SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 19, 1995
McDONALD'S CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 1-5231 36-2361282
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
One McDonald's Plaza
Oak Brook, Illinois 60521
(708) 575-3000
(Address and Phone Number of Principal Executive Offices)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(c) Exhibits
(99) Press Release dated October 19, 1995
"McDonald's Reports Strong Global Results"
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McDONALD'S CORPORATION
(Registrant)
By: /s/ Gloria Santona
---------------------------
Gloria Santona
Vice President,
Assistant General Counsel
and Assistant Secretary<PAGE>
Exhibit 99
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INVESTOR RELEASE
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FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
--------------------- -----------------------------
10/19/95 Investors: Patty Paul, 708-575-3499
Media: Chuck Ebeling, 708-575-6150
McDONALD'S REPORTS STRONG GLOBAL RESULTS
-----------------------------------------
OAK BROOK, IL -- McDonald's Corporation today announced record results
for the nine months and quarter ended September 30, 1995:
- McDonald's added 1,453 restaurants -- Systemwide restaurants hit
17,403.
- Net income grew 16 and 14 percent for the nine months and quarter.
- net income per common share rose 17 percent for both periods.
- Systemwide sales and operating income each increased 17 percent for
the nine months and 13 percent for the quarter.
- Total revenues rose 19 and 16 percent for the nine months and quarter.
- Operations outside of the U.S. contributed more than 50 percent to
consolidated operating income for both periods.
Key highlights Nine months
Dollars in millions, except ended Sept. 30
per common share data 1995 1994 Increase
---- ---- --------
- Systemwide sales $22,179.5 $19,023.4 $3,156.1 17%
- Total revenues 7,209.0 6,050.7 1,158.3 19
- Operating income 1,955.2 1,665.4 289.8 17
- Net income 1,060.5 915.5 145.0 16
- New income per common share 1.46 1.25 .21 17
Quarters
ended Sept. 30
1995 1994 Increase
---- ---- --------
- Systemwide sales $ 7,866.6 $ 6,944.0 $ 922.6 13%
- Total revenues 2,580.1 2,225.4 354.7 16
- Operating income 722.1 637.9 84.2 13
- Net income 400.1 349.8 50.3 14
- Net income per common share .56 .48 .08 17
<PAGE>
SUMMARY COMMENTARY
Chairman and Chief Executive Officer Michael R. Quinlan said,
"McDonald's continued to deliver strong global results in 1995. These
results -- driven primarily by our convenience, execution and value
strategies -- are impressive even before taking into account the benefit
of stronger foreign currencies, and especially so when compared with
strong performance one year ago."
"Over the past five years, slow economic growth and excess industry
capacity have created an intensely competitive U.S. operating
environment. Nonetheless, we remain focused on building our U.S. market
share through accelerated expansion, value and service initiatives. We
continue to offer customers good value, even sacrificing near-term
margins for the long-term interest of the business. Accordingly, we
remain confident that we can grow U.S. sales and operating income at a
compound annual rate in the mid-single digits or better as measured over
a five-year period."
"Meanwhile, our international business has delivered exceptional
performance despite tough sales comparisons. Outside of the U.S., our
focus is on building market share by establishing a secure and
competitive position, while delivering value and satisfaction to
customers. We expect to grow international sales in the mid- to high-
teens and international operating income at a compound annual rate of
about 20 percent as measured over a five-year period."
"Our dedication to building global market share is best evidenced by
our expansion targets. Previously, our 1995 target was 1,200 to 1,500
traditional restaurants and approximately 1,000 satellite restaurants,
bringing the total range to 2,200 to 2,500 Systemwide restaurants. We
are adjusting our satellite restaurant target to 700, while raising our
traditional restaurant target to 1,600. This shift within the range for
1995 primarily reflects our long-term commitment to both the U.S. and
international businesses, as penetration and the low-cost approach are
key to market share growth."
