<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 September 30, 1999
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 _____
---
1,354,019,453
----------------------
(Number of shares of common stock
outstanding as of September 30, 1999)
================================================================================
<PAGE>
McDONALD'S CORPORATION
----------------------
INDEX
-----
<TABLE>
<CAPTION>
Page Reference
Part I. Financial Information
<S> <C>
Item 1 - Financial Statements
Condensed consolidated balance sheet,
September 30, 1999 (unaudited) and 3
December 31, 1998
Condensed consolidated statement of
income (unaudited), quarters and nine months ended
September 30, 1999 and 1998 4
Condensed consolidated statement of
cash flows (unaudited), quarters and nine months
ended September 30, 1999 and 1998 5
Financial comments (unaudited) 6
Item 2 - Management's Discussion and
Analysis of Financial Condition
and Results of Operations 8
Item 3 - Quantitative & Qualitative Disclosures
About Market Risk 17
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K 17
(a) Exhibits
The exhibits listed in the
accompanying Exhibit Index are
filed as part of this report 17
(b) Reports on Form 8-K 19
Signature 20
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEET
- ---------------------------------------------------------------------------------------------------------------
(unaudited)
In millions September 30, 1999 December 31, 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 424.8 $ 299.2
Accounts and notes receivable 607.9 609.4
Inventories, at cost, not in excess of market 76.0 77.3
Prepaid expenses and other current assets 284.9 323.5
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,393.6 1,309.4
- ---------------------------------------------------------------------------------------------------------------
OTHER ASSETS 2,933.1 2,433.4
PROPERTY AND EQUIPMENT
Property and equipment, at cost 22,215.3 21,758.0
Accumulated depreciation and amortization (6,075.2) (5,716.4)
- ---------------------------------------------------------------------------------------------------------------
NET PROPERTY AND EQUIPMENT 16,140.1 16,041.6
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $20,466.8 $19,784.4
===============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 682.5 $ 686.8
Accounts payable 448.8 621.3
Income taxes 142.0 94.2
Other taxes 154.7 143.5
Accrued interest 114.5 132.3
Other accrued liabilities 662.5 651.0
Current maturities of long-term debt 149.8 168.0
- ---------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,354.8 2,497.1
- ---------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 6,288.8 6,188.6
OTHER LONG-TERM LIABILITIES AND MINORITY INTERESTS 561.8 492.6
DEFERRED INCOME TAXES 1,071.5 1,081.9
COMMON EQUITY PUT OPTIONS 693.4 59.5
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 - 1,660.6 million 16.6 16.6
Additional paid-in capital 1,202.4 989.2
Guarantee of ESOP notes (149.0) (148.7)
Retained earnings 15,142.5 13,879.6
Accumulated other comprehensive income (796.3) (522.5)
Common stock in treasury, at cost; 306.6 and 304.4 million shares (5,919.7) (4,749.5)
- ---------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 9,496.5 9,464.7
- ---------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $20,466.8 $19,784.4
===============================================================================================================
</TABLE>
See accompanying Financial comments.
3
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
Quarters ended Nine months ended
In millions, except September 30 September 30
per common share data 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
Sales by Company-operated restaurants $2,474.4 $2,305.7 $7,087.6 $6,590.4
Revenues from franchised and affiliated restaurants 969.8 909.3 2,798.8 2,610.3
- -------------------------------------------------------------------------------------------------------
TOTAL REVENUES 3,444.2 3,215.0 9,886.4 9,200.7
- -------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 2,015.6 1,868.2 5,818.8 5,375.3
Franchised restaurants - occupancy expenses 186.8 172.0 546.0 496.6
Selling, general, and administrative expenses 368.0 358.5 1,073.4 1,066.4
Other operating (income) expense (40.9) (29.5) (71.9) (37.9)
Made for You costs 7.0 10.6 17.3 15.6
Special charge - - - 160.0
- -------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 2,536.5 2,379.8 7,383.6 7,076.0
- -------------------------------------------------------------------------------------------------------
OPERATING INCOME 907.7 835.2 2,502.8 2,124.7
- -------------------------------------------------------------------------------------------------------
Interest expense 95.4 102.8 298.1 312.0
Nonoperating (income) expense 12.0 15.1 30.9 21.4
- -------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 800.3 717.3 2,173.8 1,791.3
- -------------------------------------------------------------------------------------------------------
Provision for income taxes 259.4 235.1 712.1 589.7
- -------------------------------------------------------------------------------------------------------
NET INCOME $ 540.9 $ 482.2 $1,461.7 $1,201.6
=======================================================================================================
NET INCOME PER COMMON SHARE $ 0.40 $ 0.35 $ 1.08 $ 0.88
NET INCOME PER COMMON SHARE - DILUTED 0.39 0.34 1.04 0.85
- -------------------------------------------------------------------------------------------------------
DIVIDENDS PER COMMON SHARE $ .04875 $ .04500 $ .14653 $ .13125
- -------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE SHARES 1,354.7 1,362.1 1,355.8 1,369.0
WEIGHTED AVERAGE SHARES - DILUTED 1,403.1 1,404.7 1,405.4 1,408.4
- -------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Financial comments.
4
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- -----------------------------------------------------------------------------------------------------
Quarters ended Nine months ended
September 30 September 30
In millions 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 540.9 $ 482.2 $ 1,461.7 $ 1,201.6
Adjustments to reconcile to cash provided by operations
Depreciation and amortization 248.6 227.8 720.4 648.3
Changes in operating working capital items 153.4 66.2 190.5 126.0
Other (52.6) 25.8 0.5 21.5
- -----------------------------------------------------------------------------------------------------
CASH PROVIDED BY OPERATIONS 890.3 802.0 2,373.1 1,997.4
- -----------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Property and equipment expenditures (491.7) (492.6) (1,245.7) (1,350.1)
Purchases and sales of restaurant businesses and
sales of property (106.6) 23.1 (133.7) 32.9
Other (82.0) (13.0) (265.0) (83.0)
- -----------------------------------------------------------------------------------------------------
CASH USED FOR INVESTING ACTIVITIES (680.3) (482.5) (1,644.4) (1,400.2)
- -----------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Notes payable and long-term financing issuances and
repayments 124.8 207.9 97.8 390.1
Treasury stock purchases (202.6) (544.3) (643.9) (1,049.1)
Common stock dividends (66.4) (61.2) (198.7) (179.5)
Other (48.8) 57.5 141.7 204.2
- -----------------------------------------------------------------------------------------------------
CASH USED FOR FINANCING ACTIVITIES (193.0) (340.1) (603.1) (634.3)
- -----------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS INCREASE (DECREASE) 17.0 (20.6) 125.6 (37.1)
- -----------------------------------------------------------------------------------------------------
Cash and equivalents at beginning of period 407.8 324.9 299.2 341.4
- -----------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 424.8 $ 304.3 $ 424.8 $ 304.3
=====================================================================================================
</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 1998
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 and nine months ended September 30,
1999 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 $586.2 million and $513.6 million for the third quarters
of 1999 and 1998, respectively, and $1,187.9 million and $1,120.0 million for
the nine months ended September 30, 1999 and 1998, respectively.
Per Common Share Information
Common share amounts included in the accompanying financial statements have
been restated for the 2-for-1 common stock split in March, 1999. Diluted net
income per common share is calculated using net income divided by weighted
average shares on a diluted basis. Weighted average shares on a diluted basis
include weighted average shares outstanding plus the dilutive effect of stock
options, calculated using the treasury stock method, of 48.4 million shares and
42.6 million shares for the third quarters of 1999 and 1998, respectively, and
49.6 million shares and 39.4 million shares for the nine months ended September
30, 1999 and 1998, respectively.
Common Equity Put Options
At September 30, 1999, 16.6 million of common equity put options were
outstanding, which expire at various dates through November 2000. The $693.4
million exercise price of the options outstanding was classified in common
equity put options at September 30, 1999, and the related offset was recorded in
common stock in treasury, net of premiums received.
Special Charge
In the second quarter 1998, the Company recorded a $160 million pre-tax
special charge related to the results of the Company's home office productivity
initiative. The Company's home office productivity plan is designed to improve
staff alignment, focus and productivity and reduce ongoing selling, general and
administrative expenses. As a result of this initiative, the Company has reduced
home office staffing by approximately 525 positions, is consolidating certain
home office facilities and has reduced other expenditures in a variety of areas.
The $160 million charge was primarily comprised of costs associated with
employee severance and outplacement and with the facilities consolidation.
As of September 30, 1999, the remaining accrual, primarily for employee
related costs, was approximately $58 million and is included in Other accrued
liabilities in the Condensed Consolidated Balance Sheet. No significant
adjustments have been made to the original plan approved by management in second
quarter 1998.
6
<PAGE>
New Accounting Standard - Financial Instruments
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, subsequently
amended by Statement No. 137, which is required to be adopted in years beginning
after June 15, 2000. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged item
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The Company expects to adopt the new Statement
effective January 1, 2001. Management does not anticipate that the adoption will
have a significant effect on the Company's results of operations or financial
position.
Segment Information
McDonald's operates primarily in the quick-service hamburger restaurant
business, which we refer to as "Brand McDonald's". The Company also operates
other branded restaurants: Donatos Pizza, Chipotle Mexican Grill and Aroma Cafe.
Collectively these three businesses are referred to as "Other Brands". For the
quarter and nine months ended September 30, 1999, Brand McDonald's comprised
virtually all of consolidated operating results.
The following table presents the Company's revenues and operating income by
geographic segment:
<TABLE>
<CAPTION>
Quarters ended Nine Months ended
September 30 September 30
1999/(1)/ 1998 1999/(1)/ 1998
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES
U.S. $1,303.1 $1,240.9 $3,834.2 $3,659.7
Europe 1,258.0 1,165.1 3,651.3 3,253.3
Asia/Pacific 503.9 434.2 1,374.2 1,209.1
Latin America 174.2 203.7 503.6 593.4
Other 182.8 171.1 500.9 485.2
- ------------------------------------------------------------------------------------------------------
TOTAL REVENUES $3,422.0 $3,215.0 $9,864.2 $9,200.7
- ------------------------------------------------------------------------------------------------------
OPERATING INCOME
U.S. $ 389.6 $ 350.6 $1,132.8 $ 846.3/(2)/
Europe 324.8 303.7 881.1 806.1
Asia/Pacific 119.8 98.9 305.0 254.7
Latin America 36.5 46.4 94.1 124.5
Other 38.3 35.6 92.4 93.1
- ------------------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME* $ 909.0 $ 835.2 $2,505.4 $2,124.7
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Corporate selling, general & administrative expenses (costs related to home
office support of the Company's global business) were allocated to the
various geographic segments, beginning in 1999. Prior year amounts have been
restated to conform to this presentation.
(1) Total revenues exclude $22.2 million for the third quarter and nine months
ended September 30, 1999 related to Other Brands. Total Operating Income
excludes a $1.3 million operating loss during the third quarter 1999 and a
$2.6 million operating loss for the nine months ended September 30, 1999
related to Other Brands.
