<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-5231 ---------- ----------
------
McDONALD'S CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 36-2361282
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
McDonald's Plaza, Oak Brook, Illinois 60521
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (630) 623-3000
--------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes X No
--- ---
689,826,491
---------------------------------
(Number of shares of common stock
outstanding as of March 31, 1997)<PAGE>
<PAGE> 2
McDONALD'S CORPORATION
----------------------
INDEX
-----
Page Reference
Part I. Financial Information
Item 1 - Financial Statements
Condensed consolidated balance sheet,
March 31, 1997 (unaudited) and
December 31, 1996 3
Condensed consolidated statement of
income (unaudited), first quarters ended
March 31, 1997 and 1996 4
Condensed consolidated statement of
cash flows (unaudited), first quarters
ended March 31, 1997 and 1996 5
Financial comments (unaudited) 6
Item 2 - Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 16
(a) Exhibits
The exhibits listed in the
accompanying Exhibit Index are
filed as part of this report 16
(b) Reports on Form 8-K 20
Signature 21<PAGE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
-----------------------------
<TABLE>
CONDENSED CONSOLIDATED BALANCE SHEET
<CAPTION>
(unaudited)
In millions March 31, 1997 December 31, 1996
---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 299.8 $ 329.9
Accounts receivable 429.0 467.1
Notes receivable 21.1 28.3
Inventories, at cost, not in excess
of market 60.4 69.6
Prepaid expenses and other current
assets 199.8 207.6
---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,010.1 1,102.5
---------------------------------------------------------------------------
OTHER ASSETS AND DEFERRED CHARGES 1,222.6 1,184.4
---------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 19,082.4 19,133.9
Accumulated depreciation and
amortization (4,831.1) (4,781.8)
---------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 14,251.3 14,352.1
---------------------------------------------------------------------------
INTANGIBLE ASSETS-NET 773.7 747.0
---------------------------------------------------------------------------
TOTAL ASSETS $17,257.7 $17,386.0
===========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 645.4 $ 597.8
Accounts payable 478.5 638.0
Income taxes 69.3 22.5
Other taxes 141.9 136.7
Accrued interest 124.8 121.7
Other accrued liabilities 498.8 523.1
Current maturities of long-term debt 81.1 95.1
---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,039.8 2,135.3
---------------------------------------------------------------------------
LONG-TERM DEBT 4,804.1 4,830.1
COMMON EQUITY PUT OPTIONS 43.7
OTHER LONG-TERM LIABILITIES AND
MINORITY INTERESTS 721.8 726.5
DEFERRED INCOME TAXES 1,030.9 975.9<PAGE>
SHAREHOLDERS' EQUITY
Preferred stock, no par value;
authorized - 165.0 million shares;
issued - 7.2 thousand shares 358.0 358.0
Common stock, $.01 par; authorized -
3.5 billion shares; issued - 830.3
million shares 8.3 8.3
Additional paid-in capital 601.4 574.2
Guarantee of ESOP notes (193.2) (193.2)
Retained earnings 11,458.9 11,173.0
Foreign currency translation
adjustment (266.6) (175.1)
---------------------------------------------------------------------------
11,966.8 11,745.2
---------------------------------------------------------------------------
Common stock in treasury, at cost;
140.5 and 135.7 million shares (3,349.4) (3,027.0)
---------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 8,617.4 8,718.2
---------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $17,257.7 $17,386.0
===========================================================================
See accompanying Financial comments.
/TABLE
<PAGE>
<PAGE> 4
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<CAPTION>
In millions, except Quarters Ended
per common share data March 31
1997 1996
-------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Sales by Company-operated
restaurants $1,853.2 $1,713.8
Revenues from franchised and
affiliated restaurants 764.4 712.2
-------------------------------------------------------------------------------
TOTAL REVENUES 2,617.6 2,426.0
-------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 1,527.1 1,419.3
Franchised restaurants-
occupancy expenses 148.3 137.2
General, administrative and
selling expenses 334.0 311.2
Other operating (income)
expense-net (6.0) (4.2)
-------------------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 2,003.4 1,863.5
-------------------------------------------------------------------------------
OPERATING INCOME 614.2 562.5
-------------------------------------------------------------------------------
Interest expense 90.0 84.8
Nonoperating (income)
expense-net 8.5 25.6
-------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 515.7 452.1
-------------------------------------------------------------------------------
Provision for income taxes 171.2 150.5
-------------------------------------------------------------------------------
NET INCOME $ 344.5 $ 301.6
===============================================================================
NET INCOME PER COMMON
SHARE $ 0.49 $ 0.42
-------------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $ .075 $ .0675
-------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 691.6 700.5
-------------------------------------------------------------------------------
See accompanying Financial comments.
