McDonaldโs Corporation is an American operator and franchisor of fast food restaurants represented worldwide and the biggest fast food company in the world.
1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-5231 ---------- ---------- ------ McDONALD'S CORPORATION ----------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 36-2361282 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) McDonald's Plaza, Oak Brook, Illinois 60521 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (630) 623-3000 -------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 689,826,491 --------------------------------- (Number of shares of common stock outstanding as of March 31, 1997)
2 McDONALD'S CORPORATION ---------------------- INDEX ----- Page Reference Part I. Financial Information Item 1 - Financial Statements Condensed consolidated balance sheet, March 31, 1997 (unaudited) and December 31, 1996 3 Condensed consolidated statement of income (unaudited), first quarters ended March 31, 1997 and 1996 4 Condensed consolidated statement of cash flows (unaudited), first quarters ended March 31, 1997 and 1996 5 Financial comments (unaudited) 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K 16 (a) Exhibits The exhibits listed in the accompanying Exhibit Index are filed as part of this report 16 (b) Reports on Form 8-K 20 Signature 21
3 PART I. FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements ----------------------------- <TABLE> CONDENSED CONSOLIDATED BALANCE SHEET <CAPTION> (unaudited) In millions March 31, 1997 December 31, 1996 --------------------------------------------------------------------------- <S> <C> <C> ASSETS CURRENT ASSETS Cash and equivalents $ 299.8 $ 329.9 Accounts receivable 429.0 467.1 Notes receivable 21.1 28.3 Inventories, at cost, not in excess of market 60.4 69.6 Prepaid expenses and other current assets 199.8 207.6 --------------------------------------------------------------------------- TOTAL CURRENT ASSETS 1,010.1 1,102.5 --------------------------------------------------------------------------- OTHER ASSETS AND DEFERRED CHARGES 1,222.6 1,184.4 --------------------------------------------------------------------------- PROPERTY AND EQUIPMENT Property and equipment, at cost 19,082.4 19,133.9 Accumulated depreciation and amortization (4,831.1) (4,781.8) --------------------------------------------------------------------------- NET PROPERTY AND EQUIPMENT 14,251.3 14,352.1 --------------------------------------------------------------------------- INTANGIBLE ASSETS-NET 773.7 747.0 --------------------------------------------------------------------------- TOTAL ASSETS $17,257.7 $17,386.0 =========================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 645.4 $ 597.8 Accounts payable 478.5 638.0 Income taxes 69.3 22.5 Other taxes 141.9 136.7 Accrued interest 124.8 121.7 Other accrued liabilities 498.8 523.1 Current maturities of long-term debt 81.1 95.1 --------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 2,039.8 2,135.3 --------------------------------------------------------------------------- LONG-TERM DEBT 4,804.1 4,830.1 COMMON EQUITY PUT OPTIONS 43.7 OTHER LONG-TERM LIABILITIES AND MINORITY INTERESTS 721.8 726.5 DEFERRED INCOME TAXES 1,030.9 975.9
SHAREHOLDERS' EQUITY Preferred stock, no par value; authorized - 165.0 million shares; issued - 7.2 thousand shares 358.0 358.0 Common stock, $.01 par; authorized - 3.5 billion shares; issued - 830.3 million shares 8.3 8.3 Additional paid-in capital 601.4 574.2 Guarantee of ESOP notes (193.2) (193.2) Retained earnings 11,458.9 11,173.0 Foreign currency translation adjustment (266.6) (175.1) --------------------------------------------------------------------------- 11,966.8 11,745.2 --------------------------------------------------------------------------- Common stock in treasury, at cost; 140.5 and 135.7 million shares (3,349.4) (3,027.0) --------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 8,617.4 8,718.2 --------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,257.7 $17,386.0 =========================================================================== See accompanying Financial comments. /TABLE