(2) Includes the $160 million special charge related to the home office
productivity initiative recorded in the second quarter 1998.
7
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
- -----------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except Quarter ended Nine months ended
per common share data September 30, 1999 September 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------
% Increase/
% Increase/ (Decrease)
------------------------
Amount (Decrease) Amount Reported Adjusted/(1)/
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SYSTEMWIDE SALES $9,997.8 8% $28,741.0 8% 8%
- -----------------------------------------------------------------------------------------------------------------------------
REVENUES
Sales by Company-operated restaurants 2,474.4 7 7,087.6 8 8
Revenues from franchised and affiliated restaurants 969.8 7 2,798.8 7 7
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 3,444.2 7 9,886.4 7 7
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Company-operated restaurants 2,015.6 8 5,818.8 8 8
Franchised restaurants - occupancy costs 186.8 9 546.0 10 10
Selling, general, and administrative expenses 368.0 3 1,073.4 1 1
Other operating (income) expense (40.9) N/M (71.9) N/M N/M
Made for You costs 7.0 N/M 17.3 N/M N/M
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 2,536.5 7 7,383.6 4 7
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 907.7 9 2,502.8 18 10
- -----------------------------------------------------------------------------------------------------------------------------
Interest expense 95.4 (7) 298.1 (4) (4)
Nonoperating (income) expense 12.0 N/M 30.9 N/M N/M
- -----------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 800.3 12 2,173.8 21 11
- -----------------------------------------------------------------------------------------------------------------------------
Provision for income taxes 259.4 10 712.1 21 11
- -----------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 540.9 12% $ 1,461.7 22% 11%
=============================================================================================================================
NET INCOME PER COMMON SHARE $ 0.40 14% $ 1.08 23% 13%
NET INCOME PER COMMON SHARE-DILUTED 0.39 15 1.04 22 12
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
N/M Not meaningful
(1) Excluding the second quarter 1998 $160 million special charge ($110 million
after tax or $.08 per share) related to the home office productivity
initiative.
CONSOLIDATED OPERATING RESULTS
Net Income and Net Income per Common Share - Diluted
Net income and diluted net income per common share increased 12 and 15
percent for the quarter, respectively (14 and 15 percent in constant
currencies). For the nine months, net income increased 11 percent and diluted
net income per common share increased 12 percent (13 percent for both in
constant currencies), excluding the $160 million second quarter 1998 special
charge related to the home office productivity initiative ($110 million after
tax or $.08 per diluted share). Information in constant currencies excludes the
effect of foreign currency translation on reported results. Including the second
quarter 1998 special charge, both reported net income and diluted net income per
common share increased 22 percent for the nine months.
Weighted average shares outstanding for the third quarter and the nine months
were lower compared with the prior year, due to the Company's share repurchase
program. During the first nine months of 1999, the Company repurchased 17.5
million shares of its common stock for approximately $654.0 million, under its
three-year, $3.5 billion program, which is scheduled to be completed by the end
of 2001. Since the beginning of the program in fourth quarter 1998, the Company
has repurchased 27.7 million shares for approximately $973.5 million through
September 30, 1999.
8
<PAGE>
OPERATING RESULTS
McDonald's operates primarily in the quick-service hamburger restaurant
business, which we refer to as "Brand McDonald's". The Company also operates
other branded restaurants: Donatos Pizza, Chipotle Mexican Grill and Aroma Cafe.
Collectively these three businesses are referred to as "Other Brands". For the
quarter and nine months ended September 30, 1999, Brand McDonald's comprised
virtually all of consolidated operating results.
The following discussion includes only Brand McDonald's. Refer to the table
on page twelve for summarized financial information of our Other Brands.
Systemwide Sales and Revenues
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 for the quarter and
nine months were due to expansion and positive comparable sales. Foreign
currency translation had no impact on the total Systemwide sales growth rate for
either the quarter or the nine months. However, it had a negative impact on the
growth rate in revenues for both periods, primarily because the stronger
Japanese Yen had a greater positive currency translation effect on sales. This
is due to our affiliate structure in Japan. Under this structure, we record a
service fee in revenues based on a percentage of Japan's sales, whereas 100
percent of its sales are included in Systemwide sales. On a constant currency
basis, revenues increased at a higher rate than sales in both periods due to the
higher unit growth rate of Company-operated restaurants outside the U.S.
relative to Systemwide restaurants.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Systemwide sales -
Brand McDonald's
Dollars in millions 1999 1998 Increase/(Decrease)
- ----------------------------------------------------------------------------------------------------------------------
As In Constant
Reported Currencies*
- ----------------------------------------------------------------------------------------------------------------------
Quarters ended September 30
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. $ 4,870.8 $ 4,600.9 6% n/a
- ----------------------------------------------------------------------------------------------------------------------
Europe 2,458.1 2,349.4 5 10%
- ----------------------------------------------------------------------------------------------------------------------
Asia/Pacific 1,725.1 1,416.0 22 6
- ----------------------------------------------------------------------------------------------------------------------
Latin America 431.9 445.8 (3) 19
- ----------------------------------------------------------------------------------------------------------------------
Other 475.6 434.1 10 9
- ----------------------------------------------------------------------------------------------------------------------
Total Systemwide sales $ 9,961.5 $ 9,246.2 8% 8%
- ----------------------------------------------------------------------------------------------------------------------
Nine months ended September 30
- ----------------------------------------------------------------------------------------------------------------------
U.S. $14,324.0 $13,639.7 5% n/a
- ----------------------------------------------------------------------------------------------------------------------
Europe 7,107.2 6,481.4 10 12%
- ----------------------------------------------------------------------------------------------------------------------
Asia/Pacific 4,738.7 4,046.9 17 7
- ----------------------------------------------------------------------------------------------------------------------
Latin America 1,227.6 1,276.6 (4) 17
- ----------------------------------------------------------------------------------------------------------------------
Other 1,297.4 1,218.9 6 9
- ----------------------------------------------------------------------------------------------------------------------
Total Systemwide sales $28,694.9 $26,663.5 8% 8%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
n/a Not applicable
U.S. sales increased due to positive comparable sales and restaurant
expansion for the quarter and the nine months. Successful promotions such as
Furby, Teenie Beanie Babies, Winnie the Pooh, Tarzan and Inspector Gadget,
combined with local market initiatives, such as our breakfast bagel sandwich
launch in over 50 percent of the U.S. restaurants, contributed to the sales
increases.
In Europe, positive comparable sales and expansion drove the constant
currency sales increases for the quarter and the nine months. Strong
performances in France, Germany, Italy, Spain, and the U.K. drove these
increases in both periods.
9
<PAGE>
In Asia/Pacific, the constant currency sales increases were driven by
expansion, partly offset by negative comparable sales for the quarter and nine
months. Expansion in Japan, as well as positive comparable sales in Australia
and South Korea, contributed to the segment's sales increases in both periods.
In Latin America, positive comparable sales and expansion drove the constant
currency sales increase for the quarter. The results for the nine months were
driven by expansion, partly offset by negative comparable sales. Brazil
contributed to the increases due to expansion for both periods and positive
comparable sales for the quarter. Both periods benefited from continued positive
comparable sales in Mexico and Venezuela.
<TABLE>
<CAPTION>
Combined Operating Margins
- ---------------------------------------------------------------------------------------------------------------
Combined operating margins - Quarters ended Nine months ended
Brand McDonald's September 30 September 30
-------------------------- ----------------------------
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dollars in millions
- ---------------------------------------------------------------------------------------------------------------
Company-operated $ 455.3 $ 437.5 $1,265.3 $1,215.1
- ---------------------------------------------------------------------------------------------------------------
Franchised 782.7 737.3 2,252.5 2,113.7
- ---------------------------------------------------------------------------------------------------------------
Combined operating margins $1,238.0 $1,174.8 $3,517.8 $3,328.8
- ---------------------------------------------------------------------------------------------------------------
Percent of sales/revenues
- ---------------------------------------------------------------------------------------------------------------
Company-operated 18.6% 19.0% 17.9% 18.4%
- ---------------------------------------------------------------------------------------------------------------
Franchised 80.7 81.1 80.5 81.0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Combined operating margin dollars increased $63 million, or five percent for
the quarter and $189 million, or six percent for the nine months. These
increases were primarily driven by expansion and positive comparable sales.
Company-operated margins as a percent of sales decreased for both periods.
Food & paper costs as a percent of sales increased for the quarter and were flat
for the nine months. Payroll costs increased as a percent of sales for both
periods, while occupancy & other expenses as a percent of sales were flat for
the quarter and increased for the nine months.
As a percent of sales, U.S. Company-operated margins decreased for the
quarter and increased for the nine months. Food & paper costs as a percent of
sales decreased for both periods, while payroll costs increased for both
periods. Occupancy & other operating expenses increased for the quarter and were
flat for the nine months.
Outside the U.S., Company-operated margins decreased as a percent of sales
for the quarter and nine months. As a percent of sales, food & paper and payroll
costs increased for the quarter and nine months, while occupancy & other
operating expenses were flat for the quarter and increased for the nine months.
Economic difficulties in Brazil and Russia negatively impacted the Company-
operated margin percent outside the U.S., accounting for about 70 percent of the
decline for both periods.
Franchised margin dollars comprised more than 60 percent of the combined
operating margins for both periods, the same as in the prior year. Franchised
margin dollars increased six percent for the quarter and seven percent for the
nine months, while franchised margins as a percent of applicable revenues
decreased for the quarter and the nine months.
As a percent of revenues, U.S. franchised margins increased for the quarter
and the nine months, primarily due to positive comparable sales growth. Higher
occupancy costs and the consolidation, for financial reporting purposes, of
Sweden in 1999 negatively affected the franchised margin percent outside the
U.S. in both periods.
Selling, General & Administrative Expenses
Selling, general & administrative expenses increased two percent for the
quarter and were flat for the nine months. In the U.S., selling, general &
administrative expenses decreased for both periods due to savings as a result of
the home office productivity initiative. This decrease was less in the quarter
than for the nine months since the productivity initiative savings were realized
beginning in third quarter 1998 and due to an increase in performance based
incentive compensation in third quarter 1999. Outside the U.S., selling, general
& administrative expenses increased at a rate substantially less than the sales
growth rates for both periods. The consolidation, for financial reporting
purposes, of Sweden in 1999 and spending to support restaurant development
primarily drove the increases. As a result of the home office 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 annual savings expected to be realized in 1999. About $15 million of these
savings were realized in 1998.
