SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 20, 1998
McDONALD'S CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 1-5231 36-2361282
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
One McDonald's Plaza
Oak Brook, Illinois 60523
(630) 623-3000
(Address and Phone Number of Principal Executive Offices)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
-----------------------------------------------------------------
(c) Exhibits
--------
(99) Press Release dated July 20, 1998 -- McDonald's Reports Global
Results
<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 hereunto duly authorized.
McDONALD'S CORPORATION
(Registrant)
By: /s/ Gloria Santona
--------------------------------------
Gloria Santona
Vice President, Deputy General Counsel
and Secretary
EXHIBIT 99
Investor Release
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
07/20/98 Investors: Mary Healy, 630-623-6429
Media: Chuck Ebeling, 630-623-6150
McDONALD'S REPORTS GLOBAL RESULTS
OAK BROOK, IL -- McDonald's Corporation today announced results for the
six months and quarter ended June 30, 1998, which include the previously
announced $350 million of pre-tax special charges related to the "Made
For You" and home office productivity initiatives.
Information in constant currencies excludes the effect of foreign
currency translation on reported results. The following highlights
exclude the special charges.
- U.S. operating income increased 15% for the quarter.
- In constant currencies, sales in the second quarter increased 24% in
Latin America, 17% in Europe and 11% in Asia/Pacific.
- Diluted net income per common share for the quarter rose 8%; 11% in
constant currencies.
- Net income grew 7% for the quarter; 10% in constant currencies.
- Systemwide sales increased 13% for the quarter in constant
currencies.
Key highlights excluding special charges
1998 1997 Increase
---- ---- ----------------------
Dollars in millions, except As In Constant
per common share data Reported Currencies*
-------- -----------
Six months ended June 30
Systemwide sales $17,417.3 $16,308.2 7% 11%
Total revenues 5,985.7 5,450.2 10 14
Operating income 1,454.5 1,357.7 7 11
Net income 831.0 782.7 6 9
Net income per common share -
diluted 1.18 1.09 8 11
Quarters ended June 30
Systemwide sales $9,247.6 $8,475.1 9% 13%
Total revenues 3,180.8 2,832.6 12 17
Operating income 811.8 743.5 9 13
Net income 468.8 438.2 7 10
Net income per common share -
diluted .66 .61 8 11
* Excluding the effect of foreign currency translation on reported
results
Operating results including the special charges are summarized in the
following table.
Key highlights including special charges
1998 1997 (Decrease)
---- ---- ----------------------
Dollars in millions, except As In Constant
per common share data Reported Currencies*
--------- -----------
Six months ended June 30
Operating income $1,104.5 $1,357.7 (19)% (15)%
Net income 596.0 782.7 (24) (21)
Net income per common share -
diluted .85 1.09 (22) (19)
Quarters ended June 30
Operating income $461.8 $743.5 (38)% (34)%
Net income 233.8 438.2 (47) (44)
Net income per common share -
diluted .33 .61 (46) (43)
* Excluding the effect of foreign currency translation on reported
results
SUMMARY COMMENTARY
On August 1, 1998, Michael R. Quinlan, Chairman and Chief Executive
Officer, McDonald's Corporation will officially hand the reins to Jack M.
Greenberg, who will become President and Chief Executive Officer of
McDonald's Corporation. On that same day, James R. Cantalupo will become
Vice Chairman of McDonald's Corporation and Chairman and Chief Executive
Officer - McDonald's International; and Alan D. Feldman will become
President - McDonald's U.S.A.
Jack M. Greenberg commented, "It's impossible to accept the
responsibility of leading a great System like McDonald's without
acknowledging the enormous contributions of those who have paved the way
- Ray Kroc, Fred Turner and Mike Quinlan. Over the past 43 years, these
three visionaries created one of the outstanding success stories in
business history. Thanks to their leadership, McDonald's is the largest
global retail business and the world's most powerful brand. I am honored
and privileged to continue this leadership tradition.
"Looking at McDonald's today, I am pleased with the performance of
our global food service business this quarter and year-to-date.