4 <TABLE> CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) <CAPTION> In millions, except Quarters Ended per common share data March 31 1997 1996 ------------------------------------------------------------------------------- <S> <C> <C> REVENUES Sales by Company-operated restaurants $1,853.2 $1,713.8 Revenues from franchised and affiliated restaurants 764.4 712.2 ------------------------------------------------------------------------------- TOTAL REVENUES 2,617.6 2,426.0 ------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Company-operated restaurants 1,527.1 1,419.3 Franchised restaurants- occupancy expenses 148.3 137.2 General, administrative and selling expenses 334.0 311.2 Other operating (income) expense-net (6.0) (4.2) ------------------------------------------------------------------------------- TOTAL OPERATING COSTS AND EXPENSES 2,003.4 1,863.5 ------------------------------------------------------------------------------- OPERATING INCOME 614.2 562.5 ------------------------------------------------------------------------------- Interest expense 90.0 84.8 Nonoperating (income) expense-net 8.5 25.6 ------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 515.7 452.1 ------------------------------------------------------------------------------- Provision for income taxes 171.2 150.5 ------------------------------------------------------------------------------- NET INCOME $ 344.5 $ 301.6 =============================================================================== NET INCOME PER COMMON SHARE $ 0.49 $ 0.42 ------------------------------------------------------------------------------- DIVIDENDS PER COMMON SHARE $ .075 $ .0675 ------------------------------------------------------------------------------- WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 691.6 700.5 ------------------------------------------------------------------------------- See accompanying Financial comments. /TABLE
5 <TABLE> CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) <CAPTION> Quarters Ended March 31 In millions 1997 1996 ------------------------------------------------------------------------------- <S> <C> <C> OPERATING ACTIVITIES Net income $ 344.5 $ 301.6 Adjustments to reconcile to cash provided by operations Depreciation and amortization 191.9 186.6 Changes in operating working capital items 14.4 (26.0) Other (18.9) 12.1 ------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS 531.9 474.3 ------------------------------------------------------------------------------- INVESTING ACTIVITIES Property and equipment expenditures (454.4) (467.1) Purchases and sales of restaurant businesses and sales of other property 23.0 4.6 Other (57.9) (31.7) ------------------------------------------------------------------------------- CASH USED FOR INVESTING ACTIVITIES (489.3) (494.2) ------------------------------------------------------------------------------- FINANCING ACTIVITIES Notes payable and long-term financing issuances and repayments 235.1 171.9 Treasury stock purchases (296.4) (140.0) Common and preferred stock dividends (58.7) (53.5) Other 47.3 36.2 ------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (72.7) 14.6 ------------------------------------------------------------------------------- CASH AND EQUIVALENTS DECREASE (30.1) (5.3) ------------------------------------------------------------------------------- Cash and equivalents at beginning of period 329.9 334.8 ------------------------------------------------------------------------------- CASH AND EQUIVALENTS AT END OF PERIOD $ 299.8 $ 329.5 =============================================================================== See accompanying Financial comments. /TABLE
6 FINANCIAL COMMENTS (UNAUDITED) BASIS OF PRESENTATION The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements in the Company's 1996 Annual Report to Shareholders. In the opinion of the Company, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. The results for the quarter ended March 31, 1997 do not necessarily indicate the results that may be expected for the full year. The results of operations of restaurant businesses purchased and sold were not material to the condensed consolidated financial statements for periods prior to purchase and sale. NET INCOME PER COMMON SHARE Net income per common share was computed using net income, reduced by preferred stock cash dividends of $6.9 million for the first quarters of 1997 and 1996. Adjusted net income was divided by the weighted average shares of common stock outstanding: 691.6 and 700.5 million for the first quarters ended March 31, 1997 and 1996, respectively. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, (SFAS 128), which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods to disclose diluted net income per common share in addition to its current basic net income per common share. Pro forma diluted net income per common share amounts, calculated in accordance with SFAS 128, were $0.48 and $0.41 for the first quarters ended March 31, 1997 and 1996, respectively. ASSET IMPAIRMENT In first quarter 1996, the Company recorded a $16 million pre-tax charge to other operating (income) expense, equivalent to 2 cents per common share, related to restaurant sites in Mexico. COMMON EQUITY PUT OPTIONS During February and March 1997, the Company sold 1.0 million common equity put options which will expire in May 1997. At March 31, 1997, the $43.7 million exercise price of these options was classified in common equity put options, and the related offset was recorded in common stock in treasury, net of premiums received.
