SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 19, 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 October 19, 1998 -- McDonald's Reports Double
Digit Increase In Quarterly Net Income Per Share
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<PAGE>
EXHIBIT 99
Investor Release
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
10/19/98 Investors: Mary Healy, 630-623-6429
Media: Chuck Ebeling, 630-623-6150
McDONALD'S REPORTS DOUBLE DIGIT INCREASE
IN QUARTERLY NET INCOME PER SHARE
OAK BROOK, IL -- McDonald's Corporation today announced strong global
results for the quarter and nine months ended September 30, 1998.
- Diluted net income per common share was 69 cents for the quarter, an
increase of 10%; 13% in constant currencies.
- Excluding the "Made For You" expenses, diluted net income per common
share was 70 cents for the quarter, an increase of 11%; 14% in constant
currencies.
- Operating income for the quarter increased 11%; 13% in constant
currencies.
- U.S. operating income increased 15% for the quarter, or 19%
excluding the "Made For You" expenses. Each international segment also
reported double-digit constant currency operating income growth for the
quarter.
- The Company repurchased about $1.1 billion of stock during the nine
months and announced a new $3.5 billion repurchase program.
All information in constant currencies excludes the effect of foreign
currency translation on reported results.
Key highlights 1998 1997 Increase/(Decrease)
---- ---- ---------------------
Dollars in millions, except As In Constant
per common share data Reported Currencies*
-------- -----------
Quarters ended September 30
Systemwide sales $ 9,246.2 $ 8,799.7 5% 9%
Total revenues 3,215.0 3,006.0 7 10
Operating income 835.2 755.4 11 13
Net income 482.2 448.9 7 11
Net income per common share -
diluted .69 .63 10 13
Nine months ended September 30
Systemwide sales $26,663.5 $25,107.9 6% 10%
Total revenues 9,200.7 8,456.2 9 13
Operating income 2,124.7 2,113.1 1 4
Operating Income (1) 2,284.7 2,113.1 8 12
Net income 1,201.6 1,231.6 (2) 1
Net income (1) 1,311.6 1,231.6 6 10
Net income per common share -
diluted 1.71 1.71 - 4
Net income per common share -
diluted (1) 1.86 1.71 9 12
(1) Excluding the special charge recorded in second quarter 1998
SUMMARY COMMENTARY
Jack Greenberg, President and Chief Executive Officer said, "This
has been a very strong quarter for our global business. Constant
currency diluted net income per common share increased 13 percent in the
quarter. This increase would have been 14 percent excluding the expenses
related to the introduction of our 'Made For You' food preparation
system.
"The U.S. delivered an extremely strong performance. Positive
comparable sales and lower selling, general and administrative expenses
contributed to a 15 percent increase in operating income for the quarter.
Owner/operator cash flow is up significantly year-to-date. We are
committed to consistently satisfying our customers better than anyone
else, every day, in every restaurant.
"And we are also delighted with our performance outside the U.S.
Our unique global infrastructure gives us an advantage in dealing with
cyclical issues impacting the marketplace. We are confident that our
strategies are working to solidify our market position around the world.
"While we anticipate opening in excess of 2,000 restaurants this
year, we expect net restaurant additions to be about 1,800. This
reflects our decision to close nearly 200 low volume satellite
restaurants, primarily in the U.S., and a more selective growth strategy
in the five Southeast Asian countries hit hardest by the financial
crisis.
"During the quarter, we completed our $2 billion, three-year share
repurchase program early and announced a new $3.5 billion program to be
completed by year-end 2001. We believe that common share repurchase is
an excellent means of providing shareholder value. We expect cash from
operations to more than cover capital expenditures and produce increasing
amounts of free cash flow. We are using this free cash flow together
with our debt capacity to repurchase shares. We purchased 18.5 million
shares of our stock for $1.1 billion in the first nine months of 1998.
Of this, 4.6 million shares, or $280 million are part of our new $3.5
billion program."
Jim Cantalupo, Vice Chairman McDonald's Corporation, Chairman and
Chief Executive Officer - McDonald's International said, "We are
extremely pleased with international results, especially in light of the
strong dollar and economic issues throughout the world. McDonald's
lessens exposure to the economic impact of currency fluctuations, where
practical, by sourcing locally, financing expansion with local currency
debt and hedging cash flows. Additionally, our family of suppliers and
local management teams create and adapt strategies to manage through
difficult cyclical situations. By staying the course, we are able to
quickly capitalize on opportunities when economies strengthen.
