<PAGE>
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, 2000
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
(99) Press Release dated January 26, 2000 -- McDonald's Reports
Record Global Results
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
McDONALD'S CORPORATION
(Registrant)
By: /s/ Gloria Santona
Gloria Santona
Vice President, U.S. General Counsel
and Secretary
<PAGE>
Exhibit 99
Investor Release
FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
- --------------------- -----------------------------
01/26/00 Investors: Mary Healy, 630-623-6429
Media: Bill Whitman, 630-623-6745
McDONALD'S REPORTS RECORD GLOBAL RESULTS
----------------------------------------
OAK BROOK, IL -- McDonald's Corporation today announced record global results
for the year and quarter ended December 31, 1999.
The following highlights exclude 1998 Made for You costs and the 1998
special charge related to the home office productivity initiative.
. Diluted net income per common share increased 13 percent for the year and 16
percent for the quarter in constant currencies.
. Operating income rose 10 percent for the year and nine percent for the
quarter in constant currencies.
. Sales for the year increased in all segments in constant currencies. The
annual increases in constant currencies were 12 percent in Europe, six
percent in Asia/Pacific and 15 percent in Latin America. U.S. sales
increased five percent and exceeded $19 billion for the year.
. Operating income for the year increased 11 percent in the U.S., and in
constant currencies Europe increased 13 percent, Asia/Pacific increased 10
percent and Latin America declined eight percent.
. Consolidated operating income exceeded $3 billion for the year.
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.
<PAGE>
<TABLE>
<CAPTION>
Key highlights - Consolidated 1999 1998 Increase
- ---------------------------------------------------------------------------------------------------------------------
Dollars in millions, except per common Excluding 1998
share data Made for You costs and 1998 special
charge (1)
---------------------------------------
In Constant
As Reported Adjusted Currencies*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Quarters ended December 31
- ---------------------------------------------------------------------------------------------------------------------
Systemwide sales $ 9,749.7 $ 9,316.0 5% 5% 7%
- ---------------------------------------------------------------------------------------------------------------------
Total revenues 3,372.9 3,220.7 5 5 10
- ---------------------------------------------------------------------------------------------------------------------
Operating income 816.8 637.2 28 4 9
- ---------------------------------------------------------------------------------------------------------------------
Net income 486.2 348.5 40 9 14
- ---------------------------------------------------------------------------------------------------------------------
Net income per
common share - diluted .35 .25 40 9 16
- ---------------------------------------------------------------------------------------------------------------------
Years ended December 31
- ---------------------------------------------------------------------------------------------------------------------
Systemwide sales $38,490.7 $35,979.5 7% 7% 8%
- ---------------------------------------------------------------------------------------------------------------------
Total revenues 13,259.3 12,421.4 7 7 10
- ---------------------------------------------------------------------------------------------------------------------
Operating income 3,319.6 2,761.9 20 8 10
- ---------------------------------------------------------------------------------------------------------------------
Net income 1,947.9 1,550.1 26 10 13
- ---------------------------------------------------------------------------------------------------------------------
Net income per
common share - diluted 1.39 1.10 26 10 13
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
(1) Excluding Made for You costs of $146.0 million ($98.6 million after tax or
$0.07 per diluted share) for the fourth quarter 1998, and excluding $161.6
million of 1998 Made for You costs and the $160.0 million 1998 special
charge for a total of $321.6 million ($219.1 million after tax or $.16 per
diluted share) for the year 1998.
SUMMARY COMMENTARY
Chairman and Chief Executive Officer Jack M. Greenberg commented, "I am pleased
to report that McDonald's fourth quarter and annual 1999 results reflect
continued strong performance. Diluted earnings per share was $.35 for the
quarter, or $.37 on a constant currency basis. Excluding 1998 Made for You costs
and the 1998 special charge, diluted earnings per share increased 16 percent for
the fourth quarter and 13 percent for the year on a constant currency basis.
"We are on track with our expansion plans, adding 1,790 McDonald's
restaurants in 1999, more than 90 percent outside the U.S. We plan to add 1,800
to 1,900 McDonald's restaurants in 2000.
"Our cash flow is strong and we expect free cash flow to increase as cash
from operations continues to grow at a higher rate than capital expenditures. We
will use this free cash flow primarily for share repurchase, thus enhancing
returns to shareholders. In the fourth quarter, we purchased 6.7 million shares
of McDonald's stock for approximately $280 million. Cumulatively, we have
purchased 34.4 million
-2-
<PAGE>
shares for approximately $1.3 billion, towards our $3.5 billion, 3-year, share
repurchase program, which we intend to complete in 2001.
"We look forward to another outstanding year in 2000. Our U.S., European
and Canadian markets have good momentum and Latin America and Japan are poised
for improvement."
Alan Feldman, President McDonald's USA said, "We had great success in the
U.S., reporting our eighth consecutive quarter of positive comparable sales and
seventh consecutive quarter of double-digit operating income growth. U.S.
operating income increased 11 percent for the year, excluding 1998 Made for You
costs and the 1998 special charge. Our successful promotions, our emphasis on
food taste and our intense focus on excellent operations all combined to make
1999 a terrific year.