10
<PAGE>
<TABLE>
<CAPTION>
Other Operating (Income) Expense
- -------------------------------------------------------------------------------------------------------------------------
Other operating (income) expense - Quarters ended Nine months ended
Brand McDonald's September 30 September 30
------------------------ --------------------------
Dollars in millions 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gains on sales of restaurant businesses $(16.2) $(10.5) $ (38.6) $(32.5)
- -------------------------------------------------------------------------------------------------------------------------
Equity in earnings of unconsolidated affiliates (36.5) (31.5) (111.7) (65.9)
- -------------------------------------------------------------------------------------------------------------------------
Other (income) expense 9.8 12.5 75.1 60.5
- ------------------------------------------------------------------------------------------------------------------------
Other operating (income) expense $(42.9) $(29.5) $ (75.2) $(37.9)
- ------------------------------------------------------------------------------------------------------------------------
Made for You costs $ 7.0 $ 10.6 $ 17.3 $ 15.6
- ------------------------------------------------------------------------------------------------------------------------
Special charge - - - $160.0
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Other operating (income) expense consists of transactions related to
franchising and the food service business. The increase for the nine months in
equity in earnings of unconsolidated affiliates was primarily due to a second
quarter gain from the sale of real estate in a U.S. partnership. Results in
Japan, which benefited from a lower effective tax rate and the stronger Japanese
Yen, also contributed to the increases for both periods. Costs associated with
implementation of the Made for You food preparation system related primarily to
accelerated depreciation on equipment being replaced in U.S. Company-operated
restaurants. The special charge in the second quarter 1998 reflected employee
severance and outplacement, consolidation of facilities and other costs in
connection with the home office productivity initiative.
Operating Income
Operating income increased $74 million, or nine percent for the quarter, and
$221 million, or ten percent for the nine months, excluding the second quarter
1998 special charge. For both periods, these increases were primarily driven by
higher combined operating margin dollars and higher other operating income,
partly offset by weaker foreign currencies.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Operating income - 1999 1998 Increase/(Decrease)
Brand McDonald's (1)
- -------------------------------------------------------------------------------------------------------------
Dollars in millions As In Constant
Reported Currencies*
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Quarters ended September 30
- -------------------------------------------------------------------------------------------------------------
U.S. $ 389.6 $ 350.6 11% n/a
- -------------------------------------------------------------------------------------------------------------
Europe 324.8 303.7 7 12%
- -------------------------------------------------------------------------------------------------------------
Asia/Pacific 119.8 98.9 21 9
- -------------------------------------------------------------------------------------------------------------
Latin America 36.5 46.4 (21) 1
- -------------------------------------------------------------------------------------------------------------
Other 38.3 35.6 8 7
- -------------------------------------------------------------------------------------------------------------
Total operating income $ 909.0 $ 835.2 9% 11%
- -------------------------------------------------------------------------------------------------------------
Nine months ended September 30
- -------------------------------------------------------------------------------------------------------------
U.S. (2) $1,132.8 $ 846.3 34% n/a
- -------------------------------------------------------------------------------------------------------------
Europe 881.1 806.1 9 12%
- -------------------------------------------------------------------------------------------------------------
Asia/Pacific 305.0 254.7 20 12
- -------------------------------------------------------------------------------------------------------------
Latin America 94.1 124.5 (24) (4)
- -------------------------------------------------------------------------------------------------------------
Other 92.4 93.1 (1) 1
- -------------------------------------------------------------------------------------------------------------
Total operating income (2) $2,505.4 $2,124.7 18 19
- -------------------------------------------------------------------------------------------------------------
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
(1) For financial reporting purposes, Corporate selling, general &
administrative expenses (costs related to home office support of the
Company's global business) were allocated to the various geographic
segments, beginning in 1999. Prior year amounts have been restated to
conform to this presentation.
(2) Excluding the second quarter 1998 $160 million special charge related to the
home office productivity initiative, U.S. operating income increased 13% and
total operating income increased 10%, 11% in constant currencies.
n/a Not applicable
U.S. operating income increased $39 million, or 11 percent for the quarter
and increased $127 million, or 13 percent for the nine months, excluding the
second quarter 1998 special charge. The increases in both periods were driven by
higher combined operating margin dollars, higher other operating income and
lower selling, general & administrative expenses.
11
<PAGE>
Europe's operating income increased 12 percent for both the quarter and nine
months in constant currencies. The strong results in France, Germany, Italy,
Spain and the U.K. drove this segment's performance in both periods.
Additionally, Europe's operating income benefited from the consolidation of
Sweden, due to an increase in ownership, but was dampened by the difficult
economic conditions in Russia, which began in September 1998. Excluding Russia,
Europe's constant currency operating income increased 15 percent for the quarter
and 16 percent for the nine months.
Operating income in Asia/Pacific increased nine percent for the quarter and
12 percent for the nine months in constant currencies, despite Japan's economic
weakness and difficult comparisons with strong third quarter 1998 price-value
promotions. For the quarter, the increase was primarily due to strong results in
Australia and improved results in China, and for the nine months the increase
was primarily due to Japan, which benefited from a lower effective tax rate. In
both periods, improved results in several Southeast Asia markets contributed to
the increases.
The late September earthquake in Taiwan will likely temper fourth quarter
results for Asia/Pacific, due primarily to its temporary negative impact on
consumer spending patterns.
Latin America's operating income increased one percent for the quarter and
decreased four percent for the nine months in constant currencies. Difficult
economic conditions in Brazil and other parts of the region, along with Brazil's
currency devaluation, had a significant adverse effect on this segment's
operating results. We are cautiously optimistic that improvements in the
Brazilian economy and actions we have taken will continue to improve operating
results as we move forward. Mexico and Venezuela contributed positively to this
segment's performance with strong results in both periods.
Summary of Operating Results by Brand
The following table summarizes key operating results of Brand McDonald's and
our Other Brands.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Summary of Operating Results by Brand
- --------------------------------------------------------------------------------------------------------------------------
Dollars in millions Brand Other
McDonald's Brands Consolidated
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Quarter ended September 30, 1999
- --------------------------------------------------------------------------------------------------------------------------
Systemwide sales $ 9,961.5 $36.3 $ 9,997.8
- --------------------------------------------------------------------------------------------------------------------------
Revenues 3,422.0 22.2 3,444.2
- --------------------------------------------------------------------------------------------------------------------------
Combined operating margins 1,238.0 3.8 1,241.8
- --------------------------------------------------------------------------------------------------------------------------
Selling, general & administrative expenses 364.9 3.1 368.0
- --------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 909.0 $(1.3) $ 907.7
- --------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 1999
- --------------------------------------------------------------------------------------------------------------------------
Systemwide sales $28,694.9 $46.1 $28,741.0
- --------------------------------------------------------------------------------------------------------------------------
Revenues 9,864.2 22.2 9,886.4
- --------------------------------------------------------------------------------------------------------------------------
Combined operating margins 3,517.8 3.8 3,521.6
- --------------------------------------------------------------------------------------------------------------------------
Selling, general & administrative expenses 1,070.3 3.1 1,073.4
- --------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 2,505.4 $(2.6) $ 2,502.8
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest and Nonoperating Expense and Income Taxes
Lower interest expense in both periods reflected lower average interest rates
and weaker foreign currencies, partly offset by higher debt levels.
Nonoperating (income) expense reflected lower translation losses for the
quarter compared with 1998, and higher translation losses for the nine months.
The effective income tax rate was 32.4 percent for the quarter and 32.8
percent for the nine months of 1999 compared with 32.8 percent for the quarter
and 32.9 percent for the nine months of 1998.
12
<PAGE>
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 primary currencies positively affecting reported results in both periods
were the Australian Dollar, the Japanese Yen and the Southeast Asian currencies.
The Brazilian Real, the British Pound, and the Euro, which encompasses 11 of our
European markets including Germany and France, had a negative effect on reported
results in both periods.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Effect of foreign currency translation on Increase
worldwide reported results - Consolidated Over Prior Period
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per As In Constant As In Constant
common share data Reported Currencies* Change Reported Currencies*
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quarter ended September 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Systemwide sales $ 9,997.8 $ 9,994.0 $ (3.8) 8% 8%
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenues 3,444.2 3,532.1 87.9 7 10
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income 907.7 922.9 15.2 9 11
- ---------------------------------------------------------------------------------------------------------------------------------
Net income 540.9 550.7 9.8 12 14
- ---------------------------------------------------------------------------------------------------------------------------------
Net income per common share -
diluted .39 .39 - 15 15
- ---------------------------------------------------------------------------------------------------------------------------------
Nine months ended September 30, 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Systemwide sales $28,741.0 $28,783.1 $ 42.1 8% 8%
- ---------------------------------------------------------------------------------------------------------------------------------
Total revenues 9,886.4 10,091.4 205.0 7 10
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income (1) 2,502.8 2,530.9 28.1 10 11
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (1) 1,461.7 1,481.7 20.0 11 13
- ---------------------------------------------------------------------------------------------------------------------------------
Net income per common share -
diluted (1) 1.04 1.05 .01 12 13
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
(1) The percentage increase over the prior period excludes the second quarter
1998 $160 million special charge ($110 million after tax or $.08 per diluted
share) related to the home office productivity initiative.
MADE FOR YOU SYSTEM
In 1998, the Company announced the introduction of Made for You, a new food
preparation system that is expected to be installed in virtually all restaurants
in the U.S. and Canada by the end of 1999. Over 12,000 restaurants, including
all Canadian and about 90 percent of U.S. restaurants, are currently using the
new system. Through advances in equipment and technology, the new system allows
us to serve fresher, better-tasting food at the speed of McDonald's. The system
also supports future growth through product development because it can more
easily accommodate an expanded menu. The Company is providing financial
incentives of up to $12,500 per restaurant to owner/operators to defray the cost
of equipment made obsolete as a result of converting to the new system. The
Company is also making additional payments in special cases where the conversion
to Made for You is more extensive.
In 1999, the Company expects to incur about $30 million related to the
implementation of Made for You, consisting of about $15 million of incentive
payments and $15 million of accelerated depreciation on equipment being replaced
in Company-operated restaurants. The Company incurred $7.0 million in the third
quarter and $17.3 million for the nine months. The Company expects to use cash
provided by operations to fund the financial incentive payments provided to
owner/operators.
SPECIAL CHARGE
In the second quarter 1998, the Company recorded a $160 million pre-tax
special charge related to the results of the Company's home office productivity
initiative. The Company's home office productivity plan is designed to improve
staff alignment, focus and productivity and reduce ongoing selling, general and
administrative expenses. As a result of this initiative, the Company has reduced
home office staffing by approximately 525 positions, is consolidating certain
home office facilities and has reduced other expenditures in a variety of areas.
The $160 million charge was primarily comprised of costs associated with
employee severance and outplacement and with the facilities consolidation. The
Company expects to use cash provided by operations to fund the remaining
severance payments and other cash costs related to the productivity initiative.
13
<PAGE>
FINANCIAL POSITION
Free cash flow - cash provided by operations less capital expenditures - for
the nine months ended September 30, 1999 increased $480.1 million to $1,127.4
million. Together with other sources of cash such as borrowings, free cash flow
was used primarily for share repurchases, debt repayments, and dividends. The
consolidated capital expenditure decrease of 8% for the nine months ended
September 30, 1999 was primarily due to fewer restaurant additions, weaker
foreign currencies and the continued focus on more efficient capital deployment.