/TABLE
<PAGE>
<PAGE> 5
<TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
<CAPTION>
Quarters Ended
March 31
In millions 1997 1996
-------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 344.5 $ 301.6
Adjustments to reconcile to cash
provided by operations
Depreciation and amortization 191.9 186.6
Changes in operating working
capital items 14.4 (26.0)
Other (18.9) 12.1
-------------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS 531.9 474.3
-------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment expenditures (454.4) (467.1)
Purchases and sales of restaurant
businesses and sales of other
property 23.0 4.6
Other (57.9) (31.7)
-------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (489.3) (494.2)
-------------------------------------------------------------------------------
FINANCING ACTIVITIES
Notes payable and long-term
financing issuances and repayments 235.1 171.9
Treasury stock purchases (296.4) (140.0)
Common and preferred stock dividends (58.7) (53.5)
Other 47.3 36.2
-------------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES (72.7) 14.6
-------------------------------------------------------------------------------
CASH AND EQUIVALENTS DECREASE (30.1) (5.3)
-------------------------------------------------------------------------------
Cash and equivalents at beginning of
period 329.9 334.8
-------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 299.8 $ 329.5
===============================================================================
See accompanying Financial comments.
/TABLE
<PAGE>
<PAGE> 6
FINANCIAL COMMENTS (UNAUDITED)
BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements in the
Company's 1996 Annual Report to Shareholders. In the opinion of the
Company, all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation have been included. The results for
the quarter ended March 31, 1997 do not necessarily indicate the
results that may be expected for the full year.
The results of operations of restaurant businesses purchased and
sold were not material to the condensed consolidated financial
statements for periods prior to purchase and sale.
NET INCOME PER COMMON SHARE
Net income per common share was computed using net income, reduced by
preferred stock cash dividends of $6.9 million for the first quarters
of 1997 and 1996. Adjusted net income was divided by the weighted
average shares of common stock outstanding: 691.6 and 700.5 million
for the first quarters ended March 31, 1997 and 1996, respectively.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, (SFAS 128), which is required
to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per
share and to restate all prior periods to disclose diluted net income
per common share in addition to its current basic net income per
common share. Pro forma diluted net income per common share amounts,
calculated in accordance with SFAS 128, were $0.48 and $0.41 for the
first quarters ended March 31, 1997 and 1996, respectively.
ASSET IMPAIRMENT
In first quarter 1996, the Company recorded a $16 million pre-tax
charge to other operating (income) expense, equivalent to 2 cents per
common share, related to restaurant sites in Mexico.
COMMON EQUITY PUT OPTIONS
During February and March 1997, the Company sold 1.0 million common
equity put options which will expire in May 1997. At March 31, 1997,
the $43.7 million exercise price of these options was classified in
common equity put options, and the related offset was recorded in
common stock in treasury, net of premiums received.<PAGE>
<PAGE> 7
Item 2. Management's Discussion And Analysis Of Financial Condition
--------------------------------------------------------------------
And Results Of Operations
-------------------------
<TABLE>
INCREASES (DECREASES) IN OPERATING RESULTS OVER 1996
<CAPTION>
Dollars in millions, except First Quarter
per common share data Ended March 31
-------------------------------------------------------------------------
<S> <C> <C>
SYSTEMWIDE SALES $523.6 7%
-------------------------------------------------------------------------
REVENUES
Sales by Company-operated
restaurants $139.4 8%
Revenues from franchised and
affiliated restaurants 52.2 7
-------------------------------------------------------------------------
TOTAL REVENUES 191.6 8
-------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 107.8 8
Franchised restaurants-
occupancy costs 11.1 8
General, administrative
and selling expenses 22.8 7
Other operating (income)
expense-net (1.8) (N/M)
-------------------------------------------------------------------------
TOTAL OPERATING COSTS
AND EXPENSES 139.9 8
-------------------------------------------------------------------------
OPERATING INCOME 51.7 9
-------------------------------------------------------------------------
Interest expense 5.2 6
Nonoperating (income)
expense-net (17.1) (N/M)
-------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 63.6 14
-------------------------------------------------------------------------
Provision for income taxes 20.7 14
-------------------------------------------------------------------------
NET INCOME $ 42.9 14%
=========================================================================
NET INCOME PER COMMON
SHARE $ .07 17%
-------------------------------------------------------------------------
(N/M) Not meaningful
/TABLE
<PAGE>
<PAGE> 8
CONSOLIDATED OPERATING RESULTS
Net income per common share and net income increased 17 and 14
percent, respectively. During the first quarter, the Company
repurchased 6.7 million shares of common stock for approximately $300
million. Fewer shares outstanding resulted in the higher increase in
net income per common share compared with the increase in net income.