"Our ability to manage costs and retain people in this tough labor market
has been nothing short of remarkable. Our U.S. operating margins were up for
the quarter and the year.
"One of our greatest accomplishments was the installation of the Made for
You food preparation system in virtually all our U.S. restaurants. This system
provides our customers with better-tasting food and enables us to offer more
food variety. We believe customers will be pleased with our new food offerings
in 2000, including Breakfast Bagels, Grilled and Crispy Chicken sandwiches, the
McDonald's Big Xtra! and the McSalad Shakers."
Jim Cantalupo, Vice Chairman and President McDonald's Corporation said, "In
constant currencies, consolidated operating income increased 10 percent for the
year. Europe, which represents almost 40 percent of consolidated operating
income, continued to lead the international segments, achieving a 13 percent
operating income increase for the year in constant currencies. France, Germany,
Spain and the U.K. all reported strong results.
"Asia/Pacific's operating income increased 10 percent in constant
currencies for the year. We are pleased with improved results in South Korea
and several Southeast Asian markets and good performance in Australia. Japan's
economic weakness and difficult comparisons with strong price-value promotions
adversely affected this segment in the last half of 1999. This year, we will
implement a refocused marketing effort in Japan to drive improved sales and
profits and to build on our strong market share gains achieved in recent years.
"Latin America's results were adversely affected by the devaluation in
Brazil and the resultant difficult economic conditions in several markets, which
were more significant than we anticipated. While we were disappointed with the
lack of profit
-3-
<PAGE>
improvement in the fourth quarter, we are encouraged by our ability to retain
customers in the face of severe economic weakness. We expect profits to improve
as we progress throughout 2000.
"One of the great things about our global business is that we were able to
more than offset the weakness in Japan and Latin America through the strength of
our U.S., European and Canadian operations. I am confident that 2000 will be a
strong year for McDonald's around the world. As various economies improve and
as we continue to focus on value as our foundation, we have enormous opportunity
to build our already substantial presence, profits and returns."
NET INCOME AND NET INCOME PER COMMON SHARE - DILUTED
Net income and diluted net income per common share increased nine percent for
the quarter (14 and 16 percent in constant currencies, respectively), excluding
1998 Made for You costs of $146.0 million ($98.6 million after tax or $.07 per
diluted share). For the year, net income and diluted net income per common
share increased ten percent (13 percent for both in constant currencies),
excluding $161.6 million of 1998 Made for You costs and the $160.0 million 1998
special charge for a total of $321.6 million ($219.1 million after tax or $.16
per diluted share) in 1998. Including these items, reported net income and
diluted net income per common share both increased 40 percent for the quarter
and 26 percent for the year.
Weighted average shares outstanding for the fourth quarter and the year were
lower compared with the prior year primarily due to the Company's share
repurchase program. However, diluted weighted average shares outstanding
increased for the quarter as the increase in the average stock price caused
outstanding stock options to be more dilutive. During the year, the Company
repurchased 24.2 million shares of its common stock for approximately $933
million, under its three-year, $3.5 billion program, which is scheduled to be
completed in 2001.
OPERATING RESULTS
McDonald's operates primarily in the quick-service hamburger restaurant
business. Beginning in 1999, the Company also operates other restaurants:
Aroma Cafe, Chipotle Mexican Grill and Donatos Pizza. Collectively these three
businesses are referred to as "Other Brands." Throughout this release, the
financial information related to Other Brands is included in the Other segment.
-4-
<PAGE>
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
the year were due to expansion and positive comparable sales. Foreign currency
translation had a negative effect on the Systemwide sales growth rate for both
the quarter and the year.
The negative impact of foreign currency translation on revenues was greater
than that on Systemwide sales for both periods primarily because the stronger
Japanese Yen had a greater positive currency translation effect on sales
compared to revenues. 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, primarily in Europe, relative to Systemwide restaurants.
<TABLE>
<CAPTION>
====================================================================================================================
Systemwide sales
Dollars in millions 1999 1998 Increase/(Decrease)
====================================================================================================================
As In Constant
Reported Currencies*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Quarters ended December 31
- --------------------------------------------------------------------------------------------------------------------
U.S. $ 4,681.6 $ 4,483.5 4% n/a
- --------------------------------------------------------------------------------------------------------------------
Europe 2,449.8 2,427.7 1 11%
- --------------------------------------------------------------------------------------------------------------------
Asia/Pacific 1,697.0 1,532.5 11 2
- --------------------------------------------------------------------------------------------------------------------
Latin America 438.0 484.2 (10) 12
- --------------------------------------------------------------------------------------------------------------------
Other 483.3 388.1 25 21
- --------------------------------------------------------------------------------------------------------------------
Total Systemwide sales $ 9,749.7 $ 9,316.0 5% 7%
- --------------------------------------------------------------------------------------------------------------------
Years ended December 31
- --------------------------------------------------------------------------------------------------------------------
U.S. $19,005.6 $18,123.2 5% n/a
- --------------------------------------------------------------------------------------------------------------------
Europe 9,557.0 8,909.1 7 12%
- --------------------------------------------------------------------------------------------------------------------
Asia/Pacific 6,435.7 5,579.4 15 6
- --------------------------------------------------------------------------------------------------------------------
Latin America 1,665.6 1,760.8 (5) 15
- --------------------------------------------------------------------------------------------------------------------
Other 1,826.8 1,607.0 14 15
- --------------------------------------------------------------------------------------------------------------------
Total Systemwide sales $38,490.7 $35,979.5 7% 8%
====================================================================================================================
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
n/a Not applicable
-5-
<PAGE>
U.S. sales increased due to positive comparable sales and restaurant
expansion in both periods. Successful promotions, such as Furby, Teenie Beanie
Babies, Winnie the Pooh, Tarzan, Inspector Gadget and Toy Story 2, local market
initiatives and product introductions, contributed to the sales increase.
