<PAGE>
===============================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended March 31, 1998
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 60523
(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
----- ------
687,430,149
---------------------
(Number of shares of common stock
outstanding as of March 31, 1998)
===============================================================================
<PAGE>
McDONALD'S CORPORATION
----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page Reference
Part I. Financial Information
<S> <C> <C>
Item 1 - Financial Statements
Condensed consolidated balance sheet,
March 31, 1998 (unaudited) and 3
December 31, 1997
Condensed consolidated statement of
income (unaudited), first quarters ended
March 31, 1998 and 1997 4
Condensed consolidated statement of
cash flows (unaudited), first quarters
ended March 31, 1998 and 1997 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 12
(a) Exhibits
The exhibits listed in the
accompanying Exhibit Index are
filed as part of this report 12
(b) Reports on Form 8-K 14
Signature 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(unaudited)
In millions March 31, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and equivalents $ 353.8 $ 341.4
Accounts and notes receivable 498.5 483.5
Inventories, at cost, not in excess of market 67.2 70.5
Prepaid expenses and other current assets 261.0 246.9
- ----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,180.5 1,142.3
- ----------------------------------------------------------------------------------------------------------------
OTHER ASSETS 2,237.6 2,137.8
PROPERTY AND EQUIPMENT
Property and equipment, at cost 20,275.2 20,088.2
Accumulated depreciation and amortization (5,277.1) (5,126.8)
- ----------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 14,998.1 14,961.4
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $18,416.2 $18,241.5
================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 565.3 $ 1,293.8
Accounts payable 404.4 650.6
Income taxes 148.4 52.5
Other taxes 151.6 148.5
Accrued interest 124.7 107.1
Other accrued liabilities 442.7 396.4
Current maturities of long-term debt 46.9 335.6
- ----------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,884.0 2,984.5
- ----------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 5,848.5 4,834.1
OTHER LONG-TERM LIABILITIES AND MINORITY INTERESTS 422.7 427.5
DEFERRED INCOME TAXES 1,057.6 1,063.5
COMMON EQUITY PUT OPTIONS 81.4 80.3
SHAREHOLDERS' EQUITY
Preferred stock, no par value; authorized - 165.0 million shares;
issued - none
Common stock, $.01 par value; authorized - 3.5 billion shares;
issued - 830.3 million shares 8.3 8.3
Additional paid-in capital 790.1 699.2
Guarantee of ESOP notes (171.3) (171.3)
Retained earnings 12,874.8 12,569.0
Accumulated other comprehensive income (510.2) (470.5)
Common stock in treasury, at cost; 142.9 and 144.6 million shares (3,869.7) (3,783.1)
- ----------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 9,122.0 8,851.6
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,416.2 $18,241.5
================================================================================================================
</TABLE>
See accompanying Financial comments.
3
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended
In millions, except March 31
per common share data 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Sales by Company-operated restaurants $2,014.3 $1,853.2
Revenues from franchised and affiliated restaurants 790.6 764.4
- -------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 2,804.9 2,617.6
- -------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 1,663.4 1,527.1
Franchised restaurants - occupancy expenses 158.1 148.3
Selling, general, and administrative expenses 343.0 334.0
Other operating (income) expense-net (2.3) (6.0)
- -------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 2,162.2 2,003.4
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 642.7 614.2
- -------------------------------------------------------------------------------------------------------------------
Interest expense 102.8 90.0
Nonoperating (income) expense-net (.3) 8.5
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 540.2 515.7
- -------------------------------------------------------------------------------------------------------------------
Provision for income taxes 178.0 171.2
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 362.2 $ 344.5
===================================================================================================================
NET INCOME PER COMMON SHARE $ .53 $ .49
NET INCOME PER COMMON SHARE - DILUTED .52 .48
- -------------------------------------------------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $ .0825 $ .075
- -------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 686.4 691.6
WEIGHTED AVERAGE SHARES - DILUTED 701.9 707.5
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Financial comments.
4
<PAGE>
- --------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended
March 31
In millions 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 362.2 $ 344.5
Adjustments to reconcile to cash provided by operations
Depreciation and amortization 203.9 191.9
Changes in operating working capital items (54.9) 14.4
Other 10.2 (18.9)
- -------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS 521.4 531.9
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment expenditures (401.9) (454.4)
Purchases and sales of restaurant businesses and
sales of other property 7.2 23.0
Other (36.7) (57.9)
- -------------------------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (431.4) (489.3)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Notes payable and long-term financing issuances and repayments 22.0 235.1
Treasury stock purchases (100.7) (296.4)
Common and preferred stock dividends (56.6) (58.7)
Other 57.7 47.3
- -------------------------------------------------------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES (77.6) (72.7)
- -------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS INCREASE (DECREASE) 12.4 (30.1)
- -------------------------------------------------------------------------------------------------------------------
Cash and equivalents at beginning of period 341.4 329.9
- -------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 353.8 $ 299.8
===================================================================================================================
</TABLE>
See accompanying Financial comments.
5
<PAGE>
- --------------------------------------------------------------------------------
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 1997
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, 1998 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.
Comprehensive Income
Comprehensive income consists of net income and foreign currency translation
adjustments and totaled $322.5 million and $253.0 million for the quarters ended
March 31, 1998 and 1997, respectively.
Per Common Share Information
Income used in the computation of per common share information was reduced by
preferred stock cash dividends of $6.9 million for the first quarter of 1997.
The Company retired its remaining Series E Preferred Stock in December 1997.
Diluted net income per common share includes the dilutive effect of stock
options.
Common Equity Put Options
At March 31, 1998, 1.8 million of common equity put options were outstanding,
of which .8 million were sold in first quarter 1998. The options expire at
various dates through May 1998. The $81.4 million exercise price of the options
outstanding was classified in common equity put options at March 31, 1998, and
the related offset was recorded in common stock in treasury, net of premiums
received.
Segment Information
The following table presents the Company's revenues and operating income by
geographic segment:
<TABLE>
<CAPTION>
Quarters Ended March 31
1998 1997
-----------------------
<S> <C> <C>
Revenues
U.S. $1,102.0 $1,083.9
Europe 990.3 890.5
Asia/Pacific 376.3 351.8
Latin America 192.9 149.1
Other 143.4 142.3
-------- --------
Total revenues $2,804.9 $2,617.6
======== ========
Operating income
U.S. $284.5 $271.2
Europe 228.6 205.0
Asia/Pacific 81.5 95.1
Latin America 39.8 32.8
Other 23.9 23.2
Corporate SG&A (15.6) (13.1)
------ ------
Total operating income $642.7 $614.2
====== ======
</TABLE>
6
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASES (DECREASES) IN OPERATING RESULTS OVER 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except First Quarter
per common share data Ended March 31
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SYSTEMWIDE SALES $336.6 4%
- ------------------------------------------------------------------------------------------------------------------------------------
REVENUES
Sales by Company-operated restaurants $161.1 9%
Revenues from franchised and affiliated restaurants 26.2 3
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 187.3 7
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 136.3 9
Franchised restaurants - occupancy costs 9.8 7
Selling, general, and administrative expenses 9.0 3
Other operating (income) expense-net 3.7 (N/M)
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 158.8 8
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 28.5 5
- ------------------------------------------------------------------------------------------------------------------------------------
Interest expense 12.8 14
Nonoperating (income) expense-net (8.8) (N/M)
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 24.5 5
- ------------------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 6.8 4
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 17.7 5%
====================================================================================================================================
NET INCOME PER COMMON SHARE $ .04 8%
NET INCOME PER COMMON SHARE - DILUTED .04 8
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(N/M) Not meaningful
CONSOLIDATED OPERATING RESULTS
Net income and diluted net income per common share for the quarter
increased five percent and eight percent, respectively, over the same period of
1997. Changing foreign currencies significantly reduced reported results.
Excluding the foreign currency translation effect, net income would have
increased nine percent and diluted net income per common share would have
increased 12 percent.
During the first quarter, the Company repurchased $127 million of common
stock. Fewer shares outstanding and the absence of preferred dividends in first
quarter 1998, due to the retirement of the Company's remaining Series E
Preferred Stock in December 1997, resulted in the higher increase in diluted net
income per common share compared with net income.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Systemwide sales Quarters ended March 31
--------------------------------------------------------------------------------
Dollars in millions 1998 1997 Increase/(Decrease)
- ------------------------------------------------------------------------------------------------------------------------------------
As In Constant
Reported Currencies*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. $4,119.2 $3,988.9 3% n/a
- ------------------------------------------------------------------------------------------------------------------------------------
Europe 1,949.9 1,801.0 8 16%
- ------------------------------------------------------------------------------------------------------------------------------------
Asia/Pacific 1,334.0 1,377.7 (3) 10
- ------------------------------------------------------------------------------------------------------------------------------------
Latin America 410.6 328.6 25 30
- ------------------------------------------------------------------------------------------------------------------------------------
Other 356.0 336.9 6 11
- ------------------------------------------------------------------------------------------------------------------------------------
Total Systemwide sales $8,169.7 $7,833.1 4% 9%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excluding the effect of foreign currency translation on reported results
n/a Not applicable
7
<PAGE>
Systemwide sales represent sales by Company-operated, franchised and
affiliated restaurants. Comparable sales are measured on a constant currency
basis. Constant currency information excludes the effect of foreign currency
translation on reported results. Total revenues include sales by Company-
operated restaurants and fees from restaurants operated by franchisees and
affiliates. These fees include rent, service fees and royalties that are based
on a percent of sales with specified minimum payments along with initial fees.
On a global basis, the increases in sales and revenues were primarily due
to expansion, offset in part by weaker foreign currencies.
U.S. sales increased primarily due to restaurant expansion as comparable
sales were relatively flat.
In Europe, the constant currency sales increase was driven by expansion and
positive comparable sales. England, France, Italy and Spain were the primary
contributors to the strong sales performance.
In Asia/Pacific, the constant currency sales increase was due to expansion,
partly offset by negative comparable sales. Difficult economic conditions in
Japan and the economic downturns in Southeast Asia negatively impacted consumer
spending.
In Latin America, the constant currency sales increase was driven by
expansion and positive comparable sales. Brazil accounted for more than half of
the sales growth. In addition, strong sales in Argentina, Mexico, and Venezuela
contributed to Latin America's strong performance.
Revenues increased at a faster rate than sales for first quarter 1998. This
was primarily due to the weakening Japanese Yen, which had a greater negative
effect on sales than revenues due to our affiliate structure in Japan, and the
higher growth rate in Company-operated versus franchised restaurants.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
Consolidated operating margins Quarters ended March 31
---------------------------
1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
Dollars in millions
- -------------------------------------------------------------------------
Company-operated $350.9 $326.1
- -------------------------------------------------------------------------
Franchised 632.5 616.1
- -------------------------------------------------------------------------
Combined operating margins $983.4 $942.2
- -------------------------------------------------------------------------
Percent of sales/revenues
- -------------------------------------------------------------------------
Company-operated 17.4% 17.6%
- -------------------------------------------------------------------------
Franchised 80.0 80.6
- -------------------------------------------------------------------------
</TABLE>
Company-operated margins as a percent of sales decreased slightly for the
quarter. Occupancy & other operating expenses increased as a percent of sales,
while food & paper and payroll costs were relatively flat.
