It was a sad day for McDonald's shareholders -- and those who follow good business in general -- as the company's chairman and CEO, Jim Cantalupo, passed away after a heart attack. Cantalupo, only 60, was largely credited for McDonald's recent turnaround and will be sorely missed. For more, read the full story below.

In today's Motley Fool Take:

M i ckey D's Unhappy Day

By Alyce Lomax (TMF Lomax)

McDonald's (NYSE: MCD) shares slipped today on the shocking surprise death of Chairman and CEO Jim Cantalupo of a heart attack overnight. It's always sad, disconcerting, and frightening from a shareholder point of view when a company's CEO unexpectedly departs this earth. In this case, it could be seen as devastating, considering Cantalupo's transformation of McDonald's into a turnaround story.

When Cantalupo retook the helm in Jan. 2003 after retiring from his leadership position for McDonald's International in 2002, McDonald's was struggling. For many, it seemed the death knell of a company that had lost its appeal.

Since then, it's been nearly impossible to keep up with all the strategic moves the company has made to return to viability. The "I'm Lovin' It" marketing campaign, Wi-Fi, and even musical downloads are helping it appeal to hipper, younger consumers and technophiles. Meanwhile, in what has likely been the bigger success, it has brought a more healthy angle to its fast-food appeal, with a range of initiatives including adult Happy Meals and serious menu changes, like the addition of white meat nuggets and the subtraction of "Supersized" fries.

I could go on, but you get the picture. Cantalupo's success in both getting back to basics and addressing important trends that could have made McDonald's obsolete when facing hungry competitors like Wendy's(NYSE: WEN), Burger King, CKE Restaurants(NYSE: CKR), and Yum! Brands(NYSE: YUM) has been evident. McDonald's monthly same-store sales and quarterly numbers have knocked proverbial socks off (though, of course, shoes are still required in all restaurants). The stock has risen 66% since Jan. 2003.

Most impressive of all, Jim Cantalupo forced many a naysayer to eat crow. Some pundits said he certainly couldn't transform McDonald's anytime soon, and some suspected maybe McDonald's was too far gone -- in reality, the transition took less than a year to pull off. If you'd like a recap on the remarkable doings of Cantalupo, rewind to last October, when Whitney Tilson nominated him CEO of the Year.

After today's sad news, McDonald's wasted no time promoting President and Chief Operating Officer Charlie Bell to the post. (In an interesting side note, Charlie Bell is one of those rare executives who started at the bottom of the ladder -- as a teenager, he became the youngest Mickey D's manager ever, at the tender age of 19.)

It may be tempting, but investors shouldn't give in to the gloom. While most stockholders face similar random risks, McDonald's investors may be in better shape than many other companies' shareholders would be under similar circumstances. Luckily, Cantalupo put the wheels of change into motion fast, and it's been clear what's been working for the fast-food giant. As long as the company continues to follow the course Cantalupo has charted, chances are investors will still find a lot to love in McDonald's.

Alyce Lomax does not own shares of any of the companies mentioned.

Di scussion Board of the Day: McDonald's

Can McDonald's keep customers "lovin' it" without Cantalupo? Is the fast-food chain's recent success a clear blueprint for McDonald's management? Talk to other Fools about the tragedy on the McDonald's discussion board. Only on

Eli Lilly's Drug Dependency

By Alyce Lomax (TMF Lomax)

Eli Lilly (NYSE: LLY) investors who were looking for some good news from the drug maker's first quarter got it today. Excluding a onetime charge, the company blew past earnings and sales estimates. However, one of its strongest drugs is losing some ground, making those in its pipeline more crucial.

The drug maker warned about the "substantial" charge to this quarter's earnings related to its acquisition of Applied Molecular Evolution last quarter. Including the $362.3 million charge, earnings came in at $400.4 million, or $0.37 per share, as compared to $407 million, or $0.38 per share, in the same quarter last year.