Excluding the impact of the special charges recorded in the quarter,
constant currency operating income increased 13 and 11 percent in the
quarter and six months, respectively, despite weak economies in several
key markets outside the U.S., economic downturns in Southeast Asia and a
competitive U.S. marketplace.
"We have made significant changes in the U.S. over the past year to
put the business back on track, and we are beginning to enjoy the results
of our efforts. Excluding special charges, the rate of increase in
second quarter U.S. operating income was extraordinary - the highest
since the fourth quarter of 1984. Internationally, cyclical economic
issues have hurt results, but the fundamentals of our business remain
strong. We have a significant competitive advantage, supported by a
global infrastructure and expertise that I believe are very tough to
replicate.
"Our goal is to strengthen our position as the World's Best Fast
Food Restaurant Experience through an emphasis on people and innovation
and by aggressively leveraging the inherent strengths that exist in our
global business.
"We are focused on managing our capital outlays more effectively as
well as controlling our selling, general and administrative expenses. We
are on track to add about 2,100 restaurants this year, approximately
85 percent outside the U.S., and expect to once again more than cover
capital expenditures with cash from operations. We are using our excess
cash together with our debt capacity to repurchase shares, thus enhancing
returns to shareholders. We purchased 8.8 million shares of our stock
for $516 million in the first six months of 1998. This brings total
repurchases under our $2 billion, three-year program to about $1.7
billion."
Alan Feldman said, "I'm excited about assuming responsibility and
accountability for the U.S. business. The successful Monopoly and Teenie
Beanie Baby promotions combined with local market initiatives contributed
to the exceptional strength of the second quarter. As we face tougher
comparisons in the second half of the year, it is unlikely we will
sustain this level of performance. Yet, the underlying trends are very
encouraging. I am confident we will continue to grow the business
through operational excellence and outstanding value, and by harnessing
the exceptional talents of our owner/operators, employees and suppliers.
"Today, we have more than 700 restaurants on the "Made For You" food
preparation system in the U.S. We expect that number to increase
significantly late this year and to meet our objective of having all U.S.
restaurants using "Made For You" by the end of 1999. Experience shows
that "Made For You" provides customers with hotter, fresher food; is
easier for restaurant employees; and reduces restaurant operating costs.
Strategically, it supports our efforts to optimize food taste and
accommodate more menu variety."
Jim Cantalupo said, "The fundamentals of our business outside the
U.S. remain strong as illustrated by the growth in combined restaurant
margin dollars. Despite economic difficulties in some countries, these
margins grew by $154 million or 15 percent, and $83 million or 16 percent
in constant currencies during the six months and second quarter,
respectively. These increases were driven principally by Europe.
"Our results outside the U.S. were negatively affected by the strong
U.S. dollar and economic difficulties in a number of markets, and we
expect these factors to continue to impact us in the second half of the
year.
"In countries with high unemployment, low consumer confidence and
economic downturns, we are minimizing the negative effect on our
operations with an increased focus on value. We also have scaled back
openings in certain Southeast Asian markets; however, we still expect to
add about 1,800 restaurants outside the U.S. this year. We want to make
sure new restaurants meet our financial screens, while keeping an eye on
emerging opportunities."
Michael R. Quinlan said, "We have taken significant steps toward
preparing the McDonald's System to succeed in the 21st century, and I am
proud of the great management team who will continue to lead the System.
These men and women are dedicated to delivering great customer
experiences and driven to enhancing shareholder value.
"As I conclude my 11 years as CEO, it's interesting to note that
although McDonald's has been serving customers for 43 years, in many ways
we are just beginning. There is a lot of opportunity in the global
marketplace, and McDonald's is going after it in an unrelenting drive to
deliver the great taste of McDonald's to more and more people through
expansion and increasing existing restaurant sales. As a shareholder, I
find that very exciting."