Excluding the $16 million charge for the adoption of SFAS 121 in first
quarter 1996 and the negative effect of weaker foreign currencies, net
income per common share and net income increased 13 and 12 percent,
respectively.
The first quarter 1997 had one less trading day compared with the
prior year, as 1996 was a leap year. This negatively affected 1997
global results by approximately one cent per common share.
Systemwide sales represent sales by Company-operated, franchised
and affiliated restaurants. 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. On a global basis, the
increases in sales and revenues were due to expansion, offset in part
by weaker foreign currencies. The unusually low number of net U.S.
restaurant additions in the first quarter was primarily due to
satellite closings previously announced. Restaurant additions are in
line with our plans to add between 2,400 and 2,800 restaurants
worldwide in 1997.
----------------------------------------------------------------------
RESTAURANT ADDITIONS Quarters Ended
March 31
1997 1996
----------------------------------------------------------------------
U.S. 10 129
Outside the U.S. 244 187
----------------------------------------------------------------------
Total restaurant additions 254 316
----------------------------------------------------------------------
RESTAURANTS UNDER CONSTRUCTION At March 31
1997 1996
----------------------------------------------------------------------
U.S. 106 115
Outside the U.S. 406 272
----------------------------------------------------------------------
Total restaurants under construction 512 387
----------------------------------------------------------------------<PAGE>
<PAGE> 9
-----------------------------------------------------------------------
CONSOLIDATED OPERATING MARGINS Quarters Ended March 31
1997 1996 Change
-----------------------------------------------------------------------
In millions of dollars
Company-operated $326.1 $294.5 11%
Franchised 616.1 575.0 7%
As a percent of sales/revenues
Company-operated 17.6 17.2 .4
Franchised 80.6 80.7 (.1)
-----------------------------------------------------------------------
Company-operated margins as a percent of sales increased, as food &
paper and payroll costs declined, while occupancy & other operating
costs increased as a percent of sales.
Franchised margin dollars comprised about two-thirds of the
combined operating margins, the same as in the prior year. While
franchised margins as a percent of applicable revenues were relatively
flat, franchised margin dollars increased seven percent.
The increase in general, administrative & selling expenses was
primarily due to strategic global spending to support the Convenience,
Value and Execution Strategies including costs associated with
expansion and continued investment in developing countries.
Other operating (income) expense--net is composed of transactions
related to franchising and the foodservice business. Equity in
earnings decreased principally due to weaker results from
international affiliates and a weaker Japanese Yen. The other
category reflects the $16 million charge for the adoption of SFAS 121
in first quarter 1996. Excluding the effect of this charge, the other
category would have increased due to higher provisions for property
dispositions in first quarter 1997.
------------------------------------------------------------------------
OTHER OPERATING (INCOME) Quarters Ended
EXPENSE-NET March 31
In millions of dollars 1997 1996
------------------------------------------------------------------------
Gains on sales of restaurant
businesses $ (7.6) $ (9.0)
Equity in earnings of
unconsolidated affiliates (15.9) (18.5)
Other 17.5 23.3
------------------------------------------------------------------------
Other operating (income)
expense--net $ (6.0) $ (4.2)
========================================================================<PAGE>
<PAGE> 10
Consolidated operating income increased $51.7 million or nine
percent. This increase reflected higher combined operating margin
dollars and slightly higher other operating income, offset in part by
higher general, administrative & selling expenses and weaker foreign
currencies.
Higher interest expense reflected higher debt levels, offset in
part by lower average interest rates and weaker foreign currencies.
Nonoperating (income) expense reflected higher translation gains in
1997 compared with 1996, and in 1996, losses associated with the
reduction of the carrying value of the Company's investment in
Discovery Zone common stock to zero.
