Present Value of Future Operating Lease Payments (before Adoption of FASB Topic 842)

McDonald’s Corp., future operating lease payments (before adoption of FASB Topic 842)

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Total undiscounted future operating lease payments 12,266,300  11,856,900  12,252,500 
Discount rate1 3.15% 3.11% 3.19%
 
Total present value of future operating lease payments 9,938,824  9,673,356  10,093,270 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1 Weighted-average interest rate for McDonald’s Corp. debt

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.15%
2019 1,144,700  2019 1,144,700  1,109,743 
2020 1,083,100  2020 1,083,100  1,017,959 
2021 1,001,200  2021 1,001,200  912,248 
2022 909,500  2022 909,500  803,389 
2023 830,600  2023 830,600  711,288 
2024 and thereafter 7,297,200  2024 830,600  689,567 
2025 830,600  668,509 
2026 830,600  648,094 
2027 830,600  628,303 
2028 830,600  609,115 
2029 830,600  590,514 
2030 830,600  572,481 
2031 830,600  554,999 
2032 652,400  422,615 
Total: 12,266,300  12,266,300  9,938,824 

Based on: 10-K (reporting date: 2018-12-31).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.11%
2018 1,151,900  2018 1,151,900  1,117,156 
2019 1,087,000  2019 1,087,000  1,022,417 
2020 996,700  2020 996,700  909,206 
2021 903,500  2021 903,500  799,328 
2022 805,500  2022 805,500  691,133 
2023 and thereafter 6,912,300  2023 805,500  670,287 
2024 805,500  650,070 
2025 805,500  630,462 
2026 805,500  611,446 
2027 805,500  593,004 
2028 805,500  575,118 
2029 805,500  557,771 
2030 805,500  540,948 
2031 468,300  305,009 
Total: 11,856,900  11,856,900  9,673,356 

Based on: 10-K (reporting date: 2017-12-31).

Year Future operating lease payments (as reported) Year Future operating lease payments (estimated) Present value at 3.19%
2017 1,303,000  2017 1,303,000  1,262,719 
2018 1,199,900  2018 1,199,900  1,126,860 
2019 1,102,500  2019 1,102,500  1,003,381 
2020 1,000,800  2020 1,000,800  882,667 
2021 891,900  2021 891,900  762,304 
2022 and thereafter 6,754,400  2022 891,900  738,738 
2023 891,900  715,901 
2024 891,900  693,770 
2025 891,900  672,323 
2026 891,900  651,538 
2027 891,900  631,397 
2028 891,900  611,878 
2029 511,100  339,795 
Total: 12,252,500  12,252,500  10,093,270 

Based on: 10-K (reporting date: 2016-12-31).


Adjustments to Financial Statements for Operating Leases

McDonald’s Corp., adjustments to financial statements

US$ in thousands

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Adjustment to Total Assets
Total assets (as reported) 52,626,800  47,510,800  32,811,200  33,803,700  31,023,900 
Add: Operating lease right-of-use asset (before adoption of FASB Topic 842)1 —  —  9,938,824  9,673,356  10,093,270 
Total assets (adjusted) 52,626,800  47,510,800  42,750,024  43,477,056  41,117,170 
Adjustment to Total Debt
Total debt (as reported) 37,440,400  34,177,200  31,075,300  29,536,400  25,955,700 
Add: Operating lease liability (before adoption of FASB Topic 842)2 —  —  9,938,824  9,673,356  10,093,270 
Add: Current lease liability 701,500  621,000  —  —  — 
Add: Long-term lease liability 13,321,300  12,757,800  —  —  — 
Total debt (adjusted) 51,463,200  47,556,000  41,014,124  39,209,756  36,048,970 

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

1, 2 Equal to total present value of future operating lease payments.


McDonald’s Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios for Operating Leases (Summary)

McDonald’s Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Total Asset Turnover1
Reported total asset turnover 0.36 0.44 0.64 0.68 0.79
Adjusted total asset turnover 0.36 0.44 0.49 0.52 0.60
Debt to Equity2
Reported debt to equity
Adjusted debt to equity
Return on Assets3 (ROA)
Reported ROA 8.99% 12.68% 18.06% 15.36% 15.11%
Adjusted ROA 8.99% 12.68% 13.86% 11.94% 11.40%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. McDonald’s Corp. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. McDonald’s Corp. adjusted ROA deteriorated from 2018 to 2019 and from 2019 to 2020.

McDonald’s Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Revenues 19,207,800  21,076,500  21,025,200  22,820,400  24,621,900 
Total assets 52,626,800  47,510,800  32,811,200  33,803,700  31,023,900 
Activity Ratio
Total asset turnover1 0.36 0.44 0.64 0.68 0.79
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Revenues 19,207,800  21,076,500  21,025,200  22,820,400  24,621,900 
Adjusted total assets 52,626,800  47,510,800  42,750,024  43,477,056  41,117,170 
Activity Ratio
Adjusted total asset turnover2 0.36 0.44 0.49 0.52 0.60

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= 19,207,800 ÷ 52,626,800 = 0.36

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 19,207,800 ÷ 52,626,800 = 0.36

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. McDonald’s Corp. adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Debt to Equity

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Total debt 37,440,400  34,177,200  31,075,300  29,536,400  25,955,700 
Shareholders’ equity (deficit) (7,824,900) (8,210,300) (6,258,400) (3,268,000) (2,204,300)
Solvency Ratio
Debt to equity1
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Adjusted total debt 51,463,200  47,556,000  41,014,124  39,209,756  36,048,970 
Shareholders’ equity (deficit) (7,824,900) (8,210,300) (6,258,400) (3,268,000) (2,204,300)
Solvency Ratio
Adjusted debt to equity2

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Debt to equity = Total debt ÷ Shareholders’ equity (deficit)
= 37,440,400 ÷ -7,824,900 =

2 Adjusted debt to equity = Adjusted total debt ÷ Shareholders’ equity (deficit)
= 51,463,200 ÷ -7,824,900 =


Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
As Reported
Selected Financial Data (US$ in thousands)
Net income 4,730,500  6,025,400  5,924,300  5,192,300  4,686,500 
Total assets 52,626,800  47,510,800  32,811,200  33,803,700  31,023,900 
Profitability Ratio
ROA1 8.99% 12.68% 18.06% 15.36% 15.11%
Adjusted for Operating Leases
Selected Financial Data (US$ in thousands)
Net income 4,730,500  6,025,400  5,924,300  5,192,300  4,686,500 
Adjusted total assets 52,626,800  47,510,800  42,750,024  43,477,056  41,117,170 
Profitability Ratio
Adjusted ROA2 8.99% 12.68% 13.86% 11.94% 11.40%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × 4,730,500 ÷ 52,626,800 = 8.99%

2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 4,730,500 ÷ 52,626,800 = 8.99%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. McDonald’s Corp. adjusted ROA deteriorated from 2018 to 2019 and from 2019 to 2020.