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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2018
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Delaware
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36-2361282
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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110 North Carpenter Street
Chicago, Illinois
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60607
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer x
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Accelerated filer ¨
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Non-accelerated filer ¨
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Smaller reporting company ¨
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Emerging growth company ¨
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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Page Reference
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Item 1 – Financial Statements
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Item 4 – Controls and Procedures
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Item 1 – Legal Proceedings
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Item 1A – Risk Factors
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Item 6 – Exhibits
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CONDENSED CONSOLIDATED BALANCE SHEET
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|||||||||
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(unaudited)
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In millions, except per share data
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September 30,
2018 |
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December 31,
2017 |
||||
Assets
|
|
|
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|
||||
Current assets
|
|
|
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|
||||
Cash and equivalents
|
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$
|
2,574.5
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|
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$
|
2,463.8
|
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Accounts and notes receivable
|
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2,266.8
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1,976.2
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||
Inventories, at cost, not in excess of market
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41.9
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|
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|
58.8
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Prepaid expenses and other current assets
|
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669.9
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|
828.4
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Total current assets
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5,553.1
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5,327.2
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Other assets
|
|
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||||
Investments in and advances to affiliates
|
|
1,135.5
|
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1,085.7
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||
Goodwill
|
|
2,345.0
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|
|
|
2,379.7
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Miscellaneous
|
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2,406.5
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2,562.8
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Total other assets
|
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5,887.0
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6,028.2
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Property and equipment
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Property and equipment, at cost
|
|
36,946.4
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36,626.4
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Accumulated depreciation and amortization
|
|
(14,332.8
|
)
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|
(14,178.1
|
)
|
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Net property and equipment
|
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22,613.6
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22,448.3
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Total assets
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$
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34,053.7
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$
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33,803.7
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Liabilities and shareholders’ equity
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Current liabilities
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Accounts payable
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$
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932.8
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|
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|
$
|
924.8
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Dividends payable
|
|
888.0
|
|
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—
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Income taxes
|
|
160.0
|
|
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|
265.8
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Other taxes
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256.4
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275.4
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Accrued interest
|
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314.7
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278.4
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Accrued payroll and other liabilities
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1,074.8
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1,146.2
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Total current liabilities
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3,626.7
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2,890.6
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Long-term debt
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31,895.2
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29,536.4
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Long-term income taxes
|
|
2,376.4
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2,370.9
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||
Deferred revenues - initial franchise fees
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617.0
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—
|
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Other long-term liabilities
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1,129.2
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1,154.4
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Deferred income taxes
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|
1,201.8
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1,119.4
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Shareholders’ equity (deficit)
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Preferred stock, no par value; authorized – 165.0 million shares; issued – none
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—
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—
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Common stock, $.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares
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16.6
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16.6
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Additional paid-in capital
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7,257.2
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7,072.4
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Retained earnings
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49,076.2
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48,325.8
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Accumulated other comprehensive income (loss)
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(2,508.3
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)
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(2,178.4
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)
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Common stock in treasury, at cost; 889.7 and 866.5 million shares
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(60,634.3
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)
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(56,504.4
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)
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Total shareholders’ equity (deficit)
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(6,792.6
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)
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(3,268.0
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)
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Total liabilities and shareholders’ equity (deficit)
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$
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34,053.7
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$
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33,803.7
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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
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|||||||||||||
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||||||||
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Quarters Ended
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Nine Months Ended
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||||||||||||||
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September 30,
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September 30,
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||||||||||||||
In millions, except per share data
|
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2018
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2017
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2018
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2017
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||||||||
Revenues
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Sales by Company-operated restaurants
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$
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2,511.0
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$
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3,064.3
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$
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7,641.5
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$
|
10,045.8
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Revenues from franchised restaurants
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2,858.4
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2,690.3
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8,220.7
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7,434.4
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Total revenues
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5,369.4
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5,754.6