CONSOLIDATED OPERATING RESULTS
McDonald's previously announced plans to introduce the "Made For You"
food preparation system in the United States and Canada and the results
of the home office productivity initiative designed to improve staff
alignment, focus and productivity and reduce ongoing selling, general and
administrative expenses. As a result of these initiatives, in the second
quarter, the Company recorded $350 million of pre-tax special charges
($235 million after tax or $0.33 per diluted share) in U.S. other
operating income. The charges included $190 million related to the "Made
For You" system, primarily to provide financial incentives to
owner/operators to defray the cost of equipment made obsolete as a result
of conversion to this new system, and $160 million for employee severance
and outplacement, consolidation of facilities and other costs in
connection with the productivity initiative. As a result of the
productivity initiative, the Company expects to save about $100 million
of selling, general & administrative expenses per year beginning in 2000,
with about two-thirds of the savings expected to be realized in 1999.
Excluding the special charges, net income and diluted net income per
common share increased six and eight percent for the six months and seven
and eight percent for the quarter, respectively. Changing foreign
currencies significantly reduced reported results. Excluding the foreign
currency translation effect and the special charges, net income would
have increased nine percent for the six months and ten percent for the
quarter and diluted net income per common share would have increased 11
percent for both the six months and the quarter. Net income and diluted
net income per common share, including the special charges, decreased 24
and 22 percent for the six months and 47 and 46 percent for the quarter,
respectively.
During the second quarter, McDonald's repurchased $389 million of
the Company's common stock, bringing total share repurchases for the six
months to $516 million. The spreads between the percent change in
diluted net income per common share compared with net income resulted
from fewer shares outstanding for the six months and the absence of
preferred dividends in the six months and second quarter 1998, due to the
retirement of our remaining Series E Preferred Stock in December 1997.
Systemwide sales
Dollars in millions 1998 1997 Increase/(Decrease)
---- ---- ---------------------
As In Constant
Reported Currencies*
-------- -----------
Six months ended June 30
U.S. $ 9,038.8 $ 8,409.3 7% n/a
Europe 4,132.0 3,725.2 11 17%
Asia/Pacific 2,630.9 2,756.2 (5) 11
Latin America 830.8 683.5 22 27
Other 784.8 734.0 7 12
Total Systemwide sales $17,417.3 $16,308.2 7% 11%
Quarters ended June 30
U.S. $ 4,919.6 $ 4,420.4 11% n/a
Europe 2,182.1 1,924.2 13 17%
Asia/Pacific 1,296.9 1,378.5 (6) 11
Latin America 420.2 354.9 18 24
Other 428.8 397.1 8 13
Total Systemwide sales $ 9,247.6 $ 8,475.1 9% 13%
* Excluding the effect of foreign currency translation on reported
results
n/a Not applicable
Systemwide sales represent sales by Company-operated, franchised and
affiliated restaurants. Comparable sales are measured on a constant
currency basis. 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 due to
expansion and positive comparable sales trends, offset in part by weaker
foreign currencies.
U.S. sales increased due to positive comparable sales trends and
restaurant expansion in both periods. Successful Monopoly and Teenie
Beanie Baby promotions, combined with local market initiatives and
favorable comparisons with the second quarter of 1997, contributed to the
strong sales increases for both periods. This exceptionally strong level
of performance is not expected to continue in the second half of the
year.
In Europe, the constant currency sales increase was driven by
expansion and positive comparable sales trends in both periods. England,
France, Italy and Spain were the primary contributors to the strong sales
performance in both periods. In addition, Germany continued to show
improved results from the value campaign initiated early this year.
In Asia/Pacific, the constant currency sales increase in both
periods was due to expansion, partly offset by negative comparable sales
trends. Difficult economic conditions in Japan and Southeast Asia
continued to negatively impact consumer spending.
In Latin America, the constant currency sales increase was driven by
expansion and positive comparable sales trends in both periods. For the
six months, expansion and positive comparable sales trends in Argentina,
Brazil, Mexico and Venezuela contributed to Latin America's strong
performance, with Brazil accounting for about half of the sales growth.
For the quarter, the strong performance was driven by expansion in
Argentina and Brazil, and by expansion and positive comparable sales
trends in Mexico and Venezuela.
Revenues increased at a faster rate than sales for the six months
and the quarter. 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.