"McDonald's International delivered solid operating income growth
for the quarter, primarily due to a $73 million or 13 percent constant
currency increase in combined restaurant operating margin dollars. For
the nine months, these margins increased $227 million or 14 percent on a
constant currency basis, driven principally by Europe.
"Sales continue to be strong in all segments of the world. In
Asia/Pacific, constant currency sales were up over 14 percent for the
quarter. In Europe and Latin America, constant currency sales increased
13 and 18 percent, respectively, for the quarter. On a year-to-date
basis, all international segments had double digit constant currency
sales increases.
"The fundamentals of our business outside the U.S. remain strong.
McDonald's is the value leader in virtually every market and customer
demand for the McDonald's experience remains strong, as evidenced by the
successful opening of our 114th country, Sri Lanka, last week."
Alan Feldman, President - McDonald's U.S.A. said, " We are extremely
pleased with the momentum of the U.S. business. The changes and
strategic initiatives begun last year are working, and along with local
market initiatives and everyday value, resulted in another outstanding
quarter.
"Last month we celebrated the 30th anniversary of the Big Mac with a
highly successful promotion. We are also excited about our most recent
commercials featuring Mark McGwire and Sammy Sosa on the heels of their
historic home run chase.
"An important strategic initiative in the U.S. is our new 'Made For
You' food preparation system, which we expect will be installed in all of
our U.S. restaurants by year-end 1999. Experience shows that 'Made For
You' provides customers with hotter, fresher food, increases menu
flexibility and reduces restaurant operating costs. We currently have more
than 1,200 restaurants on or transitioning to the 'Made For You' system in
the U.S. We are pleased that our owner/operators are embracing the system.
By the end of this year, we expect that most of our owner/operators will be
scheduled for conversion to 'Made For You' and therefore, we expect to make
a significant amount of incentive payments to owner/operators during the
fourth quarter. I am excited about the long-term opportunities created for
the U.S. business by 'Made For You' and through our continued focus on
Quality, Service, Cleanliness and Value."
CONSOLIDATED OPERATING RESULTS
Net income and diluted net income per common share increased seven and
ten percent for the quarter, respectively, while for the nine months, net
income decreased two percent and diluted net income per common share was
flat. Excluding costs associated with "Made For You" and the second
quarter 1998 special charge, net income and diluted net income per common
share increased nine and 11 percent for the quarter, and seven and ten
percent for the nine months, respectively.
Changing foreign currencies significantly reduced reported results.
Excluding the foreign currency translation effect, "Made For You" costs
and the second quarter 1998 special charge, net income would have
increased 13 percent for the quarter and 11 percent for the nine months;
diluted net income per common share would have increased 14 percent for
the quarter and 13 percent for the nine months.
The spreads between the percent change in diluted net income per
common share compared with net income was a result of fewer shares
outstanding and the absence of preferred dividends in 1998, due to the
retirement of our remaining Series E Preferred Stock in December 1997.
During the third quarter, McDonald's repurchased about $600 million
of the Company's common stock, bringing total share repurchases for the
nine months to approximately $1.1 billion. Of the amount repurchased in
the third quarter, about $320 million completed the $2.0 billion
repurchase program begun in 1996 and $280 million related to the new $3.5
billion repurchase program.
Systemwide sales represent sales by Company-operated, franchised and
affiliated restaurants. 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.
Revenues increased at a faster rate than sales for the quarter and
the nine months. 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.
