SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 26, 1999
McDONALD'S CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware 1-5231 36-2361282
(State of Incorporation) (Commission File No.) (IRS Employer
Identification No.)
One McDonald's Plaza
Oak Brook, Illinois 60523
(630) 623-3000
(Address and Phone Number of Principal Executive Offices)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
-------------------------------------------------------------------------
(c) Exhibit
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(99) McDonald's Announces Strong Global Results, 2-for-1 Stock Split
and Dividend Increase
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McDONALD'S CORPORATION
(Registrant)
By: /s/ Gloria Santona
--------------------------------------
Gloria Santona
Vice President, Deputy General Counsel
and Secretary
EXHIBIT 99
Investor Release
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
01/26/99 Investors: Mary Healy, 630-623-6429
Media: Chuck Ebeling, 630-623-6150
McDONALD'S ANNOUNCES STRONG GLOBAL RESULTS,
2-FOR-1 STOCK SPLIT AND DIVIDEND INCREASE
OAK BROOK, IL - McDonald's reported strong global results with diluted
net income per common share increasing 10 percent for the year and for
the quarter, excluding Made For You costs and the second quarter special
charge. On a constant currency basis, these increases were 13 percent
and 10 percent for the year and quarter, respectively. McDonald's also
announced a two-for-one stock split and cash dividend increase. Today's
announcements reflect McDonald's 12th stock split since the Company went
public in 1965 and the 25th increase since the first dividend was
declared in 1976. The stock split will be effected in the form of a
stock dividend and is payable on March 5, 1999 to shareholders of record
on February 12. The quarterly cash dividend was increased eight percent
to 4 7/8 cents per share on a post-split basis, and is payable on March
31, 1999 to shareholders of record on March 15.
The following highlights exclude Made For You costs and the special
charge related to the home office productivity initiative.
- Diluted net income per common share increased 13 percent for the year
and 10 percent for the quarter in constant currencies.
- U.S. operating income was up 13 percent for the year; 11 percent for
the quarter.
- In constant currencies, operating income in the fourth quarter
increased 24 percent in Latin America, 14 percent in Asia/Pacific and
12 percent in Europe.
- Systemwide sales increased 10 percent in constant currencies for the
year.
- The Company purchased nearly $1.2 billion of common stock during the
year.
All information in constant currencies excludes the effect of foreign
currency translation on reported results, except for hyperinflationary
economies, such as Russia, whose functional currency is the U.S. dollar.
Throughout this report unless otherwise noted, per share amounts have not
been adjusted to reflect the upcoming stock split.
Key highlights excluding Made For You
costs and special charge 1998 1997 Increase
Dollars in millions, except As In Constant
per common share data Reported Currencies*
Quarters ended December 31 (1)
Systemwide sales $9,316.0 $8,530.4 9% 9%
Total revenues 3,220.7 2,952.6 9 10
Operating income 783.2 695.2 13 12
Net income 447.1 410.9 9 10
Net income per common
share - diluted .64 .58 10 10
Years ended December 31 (2)
Systemwide sales $35,979.5 $33,638.3 7% 10%
Total revenues 12,421.4 11,408.8 9 12
Operating income 3,083.5 2,808.3 10 12
Net income 1,769.2 1,642.5 8 10
Net income per common
share - diluted 2.52 2.29 10 13
*Excluding the effect of foreign currency translation on reported results
(1) Excluding $146.0 million of Made For You costs ($98.6 million after
tax or $.14 per diluted share) in 1998
(2) Excluding $161.6 million of Made For You costs and $160.0 million
special charge related to home office productivity initiative for a total
of $321.6 million ($219.1 million after tax or $.31 per diluted share) in
1998
Key highlights including Made For You
costs and special charge 1998 1997 Increase/(Decrease)
Dollars in millions, except per As In Constant
common share data Reported Currencies*
Quarters ended December 31
Operating income $637.2 $695.2 (8)% (9)%
Net income 348.5 410.9 (15) (14)
Net income per common
share - diluted .50 .58 (14) (14)
Years ended December 31
Operating income $2,761.9 $2,808.3 (2)% 1%
Net income 1,550.1 1,642.5 (6) (3)
Net income per common
share - diluted 2.21 2.29 (3) (1)
*Excluding the effect of foreign currency translation on reported results
SUMMARY COMMENTARY
President and Chief Executive Officer Jack M. Greenberg commented, "I'm
delighted to report McDonald's outstanding 1998 performance. By focusing on
strategic priorities and by building on our heritage of dynamic people and
innovation, we extended our considerable lead internationally and achieved a
remarkable turnaround in our U.S. business. This performance was rewarded
with a 61 percent increase in the Company's stock price. We are proud to
share our success with investors by splitting our common stock and
increasing the dividend.