Consolidated operating margins Six months ended Quarters ended
June 30 June 30
---------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Dollars in millions
Company-operated $ 777.6 $ 700.1 $ 426.7 $ 374.0
Franchised 1,376.4 1,283.5 743.9 667.4
Combined operating margins $2,154.0 $1,983.6 $1,170.6 $1,041.4
Percent of sales/revenues
Company-operated 18.1% 18.1% 18.8% 18.6%
Franchised 80.9 81.1 81.7 81.5
Company-operated margins as a percent of sales were flat for the six
months and increased slightly for the quarter. Occupancy & other
operating expenses increased as a percent of sales for both periods,
while food & paper and payroll costs decreased.
U.S. Company-operated margins as a percent of sales increased for
the six months and the quarter, while Company-operated margins outside
the U.S. declined for both periods.
In the U.S., food & paper costs decreased as a percent of sales for
both the six months and the quarter. Payroll costs as a percent of sales
increased for the six months and decreased for the quarter, while
occupancy & other operating expenses decreased for the six months and
increased for the quarter. Outside the U.S., as a percent of sales,
increases in food & paper costs and occupancy & other operating expenses
for both periods were offset in part by decreased 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 slightly for the
six months and increased slightly for the quarter, franchised margin
dollars increased seven percent and 11 percent, respectively.
As a percent of revenues, franchised margins increased in the U.S.
for both periods, while franchised margins as a percent of revenues
outside the U.S. decreased. The increases in the U.S. were driven by
positive comparable sales trends for both periods. The declines outside
the U.S. reflected the negative impacts from the consolidation of several
of our affiliate markets, principally Singapore and the Philippines. In
addition, margins outside the U.S. reflected higher occupancy costs,
including rent expense, driven by an increase in the number of leased
sites.
The increase in selling, general & administrative expenses for the
six months and the quarter 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.
Other operating (income) expense-net Six months ended Quarters ended
June 30 June 30
---------------- --------------
Dollars in millions 1998 1997 1998 1997
---- ---- ---- ----
Gains on sales of restaurant
businesses $(22.0) $(27.6) $(14.0) $(20.0)
Equity in earnings of unconsolidated
affiliates (34.4) (33.2) (22.0) (17.3)
Special charges 350.0 - 350.0 -
Other (income) expense 48.0 5.5 29.9 (12.0)
Other operating (income) expense-
net $341.6 $(55.3) $343.9 $(49.3)
Other operating (income) expense-net consists of transactions
related to franchising and the food service business. Other expenses
increased for both periods reflecting higher provisions for property
dispositions and certain non-recurring income items outside the U.S.
recognized in second quarter 1997.
Operating income excluding
special charges
Dollars in millions 1998 1997 Increase/(Decrease)
---- ---- ----------------------
As In Constant
Reported Currencies*
--------- -----------
Six months ended June 30
U.S. $ 676.8 $ 611.4 11% n/a
Europe 512.6 461.7 11 16%
Asia/Pacific 159.0 181.3 (12) 2
Latin America 79.7 71.7 11 18
Other 58.6 58.2 1 5
Corporate SG&A (32.2) (26.6) 21 n/a
Total operating income $1,454.5 $1,357.7 7% 11%
Quarters ended June 30
U.S. $392.3 $340.2 15% n/a
Europe 284.0 256.7 11 14%
Asia/Pacific 77.5 86.2 (10) 10
Latin America 39.9 38.9 3 9
Other 34.7 35.0 (1) 4
Corporate SG&A (16.6) (13.5) 23 n/a
Total operating income $811.8 $743.5 9% 13%
* Excluding the effect of foreign currency translation on reported
results
n/a Not applicable
Excluding the special charges, constant currency consolidated
operating income increased $153 million or 11 percent for the six months
and $97 million or 13 percent for the quarter. For both periods,
consolidated operating income, excluding the special charges, reflected
higher combined operating margin dollars, offset in part by higher
selling, general & administrative expenses and lower other operating
income. Including the special charges, reported consolidated operating
income decreased $253 million or 19 percent for the six months and $282
million or 38 percent for the quarter.