U.S. Company-operated margins as a percent of sales increased for the
quarter, while Company-operated margins outside the U.S. declined, primarily in
Asia/Pacific. In the U.S., decreases in food & paper costs and occupancy & other
operating expenses as a percent of sales were partially offset by increases in
payroll costs. Outside the U.S., as a percent of sales, increases in food &
paper costs and occupancy & other operating expenses were offset in part by
decreases in payroll costs.
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 decreased, franchised margin dollars increased
three percent.
As a percent of revenues, franchised margins declined both in the U.S. and
outside the U.S. The declines reflected higher occupancy costs, including rent
expense, driven by an increase in the number of leased sites.
The increase in selling, general & administrative expenses was primarily
due to strategic global spending to support restaurant development, value
initiatives and execution strategies, offset in part by the translation effect
of weaker foreign currencies.
8
<PAGE>
<TABLE>
<CAPTION>
Other operating (income) expense-net Quarters ended
March 31
-----------------
Dollars in millions 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Gains on sales of restaurant businesses $ (8.0) $ (7.6)
- --------------------------------------------------------------------------
Equity in earnings of unconsolidated affiliates (12.4) (15.9)
- --------------------------------------------------------------------------
Other (income) expense 18.1 17.5
- --------------------------------------------------------------------------
Other operating (income) expense--net $ (2.3) $ (6.0)
- --------------------------------------------------------------------------
</TABLE>
Other operating (income) expense-net consists of transactions related to
franchising and the food service business. The decrease in equity in earnings of
unconsolidated affiliates was due to the weaker Japanese Yen; increased
ownership in Singapore, changing its classification from an affiliate to a
consolidated subsidiary; and weak performance in certain Asia/Pacific markets,
partly offset by increased equity in earnings of U.S. affiliates.
<TABLE>
<CAPTION>
Operating income Quarters ended March 31
------------------------------------------
Dollars in millions 1998 1997 Increase/(Decrease)
------------------------------------------
As In Constant
Reported Currencies*
<S> <C> <C> <C> <C>
U.S. $284.5 $271.2 5% n/a
- ---------------------------------------------------------------------------
Europe 228.6 205.0 12 18%
- ---------------------------------------------------------------------------
Asia/Pacific 81.5 95.1 (14) (5)
- ---------------------------------------------------------------------------
Latin America 39.8 32.8 21 29
- ---------------------------------------------------------------------------
Other 23.9 23.2 3 8
- ---------------------------------------------------------------------------
Corporate SG&A (15.6) (13.1 ) 19 n/a
- ---------------------------------------------------------------------------
Total operating income $642.7 $614.2 5% 9%
- ---------------------------------------------------------------------------
</TABLE>
* Excluding the effect of foreign currency translation on reported results
n/a Not applicable
Consolidated operating income increased $55.7 million or nine percent in
constant currencies. The increase reflected higher combined operating margin
dollars, offset in part by higher selling, general & administrative expenses and
slightly lower other operating income.
U.S. operating income increased $13.3 million or five percent, reflecting
higher combined operating margin dollars and relatively flat selling, general &
administrative expenses and other operating income.
Europe's operating income increased 18 percent in constant currencies. This
performance was primarily due to strong results in England, France, Germany,
Italy and Spain.
Asia/Pacific's operating income decreased five percent in constant
currencies. The benefit from the consolidation of our Singapore affiliate was
more than offset by the depressed operating results in certain Southeast Asian
markets.
Latin America's operating income increased 29 percent in constant
currencies, primarily driven by strong operating results in Brazil.
Higher interest expense reflected higher debt levels, offset in part by
weaker foreign currencies and lower average interest rates. The higher debt
levels were primarily due to borrowings in the last half of 1997 to fund the
retirement of preferred stock issued by a foreign subsidiary and the Company's
Series E Preferred Stock.
Nonoperating (income) expense-net reflected lower charges for minority
interests.
The effective income tax rate was 33.0 percent for first quarter 1998
compared with 33.2 percent for first quarter 1997. For the year 1998, the
Company expects the effective tax rate to be in the range of 32.5 percent to
33.5 percent.
9
<PAGE>
IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS
While changing foreign currencies affect reported results, McDonald's
lessens exposures by financing in local currencies, hedging certain foreign-
denominated cash flows and, where practical, by purchasing goods and services in
local currencies.
The weakening Australian Dollar, Deutsche Mark, French Franc and Japanese
Yen, as well as the significantly weakened Southeast Asian currencies, were the
primary foreign currencies that negatively affected reported results for first
quarter 1998. The following table presents the 1998 results translated at 1997
rates compared with reported results.
<TABLE>
<CAPTION>
=======================================================================================================
Effect of foreign currency translation on worldwide reported results
- -------------------------------------------------------------------------------------------------------
Increase
------------------------------------------------------------------
Dollars in millions, except per As In Constant As In Constant
common share data Reported Currencies* Change Reported Currencies*
=======================================================================================================
Quarter ended March 31, 1998
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Systemwide sales $8,169.7 $8,526.9 $357.2 4% 9%
- -------------------------------------------------------------------------------------------------------
Total revenues 2,804.9 2,935.4 130.5 7 12
- -------------------------------------------------------------------------------------------------------
Operating income 642.7 669.9 27.2 5 9
- -------------------------------------------------------------------------------------------------------
Net income 362.2 373.8 11.6 5 9
- -------------------------------------------------------------------------------------------------------
Net income per common share-
diluted .52 .54 .02 8 12
=======================================================================================================
</TABLE>
* Excluding the effect of foreign currency translation on reported results
FINANCIAL POSITION
Free cash flow - cash provided by operations less capital expenditures -
for the quarter ended March 31, 1998 increased $42 million to $119.5 million.
Together with other sources of cash such as borrowings, free cash flow was used
primarily for debt repayments, share repurchases and dividends. The consolidated
capital expenditure decrease of 12% in the first quarter is primarily due to a
decrease in U.S. capital expenditures. The Company plans to add about 2,100
restaurants worldwide in 1998, with about 85% being outside the U.S.
STRATEGIC INITIATIVES
In March 1998, the Company announced initiatives to improve restaurant
operations, enhance returns and reduce expenses. These initiatives include the
introduction of a new "Made for You" food preparation system in the U.S. and
Canada; a new financing approach to increase returns on new U.S. restaurants for
owners/operators and the Company; and a comprehensive study undertaken to
improve home office alignment, focus and productivity, and to reduce selling,
general and administrative expenses. The Company anticipates recording a special
charge to operating income in second quarter 1998 of approximately $170-$190
million related to the conversion to "Made for You." In addition, the Company
expects to conclude the study of home office spending in second quarter 1998, at
which time anticipated ongoing savings will be quantified and any related charge
for one-time costs will be recorded.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this 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 the success of operating initiatives and advertising and
promotional efforts and changes in: global and local business and economic
conditions; currency exchange and interest rates; food, labor and other
operating costs; political or economic instability in local markets;
competition; consumer preferences, spending patterns and demographic trends;
availability and cost of land and construction; legislation and government
regulation; and accounting policies and practices.
10
<PAGE>
- --------------------------------------------------------------------------------
FIRST QUARTER HIGHLIGHTS
- --------------------------------------------------------------------------------
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Quarters Ended March 31
Dollars in millions 1998 1997
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Systemwide sales by type
Operated by franchisees $ 5,030.2 $ 4,864.1
Operated by the Company 2,014.3 1,853.2
Operated by affiliates 1,125.2 1,115.8
- --------------------------------------------------------------------------------------------------------------------
Systemwide sales 8,169.7 7,833.1
- --------------------------------------------------------------------------------------------------------------------
Revenues
U.S. 1,102.0 1,083.9
Europe 990.3 890.5
Asia/Pacific 376.3 351.8
Latin America 192.9 149.1
Other 143.4 142.3
- --------------------------------------------------------------------------------------------------------------------
Total revenues 2,804.9 2,617.6
- --------------------------------------------------------------------------------------------------------------------
Restaurant margins
Company-operated
----------------
U.S. 16.4% 16.0%
Outside the U.S. 17.9% 18.4%
Franchised
----------
U.S. 80.1% 80.5%
Outside the U.S. 79.8% 80.7%
- --------------------------------------------------------------------------------------------------------------------
Operating income $ 642.7 $ 614.2
Income before provision for income taxes 540.2 515.7
Net income 362.2 344.5
Net income per common share .53 .49
Net income per common share - diluted .52 .48
- --------------------------------------------------------------------------------------------------------------------
Cash provided by operations 486.9 531.9
- ---------------------------------------------------------------------------------------------------------------------
Total assets 18,416.2 17,257.7
Total shareholders' equity 9,122.0 8,617.4
- ---------------------------------------------------------------------------------------------------------------------
RESTAURANTS
- --------------------------------------------------------------------------------------------------------------------
At March 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
By type
Operated by franchisees 14,366 13,510
Operated by the Company 5,065 4,406
Operated by affiliates 3,915 3,360
- --------------------------------------------------------------------------------------------------------------------
Systemwide restaurants 23,346 21,276
- ---------------------------------------------------------------------------------------------------------------------
Quarters Ended March 31
1998 1997
- --------------------------------------------------------------------------------------------------------------------
Additions
U.S. 33 10
Europe 57 61
Asia/Pacific 91 127
Latin America 18 30
Other 15 26
- --------------------------------------------------------------------------------------------------------------------
Systemwide additions 214 254
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Number Description
- -------------- -----------
(3) Restated Certificate of Incorporation, effective as of March 24, 1998,
incorporated herein by reference from Form 8-K dated April 17, 1998.
By-Laws, effective as of December 19, 1997, incorporated herein by
reference from Form 8-K dated January 5, 1998.
(4) Instruments defining the rights of security holders, including
Indentures (A):
(a) Senior Debt Securities Indenture dated as of October 19, 1996
incorporated herein by reference from Exhibit 4(a) of Form S-3
Registration Statement (File No. 333-14141).
(i) 6 3/8% Debentures due January 8, 2028. Supplemental
Indenture No. 1 dated as of January 8, 1998, incorporated
herein by reference from Exhibit (4)(a) of Form 8-K dated
January 5, 1998.
(b) 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 October 18, 1996.
(ii) 7 1/2% Subordinated Deferrable Interest Debentures due
2037. Supplemental Indenture No. 2 dated as of January 14,
1997, incorporated herein by reference from Exhibit (4)(b)
of Form 8-K dated January 9, 1997.
(iii) 7.31% Subordinated Deferrable Interest Debentures due 2027.
Supplemental Indenture No. 3 dated September 24, 1997,
incorporated herein by reference from Exhibit (4)(b) of
Form 8-K dated September 19, 1997.
(c) Debt Securities. Indenture dated as of March 1, 1987 incorporated
herein by reference from Exhibit 4(a) of Form S-3 Registration
Statement (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 (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.
12
<PAGE>
Exhibit Number Description
- -------------- -----------
(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.
(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 (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 (U.S.
Issue)/ 184 days (Euro Issue) to 60 years from the Date of
Issue. Supplemental Indenture No. 22 incorporated herein
by reference from Exhibit 4(b) of Form S-3 Registration
Statement (File No. 33-60939), dated July 13, 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.
(d) 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.
(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.
(e) 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.
(f) 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.