The effective income tax rate was 33.2 percent for first quarter
1997 compared with 33.3 percent for first quarter 1996. For 1997, the
Company expects the effective tax rate to be in the range of 32.5 to
33.5 percent.
U.S. OPERATING RESULTS
U.S. sales increased due to restaurant expansion (607 restaurants
added in the 12 months ended March 31, 1997) and positive comparable
sales. The increase in U.S. comparable sales was significant given an
extremely competitive U.S. operating environment, and one less trading
day in the quarter because 1996 was a leap year. We attribute the
increase in part to successful marketing and promotions including
Monopoly and Chicken McNuggets. Weather patterns year over year had a
negligible effect on results.
----------------------------------------------------------------------
U.S. OPERATING RESULTS Quarters Ended
March 31
1997 1996
----------------------------------------------------------------------
Percent increase/(decrease)
Sales 7 3
Revenues 3 4
Operating income 5 (4)
----------------------------------------------------------------------
As a percent of sales/revenues
Company-operated margins 16.0 15.0
Franchised margins 80.5 80.5
----------------------------------------------------------------------
U.S. sales increased at a faster rate than revenues primarily
because the number of U.S. franchised and affiliated restaurants
increased over the past year while the number of Company-operated
restaurants decreased.
The increase in U.S. operating income reflected higher Company-
operated and franchised margin dollars, offset in part by higher
general, administrative & selling expenses, and an increase in other
operating expenses.
The increase in Company-operated margins as a percent of sales
primarily resulted from lower food & paper and payroll costs, offset
in part by an increase in occupancy & other operating expenses as a
percent of sales.
Franchised margins as a percent of revenues were flat for the
quarter as the benefit of positive comparable sales was offset by
higher rent expense as a percent of revenues.<PAGE>
<PAGE> 11
OPERATING RESULTS OUTSIDE THE U.S.
The sales increase outside the U.S. was driven primarily by expansion
as weaker foreign currencies and negative comparable sales on a
constant currency basis tempered the results. If exchange rates had
remained at 1996 levels, sales outside the U.S. would have increased
14 percent. Strong comparable sales last year, weak economies, as
well as one less trading day and severe weather in Europe in 1997,
contributed to the weakness in comparable sales in first quarter 1997.
We expect results to improve for the balance of the year.
----------------------------------------------------------------------
OPERATING RESULTS OUTSIDE THE U.S. Quarters Ended
March 31
1997 1996
----------------------------------------------------------------------
Percent increase
Sales 7 17
Revenues 12 20
Operating income 13 6
Operating income excluding
SFAS 121 charge and foreign
currency impact 14 15
----------------------------------------------------------------------
As a percent of sales/revenues
Company-operated margins 18.4 18.5
Franchised margins 80.7 81.1
----------------------------------------------------------------------
Revenues increased at a faster rate than sales. This was primarily
due to the weakening Japanese Yen that had a greater effect on sales
than revenues due to our affiliate structure in Japan, and the higher
growth rate in Company-operated versus franchised restaurants.
Of the fifteen largest international markets, the following had
strong sales and operating income growth for the first quarter: New
Zealand and Taiwan in Asia/Pacific; Austria, England, Italy, Spain,
Sweden and Switzerland in Europe; and Argentina and Mexico in Latin
America. Our operations in Canada, France and Germany were negatively
affected by weak economies throughout the first quarter.
The increase in operating income outside the U.S. was driven by
higher Company-operated and franchised margin dollars, and an increase
in other operating income. Weaker foreign currencies and higher
general, administrative & selling expenses necessary to fund the
accelerated expansion and continued investment in developing countries
partly offset these increases. Excluding the negative effect of
weaker foreign currencies and the $16 million charge to other
operating income recorded in first quarter 1996, operating income
outside the U.S. increased 14 percent in 1997.
Company-operated margins as a percent of sales were relatively flat
as a decrease in food & paper costs was offset by an increase in
occupancy & other operating costs as a percent of sales. Payroll
costs as a percent of sales remained flat.
Franchised margins as a percent of revenues were relatively flat.<PAGE>
<PAGE> 12
IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS
While changing foreign currencies affect reported results, McDonald's
lessens exposures by primarily purchasing goods and services in local
currencies, financing in local currencies and hedging certain foreign-
denominated cash flows.