The Company expects to add about 1,750 restaurants this year, with about 90
percent in locations outside the U.S.
NEW ACCOUNTING STANDARD - FINANCIAL INSTRUMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, subsequently
amended by Statement No. 137, which is required to be adopted in years beginning
after June 15, 2000. The Statement will require the Company to recognize all
derivatives on the balance sheet at fair value. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged item,
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The Company expects to adopt the new Statement
effective January 1, 2001. Management does not anticipate that the adoption will
have a significant effect on the Company's results of operations or financial
position.
YEAR 2000
The Company assessed its computerized systems to determine their ability to
correctly identify the Year 2000 and has devoted the necessary internal and
external resources to replace, upgrade or modify all of its significant systems
which did not correctly identify the Year 2000. All necessary modifications,
testing and replacements of significant systems have been completed.
In addition, the Company has assessed the extent to which its operations may
be affected by the compliance efforts of its significant suppliers and
owner/operators and is taking the necessary steps to minimize potential
problems. The Company has implemented a Systemwide supply chain compliance
monitoring program, which encompasses supplier risk assessment and compliance
validation for significant suppliers. The assessment and compliance validation
process has been completed for all key U.S. and global suppliers as well as
significant local suppliers in many of the Company's international markets. In
addition, the Company has communicated the business risks associated with the
Year 2000 to its owner/operators and is providing technical support to assist
them in determining and resolving any Year 2000 issues experienced.
Management does not expect Year 2000 issues relating to internal systems, its
owner/operators or suppliers to pose significant operational or financial
difficulties for the Company; however, in the unlikely event McDonald's, a
significant number of its owner/operators or key suppliers are unable to resolve
their issues in a timely manner, such matters could have a material impact on
the Company's results of operations. In addition, failures related to Year 2000
issues by providers of infrastructure services could have a material adverse
effect on results of operations. Possible consequences include delays in the
delivery of products to restaurants and temporary isolated restaurant closures.
Contingency plans continue to be developed, to the extent feasible, to
address Year 2000 issues that might arise at the Company, with its
owner/operators, within the supply chain or by infrastructure service providers.
The plans include certain suppliers maintaining an increased inventory of
critical products and equipment, developing alternative methods of
transportation to deliver products to the restaurants, establishing back-up cash
management procedures and increasing restaurant support. In addition, the
Company has established a global crisis management process to ensure the rapid
response to, and resolution of any unforeseen Year 2000 problems that may occur.
The Company has also put a technology freeze in place, whereby no new systems or
enhancements to existing systems are being implemented, from October 1, 1999
through February 15, 2000 to minimize the risk of unplanned disruptions to
critical year-end processes.
Modification and testing costs are expensed as incurred, while the costs of
new systems are capitalized. The Company expects its total Year 2000 costs to be
about $80 million, of which $78 million was spent through September 30, 1999,
including $25 million of capitalized costs related to new systems. The total
Year 2000 costs have not and are not expected to have a material adverse impact
on the Company's financial position, results of operations or cash flows.
All Year 2000 statements contained herein are designated as "Year 2000
Readiness Disclosures" pursuant to the Year 2000 Information and Readiness
Disclosure Act of 1998.
14
<PAGE>
EURO CONVERSION
On January 1, 1999, 11 member countries of the European Union established
fixed conversion rates between their existing currencies ("legacy currencies")
and one common currency, the Euro. The Euro is now trading on currency exchanges
and may be used in certain transactions such as electronic payments. Beginning
in January 2002, new Euro-denominated notes and coins will be issued, and legacy
currencies will be withdrawn from circulation. The conversion to the Euro has
eliminated currency exchange rate risk for transactions between the member
countries, which for the Company, primarily consist of payments to suppliers. In
addition, since the Company uses foreign-denominated debt and derivatives to
meet its financing requirements and to minimize its foreign currency risks,
certain of these financial instruments are now being denominated in Euros.
The Company has restaurants located in all member countries and has been
preparing for the introduction of the Euro for the past several years. The
Company is currently addressing the issues involved with the new currency, which
include converting information technology systems, recalculating currency risk,
recalibrating derivatives and other financial instruments and revising processes
for preparing accounting and taxation records. Based on the work to date, the
Company does not believe the Euro conversion will have a significant impact on
the Company's financial position, results of operations or cash flows.
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 effectiveness of operating initiatives, advertising and
promotional efforts, and Year 2000 compliance and Euro conversion efforts of the
Company, its owner/operators, suppliers and service providers, as well as
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.
15
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
THIRD QUARTER AND NINE MONTHS HIGHLIGHTS
- -----------------------------------------------------------------------------------------------
FINANCIAL INFORMATION - BRAND McDONALD'S
Quarters ended Nine months ended
September 30 September 30
Dollars in millions 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Systemwide sales by type
Operated by franchisees $6,154.6 $5,740.4 $17,853.1 $16,602.0
Operated by the Company 2,452.5 2,305.7 7,065.7 6,590.4
Operated by affiliates 1,354.4 1,200.1 3,776.1 3,471.1
- -----------------------------------------------------------------------------------------------
Systemwide sales 9,961.5 9,246.2 28,694.9 26,663.5
- -----------------------------------------------------------------------------------------------
Restaurant margins
Company-operated
----------------
U.S. 17.2% 17.5% 17.8% 17.7%
Outside the U.S. 19.2% 19.6% 18.0% 18.8%
Franchised
----------
U.S. 81.2% 80.9% 81.3% 81.2%
Outside the U.S. 80.1% 81.3% 79.4% 80.6%
- -----------------------------------------------------------------------------------------------
<CAPTION>
RESTAURANTS - BRAND McDONALD'S
- ------------------------------------------------------------------------------------------
At September 30, 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
By type
Operated by franchisees 15,713 14,932
Operated by the Company 5,909 5,350
Operated by affiliates 4,137 3,847
- ------------------------------------------------------------------------------------------
Systemwide restaurants 25,759 24,129
- ------------------------------------------------------------------------------------------
<CAPTION>
Quarters ended Nine months ended
September 30 September 30
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Additions
U.S. 39 18 57 44
Europe 131 124 268 314
Asia/Pacific 138 142 344 410
Latin America 66 97 215 166
Other 44 22 75 63
- ------------------------------------------------------------------------------------------
Systemwide additions 418 403 959 997
- ------------------------------------------------------------------------------------------
<CAPTION>
RESTAURANTS - OTHER BRANDS
- ------------------------------------------------------------------------------------------
At September 30, 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Donatos Pizza 147 *
Chipotle Mexican Grill 29 16
Aroma Cafe 19 *
- ------------------------------------------------------------------------------------------
TOTAL OTHER BRANDS 195 16
- ------------------------------------------------------------------------------------------
</TABLE>
*Business acquired in 1999.
16
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There are no material changes to the disclosure made in the Annual Report on
Form 10-K for the year ended December 31, 1998 regarding this matter.
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 July 8, 1998, incorporated herein by reference
from Form 10-Q for the quarter ended June 30, 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.
(ii) 5.90% REset Put Securities due 2011. Supplemental Indenture
No. 2 dated as of May 11, 1998, incorporated herein by
reference from Exhibit 4(a) of Form 8-K dated May 6, 1998.
(iii) 6% REset Put Securities due 2012. Supplemental Indenture
No. 3 dated as of June 23, 1998, incorporated herein by
reference from Exhibit 4(a) of Form 8-K dated June 18,
1998.
(iv) Medium-Term Notes, Series F, due from 1 year to 60 years
from the Date of Issue. Supplemental Indenture No. 4
incorporated herein by reference from Exhibit (4) (c) of
Form S-3 Registration Statement (File No. 333-59145), dated
July 15, 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.
17
<PAGE>
Exhibit Number Description
- -------------- -----------
(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.
(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) 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.
(vii) 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.
(viii) 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.
(ix) 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.
(x) 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) Indenture and Supplemental Indenture No. 1 dated as of September
8, 1989, between McDonald's Matching and Deferred Stock Ownership
Trust, McDonald's Corporation and Pittsburgh National Bank in
connection with SEC Registration Statement Nos. 33-28684 and
33-28684-01, incorporated herein by reference from Exhibit (4)(a)
of Form 8-K dated September 14, 1989.
(e) Form of Supplemental Indenture No. 2 dated as of April 1, 1991,
supplemental to the Indenture between McDonald's Matching and
Deferred Stock Ownership Trust, McDonald's Corporation and
Pittsburgh National Bank in connection with SEC Registration
Statement Nos. 33-28684 and 33-28684-01, incorporated herein by
reference from Exhibit (4)(c) of Form 8-K dated March 22, 1991.
(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.*
(b) Profit Sharing Program, as amended and restated, incorporated by
reference from Form 10-K for the year ended December 31, 1998.*
(i) First amendment to the McDonald's Profit Sharing Program
filed herewith.*
(c) McDonald's Supplemental Employee Benefit Equalization Plan,
McDonald's Profit Sharing Program Equalization Plan and
McDonald's 1989 Equalization Plan, as amended and restated,
incorporated herein by reference from Form 10-K for the year
ended December 31, 1995.*
(d) 1975 Stock Ownership Option Plan, as amended and restated,
incorporated by reference from Form 10-Q for the quarter ended
June 30, 1999.*
18
<PAGE>
(e) 1992 Stock Ownership Incentive Plan, as amended and restated,
incorporated by reference from Form 10-Q for the quarter ended
June 30, 1999.*
(f) McDonald's Corporation Deferred Income Plan, as amended and
restated, filed herewith.*
(g) 1999 Non-Employee Director Stock Option Plan, incorporated by
reference from Form 10-Q for the quarter ended June 30, 1999.*
(h) Executive Retention Plan, incorporated by reference from Form
10-K for the year ended December 31, 1998.*
(12) Statement re: Computation of Ratios
(27) Financial Data Schedule
(99) Press Release dated November 2, 1999 -- McDonald's Corporation's 1999
Biennial Analyst Meeting Highlights
_______________________
* 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 through November 10, 1999.
Financial Statements
Date of Report Item Number Required to be Filed
-------------- ----------- --------------------
9/29/99 Item 7 No
10/21/99 Item 7 No
19
<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 /s/ Michael L. Conley
---------------------
(Signature)
Michael L. Conley
Executive Vice President,
Chief Financial Officer
November 10, 1999
- -----------------
20
<PAGE>
Exhibit 10(b)(i)
FIRST AMENDMENT
TO
THE McDONALD'S PROFIT SHARING PROGRAM
The McDonald's Profit Sharing Program (the "Program") as amended and
restated effective January 1, 1997, is hereby amended effective September 1,
1999, except as otherwise specifically provided herein.