(10) Material Contracts
(a) Directors' Stock Plan, as amended and restated, incorporated
herein by reference from Exhibit 10(a) of Form 10-Q for the
quarter ended September 30, 1997.*
13
<PAGE>
Exhibit Number Description
- -------------- -----------
(b) Profit Sharing Program, as amended and restated, incorporated
herein by reference from Form 10-K for the year ended December
31, 1995.*
(i) Amendment No. 1 incorporated herein by reference from Form
10-Q for the quarter ended June 30, 1997.
(ii) Amendment No. 2 incorporated herein by reference from Form
10-Q for the quarter ended June 30, 1997.
(iii) Amendment No. 3 incorporated herein by reference from Form
10-Q for the quarter ended June 30, 1997.
(iv) Amendment No. 4 incorporated herein by reference from Form
10-K for the year ended December 31, 1997.
(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, filed
herewith.*
(e) 1992 Stock Ownership Incentive Plan, as amended and restated,
filed herewith.*
(f) McDonald's Corporation Deferred Income Plan, as amended and
restated, incorporated herein by reference from Exhibit 10(f) of
Form 10-Q for the quarter ended September 30, 1997.*
(g) Non-Employee Director Stock Option Plan, incorporated herein 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.*
(h) Employment Agreement, incorporated by reference from Exhibit 10
(h) of Form 10-Q for the quarter ended September 30, 1997.*
(12) Statement re: Computation of ratios
(27.1) Financial Data Schedule
(27.2) Restated Financial Data Schedule
- ---------------------
* Denotes compensatory plan.
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 14, 1998.
<TABLE>
<CAPTION>
Financial Statements
Date of Report Item Number Required to be Filed
-------------- ----------- --------------------
<C> <S> <C>
1/5/98 Item 5 No
2/10/98 Item 7 No
4/17/98 Item 7 No
4/30/98 Item 7 No
5/6/98 Item 5 No
</TABLE>
14
<PAGE>
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 Michael L. Conley
-----------------
(Signature)
Michael L. Conley
Executive Vice President,
Chief Financial Officer
May 14, 1998
- --------------
(Date)
15
<PAGE>
Exhibit 10(d)
McDONALD'S CORPORATION
1975 STOCK OWNERSHIP OPTION PLAN
AS AMENDED AND RESTATED
-----------------------
THE PLAN
McDonald's Corporation (the "Company") hereby amends and restates the
McDonald's Corporation 1975 Stock Ownership Option Plan, effective January 19,
1998. As so amended and restated, the McDonald's Corporation 1975 Stock
Ownership Option Plan is hereinafter called the "Plan". The terms of options
granted prior to the effective date of this amendment shall not be adversely
affected in any way by this amendment.
1. Purpose. The purpose of this Plan is to advance the interest of the
Company by encouraging and enabling the acquisition of a larger personal
financial interest in the Company by those employees upon whose judgment and
efforts the Company is largely dependent for the successful conduct of its
operations. It is anticipated that the acquisition of such financial interest
will stimulate the efforts of such employees on behalf of the Company,
strengthen their desire to continue in the service of the Company and encourage
shareholder and entrepreneurial perspectives through employee stock ownership.
It is also anticipated that the opportunity to obtain such financial interest
will prove attractive to promising new managerial and executive talent and will
assist the Company in attracting such employees. The options granted hereunder
shall not constitute incentive stock options as such term is defined in Section
422A of the Internal Revenue Code.
2. Scope of the Plan. An aggregate of 60,890,394 of the Company's
authorized but unissued shares of common stock, $.01 par value per share or
shares acquired by purchase as described in the paragraph below or any
combination of shares from both sources are hereby made available, and shall be
reserved for issuance, under the Plan. The aggregate number of shares available
under this Plan shall be subject to adjustment on the occurrence of any of the
events and in the manner set forth in Section 11 hereof. If an option shall
expire or terminate for any reason, without having been exercised in full, the
unpurchased shares subject thereto shall (unless the Plan shall have terminated
or unless all or a part of such shares were issued under the Company's 1978
Incentive Plan) become available for other options under the Plan.
The Board of Directors (called the "Board") or such person or persons that
the Board shall specifically authorize or direct to act on its behalf shall also
have the authority to purchase from time to time, in such amounts and at such
prices as it, in its discretion, shall deem advisable or appropriate, shares of
the common stock of the Company, to be held as treasury shares and reserved and
used solely for issuance at the discretion of the Option Committee, as set forth
in Section 3 hereof, upon exercise of options granted under this Plan and in
accordance with the provisions of the preceding paragraph.
3. Administration. Except as herein expressly reserved by the Board and
not delegated by the Board to the Committee, the Plan shall be administered by a
Committee, to be known as the Option Committee (called the "Committee"), which
will include not less than three Directors of the Company, who shall be
appointed, from time to time, by the Board. Except as herein expressly reserved
by the Board and not delegated by the Board to the Committee, the Committee
shall have full and final authority, in its discretion, but subject to the
express provisions of the Plan: (a) to determine the purchase price of the
common stock covered by each option, and the individuals to whom, and the time
or times at which, options shall be granted and the number of shares to be
covered by each option; (b) to interpret the Plan; (c) to prescribe, amend and
rescind rules and regulations relating to the Plan; (d) to determine the terms,
provisions, and any restrictions or conditions (including but not limited to
restrictions with respect to stock acquired upon exercise of the option which
may continue beyond the date of the optionee's termination of employment) of the
respective option agreements (which need not be identical) by which options
shall be evidenced and, with the consent of the optionee, to modify the terms,
provisions, restrictions or conditions of any option agreement; (e) to cancel,
with the consent of the optionee, outstanding options and to grant new options
in substitution therefor; (f) to authorize foreign subsidiaries to adopt plans
as provided in Section 17; (g) to delegate its duties and responsibilities under
the Plan with respect to such foreign subsidiary plans, except its duties and
responsibilities with respect to grants of options to persons who, under Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Act"), are
treated (in the opinion of counsel for the Company) as officers or directors of
the Company, to such individuals or committees as the Committee in its sole
discretion may approve and (i) the acts thereunder by such individuals or
committees shall be treated hereunder as acts of the Committee and (ii) such
individuals or committees shall report to the Committee regarding the delegated
duties and responsibilities; and (h) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
4. Eligibility. With the exception of clerical employees and with the
further exception of persons (other than managers) employed in Company-owned
restaurants, options may be granted to (a) any employees of the Company or its
domestic subsidiaries, or (b) any employees, officers and directors of the
Company's foreign subsidiaries. Any entity in which the Company directly or
through intervening subsidiaries owns twenty-five percent (25%) or more of the
total combined voting power or value of all classes of stock or, in the case of
an unincorporated entity, a twenty-five percent (25%) or more interest in the
capital and profits, shall be treated as a subsidiary. In selecting the
16
<PAGE>
individuals to whom options shall be granted, as well as in determining the
number of shares subject to each option, the Committee shall take into
consideration such factors as it deems relevant in connection with accomplishing
the purpose of the Plan. Subject to the provisions of Section 2 hereof, an
individual who has been granted an option may, if he is otherwise eligible, be
granted additional options if the Committee shall so determine.
5. Option price. The purchase price of the stock covered by each option
shall not be less than the fair market value of such stock on the date the
option is granted (herein called the "Option Date"). For the purposes hereof the
fair market value shall be deemed to be the closing price of said stock on the
New York Stock Exchange Composite Tape on the Option Date or, if no sales of
said stock appear on such Tape on that date, on the next preceding date on which
there were such sales. Such price shall be subject to adjustment as provided in
Section 11 hereof.
6. Terms of employment. No obligation of the Company as to the length of
employment shall be implied by the terms of this Plan or any option granted
hereunder. The Company reserves the same rights to terminate employment of any
employee as existed prior to the date hereof.
7. Non-transferability of options. An option granted hereunder shall, by
its terms, not be transferable other than by will or the laws of descent and
distribution and may be exercised, during his lifetime, only by the optionee;
provided, however, that an optionee may, in a manner specified by the Committee,
designate in writing an individual beneficiary or beneficiaries to exercise an
option granted hereunder after the optionee's death.
8. Restricted stock. Upon granting an option or a substituted option or
upon accelerating the exercise date of an option pursuant to Section 16 or, with
respect to previously granted outstanding options, upon consent of the optionee,
the Committee may provide that shares granted upon exercise of the option shall
be subject to such restrictions as it may from time to time deem appropriate.
Specifically, but without limitation, the Committee may provide that shares
granted upon exercise of the option shall be restricted for such period after
the date of exercise as the Committee may determine, and shall be non-
transferable during such period, provided that with respect to options which are
accelerated, the restriction period shall not extend beyond the earliest date on
which the option or portion thereof could have been exercised prior to
acceleration. The restriction shall provide that if the optionee's employment is
terminated for reasons other than death, permanent disability or any other
reason specified by the Committee during the restriction period, the optionee
shall resell the restricted stock to the Company at the lesser of the option
exercise price paid or the fair market value on the date of termination of
employment. Any such shares shall bear an appropriate legend specifying that
such shares are subject to such restrictions. The Committee shall have
authority, in its discretion, to accelerate the time at which any or all of the
restrictions may lapse prior to the expiration of the restrictions or to remove
any or all of the restrictions. After the expiration of the restrictions, the
Committee shall cause shares free of the restrictions to be reissued without a
legend. Notwithstanding the foregoing, such restrictions shall not apply to
shares issued upon exercise after termination of employment by reason of death
or permanent disability pursuant to Subsection 9(a) and 9(b) hereof and, with
respect to shares issued subject to such restrictions, such restrictions shall
be cancelled by the Committee upon submission to the Committee of proof that the
termination of the optionee's employment occurred by reason of the optionee's
death, permanent disability (as defined in Section 9) or other reasons specified
by the Committee.
9. Termination of employment. An unexercised option, or any unexercised
installment thereof, shall terminate if the employment of the optionee by the
Company or any of its subsidiaries shall be terminated for any reason; except
that (a) if such employment is so terminated by death of the optionee, any
unexercised portion of the option (whether or not currently exercisable) at the
date of death may be exercised, in whole or in part, at any time within two
years after the date of death, by the optionee's personal representative or by
the person to whom the option is transferred by will or the applicable laws of
descent and distribution, and any such option which by its terms would otherwise
expire after the optionee's death but prior to the end of such two-year period
following the optionee's death, shall be extended so as to permit any
unexercised portion thereof to be exercised at any time within such two-year
period, provided that in no event shall any option be exercised after 12 years
from the Option Date; or (b) if such employment is terminated as a result of the
permanent disability of the optionee, the unexercised portion of the option
(whether or not currently exercisable) at the date of such termination of
employment may be exercised, in whole or in part, at any time within two years
after the date of such termination, and any such option which by its terms would
otherwise expire after the optionee's termination of employment by reason of
permanent disability but prior to the end of the two-year period following the
optionee's termination of employment, shall be extended so as to permit any
unexercised portion thereof to be exercised at any time within such two-year
period, provided that in no event shall any option be exercised after 12 years
from the Option Date; (c) if such employment is terminated on account of
retirement after attaining age 60 with at least 20 years of Company service, any
unexercised portion of an option or an installment which is then exercisable or
which becomes exercisable within the year following the date of retirement may
be exercised at any time within three years after such retirement, provided that
in no event shall any option be exercised after 10 years from the Option Date;
or (d) if such employment is terminated for any other reason excluding
termination for cause, the unexercised portion of the option (to the extent
exercisable on the date such employment is terminated) shall be exercisable at
any time within 30 days after the date of such termination, provided that in no
event shall any option be exercised after 10 years from the Option Date.