"The stock split announced today reflects our confidence in the
business as well as our desire to continue to position McDonald's as an
attractive investment for individual investors - customers, employees,
franchisees and suppliers.
"Our 1998 U.S. performance exceeded our expectations. We are seeing
results from our strategies of delivering operational excellence,
providing our customers with the best value in the business and
motivating our owner/operators and employees as they drive customer
satisfaction.
"Our international business overcame tough challenges this year, and
reported strong results once again. McDonald's is the value leader in
virtually every market and customer demand for the McDonald's experience
remains strong.
"We continue to focus on managing our capital outlays more
effectively and increasing returns. We added 1,668 restaurants in 1998,
reflecting our strategic, more selective expansion strategy. Our plans
for 1999 include adding about 1,750 restaurants worldwide.
"We expect free cash flow to continue to grow as capital
expenditures level off and cash from operations continues to increase.
We will use this free cash flow for share repurchase, thus enhancing
returns to shareholders. Last September, we announced a $3.5 billion
share repurchase program, an amount 75 percent larger than McDonald's
previous program that was completed in 1998."
Jim Cantalupo, Vice Chairman McDonald's Corporation, Chairman and
Chief Executive Officer - McDonald's International said, "I am extremely
pleased with the quality of international results, especially in light of
the economic turmoil in certain areas of the world. I'm proud of the
international team's efforts which resulted in an increase in combined
operating margins on a constant currency basis of $296 million or 14
percent for the year and $69 million or 12 percent for the fourth
quarter. This performance was led by Europe.
"McDonald's diverse revenue and operating income mix allows us
to weather regional economic issues better than most other
companies. We have a strong presence in every one of the 114
countries in which we do business. And our global infrastructure
provides a competitive advantage that is extremely difficult to
replicate. We will continue our focus on value and profitable
expansion to help us widen the gap against our competition. Long
term, we have enormous opportunity to build our already substantial
sales, profits and returns in the international marketplace."
Alan D. Feldman, President _ McDonald's U.S.A. said, "I'm excited
about the momentum and results of the U.S. business in 1998 and I'm
confident that we can continue to build on this momentum. Strong
comparable sales and lower selling, general & administrative expenses
contributed to the terrific operating income increase and a noticeable
improvement in return on assets. Owner/operator cash flow was up
significantly for the year; average sales for new restaurants have
increased; and McDonald's market share of the U.S. hamburger segment grew
to its highest level this decade.
"The strong support of our new Made For You food preparation system by
our owner/operators verifies the effectiveness and consumer power of this
system. About 92 percent of our owner/operators have committed to the
implementation of Made For You in their restaurants. As a result, during
the fourth quarter, McDonald's made a significant amount of incentive
payments to owner/operators. We are happy to support this system which
provides customers with hotter, fresher food, reduces restaurant operating
costs and strategically supports our efforts to optimize food taste and
accommodate more menu variety.
"Today about 2,400 restaurants are using the Made For You system in
the U.S. and we expect to have virtually all U.S. restaurants using Made
For You by the end of this year."
CONSOLIDATED OPERATING RESULTS
Made For You Costs and Special Charge
During the fourth quarter, the Company incurred $146.0 million in costs
associated with Made For You, which consisted primarily of incentive
payments made to owner/operators to defray the cost of equipment made
obsolete as a result of conversion to the new system. For the year, Made
For You costs totaled $161.6 million. In addition, during the second
quarter the Company recorded a $160.0 million special charge related to
the home office productivity initiative, primarily comprised of costs
associated with employee severance and with the consolidation of office
facilities. For the quarter, the after tax amount related to Made For
You was $98.6 million, or $0.14 per diluted share. For the year, Made
For You costs and the special charge totaled $219.1 million after tax, or
$0.31 per diluted share.