However, if you take out the charge, Eli Lilly's earnings were $762.7 million, or $0.70 per share, beating analysts' consensus expectation for earnings of $0.66 per share. Revenues increased 17% to $3.38 billion, exceeding analysts' expectations for sales of $3.23 billion.

Lots of its revenue growth was attributed to established, major products, like schizophrenia drug Zyprexa, osteoporosis med Evista, and cancer drug Gemzar. Zyprexa is particularly important because it represented one-third of revenues last year.

However, much has been made of the competitive forces facing Zyprexa. This quarter, Zyprexa's sales were up 15%, related to several variables including buying from institutions. At the same time, the drug had a lower prescription volume in retail, due to what the company called "increased competitive pressures." Other schizophrenia drugs include Johnson & Johnson's(NYSE: JNJ) Risperdal. In November, a study was publicized that brought up the possibility that an older schizophrenia drug, haloperidol or Haldol, is as effective as Zyprexa.

Eli Lilly said that it still expects regulatory approval of long-awaited depression drug Cymbalta so it can spring a summer launch. There's lots hinged on Cymbalta, with expectations that it could be Eli Lilly's newest blockbuster. Recent flak about antidepressants' relationship with suicide -- including a February suicide that took place during Cymbalta trials -- could throw a wrench into the works, but in Eli Lilly's conference call (courtesy of CCBN StreetEvents), the company claimed little regulatory effect from the controversy.

With expectations that Cymbalta could pull in about $2 billion in sales, it would do a lot to fire up earnings growth as well as offset loss of revenues from other products. It may be hard to ignore the recent FDA scrutiny of antidepressants as well as the media coverage linking Eli Lilly's promising drug to such controversy. The company may have a robust pipeline, but there are still industry and competitive considerations that put some risk into the picture.

Alyce Lomax does not own shares of any of the companies mentioned.

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3M: Money, Margins, Magnificent

By W.D. Crotty

Diversified products company 3M(NYSE: MMM) may be best known for Scotch tape and Post-it Notes, but it's a true conglomerate. In fact, the lower-profile health-care and display/graphic businesses generate half the company's profits. And profitable it is.

In the first quarter, net income shot up an impressive 29% on a 14.4% year-over-year jump in sales. Indeed, aside from some lukewarm comments on the global recovery from the CEO, those looking for bad news will have to do some digging.

U.S. unit sales volume, which barely rose in 2003, was up an impressive 4%. Free cash flow increased 21.7% to $0.98 a share, while operating margins remained strong at 22.6%. Compared to the first quarter last year, both short-term borrowing and long-term debt declined, while cash rose to where it exceeds long-term debt. Bravo!

Just as important, 3M shares the wealth with its owners. A current 1.7% dividend yield returns more than $1.1 billion annually to shareholders, and the company plans to repurchase $1.5 billion of its shares to offset dilution from stock options. Did I mention that the company upped its earnings outlook for 2004 by $0.08 to $3.60-$3.70 a share?

As for the competition, Avery Dennison(NYSE: AVY), with operating margins of 8.7% and high levels of debt, trades at multiples comparable to 3M. Go figure! Chemical and health-care competitor Bayer AG(NYSE: BAY), meanwhile, posted declining sales and a loss in 2003. You have to turn to health care and competitors like Johnson & Johnson(NYSE: JNJ) before you see better operating margins and lower price-to-earnings ratios.

Annualizing this quarter's results pegs 3M at around 21 times free cash flow. That's not exactly cheap, but 3M is not exactly your average company. Over the past 10 years, the company has shrunk its share base while improving its operating margins and return on total capital. For perspective, that's something even IBM(NYSE: IBM) and Microsoft(Nasdaq: MSFT) can't claim. 3M's stock may be off marginally today, but the company is a winner.

Fool contributor W.D. Crotty does not own stock in any of the companies mentioned.

Qu ote of Note

"Imagination is the beginning of creation. You imagine what you desire, you will what you imagine and at last you create what you will." -- George Bernard Shaw

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