McDonald's is the largest and best-known global foodservice
retailer, with more than 17,000 restaurants in 84 countries as of
September 30, 1995. The Company, its franchisees and affiliates operate
two types of restaurants -- traditional restaurants which are larger in
size and volume and offer a full menu, and satellite restaurants which
are smaller in size and volume and offer a specialized menu. McDonald's
vision is to dominate the global foodservice industry.
<PAGE>
CONSOLIDATED OPERATING RESULTS
Net income and net income per common share increased 16 and 17 percent
for the nine months, respectively; and 14 and 17 percent for the quarter,
respectively. As of September 30, 1995, the Company had repurchased
about $800.0 million of its common stock in connection with a three-year,
$1.0 billion program announced in January 1994.
Systemwide sales represent sales by Company-operated, franchised and
affiliated restaurants. The increases were due to expansion and higher
comparable sales, aided by stronger foreign currencies.
Systemwide restaurants Nine months Quarters
ended Sept. 30 ended Sept. 30
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
Traditional restaurants
U.S. 326 280 142 138
Outside of the U.S. 568 392 250 169
Total traditional restaurant
additions 894 672 392 307
Satellite restaurants
U.S. 389 242 150 122
Outside of the U.S. 170 141 77 78
Total satellite restaurant
additions 559 383 227 200
Systemwide restaurant additions 1,453 1,055 619 507
At Sept. 30
-----------
Traditional restaurants under
construction
U.S. 203 170
Outside of the U.S. 313 279
Total traditional restaurants 516 449
Total revenues consist of sales by Company-operated restaurants, and
fees from restaurants operated by franchisees and affiliates. These fees
are based upon a percent of sales with specified minimum payments. The
increases reflected strong worldwide operating results.
Consolidated operating margins Nine months Quarters
ended Sept. 30 ended Sept. 30
----------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
In millions of dollars
Franchised $1,780.0 $1,527.2 $636.5 $561.9
Company-operated 980.4 828.5 363.9 320.5
As a percent of sales/revenues
Franchised 82.5 82.8 82.9 83.4
Company-operated 19.4 19.7 20.1 20.7
<PAGE>
Franchised margin dollars comprised about two-thirds of the combined
operating margins, the same as in the prior year. Franchised margins as
a percent of revenues declined slightly for both periods, reflecting a
higher proportion of leased sites resulting from accelerated expansion.
Company-operated margins as a percent of sales declined for both periods;
as a percent of sales, food and paper and occupancy and other operating
costs increased, while payroll costs declined slightly.
The increases in general, administrative and selling expenses were
primarily due to strategic global spending to support the convenience and
value strategies and stronger foreign currencies.
Other operating transactions relate to franchising and the
foodservice business, the details of which are shown below. The
increases occurred because of greater income from affiliates, principally
Japan, offset by higher provisions for property dispositions included in
the other category and lower gains on sales of restaurant businesses.
Other operating (income) Nine months Quarters
expense--net ended Sept. 30 ended Sept. 30
----------------- --------------
1995 1994 1995 1994
In millions of dollars ---- ---- ---- ----
Gains on sales of restaurant
businesses $(45.0) $(49.4) $(16.6) $(19.0)
Equity in earnings of
unconsolidated affiliates (75.9) (41.0) (28.2) (22.7)
Other 31.2 7.1 9.0 9.1
Other operating (income)
expense--net $(89.7) $(83.3) $(35.8) $(32.6)
The increases in consolidated operating income primarily reflected
higher combined operating margin dollars and stronger foreign currencies,
partially offset by higher general, administrative and selling expenses.
The increases in interest expense were due to higher debt levels and
stronger foreign currencies, partially offset by lower average interest
rates.
Nonoperating income (expense) was impacted by higher losses on
investments and higher charges associated with minority interests.
The effective income tax rate was 34.9 and 35.3 percent for the
first nine months of 1995 and 1994, respectively, compared to 35.1
percent for the year 1994.