Net Income and Net Income per Common Share
Excluding Made For You costs and the second quarter special charge,
net income and diluted net income per common share increased nine and ten
percent for the quarter, and eight and ten percent for the year,
respectively. Foreign currency translation significantly reduced
reported results for the first nine months of 1998; however, the effect
was minimal in the fourth quarter. Excluding the foreign currency
translation effect, Made For You costs and the second quarter special
charge, net income would have increased ten percent for the quarter and
the year while diluted net income per common share would have increased
ten percent for the quarter and 13 percent for the year. Reported net
income and diluted net income per common share, including Made For You
costs and the second quarter special charge, decreased 15 and 14 percent
for the quarter and six and three percent for the year.
The spreads between the percent change in diluted net income per
common share compared with net income resulted from fewer shares
outstanding and the absence of preferred dividends in 1998, due to the
retirement of our remaining Series E Preferred Stock in December 1997.
During the year, the Company repurchased 19.0 million shares of its
common stock, for approximately $1.2 billion. Of this amount, 5.1
million shares for $319.5 million were purchased as part of our new $3.5
billion share repurchase program.
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 year were due to expansion and positive comparable sales
trends. Weaker foreign currencies negatively affected sales for the year
and revenues for both periods.
Revenues increased at a faster rate than sales for the year. This
was primarily due to the weakened Japanese Yen, which had a greater
negative effect on sales than revenues due to our affiliate structure in
Japan, and the higher growth rate in the number of Company-operated
versus franchised restaurants. For the quarter, revenues increased at
the same rate as sales, as the Japanese Yen strengthened and offset the
effect of the higher growth rate in Company-operated versus franchised
restaurants.
Systemwide sales 1998 1997 Increase/(Decrease)
Dollars in millions As In Constant
Reported Currencies*
Quarters ended December 31
U.S. $4,483.5 $4,273.5 5% n/a
Europe 2,427.7 2,071.1 17 13%
Asia/Pacific 1,532.5 1,369.2 12 13
Latin America 484.2 430.4 13 19
Other 388.1 386.2 - 9
Total Systemwide sales $9,316.0 $8,530.4 9% 9%
Years ended December 31
U.S. $18,123.2 $17,124.7 6% n/a
Europe 8,909.1 7,835.6 14 15%
Asia/Pacific 5,579.4 5,616.0 (1) 12
Latin America 1,760.8 1,510.9 17 22
Other 1,607.0 1,551.1 4 10
Total Systemwide sales $35,979.5 $33,638.3 7% 10%
*Excluding the effect of foreign currency translation on reported results
n/a Not applicable
U.S. sales increased due to positive comparable sales trends and
restaurant expansion in both periods. Successful Monopoly, Teenie Beanie
Baby, Big Mac and Disney promotions, combined with local market
initiatives, contributed to the sales increase for the year.
In Europe, expansion and positive comparable sales trends drove
constant currency sales increases in both periods. England, France,
Germany, Italy and Spain were the primary contributors to the strong
sales performance in both periods. Difficult economic conditions in
Russia dampened sales performance.
In Asia/Pacific, expansion and positive comparable sales drove the
constant currency sales increase for the quarter. For the year, the
increase driven by expansion was partly offset by negative comparable
sales. Japan was the primary contributor to the increase in both periods
despite experiencing its weakest economy in decades. Australia showed
significant improvement in sales growth for the quarter. Difficult
economic conditions in Southeast Asia continued to negatively impact
consumer spending.
In Latin America, constant currency sales increases for both periods
were driven primarily by expansion. Comparable sales trends were flat
for the quarter and positive for the year. Argentina, Brazil, Mexico and
Venezuela drove the increases in sales for both periods.
Combined Operating Margins
Combined operating margins Quarters ended Years ended
December 31 December 31
1998 1997 1998 1997
Dollars in millions
Company-operated $ 418.2 $ 384.4 $1,633.3 $1,486.9
Franchised 734.8 681.3 2,848.5 2,658.4
Combined
operating margins $1,153.0 $1,065.7 $4,481.8 $4,145.3
Percent of sales/revenues
Company-operated 18.1% 18.2% 18.4% 18.3%
Franchised 80.2 80.9 80.8 81.2
Company-operated margins as a percent of sales decreased slightly
for the quarter and increased slightly for the year. Food & paper costs
decreased as a percent of sales for both periods while payroll costs
increased for the quarter and were flat for the year. Occupancy & other
expenses as a percent of sales decreased for the quarter and increased
for the year.