The weakening of the Japanese Yen and Deutsche Mark were the
primary foreign currency changes that negatively affected first
quarter 1997 results. The following tables illustrate what the
results would have been if exchange rates had remained at 1996 levels
compared with reported results.
--------------------------------------------------------------------------
FOREIGN CURRENCY IMPACT ON INTERNATIONAL RESULTS
--------------------------------------------------------------------------
Dollars in millions Quarter Ended March 31, 1997
--------------------------------------------------------------------------
Increase
--------------------------------------------------------------------------
Adjusted Reported Change Adjusted Reported
--------------------------------------------------------------------------
Sales $4,083.6 $3,844.2 $239.4 14% 7%
Operating income 375.2 356.1 19.1 19 13
--------------------------------------------------------------------------<PAGE>
<PAGE> 13
--------------------------------------------------------------------------
FOREIGN CURRENCY IMPACT ON WORLDWIDE RESULTS
--------------------------------------------------------------------------
Dollars in millions, except
per common share data Quarter Ended March 31, 1997
--------------------------------------------------------------------------
Increase
--------------------------------------------------------------------------
Adjusted Reported Change Adjusted Reported
--------------------------------------------------------------------------
Systemwide sales $8,072.5 $7,833.1 $239.4 10% 7%
Operating income 633.3 614.2 19.1 13 9
Net income 350.7 344.5 6.2 16 14
Net income per
common share .50 .49 .01 19 17
--------------------------------------------------------------------------
FINANCIAL POSITION
Cash provided by operations for the quarter ended March 31, 1997
increased 12%. Together with other sources of cash such as
borrowings, cash provided by operations was used primarily for capital
expenditures, debt repayments, share repurchases and dividends. The
consolidated capital expenditure decrease of 3% in the first quarter
resulted from a 31% decrease in U.S. capital expenditures offsetting a
16% capital expenditure increase from outside the U.S. Restaurant
additions remain in line with our plans to add between 2,400 and 2,800
restaurants worldwide in 1997, with more than 70% being outside the
U.S.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this quarterly
report. They use such words as "may," "will," "expect," "believe,"
"plan" and other similar terminology. These statements reflect
management's current expectations and involve a number of risks and
uncertainties. Actual results could differ materially due to changes
in: global and local business and economic conditions; legislation
and governmental regulation; competition; success of operating
initiatives and advertising and promotional efforts; food, labor and
other operating costs; availability and cost of land and construction;
accounting policies and practices; consumer preferences, spending
patterns and demographic trends; political or economic instability in
local markets; and currency exchange rates.<PAGE>
<PAGE> 14
<TABLE>
FIRST QUARTER 1997 HIGHLIGHTS
<CAPTION>
OPERATING RESULTS
--------------------------------------------------------------------------
Quarters Ended
Dollars in millions March 31
1997 1996
---------------------------------------------------------------------------
<S> <C> <C>
Systemwide sales $ 7,833.1 $ 7,309.5
---------------------------------------------------------------------------
U.S. sales 3,988.9 3,722.8
Operated by franchisees 3,093.2 2,884.7
Operated by the Company 637.8 640.0
Operated by affiliates 257.9 198.1
---------------------------------------------------------------------------
Sales outside the U.S. 3,844.2 3,586.7
Operated by franchisees 1,770.9 1,686.3
Operated by the Company 1,215.4 1,073.8
Operated by affiliates 857.9 826.6
---------------------------------------------------------------------------
Total revenues 2,617.6 2,426.0
U.S. 1,083.9 1,053.0
Outside the U.S. 1,533.7 1,373.0
---------------------------------------------------------------------------
Operating income 614.2 562.5
U.S. 271.2 259.2
Outside the U.S. 356.1 314.2
Corporate G&A (13.1) (10.9)
---------------------------------------------------------------------------
Income before provision for
income taxes 515.7 452.1
Net income 344.5 301.6
Net income per common share .49 .42
---------------------------------------------------------------------------
Cash provided by operations 531.9 474.3
---------------------------------------------------------------------------
Total assets 17,257.7 17,386.0
Total shareholders' equity 8,617.4 8,718.2
---------------------------------------------------------------------------
/TABLE
<PAGE>
<PAGE> 15
<TABLE>
RESTAURANTS
<CAPTION>
-------------------------------------------------------------------------
At March 31, 1997 1996
-------------------------------------------------------------------------
<S> <C> <C>
Systemwide restaurants 21,276 18,696
-------------------------------------------------------------------------
U.S. 12,104 11,497
Operated by franchisees 9,474 9,018
Operated by the Company 1,800 1,851
Operated by affiliates 830 628
-------------------------------------------------------------------------
Outside the U.S. 9,172 7,199
Operated by franchisees 4,036 3,339
Operated by the Company 2,568 2,074
Operated by affiliates 2,568 1,786
-------------------------------------------------------------------------
By Type
Operated by franchisees 13,510 12,357
Operated by the Company 4,368 3,925
Operated by affiliates 3,398 2,414
-------------------------------------------------------------------------
/TABLE
<PAGE>
<PAGE> 16
PART II
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) - Exhibits
--------------
Exhibit Number Description
-------------- -----------
(3) Corrected Restated Certificate of Incorporation effective as
of December 13, 1996 and By-Laws effective of January 21,
1997, incorporated by reference from Form 8-K dated
January 9, 1997.