U.S. operating income, excluding the special charges, increased $65
million or 11 percent for the six months and $52 million or 15 percent
for the quarter. The increases primarily reflected higher combined
operating margin dollars, partially offset by lower other operating
income. Including the special charges, U.S. operating income decreased
$285 million or 47 percent for the six months and $298 million or 88
percent for the quarter.
Europe's operating income increased 16 percent for the six months
and 14 percent for the quarter in constant currencies. This performance
was primarily due to strong results in England, Germany, Italy and Spain.
Asia/Pacific's operating income increased two percent for the six
months and ten percent for the quarter in constant currencies. This
segment's operating income benefited from the consolidation of several of
our affiliate markets, principally Singapore and the Philippines, and a
tax law change recognized in Japan in second quarter 1998.
Latin America's operating income increased 18 percent for the six
months and nine percent for the quarter in constant currencies, primarily
driven by strong results in Argentina, Mexico and Venezuela for both
periods. Brazil experienced strong operating results for the six months;
however, weakening economic conditions dampened growth in the second
quarter.
Results outside the U.S. were negatively affected by the strong U.S.
dollar and economic difficulties in a number of markets, and the Company
expects these factors to continue to impact results in the second half of
the year.
Higher interest expense reflected higher debt levels and slightly
higher average interest rates, offset in part by weaker foreign
currencies. 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 for the six months and for the
quarter reflected lower charges for minority interests.
The effective income tax rate was 33.0 percent for both periods of
1998 compared with 32.5 percent for the six months and 31.9 percent for
the second quarter of 1997.
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 the six months and the quarter.
The following table presents 1998 results, excluding the special
charges, translated at 1997 rates compared with reported results.
Effect of foreign currency translation on worldwide reported results
excluding special charges
Dollars in millions, Increase
except per common --------------------
share data As In Constant As In Consent
Reported Currencies* Change Reported Currencies*
-------- ----------- ------ -------- -----------
Six months ended June 30, 1998
Systemwide sales $17,417.3 $18,119.4 $702.1 7% 11%
Total revenues 5,985.7 6,236.4 250.7 10 14
Operating income 1,454.5 1,510.6 56.1 7 11
Net income 831.0 854.9 23.9 6 9
Net income per common
share - diluted 1.18 1.21 .03 8 11
Quarter ended June 30, 1998
Systemwide sales $9,247.6 $9,592.5 $344.9 9% 13%
Total revenues 3,180.8 3,301.0 120.2 12 17
Operating income 811.8 840.7 28.9 9 13
Net income 468.8 481.1 12.3 7 10
Net income per common
share - diluted .66 .68 .02 8 11
* Excluding the effect of foreign currency translation on reported
results
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.
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME INCLUDING SPECIAL CHARGES(1)
Dollars and shares in millions, Six months ended June 30
except per common share data ----------------------------------------
Increase/(Decrease)
-------------------
1998 1997 Dollars Percent
---- ---- ------- -------
SYSTEMWIDE SALES $17,417.3 $16,308.2 1,109.1 7
Revenues
Sales by Company-operated
restaurants $ 4,284.7 $ 3,867.3 417.4 11
Revenues from franchised and