As a percent of sales, U.S. Company-operated margins decreased for
the quarter and increased for the year, reflecting lower food & paper
costs and higher payroll costs as a percent of sales. Occupancy & other
operating expenses were flat for both periods, as a percent of sales.
As a percent of sales, Company-operated margins outside the U.S.
were flat for the quarter and decreased slightly for the year. For both
periods, food & paper costs were flat as a percent of sales. Payroll
costs increased for the quarter and were flat for the year as a percent
of sales, while occupancy & other operating expenses decreased for the
quarter and increased for the year.
Franchised margin dollars comprised more than 60 percent of the
combined operating margins, the same as in the prior year. While
franchised margins as a percent of applicable revenues decreased for both
periods, franchised margin dollars increased eight percent for the
quarter and seven percent for the year.
As a percent of revenues, U.S. franchised margins decreased for the
quarter and the year, reflecting higher occupancy costs, driven by an
increase in the number of leased sites. Higher occupancy costs and the
consolidation of several affiliate markets negatively affected franchised
margins outside the U.S. for both periods.
Selling, General & Administrative Expenses
Selling, general & administrative expenses were relatively flat for
the quarter and for the year. In the U.S., selling, general &
administrative expenses decreased for both periods primarily due to lower
advertising costs, partially offset by higher performance based incentive
compensation. Outside the U.S., selling, general & administrative
expenses increased for both periods, primarily driven by spending to
support restaurant development and to a lesser extent, from the
consolidation of several affiliate markets. 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 savings expected to be realized by
year end. About $15 million of these savings were realized in 1998.
Other Operating (Income) Expense - Net
Other operating (income) expense-net Quarters ended Years ended
December 31 December 31
Dollars in millions 1998 1997 1998 1997
Gains on sales of
restaurant businesses $(28.2) $(21.9) $(60.7) $(59.0)
Equity in earnings of
Unconsolidated Affiliates (22.8) (13.3) (88.7) (72.8)
Other (income) expense 28.7 11.9 89.2 18.3
Other operating (income)
expense-net $ 22.3) $(23.3) $(60.2) $(113.5)
Special charge - - $160.0 -
Made For You costs $146.0 - $161.6 -
Other operating (income) expense-net consists of transactions
related to franchising and the food service business. Equity in earnings
of unconsolidated affiliates increased for the quarter and year,
primarily due to strong performances in Japan and the U.S., and
strengthening foreign currencies. Other expenses increased primarily due
to higher provisions for property dispositions reflecting the increased
number of restaurant closings in 1998. The special charge recorded in
the second quarter related to the Company's home office productivity
initiative and was primarily comprised of costs associated with employee
severance and with the consolidation of office facilities. The Made For
You costs included incentive payments made to owner/operators as well as
accelerated depreciation on equipment to be replaced in Company-operated
restaurants. The Company expects the total costs related to the
implementation of Made For You to be approximately $190 million, the
remainder of which will be incurred by year end.
Operating Income
Operating income excluding Made For You costs and special charge
Dollars in millions 1998 1997 Increase/(Decrease)
As In Constant
Reported Currencies*
Quarters ended December 31
U.S. $316.5 $286.0 11% n/a
Europe 316.6 270.9 17 12%
Asia/Pacific 91.3 81.9 11 14
Latin America 57.6 49.1 17 24
Other 23.2 23.7 (2) 7
Corporate SG&A (22.0) (16.4) 34 n/a
Total operating income $783.2 $695.2 13% 12%
Years ended December 31
U.S. $1,365.5 $1,210.8 13% n/a
Europe 1,139.8 1,007.2 13 14%
Asia/Pacific 351.4 369.1 (5) 8
Latin America 184.7 166.5 11 18
Other 118.2 116.3 2 8
Corporate SG&A (76.1) (61.6) 24 n/a
Total operating income $3,083.5 $2,808.3 10% 12%
*Excluding the effect of foreign currency translation on reported results
n/a Not applicable
Excluding Made For You costs and the second quarter special charge,
constant currency consolidated operating income increased $84 million for
the quarter and $347 million for the year, or 12 percent for both
periods. For the quarter and the year, consolidated operating income
reflected higher combined operating margin dollars, partially offset by
lower other operating (income) expense-net. Selling, general &
administrative expenses were relatively flat for both periods. Including
Made For You costs and the second quarter special charge, reported
consolidated operating income decreased $58 million or eight percent for
the quarter and $46 million or two percent for the year.