(4) Instruments defining the rights of security holders,
including indentures (A):
(a) Debt Securities. Indenture dated as of March 1, 1987
incorporated herein by reference from Exhibit 4(a) of
Form S-3 Registration Statement, SEC file no. 33-12364.
(i) Medium-Term Notes, Series B, due from nine
months to 30 years from Date of Issue.
Supplemental Indenture No. 12 incorporated
herein by reference from Exhibit (4) of Form 8-K
dated August 18, 1989 and Forms of Medium-Term
Notes, Series B, incorporated herein by
reference from Exhibit (4)(b) of Form 8-K dated
September 14, 1989.
(ii) Medium-Term Notes, Series C, due from nine
months to 30 years from Date of Issue. Form of
Supplemental Indenture No. 15 incorporated
herein by reference from Exhibit 4(b) of
Form S-3 Registration Statement, SEC file
no. 33-34762 dated May 14, 1990.
(iii) Medium-Term Notes, Series C, due from nine
months (U.S. Issue)/184 days (Euro Issue) to 30
years from Date of Issue. Amended and restated
Supplemental Indenture No. 16 incorporated
herein by reference from Exhibit (4) of Form
10-Q for the period ended March 31, 1991.
(iv) 8-7/8% Debentures due 2011. Supplemental
Indenture No. 17 incorporated herein by
reference from Exhibit (4) of Form 8-K dated
April 22, 1991.<PAGE>
<PAGE> 17
Exhibit Number Description
-------------- -----------
(v) Medium-Term Notes, Series D, due from nine
months (U.S. Issue)/184 days (Euro Issue) to 60
years from Date of Issue. Supplemental
Indenture No. 18 incorporated herein by
reference from Exhibit 4(b) of Form S-3
Registration Statement, SEC file no. 33-42642
dated September 10, 1991.
(vi) 7-3/8% Notes due July 15, 2002. Form of
Supplemental Indenture No. 19 incorporated
herein by reference from Exhibit (4) of Form 8-K
dated July 10, 1992.
(vii) 6-3/4% Notes due February 15, 2003. Form of
Supplemental Indenture No. 20 incorporated
herein by reference from Exhibit (4) of Form 8-K
dated March 1, 1993.
(viii)7-3/8% Debentures due July 15, 2033. Form of
Supplemental Indenture No. 21 incorporated
herein by reference from Exhibit (4)(a)of
Form 8-K dated July 15, 1993.
(ix) Medium-Term Notes, Series E, due from nine
months to 60 years from date of issue. Form of
Supplemental Indenture No. 22, incorporated
herein by reference from Exhibit (4) of Form
10-Q for the period ended June 30, 1995.
(x) 6-5/8% Notes due September 1, 2005. Form of
Supplemental Indenture No. 23 incorporated
herein by reference from Exhibit 4(a) of Form
8-K dated September 5, 1995.
(xi) 7.05% Debentures due 2025. Form of Supplemental
Indenture No. 24 incorporated herein by
reference from Exhibit (4)(a) of Form 8-K dated
November 13, 1995.
(b) Form of Deposit Agreement dated as of November 25, 1992
by and between McDonald's Corporation, First Chicago
Trust Company of New York, as Depositary, and the
Holders from time to time of the Depositary Receipts.