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15,862.2
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17,480.2
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Operating costs and expenses
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Company-operated restaurant expenses
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2,047.9
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2,479.8
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6,309.3
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8,199.5
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Franchised restaurants-occupancy expenses
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499.4
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457.3
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1,463.6
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1,325.4
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Selling, general & administrative expenses
|
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515.2
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|
567.0
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1,590.4
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1,613.7
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||||
Other operating (income) expense, net
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(110.8
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)
|
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(828.9
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)
|
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(324.2
|
)
|
|
|
(1,066.9
|
)
|
||||
Total operating costs and expenses
|
|
2,951.7
|
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|
2,675.2
|
|
|
|
9,039.1
|
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|
10,071.7
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|
||||
Operating income
|
|
2,417.7
|
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|
|
3,079.4
|
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|
|
6,823.1
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|
|
7,408.5
|
|
||||
Interest expense
|
|
250.1
|
|
|
|
236.7
|
|
|
|
727.1
|
|
|
|
686.2
|
|
||||
Nonoperating (income) expense, net
|
|
8.9
|
|
|
|
23.2
|
|
|
|
31.3
|
|
|
|
33.9
|
|
||||
Income before provision for income taxes
|
|
2,158.7
|
|
|
|
2,819.5
|
|
|
|
6,064.7
|
|
|
|
6,688.4
|
|
||||
Provision for income taxes
|
|
521.4
|
|
|
|
935.8
|
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|
|
1,555.7
|
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|
|
2,194.8
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||||
Net income
|
|
$
|
1,637.3
|
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|
|
$
|
1,883.7
|
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$
|
4,509.0
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|
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$
|
4,493.6
|
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Earnings per common share-basic
|
|
$
|
2.12
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|
|
$
|
2.34
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$
|
5.77
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|
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$
|
5.54
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|
Earnings per common share-diluted
|
|
$
|
2.10
|
|
|
|
$
|
2.32
|
|
|
|
$
|
5.72
|
|
|
|
$
|
5.48
|
|
Dividends declared per common share
|
|
$
|
2.17
|
|
|
|
$
|
1.95
|
|
|
|
$
|
4.19
|
|
|
|
$
|
3.83
|
|
Weighted-average shares outstanding-basic
|
|
772.8
|
|
|
|
805.3
|
|
|
|
781.2
|
|
|
|
811.8
|
|
||||
Weighted-average shares outstanding-diluted
|
|
779.6
|
|
|
|
813.5
|
|
|
|
788.5
|
|
|
|
819.4
|
|
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
|
|
|
|
|
|
|
|||||||||||||
|
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|
|
|
|
|
|
|
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|
||||||||
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Quarters Ended
|
|
|
Nine Months Ended
|
||||||||||||||
|
|
September 30,
|
|
|
September 30,
|
||||||||||||||
In millions
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
||||||||
Net income
|
|
$
|
1,637.3
|
|
|
|
$
|
1,883.7
|
|
|
|
$
|
4,509.0
|
|
|
|
$
|
4,493.6
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in accumulated other comprehensive
income ("AOCI"), including net investment hedges |
(78.8
|
)
|
|
|
247.3
|
|
|
|
(379.5
|
)
|
|
|
780.6
|
|
|||||
Reclassification of (gain) loss to net income
|
—
|
|
|
|
4.9
|
|
|
|
—
|
|
|
|
109.3
|
|
|||||
Foreign currency translation adjustments-net of tax
benefit (expense) of $(19.0), $104.0, $(90.6) and $376.4 |
(78.8
|
)
|
|
|
252.2
|
|
|
|
(379.5
|
)
|
|
|
889.9
|
|
|||||
Cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in AOCI
|
8.6
|
|
|
|
(14.5
|
)
|
|
|
33.2
|
|
|
|
(44.8
|
)
|
|||||
Reclassification of (gain) loss to net income
|
(5.2
|
)
|
|
|
9.1
|
|
|
|
10.4
|
|
|
|
3.2
|
|
|||||
Cash flow hedges-net of tax benefit (expense) of $(1.2), $3.1, $(13.0) and $23.5
|
3.4
|
|
|
|
(5.4
|
)
|
|
|
43.6
|
|
|
|
(41.6
|
)
|
|||||
Defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gain (loss) recognized in AOCI
|
—
|
|
|
|
—
|
|
|
|
(1.1
|
)
|
|
|
(0.3
|
)
|
|||||
Reclassification of (gain) loss to net income
|
2.1
|
|
|
|
2.9
|
|
|
|
7.1
|
|
|
|
8.2
|
|
|||||
Defined benefit pension plans-net of tax benefit (expense)
of $0.0, $0.0, $(0.8) and $(0.5) |
2.1
|
|
|
|
2.9
|
|
|
|
6.0
|
|
|
|
7.9
|
|
|||||
Total other comprehensive income (loss), net of tax
|
(73.3
|
)
|
|
|
249.7
|
|
|
|
(329.9
|
)
|
|
|
856.2
|
|
|||||
Comprehensive income (loss)
|
|
$
|
1,564.0
|
|
|
|
$
|
2,133.4
|
|
|
|
$
|
4,179.1
|
|
|
|
$
|
5,349.8
|
|
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
|
|
Quarters Ended
|
|
|
Nine Months Ended
|
||||||||||||||
|
|
September 30,
|
|
|
September 30,
|
||||||||||||||
In millions
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
||||||||
Operating activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
|
$
|
1,637.3
|
|
|
|
$
|
1,883.7
|
|
|
|
$
|
4,509.0
|
|
|
|
$
|
4,493.6
|
|
Adjustments to reconcile to cash provided by operations
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Charges and credits:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization
|
|
375.1
|
|
|
|
355.8
|
|
|
|
1,103.0
|
|
|
|
1,020.6
|
|
||||
Deferred income taxes
|
|
31.1
|
|
|
|
225.1
|
|
|
|
114.7
|
|
|
|
375.6
|
|
||||
Share-based compensation
|
|
36.0
|
|
|
|
39.5
|
|
|
|
99.7
|
|
|
|
83.5
|
|
||||
Net gain on sale of restaurant businesses
|
|
(68.0
|
)
|
|
|
(902.0
|
)
|
|
|
(257.1
|
)
|
|
|
(1,065.2
|
)
|
||||
Other
|
|
15.3
|
|
|
|
(42.3
|
)
|
|
|
58.8
|
|
|
|
(67.8
|
)
|
||||
Changes in working capital items
|
|
444.3
|
|
|
|
124.7
|
|
|
|
(173.0
|
)
|
|
|
(398.4
|
)
|
||||
Cash provided by operations
|
|
2,471.1
|
|
|
|
1,684.5
|
|
|
|
5,455.1
|
|
|
|
4,441.9
|
|
||||
Investing activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Capital expenditures
|
|
(703.8
|
)
|
|
|
(416.9
|
)
|
|
|
(1,867.9
|
)
|
|
|
(1,213.3
|
)
|
||||
Purchases of restaurant businesses
|
|
(40.2
|
)
|
|
|
(20.8
|
)
|
|
|
(75.5
|
)
|
|
|
(38.9
|
)
|
||||
Sales of restaurant businesses
|
|
109.5
|
|
|
|
1.9
|
|
|
|
439.4
|
|
|
|
851.8
|
|
||||
Proceeds from sale of businesses in China and Hong Kong
|
|
—
|
|
|
|
1,597.0
|
|
|
|
—
|
|
|
|
1,597.0
|
|
||||
Sales of property
|
|
11.3
|
|
|
|
59.2
|
|
|
|
135.8
|
|
|
|
153.3
|
|
||||
Other
|
|
(98.1
|
)
|
|
|
(45.7
|
)
|
|
|
(203.0
|
)
|
|
|
(183.9
|
)
|
||||
Cash provided by (used for) investing activities
|
|
(721.3
|
)
|
|
|
1,174.7
|
|
|
|
(1,571.2
|
)
|
|
|
1,166.0
|
|
||||
Financing activities
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net short-term borrowings
|
|
(801.4
|
)
|
|
|
(55.8
|
)
|
|
|
(5.7
|
)
|
|
|
(834.3
|
)
|
||||
Long-term financing issuances
|
|
1,791.9
|
|
|
|
0.4
|
|
|
|
3,792.1
|
|
|
|
2,530.5
|
|
||||
Long-term financing repayments
|
|
(1.9
|
)
|
|
|
(3.6
|
)
|
|
|
(1,004.7
|
)
|
|
|
(407.1
|
)
|
||||
Treasury stock purchases
|
|
(1,040.7
|
)
|
|
|
(2,081.7
|
)
|
|
|
(4,280.8
|
)
|
|
|
(3,937.4
|
)
|
||||
Common stock dividends
|
|
(779.8
|
)
|
|
|
(755.3
|
)
|
|
|
(2,363.4
|
)
|
|
|
(2,287.4
|
)
|
||||
Proceeds from stock option exercises
|
|
69.2
|
|
|
|
82.5
|
|
|
|
236.2
|
|
|
|
373.1
|
|
||||
Other
|
|
(5.3
|
)
|
|
|
3.5
|
|
|
|
(12.1
|
)
|
|
|
(1.1
|
)
|
||||
Cash used for financing activities
|
|
(768.0
|
)
|
|
|
(2,810.0
|
)
|
|
|
(3,638.4
|
)
|
|
|
(4,563.7
|
)
|
||||
Effect of exchange rates on cash and cash equivalents
|
|
(30.8
|
)
|
|
|
76.2
|
|
|
|
(134.8
|
)
|
|
|
229.6
|
|
||||
Cash and equivalents increase
|
|
951.0
|
|
|
|
125.4
|
|
|
|
110.7
|
|
|
|
1,273.8
|
|
||||
Change in cash balances of businesses held for sale
|
|
—
|
|
|
|
153.4
|
|
|
|
—
|
|
|
|
174.0
|
|
||||
Cash and equivalents at beginning of period
|
|
1,623.5
|
|
|
|
2,392.4
|
|
|
|
2,463.8
|
|
|
|
1,223.4
|
|
||||
Cash and equivalents at end of period
|
|
$
|
2,574.5
|
|
|
|
$
|
2,671.2
|
|
|
|
$
|
2,574.5
|
|
|
|
$
|
2,671.2
|
|
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
|
|||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
Common stock
issued |
|
|
|
|
|
|
Accumulated other
comprehensive income (loss) |
|
|
Common stock in
treasury |
|
Total
shareholders’ equity |
|
|||||||||||||||||||||||
Additional
paid-in capital |
|
|
Retained
earnings |
|
Pensions
|
|
Cash flow
hedges |
|
Foreign
currency translation |
|
|
||||||||||||||||||||||||||
In millions, except per share data
|
Shares
|
|
Amount
|
|
Shares
|
|
|
Amount
|
|
||||||||||||||||||||||||||||
Balance at December 31, 2017
|
1,660.6
|
|
|
$
|
16.6
|
|
|
$
|
7,072.4
|
|
|
$
|
48,325.8
|
|
|
$
|
(190.2
|
)
|
|
$
|
(16.5
|
)
|
|
$
|
(1,971.7
|
)
|
|
(866.5
|
)
|
|
$
|
(56,504.4
|
)
|
|
$
|
(3,268.0
|
)
|
Net income
|
|
|
|
|
|
|
4,509.0
|
|
|
|
|
|
|
|
|
|
|
|
|
4,509.0
|
|
||||||||||||||||
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
6.0
|
|
|
43.6
|
|
|
(379.5
|
)
|
|
|
|
|
|
(329.9
|
)
|
|||||||||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,179.1
|
|
|||||||||||||||||
Adoption of ASC 606 (1)
|
|
|
|
|
|
|
(450.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(450.2
|
)
|
||||||||||||||||
Adoption of ASU 2016-16 (2)
|
|
|
|
|
|
|
(57.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(57.0
|
)
|
||||||||||||||||
Common stock cash dividends
($4.19 per share) |
|
|
|
|
|
|
(3,251.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(3,251.4
|
)
|
||||||||||||||||
Treasury stock purchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26.7
|
)
|
|
(4,280.8
|
)
|
|
(4,280.8
|
)
|
|||||||||||||||
Share-based compensation
|
|
|
|
|
99.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99.7
|
|
||||||||||||||||
Stock option exercises and other
|
|
|
|
|
85.1
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
|
150.9
|
|
|
236.0
|
|
||||||||||||||
Balance at September 30, 2018
|
1,660.6
|
|
|
16.6
|
|
|
7,257.2
|
|
|
49,076.2
|
|
|
(184.2
|
)
|
|
27.1
|
|
|
(2,351.2
|
)
|
|
(889.7
|
)
|
|
(60,634.3
|
)
|
|
(6,792.6
|
)
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
Restaurants at September 30,
|
2018
|
|
2017
|
||
Conventional franchised
|
21,586
|
|
|
21,214
|
|
Developmental licensed
|
7,103
|
|
|
6,824
|
|
Foreign affiliated
|
6,056
|
|
|
5,708
|
|
Total Franchised
|
34,745
|
|
|
33,746
|
|
Company-operated
|
2,812
|
|
|
3,230
|
|
Systemwide restaurants
|
37,557
|
|
|
36,976
|
|
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
2017
|
|
|||||
Company-operated sales
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S.