<PAGE>
U.S. OPERATING RESULTS
U.S. operating results Nine months Quarters
ended Sept. 30 ended Sept. 30
----------------- --------------
1995 1994 1995 1994
Percent increase ---- ---- ---- ----
Sales 7 5 5 5
Revenues 8 6 6 6
Operating income 3 6 2 3
As a percent of sales/revenues
Company-operated margins 17.8 19.3 18.3 19.4
Franchised margins 82.7 83.2 82.6 83.5
Expansion and higher comparable sales were responsible for driving U.S.
sales. Positive comparable sales were achieved for the nine months of
1995 and for both comparable periods of 1994 through an emphasis on value
and customer satisfaction in the form of Extra Value Meals, Happy Meals
and the three-tier value program. Ongoing programs -- Operation Mac
Attack and Tastes of the Month -- and promotions such as Monopoly in May
contributed to higher sales in 1995.
The increases in U.S. operating income were driven by higher
franchised margin dollars, partially offset by higher general,
administrative and selling expenses and a slight reduction in Company-
operated margin dollars. The declines in Company-operated margins
primarily resulted from higher payroll costs due to higher average hourly
wages, and increased staffing levels designed to improve customer
satisfaction. Higher franchised margin dollars were the result of
expansion and for the nine months, improved comparable sales.
OPERATING RESULTS OUTSIDE OF THE U.S.
Operating results outside Nine months Quarters
of the U.S. ended Sept. 30 ended Sept. 30
----------------- --------------
1995 1994 1995 1994
Percent increase ---- ---- ---- ----
Sales 30 15 24 20
Revenues 31 16 25 25
Operating income 34 19 25 25
As a percent of sales/revenues
Company-operated margins 20.5 20.0 21.2 21.6
Franchised margins 82.1 82.1 83.2 83.2
<PAGE>
Expansion, stronger foreign currencies and higher comparable sales were
responsible for driving sales outside of the U.S. Comparable sales on a
local currency basis were positive in all comparable periods of 1995 and
1994.
All geographic segments reported excellent operating results, and
results for the following markets were noteworthy: Canada; Australia,
Hong Kong, Taiwan, Japan and Philippines in Asia/Pacific; France,
Germany, England and Spain in Europe; and Brazil in Latin America.
Transactions, sales and profits have improved notably in France, England,
Germany, Japan, Hong Kong and Brazil in 1995. Results in Mexico
continued to be impacted by the economy and currency devaluation;
however, we continue to believe this market offers long-term potential.
The increases in operating income outside of the U.S. resulted from
expansion, higher comparable sales, higher combined operating margins and
stronger foreign currencies, partially offset by higher general,
administrative and selling expenses.
The improvement in Company-operated margins as a percent of sales
for the nine months reflected higher food costs which were more than
offset by a reduction in payroll and other costs; in addition, Brazil
delivered better operating performance. The decline in this margin for
the quarter was due to Brazil's improved performance beginning in the
1994 third quarter. The increases in combined operating margin dollars
occurred because of better sales and stronger foreign currencies.
IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS
The Deutsche Mark, French Franc, British Pound Sterling and Japanese Yen
represented the foreign currencies which significantly contributed to the
impact on reported results for both periods in 1995. If exchange rates
had remained at 1994 levels, reported results would have been as follows:
Foreign currency impact Nine months
ended Sept. 30, 1995
Dollars in millions Reported Adjusted Adjustment Reported Adjusted
------------------- -------- -------- ---------- -------- --------
Systemwide sales $22,179.5 $21,412.2 $767.3 17% 13%
Operating income 1,955.2 1,878.6 76.6 17 13
Net income 1,060.5 1,026.1 34.4 16 12
Quarter
ended Sept. 30, 1995
Reported Adjusted Adjustment Reported Adjusted
------------------- -------- -------- ---------- -------- --------
Systemwide sales $ 7,866.6 $ 7,691.8 $174.8 13% 11%
Operating income 722.1 702.8 19.3 13 10
Net income 400.1 390.5 9.6 14 12
While changing foreign currencies impact reported results,
McDonald's lessens short-term cash exposures by primarily purchasing
goods and services in local currencies, financing in local currencies and
hedging foreign-denominated cash flows.