In Europe, expansion and positive comparable sales drove the constant
currency sales increases in both periods. Strong performances in France,
Germany, Spain and the United Kingdom were the primary contributors in both
periods.
In Asia/Pacific, the constant currency sales increases were driven by
expansion, partly offset by negative comparable sales for the quarter and the
year. China, South Korea and the Southeast Asian markets were the primary
contributors to this segment's increases in both periods. Sales growth for the
quarter was negatively affected by the late September earthquake in Taiwan,
which greatly reduced consumer spending. For the year, expansion in Japan, as
well as positive comparable sales in Australia, contributed to the increase.
In Latin America, expansion, partly offset by negative comparable sales,
drove the constant currency sales increases for the quarter and the year.
Expansion in Brazil and positive comparable sales in Mexico and Venezuela drove
the increases for both periods.
In the Other segment, the sales increases for the quarter and the year
included $45 million and $91 million, respectively, related to the addition of
Other Brands. Canada's positive comparable sales for the quarter and year
contributed to the increases.
Combined Operating Margins
The combined operating margin information that follows represents margins
for the McDonald's restaurant business only.
<TABLE>
<CAPTION>
=============================================================================================================================
Combined operating margins Quarters ended Years ended
December 31 December 31
---------------------------------------------------------------------
1999 1998 1999 1998
=============================================================================================================================
<S> <C> <C> <C> <C>
Dollars in millions
- -----------------------------------------------------------------------------------------------------------------------------
Company-operated $ 408.6 $ 418.2 $1,673.9 $1,633.3
- -----------------------------------------------------------------------------------------------------------------------------
Franchised 755.9 734.8 3,008.4 2,848.5
- -----------------------------------------------------------------------------------------------------------------------------
Combined operating margins $1,164.5 $1,153.0 $4,682.3 $4,481.8
- -----------------------------------------------------------------------------------------------------------------------------
Percent of sales/revenues
- -----------------------------------------------------------------------------------------------------------------------------
Company-operated 17.1% 18.1% 17.7% 18.4%
- -----------------------------------------------------------------------------------------------------------------------------
Franchised 79.8 80.2 80.3 80.8
=============================================================================================================================
</TABLE>
-6-
<PAGE>
Combined operating margin dollars increased $11 million, or one percent for
the quarter and $200 million, or four percent for the year. These increases
were primarily driven by expansion and positive comparable sales, partially
offset by weaker foreign currencies. Foreign currency translation negatively
impacted combined operating margin dollars by $52 million, or five percent for
the quarter and $108 million, or three percent for the year. Margin dollars in
the U.S. and Europe segments accounted for over 80 percent of the combined
margin dollars for both periods.
Company-operated margins as a percent of sales decreased for the quarter
and the year. Payroll costs and occupancy & other expenses increased as a
percent of sales for both periods, while food & paper costs as a percent of
sales increased for the quarter and were flat for the year.
As a percent of sales, U.S. Company-operated margins increased for the
quarter and the year. Food & paper costs and occupancy & other operating
expenses as a percent of sales decreased for both periods, while payroll costs
increased for both periods.
Europe's Company-operated margins decreased as a percent of sales for the
quarter and the year. As a percent of sales, payroll costs increased, food &
paper costs decreased and occupancy & other expenses were flat for both periods.
The difficult economic conditions in Russia accounted for more than half of the
decline in margin percent for the year, but had a minimal impact on the quarter.
Company-operated margins declined as a percent of sales in Asia/Pacific and
Latin America for the quarter and the year. In Asia/Pacific, the earthquake in
Taiwan has caused a temporary reduction in consumer spending, which led to a
decline in the segment's margin percent for the quarter and the year. Difficult
comparisons with strong 1998 promotions in Hong Kong also contributed to the
decline. Brazil was the primary contributor to the decline in the margin
percent in Latin America in both periods, despite improvement in margin trends
in the second half of 1999 compared with the first half of the year.
Franchised margin dollars increased three percent for the quarter and six
percent for the year, while franchised margins as a percent of applicable
revenues decreased for both periods. The decrease in margins as a percent of
sales for both periods was primarily due to higher occupancy costs as a result
of more leased sites. By leasing a higher proportion of new sites, we have
reduced initial capital requirements. However, this practice reduces franchised
margins since the financing costs implicit in the lease are included in
occupancy expense, whereas, for owned sites, financing costs are reflected in
interest expense.