Permanent disability shall mean a mental or physical condition which renders an
optionee unable or incompetent to carry out the job responsibilities he held or
tasks to which he was assigned at the time the disability was incurred.
17
<PAGE>
10. Time of granting options. The Option Date under the Plan shall be the
date on which such option shall be duly granted by or on behalf of the Company.
11. Adjustments. Notwithstanding any other provision or the Plan, option
agreements entered into hereunder shall contain such provisions as the Committee
shall determine for adjustment of the number and class of shares covered
thereby, or of the option prices, or both, to reflect a stock dividend, stock
split-up, share combination, recapitalization, merger, consolidation,
acquisition of property or shares, separation, reorganization, liquidation or
the like, of or by the Company. In any such event, the aggregate number of class
of shares available under the Plan, shall be appropriately adjusted.
12. Termination and amendment of the Plan. This Plan shall terminate on
May 4, 2010. The Plan may be terminated at such earlier time, or be further
extended until such time, as the Board may determine. A termination shall not
affect any options then outstanding under the Plan.
The Board may make modifications of the Plan as it shall deem advisable,
without further approval of the stockholders of the Company, except as such
stockholder approval may be required under (i) Rule 16b-3 (or any successor
provision) under the Act or (ii) the listing requirements of any securities
exchange registered under the Act on which are listed any of the Company's
equity securities.
13. Liquidation. Upon the complete liquidation of the Company, any
unexercised options theretofore granted under this Plan shall be deemed
cancelled, except as otherwise provided in Section 11 in connection with a
merger, consolidation or reorganization of the Company.
14. Stock purchased for investment. Shares purchased under the options
shall be purchased for investment and without present intention of resale,
unless, in the opinion of counsel for the Company, the shares may be purchased
without investment representation. Where an investment representation or other
restrictive representation or agreement is deemed necessary, the Committee may
require a written representation or agreement to that effect by the optionee at
the time the option is granted or exercised.
15. Term of options. Except as provided in Subsections 9(a) and 9(b), the
term of each option granted hereunder shall be for a period of no more than 10
years from the Option Date, and shall be subject to earlier termination as
hereinbefore provided.
16. Exercise of options.
(a) Subject to the provisions of Section 9 and Subsections 16(b) and
16(c), each option granted hereunder shall be exercisable in four equal biennial
installments, commencing on the first anniversary of the date of grant.
(b) The Board (or if delegated by the Board to the Committee, the
Committee) may specify a different exercise schedule or schedules for all or any
group or groups of employees to whom grants are made hereunder.
(c) The Committee, in its sole discretion, shall have the authority
to accelerate on an individual by individual basis, the time at which options or
any part thereof become exercisable to such earlier date or dates as determined
by the Committee. The Board (or if delegated by the Board to the Committee, the
Committee) shall have the authority to accelerate the time or times at which all
or any part of the options of all or any group of employees may be exercised.
(d) The Committee, in its sole discretion, shall have the authority
to extend on an individual by individual basis the period of time during which
options or installments or any part thereof which have not been exercised may be
exercised. The Board (or if delegated by the Board to the Committee, the
Committee) shall have the authority to extend the period of time during which
all or any part of the options or installments of all or any group of employees
may be exercised.
(e) An optionee may exercise the option (or a part thereof) in whole
or in part at any time commencing on the date the option (or such part) becomes
exercisable. An option shall be exercised by written notice of intent to
exercise the option with respect to a specific number of option shares. Except
as provided in Section 18 hereof, the purchase of any shares as to which an
option shall be exercised shall be paid in full at the time of the purchase.
Payment of the option exercise price shall be made in cash or, with the consent
of the Committee, in whole or in part, in common stock of the Company valued at
fair market value.
An optionee shall not, by reason of any option granted hereunder,
have any right of a stockholder of the Company with respect to the shares
covered by his option until such shares have been issued to him. Any of the
provisions of this Section 16 to the contrary notwithstanding, except as
provided in Subsections 9(a) or 9(b), in no event shall any option be exercised
after 10 years from the Option Date.
18
<PAGE>
17. Stock option plans of foreign subsidiaries. The Committee may, in its
sole discretion, authorize any foreign subsidiary to adopt a plan for granting
options to purchase shares of common stock of the Company ("Foreign Option
Plan"). All grants of options under such Foreign Option Plans shall be treated
as grants under the Plan. Such Foreign Option Plans shall have such terms and
provisions as the Committee permits not inconsistent with the provisions of the
Plan and which may be more restrictive than those contained in the Plan. Options
granted under such Foreign Option Plans shall be governed by the terms of the
Plan except to the extent that the provisions of the Foreign Option Plans are
more restrictive than the terms of the Plan in which cash such terms of the
Foreign Option Plans shall control.
18. Loans and guarantees. The Board (or, if delegated by the Board to the
Committee, the Committee) may, in its discretion, allow an optionee to defer all
or any portion of the option exercise price or may cause the Company to
guarantee a loan from a third party to the optionee, in an amount equal to all
or any portion of the option exercise price. Any such payment deferral by the
Company pursuant to this Section 18 shall be for such periods, at such interest
rates and on such other terms and conditions as the Board (or, if delegated to
the Committee, the Committee) may determine. Notwithstanding the foregoing, an
optionee shall not be entitled to defer the payment of the option exercise price
unless the optionee (a) has a binding obligation to pay the portion of the
option exercise price which is deferred and (b) pays at the time of exercise a
minimum amount, with respect to the shares to be granted upon exercise, equal to
the amount determined pursuant to resolution of the Board to be capital within
the meaning of Section 154 of the Delaware General Corporation Law.
19. Substituted options. In the event the Committee cancels with the
consent of an optionees any option granted under this Plan or any other Stock
Option Plan, and a new option is substituted therefor, the Option Date of the
cancelled option shall be the date used to determine the exercisability of the
new substituted option under Section 16 hereof so that the optionee may exercise
the substituted option in the same percentages and at the same times as if the
optionee has held the substituted option since the Option Date of the cancelled
option. This Section 19 shall be effective with respect to all options granted
on or after October 25, 1976, in substitution of cancelled options.
20. Elective Share Withholding. The Committee (or in its discretion, the
Board) may provide with respect to any option that an optionee may, subject to
Committee approval, elect the withholding by the Company of a portion of the
shares of common stock otherwise issuable to such optionee upon option exercise
in the amount necessary to satisfy (i) his required United States, state and
local withholding tax liability with respect to the exercise of the option for
the year such exercise becomes taxable or (ii) a greater amount, not to exceed
the estimated total amount of United States, state and local income tax
liability with respect to the exercise of the option for the year such exercise
becomes taxable ("Share Withholding"). In order for Share Withholding to be so
exempt, elections by participants to have shares withheld will be subject to the
following restrictions: (1) they must be made prior to the date the amount of
tax to be withheld is determined (the "Tax Date"); and (2) they will be
irrevocable.
Executed this 2nd day of March, 1998.
McDONALD'S CORPORATION
By: /s/ Stanley R. Stein
--------------------
Its: Executive Vice President
------------------------
19
<PAGE>
Exhibit 10(e)
McDONALD'S CORPORATION 1992 STOCK OWNERSHIP INCENTIVE PLAN AS AMENDED AND
RESTATED
- -------------------------------------------------------------------------
THE PLAN
McDonald's Corporation, a Delaware corporation (the "Company") established the
McDonald's Corporation 1992 Stock Ownership Incentive Plan (the "Plan")
effective as of June 1, 1992. The Plan was first amended and restated,
effective as of June 1, 1995 and was subsequently amended and restated effective
as of March 19, 1997 and January 20, 1998 to incorporate non-material
modifications. Unless specifically provided for in an Award (as defined herein)
to the contrary, an Award shall be governed by and subject to the applicable
provisions of the Plan in effect on the date such Award was granted, or in the
case of an amended Award, the date the Award was amended.
1. Purpose
The purpose of this Plan is to advance the interest of the Company by
encouraging and enabling the acquisition of a larger personal financial interest
in the Company by those employees upon whose judgment and efforts the Company is
largely dependent for the successful conduct of its operations. An additional
purpose of this Plan is to provide a means by which employees of the Company and
its Subsidiaries can acquire and maintain Stock ownership, thereby strengthening
their commitment to the success of the Company and their desire to remain
employed by the Company and its Subsidiaries. It is anticipated that the
acquisition of such financial interest and Stock ownership will stimulate the
efforts of such employees on behalf of the Company, strengthen their desire to
continue in the service of the Company and encourage shareholder and
entrepreneurial perspectives through employee stock ownership. It is also
anticipated that the opportunity to obtain such financial interest and Stock
ownership will prove attractive to promising new employees and will assist the
Company in attracting such employees.
2. Definitions
As used in this Plan, terms defined parenthetically immediately after their use
shall have the respective meanings provided by such definitions and the terms
set forth below shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
(a) "Award" means options, shares of restricted stock, stock appreciation
rights, performance units or stock bonuses granted under this Plan.
(b) "Award Agreement" has the meaning specified in Section 4(c)(v).
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" includes termination based on the commission of any act or
acts involving dishonesty, fraud, illegality or moral turpitude.
(e) "Code" means the Internal Revenue Code of 1986, as amended, and
regulations and rulings thereunder. References to a particular section of the
Code shall include references to successor provisions.
(f) "Committee" means the committee of the Board appointed pursuant to
Section 4.
(g) "Company" has the meaning set forth in the introductory paragraph.
(h) "Disability" means, as relates to the exercise of an incentive stock
option after termination of employment, a disability within the meaning of
Section 22(e)(3) of the Code, and for all other purposes, a mental or physical
condition which, in the opinion of the Committee, renders a Grantee unable or
incompetent to carry out the job responsibilities which such Grantee held or the
tasks to which such Grantee was assigned at the time the disability was
incurred, and which is expected to be permanent or for an indefinite duration
exceeding one year.
(i) "Effective Date" means June 1, 1992.
(j) "Fair Market Value" of any security of the Company means, as of any
applicable date the closing price, regular way, of the security as reported on
the New York Stock Exchange Composite Tape, or if no such reported sale of the
security shall have occurred on such date, on the next preceding date on which
there was such a reported sale.
(k) "Grant Date" means the date on which an Award shall be duly granted,
as determined in accordance with Section 6(a)(i).
20
<PAGE>
(l) "Grantee" means an individual who has been granted an Award.
(m) "including" or "includes" means "including, without limitation," or
"includes, without limitation."
(n) "Measuring Period" has the meaning specified in Section 6(f)(i)(B).
(o) "Minimum Consideration" means $.01 per share or such larger amount
determined pursuant to resolution of the Board to be capital within the meaning
of Section 154 of the Delaware General Corporation law.
(p) "1934 Act" means the Securities Exchange Act of 1934, as amended.
References to a particular section of, or rule under, the 1934 Act shall include
references to successor provisions.
(q) "Option Price" means the per share purchase price of Stock subject to
an option.
(r) "Performance Percentage" has the meaning specified in Section
6(f)(i)(C).