Systemwide sales
Dollars in millions 1998 1997 Increase/(Decrease)
---- ---- ---------------------
As In Constant
Reported Currencies*
-------- -----------
Quarters ended September 30
U.S. $ 4,600.9 $ 4,441.9 4% n/a
Europe 2,349.4 2,039.3 15 13%
Asia/Pacific 1,416.0 1,490.6 (5) 14
Latin America 445.8 397.0 12 18
Other 434.1 430.9 1 9
--------- --------- --- ----
Total Systemwide sales $ 9,246.2 $ 8,799.7 5% 9%
========= ========= === ====
Nine months ended September 30
U.S. $13,639.7 $12,851.2 6% n/a
Europe 6,481.4 5,764.5 12 15%
Asia/Pacific 4,046.9 4,246.8 (5) 12
Latin America 1,276.6 1,080.5 18 24
Other 1,218.9 1,164.9 5 11
--------- --------- --- ----
Total Systemwide sales $26,663.5 $25,107.9 6% 10%
========= ========= === ====
* Excluding the effect of foreign currency translation on reported
results
n/a Not applicable
U.S. sales increased due to positive comparable sales trends and
restaurant expansion in both periods. Successful Monopoly, Teenie Beanie
Baby and Big Mac promotions, combined with local market initiatives
contributed to the sales increases.
In Europe, the constant currency sales increase was driven by
expansion and positive comparable sales trends in both periods. England,
France, Germany, Italy and Spain were the primary contributors to the
strong sales performance for both periods.
In Asia/Pacific, the constant currency sales increase in both
periods was due to expansion, partly offset by negative comparable sales.
Japan was the primary contributor to the increases in both periods,
despite its weak economy. Difficult economic conditions in Southeast
Asia continue to negatively impact consumer spending.
In Latin America, the constant currency sales increase for the
quarter was driven primarily by expansion and for the nine months, by
expansion and positive comparable sales. The increases were driven by
strong performances in Argentina, Brazil, Mexico and Venezuela for both
periods.
Consolidated operating margins Quarters ended Nine months ended
September 30 September 30
--------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
Dollars in millions
Company-operated $ 437.5 $ 402.4 $1,215.1 $1,102.5
Franchised 737.3 693.6 2,113.7 1,977.1
-------- -------- -------- --------
Combined operating margins $1,174.8 $1,096.0 $3,328.8 $3,079.6
Percent of sales/revenues
Company-operated 19.0% 18.6% 18.4% 18.3%
Franchised 81.1 81.8 81.0 81.3
Company-operated margins as a percent of sales increased for the
quarter and the nine months. Food & paper costs decreased as a percent
of sales for both periods while occupancy & other operating expenses
increased. Payroll costs as a percent of sales increased for the quarter
and were flat for the nine months.
As a percent of sales, U.S. Company-operated margins increased for
the quarter and the nine months, reflecting lower food & paper costs and
higher payroll costs as a percent of sales. Occupancy & other operating
expenses increased for the quarter and decreased for the nine months, as
a percent of sales.
Outside the U.S., the improvement in Company-operated margins as a
percent of sales in Europe and Canada was offset by lower margins in
Latin America and Asia/Pacific. Overall, Company-operated margins
outside the U.S. reflected higher occupancy & other operating expenses
and lower food & paper costs as a percent of sales. Payroll costs as a
percent of sales increased for the quarter and were flat for the nine
months.
Franchised margin dollars comprised more than 60 percent of the
combined operating margins, the same as in the prior year. While
franchised margins as a percent of applicable revenues decreased for both
periods, franchised margin dollars increased six percent for the quarter
and seven percent for the nine months.
As a percent of revenues, U.S. franchised margins decreased for the
quarter and were flat for the nine months, reflecting higher occupancy
costs, including rent expense, driven by an increase in the number of
leased sites. Both higher occupancy costs and the consolidation of
several affiliate markets negatively affected franchised margins outside
the U.S.
Selling, general & administrative expenses decreased for the quarter
and increased slightly for the nine months. In the U.S., selling,
general and administrative expenses decreased for both periods primarily
due to lower advertising costs. Outside the U.S., selling, general and
administrative expenses increased for both periods, primarily driven by
spending to support restaurant development and the consolidation of
several affiliate markets. As a result of the home office productivity
initiative announced earlier this year, the Company expects to save about
$100 million of selling, general and administrative expenses per year,
beginning in 2000, with about two-thirds of the savings expected to be
realized in 1999.