-7-
<PAGE>
As a percent of revenues, U.S. franchised margins increased for the quarter
and the year, primarily due to positive comparable sales.
Europe's franchised margins as a percent of revenues declined for the
quarter and year, primarily due to the consolidation, for financial reporting
purposes, of Sweden at the beginning of 1999.
In Asia/Pacific and Latin America, franchised margins as a percent of
revenues declined for the quarter and the year. The decreases in both segments
were primarily due to higher occupancy costs and weak comparable sales.
Selling, General & Administrative Expenses
Selling, general & administrative expenses increased three percent for the
quarter and one percent for the year. For both periods, these increases were at
a rate substantially less than the sales growth rates. The consolidation, for
financial reporting purposes, of Sweden in 1999 and spending to support both
McDonald's restaurant development outside the U.S. and our Other Brands drove
the increases. In the U.S., selling, general & administrative expenses
decreased for both periods due to savings as a result of the home office
productivity initiative. As a result of the home office productivity
initiative, the Company expects to save about $100 million of selling, general
and administrative expenses annually in 2000 and thereafter. About two-thirds
of these savings were realized through 1999.
Other Operating (Income) Expense
<TABLE>
<CAPTION>
========================================================================================================================
Other operating (income) expense Quarters ended Years ended
December 31 December 31
----------------------------------------------------------------------
Dollars in millions 1999 1998 1999 1998
========================================================================================================================
<S> <C> <C> <C> <C>
Gains on sales of restaurant businesses $(36.4) $(28.2) $ (75.0) $(60.7)
- ------------------------------------------------------------------------------------------------------------------------
Equity in earnings of unconsolidated affiliates (28.7) (22.8) (138.3) (88.7)
- ------------------------------------------------------------------------------------------------------------------------
Other (income) expense 12.9 28.7 89.2 89.2
- ------------------------------------------------------------------------------------------------------------------------
Other operating (income) expense $(52.2) $(22.3) $(124.1) $(60.2)
- ------------------------------------------------------------------------------------------------------------------------
Made for You costs $ 1.6 $146.0 $ 18.9 $161.6
- ------------------------------------------------------------------------------------------------------------------------
Special charge - - - $160.0
========================================================================================================================
</TABLE>
-8-
<PAGE>
Other operating (income) expense consists of transactions related to
franchising and the food service business. The increase for the year in equity
in earnings of unconsolidated affiliates was primarily due to a gain from the
sale of real estate in a U.S. partnership. In addition, results in Japan, which
benefited from a lower effective tax rate for the year and the stronger Japanese
Yen, contributed to the increases for both periods. Other expense for both the
quarter and the year reflected lower provisions for property dispositions and
for the quarter higher gains on excess property sales. Costs associated with
implementation of the Made for You food preparation system related primarily to
accelerated depreciation on equipment replaced in U.S. Company-operated
restaurants and financial incentive payments made to owner/operators. 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.
-9-
<PAGE>
Operating Income
Operating income increased $34 million, or four percent for the quarter,
and $236 million, or eight percent for the year, excluding 1998 Made for You
costs and the 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 (1) 1999 1998 Increase/(Decrease)
- ------------------------------------------------------------------------------------------------------------
Dollars in millions Excluding 1998
Made for You costs and
1998 special charge (2)
---------------------------------------
As In Constant
Reported Adjusted Currencies*
- ------------------------------------------------------------------------------------------------------------
Quarters ended December 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. $ 338.9 $ 159.5 112% 11% n/a
- ------------------------------------------------------------------------------------------------------------
Europe 322.3 309.5 4 4 14%
- ------------------------------------------------------------------------------------------------------------
Asia/Pacific 99.3 89.2 11 11 5
- ------------------------------------------------------------------------------------------------------------
Latin America 33.4 56.3 (41) (41) (18)
- ------------------------------------------------------------------------------------------------------------
Other 22.9 22.7 1 1 (3)
- ------------------------------------------------------------------------------------------------------------
Total operating income $ 816.8 $ 637.2 28% 4% 9%
- ------------------------------------------------------------------------------------------------------------
Years ended December 31
- ------------------------------------------------------------------------------------------------------------
U.S. $1,471.7 $1,005.8 46% 11% n/a
- ------------------------------------------------------------------------------------------------------------
Europe 1,203.4 1,115.6 8 8 13%
- ------------------------------------------------------------------------------------------------------------
Asia/Pacific 404.3 343.9 18 18 10
- ------------------------------------------------------------------------------------------------------------
Latin America 127.5 180.8 (29) (29) (8)
- ------------------------------------------------------------------------------------------------------------
Other 112.7 115.8 (3) (3) (2)
- ------------------------------------------------------------------------------------------------------------
Total operating income $3,319.6 $2,761.9 20% 8% 10%
- ------------------------------------------------------------------------------------------------------------
</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 1998 Made for You costs of $146.0 million for the fourth
quarter, and excluding $161.6 million of 1998 Made for You costs and the
$160.0 million 1998 special charge for a total of $321.6 million for the
year 1998.
n/a Not applicable
U.S. operating income increased $33 million, or 11 percent for the quarter
and increased $144 million, or 11 percent for the year, excluding 1998 Made for
You costs and the 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.