7 Item 2. Management's Discussion And Analysis Of Financial Condition -------------------------------------------------------------------- And Results Of Operations ------------------------- <TABLE> INCREASES (DECREASES) IN OPERATING RESULTS OVER 1996 <CAPTION> Dollars in millions, except First Quarter per common share data Ended March 31 ------------------------------------------------------------------------- <S> <C> <C> SYSTEMWIDE SALES $523.6 7% ------------------------------------------------------------------------- REVENUES Sales by Company-operated restaurants $139.4 8% Revenues from franchised and affiliated restaurants 52.2 7 ------------------------------------------------------------------------- TOTAL REVENUES 191.6 8 ------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Company-operated restaurants 107.8 8 Franchised restaurants- occupancy costs 11.1 8 General, administrative and selling expenses 22.8 7 Other operating (income) expense-net (1.8) (N/M) ------------------------------------------------------------------------- TOTAL OPERATING COSTS AND EXPENSES 139.9 8 ------------------------------------------------------------------------- OPERATING INCOME 51.7 9 ------------------------------------------------------------------------- Interest expense 5.2 6 Nonoperating (income) expense-net (17.1) (N/M) ------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 63.6 14 ------------------------------------------------------------------------- Provision for income taxes 20.7 14 ------------------------------------------------------------------------- NET INCOME $ 42.9 14% ========================================================================= NET INCOME PER COMMON SHARE $ .07 17% ------------------------------------------------------------------------- (N/M) Not meaningful /TABLE
8 CONSOLIDATED OPERATING RESULTS Net income per common share and net income increased 17 and 14 percent, respectively. During the first quarter, the Company repurchased 6.7 million shares of common stock for approximately $300 million. Fewer shares outstanding resulted in the higher increase in net income per common share compared with the increase in net income. Excluding the $16 million charge for the adoption of SFAS 121 in first quarter 1996 and the negative effect of weaker foreign currencies, net income per common share and net income increased 13 and 12 percent, respectively. The first quarter 1997 had one less trading day compared with the prior year, as 1996 was a leap year. This negatively affected 1997 global results by approximately one cent per common share. Systemwide sales represent sales by Company-operated, franchised and affiliated restaurants. Total revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees and affiliates. These fees are based upon a percent of sales with specified minimum payments. On a global basis, the increases in sales and revenues were due to expansion, offset in part by weaker foreign currencies. The unusually low number of net U.S. restaurant additions in the first quarter was primarily due to satellite closings previously announced. Restaurant additions are in line with our plans to add between 2,400 and 2,800 restaurants worldwide in 1997. ---------------------------------------------------------------------- RESTAURANT ADDITIONS Quarters Ended March 31 1997 1996 ---------------------------------------------------------------------- U.S. 10 129 Outside the U.S. 244 187 ---------------------------------------------------------------------- Total restaurant additions 254 316 ---------------------------------------------------------------------- RESTAURANTS UNDER CONSTRUCTION At March 31 1997 1996 ---------------------------------------------------------------------- U.S. 106 115 Outside the U.S. 406 272 ---------------------------------------------------------------------- Total restaurants under construction 512 387 ----------------------------------------------------------------------
9 ----------------------------------------------------------------------- CONSOLIDATED OPERATING MARGINS Quarters Ended March 31 1997 1996 Change ----------------------------------------------------------------------- In millions of dollars Company-operated $326.1 $294.5 11% Franchised 616.1 575.0 7% As a percent of sales/revenues Company-operated 17.6 17.2 .4 Franchised 80.6 80.7 (.1) ----------------------------------------------------------------------- Company-operated margins as a percent of sales increased, as food & paper and payroll costs declined, while occupancy & other operating costs increased as a percent of sales. Franchised margin dollars comprised about two-thirds of the combined operating margins, the same as in the prior year. While franchised margins as a percent of applicable revenues were relatively flat, franchised margin dollars increased seven percent. The increase in general, administrative & selling expenses was primarily due to strategic global spending to support the Convenience, Value and Execution Strategies including costs associated with expansion and continued investment in developing countries. Other operating (income) expense--net is composed of transactions related to franchising and the foodservice business. Equity in earnings decreased principally due to weaker results from international affiliates and a weaker Japanese Yen. The other category reflects the $16 million charge for the adoption of SFAS 121 in first quarter 1996. Excluding the effect of this charge, the other category would have increased due to higher provisions for property dispositions in first quarter 1997. ------------------------------------------------------------------------ OTHER OPERATING (INCOME) Quarters Ended EXPENSE-NET March 31 In millions of dollars 1997 1996 ------------------------------------------------------------------------ Gains on sales of restaurant businesses $ (7.6) $ (9.0) Equity in earnings of unconsolidated affiliates (15.9) (18.5) Other 17.5 23.3 ------------------------------------------------------------------------ Other operating (income) expense--net $ (6.0) $ (4.2) ========================================================================