Other operating (income) expense-net Quarters ended Nine months ended
September 30 September 30
-------------- -----------------
Dollars in millions 1998 1997 1998 1997
---- ---- ---- ----
Gains on sales of restaurant
businesses $(10.5) $ (9.5) $(32.5) $(37.1)
Equity in earnings of unconsolidated
affiliates (31.5) (26.3) (65.9) (59.5)
Other (income) expense 12.5 0.9 60.5 6.4
Other operating (income) expense- ------- ------- ------- -------
net $(29.5) $(34.9) $(37.9) $(90.2)
Special charge - - $160.0 -
``Made For You'' expenses $ 10.6 - $ 15.6 -
Other operating (income) expense-net consists of transactions
related to franchising and the food service business. Other expenses
increased reflecting higher provisions for property dispositions. The
special charge recorded in the second quarter 1998 related to the
Company's home office productivity initiative and was primarily comprised
of costs associated with employee severance and with the consolidation of
office facilities. The "Made For You" expenses included incentive
payments made to owner/operators as well as accelerated depreciation on
equipment to be replaced in Company-operated restaurants. The Company
expects the total expenses related to the implementation of "Made For
You" to be approximately $190 million, the remainder of which will be
incurred by the end of 1999. Substantially all of this amount relates to
incentive payments to be paid to owner/operators.
Operating income
Dollars in millions 1998 1997 Increase/(Decrease)
---- ---- ----------------------
As In Constant
Reported Currencies*
--------- -----------
Quarters ended September 30
U.S. $ 361.6 $ 313.4 15% n/a
Europe 310.6 274.6 13 12%
Asia/Pacific 101.1 105.9 (5) 13
Latin America 47.4 45.7 4 10
Other 36.4 34.4 6 14
Corporate SG&A (21.9) (18.6) 18 n/a
-------- ------ -- ---
Total operating income $ 835.2 $ 755.4 11% 13%
Nine months ended September 30 ======== ======== == ===
U.S. excluding special
charge(1) $1,033.4 $ 924.8 12% n/a
Europe 823.2 736.3 12 14%
Asia/Pacific 260.1 287.2 (9) 6
Latin America 127.1 117.4 8 15
Other 95.0 92.6 3 9
Corporate SG&A (54.1) (45.2) 20 n/a
-------- ------ -- ---
Total operating income
excluding special charge(1) $2,284.7 $2,113.1 8% 12%
======== ======== == ===
* Excluding the effect of foreign currency translation on reported
results
(1) Excluding the $160 million pre-tax special charge recorded in second
quarter 1998
n/a Not applicable
Consolidated operating income increased $80 million or 11 percent
for the quarter and $12 million or one percent for the nine months.
Excluding the second quarter 1998 special charge, consolidated operating
income increased $172 million or eight percent for the nine months. For
both periods, consolidated operating income reflected higher combined
operating margin dollars, lower other operating income and the "Made For
You" expenses. Selling, general & administrative expenses decreased for
the quarter and increased slightly for the nine months.
Constant currency consolidated operating income increased $100
million or 13 percent for the quarter and $248 million or 12 percent for
the nine months, excluding the second quarter special charge.
U.S. operating income increased $48 million or 15 percent for the
quarter and $109 million or 12 percent for the nine months, excluding the
second quarter special charge. The increases were driven by higher
combined operating margin dollars and lower selling, general &
administrative expenses. Lower other operating income and the "Made For
You" expenses reduced the rate of increase. Including the second quarter
special charge, U.S. operating income decreased $51 million or six
percent for the nine months.
In each of the segments outside the U.S., the increases in operating
income for both periods were primarily driven by higher combined
operating margin dollars, partially offset by increased selling, general
& administrative expenses. Lower other operating income, primarily in
Europe, reduced the rate of increase.
Results outside the U.S. were negatively affected by the strong U.S.
dollar. However, certain European currencies, principally the Deutsche
Mark and French Franc, recently strengthened, partially reducing the
negative impact. In addition, economic difficulties, primarily in Russia
and Southeast Asia, negatively affected results, and the Company expects
this to continue during the remainder of the year.
Higher interest expense reflected higher debt levels, offset in part
by slightly lower average interest rates and weaker foreign currencies.
Nonoperating (income) expense-net for the quarter and for the nine
months reflected translation losses in 1998 compared with translation
gains in 1997, as well as lower charges for minority interests.
The effective income tax rate was 32.8 percent for the quarter and
32.9 percent for the nine months of 1998 compared with 31.9 percent for
the third quarter and 32.3 percent for the nine months of 1997.
IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS
While changing foreign currencies affect reported results, McDonald's
lessens exposures, where practical, by financing in local currencies,
hedging certain foreign-denominated cash flows and by purchasing goods
and services in local currencies.