Europe's operating income increased 14 percent for the quarter and 13
percent for the year in constant currencies. This performance was primarily due
to strong
-10-
<PAGE>
results in France, Germany, Spain and the United Kingdom. Additionally, Europe's
operating income growth benefited in both periods from the consolidation of
Sweden, due to our purchase of a majority ownership. The economic difficulties
in Russia, which began in September 1998, dampened this segment's operating
results for the year. Excluding Russia, Europe's constant currency operating
income increased 15 percent for the year.
In constant currencies, operating income in Asia/Pacific increased five
percent for the quarter and 10 percent for the year. The increase for the year
was driven primarily by Japan, which benefited from a lower effective tax rate,
and strong results in South Korea. In both periods, improved results in several
Southeast Asian markets contributed to the increases. The September earthquake
in Taiwan negatively affected results for the quarter and to a lesser extent the
year.
Operating income in Latin America decreased 18 percent and eight percent in
constant currencies for the quarter and year, respectively. Both periods were
negatively impacted by the difficult economic conditions experienced by many
markets in the region. While Brazil's results have improved compared with the
first half of 1999, it is still experiencing the negative effects of the
currency devaluation that occurred in early 1999. Partially offsetting the
decreases were strong performances in Mexico for both periods and in Venezuela
for the year.
INTEREST & 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 and the year compared with 1998.
The effective income tax rate was 31.6 percent for the quarter and 32.5
percent for the year 1999 compared with 32.5 percent for the quarter and 32.8
percent for the year 1998. We expect the effective income tax rate to be about
32.0 percent in 2000.
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.
-11-
<PAGE>
The primary currencies negatively affecting reported results for the
quarter and the year were the Brazilian Real, the British Pound and the Euro.
The negative effect of these currencies was partially offset by the stronger
Australian Dollar, Japanese Yen and the Southeast Asian currencies in both
periods.
-12-
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================================================
Effect of foreign currency translation on Increase
worldwide reported results Over Prior Period
==============================================================================================================================
Dollars in millions, except per As In Constant As In Constant
common share data Reported Currencies* Change Reported Currencies*
==============================================================================================================================
Quarter ended December 31, 1999
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
Systemwide sales $ 9,749.7 $ 9,956.4 $206.7 5% 7%
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues 3,372.9 3,529.4 156.5 5 10
- ------------------------------------------------------------------------------------------------------------------------------
Operating income (1) 816.8 855.7 38.9 4 9
- ------------------------------------------------------------------------------------------------------------------------------
Net income (1) 486.2 511.7 25.5 9 14
- ------------------------------------------------------------------------------------------------------------------------------
Net income per common share -
diluted (1) .35 .37 .02 9 16
==============================================================================================================================
Year ended December 31, 1999
==============================================================================================================================
Systemwide sales $38,490.7 $38,739.5 $248.8 7% 8%
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues 13,259.3 13,620.8 361.5 7 10
- ------------------------------------------------------------------------------------------------------------------------------
Operating income (1) 3,319.6 3,386.6 67.0 8 10
- ------------------------------------------------------------------------------------------------------------------------------
Net income (1) 1,947.9 1,993.4 45.5 10 13
- ------------------------------------------------------------------------------------------------------------------------------
Net income per common share -
diluted (1) 1.39 1.42 .03 10 13
==============================================================================================================================
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
(1) The percentage increase over the prior period excludes the 1998 Made for
You costs of $146.0 million ($98.6 million after tax or $.07 per diluted
share) for the fourth quarter 1998, and excludes the $161.6 million of 1998
Made for You costs and the $160.0 million 1998 special charge for a total
of $321.6 million ($219.1 million after tax or $0.16 per diluted share) for
the year 1998.
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.
-13-
<PAGE>
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Dollars and shares in millions, except per common share data
- ------------------------------------------------------------------------
Inc/(Dec)
Quarters ended December 31, 1999 1998 $ %
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SYSTEMWIDE SALES $9,749.7 $9,316.0 433.7 5
Revenues
Sales by Company-operated
restaurants 2,424.9 2,304.5 120.4 5
Revenues from franchised
and affiliated restaurants 948.0 916.2 31.8 3
TOTAL REVENUES 3,372.9 3,220.7 152.2 5
Operating costs and expenses
Company-operated
restaurants 2,010.8 1,886.3 124.5 7
Franchised restaurants
-- occupancy costs 191.7 181.4 10.3 6
Selling, general &
administrative expenses 404.2 392.1 12.1 3
Other operating (income)
expense (52.2) (22.3) (29.9) n/m
Made for You costs 1.6 146.0 (144.4) n/m
Total operating costs
and expenses 2,556.1 2,583.5 (27.4) (1)
OPERATING INCOME (1) 816.8 637.2 179.6 28
Interest expense 98.2 101.8 (3.6) (4)
Nonoperating (income)
expense 8.3 19.3 (11.0) n/m
Income before provision
for income taxes 710.3 516.1 194.2 38
Provision for
income taxes 224.1 167.6 56.5 34
NET INCOME (1) $ 486.2 $ 348.5 137.7 40
NET INCOME PER
COMMON SHARE (1) $ 0.36 $ 0.26 0.10 38
NET INCOME PER
COMMON SHARE--DILUTED (1) $ 0.35 $ 0.25 0.10 40
Weighted average common
shares outstanding 1,353.3 1,354.3
Weighted average common
shares outstanding--diluted 1,401.4 1,399.1
</TABLE>
n/m Not meaningful
(1) Excluding 1998 Made for You costs, operating income increased 4%, and
net income, net income per common share and net income per common
share--diluted each increased 9%.