|
|
$
|
637.3
|
|
|
$
|
798.7
|
|
|
$
|
2,042.8
|
|
|
$
|
2,483.8
|
|
International Lead Markets
|
|
992.3
|
|
|
1,076.3
|
|
|
3,022.1
|
|
|
3,038.9
|
|
||||
High Growth Markets
|
|
737.8
|
|
|
1,054.9
|
|
|
2,170.7
|
|
|
3,859.5
|
|
||||
Foundational Markets & Corporate
|
|
143.6
|
|
|
134.4
|
|
|
405.9
|
|
|
663.6
|
|
||||
Total
|
|
$
|
2,511.0
|
|
|
$
|
3,064.3
|
|
|
$
|
7,641.5
|
|
|
$
|
10,045.8
|
|
Franchised revenues
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
1,292.7
|
|
|
$
|
1,224.6
|
|
|
$
|
3,715.6
|
|
|
$
|
3,516.9
|
|
International Lead Markets
|
|
948.2
|
|
|
894.2
|
|
|
2,726.8
|
|
|
2,388.3
|
|
||||
High Growth Markets
|
|
302.4
|
|
|
267.2
|
|
|
855.7
|
|
|
679.0
|
|
||||
Foundational Markets & Corporate
|
|
315.1
|
|
|
304.3
|
|
|
922.6
|
|
|
850.2
|
|
||||
Total*
|
|
$
|
2,858.4
|
|
|
$
|
2,690.3
|
|
|
$
|
8,220.7
|
|
|
$
|
7,434.4
|
|
Total revenues
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
1,930.0
|
|
|
$
|
2,023.3
|
|
|
$
|
5,758.4
|
|
|
$
|
6,000.7
|
|
International Lead Markets
|
|
1,940.5
|
|
|
1,970.5
|
|
|
5,748.9
|
|
|
5,427.2
|
|
||||
High Growth Markets
|
|
1,040.2
|
|
|
1,322.1
|
|
|
3,026.4
|
|
|
4,538.5
|
|
||||
Foundational Markets & Corporate
|
|
458.7
|
|
|
438.7
|
|
|
1,328.5
|
|
|
1,513.8
|
|
||||
Total
|
|
$
|
5,369.4
|
|
|
$
|
5,754.6
|
|
|
$
|
15,862.2
|
|
|
$
|
17,480.2
|
|
*
|
The Company expects the application of ASC 606 to negatively impact 2018 annual franchised revenues by approximately $50 million. Results for the quarter and nine months ended September 30, 2018, reflected an impact of approximately $10 million and $25 million, respectively, due to the timing of new restaurant openings and new franchise terms.
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||||||
In millions
|
Balance Sheet Classification
|
|
September 30, 2018
|
|
December 31, 2017
|
|
Balance Sheet Classification
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|||||||||||
Foreign currency
|
Prepaid expenses and other current assets
|
|
$
|
24.7
|
|
|
$
|
0.5
|
|
|
Accrued payroll and other liabilities
|
|
$
|
(1.7
|
)
|
|
$
|
(31.0
|
)
|
Interest rate
|
|
|
|
|
|
|
Accrued payroll and other liabilities
|
|
(0.6
|
)
|
|
(0.3
|
)
|
||||||
Foreign currency
|
Miscellaneous other assets
|
|
6.5
|
|
|
0.1
|
|
|
Other long-term liabilities
|
|
(0.3
|
)
|
|
(1.4
|
)
|
||||
Interest rate
|
Miscellaneous other assets
|
|
3.0
|
|
|
—
|
|
|
Other long-term liabilities
|
|
(27.7
|
)
|
|
(5.9
|
)
|
||||
Total derivatives designated as hedging instruments
|
|
$
|
34.2
|
|
|
$
|
0.6
|
|
|
|
|
$
|
(30.3
|
)
|
|
$
|
(38.6
|
)
|
|
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|||||||||||
Equity
|
Prepaid expenses and other current assets
|
|
$
|
166.4
|
|
|
$
|
—
|
|
|
Accrued payroll and other liabilities
|
|
$
|
(0.2
|
)
|
|
$
|
(1.3
|
)
|
Foreign currency
|
Prepaid expenses and other current assets
|
|
12.1
|
|
|
—
|
|
|
Accrued payroll and other liabilities
|
|
—
|
|
|
(5.5
|
)
|
||||
Equity
|
Miscellaneous other assets
|
|
—
|
|
|
167.3
|
|
|
|
|
|
|
|
||||||
Total derivatives not designated as hedging instruments
|
|
$
|
178.5
|
|
|
$
|
167.3
|
|
|
|
|
$
|
(0.2
|
)
|
|
$
|
(6.8
|
)
|
|
Total derivatives
|
|
$
|
212.7
|
|
|
$
|
167.9
|
|
|
|
|
$
|
(30.5
|
)
|
|
$
|
(45.4
|
)
|
•
|
U.S. - the Company's largest segment
|
•
|
International Lead Markets - established markets including Australia, Canada, France, Germany, the U.K. and related markets
|
•
|
High Growth Markets - markets the Company believes have relatively higher restaurant expansion and franchising potential including China, Italy, South Korea, Poland, Russia, Spain, Switzerland, the Netherlands and related markets
|
•
|
Foundational Markets & Corporate - the remaining markets in the McDonald's system, most of which operate under a largely franchised model. Corporate activities are also reported within this segment.
|
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
In millions
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
U.S.
|
$
|
1,930.0
|
|
|
$
|
2,023.3
|
|
|
$
|
5,758.4
|
|
|
$
|
6,000.7
|
|
International Lead Markets
|
1,940.5
|
|
|
1,970.5
|
|
|
5,748.9
|
|
|
5,427.2
|
|
||||
High Growth Markets
|
1,040.2
|
|
|
1,322.1
|
|
|
3,026.4
|
|
|
4,538.5
|
|
||||
Foundational Markets & Corporate
|
458.7
|
|
|
438.7
|
|
|
1,328.5
|
|
|
1,513.8
|
|
||||
Total revenues
|
$
|
5,369.4
|
|
|
$
|
5,754.6
|
|
|
$
|
15,862.2
|
|
|
$
|
17,480.2
|
|
Operating Income
|
|
|
|
|
|
|
|
||||||||
U.S.
|
$
|
1,061.8
|
|
|
$
|
1,034.6
|
|
|
$
|
3,059.0
|
|
|
$
|
3,055.4
|
|
International Lead Markets
|
913.9
|
|
|
913.6
|
|
|
2,613.5
|
|
|
2,356.2
|
|
||||
High Growth Markets
|
330.1
|
|
|
1,073.8
|
|
|
847.1
|
|
|
1,724.0
|
|
||||
Foundational Markets & Corporate
|
111.9
|
|
|
57.4
|
|
|
303.5
|
|
|
272.9
|
|
||||
Total operating income
|
$
|
2,417.7
|
|
|
$
|
3,079.4
|
|
|
$
|
6,823.1
|
|
|
$
|
7,408.5
|
|
•
|
Global comparable sales increased 4.2% for the quarter and 4.5% for the nine months, reflecting positive comparable sales in all segments.
|
•
|
Due to the impact of the Company's strategic refranchising initiative, consolidated revenues decreased 7% (5% in constant currencies) for the quarter and 9% (11% in constant currencies) for the nine months.
|
•
|
Systemwide sales increased 5% in constant currencies for the quarter and 6% in constant currencies for the nine months.
|
•
|
Consolidated operating income decreased 21% (20% in constant currencies) for the quarter and 8% (10% in constant currencies) for the nine months. Diluted earnings per share of $2.10 decreased 9% (7% in constant currencies) for the quarter and $5.72 for the nine months increased 4% (3% in constant currencies).
|
◦
|
Results for the quarter and nine months 2017 reflected a pre-tax gain of approximately $850 million on the sale of the Company's businesses in China and Hong Kong, partly offset by $111 million of unrelated impairment charges.
|
◦
|
Results for the nine months 2018 included pre-tax strategic restructuring charges of $94 million (of which $85 million relates to the restructuring of the U.S. business).
|
◦
|
Excluding these current year and prior year items:
|
▪
|
Consolidated operating income increased 2% (4% in constant currencies) for the quarter and 3% (1% in constant currencies) for the nine months.
|
▪
|
Diluted earnings per share for the quarter increased 19% (22% in constant currencies) and 17% (15% in constant currencies) for the nine months.
|
•
|
Returned $1.7 billion to shareholders through share repurchases and dividends for the quarter. This brings the nine months return to shareholders to $6.6 billion.
