EX-12 3 mcd-12312019xex1210xk.htm COMPUTATION OF RATIOS Exhibit


Exhibit 12. Computation of Ratios
 

Fixed-Rate Debt as a Percent of Total Debt(1)(2)
 
 
 
 
 
 
 
Dollars in millions
Years ended December 31, 2019
 
 
2018

 
2017

Total debt obligations
 
 
$
34,177.2

 
$
31,075.3

 
$
29,536.4

Fair value adjustments
 
 
(12.1
)
 
12.0

 
6.2

Deferred debt costs
 
 
140.4

 
129.0

 
120.5

Debt obligations before fair value adjustments and deferred debt costs
 
 
$
34,305.5

 
$
31,216.3

 
$
29,663.1

Fixed-rate debt
 
 
$
31,466.8

 
$
28,358.1

 
$
26,345.0

Fixed-rate debt as a percent of total debt
 
 
92
%
 
91
%
 
89
%
(1)
Based on debt obligations before the effects of fair value hedging adjustments and deferred debt costs. These effects are excluded as they have no impact on the obligation at maturity. See Debt Financing note to the consolidated financial statements.
(2)
Includes the effect of interest rate swaps.
Foreign Currency-Denominated Debt as a Percent of Total Debt(1)
 
 
 
 
 
 
Dollars in millions
Years ended December 31, 2019
 
 
2018

 
2017

Total debt obligations
 
 
$
34,177.2

 
$
31,075.3

 
$
29,536.4

Fair value adjustments
 
 
(12.1
)
 
12.0

 
6.2

Deferred debt costs
 
 
140.4

 
129.0

 
120.5

Debt obligations before fair value adjustments and deferred debt costs
 
 
$
34,305.5

 
$
31,216.3

 
$
29,663.1

Foreign currency-denominated debt
 
 
$
12,916.0

 
$
11,790.6

 
$
12,379.8

Foreign currency-denominated debt as a percent of total debt
 
 
38
%
 
38
%
 
42
%
(1)
Based on debt obligations before the effects of fair value hedging adjustments and deferred debt costs. These effects are excluded as they have no impact on the obligation at maturity. See Debt Financing note to the consolidated financial statements.
Total Debt as a Percent of Total Capitalization(1)(2)
 
 
 
 
 
 
Dollars in millions
Years ended December 31, 2019
 
 
2018

 
2017

Total debt obligations
 
 
$
34,177.2

 
$
31,075.3

 
$
29,536.4

Fair value adjustments
 
 
(12.1
)
 
12.0

 
6.2

Deferred debt costs
 
 
140.4

 
129.0

 
120.5

Debt obligations before fair value adjustments and deferred debt costs
 
 
$
34,305.5

 
$
31,216.3

 
$
29,663.1

Total capitalization
 
 
$
26,095.2

 
$
24,957.9

 
$
26,395.1

Total debt as a percent of total capitalization
 
 
131
%
 
125
%
 
112
%
(1)
Based on debt obligations before the effects of fair value hedging adjustments and deferred debt costs. These effects are excluded as they have no impact on the obligation at maturity. See Debt Financing note to the consolidated financial statements.
(2)
Total capitalization represents debt obligations before fair value adjustments and deferred debt costs, and total shareholders' equity.
Cash Provided by Operations as a Percent of Total Debt(1)
 
 
 
 
 
 
Dollars in millions
Years ended December 31, 2019
 
 
2018

 
2017

Total debt obligations
 
 
$
34,177.2

 
$
31,075.3

 
$
29,536.4

Fair value adjustments
 
 
(12.1
)
 
12.0

 
6.2

Deferred debt costs
 
 
140.4

 
129.0

 
120.5

Debt obligations before fair value adjustments and deferred debt costs
 
 
$
34,305.5

 
$
31,216.3

 
$
29,663.1

Cash provided by operations
 
 
$
8,122.1

 
$
6,966.7

 
$
5,551.2

Cash provided by operations as a percent of total debt
 
 
24
%
 
22
%
 
19
%
(1)
Based on debt obligations before the effects of fair value hedging adjustments and deferred debt costs. These effects are excluded as they have no impact on the obligation at maturity. See Debt Financing note to the consolidated financial statements.