-14-
<PAGE>
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Dollars and shares in millions, except per common share data
- --------------------------------------------------------------------------
Inc/(Dec)
Years ended December 31, 1999 1998 $ %
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SYSTEMWIDE SALES $38,490.7 $35,979.5 2,511.2 7
Revenues
Sales by Company-operated
restaurants 9,512.5 8,894.9 617.6 7
Revenues from franchised
and affiliated restaurants 3,746.8 3,526.5 220.3 6
TOTAL REVENUES 13,259.3 12,421.4 837.9 7
Operating costs and expenses
Company-operated
restaurants 7,829.6 7,261.6 568.0 8
Franchised restaurants
- --occupancy costs 737.7 678.0 59.7 9
Selling, general &
administrative expenses 1,477.6 1,458.5 19.1 1
Other operating (income)
expense (124.1) (60.2) (63.9) n/m
Made for You costs 18.9 161.6 (142.7) n/m
Special charge - 160.0 (160.0) n/m
Total operating costs
and expenses 9,939.7 9,659.5 280.2 3
OPERATING INCOME (1) 3,319.6 2,761.9 557.7 20
Interest expense 396.3 413.8 (17.5) (4)
Nonoperating (income)
expense 39.2 40.7 (1.5) n/m
Income before provision
for income taxes 2,884.1 2,307.4 576.7 25
Provision for
income taxes 936.2 757.3 178.9 24
NET INCOME (1) $ 1,947.9 $ 1,550.1 397.8 26
NET INCOME PER
COMMON SHARE (1) $ 1.44 $ 1.14 0.30 26
NET INCOME PER
COMMON SHARE--DILUTED (1) $ 1.39 $ 1.10 0.29 26
Weighted average common
shares outstanding 1,355.3 1,365.3
Weighted average common
shares outstanding--diluted 1,404.2 1,405.7
</TABLE>
n/m Not meaningful
(1) Excluding the 1998 special charge and 1998 Made for You costs, operating
income increased 8%, net income increased 10%, net income per common share
increased 11% and net income per common share--diluted increased 10%.
-15-
<PAGE>
MCDONALD'S CORPORATION SYSTEMWIDE SALES
<TABLE>
<CAPTION>
Dollars in millions
- -----------------------------------------------------------------------
% Inc/(Dec)
Quarters ended December 31, 1999 1998 As Constant
Reported Currency*
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
US
Operated by franchisees $3,659.2 $3,496.7 5
Operated by the Company 728.5 697.2 4
Operated by affiliates 293.9 289.6 1
4,681.6 4,483.5 4 n/a
Europe**
Operated by franchisees 1,323.3 1,299.1 2
Operated by the Company 1,002.7 952.1 5
Operated by affiliates 123.8 176.5 (30)
2,449.8 2,427.7 1 11
Asia/Pacific
Operated by franchisees 469.7 440.4 7
Operated by the Company 399.7 370.2 8
Operated by affiliates 827.6 721.9 15
1,697.0 1,532.5 11 2
Latin America
Operated by franchisees 218.4 232.8 (6)
Operated by the Company 127.4 167.1 (24)
Operated by affiliates 92.2 84.3 9
438.0 484.2 (10) 12
Other***
Operated by franchisees 298.0 259.2 15
Operated by the Company 166.6 117.9 41
Operated by affiliates 18.7 11.0 70
483.3 388.1 25 21
Systemwide
Operated by franchisees 5,968.6 5,728.2 4
Operated by the Company 2,424.9 2,304.5 5
Operated by affiliates 1,356.2 1,283.3 6
$9,749.7 $9,316.0 5 7
</TABLE>
* Excluding the effect of foreign currency translation on reported results.
** Due to the consolidation of Sweden, beginning in 1999, Sweden's sales are
classified as Company-operated rather than as affiliated sales.
*** The Other segment includes $45 million of sales related to Other Brands
in 1999.