|
•
|
Changes in Systemwide sales are driven by comparable sales, net restaurant unit expansion, and the potential impacts of hyper-inflation. The Company expects net restaurant additions to add approximately 1 percentage point to 2018 Systemwide sales growth (in constant currencies).
|
•
|
The Company does not generally provide specific guidance on changes in comparable sales. However, as a perspective, assuming no change in cost structure, a 1 percentage point change in comparable sales for either the U.S. or the International Lead segment would change annual diluted earnings per share by about 5 to 6 cents.
|
•
|
Effective January 1, 2018, the Company adopted the guidance issued in Accounting Standards Codification 606, "Revenue Recognition - Revenue from Contracts with Customers." This standard changed the way initial fees from franchisees for new restaurant openings and new franchise terms are recognized. Under the new guidance, initial franchise fees will be recognized evenly over the franchise term. The Company expects the adoption of this guidance to negatively impact 2018 Consolidated franchised revenues and franchised margins by approximately $50 million.
|
•
|
With about 75% of McDonald's grocery bill comprised of 10 different commodities, a basket of goods approach is the most comprehensive way to look at the Company's commodity costs. For the full-year 2018, costs for the total basket of goods are expected to increase about 2% in the U.S. and International Lead segments.
|
•
|
The Company expects full-year 2018 selling, general and administrative expenses to decrease about 1% to 2% in constant currencies.
|
•
|
Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full-year 2018 to increase about 6% to 7% due primarily to higher average debt balances.
|
•
|
A significant part of the Company's operating income is generated outside the U.S., and about 40% of its total debt is denominated in foreign currencies. Accordingly, earnings are affected by changes in foreign currency exchange rates, particularly the Euro, British Pound, Australian Dollar and Canadian Dollar. Collectively, these currencies represent approximately 70% of the Company's operating income outside the U.S. If all four of these currencies moved by 10% in the same direction, the Company's annual diluted earnings per share would change by about 30 cents.
|
•
|
While the Company expects the effective income tax rate for the full-year 2018 to be in the 24% to 26% range, during the fourth quarter the Company will finalize the provisional amounts recorded in December 2017 under the Tax Act, which may cause the final full-year tax rate to be below this range.
|
•
|
The Company expects capital expenditures for 2018 to be approximately $2.5 billion. About $1.6 billion will be dedicated to our U.S. business, primarily focused on accelerating the pace of EOTF. We expect to complete EOTF in about 4,000 additional U.S. restaurants in 2018, and, as a result, about half of the total U.S. restaurants will have EOTF by the end of 2018. Of the remaining capital, about half will be dedicated to new restaurant openings and the remainder will be primarily allocated to reinvestment in continued expansion of EOTF around the world. The Company will contribute capital towards about 250 restaurant openings, while developmental licensees and affiliates will contribute capital towards the opening of approximately 750 restaurants, for a total of about 1,000 expected restaurant openings in 2018. The Company expects net additions of about 600 restaurants in 2018.
|
•
|
As detailed in the Company's Form 8-K filed with the Securities and Exchange Commission on September 21, 2018, the Company increased its return to shareholder target to about $25 billion for the 3-year period ending 2019.
|
•
|
The Company has other long-term targets that are detailed in its Form 10-K for the year ended December 31, 2017.
|
•
|
Information in constant currency is calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other
|
•
|
Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance, because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base.
|
•
|
Comparable sales represent sales at all restaurants and comparable guest counts represent the number of transactions at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters. Comparable sales exclude the impact of currency translation and sales from hyper-inflationary markets (currently only Venezuela). Management generally identifies hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%. Management believes that these exclusions more accurately reflect the underlying business trends. Comparable sales are driven by changes in guest counts and average check, which is affected by changes in pricing and product mix. Typically, pricing has a greater impact on average check than product mix. Management reviews the increase or decrease in comparable sales and comparable guest counts compared with the same period in the prior year to assess business trends.
|
CONSOLIDATED OPERATING RESULTS
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
Quarter Ended
|
|
Nine Months Ended
|
||||||||||||
Dollars in millions, except per share data
|
September 30, 2018
|
|
September 30, 2018
|
||||||||||||
|
Amount
|
|
|
Increase/
(Decrease)
|
|
|
Amount
|
|
|
Increase/
(Decrease)
|
|
||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||
Sales by Company-operated restaurants
|
|
$
|
2,511.0
|
|
|
(18
|
)%
|
|
|
$
|
7,641.5
|
|
|
(24
|
)%
|
Revenues from franchised restaurants
|
|
2,858.4
|
|
|
6
|
|
|
|
8,220.7
|
|
|
11
|
|
||
Total revenues
|
|
5,369.4
|
|
|
(7
|
)
|
|
|
15,862.2
|
|
|
(9
|
)
|
||
Operating costs and expenses
|
|
|
|
|
|
|
|
|
|
||||||
Company-operated restaurant expenses
|
|
2,047.9
|
|
|
(17
|
)
|
|
|
6,309.3
|
|
|
(23
|
)
|
||
Franchised restaurants-occupancy expenses
|
|
499.4
|
|
|
9
|
|
|
|
1,463.6
|
|
|
10
|
|
||
Selling, general & administrative expenses
|
|
515.2
|
|
|
(9
|
)
|
|
|
1,590.4
|
|
|
(1
|
)
|
||
Other operating (income) expense, net
|
|
(110.8
|
)
|
|
87
|
|
|
|
(324.2
|
)
|
|
70
|
|
||
Total operating costs and expenses
|
|
2,951.7
|
|
|
10
|
|
|
|
9,039.1
|
|
|
(10
|
)
|
||
Operating income
|
|
2,417.7
|
|
|
(21
|
)
|
|
|
6,823.1
|
|
|
(8
|
)
|
||
Interest expense
|
|
250.1
|
|
|
6
|
|
|
|
727.1
|
|
|
6
|
|
||
Nonoperating (income) expense, net
|
|
8.9
|
|
|
(62
|
)
|
|
|
31.3
|
|
|
(8
|
)
|
||
Income before provision for income taxes
|
|
2,158.7
|
|
|
(23
|
)
|
|
|
6,064.7
|
|
|
(9
|
)
|
||
Provision for income taxes
|
|
521.4
|
|
|
(44
|
)
|
|
|
1,555.7
|
|
|
(29
|
)
|
||
Net income
|
|
$
|
1,637.3
|
|
|
(13
|
)%
|
|
|
$
|
4,509.0
|
|
|
0
|
%
|
Earnings per common share-basic
|
|
$
|
2.12
|
|
|
(9
|
)%
|
|
|
$
|
5.77
|
|
|
4
|
%