affiliated restaurants 1,701.0 1,582.9 118.1 7
--------- --------- ------ --
TOTAL REVENUES 5,985.7 5,450.2 535.5 10
--------- --------- ------ --
Operating costs and expenses
Company-operated restaurants 3,507.1 3,167.2 339.9 11
Franchised restaurants--
occupancy costs 324.6 299.4 25.2 8
Selling, general & administrative
expenses 707.9 681.2 26.7 4
Other operating (income)
expense--net 341.6 (55.3) 396.9 n/m
--------- --------- ------ ---
Total operating costs and expenses 4,881.2 4,092.5 788.7 19
--------- --------- ------ ---
OPERATING INCOME 1,104.5 1,357.7 (253.2) (19)
Interest expense 209.2 176.2 33.0 19
Nonoperating (income) expense--net 6.3 22.7 (16.4) n/m
Income before provision for
income taxes 889.0 1,158.8 (269.8) (23)
Provision for income taxes 293.0 376.1 (83.1) (22)
NET INCOME $ 596.0 $ 782.7 (186.7) (24)
========= ========= ====== ====
NET INCOME PER COMMON SHARE(2) $ .87 $ 1.11 (0.24) (22)
NET INCOME PER COMMON SHARE--
DILUTED(2) $ .85 $ 1.09 (0.24) (22)
Weighted average common shares
outstanding 686.2 690.7
Weighted average common shares
outstanding--diluted 704.7 707.2
Dollars and shares in millions, Quarters ended June 30
except per common share data --------------------------------------
Increase/(Decrease)
-------------------
1998 1997 Dollars Percent
---- ---- ------- -------
SYSTEMWIDE SALES $9,247.6 $8,475.1 772.5 9
Revenues
Sales by Company-operated
restaurants $2,270.4 $2,014.1 256.3 13
Revenues from franchised and
affiliated restaurants 910.4 818.5 91.9 11
-------- ------- ----- --
TOTAL REVENUES 3,180.8 2,832.6 348.2 12
-------- ------- ----- --
Operating costs and expenses
Company-operated restaurants 1,843.7 1,640.1 203.6 12
Franchised restaurants--
occupancy costs 166.5 151.1 15.4 10
Selling, general & administrative
expenses 364.9 347.2 17.7 5
Other operating (income)
expense--net 343.9 (49.3) 393.2 n/m
-------- -------- ----- ---
Total operating costs and expenses 2,719.0 2,089.1 629.9 30
-------- -------- ----- ---
OPERATING INCOME 461.8 743.5 (281.7) (38)
Interest expense 106.4 86.2 20.2 23
Nonoperating (income) expense--net 6.6 14.2 (7.6) n/m
Income before provision for
income taxes 348.8 643.1 (294.3) (46)
Provision for income taxes 115.0 204.9 (89.9) (44)
NET INCOME $ 233.8 $ 438.2 (204.4) (47)
======== ======== ======= ====
NET INCOME PER COMMON SHARE(2) $ .34 $ .63 (0.29) (46)
NET INCOME PER COMMON SHARE--
DILUTED(2) $ .33 $ .61 (0.28) (46)
Weighted average common shares
outstanding 686.1 689.7
Weighted average common shares
outstanding--diluted 707.6 707.3
(1) Includes $350 million of pre-tax special charges; ($235 million
after tax or $0.33 per diluted share or $0.34 per basic share)
related to the "Made For You" and home office productivity
initiatives recorded in second quarter 1998.
(2) Computed using net income reduced by preferred stock dividends of
$13.8 million for six months 1997 and $6.9 million for second
quarter 1997. These preferred shares were redeemed in December
1997.
n/m Not meaningful
McDONALD'S CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME EXCLUDING
SPECIAL CHARGES(1)
Dollars and shares in millions, Six months ended June 30
except per common share data ----------------------------------------
Increase/(Decrease)
------------------
1998 1997 Dollars Percent
---- ---- ------- ------
SYSTEMWIDE SALES $17,417.3 $16,308.2 1,109.1 7
Revenues
Sales by Company-operated
restaurants $ 4,284.7 $ 3,867.3 417.4 11
Revenues from franchised and
affiliated restaurants 1,701.0 1,582.9 118.1 7
--------- -------- ------- ---
TOTAL REVENUES 5,985.7 5,450.2 535.5 10
--------- -------- ------- ---