10 Consolidated operating income increased $51.7 million or nine percent. This increase reflected higher combined operating margin dollars and slightly higher other operating income, offset in part by higher general, administrative & selling expenses and weaker foreign currencies. Higher interest expense reflected higher debt levels, offset in part by lower average interest rates and weaker foreign currencies. Nonoperating (income) expense reflected higher translation gains in 1997 compared with 1996, and in 1996, losses associated with the reduction of the carrying value of the Company's investment in Discovery Zone common stock to zero. The effective income tax rate was 33.2 percent for first quarter 1997 compared with 33.3 percent for first quarter 1996. For 1997, the Company expects the effective tax rate to be in the range of 32.5 to 33.5 percent. U.S. OPERATING RESULTS U.S. sales increased due to restaurant expansion (607 restaurants added in the 12 months ended March 31, 1997) and positive comparable sales. The increase in U.S. comparable sales was significant given an extremely competitive U.S. operating environment, and one less trading day in the quarter because 1996 was a leap year. We attribute the increase in part to successful marketing and promotions including Monopoly and Chicken McNuggets. Weather patterns year over year had a negligible effect on results. ---------------------------------------------------------------------- U.S. OPERATING RESULTS Quarters Ended March 31 1997 1996 ---------------------------------------------------------------------- Percent increase/(decrease) Sales 7 3 Revenues 3 4 Operating income 5 (4) ---------------------------------------------------------------------- As a percent of sales/revenues Company-operated margins 16.0 15.0 Franchised margins 80.5 80.5 ---------------------------------------------------------------------- U.S. sales increased at a faster rate than revenues primarily because the number of U.S. franchised and affiliated restaurants increased over the past year while the number of Company-operated restaurants decreased. The increase in U.S. operating income reflected higher Company- operated and franchised margin dollars, offset in part by higher general, administrative & selling expenses, and an increase in other operating expenses. The increase in Company-operated margins as a percent of sales primarily resulted from lower food & paper and payroll costs, offset in part by an increase in occupancy & other operating expenses as a percent of sales. Franchised margins as a percent of revenues were flat for the quarter as the benefit of positive comparable sales was offset by higher rent expense as a percent of revenues.
11 OPERATING RESULTS OUTSIDE THE U.S. The sales increase outside the U.S. was driven primarily by expansion as weaker foreign currencies and negative comparable sales on a constant currency basis tempered the results. If exchange rates had remained at 1996 levels, sales outside the U.S. would have increased 14 percent. Strong comparable sales last year, weak economies, as well as one less trading day and severe weather in Europe in 1997, contributed to the weakness in comparable sales in first quarter 1997. We expect results to improve for the balance of the year. ---------------------------------------------------------------------- OPERATING RESULTS OUTSIDE THE U.S. Quarters Ended March 31 1997 1996 ---------------------------------------------------------------------- Percent increase Sales 7 17 Revenues 12 20 Operating income 13 6 Operating income excluding SFAS 121 charge and foreign currency impact 14 15 ---------------------------------------------------------------------- As a percent of sales/revenues Company-operated margins 18.4 18.5 Franchised margins 80.7 81.1 ---------------------------------------------------------------------- Revenues increased at a faster rate than sales. This was primarily due to the weakening Japanese Yen that had a greater effect on sales than revenues due to our affiliate structure in Japan, and the higher growth rate in Company-operated versus franchised restaurants. Of the fifteen largest international markets, the following had strong sales and operating income growth for the first quarter: New Zealand and Taiwan in Asia/Pacific; Austria, England, Italy, Spain, Sweden and Switzerland in Europe; and Argentina and Mexico in Latin America. Our operations in Canada, France and Germany were negatively affected by weak economies throughout the first quarter. The increase in operating income outside the U.S. was driven by higher Company-operated and franchised margin dollars, and an increase in other operating income. Weaker foreign currencies and higher general, administrative & selling expenses necessary to fund the accelerated expansion and continued investment in developing countries partly offset these increases. Excluding the negative effect of weaker foreign currencies and the $16 million charge to other operating income recorded in first quarter 1996, operating income outside the U.S. increased 14 percent in 1997. Company-operated margins as a percent of sales were relatively flat as a decrease in food & paper costs was offset by an increase in occupancy & other operating costs as a percent of sales. Payroll costs as a percent of sales remained flat. Franchised margins as a percent of revenues were relatively flat.