(s) "Plan" means the McDonald's Corporation 1992 Stock Ownership Incentive
Plan, as amended and restated in the manner set forth in the introductory
paragraph.
(t) "Retirement" means a termination of employment with the Company and
its Subsidiaries any time after attaining age 60 with at least 20 years of
Company service.
(u) "SEC" means the Securities and Exchange Commission.
(v) "Section 16 Grantee" means a person subject to potential liability
under Section 16(b) of the 1934 Act with respect to transactions involving
equity securities of the Company.
(w) "Stock" means the common stock of the Company, par value $.01 per
share.
(x) "Subsidiary" means (i) with respect to incentive stock options, a
corporation as defined in Section 424(f) of the Code with the Company being
treated as the employer corporation for purposes of this definition, and (ii)
for all other purposes any entity in which the Company directly or through
intervening subsidiaries owns twenty-five percent (25%) or more of the total
combined voting power or value of all classes of stock or, in the case of an
unincorporated entity, a twenty-five percent (25%) or more interest in the
capital and profits.
(y) "10% Owner" means a person who owns stock (including stock treated as
owned under Section 424(d) of the Code) possessing more than 10% of the total
combined voting power of all classes of stock of the Company.
3. Scope of this Plan
(a) The number of shares of Stock which represented five percent (5%) of
the number of issued and outstanding shares of Stock as of June 1, 1992 was made
available and reserved for delivery on account of the exercise of Awards and
payment of benefits in connection with Awards. Effective June 1, 1995 and
January 20, 1998, an additional 32 million and 15 million shares of Stock,
respectively were made available and were reserved for delivery on account of
the exercise of Awards and payment of benefits in connection with Awards. Such
shares may be treasury shares or newly issued shares, as may be determined from
time to time by the Board or the Committee.
(b) Subject to adjustment as provided in Section 22, the maximum number of
Shares of Stock for which Awards may be granted to any Grantee in any three-year
period shall not exceed 2,500,000.
(c) Subject to Section 3(a) and (b) (as to the maximum number of shares of
Stock available for delivery in connection with Awards) and to Section 3(d), up
to 5,000,000 shares of restricted stock, and up to 200,000 bonus shares of Stock
may be granted under this Plan.
(d) If and to the extent an Award shall expire or terminate for any reason
without having been exercised in full, or shall be forfeited, without, in either
case, the Grantee having enjoyed any of the benefits of stock ownership (other
than voting rights or dividends that are likewise forfeited), the shares of
Stock (including restricted stock) associated with such Award shall become
available for other Awards.
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4. Administration
(a) Subject to Section 4(b), this Plan shall be administered by a
committee ("Committee") of the Board of Directors. All members of the Committee
shall be "Outside Directors" as defined or interpreted for purposes of Section
162(m) of the Code. The composition of the Committee shall also be subject to
such limitations as the Board deems appropriate to permit transactions in Stock
pursuant to this Plan to be exempt from liability under Rule 16b-3 under the
1934 Act.
(b) The Board may, in its discretion, reserve to itself or delegate to
another committee of the Board any or all of the authority and responsibility of
the Committee with respect to Awards to Grantees who are not Section 16 Grantees
at the time any such delegated authority or responsibility is exercised. Such
other committee may consist of two or more directors who may, but need not be,
officers or employees of the Company or of any of its Subsidiaries. To the
extent that the Board has reserved to itself or delegated to such other
committee the authority and responsibility of the Committee, all references to
the Committee in this Plan shall be to the Board or such other committee.
(c) The Committee shall have full and final authority, in its discretion,
but subject to the express provisions of this Plan, as follows:
(i) to grant Awards,
(ii) to determine (A) when Awards may be granted, and (B) whether or
not specific Awards shall be identified with other specific Awards, and if so
whether they shall be exercisable cumulatively with or alternatively to such
other specific Awards,
(iii) to interpret this Plan and to make all determinations necessary
or advisable for the administration of this Plan,
(iv) to prescribe, amend, and rescind rules and regulations relating
to this Plan, including rules with respect to the exercisability and
nonforfeitability of Awards upon the termination of employment of a Grantee,
(v) to determine the terms and provisions and any restrictions or
conditions (including specifying such performance criteria as the Committee
deems appropriate, and imposing restrictions with respect to stock acquired upon
exercise of an option, which restrictions may continue beyond the Grantee's
termination of employment) of the written agreements by which all Awards shall
be evidenced ("Award Agreements") which need not be identical and, with the
consent of the Grantee, to modify any such Award Agreement at any time,
(vi) to authorize foreign Subsidiaries to adopt plans as provided in
Section 15,
(vii) to delegate its duties and responsibilities under this Plan with
respect to such foreign Subsidiary plans, except its duties and responsibilities
with respect to Section 16 Grantees, and (A) the acts of such delegates shall be
treated hereunder as acts of the Committee and (B) such delegates shall report
to the Committee regarding the delegated duties and responsibilities,
(viii) to accelerate the exercisability of, and to accelerate or waive
any or all of the restrictions and conditions applicable to, any Award, or any
group of Awards for any reason,
(ix) subject to Section 6(a)(ii), to extend the time during which
any Award or group of Awards may be exercised,
(x) to make such adjustments or modifications to Awards to Grantees
working outside the United States as are necessary and advisable to fulfill the
purposes of this Plan,
(xi) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Awards as the Committee
may, before or concurrently with the grant thereof, deem appropriate, including
requiring simultaneous exercise of related identified Awards, and limiting the
percentage of Awards which may from time to time be exercised by a Grantee, and
(xii) to prescribe rules and regulations concerning the
transferability of any Awards granted on or after June 1, 1995 and to make such
adjustments or modifications to Awards transferable pursuant to Section 8 as are
necessary and advisable to fulfill the purposes of this Plan.
The determination of the Committee on all matters relating to this Plan or
any Award Agreement shall be conclusive and final. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to this Plan or any Award.
5. Eligibility
Awards may be granted to any full-time employee (including any officer) of the
Company or any of its domestic Subsidiaries, or any employee, officer or
director of any of the Company's foreign Subsidiaries. In selecting the
individuals to whom Awards may be granted, as
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well as in determining the number of shares of Stock subject to, and the other
terms and conditions applicable to, each Award, the Committee shall take into
consideration such factors as it deems relevant in promoting the purposes of
this Plan.
6. Conditions to Grants
(a) General conditions.
(i) The Grant Date of an Award shall be the date on which the
Committee grants the Award or such later date as specified in advance by the
Committee.
(ii) The term of each Award (subject to Section 6(c) with respect to
incentive stock options) shall be a period of not more than 15 years from the
Grant Date, and shall be subject to earlier termination as herein provided.
(iii) A Grantee may, if otherwise eligible, be granted additional
Awards in any combination.
(b) Grant of options and option price. No later than the Grant Date of any
option, the Committee shall determine the Option Price of such option. The
Option Price of an option shall not be less than 100% of the Fair Market Value
of the Stock on the Grant Date. Such price shall be subject to adjustment as
provided in Section 22. The Award Agreement may provide that the option shall be
exercisable for restricted stock.
(c) Grant of incentive stock options. At the time of the grant of any
option, the Committee may designate that such option shall be made subject to
additional restrictions to permit it to qualify as an "incentive stock option"
under the requirements of Section 422 of the Code. Any option designated as an
incentive stock option:
(i) shall not be granted to a 10% Owner;
(ii) shall be for a period of not more than 10 years from the Grant
Date, and shall be subject to earlier termination as provided herein or in the
applicable Award Agreement;
(iii) shall not have an aggregate Fair Market Value (determined for
each incentive stock option at its Grant Date) of Stock with respect to which
incentive stock options are exercisable for the first time by such Grantee
during any calendar year (under this Plan and any other employee stock option
plan of the Grantee's employer or any parent or Subsidiary thereof ("Other
Plans")), determined in accordance with the provisions of Section 422 of the
Code, which exceeds $100,000 (the "$100,000 Limit");
(iv) shall, if the aggregate Fair Market Value of Stock (determined
on the Grant Date) with respect to all incentive stock options previously
granted under this Plan and any Other Plans ("Prior Grants") and any incentive
stock options under such grant (the "Current Grant") which are exercisable for
the first time during any calendar year would exceed the $100,000 Limit, be
exercisable as follows:
(A) the portion of the Current Grant exercisable for the first
time by the Grantee during any calendar year which would, when added to any
portions of any Prior Grants, be exercisable for the first time by the Grantee
during such calendar year with respect to Stock which would have an aggregate
Fair Market Value (determined as of the respective Grant Date for such options)
in excess of the $100,000 Limit shall, notwithstanding the terms of the Current
Grant, be exercisable for the first time by the Grantee in the first subsequent
calendar year or years in which it could be exercisable for the first time by
the Grantee when added to all Prior Grants without exceeding the $100,000 Limit;
and
(B) if, viewed as of the date of the Current Grant, any portion
of a Current Grant could not be exercised under the provisions of the
immediately preceding sentence during any calendar year commencing with the
calendar year in which it is first exercisable through and including the last
calendar year in which it may by its terms be exercised, such portion of the
Current Grant shall not be an incentive stock option, but shall be exercisable
as a separate option at such date or dates as are provided in the Current Grant;
(v) shall be granted within 10 years from the earlier of the date
this Plan is adopted or the date this Plan is approved by the stockholders of
the Company;
(vi) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the incentive stock
option under the circumstances described in Section 421(b) of the Code (relating
to certain disqualifying dispositions), within 10 days of such disposition; and
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(vii) shall by its terms not be assignable or transferable other than
by will or the laws of descent and distribution and may be exercised, during the
Grantee's lifetime, only by the Grantee; provided, however, that the Grantee
may, to the extent provided in this Plan and in a manner specified by the
Committee, designate in writing a beneficiary to exercise his incentive stock
option after the Grantee's death.
Notwithstanding the foregoing and Section 4(c)(v), the Committee may,
without the consent of the Grantee, at any time before the exercise of an option
(whether or not an incentive stock option), take any action necessary to prevent
such option from being treated as an incentive stock option.
(d) Grant of Shares of Restricted Stock.
(i) The Committee may, in its discretion grant shares of restricted
stock to any individual eligible under Section 5 to receive Awards.
(ii) The Committee shall, in its discretion, determine the amount, if
any, that a Grantee shall pay for shares of restricted stock, subject to the
following sentence. Except with respect to shares of restricted stock that are
treasury shares, for which no payment need be required, the Committee shall
require the Grantee to pay at least the Minimum Consideration for each share of
restricted stock granted to such Grantee. Such payment shall be made in full by
the Grantee before the delivery of the shares and in any event no later than 10
days after the Grant Date for such shares. In the discretion of the Committee
and to the extent permitted by law, payment may also be made in accordance with
Section 10.
(iii) The Committee may, but need not, provide that all or any portion
of a Grantee's Award of restricted stock, or restricted stock acquired upon
exercise of an option shall be forfeited:
(A) except as otherwise specified in the Award Agreement, upon
the Grantee's termination of employment for reasons other than death, disability
or any other reason specified in the Award Agreement within a specified time
period after the Grant Date, or
(B) if the Company or the Grantee does not achieve specified
performance goals (if any) within a specified time period after the Grant Date
and before the Grantee's termination of employment, or
(C) upon failure to satisfy such other restrictions as the
Committee may specify in the Award Agreement; provided that subject to Sections
4(c)(viii) and 14, in no case shall such Award become nonforfeitable before the
first anniversary of the Grant Date.
