McDonaldโs Corporation is an American operator and franchisor of fast food restaurants represented worldwide and the biggest fast food company in the world.
================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended June 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _______ to _______ Commission File Number 1-5231 MCDONALD'S CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-2361282 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) McDonald's Plaza Oak Brook, Illinois 60523 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (630) 623-3000 - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- 684,628,755 ---------------------------- (Number of shares of common stock outstanding as of June 30, 1998) ================================================================================
================================================================================ McDONALD'S CORPORATION ---------------------- INDEX ----- <TABLE> <CAPTION> Page Reference Part I. Financial Information <S> <C> <C> Item 1 - Financial Statements Condensed consolidated balance sheet, June 30, 1998 (unaudited) and December 31, 1997 3 Condensed consolidated statement of income (unaudited), six months and second quarters ended June 30, 1998 and 1997 4 Condensed consolidated statement of cash flows (unaudited), six months and second quarters ended June 30, 1998 and 1997 5 Financial comments (unaudited) 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other Information Item 4 - Submission of Matters to a Vote of Security Holders 15 Item 5 - Other Information 15 Item 6 - Exhibits and Reports on Form 8-K 15 (a) Exhibits The exhibits listed in the accompanying Exhibit Index are filed as part of this report 15 (b) Reports on Form 8-K 19 Signature 20 </TABLE> -2-
PART I. FINANCIAL INFORMATION Item 1. Financial Statements <TABLE> <CAPTION> - ----------------------------------------------------------------------------------------------------------------------- CONDENSED CONSOLIDATED BALANCE SHEET - ----------------------------------------------------------------------------------------------------------------------- (unaudited) In millions June 30, 1998 December 31, 1997 - ----------------------------------------------------------------------------------------------------------------------- ASSETS CURRENT ASSETS <S> <C> <C> Cash and equivalents $ 324.9 $ 341.4 Accounts and notes receivable 571.3 483.5 Inventories, at cost, not in excess of market 71.9 70.5 Prepaid expenses and other current assets 350.4 246.9 - ----------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT ASSETS 1,318.5 1,142.3 - ----------------------------------------------------------------------------------------------------------------------- OTHER ASSETS 2,330.4 2,137.8 PROPERTY AND EQUIPMENT Property and equipment, at cost 20,602.7 20,088.2 Accumulated depreciation and amortization (5,402.0) (5,126.8) - ----------------------------------------------------------------------------------------------------------------------- NET PROPERTY AND EQUIPMENT 15,200.7 14,961.4 - ----------------------------------------------------------------------------------------------------------------------- TOTAL ASSETS $18,849.6 $18,241.5 ======================================================================================================================= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes payable $ 600.8 $ 1,293.8 Accounts payable 404.0 650.6 Income taxes 113.0 52.5 Other taxes 157.9 148.5 Accrued interest 125.0 107.1 Other accrued liabilities 593.0 396.4 Current maturities of long-term debt 51.8 335.6 - ----------------------------------------------------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 2,045.5 2,984.5 - ----------------------------------------------------------------------------------------------------------------------- LONG-TERM DEBT 6,082.9 4,834.1 OTHER LONG-TERM LIABILITIES AND MINORITY INTERESTS 464.2 427.5 DEFERRED INCOME TAXES 1,091.0 1,063.5 COMMON EQUITY PUT OPTIONS 314.3 80.3 SHAREHOLDERS' EQUITY Preferred stock, no par value; authorized - 165.0 million shares; issued - none Common stock, $.01 par value; authorized - 3.5 billion shares; issued - 830.3 million shares 8.3 8.3 Additional paid-in capital 857.3 699.2 Guarantee of ESOP notes (171.3) (171.3) Retained earnings 13,170.6 12,569.0 Accumulated other comprehensive income (583.5) (470.5) Common stock in treasury, at cost; 145.7 and 144.6 million shares (4,429.7) (3,783.1) - ----------------------------------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 8,851.7 8,851.6 - ----------------------------------------------------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $18,849.6 $18,241.5 ======================================================================================================================= </TABLE> See accompanying Financial comments. -3-