12 IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS While changing foreign currencies affect reported results, McDonald's lessens exposures by primarily purchasing goods and services in local currencies, financing in local currencies and hedging certain foreign- denominated cash flows. The weakening of the Japanese Yen and Deutsche Mark were the primary foreign currency changes that negatively affected first quarter 1997 results. The following tables illustrate what the results would have been if exchange rates had remained at 1996 levels compared with reported results. -------------------------------------------------------------------------- FOREIGN CURRENCY IMPACT ON INTERNATIONAL RESULTS -------------------------------------------------------------------------- Dollars in millions Quarter Ended March 31, 1997 -------------------------------------------------------------------------- Increase -------------------------------------------------------------------------- Adjusted Reported Change Adjusted Reported -------------------------------------------------------------------------- Sales $4,083.6 $3,844.2 $239.4 14% 7% Operating income 375.2 356.1 19.1 19 13 --------------------------------------------------------------------------
13 -------------------------------------------------------------------------- FOREIGN CURRENCY IMPACT ON WORLDWIDE RESULTS -------------------------------------------------------------------------- Dollars in millions, except per common share data Quarter Ended March 31, 1997 -------------------------------------------------------------------------- Increase -------------------------------------------------------------------------- Adjusted Reported Change Adjusted Reported -------------------------------------------------------------------------- Systemwide sales $8,072.5 $7,833.1 $239.4 10% 7% Operating income 633.3 614.2 19.1 13 9 Net income 350.7 344.5 6.2 16 14 Net income per common share .50 .49 .01 19 17 -------------------------------------------------------------------------- FINANCIAL POSITION Cash provided by operations for the quarter ended March 31, 1997 increased 12%. Together with other sources of cash such as borrowings, cash provided by operations was used primarily for capital expenditures, debt repayments, share repurchases and dividends. The consolidated capital expenditure decrease of 3% in the first quarter resulted from a 31% decrease in U.S. capital expenditures offsetting a 16% capital expenditure increase from outside the U.S. Restaurant additions remain in line with our plans to add between 2,400 and 2,800 restaurants worldwide in 1997, with more than 70% being outside the U.S. FORWARD-LOOKING STATEMENTS Certain forward-looking statements are included in this quarterly 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 changes in: global and local business and economic conditions; legislation and governmental regulation; competition; success of operating initiatives and advertising and promotional efforts; food, labor and other operating costs; availability and cost of land and construction; accounting policies and practices; consumer preferences, spending patterns and demographic trends; political or economic instability in local markets; and currency exchange rates.
14 <TABLE> FIRST QUARTER 1997 HIGHLIGHTS <CAPTION> OPERATING RESULTS -------------------------------------------------------------------------- Quarters Ended Dollars in millions March 31 1997 1996 --------------------------------------------------------------------------- <S> <C> <C> Systemwide sales $ 7,833.1 $ 7,309.5 --------------------------------------------------------------------------- U.S. sales 3,988.9 3,722.8 Operated by franchisees 3,093.2 2,884.7 Operated by the Company 637.8 640.0 Operated by affiliates 257.9 198.1 --------------------------------------------------------------------------- Sales outside the U.S. 3,844.2 3,586.7 Operated by franchisees 1,770.9 1,686.3 Operated by the Company 1,215.4 1,073.8 Operated by affiliates 857.9 826.6 --------------------------------------------------------------------------- Total revenues 2,617.6 2,426.0 U.S. 1,083.9 1,053.0 Outside the U.S. 1,533.7 1,373.0 --------------------------------------------------------------------------- Operating income 614.2 562.5 U.S. 271.2 259.2 Outside the U.S. 356.1 314.2 Corporate G&A (13.1) (10.9) --------------------------------------------------------------------------- Income before provision for income taxes 515.7 452.1 Net income 344.5 301.6 Net income per common share .49 .42 --------------------------------------------------------------------------- Cash provided by operations 531.9 474.3 --------------------------------------------------------------------------- Total assets 17,257.7 17,386.0 Total shareholders' equity 8,617.4 8,718.2 --------------------------------------------------------------------------- /TABLE