(iv) If a share of restricted stock is forfeited, then (A) if the
Grantee was required to pay for such share or acquired such restricted stock
upon the exercise of an option, the Grantee shall be deemed to have resold such
share of restricted stock to the Company at the lesser of (1) the amount paid
or, if the restricted stock was acquired on exercise of an option, the Option
Price paid by the Grantee for such share of restricted stock, or (2) the Fair
Market Value of a share of Stock on the date of such forfeiture; (B) the Company
shall pay to the Grantee the amount determined under clause (A) of this sentence
as soon as is administratively practical; and such share of restricted stock
shall cease to be outstanding, and shall no longer confer on the Grantee thereof
any rights as a stockholder of the Company, from and after the later of the date
the event causing the forfeiture occurred or the date of the Company's tender of
the payment specified in clause (B) of this sentence, whether or not such tender
is accepted by the Grantee.
(v) The Committee may provide that any share of restricted stock
shall be held (together with a stock power executed in blank by the Grantee) in
escrow by the Secretary of the Company until such shares become nonforfeitable
or are forfeited. Any share of restricted stock shall bear an appropriate legend
specifying that such share is non-transferable and subject to the restrictions
set forth in this Plan and the Award Agreement. If any shares of restricted
stock become nonforfeitable, the Company shall cause certificates for such
shares to be issued or reissued without such legend.
(e) Grant of Stock Appreciation Rights. When granted, stock appreciation
rights may, but need not, be identified with shares of Stock subject to a
specific option, specific shares of restricted stock, or specific performance
units of the Grantee (including any option, shares of restricted stock, or
performance units granted on or before the Grant Date of the stock appreciation
rights) in a number equal to or different from the number of stock appreciation
rights so granted. If stock appreciation rights are identified with shares of
Stock subject to an option, with shares of restricted stock, or with performance
units, then, unless otherwise provided in the applicable Award Agreement, the
Grantee's associated stock appreciation rights shall terminate upon (i) the
expiration, termination, forfeiture or cancellation of such option, shares of
restricted stock, or performance units, (ii) the exercise of such option or
performance units, or (iii) the date such shares of restricted stock become
nonforfeitable.
(f) Grant of Performance Units.
(i) Before the grant of any performance unit, the Committee shall:
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(A) determine performance goals applicable to such grant,
(B) designate a period, of not less than one year nor more than
seven years, for the measurement of the extent to which performance goals are
attained, which period may begin prior to the Grant Date (the "Measuring
Period"), and
(C) assign a "Performance Percentage" to each level of
attainment of performance goals during the Measuring Period, with the percentage
applicable to minimum attainment being zero percent (0%) and the percentage
applicable to maximum attainment to be determined by the Committee from time to
time.
(ii) In establishing performance goals, the Committee may consider
any performance factor or factors it deems appropriate, including net income,
growth in net income, earnings per share, growth of earnings per share, return
on equity or return on capital, remaining employed for a specified period, or
any other factor. The Committee may, at any time, in its discretion, modify
performance goals in order to facilitate their attainment for any reason,
including recognition of unusual or nonrecurring events affecting the Company or
a Subsidiary or changes in applicable laws, regulations or accounting
principles. If a Grantee is promoted, demoted or transferred to a different
business unit of the Company during a Measuring Period, then, to the extent the
Committee determines the performance goals or Measuring Period are no longer
appropriate, (A) the Committee may adjust, change or eliminate the performance
goals or the applicable Measuring Period as it deems appropriate in order to
make them appropriate and comparable to the initial performance goals or
Measuring Period; or (B) make a cash payment to the Grantee in an amount
determined in accordance with the method described in Section 14(b)(iii),
substituting the effective date of such promotion, demotion or transfer for the
termination of employment referred to in Section 14(b)(iii).
(iii) When granted, performance units may, but need not, be identified
with shares of Stock subject to a specific option, specific shares of restricted
stock, or specific stock appreciation rights of the Grantee granted under this
Plan in a number equal to or different from the number of the performance units
so granted. If performance units are identified with shares of Stock subject to
an option, shares of restricted stock, or stock appreciation rights, then,
unless otherwise provided in the applicable Award Agreement, the Grantee's
associated performance units shall terminate upon (A) the expiration,
termination, forfeiture or cancellation of such option, shares of restricted
stock, or stock appreciation rights, (B) the exercise of such option or stock
appreciation rights, or (C) the date such shares of restricted stock become
nonforfeitable.
(iv) If a Grantee commences employment after the performance goals of
a particular Measuring Period are established, the Committee may grant an Award
that is proportionately adjusted based on the period of actual service during
the Measuring Period.
(g) Grant of Stock Bonuses. The Committee may, in its discretion, grant
shares of Stock to any individual eligible under Section 5 to receive Awards,
other than executive officers of the Company.
7. Grantee's Agreement to Serve
Each Grantee who is granted an Award shall, by executing such Grantee's Award
Agreement, agree that such Grantee will remain in the employ of the Company or
any of its Subsidiaries for at least one year after the Grant Date. No
obligation of the Company or any of its Subsidiaries as to the length of any
Grantee's employment shall be implied by the terms of this Plan, any grant of an
Award hereunder or any Award Agreement. The Company and its Subsidiaries reserve
the same rights to terminate employment of any Grantee as existed before the
Effective Date.
8. Non-Transferability
Each Award (other than restricted stock) granted hereunder shall not be
assignable or transferable other than by will or the laws of descent and
distribution; provided, however, that a Grantee may, in a manner specified by
the Committee and to the extent provided in this Plan: (a) designate in writing
a beneficiary to exercise his Award after the Grantee's death; (b) transfer an
option (other than an incentive stock option), stock appreciation right or
performance unit to a revocable inter vivos trust as to which the Grantee is
both the settlor and the trustee; and (c) if the Award Agreement expressly
permits, transfer an Award (other than restricted stock or an incentive stock
option) for no consideration to any of the following permissible transferees
(each a "Permissible Transferee"): (w) any member of the Immediate Family of the
Grantee to whom such Award was granted, (x) any trust for the benefit of members
of the Grantee's Immediate Family, (y) any partnership whose partners are
members of the Grantee's Immediate Family or (z) Ronald McDonald Children's
Charities or any Ronald McDonald House; and further provided that (i) the
transferee shall remain subject to all of the terms and conditions applicable to
such Award prior to such transfer; (ii) any such transfer shall be subject to
and in accordance with the rules and regulations prescribed by the Committee in
accordance with Section 4(c)(xii) (the "Transfer Rules") and (iii) except as
otherwise expressly provided for in the Plan or in the Transfer Rules, a
Permissible Transferee shall have all the rights and obligations of the Grantee
hereunder and the Grantee shall not retain any rights with respect to the
transferred Award and further provided that the payment of any tax attributable
to the exercise of an Award shall remain the obligation of the Grantee and the
period during which an Award shall remain exercisable under Section 14 shall
depend upon the time
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and nature of the Grantee's termination of employment. For purposes of this
Section 8, "Immediate Family" includes, such Grantee's spouse, children,
grandchildren, stepchildren, parents, stepparents, grandparents, siblings,
nieces, nephews and in-laws. Notwithstanding the foregoing, the Committee may,
from time to time, in its sole discretion designate additional individuals,
persons or classes as Permissible Transferees.
Each share of restricted stock shall be non-transferable until such share
becomes nonforfeitable.
9. Exercise
(a) Exercise of Options. Subject to Sections 4(c)(viii) and 14 and such
terms and conditions as the Committee may impose, each option shall be
exercisable in one or more installments commencing not earlier than the first
anniversary of the Grant Date of such option.
Each option shall be exercised by delivery to the Company of written notice
of intent to purchase a specific number of shares of Stock subject to the
option. The Option Price of any shares of Stock or shares of restricted stock as
to which an option shall be exercised shall be paid in full at the time of the
exercise. Payment may, at the election of the Grantee, be made in any one or any
combination of the following:
(i) cash,
(ii) Stock held by the Grantee for at least 6 months prior to
exercise of the option, valued at its Fair Market Value on the date of exercise,
(iii) with the approval of the Committee, shares of restricted stock
held by the Grantee for at least 6 months prior to exercise of the option, each
valued at the Fair Market Value of a share of Stock on the date of exercise, or
(iv) through simultaneous sale through a broker of shares acquired on
exercise, as permitted under Regulation T of the Federal Reserve Board.
In the discretion of the Committee and to the extent permitted by law,
payment may also be made in accordance with Section 10.
If restricted stock ("Tendered Restricted Stock") is used to pay the Option
Price for Stock subject to an option, then the Committee may, but need not,
specify that (i) all the shares of Stock acquired on exercise of the option
shall be subject to the same restrictions as the Tendered Restricted Stock,
determined as of the date of exercise of the option, or (ii) a number of shares
of Stock acquired on exercise of the option equal to the number of shares of
Tendered Restricted Stock shall, unless the Committee provides otherwise, be
subject to the same restrictions as the Tendered Restricted Stock, determined as
of the date of exercise of the option.
(b) Exercise of Stock Appreciation Rights. Subject to Sections 4(c)(viii)
and 14 and such terms and conditions as the Committee may impose, each stock
appreciation right shall be exercisable not earlier than the first anniversary
of the Grant Date of such stock appreciation right, to the extent the option
with which it is identified, if any, may be exercised, to the extent the
restricted stock with which it is identified, if any, is nonforfeitable, or to
the extent the performance unit with which it is identified, if any, may be
exercised unless otherwise provided by the Committee. Stock appreciation rights
shall be exercised by delivery to the Company of written notice of intent to
exercise a specific number of stock appreciation rights. Unless otherwise
provided in the applicable Award Agreement, the exercise of stock appreciation
rights which are identified with shares of Stock subject to an option, shares of
restricted stock or performance units shall result in the cancellation or
forfeiture of such option, shares of restricted stock or performance units, as
the case may be, to the extent of such exercise.
The benefit for each stock appreciation right exercised shall be equal to:
(i) the Fair Market Value of a share of Stock on the date of such
exercise, reduced by
(ii) an amount equal to:
(A) for any stock appreciation right identified with shares of
Stock subject to an option, the Option Price of such option, unless the
Committee in the grant of the stock appreciation right specified a higher amount
or
(B) for any other stock appreciation right, the Fair Market
Value of a share of Stock on the Grant Date of such stock appreciation right,
unless the Committee in the grant of the stock appreciation right specified a
higher amount; provided that the Committee, in its discretion, may provide that
the benefit for any stock appreciation right shall not exceed such percentage of
the Fair Market Value of a share of Stock on such Grant Date as the Committee
shall specify. The benefit upon the exercise of a stock appreciation right shall
be payable in cash, except that the Committee, may, in its discretion, provide
in the Award Agreement that benefits, with respect to any particular exercise,
may be paid wholly or partly in Stock.
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(c) Exercise of Performance Units.