I
Section 1.2(a) up to the beginning of paragraph (1) is amended to read as
follows:
(a) for the purpose of receiving an allocation of Profit Sharing
Contributions pursuant to Section 7.1 for a Plan Year, a Participant
who is not an Employee of McG Restaurant Operations, Inc.; and
II
Section 1.2(b) up to the beginning of paragraph (1) is amended to read as
follows:
(b) for the purpose of being eligible to share in allocations of
Company Stock released from a LESOP Suspense Account for a Plan Year,
in accordance with Section 6.3(a) and of Additional LESOP
Contributions for a Plan Year, a Participant who is a staff or an
executive employee or a store manager and who is not an Employee of
McG Restaurant Operations, Inc.; and
III
Section 1.22 shall be amended to read as follows:
1.22 "Employee" means any person who is employed by the Company
--------
or another Employer (as that entity is defined for the Profit Sharing
Plan portion, the McDESOP portion or the LESOP portion of the Program
or as defined for any designated types of contributions with respect
to such contributions or to such portions of the Program with respect
to which the term Employee is being used) including a person on an
Authorized Leave of Absence. Such term does not include a consultant,
an independent contractor or a Leased Employee. A consultant, an
independent contractor or a Leased Employee shall not become an
Employee because of being reclassified as an employee of McDonald's or
another Employer by the Internal Revenue Service, except prospectively
from the date on which such reclassification occurs.
IV
Section 1.23 shall be amended by adding the following at the flush left
margin at the end thereof:
Notwithstanding the foregoing, McG Restaurant Operations, Inc.
shall be an Employer solely for the purpose of permitting its
Employees who are Active Participants to make Participant Elected
Contributions pursuant to Sections 4.3(a) and 5.1 of the Program and
to receive LESOP Employer Matching Contributions as provided in
Section 4.1(b), LESOP Employer Matching Allocations as provided in
Section 7.3(a)(2) and Special Section 401(k) Contributions as provided
in Section 4.3(b).
V
A new Section 1.31(b)(6) shall be added to Section 1.31(b) at the end
thereof:
(6) Each individual who became an Employee of McG Restaurant
Operations, Inc., McDonald's Corporation or a Commonly Controlled
Entity on July 30, 1999, as a result of the acquisition of Donatos,
Inc. shall be credited under the Program on September 1, 1999, with
their service with Donatos since January 1, 1998. An Employee shall
receive Hours of Service credit for service with Donatos for periods
after December 31, 1997 and before July 31, 1999. In determining the
Hours of Service to be credited to employees who receive credit for
Hours of Service as a result of the
<PAGE>
acquisition of Donatos, the Plan Administrator shall rely on
available information and, as necessary, shall make good faith
estimates based upon available information and records.
VI
Section 1.33 shall be amended (i) to delete the word, "and" following
(a)(4) and (ii) to insert the phrase, "and (6) the S & P 500 Fund" after the
phrase "(5) the Blended Stock Bond Fund,".
VII
Section 1.43(a) is hereby amended to read as follows:
(a) "Participant Elected Matched Contributions," which means the
portion of Participant Elected Contributions for a Plan Year with
respect to which the Company pursuant to Section 4.3(a) makes Employer
Matching Contributions or LESOP Employer Matching Contributions or
with respect to which LESOP Employer Matching Allocations are made
pursuant to Section 7.3(a)(2).
VIII
Section 4.3(a) shall be amended to add the following at the left flush
margin after paragraph (3):
Notwithstanding the foregoing provisions of Section 4.3(a), all
Participants who are Employees of McG Restaurant Operations, Inc.
shall be permitted to make Participant Elected Matched Contributions
in the amount provided in paragraph (3).
IX
Section 7.3(a) is amended to read as follows:
(a) LESOP Contributions. Any shares of Company Stock purchased
-------------------
with the proceeds of a loan (or Company Stock into which such shares
have been converted) designated by the Board of Directors to be repaid
by Compensation Based LESOP Contributions (or a loan refinanced by
such loan) and released from the LESOP Suspense Accounts maintained
with respect to such loan, any income from such LESOP Suspense
Accounts maintained with respect to such loan, any income from such
LESOP Suspense Accounts released pursuant to Section 6.2 and 6.3, and
any Forfeitures from LESOP Accounts for the Plan Year shall be
allocated to each Active Participant's LESOP Account or Employer
Matching Contribution Account, as follows:
(1) as of each Valuation Date, in an amount, if any,
with respect to each loan equal to the amount of dividends
paid with respect to Company Stock (or Company Stock into
which such shares have been converted) which was purchased
with the proceeds of such a loan (or a loan refinanced by
such loan) and which has been allocated to the Participant's
Accounts (other than his Employer Matching Contribution
Account), which dividends, since the immediately preceding
Valuation Date, were credited to the Participants' Accounts
and immediately transferred to the LESOP Suspense Account
pursuant to Section 10.13(b) to be used to make payments on
the loan;
(2) as of each Valuation Date occurring on or after
November 1, 1998, an amount equal to fifty percent (or such
greater amount as the Board of Directors shall determine) of
each Active Participant's Participant Elected Matched
Contributions since the immediately preceding Valuation Date,
as released from the LESOP Contribution Suspense Account
pursuant to Section 6.3(c) and as contributed by the
Employers pursuant to Section 4.1(b) which shall be credited
to such Participant's Employer Matching Contribution Account;
and
(3) as of the last Valuation Date of each Plan Year, in
an amount equal to the number of shares of Company Stock
released from the LESOP Contribution Suspense Account in
accordance with Section 6.3(a) (reduced by the amounts
released pursuant to Sections 6.3(b) and (c) and allocated
pursuant to Sections 7.3(a)(1) and (2)) multiplied by a
fraction the numerator of which is the Considered
Compensation of the Active Participant and the denominator of
which is the total of all Considered Compensation of all
Active Participants which shall be allocated to such
Participant's LESOP Account.
<PAGE>
X
Section 10.6(a) is hereby amended (i) to delete the word, "and", at the end
of paragraph (4) and (ii) to replace the period, ".", at the end of paragraph
(5) with, "and."
XI
A new paragraph (6) shall be added to Section 10.6(a) at the end thereof to
read as follows:
(6) The S & P 500 Fund invested in the stocks, futures contracts,
------------------
options, warrants, options on futures contracts, convertible
securities swap agreements, stock index futures contracts, repurchase
agreements and similar investments and which seeks to replicate the
return of the 500 stocks which comprise the Standard & Poor's 500
Composite Stock Price Index from time to time including to the extent
determined by the fund manager in securities of McDonald's Corporation
or its Domestic Affiliates. The fund may also engage in securities
lending.
XII
The last paragraph of 10.6(a) shall be amended to replace the phrase, "and
the Blended Stock Bond Fund," with the phrase, ",the Blended Stock Bond Fund
and the S & P 500 Fund".
XIII
The third paragraph of Section 10.8 shall be amended to add the phrase,
"the S & P 500 Fund" after the phrase, "the Blended Stock Bond Fund".
XIV
The last paragraph of Section 10.8 shall be amended to replace the phrase,
"10 percent (10%)" with the phrase, "5 percent (5%)"
XV
Effective as of the date that the administrative procedures and systems are
in place to permit its implementation, Section 10.10(a) shall be replaced by the
following:
(a) Age Diversification of LESOP Account Balances. Commencing
---------------------------------------------
with the first day of the month after a Participant attains the age of
50 and at the same times and subject to the same administrative
requirements as apply to Investment Elections under Section 10.8, each
such Participant shall be permitted to elect to diversify up to 100
percent of his LESOP Accounts ("LESOP Diversification Election").
LESOP Diversification Elections may also be made by the Beneficiary of
a deceased Participant who would have attained the age of 50 if he
were alive and by a Participant who has had a Termination of
Employment regardless of his age.
XVI
A new paragraph (e) shall be added to Section 10.10 at the end thereof:
(e) Required Diversification. If not already permitted pursuant
------------------------
to the foregoing provisions of this Section 10.10, each Participant
who has had at least 10 years of service under the Program and has
attained age 55 shall be permitted to elect to diversify any Accounts
to which Company Stock has been allocated pursuant to Section 6.3 of
the Program at the times and to the extent provided in Section
401(a)(28) of the Internal Revenue Code.
XVII
A new Section 13.18 shall be added to the Program to read as follows:
13.18 Year 2000 Program. Although the Company and the Committee
-----------------
have made all reasonable good faith efforts to assure that Year 2000
Problems do not interfere with the normal operations of the Program,
it is appropriate to adopt a provision which would permit the
temporary suspension of normal Program operations if unexpected Year
2000 Problems should occur. Notwithstanding any other provision of the
Program to the contrary, the Company or the
<PAGE>
Committee may take such actions it deems necessary or appropriate in
the event any Year 2000 Problem arises which affects the
administration of the Program (whether involving Systems in the use of
the Company or of other parties). If, due to a Year 2000 Problem,
Program administration is delayed beyond the times otherwise permitted
or required by the Program, the Program shall be deemed to permit such
delay until such time as is administratively practicable after the
Year 2000 Problem no longer adversely affects, impedes or delays
compliance with such provisions, including but not limited to the
implementation of Participant elections, the crediting of
contributions and earnings to Participants' Accounts, the making of
distributions to Participants, and any and all other actions dependent
upon the proper operation of Systems in a manner unaffected by the
Year 2000 Problem. For purposes hereof, "Year 2000 Problem" shall have
the broadest meaning necessary to effectuate the purposes of this
provision, but shall generally mean: (a) the inability of any computer
system, chip, hardware or software (the "Systems") to record, store,
process, sort, sequence, and present calendar dates following December
31, 1999, with the same accuracy and functionality as such calendar
dates on or before December 31, 1999; (b) the loss by such Systems of
functionality or a degradation in performance of any such Systems as a
result of such Systems operating at a date later than December 31,
1999; (c) the failure of any such Systems to accurately and
automatically process all leap year calendar dates, including February
29, 2000; (d) the failure of any such Systems to interface with other
computer systems, hardware, and software in a manner that will be
fully interoperable with such other computer systems, hardware, and
software on or after December 31, 1999 and (e) the inability to
complete software revisions affecting Program administration because
available resources are committed to fixing and testing systems for a
Year 2000 Problem.
XVIII
Except as amended herein, the Program shall remain in full force and
effect.
Executed in multiple originals this 1st day of September, 1999.
McDONALD'S CORPORATION
By: /s/ Michael L. Conley
----------------------
Its: Chief Financial Officer and Executive
Vice President
<PAGE>
Exhibit 10(f)
-------------
McDONALD'S CORPORATION
----------------------
DEFERRED INCOME PLAN
--------------------
(As Amended and Restated Effective as of September 1, 1999)
Section 1
---------
Introduction
------------
1.1 The Plan and Effective Date. The McDonald's Corporation Deferred
---------------------------
Income Plan, formerly known as the McDonald's Corporation Deferred Incentive
Plan, ("Plan") was established November 1, 1993. The Plan was amended and
restated effective September 1, 1994 and was subsequently amended by the first
amendment thereof effective as of February 1, 1996 and the second amendment
thereof effective as of August 15, 1996. The Plan was subsequently amended and
restated effective several times, including amendment and restatements effective
as of January 1, 1997, July 15, 1997, August 1, 1998 and December 1, 1998. The
"effective date" of the amendment and restatement of the Plan as set forth
herein is September 1, 1999 (unless otherwise indicated herein).