Operating costs and expenses
Company-operated restaurants 3,507.1 3,167.2 339.9 11
Franchised restaurants--
occupancy costs 324.6 299.4 25.2 8
Selling, general & administrative
expenses 707.9 681.2 26.7 4
Other operating (income)
expense--net (8.4) (55.3) 46.9 n/m
-------- -------- ------ ---
Total operating costs and expenses 4,531.2 4,092.5 438.7 11
-------- -------- ------ ---
OPERATING INCOME 1,454.5 1,357.7 96.8 7
Interest expense 209.2 176.2 33.0 19
Nonoperating (income) expense--net 6.3 22.7 (16.4) n/m
Income before provision for
income taxes 1,239.0 1,158.8 80.2 7
Provision for income taxes 408.0 376.1 31.9 8
NET INCOME $ 831.0 $ 782.7 48.3 6
========= ========= ===== ===
NET INCOME PER COMMON SHARE(2) $ 1.21 $ 1.11 0.10 9
NET INCOME PER COMMON SHARE--
DILUTED(2) $ 1.18 $ 1.09 0.09 8
Weighted average common shares
outstanding 686.2 690.7
Weighted average common shares
outstanding--diluted 704.7 707.2
Dollars and shares in millions, Quarters ended June 30
except per common share data --------------------------------------
Increase/(Decrease)
------------------
1998 1997 Dollars Percent
---- ---- ------- -------
SYSTEMWIDE SALES $9,247.6 $8,475.1 772.5 9
Revenues
Sales by Company-operated
restaurants $2,270.4 $2,014.1 256.3 13
Revenues from franchised and
affiliated restaurants 910.4 818.5 91.9 11
-------- ------- ----- ---
TOTAL REVENUES 3,180.8 2,832.6 348.2 12
-------- ------- ----- ---
Operating costs and expenses
Company-operated restaurants 1,843.7 1,640.1 203.6 12
Franchised restaurants--
occupancy costs 166.5 151.1 15.4 10
Selling, general & administrative
expenses 364.9 347.2 17.7 5
Other operating (income)
expense--net (6.1) (49.3) 43.2 n/m
-------- -------- ------ ---
Total operating costs and expenses 2,369.0 2,089.1 279.9 13
-------- -------- ------ ---
OPERATING INCOME 811.8 743.5 68.3 9
Interest expense 106.4 86.2 20.2 23
Nonoperating (income) expense--net 6.6 14.2 (7.6) n/m
Income before provision for
income taxes 698.8 643.1 55.7 9
Provision for income taxes 230.0 204.9 25.1 12
NET INCOME $ 468.8 $ 438.2 30.6 7
======= ======== ==== ===
NET INCOME PER COMMON SHARE(2) $ .68 $ .63 0.05 8
NET INCOME PER COMMON SHARE--
DILUTED(2) $ .66 $ .61 0.05 8
Weighted average common shares
outstanding 686.1 689.7
Weighted average common shares
outstanding--diluted 707.6 707.3
(1) Includes $350 million of pre-tax special charges; ($235 million
after tax or $0.33 per diluted share or $0.34 per basic share)
related to the "Made For You" and home office productivity
initiatives recorded in second quarter 1998.
(2) Computed using net income reduced by preferred stock dividends of
$13.8 million for six months 1997 and $6.9 million for second
quarter 1997. These preferred shares were redeemed in December
1997.
n/m Not meaningful
McDONALD'S CORPORATION
FINANCIAL INFORMATION
Dollars in millions Six months ended June 30
----------------------------------------
Increase/(Decrease)
------------------
1998 1997 Dollars Percent
---- ---- ------- -------
SYSTEMWIDE SALES
----------------
By Type
-------
Operated by franchisees $10,861.7 $10,161.9 699.8 7
Operated by the Company 4,284.7 3,867.3 417.4 11
Operated by affiliates 2,270.9 2,279.0 (8.1) -
--------- --------- ------- --
$17,417.3 $16,308.2 1,109.1 7
========= ========= ======= ==
---------------------------------------------------------------------------
TOTAL REVENUES
By Segment
----------
U.S. $ 2,418.8 $ 2,262.1 156.7 7
Europe 2,088.2 1,848.8 239.4 13
Asia/Pacific 774.9 711.2 63.7 9
Latin America 389.7 319.6 70.1 22
Other 314.1 308.5 5.6 2
--------- --------- ------- ---
$ 5,985.7 $ 5,450.2 535.5 10