-16-
<PAGE>
MCDONALD'S CORPORATION SYSTEMWIDE SALES
<TABLE>
<CAPTION>
Dollars in millions
- ------------------------------------------------------------------------
% Inc/(Dec)
Years ended December 31, 1999 1998 As Constant
Reported Currency*
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
US
Operated by franchisees $14,857.9 $14,105.3 5
Operated by the Company 2,956.6 2,829.2 5
Operated by affiliates 1,191.1 1,188.7 -
19,005.6 18,123.2 5 n/a
Europe**
Operated by franchisees 5,194.9 4,727.0 10
Operated by the Company 3,876.7 3,519.8 10
Operated by affiliates 485.4 662.3 (27)
9,557.0 8,909.1 7 12
Asia/Pacific
Operated by franchisees 1,787.5 1,611.0 11
Operated by the Company 1,609.3 1,428.1 13
Operated by affiliates 3,038.9 2,540.3 20
6,435.7 5,579.4 15 6
Latin America
Operated by franchisees 820.7 819.7 -
Operated by the Company 494.3 620.3 (20)
Operated by affiliates 350.6 320.8 9
1,665.6 1,760.8 (5) 15
Other***
Operated by franchisees 1,168.0 1,067.2 9
Operated by the Company 575.6 497.5 16
Operated by affiliates 83.2 42.3 97
1,826.8 1,607.0 14 15
Systemwide
Operated by franchisees 23,829.0 22,330.2 7
Operated by the Company 9,512.5 8,894.9 7
Operated by affiliates 5,149.2 4,754.4 8
$38,490.7 $35,979.5 7 8
</TABLE>
* Excluding the effect of foreign currency translation on reported
results.
** Due to the consolidation of Sweden, beginning in 1999, Sweden's sales
are classified as Company-operated rather than as affiliated sales.
*** The Other segment includes $91 million of sales related to Other Brands
in 1999.
-17-
<PAGE>
MCDONALD'S CORPORATION TOTAL REVENUES
<TABLE>
<CAPTION>
Dollars in millions
- --------------------------------------------------------------------------
% Inc/(Dec)
As Constant
Quarters ended December 31, 1999 1998 Reported Currency*
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. $ 1,258.8 $ 1,208.4 4 n/a
Europe 1,273.6 1,213.4 5 14
Asia/Pacific 458.1 424.1 8 6
Latin America 176.7 221.3 (20) 6
Other** 205.7 153.5 34 30
$ 3,372.9 $ 3,220.7 5 10
- --------------------------------------------------------------------------
% Inc/(Dec)
As Constant
Years ended December 31, 1999 1998 Reported Currency*
- --------------------------------------------------------------------------
U.S. $ 5,093.0 $ 4,868.1 5 n/a
Europe 4,924.9 4,466.7 10 15
Asia/Pacific 1,832.3 1,633.2 12 9
Latin America 680.3 814.7 (16) 10
Other** 728.8 638.7 14 15
$13,259.3 $12,421.4 7 10
</TABLE>
* Excluding the effect of foreign currency translation on reported
results.
** The Other segment revenue for the fourth quarter and year 1999 includes
$34.5 million and $56.7 million, respectively, related to Other Brands.
-18-
<PAGE>
MCDONALD'S CORPORATION FINANCIAL INFORMATION
<TABLE>
<CAPTION>
OPERATING MARGINS - MCDONALD'S RESTAURANT BUSINESS*
- ----------------------------------------------------------------------------
% Inc/(Dec)
Percent Amount As Constant
Quarters ended December 31, 1999 1998 1999 1998 Reported Currency**
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Company-operated
U.S. 16.5% 16.3% $120.0 $113.4 6 n/a
Europe 19.4 20.0 194.5 190.6 2 10
Asia/Pacific 14.5 17.1 58.0 63.3 (8) (10)
Latin America 14.4 20.9 18.3 34.9 (48) (25)
Other 13.5 13.6 17.8 16.0 11 7
Total 17.1% 18.1% $408.6 $418.2 (2) 3
Franchised
U.S. 80.1% 80.0% $424.8 $409.1 4 n/a
Europe 79.0 79.8 214.1 208.5 3 15
Asia/Pacific 83.7 84.0 48.8 45.3 8 3
Latin America 76.9 80.3 38.0 43.5 (13) 7
Other 78.0 79.8 30.2 28.4 6 3
Total 79.8% 80.2% $755.9 $734.8 3 7
- ----------------------------------------------------------------------------
% Inc/(Dec)
Percent Amount As Constant
Years ended December 31, 1999 1998 1999 1998 Reported Currency**
- ----------------------------------------------------------------------------
Company-operated
U.S. 17.5% 17.3% $ 516.2 $ 490.3 5 n/a
Europe 19.2 20.0 742.6 703.4 6 10
Asia/Pacific 16.6 16.9 267.5 241.7 11 7
Latin America 14.1 19.1 69.9 118.4 (41) (19)
Other 14.9 16.0 77.7 79.5 (2) (2)
Total 17.7% 18.4% $1,673.9 $1,633.3 2 5
Franchised
U.S. 81.0% 80.9% $1,730.1 $1,649.8 5 n/a
Europe 79.0 80.0 828.1 757.5 9 14
Asia/Pacific 83.6 84.3 186.5 173.0 8 3
Latin America 77.5 79.7 144.1 155.0 (7) 12
Other 78.5 80.2 119.6 113.2 6 6
Total 80.3% 80.8% $3,008.4 $2,848.5 6 8
</TABLE>
* Operating margin information relates to McDonald's restaurant business
and excludes Other Brands.
** Excludes the effect of foreign currency translation on reported results.
However, it does not exclude the impact of changing foreign currency
rates on the cost of imported products.