- ------------------------------------------------------------------------------ CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) - ------------------------------------------------------------------------------ <TABLE> <CAPTION> Six months ended Quarters ended In millions, except June 30 June 30 per common share data 1998 1997 1998 1997 - --------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> REVENUES Sales by Company-operated restaurants $4,284.7 $3,867.3 $2,270.4 $2,014.1 Revenues from franchised and affiliated restaurants 1,701.0 1,582.9 910.4 818.5 - --------------------------------------------------------------------------------------------------------- TOTAL REVENUES 5,985.7 5,450.2 3,180.8 2,832.6 - --------------------------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Company-operated restaurants 3,507.1 3,167.2 1,843.7 1,640.1 Franchised restaurants - occupancy expenses 324.6 299.4 166.5 151.1 Selling, general, and administrative expenses 707.9 681.2 364.9 347.2 Special charge 160.0 160.0 Other operating (income) expense-net (3.4) (55.3) (1.1) (49.3) - --------------------------------------------------------------------------------------------------------- TOTAL OPERATING COSTS AND EXPENSES 4,696.2 4,092.5 2,534.0 2,089.1 - --------------------------------------------------------------------------------------------------------- OPERATING INCOME 1,289.5 1,357.7 646.8 743.5 - --------------------------------------------------------------------------------------------------------- Interest expense 209.2 176.2 106.4 86.2 Nonoperating (income) expense-net 6.3 22.7 6.6 14.2 - --------------------------------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES 1,074.0 1,158.8 533.8 643.1 - --------------------------------------------------------------------------------------------------------- Provision for income taxes 354.6 376.1 176.6 204.9 - --------------------------------------------------------------------------------------------------------- NET INCOME $ 719.4 $ 782.7 $ 357.2 $ 438.2 ========================================================================================================= NET INCOME PER COMMON SHARE $ 1.05 $ 1.11 $ .52 $ .63 NET INCOME PER COMMON SHARE - DILUTED 1.02 1.09 .50 .61 - --------------------------------------------------------------------------------------------------------- DIVIDENDS PER COMMON SHARE $ .1725 $ .1575 $ .0900 $ .0825 - --------------------------------------------------------------------------------------------------------- WEIGHTED AVERAGE SHARES 686.2 690.7 686.1 689.7 WEIGHTED AVERAGE SHARES - DILUTED 704.7 707.2 707.6 707.3 - --------------------------------------------------------------------------------------------------------- </TABLE> See accompanying Financial comments. -4-
- -------------------------------------------------------------------------------- CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) - -------------------------------------------------------------------------------- <TABLE> <CAPTION> Six months ended Quarters ended June 30 June 30 In millions 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> OPERATING ACTIVITIES Net income $ 719.4 $ 782.7 $ 357.2 $ 438.2 Adjustments to reconcile to cash provided by operations Depreciation and amortization 420.5 386.6 216.6 194.7 Special charge, net of cash paid 148.4 148.4 Changes in operating working capital items (88.6) (152.9) (33.7) (167.3) Other (4.3) (40.6) (14.5) (21.7) - ---------------------------------------------------------------------------------------------------- CASH PROVIDED BY OPERATIONS 1,195.4 975.8 674.0 443.9 - ---------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Property and equipment expenditures (857.5) (956.9) (455.6) (502.5) Purchases and sales of restaurant businesses and sales of property 11.5 37.9 4.3 14.9 Other (71.7) (62.5) (35.0) (4.6) - ---------------------------------------------------------------------------------------------------- CASH USED FOR INVESTING ACTIVITIES (917.7) (981.5) (486.3) (492.2) - ---------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Notes payable and long-term financing issuances and repayments 182.2 496.0 160.2 260.9 Treasury stock purchases (504.8) (470.4) (404.1) (174.0) Common and preferred stock dividends (118.3) (122.5) (61.7) (63.8) Other 146.7 74.9 89.0 27.6 - ---------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (294.2) (22.0) (216.6) 50.7 - ---------------------------------------------------------------------------------------------------- CASH AND EQUIVALENTS INCREASE (DECREASE) (16.5) (27.7) (28.9) 2.4 - ---------------------------------------------------------------------------------------------------- Cash and equivalents at beginning of period 341.4 329.9 353.8 299.8 - ---------------------------------------------------------------------------------------------------- CASH AND EQUIVALENTS AT END OF PERIOD $ 324.9 $ 302.2 $ 324.9 $ 302.2 ==================================================================================================== </TABLE> See accompanying Financial comments. -5-
- -------------------------------------------------------------------------------- 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 1997 Annual Report to Shareholders. In the opinion of the Company, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. The results for the quarter and the six months ended June 30, 1998 do not necessarily indicate the results that may be expected for the full year. The results of operations of restaurant businesses purchased and sold were not material to the condensed consolidated financial statements for periods prior to purchase and sale. Comprehensive Income Comprehensive income consists of net income and foreign currency translation adjustments and totaled $283.9 million and $376.7 million for the second quarters of 1998 and 1997, respectively, and $606.4 million and $629.7 million for the six months ended June 30, 1998 and 1997, respectively. Per Common Share Information Income used in the computation of per common share information was reduced by preferred stock cash dividends of $6.9 million for the second quarter of 1997 and $13.8 million for the six months ended June 30, 1997. The Company retired its remaining Series E Preferred Stock in December 1997. Diluted net income per common share includes the dilutive effect of stock options. Common Equity Put Options At June 30, 1998, 5.0 million of common equity put options were outstanding, all of which were sold in the second quarter 1998. The options expire at various dates through November 1998. The $314.3 