U.S. operating income, excluding Made For You costs and the second
quarter special charge, increased $30 million or 11 percent for the
quarter and $155 million or 13 percent for the year. The increases were
driven by higher combined operating margin dollars and lower selling,
general & administrative expenses, partially offset by lower other
operating (income) expense-net. Including Made For You costs and the
second quarter special charge, U.S. operating income decreased $116
million or 40 percent for the quarter and $167 million or 14 percent for
the year.
Europe's operating income increased 12 percent for the quarter and
14 percent for the year in constant currencies. This performance was
primarily due to strong results in England, France, Germany, Italy and
Spain. The region's results were dampened in both periods due to the
difficult economic conditions in Russia.
Asia/Pacific's operating income increased 14 percent for the quarter
and eight percent for the year in constant currencies. The region's
results were driven primarily by Japan for both periods and by Australia
and Hong Kong for the quarter. The segment's operating income in both
periods benefited from the consolidation of several of our affiliate
markets. Economic difficulties in Southeast Asia negatively affected
results.
Latin America's operating income increased 24 percent for the
quarter and 18 percent for the year in constant currencies. This
region's results were driven by Argentina, Brazil and Mexico for both
periods and by Venezuela for the year.
Interest, Nonoperating and Income Taxes
Higher interest expense reflected higher debt levels, offset by
slightly lower average interest rates. Weaker foreign currencies reduced
the increase in interest expense for the year, while strengthening
currencies contributed to the increase for the quarter.
Nonoperating (income) expense-net for the quarter and for the year
reflected translation losses in 1998 compared with translation gains in
1997.
The effective income tax rate was 32.5 percent for the quarter and
32.8 percent for the year in 1998 compared with 30.3 percent for the
quarter and 31.8 percent for the year in 1997.
IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS
While changing foreign currencies affect reported results, McDonald's
lessens exposures, where practical, by financing in local currencies,
hedging certain foreign-denominated cash flows and by purchasing goods
and services in local currencies.
Foreign currency exchange rates were highly volatile in several of
our larger markets in 1998. The Australian Dollar, Brazilian Real,
Canadian Dollar and Japanese Yen, as well as the Southeast Asian
currencies, were the primary currencies negatively impacting reported
results for the year. The French Franc, Deutsche Mark and Japanese Yen
strengthened during the fourth quarter resulting in a minimal foreign
currency benefit to reported sales and operating income for the quarter.
Effect of foreign currency translation on worldwide results excluding
Made For You costs and special charge
Dollars in millions, except As In Constant Currency
Per common share data Reported Currencies* (benefit)/loss
Quarter ended December 31, 1998
Systemwide sales $ 9,316.0 $ 9,309.4 $(6.6)
Total revenues 3,220.7 3,235.5 14.8
Operating income 783.2 779.0 (4.2)
Net income 447.1 450.1 3.0
Net income per common
Share - diluted 0.64 0.64 -
Year ended December 31, 1998
Systemwide sales $35,979.5 $36,984.6 $ 1,005.1
Total revenues 12,421.4 12,775.6 354.2
Operating income 3,083.5 3,155.4 71.9
Net income 1,769.2 1,814.0 44.8
Net income per common
Share - diluted 2.52 2.58 0.06
Increase over prior period
As In Constant
Reported Currencies*
Quarter ended December 31, 1998
Systemwide sales 9% 9%
Total revenues 9 10
Operating income 13 12
Net income 9 10
Net income per common
Share - diluted 10 10
Year ended December 31, 1998
Systemwide sales 7% 10%
Total revenues 9 12
Operating income 10 12
Net income 8 10
Net income per common
Share - diluted 10 13
*Excluding the effect of foreign currency translation on reported results
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this report. They use
such words as "may," "will," "expect," "believe," "plan" and other
similar terminology. These statements reflect management's current
expectations and involve a number of risks and uncertainties. Actual
results could differ materially due to the success of operating
initiatives and advertising and promotional efforts and changes in:
global and local business and economic conditions; currency exchange and
interest rates; food, labor and other operating costs; political or
economic instability in local markets; competition; consumer preferences,
spending patterns and demographic trends; availability and cost of land
and construction; legislation and government regulation; and accounting
policies and practices.