(i) Subject to Section 14 and such terms and conditions as the
Committee may impose, if, with respect to any performance unit, the minimum
performance goals have been achieved during the applicable Measuring Period,
then such performance unit shall vest and be exercisable commencing on the later
of (A) the first anniversary of the Grant Date or (B) the first day after the
end of the applicable Measuring Period. Performance units shall be exercised by
delivery to the Company of written notice of intent to exercise a specific
number of performance units; provided, however, that performance units not
identified with shares of Stock subject to an option, shares of restricted stock
or stock appreciation rights shall be deemed exercised on the date on which they
first become exercisable. Unless otherwise provided in the applicable Award
Agreement, the exercise of performance units which are identified with shares of
Stock subject to an option, shares of restricted stock or stock appreciation
rights shall result in the cancellation or forfeiture of such shares of Stock
subject to option, shares of restricted stock or stock appreciation rights as
the case may be, to the extent of such exercise.
(ii) The benefit for each performance unit exercised shall be an
amount equal to the product of:
(A) the Unit Value (as defined below) multiplied by
(B) the Performance Percentage attained during the Measuring
Period for such performance unit.
(iii) The Unit Value shall be, as specified by the Committee,
(A) a dollar amount,
(B) an amount equal to the Fair Market Value of a share of
Stock on the Grant Date,
(C) an amount equal to the Fair Market Value of a share of
Stock on the exercise date of the performance unit, including, if so provided in
the Award Agreement, an amount ("Dividend Equivalent Amount") equal to the value
that would result if dividends paid on a share of Stock on or after the Grant
Date and on or before the exercise date were invested in shares of Stock as of
each respective dividend payment date, or
(D) an amount equal to the Fair Market Value of a share of Stock
on the exercise date of the performance unit (plus, if so specified in the Award
Agreement a Dividend Equivalent Amount), reduced by the Fair Market Value of a
share of Stock on the Grant Date of the performance unit.
(iv) Unless expressly provided for in the Award Agreement, the benefit
upon the exercise of a performance unit shall be payable on or about April 1st
following the close of the Measuring Period.
(v) Benefits upon exercise of a performance unit shall be payable in
cash (unless deferred under the terms and conditions of the Company's Deferred
Income Plan or in accordance with such other rules and regulations as the
Committee may approve), except that the Committee, may, in its discretion,
provide in the Award Agreement that benefits, with respect to any particular
exercise, may be paid wholly or partly in Stock. In the event the Award
Agreement provides that the benefit may be paid wholly in Stock unless the
Committee, in its discretion, specifies at the time of exercise that the benefit
shall be paid partly or wholly in cash, the number of shares of Stock payable in
lieu of cash shall be determined by valuing the Stock at its Fair Market Value
on the date such benefit is to be paid.
10. Loans and Guarantees
The Committee may, in its discretion:
(a) allow a Grantee to defer payment to the Company of all or any portion
of (i) the Option Price of an option, (ii) the purchase price of a share of
restricted stock, or (iii) any taxes associated with a benefit hereunder which
is not a cash benefit at the time such benefit is so taxable, or
(b) cause the Company to guarantee a loan from a third party to the
Grantee, in an amount equal to all or any portion of such Option Price, purchase
price, or any related taxes.
Any such payment deferral or guarantee by the Company pursuant to this
Section 10 shall be on such terms and conditions as the Committee may determine;
provided that the interest rate applicable to any such payment deferral shall be
not more favorable to the Grantee than the terms applicable to funds borrowed by
the Company. Notwithstanding the foregoing, a Grantee shall not be entitled to
defer the payment of such Option Price, purchase price or any related taxes
unless the Grantee (i) enters into a binding obligation to pay the deferred
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amount and (ii) except with respect to treasury shares, pays upon exercise of an
option or grant of shares of restricted stock, as the case may be, an amount
equal to or greater than the Minimum Consideration thereof. If the Committee has
permitted a payment deferral or caused the Company to guarantee a loan pursuant
to this Section 10, then the Committee may, in its discretion, require the
immediate payment of such deferred amount or the immediate release of such
guarantee upon the Grantee's termination of employment or if the Grantee sells
or otherwise transfers the Grantee's shares of Stock purchased pursuant to such
deferral or guarantee.
11. Notification under Section 83(b)
The Committee may, on the Grant Date or any later date, prohibit a Grantee from
making the election described below. If the Committee has not prohibited such
Grantee from making such election, and the Grantee shall, in connection with the
exercise of any option, or the grant of any share of restricted stock, make the
election permitted under Section 83(b) of the Code (i.e., an election to include
in such Grantee's gross income in the year of transfer the amounts specified in
Section 83(b) of the Code), such Grantee shall notify the Company of such
election within 10 days of filing notice of the election with the Internal
Revenue Service, in addition to any filing and notification required pursuant to
regulations issued under the authority of Section 83(b) of the Code.
12. Mandatory Withholding Taxes
(a) Whenever under this Plan, cash or shares of Stock are to be delivered
upon exercise or payment of an Award or upon a share of restricted stock
becoming nonforfeitable, or any other event with respect to rights and benefits
hereunder, the Company shall be entitled to require as a condition of delivery
(i) that the Grantee remit an amount sufficient to satisfy all federal, state,
and local withholding tax requirements related thereto, (ii) the withholding of
such sums from compensation otherwise due to the Grantee or from any shares of
Stock due to the Grantee under this Plan or (iii) any combination of the
foregoing provided, however, that no amount shall be withheld from any cash
payment or shares of Stock relating to an Award which was transferred by the
Grantee in accordance with this Plan and such cash payment or delivery to such
Permissible Transferee shall in no way be conditioned upon the Grantee's
remittance obligation described herein.
(b) If any disqualifying disposition described in Section 6(c)(vi) is made
with respect to shares of Stock acquired under an incentive stock option granted
pursuant to this Plan or any election described in Section 11 is made, then the
person making such disqualifying disposition or election shall remit to the
Company an amount sufficient to satisfy all federal, state, and local
withholding taxes thereby incurred; provided that, in lieu of or in addition to
the foregoing, the Company shall have the right to withhold such sums from
compensation otherwise due to the Grantee or from any shares of Stock due to the
Grantee under this Plan.
13. Elective Share Withholding
(a) Subject to Section 13(b), a Grantee may elect the withholding ("Share
Withholding") by the Company of a portion of the shares of Stock otherwise
deliverable to such Grantee upon the exercise or payment of an Award or upon a
share of restricted stock becoming nonforfeitable (each a "Taxable Event")
having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required federal, state,
or local withholding tax liability attributable to the Taxable Event; or
(ii) with the Committee's prior approval, a greater amount, not to
exceed the estimated total amount of such Grantee's tax liability with respect
to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be subject to the
following restrictions:
(i) any Grantee's election shall be subject to the Committee's right
to revoke such election of Share Withholding by such Grantee at any time before
the Grantee's election if the Committee has reserved the right to do so in the
Award Agreement;
(ii) the Grantee's election must be made before the date (the "Tax
Date") on which the amount of tax to be withheld is determined;
(iii) the Grantee's election shall be irrevocable;
(iv) provided, however, that no election to have shares of Stock
withheld from any Award shall be effective with respect to an Award which was
transferred by the Grantee in accordance with this Plan.
28
<PAGE>
14. Termination of Employment
(a) For Cause. If a Grantee has a termination of employment for Cause,
(i) the Grantee's shares of restricted stock that are forfeitable
shall thereupon be forfeited, subject to the provisions of Section 6(d)(iv)
regarding repayment of certain amounts to the Grantee; and
(ii) any unexercised option, stock appreciation right, or performance
unit shall terminate upon such termination.
(b) On Account of Death or Disability. If a Grantee has a termination of
employment on account of the Grantee's death or Disability, then, except as
otherwise provided in the Award Agreement,
(i) the Grantee's shares of restricted stock that were forfeitable
shall thereupon become nonforfeitable;
(ii) any unexercised option or stock appreciation right, whether or
not exercisable on the date of such termination of employment may be exercised,
in whole or in part, at any time within three years after such termination of
employment by the Grantee, or after the Grantee's death, by (A) his personal
representative or by the person to whom the option or stock appreciation right
is transferred by will or the applicable laws of descent and distribution, (B)
the Grantee's beneficiary designated in accordance with Sections 6(c)(vii) or 8,
(C) the then-acting trustee of the trust described in clause (b) in the first
paragraph of Section 8 (the "Trust"); or (D) a Permissible Transferee of an
Award assigned or transferred in accordance with Section 8; and
(iii) any unexercised performance unit shall be deemed exercised upon
such termination of employment by the Grantee (or, if applicable, an individual
or entity as specified in Section 14(b)(ii)) as follows: (A) the value of any
vested performance units shall be payable at the same time that payments for
that Measuring Period are made to other Grantees under the Plan; and (B) the
value of any unvested performance units shall be payable on or about April 1st
of the year following the year of such termination; provided that the value of
any unvested performance unit shall be equal to the product of the Unit Value
multiplied successively by each of the following:
(1) a fraction, the numerator of which is the number of months
(including as a whole month any partial month) that have elapsed since the
beginning of such Measuring Period until the date of such termination of
employment and the denominator of which is the number of months (including as a
whole month any partial month) in the Measuring Period (the "Time Proration
Factor"); and
(2) the percentage that would be earned under the terms of the
applicable Award Agreement assuming that the rate at which the performance goals
are achieved as of December 31 following termination would continue until the
end of the Measuring Period (the "Performance Percentage Factor").
(c) On Account of Retirement. If a Grantee has a termination of employment
on account of Retirement, any unexercised option or stock appreciation right
(other than a stock appreciation right identified with a share of restricted
stock or a performance unit) which is then exercisable or which would become
exercisable within three years of such Retirement if the Grantee remained
employed by the Company or a Subsidiary throughout such three-year period, may
be exercised, in whole or in part, by the Grantee or Permissible Transferee of
an Award assigned or transferred in accordance with Section 8, at any time
within three years after the Grantee's Retirement. The nonforfeitability and
exercisability of the Grantee's restricted stock (and any stock appreciation
rights identified therewith) shall be determined under Section 14(e). The
vesting and exercisability of the Grantee's performance units shall be
determined under Section 14(b)(iii).
(d) On Account of Termination of Employment After Age 60. If a Grantee has
a termination of employment after attaining age 60, other than a termination of
employment on account of death, Disability or Retirement, any unexercised option
or stock appreciation right (other than a stock appreciation right identified
with a share of restricted stock or a performance unit) to the extent
exercisable on the date of such termination of employment, may be exercised, in
whole or in part by the Grantee or Permissible Transferee of an Award assigned
or transferred in accordance with Section 8, at any time within one year after
the Grantee's termination of employment. The nonforfeitability and
exercisability of the Grantee's restricted stock (and any stock appreciation
rights identified therewith) shall be determined under Section 14(e). The
vesting and exercisability of the Grantee's performance units shall be
determined under Section 14(b)(iii).