(c) Rights Agreement dated as of December 13, 1988 between
McDonald's Corporation and The First National Bank of
Chicago, incorporated herein by reference from Exhibit
1 of Form 8-K dated December 23, 1988.<PAGE>
<PAGE> 18
Exhibit Number Description
-------------- -----------
(i) Amendment No. 1 to Rights Agreement incorporated
herein by reference from Exhibit 1 of Form 8-K
dated May 25, 1989.
(ii) Amendment No. 2 to Rights Agreement incorporated
herein by reference from Exhibit 1 of Form 8-K
dated July 25, 1990.
(d) Indenture and Supplemental Indenture No. 1 dated as of
September 8, 1989, between McDonald's Matching and
Deferred Stock Ownership Trust, McDonald's Corporation
and Pittsburgh National Bank in connection with SEC
Registration Statement Nos. 33-28684 and 33-28684-01,
incorporated herein by reference from Exhibit (4)(a) of
Form 8-K dated September 14, 1989.
(e) Form of Supplemental Indenture No. 2 dated as of
April 1, 1991, supplemental to the Indenture between
McDonald's Matching and Deferred Stock Ownership Trust,
McDonald's Corporation and Pittsburgh National Bank in
connection with SEC Registration Statement Nos.
33-28684 and 33-28684-01, incorporated herein by
reference from Exhibit (4)(c) of Form 8-K dated
March 22, 1991.
(f) 8.35% Subordinated Deferrable Interest Debentures due
2025. Indenture incorporated herein by reference from
Exhibit 99.1 of Schedule 13E-4/A Amendment No. 2 dated
July 14, 1995.
(g) Senior Debt Securities Indenture dated as of
October 19, 1996, incorporated herein by reference from
Exhibit 4(a) of Form S-3 Registration Statement, SEC
File No. 333-14141.
(h) Subordinated Debt Securities Indenture dated as of
October 18, 1996, incorporated herein by reference from
Form 8-K dated October 18, 1996.
(i) 7 1/2% Subordinated Deferrable Interest Debentures
due 2036. Supplemental Indenture No. 1 dated as
of November 5, 1996, incorporated herein by
reference from Exhibit 4(b) of Form 8-K dated as
of October 18, 1996.
(ii) 7 1/2% Subordinated Deferrable Interest Debentures
due 2037. Supplemental Indenture No. 2 dated as
of November 5, 1996, incorporated herein by
reference from Form 8-K dated January 9, 1997.<PAGE>
<PAGE> 19
Exhibit Number Description
-------------- -----------
(10) Material Contracts
(a) Directors' Stock Plan, as amended and restated,
incorporated herein by reference from Form 10-K for the
year ended December 31, 1994.*
(b) Profit Sharing Program, as amended and restated,
incorporated herein by reference from Form 10-K for the
year ended December 31, 1995.*
(c) McDonald's Supplemental Employee Benefit Equalization
Plan, McDonald's Profit Sharing Program Equalization Plan
and McDonald's 1989 Equalization Plan, as amended and
restated, incorporated herein by reference from Form 10-K
for the year ended December 31, 1995.*
(d) 1975 Stock Ownership Option Plan as amended and
restated, incorporated herein by reference from
Exhibit (10)(d) of Form 10-Q for the quarter ended
March 31, 1996*.
(e) 1992 Stock Ownership Incentive Plan, incorporated
herein by reference from Exhibit B on pages 29-41 of
McDonald's 1995 Proxy Statement and Notice of 1995
Annual Meeting of Shareholders dated April 12, 1995*.
(f) McDonald's Corporation Deferred Income Plan, as amended
and restated, incorporated herein by reference from
Form 10-K for the year ended December 31, 1996.*
(g) Non-Employee Director Stock Option Plan, incorporated
by reference from Exhibit A on pages 25-28 of
McDonald's 1995 Proxy Statement and Notice of 1995
Annual Meeting of Shareholders dated April 12, 1995.*
(11) Statement re: Computation of per share earnings.
(12) Statement re: Computation of ratios.
(27) Financial Data Schedule
--------------------
* Denotes compensatory plan.<PAGE>
<PAGE> 20
(A) Other instruments defining the rights of holders of long-term
debt of the registrant and all of its subsidiaries for which
consolidated financial statements are required to be filed and
which are not required to be registered with the Securities and
Exchange Commission, are not included herein as the securities
authorized under these instruments, individually, do not exceed
10% of the total assets of the registrant and its subsidiaries on
a consolidated basis. An agreement to furnish a copy of any such
instruments to the Securities and Exchange Commission upon
request has been filed with the Commission.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed for the last quarter
covered by this report, and subsequently up to May 7, 1997.