15 <TABLE> RESTAURANTS <CAPTION> ------------------------------------------------------------------------- At March 31, 1997 1996 ------------------------------------------------------------------------- <S> <C> <C> Systemwide restaurants 21,276 18,696 ------------------------------------------------------------------------- U.S. 12,104 11,497 Operated by franchisees 9,474 9,018 Operated by the Company 1,800 1,851 Operated by affiliates 830 628 ------------------------------------------------------------------------- Outside the U.S. 9,172 7,199 Operated by franchisees 4,036 3,339 Operated by the Company 2,568 2,074 Operated by affiliates 2,568 1,786 ------------------------------------------------------------------------- By Type Operated by franchisees 13,510 12,357 Operated by the Company 4,368 3,925 Operated by affiliates 3,398 2,414 ------------------------------------------------------------------------- /TABLE
16 PART II Item 6. Exhibits and Reports on Form 8-K ----------------------------------------- (a) - Exhibits -------------- Exhibit Number Description -------------- ----------- (3) Corrected Restated Certificate of Incorporation effective as of December 13, 1996 and By-Laws effective of January 21, 1997, incorporated by reference from Form 8-K dated January 9, 1997. (4) Instruments defining the rights of security holders, including indentures (A): (a) Debt Securities. Indenture dated as of March 1, 1987 incorporated herein by reference from Exhibit 4(a) of Form S-3 Registration Statement, SEC file no. 33-12364. (i) Medium-Term Notes, Series B, due from nine months to 30 years from Date of Issue. Supplemental Indenture No. 12 incorporated herein by reference from Exhibit (4) of Form 8-K dated August 18, 1989 and Forms of Medium-Term Notes, Series B, incorporated herein by reference from Exhibit (4)(b) of Form 8-K dated September 14, 1989. (ii) Medium-Term Notes, Series C, due from nine months to 30 years from Date of Issue. Form of Supplemental Indenture No. 15 incorporated herein by reference from Exhibit 4(b) of Form S-3 Registration Statement, SEC file no. 33-34762 dated May 14, 1990. (iii) Medium-Term Notes, Series C, due from nine months (U.S. Issue)/184 days (Euro Issue) to 30 years from Date of Issue. Amended and restated Supplemental Indenture No. 16 incorporated herein by reference from Exhibit (4) of Form 10-Q for the period ended March 31, 1991. (iv) 8-7/8% Debentures due 2011. Supplemental Indenture No. 17 incorporated herein by reference from Exhibit (4) of Form 8-K dated April 22, 1991.
17 Exhibit Number Description -------------- ----------- (v) Medium-Term Notes, Series D, due from nine months (U.S. Issue)/184 days (Euro Issue) to 60 years from Date of Issue. Supplemental Indenture No. 18 incorporated herein by reference from Exhibit 4(b) of Form S-3 Registration Statement, SEC file no. 33-42642 dated September 10, 1991. (vi) 7-3/8% Notes due July 15, 2002. Form of Supplemental Indenture No. 19 incorporated herein by reference from Exhibit (4) of Form 8-K dated July 10, 1992. (vii) 6-3/4% Notes due February 15, 2003. Form of Supplemental Indenture No. 20 incorporated herein by reference from Exhibit (4) of Form 8-K dated March 1, 1993. (viii)7-3/8% Debentures due July 15, 2033. Form of Supplemental Indenture No. 21 incorporated herein by reference from Exhibit (4)(a)of Form 8-K dated July 15, 1993. (ix) Medium-Term Notes, Series E, due from nine months to 60 years from date of issue. Form of Supplemental Indenture No. 22, incorporated herein by reference from Exhibit (4) of Form 10-Q for the period ended June 30, 1995. (x) 6-5/8% Notes due September 1, 2005. Form of Supplemental Indenture No. 23 incorporated herein by reference from Exhibit 4(a) of Form 8-K dated September 5, 1995. (xi) 7.05% Debentures due 2025. Form of Supplemental Indenture No. 24 incorporated herein by reference from Exhibit (4)(a) of Form 8-K dated November 13, 1995. (b) Form of Deposit Agreement dated as of November 25, 1992 by and between McDonald's Corporation, First Chicago Trust Company of New York, as Depositary, and the Holders from time to time of the Depositary Receipts. (c) Rights Agreement dated as of December 13, 1988 between McDonald's Corporation and The First National Bank of Chicago, incorporated herein by reference from Exhibit 1 of Form 8-K dated December 23, 1988.