1.2 Purpose. McDonald's Corporation ("McDonald's" or the "Company") has
-------
established the Plan for its officers, regional managers, department directors
and certain expatriate international country heads to retain and attract highly
qualified personnel by offering the benefits of a non-qualified, unfunded plan
of deferred compensation. The Company may also allow other subsidiaries or
affiliates to adopt the Plan in accordance with Section 7.
1.3 Administration. The Plan shall be administered by the Compensation
--------------
Committee of the Board of Directors of the Company (the "Committee"). The
Committee shall have the powers set forth in the Plan and the power to interpret
its provisions. Any decisions of the Committee shall be final and binding on all
persons with regard to the Plan. The Committee may delegate its authority
hereunder to an officer or officers of the Company.
Section 2
---------
Participation and Deferral Elections
------------------------------------
2.1 Eligibility and Participation. Subject to the conditions and
-----------------------------
limitations of the Plan, all officers, regional managers and department
directors of the Company and international country heads who are on United
States payroll and who are identified as eligible by the Committee shall be
eligible to participate in the Plan ("Eligible Employees"). Notwithstanding the
foregoing, an individual who becomes employed in one of the positions listed in
the preceding sentence after the Due Date (as defined in Section 2.3(a)) shall
be eligible to participate in the Plan and become an Eligible Employee on the
first day of the month next following the date of such employment. Any Eligible
Employee who makes a Deferral Election as described in Section 2.2 below shall
become a participant in the Plan ("Participant") and shall remain a Participant
until the entire balance of the Participant's Deferral (defined in Section 4.1
below) is distributed.
2.2 Deferral Elections. Any Eligible Employee may make an election to
------------------
defer receipt of all or any portion of his or her incentive under the McDonald's
Target Incentive Plan ("TIP") for a calendar year. Subject to Section 2.3(b)
below, any Eligible Employee may also make an election to defer a percentage of
his or her base salary for the following calendar year in accordance with the
following schedule:
Category of Eligible Employee Maximum Deferral
-----------------------------
(or Equivalent Compensation Band) Percentage
--------------------------------- ----------
Highest paid five officers (ranked by the total of
base pay and the target incentive under TIP for the
current year) 90%
Executive Vice Presidents 80%
All other officers and regional managers 70%
Department Directors 60%
provided, however, that the committee of officers designated by the Committee to
administer the Plan (the "Officer Committee") may, in its discretion, grant
individual requests for higher deferral percentages of base salary and provided
further that the Officer Committee may, in its discretion, authorize Eligible
Employees to modify their deferral percentages of base salary as may be
necessary to reflect organizational, title or compensation band changes. Such
modification may be made only with respect to base salary earned and paid after
the effective date of the modification.
<PAGE>
If applicable, any Eligible Employee may also make an election to defer all or a
portion of his or her Three-Year Incentive award ("Three-Year Incentive") under
the 1992 Stock Ownership Incentive Plan for a calendar year.
Elections to defer TIP, base salary or Three-Year Incentive awards are referred
to herein as "Deferral Elections". Exit bonuses, severance bonuses or bonuses
paid under the Executive Retention Plan during a transition or retention period
may not be deferred under this Plan.
2.3 Rules for Deferral Elections. Deferral Elections shall be made in
----------------------------
accordance with the rules set forth below:
(a) All Deferral Elections must be in writing on such forms as the
Committee may prescribe and must be returned to the Committee no later
than the date specified by the Committee (the "Due Date"). In no event
will the Due Date be later than the end of the year that precedes the
year that the amount deferred would otherwise be made available to
such Eligible Employee.
(b) An individual shall be eligible to make a Deferral Election only if he
or she is an Eligible Employee on the Due Date. Notwithstanding the
foregoing, an individual who becomes an Eligible Employee after the
Due Date in accordance with Section 2.1 will be eligible to make a
base salary Deferral Election within 30 days after the date he or she
becomes an Eligible Employee. Such Deferral Elections shall become
effective as soon as administratively feasible after the Deferral
Election is made.
(c) If an Eligible Employee terminates employment in the same calendar
year in which he or she makes a Deferral Election, that Deferral
Election (and any Deferral Elections respecting future compensation in
years following the year of employment termination) will be null and
void and no deferral will be made. This provision will not apply to
any base salary Deferral Election made in accordance with Section
2.3(b) by an individual who becomes an Eligible Employee after the Due
Date.
(d) Amounts will be deferred to the "Payment Date" specified by the
Eligible Employee in the Deferral Election and payments will commence
within 30 days following the Payment Date in accordance with Section
5.1(b). The Payment Date specified must be no earlier than the March
31st of the calendar year following the year in which the deferred
amounts would otherwise have been paid and must be either a "Specific
Payment Date" or an "Employment Termination Payment Date" as follows:
(i) A "Specific Payment Date" is the 15th or last day of a specified
month (but not December 31) of a specified year.
(ii) An "Employment Termination Payment Date" is the March 31
following the year in which the Eligible Employee terminates
employment, unless the Eligible Employee elects a later
Employment Termination Date in accordance with Section 5.1(a).
If an Eligible Employee terminates employment and has one or more
Specific Payment Dates that would occur after the Employment
Termination Payment Date, all amounts deferred to those Specific
Payment Date(s) shall automatically be accelerated and payment will
commence in accordance with the Eligible Employee's Employment
Termination Payment Date election under Section 5.1(a). Participant
401(k) McDESOP Equalization Amounts and Company Profit Sharing
Equalization Credits described in Section 3 shall be deferred to the
Participant's Employment Termination Payment Date, even though a
Participant has elected a Specific Payment Date for the remainder of
his or her deferral.
(e) An Eligible Employee may revoke a Specific Payment Date and elect an
earlier or later Payment Date and may revoke an Employment Termination
Payment Date and elect an earlier Payment Date, subject to the
following rules:
(i) The election to revoke a Payment Date and elect a new Payment
Date must be made no later than the end of the calendar year
preceding the original designated Payment Date and must be made
at least six months prior to the original designated Payment
Date; and
(ii) Any new designated Payment Date must be in a calendar year
subsequent to the date of the election and must be at least six
months after the date of the election.
<PAGE>
Section 3
---------
Equalization for McDonald's Corporation Profit Sharing Program
--------------------------------------------------------------
3.1 Equalization to Adjust for Participant 401(k) McDESOP Contributions.
-------------------------------------------------------------------
Amounts deferred under this Plan are not considered compensation for the
McDonald's Corporation Profit Sharing Program (the "Profit Sharing Program") or
for the related non-qualified plans: the McDonald's 1989 Executive Compensation
Plan, the McDonald's Supplemental Employee Benefit Equalization Plan and the
McDonald's Profit Sharing Program Equalization Plan (the "McCAP/McEqual Plans").
The McDESOP portion of the Profit Sharing Program allows participants to
contribute a percentage of their compensation as Section 401(k) contributions.
Therefore, Eligible Employees who are Profit Sharing Program participants and
make Deferral Elections for base salary and TIP awards under this Plan shall
automatically have a portion of these deferred amounts set aside until the
Participant's Employment Termination Payment Date to adjust for the fact that
McDESOP Section 401(k) contributions cannot be made to the Profit Sharing
Program or the related non-qualified plans for these deferred amounts (the
"Participant 401(k) McDESOP Equalization Amount"). The Participant 401(k)
McDESOP Equalization Amount shall be based on the amount that would have been
contributed by the Participant under the McDESOP portion of the Profit Sharing
Program and the related non-qualified plans if the deferral of base salary and
TIP had not occurred. No Participant 401(k) McDESOP Equalization credit will be
made for deferrals of Three-Year Incentive awards under this Plan.
3.2 Company Profit Sharing Equalization Credits. Amounts deferred under
-------------------------------------------
this Plan are not considered as compensation under the Profit Sharing Program or
the McCAP/McEqual Plans. Therefore, base salary and TIP awards deferred under
this Plan shall be credited with an amount equal to the Company contribution
that the Participant would have received under the Profit Sharing Program and/or
McCAP/McEqual Plans if such deferral had not occurred ("Company Profit Sharing
Equalization Credit"). If a Participant is not eligible to participate in the
Profit Sharing Program or McCAP/McEqual Plans, or is not eligible to receive a
Company contribution under such plans with respect to a deferred amount, no
Company Profit Sharing Equalization Credit will be made. No Company Profit
Sharing Equalization Credit shall be made for Three-Year Incentive awards
deferred under this Plan.
3.3 Rules for Profit Sharing Equalization Amounts. Equalization amounts
---------------------------------------------
under Sections 3.1 and 3.2 above (collectively referred to as "Equalization
Amounts") shall be deferred until the Participant's Employment Termination
Payment Date and cannot be withdrawn under Section 5.3. Equalization Amounts
will become part of the Participant's Deferral Account and will be credited with
earnings as part of that Deferral Account as described in Section 4.1.
Section 4
---------
Deferral Accounts
-----------------
4.1 Deferral Accounts. A bookkeeping account shall be established in the
-----------------
Participant's name ("Deferral Account"). Each Participant's Deferral Account may
be further divided into:
(a) amounts deferred pursuant to that year's Deferral Election and
earnings thereon,
(b) Company Profit Sharing Equalization Credits associated with that
year's Deferral Election and earnings thereon; and
(c) Participant 401(k) McDESOP Equalization amounts associated with that
year's Deferral Election and earnings thereon.
The Committee may also authorize other divisions or subaccounts of the Deferral
Accounts as may be necessary to reflect the terms of the Plan as amended from
time to time.
Amounts deferred pursuant to a Deferral Election shall be credited to the
Deferral Account as of the date the Participant would otherwise have received
the deferred amounts in the absence of a Deferral Election. Any Equalization
Amounts shall be credited to the Deferral Account as of the date the amount
would have been allocated under the Profit Sharing Program or the McCAP/McEqual
Plans if the deferral had not occurred.
4.2 Investment Elections and Earnings Credits. Each Participant in the
-----------------------------------------
Plan shall make an investment election, as described below, and such election
shall apply to the entire amount credited to the Participant's Deferral under
the Plan. However, Section 16 Insiders, as defined in Section 5.5 of the Plan
may not make investment elections involving McDonald's Common Stock. (For
further details concerning these restrictions, see Section 5.5 of the Plan.)
<PAGE>
A Participant may change his investment election effective as of the first day
of any month. All investment elections shall be made by filing an investment
election form with the Committee at such time and in such manner as the
Committee may specify. If no new investment election is filed, the Participant's
Deferral Account will continue to be invested in accordance with his or her most
recent investment election.