|
Earnings per common share-diluted
|
|
$
|
2.10
|
|
|
(9
|
)%
|
|
|
$
|
5.72
|
|
|
4
|
%
|
IMPACT OF FOREIGN CURRENCY TRANSLATION
|
|
|
|
|
|
|
|
|
||||||
Dollars in millions, except per share data
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Currency
Translation
Benefit/ (Cost)
|
|
||||||
Quarters Ended September 30,
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|||
Revenues
|
|
$
|
5,369.4
|
|
|
|
$
|
5,754.6
|
|
|
|
$
|
(120.6
|
)
|
Company-operated margins
|
|
463.1
|
|
|
|
584.5
|
|
|
|
(16.2
|
)
|
|||
Franchised margins
|
|
2,359.0
|
|
|
|
2,233.0
|
|
|
|
(41.8
|
)
|
|||
Selling, general & administrative expenses
|
|
515.2
|
|
|
|
567.0
|
|
|
|
4.3
|
|
|||
Operating income
|
|
2,417.7
|
|
|
|
3,079.4
|
|
|
|
(54.6
|
)
|
|||
Net income
|
|
1,637.3
|
|
|
|
1,883.7
|
|
|
|
(36.8
|
)
|
|||
Earnings per share-diluted
|
|
$
|
2.10
|
|
|
|
$
|
2.32
|
|
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
Currency
Translation
Benefit/ (Cost)
|
|
||||||
Nine Months Ended September 30,
|
|
2018
|
|
|
|
2017
|
|
|
|
2018
|
|
|||
Revenues
|
|
$
|
15,862.2
|
|
|
|
$
|
17,480.2
|
|
|
|
$
|
289.1
|
|
Company-operated margins
|
|
1,332.2
|
|
|
|
1,846.3
|
|
|
|
21.6
|
|
|||
Franchised margins
|
|
6,757.1
|
|
|
|
6,109.0
|
|
|
|
114.4
|
|
|||
Selling, general & administrative expenses
|
|
1,590.4
|
|
|
|
1,613.7
|
|
|
|
(19.7
|
)
|
|||
Operating income
|
|
6,823.1
|
|
|
|
7,408.5
|
|
|
|
120.2
|
|
|||
Net income
|
|
4,509.0
|
|
|
|
4,493.6
|
|
|
|
70.0
|
|
|||
Earnings per share-diluted
|
|
$
|
5.72
|
|
|
|
$
|
5.48
|
|
|
|
$
|
0.09
|
|
REVENUES
|
|
|
|
|
|
|
|
|
||||||
Dollars in millions
|
|
|
|
|
|
|
|
|
||||||
Quarters Ended September 30,
|
|
2018
|
|
|
2017
|
|
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding
Currency
Translation
|
|
||
Company-operated sales
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
637.3
|
|
|
$
|
798.7
|
|
|
(20
|
)%
|
|
(20
|
)%
|
International Lead Markets
|
|
992.3
|
|
|
1,076.3
|
|
|
(8
|
)
|
|
(5
|
)
|
||
High Growth Markets
|
|
737.8
|
|
|
1,054.9
|
|
|
(30
|
)
|
|
(26
|
)
|
||
Foundational Markets & Corporate
|
|
143.6
|
|
|
134.4
|
|
|
7
|
|
|
11
|
|
||
Total
|
|
$
|
2,511.0
|
|
|
$
|
3,064.3
|
|
|
(18
|
)%
|
|
(16
|
)%
|
Franchised revenues
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
1,292.7
|
|
|
$
|
1,224.6
|
|
|
6
|
%
|
|
6
|
%
|
International Lead Markets
|
|
948.2
|
|
|
894.2
|
|
|
6
|
|
|
9
|
|
||
High Growth Markets
|
|
302.4
|
|
|
267.2
|
|
|
13
|
|
|
15
|
|
||
Foundational Markets & Corporate
|
|
315.1
|
|
|
304.3
|
|
|
3
|
|
|
9
|
|
||
Total
|
|
$
|
2,858.4
|
|
|
$
|
2,690.3
|
|
|
6
|
%
|
|
8
|
%
|
Total revenues
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
1,930.0
|
|
|
$
|
2,023.3
|
|
|
(5
|
)%
|
|
(5
|
)%
|
International Lead Markets
|
|
1,940.5
|
|
|
1,970.5
|
|
|
(2
|
)
|
|
1
|
|
||
High Growth Markets
|
|
1,040.2
|
|
|
1,322.1
|
|
|
(21
|
)
|
|
(18
|
)
|
||
Foundational Markets & Corporate
|
|
458.7
|
|
|
438.7
|
|
|
5
|
|
|
10
|
|
||
Total
|
|
$
|
5,369.4
|
|
|
$
|
5,754.6
|
|
|
(7
|
)%
|
|
(5
|
)%
|
|
|
|
|
|
|
|
|
|
||||||
Nine Months Ended September 30,
|
|
2018
|
|
|
2017
|
|
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding Currency Translation |
|
||
Company-operated sales
|
|
|
|
|
|
|
|
|
|
|||||
U.S.
|
|
$
|
2,042.8
|
|
|
$
|
2,483.8
|
|
|
(18
|
)%
|
|
(18
|
)%
|
International Lead Markets
|
|
3,022.1
|
|
|
3,038.9
|
|
|
(1
|
)
|
|
(5
|
)
|
||
High Growth Markets
|
|
2,170.7
|
|
|
3,859.5
|
|
|
(44
|
)
|
|
(44
|
)
|
||
Foundational Markets & Corporate
|
|
405.9
|
|
|
663.6
|
|
|
(39
|
)
|
|
(40
|
)
|
||
Total
|
|
$
|
7,641.5
|
|
|
$
|
10,045.8
|
|
|
(24
|
)%
|
|
(25
|
)%
|
Franchised revenues
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
3,715.6
|
|
|
$
|
3,516.9
|
|
|
6
|
%
|
|
6
|
%
|
International Lead Markets
|
|
2,726.8
|
|
|
2,388.3
|
|
|
14
|
|
|
10
|
|
||
High Growth Markets
|
|
855.7
|
|
|
679.0
|
|
|
26
|
|
|
20
|
|
||
Foundational Markets & Corporate
|
|
922.6
|
|
|
850.2
|
|
|
8
|
|
|
8
|
|
||
Total
|
|
$
|
8,220.7
|
|
|
$
|
7,434.4
|
|
|
11
|
%
|
|
9
|
%
|
Total revenues
|
|
|
|
|
|
|
|
|
||||||
U.S.
|
|
$
|
5,758.4
|
|
|
$
|
6,000.7
|
|
|
(4
|
)%
|
|
(4
|
)%
|
International Lead Markets
|
|
5,748.9
|
|
|
5,427.2
|
|
|
6
|
|
|
2
|
|
||
High Growth Markets
|
|
3,026.4
|
|
|
4,538.5
|
|
|
(33
|
)
|
|
(34
|
)
|
||
Foundational Markets & Corporate
|
|
1,328.5
|
|
|
1,513.8
|
|
|
(12
|
)
|
|
(13
|
)
|
||
Total
|
|
$
|
15,862.2
|
|
|
$
|
17,480.2
|
|
|
(9
|
)%
|
|
(11
|
)%
|
•
|
Revenues: Revenues decreased 7% (5% in constant currencies) for the quarter and decreased 9% (11% in constant currencies) for the nine months due to the Company's strategic refranchising initiative.
|
•
|
U.S.: Revenues decreased for both periods as the benefit from positive comparable sales was more than offset by the impact of refranchising.
|
•
|
International Lead Markets: Revenues decreased for the quarter and increased for the nine months. In constant currencies, revenues increased for both periods as positive comparable sales across all markets were partly offset by the impact of refranchising.
|
•
|
High Growth Markets: Revenues decreased for both periods as positive comparable sales across most markets were more than offset by the impact of refranchising the Company's businesses in China and Hong Kong in third quarter 2017.
|
COMPARABLE SALES
|
|
|
|
|
|
||||||
|
Increase/ (Decrease)
|
||||||||||
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
U.S.
|
2.4
|
%
|
|
4.1
|
%
|
|
2.6
|
%
|
|
3.3
|
%
|
International Lead Markets
|
5.4
|
|
|
5.7
|
|
|
6.0
|
|
|
5.0
|
|
High Growth Markets
|
4.6
|
|
|
6.2
|
|
|
3.9
|
|
|
5.7
|
|
Foundational Markets & Corporate
|
6.0
|
|
|
8.0
|
|
|
7.1
|
|
|
9.3
|
|
Total
|
4.2
|
%
|
|
5.6
|
%
|
|
4.5
|
%
|
|
5.2
|
%
|
SYSTEMWIDE SALES*
|
|
|
|
|
|
|
||||
|
Quarter Ended
|
|
Nine Months Ended
|
|||||||
|
September 30, 2018
|
|
September 30, 2018
|
|||||||
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding Currency Translation |
|
|
Inc/ (Dec)
|
|
Inc/ (Dec)
Excluding Currency Translation |
|
U.S.
|
2
|
%
|
|
2
|
%
|
|
2
|
%
|
2
|
%
|
International Lead Markets
|
3
|
|
|
6
|
|
|
11
|
|
7
|
|
High Growth Markets
|
6
|
|
|
8
|
|
|
11
|
|
8
|
|
Foundational Markets & Corporate
|
2
|
|
|
9
|
|
|
9
|
|
10
|
|
Total
|
3
|
%
|
|
5
|
%
|
|
7
|
%
|
6
|
%
|
*
|
Unlike comparable sales, the Company has not excluded hyper-inflationary market results (currently only Venezuela) from Systemwide sales as these sales are the basis on which the Company calculates and records revenues.
|
FRANCHISED SALES
|
|
|
|
|
|
|
|
|
||||||
Dollars in millions
|
|
|
|
|
|
|
|
|
||||||
Quarters Ended September 30,
|
|
2018
|
|
|
2017
|
|
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding Currency Translation |
|
||
U.S.