<PAGE>
McDONALD'S CORPORATION
Condensed Consolidated Statement of Income
<TABLE>
Dollars and shares in millions, Nine months ended Sept. 30 Quarters ended Sept. 30
except per common share data Increase Increase
(Decrease) (Decrease)
1995 1994 $ % 1995 1994 $ %
---- ---- ------ --- ---- ---- ----- ---
<C> <S> <S> <S> <S> <S> <S> <S> <S>
SYSTEMWIDE SALES $22,179.5 $19,023.4 3,156.1 17 $7,866.6 $6,944.0 922.6 13
Revenues
Sales by Company-operated
restaurants $ 5,051.3 $ 4,205.8 845.5 20 $1,811.9 1,551.8 260.1 17
Revenues from franchised
restaurants 2,157.7 1,844.9 312.8 17 768.2 673.6 94.6 14
TOTAL REVENUES 7,209.0 6,050.7 1,158.3 19 2,580.1 2,225.4 354.7 16
Operating costs and expenses
Company-operated restaurants 4,070.9 3,377.3 693.6 21 1,448.0 1,231.3 216.7 18
Franchised restaurants--
occupancy costs 377.7 317.7 60.0 19 131.7 111.7 20.0 18
General, administrative and
selling expenses 894.9 773.6 121.3 16 314.1 277.1 37.0 13
Other operating (income)
expense--net (89.7) (83.3) (6.4) 8 (35.8) (32.6) (3.2) 10
Total operating costs
and expenses 5,253.8 4,385.3 868.5 20 1,858.0 1,587.5 270.5 17
OPERATING INCOME 1,955.2 1,665.4 289.8 17 722.1 637.9 84.2 13
Interest expense 252.5 225.6 26.9 12 86.1 80.2 5.9 7
Nonoperating income
(expense)--net (73.2) (24.8) (48.4) NM (26.5) (16.6) (9.9) 60
Income before provision for
income taxes 1,629.5 1,415.0 214.5 15 609.5 541.1 68.4 13
Provision for income taxes 569.0 499.5 69.5 14 209.4 191.3 18.1 9
NET INCOME $ 1,060.5 $ 915.5 145.0 16 $ 400.1 $ 349.8 50.3 14
NET INCOME PER COMMON SHARE* $ 1.46 $ 1.25 .21 17 $ .56 $ .48 .08 17
Weighted average common shares
outstanding 699.6 704.1 698.4 699.9
*Computed using net income reduced by preferred stock dividends (net
of tax) of $31.8 and $35.5 million for the first nine months of 1995 and
1994, respectively, and $8.0 and $11.8 million for the third quarters of
1995 and 1994, respectively; and for the nine month period of 1995: $3.9
million for the one-time effect of the Company's offer to exchange its
Series E 7.72% Cumulative Preferred Stock for subordinated debt
securities completed on June 30, 1995, and an additional $.4 million for
the effect of the Company's repurchase of additional Series E preferred
stock in the third quarter.
NM - Not Meaningful
</TABLE>
<PAGE>
McDONALD'S CORPORATION
Financial Information
Nine months ended Sept. 30
--------------------------------
Increase
(Decrease)
-----------
Dollars in millions 1995 1994 $ %
---- ---- --- ---
SYSTEMWIDE SALES
U.S.
----
Operated by franchisees $ 9,313.1 $ 8,894.0 419.1 5
Operated by the Company 2,034.9 1,894.6 140.3 7
Operated by affiliates 506.2 298.6 207.3 69
--------- --------- ------- --
11,854.2 11,087.5 766.7 7
Outside of the U.S.