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
-------------------------------------------------------------------
Inc/(Dec)
Quarters ended December 31, 1998 1997 $ %
-------------------------------------------------------------------
SYSTEMWIDE SALES $9,316.0 $8,530.4 785.6 9
Revenues
Sales by Company-operated
restaurants $2,304.5 $2,110.7 193.8 9
Revenues from franchised
and affiliated restaurants 916.2 841.9 74.3 9
TOTAL REVENUES 3,220.7 2,952.6 268.1 9
Operating costs and expenses
Company-operated restaurants 1,886.3 1,726.3 160.0 9
Franchised restaurants
--occupancy costs 181.4 160.6 20.8 13
Selling, general &
administrative expenses 392.1 393.8 (1.7) -
Made For You costs (1) 146.0 - 146.0 n/m
Other operating (income)
expense--net (22.3) (23.3) 1.0 n/m
Total operating costs
and expenses 2,583.5 2,257.4 326.1 14
OPERATING INCOME 637.2 695.2 (58.0) (8)
Interest expense 101.8 94.1 7.7 8
Nonoperating (income)
expense--net 19.3 11.7 7.6 n/m
Income before provision for
income taxes 516.1 589.4 (73.3) (12)
Provision for income taxes 167.6 178.5 (10.9) (6)
NET INCOME $ 348.5 $ 410.9 (62.4) (15)
NET INCOME PER
COMMON SHARE (2)(3) $ 0.51 $ 0.59 (0.08) (14)
NET INCOME PER COMMON
SHARE--DILUTED (2)(3) $ 0.50 $ 0.58 (0.08) (14)
Weighted average common
shares outstanding (3) 677.2 687.6
Weighted average common shares
outstanding--diluted (3) 699.5 701.8
(1) Made For You costs of $146.0 million pre-tax ($98.6 million after tax
or $0.14 per diluted share) related to incentive payments made to
owner/operators as well as accelerated depreciation on equipment to be
replaced in Company-operated restaurants.
(2) Computed using net income reduced by preferred stock dividends of
$4.6 million for fourth quarter 1997. These preferred shares were
redeemed in December 1997.
(3) This information has not been adjusted to reflect the upcoming stock
split.
n/m Not meaningful
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------------
Inc/(Dec)
Years ended December 31, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES $35,979.5 $33,638.3 2,341.2 7
Revenues
Sales by Company-operated
restaurants $ 8,894.9 $ 8,136.5 758.4 9
Revenues from franchised
and affiliated restaurants 3,526.5 3,272.3 254.2 8
TOTAL REVENUES 12,421.4 11,408.8 1,012.6 9
Operating costs and expenses
Company-operated restaurants 7,261.6 6,649.6 612.0 9
Franchised restaurants
--occupancy costs 678.0 613.9 64.1 10
Selling, general &
administrative expenses 1,458.5 1,450.5 8.0 1
Made For You costs (1) 161.6 - 161.6 n/m
Special charge (2) 160.0 - 160.0 n/m
Other operating (income)
expense--net (60.2) (113.5) 53.3 n/m
Total operating costs
and expenses 9,659.5 8,600.5 1,059.0 12
OPERATING INCOME 2,761.9 2,808.3 (46.4) (2)
Interest expense 413.8 364.4 49.4 14
Nonoperating (income)
expense--net 40.7 36.6 4.1 n/m
Income before provision for
income taxes 2,307.4 2,407.3 (99.9) (4)
Provision for income taxes 757.3 764.8 (7.5) (1)
NET INCOME $ 1,550.1 $ 1,642.5 (92.4) (6)
NET INCOME PER
COMMON SHARE (3)(4) $ 2.27 $ 2.35 (0.08) (3)
NET INCOME PER COMMON
SHARE--DILUTED (3)(4) $ 2.21 $ 2.29 (0.08) (3)
Weighted average common
shares outstanding(4) 682.6 689.3
Weighted average common shares
outstanding--diluted (4) 702.9 705.1
(1) Made For You costs of $161.6 million pre-tax ($109.1 million after
tax or $0.16 per diluted share) related to incentive payments made to
owner/operators as well as accelerated depreciation on equipment to be
replaced in Company-operated restaurants.