|
|
$
|
9,240.5
|
|
|
$
|
8,869.2
|
|
|
4
|
%
|
|
4
|
%
|
International Lead Markets
|
|
5,473.3
|
|
|
5,175.7
|
|
|
6
|
|
|
9
|
|
||
High Growth Markets*
|
|
2,584.4
|
|
|
2,083.6
|
|
|
24
|
|
|
26
|
|
||
Foundational Markets & Corporate
|
|
4,957.3
|
|
|
4,876.1
|
|
|
2
|
|
|
9
|
|
||
Total
|
|
$
|
22,255.5
|
|
|
$
|
21,004.6
|
|
|
6
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
||||||
Ownership type
|
|
|
|
|
|
|
|
|
||||||
Conventional franchised
|
|
$
|
16,366.0
|
|
|
$
|
15,611.2
|
|
|
5
|
%
|
|
6
|
%
|
Developmental licensed
|
|
3,463.5
|
|
|
3,436.5
|
|
|
1
|
|
|
10
|
|
||
Foreign affiliated*
|
|
2,426.0
|
|
|
1,956.9
|
|
|
24
|
|
|
25
|
|
||
Total
|
|
$
|
22,255.5
|
|
|
$
|
21,004.6
|
|
|
6
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
||||||
Nine Months Ended September 30,
|
|
2018
|
|
|
2017
|
|
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding Currency Translation |
|
||
U.S.
|
|
$
|
26,699.8
|
|
|
$
|
25,574.8
|
|
|
4
|
%
|
|
4
|
%
|
International Lead Markets
|
|
15,720.7
|
|
|
13,787.1
|
|
|
14
|
|
|
10
|
|
||
High Growth Markets*
|
|
7,379.1
|
|
|
4,709.3
|
|
|
57
|
|
|
50
|
|
||
Foundational Markets & Corporate
|
|
14,674.9
|
|
|
13,227.8
|
|
|
11
|
|
|
13
|
|
||
Total
|
|
$
|
64,474.5
|
|
|
$
|
57,299.0
|
|
|
13
|
%
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
||||||
Ownership type
|
|
|
|
|
|
|
|
|
||||||
Conventional franchised
|
|
$
|
47,222.8
|
|
|
$
|
43,856.6
|
|
|
8
|
%
|
|
6
|
%
|
Developmental licensed
|
|
10,149.0
|
|
|
9,111.2
|
|
|
11
|
|
|
15
|
|
||
Foreign affiliated*
|
|
7,102.7
|
|
|
4,331.2
|
|
|
64
|
|
|
60
|
|
||
Total
|
|
$
|
64,474.5
|
|
|
$
|
57,299.0
|
|
|
13
|
%
|
|
11
|
%
|
*
|
Reflects the impact of refranchising the Company's businesses in China and Hong Kong in the third quarter of 2017.
|
FRANCHISED AND COMPANY-OPERATED RESTAURANT MARGINS
|
|||||||||||||||||||
Dollars in millions
|
|||||||||||||||||||
|
Percent
|
|
Amount
|
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding
Currency
Translation
|
|
||||||||||
Quarters Ended September 30,
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
||||||
Franchised
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
81.5
|
%
|
|
82.9
|
%
|
|
$
|
1,052.9
|
|
|
$
|
1,014.9
|
|
|
4
|
%
|
|
4
|
%
|
International Lead Markets
|
82.0
|
|
|
81.6
|
|
|
777.8
|
|
|
729.5
|
|
|
7
|
|
|
10
|
|
||
High Growth Markets
|
77.3
|
|
|
76.0
|
|
|
233.9
|
|
|
203.1
|
|
|
15
|
|
|
17
|
|
||
Foundational Markets & Corporate
|
93.5
|
|
|
93.8
|
|
|
294.4
|
|
|
285.5
|
|
|
3
|
|
|
9
|
|
||
Total
|
82.5
|
%
|
|
83.0
|
%
|
|
$
|
2,359.0
|
|
|
$
|
2,233.0
|
|
|
6
|
%
|
|
8
|
%
|
Company-operated
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
12.8
|
%
|
|
15.5
|
%
|
|
$
|
81.3
|
|
|
$
|
124.2
|
|
|
(35
|
)%
|
|
(35
|
)%
|
International Lead Markets
|
22.5
|
|
|
21.9
|
|
|
223.2
|
|
|
235.5
|
|
|
(5
|
)
|
|
(3
|
)
|
||
High Growth Markets
|
17.1
|
|
|
18.5
|
|
|
126.3
|
|
|
195.5
|
|
|
(35
|
)
|
|
(31
|
)
|
||
Foundational Markets & Corporate
|
22.5
|
|
|
21.8
|
|
|
32.3
|
|
|
29.3
|
|
|
10
|
|
|
15
|
|
||
Total
|
18.4
|
%
|
|
19.1
|
%
|
|
$
|
463.1
|
|
|
$
|
584.5
|
|
|
(21
|
)%
|
|
(18
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Percent
|
|
Amount
|
|
Inc/ (Dec)
|
|
|
Inc/ (Dec)
Excluding Currency Translation |
|
||||||||||
Nine Months Ended September 30,
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
||||||
Franchised
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
81.6
|
%
|
|
82.4
|
%
|
|
$
|
3,033.0
|
|
|
$
|
2,898.9
|
|
|
5
|
%
|
|
5
|
%
|
International Lead Markets
|
81.1
|
|
|
80.7
|
|
|
2,211.4
|
|
|
1,927.5
|
|
|
15
|
|
|
10
|
|
||
High Growth Markets
|
76.1
|
|
|
72.8
|
|
|
651.4
|
|
|
494.4
|
|
|
32
|
|
|
26
|
|
||
Foundational Markets & Corporate
|
93.4
|
|
|
92.7
|
|
|
861.3
|
|
|
788.2
|
|
|
9
|
|
|
10
|
|
||
Total
|
82.2
|
%
|
|
82.2
|
%
|
|
$
|
6,757.1
|
|
|
$
|
6,109.0
|
|
|
11
|
%
|
|
9
|
%
|
Company-operated
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
U.S.
|
14.9
|
%
|
|
15.8
|
%
|
|
$
|
304.6
|
|
|
$
|
392.3
|
|
|
(22
|
)%
|
|
(22
|
)%
|
International Lead Markets
|
21.3
|
|
|
21.2
|
|
|
643.6
|
|
|
643.2
|
|
|
0
|
|
|
(4
|
)
|
||
High Growth Markets
|
13.9
|
|
|
17.9
|
|
|
302.6
|
|
|
689.6
|
|
|
(56
|
)
|
|
(55
|
)
|
||
Foundational Markets & Corporate
|
20.1
|
|
|
18.3
|
|
|
81.4
|
|
|
121.2
|
|
|
(33
|
)
|
|
(34
|
)
|
||
Total
|
17.4
|
%
|
|
18.4
|
%
|
|
$
|
1,332.2
|
|
|
$
|
1,846.3
|
|
|
(28
|
)%
|
|
(29
|
)%
|
•
|
Franchised: Franchised margin dollars increased $126.0 million or 6% (8% in constant currencies) for the quarter and increased $648.1 million or 11% (9% in constant currencies) for the nine months. Both periods benefited from expansion and the impact of refranchising, as well as positive comparable sales performance across all segments.
|
•
|
U.S.: The decrease in the franchised margin percent for the quarter and nine months was primarily due to higher depreciation costs related to investments in EOTF, partly offset by the benefit from positive comparable sales.
|
•
|
International Lead Markets: The increase in the franchised margin percent for the quarter and nine months primarily reflected the benefit from strong comparable sales performance.
|
•
|
High Growth Markets: The increase in the franchised margin percent for the quarter and nine months was primarily due to the impact of refranchising, largely related to the 2017 sale of the Company's businesses in China and Hong Kong, and positive comparable sales performance.
|
•
|
Company-operated: Company-operated margin dollars decreased $121.4 million or 21% (18% in constant currencies) for the quarter and decreased $514.1 million or 28% (29% in constant currencies) for the nine months, reflecting the impact of refranchising.
|
•
|
U.S.: The decrease in the Company-operated margin percent for the quarter and nine months reflected the impact of accelerated deployment of EOTF (including the related decrease in labor productivity and higher depreciation expense), and higher labor and commodity costs, which more than offset the benefit from positive comparable sales and refranchising.
|
•
|
International Lead Markets: The Company-operated margin percent increased for the quarter and nine months, reflecting strong comparable sales partly offset by higher labor, commodity and occupancy costs.
|
•
|
High Growth Markets: The decrease in the Company-operated margin percent for the quarter and nine months was primarily due to the impact of refranchising related to the 2017 sale of the Company's businesses in China and Hong Kong.