The Australian Dollar, Canadian Dollar and Japanese Yen, as well as
the significantly weakened Southeast Asian currencies, were the primary
foreign currencies that negatively affected reported results for the
quarter and the nine months. For the quarter, the Deutsche Mark and
French Franc had a positive impact on reported results, however, the
Deutsche Mark negatively impacted results for the nine months.
The following tables present 1998 results translated at 1997 rates
compared with reported results.
Effect of foreign currency translation on worldwide results excluding
special charge
Dollars in millions, except Increase
per common share data --------------------
As In Constant As In Consent
Reported Currencies* Change Reported Currencies*
-------- ----------- ------ -------- -----------
Quarter ended September 30, 1998
Systemwide sales $ 9,246.2 $ 9,556.0 $ 309.8 5% 9%
Total revenues 3,215.0 3,303.8 88.8 7 10
Operating income 835.2 855.2 20.0 11 13
Net income 482.2 500.1 17.9 7 11
Net income per common
share - diluted .69 .71 .02 10 13
Nine months ended September 30, 1998
Systemwide sales $26,663.5 $27,675.4 $1,011.9 6% 10%
Total revenues 9,200.7 9,540.2 339.5 9 13
Operating income(1) 2,284.7 2,360.8 76.1 8 12
Net income(1) 1,311.6 1,353.4 41.8 6 10
Net income per common
share - diluted(1) 1.86 1.92 .06 9 12
* Excluding the effect of foreign currency translation on reported
results
(1)Excluding the $160 million pre-tax special charge recorded in second
quarter 1998 ($110 million after-tax or $0.15 per diluted share)
Effect of foreign currency translation on worldwide results excluding
``Made For You'' expenses and special charge
Dollars in millions, except Increase
per common share data --------------------
As In Constant As In Consent
Reported Currencies* Change Reported Currencies*
-------- ----------- ------ -------- -----------
Quarter ended September 30, 1998(1)
Operating income $ 845.8 $ 865.8 $20.0 12% 15%
Net income 489.3 507.2 17.9 9 13
Net income per common
share - diluted .70 .72 .02 11 14
Nine months ended September 30, 1998(2)
Operating income $2,300.3 $2,376.4 $76.1 9% 12%
Net income 1,322.1 1,363.9 41.8 7 11
Net income per common
share - diluted 1.88 1.94 .06 10 13
* Excluding the effect of foreign currency translation on reported
results
(1) Excluding "Made For You" expenses of $10.6 million for the quarter
($7.1 million after-tax or $0.01 per diluted share), which included
incentive payments made to owner/operators as well as accelerated
depreciation on equipment to be replaced in Company-operated
restaurants
(2) Excluding the $160 million pre-tax special charge recorded in second
quarter 1998 and $15.6 million of "Made For You" expenses, for a
pre-tax total of $175.6 million ($120.5 million after-tax or $0.17
per diluted share)
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.
<PAGE>
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------------
Inc/(Dec)
Quarters ended September 30, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES $9,246.2 $8,799.7 446.5 5
Revenues
Sales by Company-operated
restaurants $2,305.7 $2,158.5 147.2 7
Revenues from franchised
and affiliated restaurants 909.3 847.5 61.8 7
TOTAL REVENUES 3,215.0 3,006.0 209.0 7
Operating costs and expenses
Company-operated
restaurants 1,868.2 1,756.1 112.1 6
Franchised restaurants
--occupancy costs 172.0 153.9 18.1 12
Selling, general &
administrative expenses 358.5 375.5 (17.0) (5)
"Made For You" expenses 10.6 - 10.6 n/m
Other operating (income)
expense--net (29.5) (34.9) 5.4 n/m
Total operating costs
and expenses 2,379.8 2,250.6 129.2 6
OPERATING INCOME 835.2 755.4 79.8 11
Interest expense 102.8 94.1 8.7 9
Nonoperating (income)
expense--net 15.1 2.2 12.9 n/m
Income before provision
for income taxes 717.3 659.1 58.2 9
Provision for income taxes 235.1 210.2 24.9 12
NET INCOME $ 482.2 $ 448.9 33.3 7
NET INCOME PER
COMMON SHARE (1) $ .71 $ .64 0.07 11
NET INCOME PER
COMMON SHARE--DILUTED (1) $ .69 $ .63 0.06 10
Weighted average common
shares outstanding 681.1 688.5
Weighted average common
shares outstanding--diluted 702.3 704.4
(1) Computed using net income reduced by preferred stock dividends of
$6.9 million for third quarter 1997. These preferred shares were
redeemed in December 1997.