(2) The $160 million pre-tax special charge ($110 million after tax or
$0.15 per diluted share) related to the home office productivity
initiative was recorded in second quarter 1998.
(3) Computed using net income reduced by preferred stock dividends of
$25.3 million for year ended 1997. These preferred shares were redeemed
in December 1997.
(4) This information has not been adjusted to reflect the upcoming stock
split.
n/m Not meaningful
MCDONALD'S CORPORATION FINANCIAL INFORMATION
Dollars in millions
-------------------------------------------------------------------
Inc/(Dec)
Quarters ended December 31, 1998 1997 $ %
-------------------------------------------------------------------
SYSTEMWIDE SALES
By Type
Operated by franchisees $ 5,728.2 $ 5,270.0 458.2 9
Operated by the Company 2,304.5 2,110.7 193.8 9
Operated by affiliates 1,283.3 1,149.7 133.6 12
$ 9,316.0 $ 8,530.4 785.6 9
TOTAL REVENUES
By Segment
U.S. $ 1,208.4 $ 1,149.0 59.4 5
Europe 1,213.4 1,058.2 155.2 15
Asia/Pacific 424.1 383.0 41.1 11
Latin America 221.3 205.1 16.2 8
Other 153.5 157.3 (3.8) (2)
$ 3,220.7 $ 2,952.6 268.1 9
-------------------------------------------------------------------
Inc/(Dec)
Years ended December 31, 1998 1997 $ %
-------------------------------------------------------------------
SYSTEMWIDE SALES
By Type
Operated by franchisees $22,330.2 $20,862.7 1,467.5 7
Operated by the Company 8,894.9 8,136.5 758.4 9
Operated by affiliates 4,754.4 4,639.1 115.3 2
$35,979.5 $33,638.3 2,341.2 7
TOTAL REVENUES
By Segment
U.S. $ 4,868.1 $ 4,602.7 265.4 6
Europe 4,466.7 3,931.5 535.2 14
Asia/Pacific 1,633.2 1,522.8 110.4 7
Latin America 814.7 709.2 105.5 15
Other 638.7 642.6 (3.9) (1)
$12,421.4 $11,408.8 1,012.6 9
MCDONALD'S CORPORATION FINANCIAL INFORMATION
RESTAURANT MARGINS
--------------------------------------------------------------------
Quarters ended December 31 Years ended December 31
1998 1997 1998 1997
--------------------------------------------------------------------
Company-operated
U.S. 16.3% 16.5% 17.3% 16.5%
Outside the U.S. 19.0% 19.0% 18.8% 19.1%
Franchised
U.S. 80.0% 80.8% 80.9% 81.1%
Outside the U.S. 80.4% 81.1% 80.6% 81.4%
% CONTRIBUTION TO
CONSOLIDATED MARGINS
--------------------------------------------------------------------
Quarters ended December 31 Years ended December 31
1998 1997 1998 1997
--------------------------------------------------------------------
Company-operated
U.S. 27 28 30 30
Outside the U.S. 73 72 70 70
100 100 100 100
Franchised
U.S. 56 58 58 58
Outside the U.S. 44 42 42 42
100 100 100 100
MCDONALD'S CORPORATION RESTAURANT INFORMATION
At December 31, 1998 1997 Increase
-----------------------------------------------------------------
By Type
Operated by franchisees 15,281 14,265 1,016
Operated by the Company 5,512 5,000 512
Operated by affiliates 4,007 3,867 140
Systemwide restaurants 24,800 23,132 1,668
By Segment
U.S. 12,472 12,380 92
Europe
Germany 931 850 81
England 834 746 88
France 708 629 79
Italy 201 173 28
Spain 188 150 38
Netherlands 187 176 11
Sweden 177 151 26
Other 1,195 1,011 184
Total Europe 4,421 3,886 535
Asia/Pacific
Japan 2,852 2,437 415
Australia 666 642 24
Taiwan 292 233 59
China 220 184 36
Philippines 194 157 37
Hong Kong 152 140 12
Other 679 663 16
Total Asia/Pacific 5,055 4,456 599
Latin America
Brazil 672 480 192
Argentina 166 131 35
Other 567 480 87
Total Latin America 1,405 1,091 314
Other
Canada 1,085 1,050 35
Other 362 269 93
Total Other 1,447 1,319 128
Systemwide restaurants 24,800 23,132 1,668
Countries 114 109
--------------------------------------------------
Quarters ended December 31, 1998 1997