-------------------
Operated by franchisees 4,907.7 3,705.4 1,202.3 32
Operated by the Company 3,016.4 2,311.2 705.2 31
Operated by affiliates 2,401.2 1,919.3 481.9 25
--------- --------- ------- --
10,325.3 7,935.9 2,389.4 30
--------- --------- ------- --
$22,179.5 $19,023.4 3,156.1 17
--------- --------- ------- --
--------- --------- ------- --
By Type
-------
Operated by franchisees $14,220.8 $12,599.4 1,621.4 13
Operated by the Company 5,051.3 4,205.8 845.5 20
Operated by affiliates 2,907.4 2,218.2 689.2 31
--------- --------- ------- --
$22,179.5 $19,023.4 3,156.1 17
--------- --------- ------- --
--------- --------- ------- --
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TOTAL REVENUES
U.S. $ 3,328.0 $ 3,081.1 246.9 8
Outside of the U.S. 3,881.0 2,969.6 911.4 31
--------- --------- ------- --
$ 7,209.0 $ 6,050.7 1,158.3 19
--------- --------- ------- --
--------- --------- ------- --
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OPERATING INCOME*
U.S. $ 951.6 $ 928.0 23.6 3
Outside of the U.S. 1,038.2 772.4 265.8 34
Corporate G&A (34.6) (35.0) .4 (1)
--------- --------- ------- --
$ 1,955.2 $ 1,665.4 289.8 17
--------- --------- ------- --
--------- --------- ------- --
*1994 operating income has been restated to reflect a more meaningful
allocation of general, administrative and selling expenses between the
U.S. and international segments and now includes an additional corporate
category which is not allocated.
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PERCENT CONTRIBUTION TO COMBINED OPERATING MARGINS
Company-operated
----------------
U.S. 37 44
Outside of the U.S. 63 56
--- ---
100 100
--- ---
--- ---
Franchised
----------
U.S. 60 65
Outside of the U.S. 40 35
--- ---
100 100
--- ---
--- ---
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<PAGE>
McDONALD'S CORPORATION
RESTAURANT Information
At Sept. 30
------------------------------------
Increase
-----------
-
1995 1994 # %
---- ---- --- ---
TRADITIONAL RESTAURANTS
U.S.
----
Operated by franchisees 7,989 7,784 205 3
Operated by the Company 1,607 1,492 115 8
Operated by affiliates 474 287 187 65
------ ------ ----- ---
10,070 9,563 507 5
------ ------ ----- ---
Outside of the U.S.
-------------------
Operated by franchisees 2,878 2,426 452 19
Operated by the Company 1,743 1,455 288 20
Operated by affiliates 1,408 1,221 187 15
------ ------ ----- ----
6,029 5,102 927 18
------ ------ ----- ----
16,099 14,665 1,434 10
------ ------ ----- ----
------ ------ ----- ----
By Type
-------
Operated by franchisees 10,867 10,210 657 6
Operated by the Company 3,350 2,947 403 14
Operated by affiliates 1,882 1,508 374 25
------ ------ ----- ----
16,099 14,665 1,434 10
------ ------ ----- ----
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SATELLITE RESTAURANTS
U.S. 883 356 527 148
Outside of the U.S. 421 197 224 114
------ ------ ----- ----
1,304 553 751 136
------ ------ ----- ----
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SYSTEMWIDE RESTAURANTS 17,403 15,218 2,185 14
------ ------ ----- ----
------ ------ ----- ----
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SYSTEMWIDE COUNTRIES 84 74
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TRADITIONAL RESTAURANTS IN MARKETS OUTSIDE OF THE U.S.
Japan 1,164 1,067
Canada 750 699
Germany 632 545
England 547 504
Australia 494 420
France 396 327
Brazil 163 133
Netherlands 121 105
Mexico 118 96
Other 1,644 1,206
------ ------
6,029 5,102
------ ------
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