========= ========= ======= ===
---------------------------------------------------------------------------
RESTAURANT MARGINS
Company-operated
----------------
U.S. 17.8% 16.9%
Outside the U.S. 18.3% 18.7%
Franchised
----------
U.S. 81.4% 81.0%
Outside the U.S. 80.3% 81.2%
---------------------------------------------------------------------------
PERCENT CONTRIBUTION TO
CONSOLIDATED MARGINS
Company-operated
----------------
U.S. 32 32
Outside the U.S. 68 68
--- ---
100 100
=== ===
Franchised
----------
U.S. 59 58
Outside the U.S. 41 42
--- ---
100 100
=== ===
---------------------------------------------------------------------------
Dollars in millions Quarters ended June 30
----------------------------------------
Increase/(Decrease)
------------------
1998 1997 Dollars Percent
---- ---- ------- -------
SYSTEMWIDE SALES
----------------
By Type
-------
Operated by franchisees $5,831.5 $5,297.8 533.7 10
Operated by the Company 2,270.4 2,014.1 256.3 13
Operated by affiliates 1,145.7 1,163.2 (17.5) (2)
-------- -------- ----- --
$9,247.6 $8,475.1 772.5 9
======== ======== ===== ==
---------------------------------------------------------------------------
TOTAL REVENUES
By Segment
----------
U.S. $1,316.8 $1,178.2 138.6 12
Europe 1,097.9 958.3 139.6 15
Asia/Pacific 398.6 359.4 39.2 11
Latin America 196.8 170.5 26.3 15
Other 170.7 166.2 4.5 3
-------- -------- ----- --
$3,180.8 $2,832.6 348.2 12
======== ======== ===== ==
---------------------------------------------------------------------------
RESTAURANT MARGINS
Company-operated
----------------
U.S. 18.9% 17.7%
Outside the U.S. 18.7% 19.0%
Franchised
----------
U.S. 82.4% 81.4%
Outside the U.S. 80.7% 81.7%
---------------------------------------------------------------------------
PERCENT CONTRIBUTION TO
CONSOLIDATED MARGINS
Company-operated
----------------
U.S. 34 33
Outside the U.S. 66 67
--- ---
100 100
=== ===
Franchised
----------
U.S. 60 58
Outside the U.S. 40 42
--- ---
100 100
=== ===
---------------------------------------------------------------------------
McDONALD'S CORPORATION RESTAURANT INFORMATION
At June 30
--------------------------
1998 1997 Increase
------ ------ --------
By Type
-------
Operated by franchisees 14,556 13,703 853
Operated by the Company 5,283 4,550 733
Operated by affiliates 3,887 3,530 357
------ ------ -----
Systemwide restaurants 23,726 21,783 1,943
====== ====== =====
------------------------------------------------------------
By Segment
----------
U.S. 12,406 12,178 228
Europe
Germany 874 781 93
England 773 676 97
France 671 594 77
Italy 180 153 27
Netherlands 177 160 17
Sweden 165 138 27
Spain 160 126 34
Other 1,076 880 196
----- ------ -----
Total Europe 4,076 3,508 568
Asia/Pacific
Japan 2,594 2,148 446
Australia 657 625 32
Taiwan 267 196 71
China 205 148 57
Philippines 172 121 51
Other 829 703 126
------ ------ -----
Total Asia/Pacific 4,724 3,941 783
Latin America
Brazil 505 378 127
Other 655 544 111
------ ------ -----
Total Latin America 1,160 922 238
Other
Canada 1,062 1,015 47
Other 298 219 79
------ ------ -----
Total Other 1,360 1,234 126
------ ------ -----
Systemwide restaurants 23,726 21,783 1,943
====== ====== =====
Countries 110 103
Six months ended Quarters ended
June 30 June 30
--------------- --------------
1998 1997 1998 1997
---- ---- ---- ----
Additions
---------
U.S. (1) 26 84 (7) 74
Europe 190 225 133 164
Asia/Pacific 268 308 177 181
Latin America 69 85 51 55
Other 41 59 26 33
--- --- --- ---
Systemwide additions 594 761 380 507
=== === === ===
(1) Includes the closing of about 60 low volume, satellite locations in
second quarter 1998.