|
CONSOLIDATED COMPANY-OPERATED RESTAURANT EXPENSES AND MARGINS AS A PERCENT OF SALES
|
|||||||||||
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||
|
September 30,
|
|
September 30,
|
||||||||
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Food & paper
|
31.2
|
%
|
|
31.4
|
%
|
|
31.4
|
%
|
|
31.7
|
%
|
Payroll & employee benefits
|
28.8
|
|
|
27.6
|
|
|
29.4
|
|
|
27.5
|
|
Occupancy & other operating expenses
|
21.6
|
|
|
21.9
|
|
|
21.8
|
|
|
22.4
|
|
Total expenses
|
81.6
|
%
|
|
80.9
|
%
|
|
82.6
|
%
|
|
81.6
|
%
|
Company-operated margins
|
18.4
|
%
|
|
19.1
|
%
|
|
17.4
|
%
|
|
18.4
|
%
|
•
|
Selling, general and administrative expenses decreased $51.8 million or 9% (8% in constant currencies) for the quarter and decreased $23.3 million or 1% (3% in constant currencies) for the nine months. Both periods reflected lower employee-related costs, partly offset by investment in restaurant technology. The nine months also reflected costs related to the 2018 Worldwide Owner/Operator Convention and sponsorship of the 2018 Winter Olympics.
|
•
|
For the nine months, selling, general and administrative expenses as a percent of Systemwide sales decreased to 2.2% for 2018 compared with 2.4% for 2017.
|
OTHER OPERATING (INCOME) EXPENSE, NET
|
|
|
|
|
|
|
|
||||||||
Dollars in millions
|
|
|
|
|
|
|
|
||||||||
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Gains on sales of restaurant businesses
|
$
|
(68.0
|
)
|
|
$
|
(63.1
|
)
|
|
$
|
(256.7
|
)
|
|
$
|
(230.9
|
)
|
Equity in (earnings) losses of unconsolidated affiliates
|
(38.6
|
)
|
|
(30.9
|
)
|
|
(116.2
|
)
|
|
(101.1
|
)
|
||||
Asset dispositions and other (income) expense, net
|
(4.7
|
)
|
|
(29.0
|
)
|
|
(45.1
|
)
|
|
(47.1
|
)
|
||||
Impairment and other charges (gains), net
|
0.5
|
|
|
(705.9
|
)
|
|
93.8
|
|
|
(687.8
|
)
|
||||
Total
|
$
|
(110.8
|
)
|
|
$
|
(828.9
|
)
|
|
$
|
(324.2
|
)
|
|
$
|
(1,066.9
|
)
|
•
|
Gains on sales of restaurant businesses increased primarily due to activity within the U.K. for the quarter and within the U.S. for the nine months.
|
•
|
Equity in earnings of unconsolidated affiliates for the quarter and nine months reflected improved performance in Japan, partly offset by a higher effective tax rate in Japan in 2018 compared to 2017. Results in 2018 also reflected the retained 20% ownership in the entity that operates the Company's businesses in China and Hong Kong subsequent to the refranchising transaction that occurred in third quarter 2017.
|
•
|
Asset dispositions and other income, net for the quarter primarily reflected the comparison to a prior year gain on the strategic sale of property in Australia.
|
•
|
Impairment and other charges (gains), net for the quarter and nine months 2017 reflected a gain on the Company's sale of its businesses in China and Hong Kong of approximately $850 million, partly offset by $111 million of unrelated impairment charges. The nine months 2018 included the strategic restructuring charge in the U.S. of $85 million.
|
OPERATING INCOME
|
|||||||||||||
Dollars in millions
|
|||||||||||||
Quarters Ended September 30,
|
2018
|
|
|
2017
|
|
|
Inc/ (Dec)
|
|
|
Increase
Excluding
Currency
Translation
|
|
||
U.S.
|
$
|
1,061.8
|
|
|
$
|
1,034.6
|
|
|
3
|
%
|
|
3
|
%
|
International Lead Markets
|
913.9
|
|
|
913.6
|
|
|
0
|
|
|
3
|
|
||
High Growth Markets
|
330.1
|
|
|
1,073.8
|
|
|
(69
|
)
|
|
(68
|
)
|
||
Foundational Markets & Corporate
|
111.9
|
|
|
57.4
|
|
|
95
|
|
|
n/m
|
|
||
Total
|
$
|
2,417.7
|
|
|
$
|
3,079.4
|
|
|
(21
|
)%
|
|
(20
|
)%
|
|
|
|
|
|
|
|
|
||||||
Nine Months Ended September 30,
|
2018
|
|
|
2017
|
|
|
Inc/ (Dec)
|
|
|
Increase
Excluding
Currency
Translation
|
|
||
U.S.
|
$
|
3,059.0
|
|
|
$
|
3,055.4
|
|
|
0
|
%
|
|
0
|
%
|
International Lead Markets
|
2,613.5
|
|
|
2,356.2
|
|
|
11
|
|
|
7
|
|
||
High Growth Markets
|
847.1
|
|
|
1,724.0
|
|
|
(51
|
)
|
|
(52
|
)
|
||
Foundational Markets & Corporate
|
303.5
|
|
|
272.9
|
|
|
11
|
|
|
12
|
|
||
Total
|
$
|
6,823.1
|
|
|
$
|
7,408.5
|
|
|
(8
|
)%
|
|
(10
|
)%
|
•
|
Operating Income: Operating income decreased $661.7 million or 21% (20% in constant currencies) for the quarter and decreased $585.4 million or 8% (10% in constant currencies) for the nine months. Both the quarter and nine months 2017 reflected a gain of approximately $850 million on the sale of the Company's businesses in China and Hong Kong, partly offset by $111 million of unrelated impairment charges. Results for the nine months 2018 included strategic restructuring charges of $94 million (of which $85 million relates to the restructuring of the U.S. business). Excluding these current year and prior year items, operating income increased $44.2 million or 2% (4% in constant currencies) for the quarter and $196.2 million or 3% (1% in constant currencies) for the nine months.
|
•
|
U.S.: Results for both periods reflected higher franchised margin dollars and lower G&A costs, partly offset by lower Company-operated margin dollars. Results for the nine months also reflected higher gains on sales of restaurant businesses and the $85 million strategic restructuring charge. Excluding this charge, operating income for the nine months increased 3%.
|
•
|
International Lead Markets: The constant currency operating income increase for the quarter and nine months was primarily due to sales-driven improvements in franchised margin dollars across all markets, partly offset by the comparison to a prior year gain on the strategic sale of property in Australia.
|
•
|
High Growth Markets: Excluding the 2017 gain on the sale of the Company's businesses in China and Hong Kong, as well as unrelated impairment charges, operating income decreased 5% (1% in constant currencies) for the quarter and 15% (17% in constant currencies) for the nine months due to the impact of refranchising.
|
•
|
Foundational Markets & Corporate: The constant currency operating income increase for the quarter and nine months reflected higher sales-driven improvements in franchised margin dollars.
|
•
|
Operating Margin: Operating margin is defined as operating income as a percent of total revenues. Operating margin was 43.0% and 42.4% for the nine months ended 2018 and 2017, respectively. Excluding the previously described 2018 strategic restructuring charges and the 2017 gain and unrelated restructuring and impairment charges, operating margin was 43.6% and 38.4% for the nine months ended 2018 and 2017, respectively.
|
•
|
Interest expense increased 6% (6% in constant currencies) for the quarter and increased 6% (5% in constant currencies) for the nine months, primarily reflecting higher average debt balances, partly offset by lower average interest rates.
|
NONOPERATING (INCOME) EXPENSE, NET
|
|
|
|
|
|
|
|
||||||||
Dollars in millions
|
|
|
|
|
|
|
|
||||||||
|
Quarters Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
||||
Interest income
|
$
|
1.2
|
|
|
$
|
(6.5
|
)
|
|
$
|
(4.4
|
)
|
|
$
|
(6.4
|
)
|
Foreign currency and hedging activity
|
(2.9
|
)
|
|
15.4
|
|
|
16.3
|
|
|
11.1
|
|
||||
Other (income) expense, net
|
10.6
|
|
|
14.3
|
|
|
19.4
|
|
|
29.2
|
|
||||
Total
|
$
|
8.9
|
|
|
$
|
23.2
|
|
|
$
|
31.3
|
|
|
$
|
33.9
|
|
•
|
The effective income tax rate was 24.2% and 33.2% for the quarters ended 2018 and 2017, respectively, and 25.7% and 32.8% for the nine months ended 2018 and 2017, respectively.
|
•
|
The decrease in the tax rate for the quarter and nine months primarily reflected the lower enacted U.S. corporate tax rate. The tax rate for both periods also reflected a tax cost related to adjustments to the provisional amounts recorded in December 2017 under the Tax Act of $47 million for the quarter and $99 million for the nine months, as well as tax benefits resulting from continued refinement of estimates related to certain aspects of the Tax Act.