(e) Any Other Reason. If a Grantee has a termination of employment for a
reason other than for Cause, death of the Grantee, the Grantee's Disability,
and, with respect to options and stock appreciation rights (other than stock
appreciation rights identified with a share of restricted stock or a performance
unit) the termination of employment is for reasons other than the Grantee's
Retirement or the Grantee's termination of employment after attaining age 60,
(i) the Grantee's shares of restricted stock (and any stock
appreciation rights identified therewith), to the extent forfeitable on the date
of the Grantee's termination of employment, shall be forfeited on such date;
29
<PAGE>
(ii) any unexercised option or stock appreciation right (other than a
stock appreciation right identified with a share of restricted stock or
performance unit) to the extent exercisable on the date of the Grantee's
termination of employment, may be exercised in whole or in part by the Grantee
or Permissible Transferee of an Award assigned or transferred in accordance with
Section 8, not later than the 30th day following the Grantee's termination of
employment; provided that if such 30th day is not a business day, such option or
stock appreciation right may be exercised not later than the first business day
following such 30th day; and
(iii) the Grantee's performance units (and any stock appreciation
rights identified therewith) shall not vest further and may not be exercised in
whole or in part by the Grantee or Permissible Transferee of an Award assigned
or transferred in accordance with Section 8; provided that the value of any
vested performance units shall be payable to the Grantee at the same time that
payments for that Measuring Period are made to other Grantees under the Plan.
(f) Extension of Term. In the event of termination of employment other
than for Cause, the term of any Award (except for an Award of performance units)
which by its terms would otherwise expire after the Grantee's termination of
employment but prior to the end of the period following the Grantee's
termination of employment described in Sections (b), (c), (d) and (e) above for
exercise of Awards shall be extended so as to permit any unexercised portion
thereof to be exercised at any time by the Grantee or Permissible Transferee of
an Award assigned or transferred in accordance with Section 8 within such
period; provided, however, that in no event may the term of any Award expire
more than 15 years after the Grant Date of such Award.
15. Equity Incentive Plans of Foreign Subsidiaries
The Committee may authorize any foreign Subsidiary to adopt a plan for granting
Awards ("Foreign Equity Incentive Plan"). All awards granted under such Foreign
Equity Incentive Plans shall be treated as grants under this Plan. Such Foreign
Equity Incentive Plans shall have such terms and provisions as the Committee
permits not inconsistent with the provisions of this Plan and which may be more
restrictive than those contained in this Plan. Awards granted under such Foreign
Equity Incentive Plans shall be governed by the terms of this Plan except to the
extent that the provisions of the Foreign Equity Incentive Plans are more
restrictive than the terms of this Plan, in which case such terms of the Foreign
Equity Incentive Plans shall control.
16. Securities Law Matters
(a) If the Committee deems necessary to comply with the Securities Act of
1933, the Committee may require a written investment intent representation by
the Grantee and may require that a restrictive legend be affixed to certificates
for shares of Stock.
(b) If based upon the opinion of counsel for the Company, the Committee
determines that the exercise or nonforfeitability of, or delivery of benefits
pursuant to, any Award would violate any applicable provision of (i) federal or
state securities law or (ii) the listing requirements of any national securities
exchange on which are listed any of the Company's equity securities, then the
Committee may postpone any such exercise, nonforfeitability or delivery, as the
case may be, but the Company shall use its best efforts to cause such exercise,
nonforfeitability or delivery to comply with all such provisions at the earliest
practicable date.
17. Funding
Benefits payable under this Plan to any person shall be paid directly by the
Company. The Company shall not be required to fund, or otherwise segregate
assets to be used for payment of, benefits under this Plan.
18. No Employment Rights
Neither the establishment of this Plan, nor the granting of any Award shall be
construed to (a) give any Grantee the right to remain employed by the Company or
any of its Subsidiaries or to any benefits not specifically provided by this
Plan or (b) in any manner modify the right of the Company or any of its
Subsidiaries to modify, amend, or terminate any of its employee benefit plans.
19. Rights as a Stockholder
A Grantee shall not, by reason of any Award (other than restricted stock) have
any right as a stockholder of the Company with respect to the shares of Stock
which may be deliverable upon exercise or payment of such Award until such
shares have been delivered to him. Shares of restricted stock held by a Grantee
or held in escrow by the Secretary of the Company shall confer on the Grantee
all rights of a stockholder of the Company, except as otherwise provided in this
Plan. The Committee, in its discretion, at the time of grant of restricted
stock, may permit or require the payment of cash dividends thereon to be
deferred and, if the Committee so determines, reinvested in additional
restricted stock to the extent shares are available under Section 3 or otherwise
reinvested. Stock dividends and deferred cash dividends issued with respect to
restricted stock shall be treated as additional shares of restricted stock that
are subject to the same restrictions and other terms as apply to the
30
<PAGE>
shares with respect to which such dividends are issued. The Committee may, in
its discretion, provide for crediting to and payment of interest on deferred
cash dividends.
20. Nature of Payments
Any and all grants, payments of cash, or deliveries of shares of Stock hereunder
shall constitute special incentive payments to the Grantee and shall not be
taken into account in computing the amount of salary or compensation of the
Grantee for the purposes of determining any pension, retirement, death or other
benefits under (a) any pension, retirement, profit-sharing, bonus, life
insurance or other employee benefit plan of the Company or any of its
Subsidiaries or (b) any agreement between the Company or any Subsidiary, on the
one hand, and the Grantee, on the other hand, except as such plan or agreement
shall otherwise expressly provide.
21. Non-Uniform Determinations
Neither the Committee's nor the Board's determinations under this Plan need be
uniform and may be made by the Committee or the Board selectively among persons
who receive, or are eligible to receive, Awards (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations, to enter into non-uniform and selective Award
Agreements as to (a) the identity of the Grantees, (b) the terms and provisions
of Awards, and (c) the treatment, under Section 14, of terminations of
employment. Notwithstanding the foregoing, the Committee's interpretation of
Plan provisions shall be uniform as to similarly situated Grantees.
22. Adjustments
The Committee shall make equitable adjustment of:
(a) the aggregate numbers of shares of Stock, shares of restricted stock,
and bonus stock available under Sections 3(a) and 3(c),
(b) the number of shares of Stock, shares of restricted stock, stock
appreciation rights or performance units covered by an Award,
(c) the Option Price,
(d) the Fair Market Value of Stock to be used to determine the amount of
the benefit payable upon exercise of stock appreciation rights or performance
units, and
(e) the maximum number of shares of Stock for which Awards may be granted
to any Grantee in any three year period under Section 3(b),
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of property or
shares, separation, asset spin-off, reorganization, stock rights offering,
liquidation or similar event, of or by the Company.
Notwithstanding the foregoing, upon the approval by the stockholders of the
Company of a plan of liquidation for the Company, any unexercised options, stock
appreciation rights and performance units theretofore granted shall thereupon
become exercisable, and any shares of restricted stock that have not become
nonforfeitable shall become nonforfeitable.
23. Amendment of this Plan
The Board may from time to time in its discretion amend or modify this Plan
without the approval of the stockholders of the Company, except as such
stockholder approval may be required (a) to permit the grant of Awards under,
and transactions in Stock pursuant to, this Plan to be exempt from liability
under Section 16(b) of the 1934 Act or (b) under the listing requirements of any
national securities exchange on which are listed any of the Company's equity
securities.
24. Termination of this Plan
This Plan shall terminate on the tenth (10th) anniversary of the Effective Date
or at such earlier time as the Board may determine. Any termination, whether in
whole or in part, shall not affect any Award then outstanding under this Plan.
25. No Illegal Transactions
This Plan and all Awards granted pursuant to it are subject to all laws and
regulations of any governmental authority which may be applicable thereto; and
notwithstanding any provision of this Plan or any Award, Grantees shall not be
entitled to exercise Awards or receive
31
<PAGE>
the benefits thereof and the Company shall not be obligated to deliver any Stock
or pay any benefits to a Grantee if such exercise, delivery, receipt or payment
of benefits would constitute a violation by the Grantee or the Company of any
provision of any such law or regulation.
26. Controlling Law
The law of the State of Illinois, except its law with respect to choice of law,
shall be controlling in all matters relating to this Plan.
27. Severability
If all or any part of this Plan is declared by any court or governmental
authority to be unlawful or invalid, such unlawfulness or invalidity shall not
serve to invalidate any portion of this Plan not declared to be unlawful or
invalid. Any Section or part of a Section so declared to be unlawful or invalid
shall, if possible, be construed in a manner which will give effect to the terms
of such Section or part of a Section to the fullest extent possible while
remaining lawful and valid.
Executed this 8th day of May, 1998.
McDONALD'S CORPORATION
By: /s/ Stanley R. Stein
--------------------
Its: Executive Vice President
------------------------
32
<PAGE>
Exhibit 12
McDONALD'S CORPORATION
STATEMENT RE: COMPUTATION OF RATIOS
Dollars In Millions
<TABLE>
<CAPTION>
Three Months
Ended March 31, Years Ended December 31,
1998 1997 1997 1996 1995 1994 1993
--------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
- - Income before provision for income taxes $540.2 $515.7 $2,407.3 $2,251.0 $2,169.1 $1,886.6 $1,675.7
- - 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 4.8 8.1 28.3 39.6 19.6 6.6 6.9
- - Provision for income taxes of 50% owned
affiliates included in consolidated income
before provision for income taxes 17.8 19.1 69.0 73.2 73.3 34.9 34.2
- - Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* 40.0 35.5 145.9 130.9 103.8 83.4 71.6
- - Interest expense, amortization of debt
discount and issuance costs, and
depreciation of capitalized interest* 116.1 115.5 424.8 392.2 388.8 346.0 358.0
-------------- ------------------------------------------------
$718.9 $693.9 $3,075.3 $2,886.9 $2,754.6 $2,357.5 $2,146.4
============== ================================================
FIXED CHARGES
- - Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* $ 40.0 $ 35.5 $ 145.9 $ 130.9 $ 103.8 $ 83.4 $ 71.6
- - Interest expense, amortization of debt
discount and issuance costs, and fixed
charges related to redeemable preferred
stock* 113.3 113.7 426.1 410.4 403.4 343.9 349.3
- - Capitalized interest* 4.0 4.1 23.7 23.5 22.8 21.0 20.7
-------------- ------------------------------------------------
$157.3 $153.3 $ 595.7 $ 564.8 $ 530.0 $ 448.3 $ 441.6
============== ================================================
RATIO OF EARNINGS TO FIXED CHARGES 4.57 4.53 5.16 5.11 5.20 5.26 4.86
============== ================================================
</TABLE>
*Includes amounts of the Registrant and its majority-owned subsidiaries, and
one-half of the amounts of 50%-owned affiliates.
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the Company's Form 10-Q for the quarterly period ended March 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 354
<SECURITIES> 0
<RECEIVABLES> 499
<ALLOWANCES> 0
<INVENTORY> 67
<CURRENT-ASSETS> 1,181
<PP&E> 20,275
<DEPRECIATION> 5,277
<TOTAL-ASSETS> 18,416
<CURRENT-LIABILITIES> 1,884
<BONDS> 5,849
0
0
<COMMON> 8
<OTHER-SE> 12,983
<TOTAL-LIABILITY-AND-EQUITY> 18,416
<SALES> 2,014
<TOTAL-REVENUES> 2,805
<CGS> 1,663
<TOTAL-COSTS> 1,821
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 103
<INCOME-PRETAX> 540
<INCOME-TAX> 178
<INCOME-CONTINUING> 362
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362
<EPS-PRIMARY> .53
<EPS-DILUTED> .52
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
Company's Form 10-Q for the quarterly periods ended March 31, 1998 and 1997, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<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> .48
<FN>
NOTE 1: Restatement reflected herein is the result of reclassification of prior
period's financial statements to conform to current period presentation
due to the adoption of SFAS No. 128, Earnings Per Share.
</FN>
</TABLE>