-19-
<PAGE>
McDONALD'S CORPORATION FINANCIAL INFORMATION
<TABLE>
<CAPTION>
COMPANY-OPERATED MARGINS AS A PERCENT OF SALES -
McDONALD'S RESTAURANT BUSINESS*
- --------------------------------------------------------------------
Quarters ended December 31 Years ended December 31
1999 1998 1999 1998
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Food & paper 33.7 33.6 33.7 33.7
Payroll & employee
benefits 25.5 25.2 25.4 24.9
Occupancy & other
operating expenses 23.7 23.1 23.2 23.0
Total expenses 82.9 81.9 82.3 81.6
Company-operated margins 17.1 18.1 17.7 18.4
</TABLE>
* Operating margin information relates to McDonald's restaurant business
and excludes Other Brands.
<TABLE>
<CAPTION>
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
- --------------------------------------------------------------------
% Inc/(Dec)
Years ended December 31 As Constant
1999 1998 Reported Currencies*
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. $ 765.7 $ 789.0 (3) n/a
Europe 400.9 379.6 6 10
Asia/Pacific 134.5 123.3 9 6
Latin America 88.9 93.2 (5) 18
Other** 87.6 73.4 19 20
$1,477.6 $1,458.5 1 3
</TABLE>
* Excluding the effect of foreign currency translation on reported
results.
** The Other segment includes $12.6 million of selling, general and
administrative expenses related to Other Brands in 1999.
-20-
<PAGE>
MCDONALD'S CORPORATION RESTAURANT INFORMATION
<TABLE>
<CAPTION>
SYSTEMWIDE RESTAURANTS
- -----------------------------------------------------------------------
At December 31, 1999 1998 Inc/(Dec)
- -----------------------------------------------------------------------
<S> <C> <C> <C>
*U.S. 12,629 12,472 157
Europe
Germany 1,008 931 77
England 884 810 74
France 790 708 82
Italy 242 201 41
Spain 229 188 41
Sweden 202 177 25
Netherlands 201 187 14
Poland 160 130 30
Other 1,227 1,089 138
Total Europe 4,943 4,421 522
Asia/Pacific
*Japan 3,258 2,852 406
Australia 684 666 18
Taiwan 319 292 27
China 252 220 32
Philippines 217 194 23
South Korea 176 131 45
Hong Kong 163 152 11
Other 586 548 38
Total Asia/Pacific 5,655 5,055 600
Latin America
*Brazil 921 672 249
Argentina 205 166 39
Mexico 170 144 26
Other 493 423 70
Total Latin America 1,789 1,405 384
Other
*Canada 1,125 1,085 40
Other 449 362 87
Other Brands 216 18 198
Total Other 1,790 1,465 325
Systemwide restaurants 26,806 24,818 1,988
Countries 118 114 4
* Includes satellites in 1999: U.S. 1,048; Japan 1,333; Brazil 457; Canada 259.
In 1998: U.S. 1,090; Japan 1,123; Brazil 285; Canada 236.
RESTAURANT ADDITIONS
- ------------------------------------------------------------------------------
Quarters ended December 31 Years ended December 31
1999 1998 1999 1998
- ------------------------------------------------------------------------------
U.S. 100 48 157 92
Europe 254 221 522 535
Asia/Pacific 256 189 600 599
Latin America 169 148 384 314
Other - McDonald's 52 65 127 128
Other Brands 21 2 198 18
Systemwide additions 852 673 1,988 1,686
</TABLE>
-21-
<PAGE>
MCDONALD'S CORPORATION RESTAURANT INFORMATION
<TABLE>
<CAPTION>
SYSTEMWIDE RESTAURANTS
- ----------------------------------------------------
At December 31, 1999 1998 Inc/(Dec)
- ----------------------------------------------------
<S> <C> <C> <C>
US
Operated by franchisees 9,986 9,849 137
Operated by the Company 1,837 1,810 27
Operated by affiliates 806 813 (7)
12,629 12,472 157
Europe*
Operated by franchisees 2,722 2,377 345
Operated by the Company 2,005 1,735 270
Operated by affiliates 216 309 (93)
4,943 4,421 522
Asia/Pacific
Operated by franchisees 1,496 1,383 113
Operated by the Company 1,248 1,124 124
Operated by affiliates 2,911 2,548 363
5,655 5,055 600
Latin America
Operated by franchisees 975 721 254
Operated by the Company 518 421 97
Operated by affiliates 296 263 33
1,789 1,405 384
Other**
Operated by franchisees 1,086 951 135
Operated by the Company 605 435 170
Operated by affiliates 99 79 20
1,790 1,465 325
Systemwide
Operated by franchisees 16,265 15,281 984
Operated by the Company 6,213 5,525 688
Operated by affiliates 4,328 4,012 316
26,806 24,818 1,988
</TABLE>
* Due to the consolidation of Sweden, beginning in 1999, Sweden's restaurants
are classified as Company-operated restaurants rather than as affiliated
restaurants.
** The Other segment includes 216 and 18 restaurants for 1999 and 1998,
respectively, related to Other Brands.
-22-