n/m Not meaningful
<PAGE>
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------------
Inc/(Dec)
Nine months ended September 30, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES $26,663.5 $25,107.9 1,555.6 6
Revenues
Sales by Company-operated
restaurants $ 6,590.4 $ 6,025.8 564.6 9
Revenues from franchised
and affiliated restaurants 2,610.3 2,430.4 179.9 7
TOTAL REVENUES 9,200.7 8,456.2 744.5 9
Operating costs and expenses
Company-operated
restaurants 5,375.3 4,923.3 452.0 9
Franchised restaurants
--occupancy costs 496.6 453.3 43.3 10
Selling, general &
administrative expenses 1,066.4 1,056.7 9.7 1
Special charge (1) 160.0 - 160.0 n/m
"Made For You" expenses 15.6 - 15.6 n/m
Other operating (income)
expense--net (37.9) (90.2) 52.3 n/m
Total operating costs
and expenses 7,076.0 6,343.1 732.9 12
OPERATING INCOME 2,124.7 2,113.1 11.6 1
Interest expense 312.0 270.3 41.7 15
Nonoperating (income)
expense--net 21.4 24.9 (3.5) n/m
Income before provision
for income taxes 1,791.3 1,817.9 (26.6) (1)
Provision for income taxes 589.7 586.3 3.4 1
NET INCOME $ 1,201.6 $ 1,231.6 (30.0) (2)
NET INCOME PER
COMMON SHARE (2) $ 1.76 $ 1.76 - -
NET INCOME PER
COMMON SHARE--DILUTED (2) $ 1.71 $ 1.71 - -
Weighted average common
shares outstanding 684.5 689.9
Weighted average common
shares outstanding--diluted 704.2 706.3
(1) The $160 million pre-tax special charge ($110 million after tax or
$0.15 per diluted share) related to the home office productivity
initiative was recorded in second quarter 1998.
(2) Computed using net income reduced by preferred stock dividends of
$20.7 million for nine months 1997. These preferred shares were
redeemed in December 1997.
n/m Not meaningful
<PAGE>
MCDONALD'S CORPORATION FINANCIAL INFORMATION
Dollars in millions
-------------------------------------------------------------------
Inc/(Dec)
Quarters ended September 30, 1998 1997 $ %
-------------------------------------------------------------------
SYSTEMWIDE SALES
By Type
Operated by franchisees $5,740.3 $5,430.8 309.5 6
Operated by the Company 2,305.8 2,158.5 147.3 7
Operated by affiliates 1,200.1 1,210.4 (10.3) (1)
$9,246.2 $8,799.7 446.5 5
TOTAL REVENUES
By Segment
U.S. $1,240.9 $1,191.6 49.3 4
Europe 1,165.1 1,024.5 140.6 14
Asia/Pacific 434.2 428.6 5.6 1
Latin America 203.7 184.5 19.2 10
Other 171.1 176.8 (5.7) (3)
$3,215.0 $3,006.0 209.0 7
-------------------------------------------------------------------
Inc/(Dec)
Nine months ended September 30, 1998 1997 $ %
-------------------------------------------------------------------
SYSTEMWIDE SALES
By Type
Operated by franchisees $16,602.0 $15,592.7 1,009.3 6
Operated by the Company 6,590.5 6,025.8 564.7 9
Operated by affiliates 3,471.0 3,489.4 (18.4) (1)
$26,663.5 $25,107.9 1,555.6 6
TOTAL REVENUES
By Segment
U.S. $ 3,659.7 $ 3,453.7 206.0 6
Europe 3,253.3 2,873.3 380.0 13
Asia/Pacific 1,209.1 1,139.8 69.3 6
Latin America 593.4 504.1 89.3 18
Other 485.2 485.3 (0.1) -
$ 9,200.7 $ 8,456.2 744.5 9
<PAGE>
MCDONALD'S CORPORATION FINANCIAL INFORMATION
RESTAURANT MARGINS
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Quarters ended September 30 Nine months ended September 30
1998 1997 1998 1997
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Company-operated
U.S. 17.5% 15.9% 17.7% 16.6%
Outside the U.S. 19.6% 19.9% 18.8% 19.2%
Franchised
U.S. 80.9% 81.6% 81.2% 81.2%
Outside the U.S. 81.3% 82.2% 80.6% 81.6%
PERCENT CONTRIBUTION TO
CONSOLIDATED MARGINS