Investment elections may be split between the rates of return equivalent to the
rates of return of the investment funds under the Profit Sharing Program in
increments of 5%, provided that the percentages specified must total 100%. As of
September 1, 1999, these equivalent rates of return are:
(a) a rate of return based upon the McDonald's Common Stock Fund under the
Profit Sharing Program, after adjustment for expenses ("McDonald's
Common Stock" equivalent);
(b) a rate of return based upon the Stable Value Fund under the Profit
Sharing Program, after adjustment for expenses ("Stable Value"
equivalent);
(c) a rate of return based upon the Diversified Stock Fund under the
Profit Sharing Program, after adjustment for expenses ("Diversified
Stock" equivalent);
(d) a rate of return based upon the Blended Stock/Bond Fund under the
Profit Sharing Program, after adjustment for expenses ("Blended
Stock/Bond" equivalent);
(e) a rate of return based upon the S&P 500 Index Fund under the Profit
Sharing Program, after adjustment for expenses ("S&P 500 Index"
equivalent); and
(f) a rate of return based upon the Money Market Fund under the Profit
Sharing Program, after adjustment for expenses ("Money Market"
equivalent).
The rate of return of any investment fund added to the Profit Sharing Program
shall automatically be added as an investment alternative under the Plan.
If a Participant fails to make an investment election, amounts shall be credited
with the same rate of return as amounts for which no investment election is
received under the Profit Sharing component of the McDonald's Corporation Profit
Sharing Program. (Currently, this is the Money Market equivalent rate of
return.) All investment elections will continue in effect for all Participants
until the Participant files a new investment election.
As of the 15th day (or if the 15th day of the month is not a business day, the
next previous business day) and the last business day of each calendar month, or
such additional dates as the Committee shall specify ("Valuation Date"), each
Deferral Account shall be credited with earnings, gains and losses equal to the
amount the Deferral Account would have earned, gained or lost, since the prior
Valuation Date if actually invested in the funds specified.
4.3 Vesting. A Participant shall be fully vested at all times in the
-------
balance of his or her Deferral Account.
Section 5
---------
Payment of Benefits
-------------------
5.1 Time and Method of Payment. Payments of a Participant's Deferral
--------------------------
Account shall be made to a Participant, or the Participant's beneficiary if the
Participant is deceased, in accordance with the rules set forth below:
(a) Time of Payment. Payment shall be made in accordance with the
---------------
applicable Specific Payment Date or Employment Termination Payment
Date. A Participant may elect an Employment Termination Payment Date
that is later than the March 31 following the year in which the
Participant terminates employment, which later date shall be either
the 15th or last date of any month (but not December 31) specified by
the Participant. Such election shall be made in writing in such form
as the Committee shall require, no later than December 31 of the year
in which the Participant terminates employment.
(b) Commencement of Payment. Payment to the Participant or the
-----------------------
Participant's beneficiary shall commence within 30 days following the
Payment Date.
<PAGE>
(c) Method of Payment. Payments to a Participant or Participant's
-----------------
beneficiary shall automatically be paid in a lump sum, unless the
Participant or the Participant's beneficiary elects one of the
following installment payment methods:
(i) In monthly, quarterly or annual installments over a period of up
to 25 years, as specified by the Participant or the
Participant's beneficiary. Installment payments shall be made in
substantially equal installments over the installment period
specified. Each installment payment shall be computed by
dividing the balance of the Deferral Account that is to be paid
in installments by the number of payments remaining in the
installment period.
(ii) In monthly, quarterly or annual installments of a dollar amount
specified by the Participant or the Participant's beneficiary.
(iii) In an initial partial lump sum payment with subsequent
installment payments. The lump sum payment and first installment
payment shall be distributed in a year specified by the
Participant or the Participant's beneficiary and subsequent
monthly, quarterly or annual installment payments shall be made
either over a period of years (as described in (i) above) or of
a specified dollar amount (as described in (ii) above), as
specified by the Participant or the Participant's beneficiary.
An installment distribution election under this Section 5.1(c) shall
be made in writing in such form as the Committee shall require on or
before the December 31 of the calendar year preceding the Payment
Date. Such installment distribution election shall apply to all
payments that commence on the same Payment Date. Once an installment
election is filed for a Payment Date, it cannot be revoked.
Installment payments shall commence within 30 days after the Payment
Date.
Notwithstanding the foregoing, Deferral Elections made in 1993 which specified a
five year installment payment shall be null and void, and shall be paid in a
lump sum, unless the Participant or the Participant's beneficiary files a
written installment election prior to December 31 of the calendar year preceding
the Payment Date.
5.2 Form of Payment. All payments shall be made in cash. However, a
---------------
Participant who has elected a McDonald's Common Stock based return may elect to
receive payment in the form of shares of McDonald's Common Stock by filing a
written request with the Committee prior to December 31 of the calendar year
preceding the Payment Date.
5.3 Early Withdrawals and Acceleration of Installment Payments. A
----------------------------------------------------------
Participant shall have the right to withdraw in cash any portion of the balance
of his or her Deferral Account (except for the Equalization Amounts of the
Participant's Deferral Account under Sections 4.1(b) and (c) and amounts which
were not withdrawable under the terms of the Plan prior to September 1, 1994) at
any time prior to the applicable Payment Date, subject to the Committee's
consent and a 10% forfeiture penalty on the amount requested. A Participant who
is receiving installment payments may accelerate payment of any unpaid amount,
subject to the Committee's consent and 10% forfeiture penalty on the amount
accelerated. The withdrawal or accelerated installment (reduced by the 10%
forfeiture penalty) shall be paid within 30 days of the Valuation Date next
following the date the election to withdraw or accelerate payments is approved
by the Committee. Withdrawals and accelerated installments shall be made first
from the earliest maturing Deferral Account and shall be taken pro rata from the
investment rate equivalents elected by the Participant. Withdrawals shall be
subject to such procedures as the Committee shall establish from time to time.
5.4 Withholding of Taxes. The Company shall withhold any applicable
--------------------
Federal, state or local income tax from payments due under the Plan in
accordance with such procedures as the Company may establish. Generally, any
Social Security taxes, including the Medicare portion of such taxes, shall be
withheld and paid at the time base salary payments or incentive payments under
TIP or the Three Year Incentive would otherwise have been paid to the
Participant. The Company shall also withhold any other employment taxes as
necessary to comply with applicable laws.
5.5 Limitations For Section 16 Insiders. A "Section 16 Insider" shall
-----------------------------------
include any Participant who has been deemed to be subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") by the Board of Directors
of the Company. Notwithstanding any provision of the Plan to the contrary, the
Deferral Account of each Section 16 Insider is subject to the following
limitations:
(a) An Eligible Employee who is a Section 16 Insider at the time he or she
makes a Deferral Election may elect a McDonald's Common Stock based
return and at the same time must also specify the Payment Date and
whether the payment will be in a lump sum or the specific installment
method that will apply. The election of a McDonald's Common Stock
based return is irrevocable and cannot be changed by an investment
election at a later date. A Participant who is a Section 16 Insider
may not make a withdrawal or accelerate installments
<PAGE>
under Section 5.3 of any Deferral Accounts that are credited with a
McDonald's Common Stock based return. Section 16 Insiders who elect a
McDonald's Common Stock based return and a form of payment will not be
able to change those elections, even if the Plan is amended at a later
date to provide increased flexibility.
(b) A Section 16 Insider who elects to invest in a McDonald's Common Stock
based return shall also elect, at the time the deferral is made,
whether the distribution will be paid in cash or in the form of
McDonald's Common Stock. This provision applies only to Deferral
Elections made on and after August 15, 1996. Amounts deferred under
all Deferral Elections made prior to August 15, 1996 will be paid in
cash. However, for these cash distributions only, to the extent that a
Section 16 Insider uses the cash distribution to purchase shares of
McDonald's Common Stock on the open market in one or more transactions
within seven months after the date such amounts are distributed, the
Company shall reimburse the Section 16 Insider for all reasonable
brokerage fees and other transaction costs incurred in connection with
such purchases upon presentation of satisfactory evidence thereof not
later than 60 days after the date of each transaction.
(c) If any Participant becomes a Section 16 Insider after making a
Deferral Election under the Plan, any Deferral Account that is being
credited with a McDonald's Common Stock based return shall
automatically be converted to any non-McDonald's Common Stock based
investment return specified by the Participant on an investment
election form as of the Valuation Date immediately preceding the date
the Participant is designated a Section 16 Insider by the Board of
Directors. This automatic change to non-McDonald's Common Stock based
returns will be made to preserve the Participant's right to make
investment choices for investment options that do not involve
McDonald's Common Stock, make early withdrawals and elect accelerated
installments under Section 5.3.
(d) Elections to invest in McDonald's Common Stock based returns can be
made by Section 16 Insiders only at the time the Deferral Election is
made. Investment elections which would result in a transfer into the
McDonald's Common Stock based return at a later date are not permitted
for Section 16 Insiders.
In addition, the Committee may take such other actions as are necessary so that
transactions by Section 16 Insiders do not result in liability under Section
16(b) of the Exchange Act.
5.6 Beneficiary. A Participant shall have the right to name a beneficiary
-----------
or beneficiaries who shall receive the balance of a Participant's Deferral
Account in the event of the Participant's death prior to the payment of his or
her entire Deferral Account. A beneficiary may include any person or persons or
an entity (ies) which is tax exempt under Section 501(c)(3) of the Internal
Revenue Code. If no beneficiary is named by a Participant or if he or she
survives all of the named beneficiaries, the Deferral Account shall be paid to
the same beneficiary or beneficiaries to which the Deferral Account would have
been paid if it were in the Participant's Profit Sharing Fund Account under the
Profit Sharing Program as of the date of the Participant's death. To be
effective, any beneficiary designation shall be filed in writing with the
Committee. A Participant may revoke an existing beneficiary designation by
filing another written beneficiary designation with the Committee. The latest
beneficiary designation received by the Committee shall be controlling.
A beneficiary designated by the Participant who has not yet received payment of
the entire benefit payable to him or her under the Plan shall have the right to
name a beneficiary or beneficiaries to receive the balance of such benefit in
the event of the beneficiary's death prior to the payment of the entire amount
of such benefit. Any such beneficiary designation shall be made in accordance
with the provisions of this Section 5.6.
Section 6
---------
Miscellaneous
-------------
6.1 Funding. Benefits payable under the Plan to any Participant 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 the Plan.
While the Company may, in the discretion of the Committee, make investments (a)
in shares of McDonald's Common Stock through open market purchases or (b) in
other investments in amounts equal or unequal to amounts payable hereunder, the
Company shall not be under any obligation to make such investments and any such
investment shall remain an asset of the Company subject to the claims of its
general creditors. Notwithstanding the foregoing, the Company may maintain one
or more trusts ("Trust") to hold assets to be used for payment of benefits under
the Plan. Any payments by a Trust of benefits provided to a Participant under
the Plan shall be considered payment by the Company and shall discharge the
Company of any further liability under the Plan for such payments.