--------------------------------------------------
Additions
U.S. 48 131
Europe 221 239
Asia/Pacific 189 341
Latin America 148 132
Other 65 43
Systemwide additions 671 886
--------------------------------------------------
Years ended December 31, 1998 1997
--------------------------------------------------
Additions
U.S. 92 286
Europe 535 603
Asia/Pacific 599 823
Latin America 314 254
Other 128 144
Systemwide additions 1,668 2,110
MCDONALD'S CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION
Dollars in millions
--------------------------------------------------------------------
Inc/(Dec)
Quarters ended December 31, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES
US
Operated by franchisees $ 3,496.7 $ 3,319.3 177.4 5
Operated by the Company 697.2 662.0 35.2 5
Operated by affiliates 289.6 292.2 (2.6) (1)
4,483.5 4,273.5 210.0 5
Outside the US
Operated by franchisees 2,231.5 1,950.7 280.8 14
Operated by the Company 1,607.3 1,448.7 158.6 11
Operated by affiliates 993.7 857.5 136.2 16
4,832.5 4,256.9 575.6 14
$ 9,316.0 $ 8,530.4 785.6 9
Systemwide
Operated by franchisees $ 5,728.2 $ 5,270.0 458.2 9
Operated by the Company 2,304.5 2,110.7 193.8 9
Operated by affiliates 1,283.3 1,149.7 133.6 12
$ 9,316.0 $ 8,530.4 785.6 9
--------------------------------------------------------------------
Inc/(Dec)
Years ended December 31, 1998 1997 $ %
--------------------------------------------------------------------
SYSTEMWIDE SALES
US
Operated by franchisees $14,105.3 $13,284.3 821.0 6
Operated by the Company 2,829.2 2,691.4 137.8 5
Operated by affiliates 1,188.7 1,149.0 39.7 3
18,123.2 17,124.7 998.5 6
Outside the US
Operated by franchisees 8,224.9 7,578.4 646.5 9
Operated by the Company 6,065.7 5,445.1 620.6 11
Operated by affiliates 3,565.7 3,490.1 75.6 2
17,856.3 16,513.6 1,342.7 8
$35,979.5 $33,638.3 2,341.2 7
Systemwide
Operated by franchisees $22,330.2 $20,862.7 1,467.5 7
Operated by the Company 8,894.9 8,136.5 758.4 9
Operated by affiliates 4,754.4 4,639.1 115.3 2
$35,979.5 $33,638.3 2,341.2 7
MCDONALD'S CORPORATION SUPPLEMENTAL FINANCIAL INFORMATION
At December 31, 1998 1997 Inc/(Dec)
--------------------------------------------------------------------
SYSTEMWIDE RESTAURANTS
US
Operated by franchisees 9,849 9,716 133
Operated by the Company 1,810 1,798 12
Operated by affiliates 813 866 (53)
12,472 12,380 92
Outside the US
Operated by franchisees 5,432 4,549 883
Operated by the Company 3,702 3,202 500
Operated by affiliates 3,194 3,001 193
12,328 10,752 1,576
24,800 23,132 1,668
Systemwide
Operated by franchisees 15,281 14,265 1,016
Operated by the Company 5,512 5,000 512
Operated by affiliates 4,007 3,867 140
24,800 23,132 1,668
RESTAURANTS UNDER
CONSTRUCTION
US 66 60
Outside the US 190 192
256 252
The following table shows information adjusted to reflect the upcoming
stock split.
EFFECT OF STOCK SPLIT
--------------------------------------------------------------------
1998 1997
--------------------------------------------------------------------
Quarters ended December 31
Net income per common share -- diluted,
excluding Made For You costs and special charge $.32 $.29
Net income per common share -- diluted,
including Made For You costs and special charge $.25 $.29
Weighted average common shares outstanding
-- diluted (in millions) 1,399.1 1,403.6
Years ended December 31
Net income per common share -- diluted,
excluding Made For You costs and special charge $1.26 $1.15
Net income per common share -- diluted,
including Made For You costs and special charge $1.10 $1.15
Weighted average common shares outstanding
-- diluted (in millions) 1,405.7 1,410.2
# # #