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Quarters ended September 30 Nine months ended September 30
1998 1997 1998 1997
--------------------------------------------------------------------
Company-operated
U.S. 29 27 31 30
Outside the U.S. 71 73 69 70
100 100 100 100
Franchised
U.S. 57 59 59 58
Outside the U.S. 43 41 41 42
100 100 100 100
<PAGE>
MCDONALD'S CORPORATION RESTAURANT INFORMATION
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At September 30, 1998 1997 Increase
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By Type
Operated by franchisees 14,932 13,909 1,023
Operated by the Company 5,350 4,782 568
Operated by affiliates 3,847 3,555 292
Systemwide restaurants 24,129 22,246 1,883
By Segment
U.S. 12,424 12,249 175
Europe
Germany 894 802 92
England 797 702 95
France 692 613 79
Italy 182 161 21
Netherlands 179 165 14
Sweden 171 145 26
Spain 168 133 35
Other 1,117 926 191
Total Europe 4,200 3,647 553
Asia/Pacific
Japan 2,679 2,241 438
Australia 662 633 29
Taiwan 284 218 66
China 213 160 53
Philippines 183 130 53
Other 845 733 112
Total Asia/Pacific 4,866 4,115 751
Latin America
Brazil 568 404 164
Argentina 155 114 41
Other 534 441 93
Total Latin America 1,257 959 298
Other
Canada 1,063 1,030 33
Other 319 246 73
Total Other 1,382 1,276 106
Systemwide restaurants 24,129 22,246 1,883
Countries 113 104
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Quarters ended September 30, 1998 1997
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Additions
U.S. 18 71
Europe 124 175
Asia/Pacific 142 179
Latin America 97 37
Other 22 1
Systemwide additions 403 463
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Nine months ended September 30, 1998 1997
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Additions
U.S. 44 155
Europe 314 364
Asia/Pacific 410 482
Latin America 166 122
Other 63 101
Systemwide additions 997 1,224
<PAGE>
MCDONALD'S CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION
Dollars in millions
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Inc/(Dec)
Quarters ended September 30, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES
US
Operated by franchisees $3,587.1 $3,448.6 138.5 4
Operated by the Company 719.8 692.8 27.0 4
Operated by affiliates 294.0 300.5 (6.5) (2)
4,600.9 4,441.9 159.0 4
Outside the US
Operated by franchisees 2,153.3 1,982.2 171.1 9
Operated by the Company 1,586.0 1,465.7 120.3 8
Operated by affiliates 906.0 909.9 (3.9) -
4,645.3 4,357.8 287.5 7
$9,246.2 $8,799.7 446.5 5
Systemwide
Operated by franchisees $5,740.3 $5,430.8 309.5 6
Operated by the Company 2,305.8 2,158.5 147.3 7
Operated by affiliates 1,200.1 1,210.4 (10.3) (1)
$9,246.2 $8,799.7 446.5 5
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Inc/(Dec)
Nine months ended September 30, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES
US
Operated by franchisees $10,608.6 $ 9,965.0 643.6 6
Operated by the Company 2,132.1 2,029.4 102.7 5
Operated by affiliates 899.0 856.8 42.2 5
13,639.7 12,851.2 788.5 6
Outside the US
Operated by franchisees 5,993.4 5,627.7 365.7 6
Operated by the Company 4,458.4 3,996.4 462.0 12
Operated by affiliates 2,572.0 2,632.6 (60.6) (2)
13,023.8 12,256.7 767.1 6
$26,663.5 $25,107.9 1,555.6 6
Systemwide
Operated by franchisees $16,602.0 $15,592.7 1,009.3 6
Operated by the Company 6,590.5 6,025.8 564.7 9
Operated by affiliates 3,471.0 3,489.4 (18.4) -
$26,663.5 $25,107.9 1,555.6 6
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