Financial Statements
Date of Report Item Number Required to be Filed
-------------- ----------- --------------------
January 9, 1997 Item 5 No
April 17, 1997 Item 7 No<PAGE>
<PAGE> 21
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 thereunto duly authorized.
McDONALD'S CORPORATION
(Registrant)
By /s/ Michael L. Conley
-----------------
(Signature)
Michael L. Conley
Executive Vice President,
Chief Financial Officer
May 7, 1997
------------------
(Date)<PAGE>
<PAGE> 22
<TABLE>
Exhibit 11
McDONALD'S CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Dollars and shares in millions, except per common share data
<CAPTION> Quarters Ended
March 31
1997 1996
---- ----
<S> <C> <C>
Net income $344.5 $301.6
Preferred stock dividends (6.9) (6.9)
------- -------
Net income available to common shareholders $337.6 $294.7
======= =======
Weighted average number of common shares outstanding during the
period (A) 691.6 700.5
Additional shares related to potentially dilutive securities 16.6 20.6
------- -------
Adjusted weighted average common shares 708.2 721.1
======= =======
Fully diluted net income per common share $ 0.48 $ 0.41
------- -------
NOTES:
(A) Refer to Condensed consolidated statement of income on page 4 and to Financial comments -
Net income per common share on page 6 of this report.
/TABLE
<PAGE>
<PAGE> 23
<TABLE> Exhibit 12
McDONALD'S CORPORATION
STATEMENT RE: COMPUTATION OF RATIOS
In Millions
<CAPTION> Quarters
Ended March 31, Years Ended December 31,
------------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
- Income before provision for income taxes $515.7 $452.1 $2,251.0 $2,169.1 $1,886.6 $1,675.7 $1,448.1
- Minority interest in operating results of
majority-owned subsidiaries, including
fixed charges related to redeemable
preferred stock, less equity in
undistributed operating results of
less-than-50% owned affiliates 8.1 4.0 39.6 19.6 6.6 6.9 5.3
- Provision for income taxes of 50% owned
affiliates included in consolidated income
before provision for income taxes 19.1 22.4 73.2 73.3 34.9 34.2 29.4
- Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* 35.5 29.6 130.9 103.8 83.4 71.6 70.1
- Interest expense, amortization of debt
discount and issuance costs, and
depreciation of capitalized interest* 115.5 96.6 392.2 388.8 346.0 358.0 413.8
---------------------------------------------------------------------------
$693.9 $604.7 $2,886.9 $2,754.6 $2,357.5 $2,146.4 $1,966.7
===========================================================================
FIXED CHARGES
- Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* $35.5 $29.6 $130.9 $103.8 $83.4 $71.6 $70.1
- Interest expense, amortization of debt
discount and issuance costs, and fixed
charges related to redeemable preferred
stock* 113.7 100.4 410.4 403.4 343.9 349.3 405.4
- Capitalized interest* 4.1 4.5 23.5 22.8 21.0 20.7 20.5
---------------------------------------------------------------------------
$153.3 $134.5 $564.8 $530.0 $448.3 $441.6 $496.0
===========================================================================
RATIO OF EARNINGS TO FIXED CHARGES 4.53 4.50 5.11 5.20 5.26 4.86 3.96
===========================================================================
*Includes amounts of the Registrant and its majority-owned subsidiaries, and one-half of the amounts of 50%-owned affiliates.
/TABLE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5 EXHIBIT 27
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 300
<SECURITIES> 0
<RECEIVABLES> 450
<ALLOWANCES> 0
<INVENTORY> 60
<CURRENT-ASSETS> 1,010
<PP&E> 19,082
<DEPRECIATION> 4,831
<TOTAL-ASSETS> 17,258
<CURRENT-LIABILITIES> 2,040
<BONDS> 4,804
0
358
<COMMON> 8
<OTHER-SE> 11,601
<TOTAL-LIABILITY-AND-EQUITY> 17,258
<SALES> 1,853
<TOTAL-REVENUES> 2,618
<CGS> 1,527
<TOTAL-COSTS> 1,675
<OTHER-EXPENSES> (6)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> 516
<INCOME-TAX> 171
<INCOME-CONTINUING> 345
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345
<EPS-PRIMARY> .49
<EPS-DILUTED> 0
</TABLE>