|
•
|
Continue to innovate and differentiate the McDonald’s experience by preparing and serving our food in a way that balances value and convenience to our customers with profitability;
|
•
|
Capitalize on our global scale, iconic brand and local market presence to enhance our ability to retain, regain and convert key customer groups;
|
•
|
Utilize our new organizational structure to build on our progress and execute against our initiatives at an accelerated pace;
|
•
|
Strengthen customer appeal and augment our digital initiatives, including mobile ordering and delivery, along with Experience of the Future (“EOTF”), particularly in the U.S.;
|
•
|
Identify and develop restaurant sites consistent with our plans for net growth of Systemwide restaurants; and
|
•
|
Operate restaurants with high service levels and optimal capacity while managing the increasing complexity of our restaurant operations.
|
•
|
The relative level of our defense costs, which vary from period to period depending on the number, nature and procedural status of pending proceedings;
|
•
|
The cost and other effects of settlements, judgments or consent decrees, which may require us to make disclosures or take other actions that may affect perceptions of our brand and products;
|
•
|
Adverse results of pending or future litigation, including litigation challenging the composition and preparation of our products, or the appropriateness or accuracy of our marketing or other communication practices; and
|
•
|
The scope and terms of insurance or indemnification protections that we may have.
|
•
|
The unpredictable nature of global economic and market conditions;
|
•
|
Governmental action or inaction in light of key indicators of economic activity or events that can significantly influence financial markets, particularly in the U.S., which is the principal trading market for our common stock, and media reports and commentary about economic or other matters, even when the matter in question does not directly relate to our business;
|
•
|
Trading activity in our common stock or trading activity in derivative instruments with respect to our common stock or debt securities, which can be affected by market commentary (including commentary that may be unreliable or incomplete); unauthorized disclosures about our performance, plans or expectations about our business; our actual performance and creditworthiness; investor confidence, driven in part by expectations about our performance; actions by shareholders and others seeking to influence our business strategies; portfolio transactions in our stock by significant shareholders; or trading activity that results from the ordinary course rebalancing of stock indices in which McDonald’s may be included, such as the S&P 500 Index and the Dow Jones Industrial Average;
|
•
|
The impact of our stock repurchase program or dividend rate; and
|
•
|
The impact on our results of corporate actions and market and third-party perceptions and assessments of such actions, such as those we may take from time to time as we implement our strategies in light of changing business, legal and tax considerations and evolve our corporate structure.
|
Period
|
Total Number of
Shares Purchased
|
|
Average Price
Paid
per Share
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
|
|
Approximate Dollar
Value of Shares
that May Yet
Be Purchased Under
the Plans or Programs (1)
|
|||||||
July 1-31, 2018
|
2,681,648
|
|
|
$
|
157.88
|
|
|
2,681,648
|
|
|
$
|
8,502,410,182
|
|
|
August 1-31, 2018
|
1,674,088
|
|
|
159.06
|
|
|
1,674,088
|
|
|
8,236,125,923
|
|
|||
September 1-30, 2018
|
1,578,929
|
|
|
161.51
|
|
|
1,578,929
|
|
|
7,981,117,950
|
|
|||
Total
|
5,934,665
|
|
|
$
|
159.18
|
|
|
5,934,665
|
|
|
|
*
|
Subject to applicable law, the Company may repurchase shares directly in the open market, in privately negotiated transactions, or pursuant to derivative instruments and plans complying with Rule 10b5-1, among other types of transactions and arrangements.
|
(1)
|
On July 27, 2017, the Company's Board of Directors approved a share repurchase program, effective July 28, 2017, that authorizes the purchase of up to $15 billion of the Company's outstanding common stock with no specified expiration date.
|
*
|
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 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 Commission upon request has been filed with the Commission.
|
|
|
**
|
Denotes compensatory plan.
|
|
|
McDONALD’S CORPORATION
(Registrant)
|
||
|
|
|
||
|
|
/s/ Kevin M. Ozan
|
||
Date:
|
November 1, 2018
|
Kevin M. Ozan
|
||
|
|
Corporate Executive Vice President and
Chief Financial Officer
|
Executed this July 23, 2018 .
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McDonald’s Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Karen Matusinec
|
|
|
|
|
Karen Matusinec
|
|
|
|
|
Corporate SVP, Treasurer
|
Computation of Ratios
|
|
|
|
|
|
|
|
|
|
|
Exhibit 12
|
|
|||||||||||||||
Ratio of Earnings to Fixed Charges
|
|||||||||||||||||||||||||||
Dollars in millions
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Nine Months
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
|
Ended September 30,
|
|
Years Ended December 31,
|
||||||||||||||||||||||||
|
2018
|
|
2017
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||||||
Earnings available for fixed charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
- Income before provision for income taxes
|
$
|
6,064.7
|
|
|
$
|
6,688.4
|
|
|
$
|
8,573.5
|
|
|
$
|
6,866.0
|
|
|
$
|
6,555.7
|
|
|
$
|
7,372.0
|
|
|
$
|
8,204.5
|
|
- Noncontrolling interest expense in operating
results of majority-owned subsidiaries less
equity in undistributed operating results of
less than 50%-owned affiliates
|
(23.0
|
)
|
|
9.7
|
|
|
5.3
|
|
|
12.5
|
|
|
7.3
|
|
|
6.3
|
|
|
9.0
|
|
|||||||
- Income tax provision (benefit) of 50%-owned
affiliates included in income from continuing
operations before provision for income taxes
|
33.4
|
|
|
13.9
|
|
|
(36.5
|
)
|
|
3.3
|
|
|
3.7
|
|
|
(0.1
|
)
|
|
23.8
|
|
|||||||
- Portion of rent charges (after reduction for rental
income from subleased properties) considered
to be representative of interest factors*
|
121.0
|
|
|
202.9
|
|
|
244.8
|
|
|
342.6
|
|
|
365.1
|
|
|
374.6
|
|
|
374.6
|
|
|||||||
- Interest expense, amortization of debt discount
and issuance costs, and depreciation of
capitalized interest*
|
738.2
|
|
|
698.7
|
|
|
938.3
|
|
|
904.8
|
|
|
660.4
|
|
|
596.1
|
|
|
548.9
|
|
|||||||
|
$
|
6,934.3
|
|
|
$
|
7,613.6
|
|
|
$
|
9,725.4
|
|
|
$
|
8,129.2
|
|
|
$
|
7,592.2
|
|
|
$
|
8,348.9
|
|
|
$
|
9,160.8
|
|
Fixed charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
- Portion of rent charges (after reduction for rental
income from subleased properties) considered
to be representative of interest factors*
|
$
|
121.0
|
|
|
$
|
202.9
|
|
|
$
|
244.8
|
|
|
$
|
342.6
|
|
|
$
|
365.1
|
|
|
$
|
374.6
|
|
|
$
|
374.6
|
|
- Interest expense, amortization of debt discount
and issuance costs*
|
727.5
|
|
|
688.0
|
|
|
924.0
|
|
|
888.2
|
|
|
643.7
|
|
|
579.8
|
|
|
532.1
|
|
|||||||
- Capitalized interest*
|
4.0
|
|
|
4.1
|
|
|
5.3
|
|
|
7.1
|
|
|
9.4
|
|
|
14.8
|
|
|
15.6
|
|
|||||||
|
$
|
852.5
|
|
|
$
|
895.0
|
|
|
$
|
1,174.1
|
|
|
$
|
1,237.9
|
|
|
$
|
1,018.2
|
|
|
$
|
969.2
|
|
|
$
|
922.3
|
|
Ratio of earnings to fixed charges
|
8.13
|
|
|
8.51
|
|
|
8.28
|
|
|
6.57
|
|
|
7.46
|
|
|
8.61
|
|
|
9.93
|
|
*
|
Includes amounts of the Company and its majority-owned subsidiaries, and one-half of the amounts of 50%-owned affiliates. The Company records interest expense on unrecognized tax benefits in the provision for income taxes. This interest is not included in the computation of fixed charges.
|
(1)
|
I have reviewed this quarterly report on Form 10-Q of McDonald’s Corporation;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Stephen J. Easterbrook
|
Stephen J. Easterbrook
|
President and Chief Executive Officer
|
(1)
|
I have reviewed this quarterly report on Form 10-Q of McDonald’s Corporation;
|
(2)
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
(3)
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
(4)
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
(5)
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Kevin M. Ozan
|
Kevin M. Ozan
|
Corporate Executive Vice President and
Chief Financial Officer
|
/s/ Stephen J. Easterbrook
|
Stephen J. Easterbrook
|
President and Chief Executive Officer
|
/s/ Kevin M. Ozan
|
Kevin M. Ozan
|
Corporate Executive Vice President and
Chief Financial Officer
|