18 Exhibit Number Description -------------- ----------- (i) Amendment No. 1 to Rights Agreement incorporated herein by reference from Exhibit 1 of Form 8-K dated May 25, 1989. (ii) Amendment No. 2 to Rights Agreement incorporated herein by reference from Exhibit 1 of Form 8-K dated July 25, 1990. (d) Indenture and Supplemental Indenture No. 1 dated as of September 8, 1989, between McDonald's Matching and Deferred Stock Ownership Trust, McDonald's Corporation and Pittsburgh National Bank in connection with SEC Registration Statement Nos. 33-28684 and 33-28684-01, incorporated herein by reference from Exhibit (4)(a) of Form 8-K dated September 14, 1989. (e) Form of Supplemental Indenture No. 2 dated as of April 1, 1991, supplemental to the Indenture between McDonald's Matching and Deferred Stock Ownership Trust, McDonald's Corporation and Pittsburgh National Bank in connection with SEC Registration Statement Nos. 33-28684 and 33-28684-01, incorporated herein by reference from Exhibit (4)(c) of Form 8-K dated March 22, 1991. (f) 8.35% Subordinated Deferrable Interest Debentures due 2025. Indenture incorporated herein by reference from Exhibit 99.1 of Schedule 13E-4/A Amendment No. 2 dated July 14, 1995. (g) Senior Debt Securities Indenture dated as of October 19, 1996, incorporated herein by reference from Exhibit 4(a) of Form S-3 Registration Statement, SEC File No. 333-14141. (h) Subordinated Debt Securities Indenture dated as of October 18, 1996, incorporated herein by reference from Form 8-K dated October 18, 1996. (i) 7 1/2% Subordinated Deferrable Interest Debentures due 2036. Supplemental Indenture No. 1 dated as of November 5, 1996, incorporated herein by reference from Exhibit 4(b) of Form 8-K dated as of October 18, 1996. (ii) 7 1/2% Subordinated Deferrable Interest Debentures due 2037. Supplemental Indenture No. 2 dated as of November 5, 1996, incorporated herein by reference from Form 8-K dated January 9, 1997.
19 Exhibit Number Description -------------- ----------- (10) Material Contracts (a) Directors' Stock Plan, as amended and restated, incorporated herein by reference from Form 10-K for the year ended December 31, 1994.* (b) Profit Sharing Program, as amended and restated, incorporated herein by reference from Form 10-K for the year ended December 31, 1995.* (c) McDonald's Supplemental Employee Benefit Equalization Plan, McDonald's Profit Sharing Program Equalization Plan and McDonald's 1989 Equalization Plan, as amended and restated, incorporated herein by reference from Form 10-K for the year ended December 31, 1995.* (d) 1975 Stock Ownership Option Plan as amended and restated, incorporated herein by reference from Exhibit (10)(d) of Form 10-Q for the quarter ended March 31, 1996*. (e) 1992 Stock Ownership Incentive Plan, incorporated herein by reference from Exhibit B on pages 29-41 of McDonald's 1995 Proxy Statement and Notice of 1995 Annual Meeting of Shareholders dated April 12, 1995*. (f) McDonald's Corporation Deferred Income Plan, as amended and restated, incorporated herein by reference from Form 10-K for the year ended December 31, 1996.* (g) Non-Employee Director Stock Option Plan, incorporated by reference from Exhibit A on pages 25-28 of McDonald's 1995 Proxy Statement and Notice of 1995 Annual Meeting of Shareholders dated April 12, 1995.* (11) Statement re: Computation of per share earnings. (12) Statement re: Computation of ratios. (27) Financial Data Schedule -------------------- * Denotes compensatory plan.
20 (A) Other instruments defining the rights of holders of long-term debt of the registrant and all of its subsidiaries for which consolidated financial statements are required to be filed and which are not required to be registered with the Securities and Exchange Commission, are not included herein as the securities authorized under these instruments, individually, do not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. An agreement to furnish a copy of any such instruments to the Securities and Exchange Commission upon request has been filed with the Commission. (b) Reports on Form 8-K The following reports on Form 8-K were filed for the last quarter covered by this report, and subsequently up to May 7, 1997. Financial Statements Date of Report Item Number Required to be Filed -------------- ----------- -------------------- January 9, 1997 Item 5 No April 17, 1997 Item 7 No
21 Signature ----------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. McDONALD'S CORPORATION (Registrant) By /s/ Michael L. Conley ----------------- (Signature) Michael L. Conley Executive Vice President, Chief Financial Officer May 7, 1997 ------------------ (Date)