Free Cash Flow and Free Cash Flow Conversion Rate
Dollars in millions
Years ended December 31, 2019
 
 
2018

 
2017

Cash Provided by Operations
 
 
$
8,122.1

 
$
6,966.7

 
$
5,551.2

Less: Capital expenditures
 
 
2,393.7

 
2,741.7

 
1,853.7

Free cash flow
 
 
$
5,728.4

 
$
4,225.0

 
$
3,697.5

Divided by: Net income
 
 
6,025.4

 
5,924.3

 
5,192.3

Free cash flow conversion rate
 
 
95.1
%
 
71.3
%
 
71.2
%




Reconciliation of Returns on Incremental Invested Capital
ROIIC is a measure reviewed by management over one-year and three-year time periods to evaluate the overall profitability of our markets, the effectiveness of capital deployed and the future allocation of capital. This measure is calculated using operating income and constant foreign exchange rates to exclude the impact of foreign currency translation. The numerator is the Company’s incremental operating income plus depreciation and amortization from the base period.
The denominator is the weighted-average cash used for investing activities during the applicable one-or three-year period. The weighted-average cash used for investing activities is based on a weighting applied on a quarterly basis. These weightings are used to reflect the estimated contribution of each quarter’s investing activities to incremental operating income. For example, fourth quarter 2019 investing activities are weighted less because the assets purchased have only recently been deployed and would have generated little incremental operating income (12.5% of fourth quarter 2019 investing activities are included in the one-year and three-year calculations). In contrast, fourth quarter 2018 is heavily weighted because the assets purchased were deployed more than 12 months ago, and therefore have a full-year impact on 2019 operating income, with little or no impact to the base period (87.5% and 100.0% of fourth quarter 2018 investing activities are included in the one-year and three-year calculations, respectively). Cash used for investing activities can vary significantly by quarter, resulting in a weighted-average that may be higher or lower than the simple average of the periods presented. Management believes that weighting cash used for investing activities provides a more accurate reflection of the relationship between its investments and returns than a simple average.
The reconciliations to the most comparable measurements, in accordance with accounting principles generally accepted in the U.S., for the numerator and denominator of the one-year and three-year ROIIC are as follows:
One-year ROIIC calculation (dollars in millions):
 
Three-year ROIIC calculation (dollars in millions):
Years ended December 31,
2019

 
2018

 
Increase/
(decrease)
 
 
Years ended December 31,
2019

 
2016

 
Increase/
(decrease)
 
NUMERATOR:
 
 
 
 
 
 
 
NUMERATOR:
 
 
 
 
 
 
Operating income
$
9,069.8

 
$
8,822.6

 
 
$
247.2

 
Operating income
$
9,069.8

 
$
7,744.5

 
 
$
1,325.3

Depreciation and amortization
1,617.9

 
1,482.0

 
 
135.9

 
Depreciation and amortization
1,617.9

 
1,516.5

 
 
101.4

Currency translation(1)
 
 
 
 
 
307.2

 
Currency translation(1)
 
 
 
 
 
171.5

Change in operating income plus depreciation and
amortization (at constant foreign exchange rates)
 
 
$
690.3

 
Change in operating income plus depreciation and
amortization (at constant foreign exchange rates)
 
 
$
1,598.2

DENOMINATOR:
 
 
 
 
 
 
 
DENOMINATOR:
 
 
 
 
 
 
Weighted-average cash used for investing activities(2)
 
 
 
 
 
$
3,013.8

 
Weighted-average cash used for investing activities(2)
 
 
 
 
 
$
3,931.1

Currency translation(1)
 
 
 
 
 
8.1

 
Currency translation(1)
 
 
 
 
 
7.5

Weighted-average cash used for investing activities (at constant foreign exchange rates)
 
 
$
3,021.9

 
Weighted-average cash used for investing activities (at constant foreign exchange rates)
 
 
$
3,938.6

One-year ROIIC(3)
 
 
 
 
 
22.8
%
 
Three-year ROIIC(3)
 
 
 
 
 
40.6
%
(1)
Represents the effect of foreign currency translation by translating results at an average exchange rate for the periods measured.
(2)
Represents one-year and three-year, respectively, weighted-average cash used for investing activities, determined by applying the weightings below to the cash (provided by) used for investing activities for each quarter in the two-year and four-year periods ended December 31, 2019.
 
Years ended December 31,
 
 
 
 
 
Years ended December 31,
 
 
 
2019

 
2018

 
 
 
 
2019

2018

2017

2016

Cash (provided by) used for
    investing activities
 
$
3,071.1

 
$
2,455.1

 
Cash (provided by) used for investing activities
 
 
$
3,071.1

$
2,455.1

$
(562.0
)
$
981.6

AS A PERCENT
 
 
 
 
 
AS A PERCENT
 
 
 
 
 
 
Quarters ended:
 
 
 
 
 
Quarters ended:
 
 
 
 
 
 
March 31
 
87.5
%
 
12.5
%
 
March 31
 
 
87.5
%
100.0
%
100.0
%
12.5
%
June 30
 
62.5

 
37.5

 
June 30
 
 
62.5

100.0

100.0

37.5

September 30
 
37.5

 
62.5

 
September 30
 
 
37.5

100.0

100.0

62.5

December 31
 
12.5

 
87.5

 
December 31
 
 
12.5

100.0

100.0

87.5

(3)
Significant investing cash flows resulting from the Company's strategic refranchising initiatives impacted the three-year ROIIC calculation by 16.0%. Excluding these cash flows, three-year ROIIC was 24.6%.