<PAGE>
6.2 Account Statements. The Company shall provide Participants with
-------------------
statements of the balance of their Deferral Accounts under the Plan at least
annually. The Committee may, in their discretion, also issue statements as of
the March 31, June 30, September 30 and December 31 Valuation Dates, or as of
any other Valuation Date that the Committee deems appropriate.
6.3 Employment Rights. Establishment of the Plan shall not be construed to
-----------------
give any Eligible Employee the right to be retained in the Company's service or
to any benefits not specifically provided by the Plan.
6.4 Interests Not Transferable. Except as to withholding of any tax under
--------------------------
the laws of the United States or any state or locality and the provisions of
Section 5.6, no benefit payable at any time under the Plan shall be subject in
any manner to alienation, sale, transfer, assignment, pledge, attachment, or
other legal process, or encumbrance of any kind. Any attempt to alienate, sell,
transfer, assign, pledge or otherwise encumber any such benefits, whether
currently or thereafter payable, shall be void. No person shall, in any manner,
be liable for or subject to the debts or liabilities of any person entitled to
such benefits. If any person shall attempt to, or shall alienate, sell,
transfer, assign, pledge or otherwise encumber benefits under the Plan, or if by
any reason of the Participant's bankruptcy or other event happening at any time,
such benefits would devolve upon any other person or would not be enjoyed by the
person entitled thereto under the Plan, then the Company, in its discretion, may
terminate the interest in any such benefits of the person entitled thereto under
the Plan and hold or apply them to or for the benefit of such person entitled
thereto under the Plan or such individual's spouse, children or other
dependents, or any of them, in such manner as the Company may deem proper.
6.5 Forfeitures and Unclaimed Amounts. Unclaimed amounts shall consist of
---------------------------------
the amount of the Deferral Account of a Participant that cannot be distributed
because of the Committee's inability, after a reasonable search, to locate a
Participant or the Participant's beneficiary, as applicable, within a period of
two (2) years after the Payment Date upon which the payment of benefits become
due. Unclaimed amounts shall be forfeited at the end of such two-year period.
Penalties charged for withdrawals under Section 5.3 shall also be forfeited in
the year in which the penalty is charged. These forfeitures will reduce the
obligations of the Company under the Plan. After an unclaimed amount has been
forfeited, the Participant or beneficiary, as applicable, shall have no further
right to the Participant's Deferral Account.
6.6 Controlling Law. The law of Illinois, except its law with respect to
---------------
choice of law, shall be controlling in all matters relating to the Plan to the
extent not preempted by ERISA.
6.7 Action by the Company. Except as otherwise specifically provided
---------------------
herein, any action required of or permitted by the Company under the Plan shall
be by resolution of the Board of Directors of the Company or by action of any
member of the Committee or person(s) authorized by resolution of the Board of
Directors of the Company.
Section 7
---------
Employer Participation
----------------------
7.1 Adoption of Plan. Any subsidiary or affiliate of the Company
----------------
("Employer") may, with the approval of the Committee and under such terms and
conditions as the Committee may prescribe, adopt the corresponding portions of
the Plan by resolution of its board of directors. The Committee may amend the
Plan as necessary or desirable to reflect the adoption of the Plan by an
Employer, provided however, that an adopting Employer shall not have the
authority to amend or terminate the Plan under Section 8.
7.2 Withdrawal from the Plan by Employer. Any such Employer shall have the
------------------------------------
right, at any time, upon the approval of and under such conditions as may be
provided by the Committee, to withdraw from the Plan by delivering to the
Committee written notice of its election so to withdraw. Upon receipt of such
notice by the Committee, the portion of the Deferral Accounts of Participants
and beneficiaries attributable to credits made while the Participants were
employees of such withdrawing Employer, plus any net earnings, gains and losses
on such credits, shall be distributed from the Trust at the direction of the
Committee in cash at such time or times as the Committee, in its sole
discretion, may deem to be in the best interest of such employees and their
beneficiaries. To the extent the amounts held in the Trust for the benefit of
such Participants and beneficiaries are not sufficient to satisfy the Employer's
obligation to such Participants and their beneficiaries accrued on account of
their employment with the Employer, the remaining amount necessary to satisfy
such obligation shall be an obligation of the Employer, and the Company shall
have no further obligation to such Participants and beneficiaries with respect
to such amounts.
<PAGE>
Section 8
---------
Amendment and Termination
-------------------------
The Company intends the Plan to be permanent, but reserves the right at any time
by action of its Board of Directors or the Committee to modify, amend or
terminate the Plan, provided however, that any amendment or termination of the
Plan shall not reduce or eliminate any Deferral Account accrued through the date
of such amendment or termination. The Committee shall provide notice of
amendments adopted by the Committee to the Board of Directors of the Company on
a timely basis.
Executed in multiple originals this 17th day of September, 1999.
McDONALD'S CORPORATION
/s/ John P. Anderson
-----------------------
By: John P. Anderson
Title: Vice President
<PAGE>
Exhibit 12
McDONALD'S CORPORATION
STATEMENT RE: COMPUTATION OF RATIOS
Dollars In Millions
<TABLE>
<CAPTION>
Nine months
ended September 30, Years ended December 31,
1999 1998 1998 1997 1996 1995 1994
----------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
- - Income before provision for income taxes $2,173.8 $1,791.3/(1)/ $2,307.4/(2)/ $2,407.3 $2,251.0 $2,169.1 $1,886.6
- - 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 19.9 11.3 23.7 28.3 39.6 19.6 6.6
- - Provision for income taxes of 50% owned
affiliates included in consolidated income
before provision for income taxes 42.2 87.0 99.9 69.0 73.2 73.3 34.9
- - Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* 131.4 125.4 161.3 145.9 130.9 103.8 83.4
- - Interest expense, amortization of debt
discount and issuance costs, and
depreciation of capitalized interest* 327.0 350.9 461.9 424.8 392.2 388.8 346.0
----------------------- ----------------------------------------------------
$2,694.3 $2,365.9 $3,054.2 $3,075.3 $2,886.9 $2,754.6 $2,357.5
======================= ====================================================
FIXED CHARGES
- - Portion of rent charges (after reduction
for rental income from subleased
properties) considered to be representative
of interest factors* $ 131.4 $ 125.4 $ 161.3 $ 145.9 $ 130.9 $ 103.8 $ 83.4
- - Interest expense, amortization of debt
discount and issuance costs, and fixed
charges related to redeemable preferred
stock* 320.5 342.1 453.4 426.1 410.4 403.4 343.9
- - Capitalized interest* 10.5 13.6 18.3 23.7 23.5 22.8 21.0
----------------------- ----------------------------------------------------
$ 462.4 $ 481.1 $ 633.0 $ 595.7 $ 564.8 $ 530.0 $ 448.3
======================= ====================================================
RATIO OF EARNINGS TO FIXED CHARGES 5.83 4.92/(3)/ 4.82/(4)/ 5.16 5.11 5.20 5.26
======================= ====================================================
</TABLE>
* Includes amounts of the Registrant and its majority-owned subsidiaries, and
one-half of the amounts of 50%-owned affiliates.
(1) Includes $160.0 million pre-tax special charge related to the home office
productivity initiative recorded during second quarter of 1998.
(2) Includes $160.0 million pre-tax special charge and $161.6 million of Made
for You costs for a pre-tax total of $321.6 million.
(3) Excluding the special charge, the ratio of earnings to fixed charges for
the nine months ended September 30, 1998 was 5.25.
(4) Excluding the special charge and Made for You costs, the ratio of earnings
to fixed charges for the year ended December 31, 1998 was 5.33.
<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 September 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 425
<SECURITIES> 0
<RECEIVABLES> 608
<ALLOWANCES> 0
<INVENTORY> 76
<CURRENT-ASSETS> 1,394
<PP&E> 22,215
<DEPRECIATION> 6,075
<TOTAL-ASSETS> 20,467
<CURRENT-LIABILITIES> 2,355
<BONDS> 6,289
0
0
<COMMON> 17
<OTHER-SE> 15,400
<TOTAL-LIABILITY-AND-EQUITY> 20,467
<SALES> 7,088
<TOTAL-REVENUES> 9,886
<CGS> 5,819
<TOTAL-COSTS> 6,365
<OTHER-EXPENSES> (55)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 298
<INCOME-PRETAX> 2,174
<INCOME-TAX> 712
<INCOME-CONTINUING> 1,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,462
<EPS-BASIC> 1.08
<EPS-DILUTED> 1.04
</TABLE>
<PAGE>
Exhibit 99
Investor Release
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
- --------------------- -----------------------------
11/02/99 Investors: Mary Kay Shaw, 630-623-7559
Media: Chuck Ebeling, 630-623-6150
MCDONALD'S CORPORATION'S 1999 BIENNIAL ANALYST MEETING HIGHLIGHTS
OAK BROOK, IL - At McDonald's meeting today with 150 representatives of the
investment community, Chairman and Chief Executive Officer Jack M. Greenberg
noted, "In 1997, we set expectations for the business, and I am pleased that we
exceeded many of those expectations. Most notably, we have had tremendous
success in turning around the U.S. business."
He also reiterated the company's expectation for double-digit annual earnings
per share growth in the range of 10 to 15 percent through 2002, excluding the
effect of foreign currency translation. This growth will be fueled by building
sales at existing restaurants, through increased customer satisfaction and menu
innovation, and by profitable expansion.
The company is giving customers more reasons to visit McDonald's now and in the
future by leveraging its Made for You food preparation system along with its
reinvigorated new product development capability. The first priority in this
area is enhancing the core U.S. menu to ensure existing products are the best
they can be.
With virtually all U.S. restaurants on the Made for You food preparation system
by year-end, the company plans to complete the replacement of the Deluxe Line in
the U.S. next year. McDonald's began to replace the Deluxe Line in 1998 with the
introduction of the larger Filet-O-Fish sandwich. By mid-2000, the McDonald's
Big Xtra! sandwich, which is currently in almost 50 percent of the U.S.
restaurants, as well as the new Grilled and Crispy Chicken sandwiches will be
national products.
Plans for next year include adding 1,800 to 1,900 restaurants Systemwide, with
about 90 percent outside the U.S.
When discussing the company's global growth opportunities, Greenberg pointed to
McDonald's vision of being the world's best quick-service restaurant experience.
He also discussed the System's focus on three key strategies: building the
McDonald's brand; intense attention to people and their development; and driving
enduring, profitable growth through innovation and technology.
Greenberg also told investors that "McDonald's is committed to keeping selling,
general and administrative expenses growing at a slower rate than sales and
revenues; to completing our current $3.5 billion share repurchase program on, or
possibly ahead of, schedule; and to enhancing return on capital."
McDonald's is the largest and best-known food service retailer, with more than
25,000 restaurants serving more than 40 million people a day in 117 countries.
On any day, even as the market leader, McDonald's serves less than one percent
of the world's population.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this release. 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 effectiveness of operating initiatives, advertising and
promotional efforts, and Year 2000 compliance and Euro conversion efforts of the
Company, its owner/operators, suppliers and service providers, as well as
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.