million exercise price of the options outstanding was classified in common equity put options at June 30, 1998, and the related offset was recorded in common stock in treasury, net of premiums received. New Accounting Standard - Financial Instruments In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted in years beginning after June 15, 1999. The Statement permits early adoption as of the beginning of any fiscal quarter after its issuance and will require the Company to recognize all derivatives on the balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The Company has not yet determined when it will adopt the new Statement, however, management does not anticipate that the adoption of the Statement will have a significant effect on earnings or financial position. Special Charge In the second quarter 1998, the Company recorded a $160 million pre-tax special charge related to the results of the Company's home office productivity initiative. The Company's home office productivity plan, which was finalized and approved by management in the second quarter, is designed to improve staff alignment, focus and productivity and reduce ongoing selling, general and administrative expenses. As a result of this initiative, the Company will reduce home office staffing by approximately 525 positions, consolidate certain home office facilities and reduce other expenditures in a variety of areas. The $160 million second quarter charge was primarily comprised of costs associated with employee severance and outplacement and with the facilities consolidation. -6-
Segment Information The following table presents the Company's revenues and operating income by geographic segment: <TABLE> <CAPTION> Six months ended Quarters ended June 30 June 30 1998 1997 1998 1997 - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> REVENUES U.S. $2,418.8 $2,262.1 $1,316.8 $1,178.2 Europe 2,088.2 1,848.8 1,097.9 958.3 Asia/Pacific 774.9 711.2 398.6 359.4 Latin America 389.7 319.6 196.8 170.5 Other 314.1 308.5 170.7 166.2 - ----------------------------------------------------------------------------------------------- TOTAL REVENUES $5,985.7 $5,450.2 $3,180.8 $2,832.6 - ----------------------------------------------------------------------------------------------- OPERATING INCOME U.S. (1) $ 511.8 $ 611.4 $ 227.3 $ 340.2 Europe 512.6 461.7 284.0 256.7 Asia/Pacific 159.0 181.3 77.5 86.2 Latin America 79.7 71.7 39.9 38.9 Other 58.6 58.2 34.7 35.0 Corporate SG&A (32.2) (26.6) (16.6) (13.5) - ----------------------------------------------------------------------------------------------- TOTAL OPERATING INCOME $1,289.5 $1,357.7 $ 646.8 $ 743.5 - ----------------------------------------------------------------------------------------------- </TABLE> (1) Includes the $160 million special charge related to the home office productivity initiative recorded in the second quarter 1998. -7-
Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operations - -------------------------------------------------------------------------------- INCREASES (DECREASES) IN OPERATING RESULTS OVER 1997 - -------------------------------------------------------------------------------- <TABLE> <CAPTION> Dollars in millions, except Six months ended Quarter ended per common share data June 30 June 30 - ---------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> SYSTEMWIDE SALES $1,109.1 7% $ 772.5 9% - ---------------------------------------------------------------------------------------------------- REVENUES Sales by Company-operated restaurants $ 417.4 11% $ 256.3 13% Revenues from franchised and affiliated restaurants 118.1 7 91.9 11 - ---------------------------------------------------------------------------------------------------- TOTAL REVENUES 535.5 10 348.2 12 - ---------------------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES Company-operated restaurants 339.9 11 203.6 12 Franchised restaurants - occupancy costs 25.2 8 15.4 10 Selling, general, and administrative expenses 26.7 4 17.7 5 Special charge 160.0 (N/M) 160.0 (N/M) Other operating (income) expense-net 51.9 (N/M) 48.2 (N/M) - ---------------------------------------------------------------------------------------------------- TOTAL OPERATING COSTS AND EXPENSES 603.7 15 444.9 21 - ---------------------------------------------------------------------------------------------------- OPERATING INCOME (68.2) (5) (96.7) (13) - ---------------------------------------------------------------------------------------------------- Interest expense 33.0 19 20.2 23 Nonoperating (income) expense-net (16.4) (N/M) (7.6) (N/M) - ---------------------------------------------------------------------------------------------------- INCOME BEFORE PROVISION FOR INCOME TAXES (84.8) (7) (109.3) (17) - ---------------------------------------------------------------------------------------------------- Provision for income taxes (21.5) (6) (28.3) (14) - ---------------------------------------------------------------------------------------------------- NET INCOME $ (63.3) (8)% $(81.0) (18)% ==================================================================================================== NET INCOME PER COMMON SHARE $ (0.06) (5)% $(0.11) (17)% NET INCOME PER COMMON SHARE - DILUTED (0.07) (6) (0.11) (18) - ----------------------------------------------------------------------------------------------------- </TABLE> (N/M) Not meaningful The following table presents the increases in operating results excluding the $160 million pre-tax special charge ($110 million after tax or $0.16 per diluted share) related to the home office productivity initiative recorded in the second quarter 1998: - -------------------------------------------------------------------------------- INCREASES IN OPERATING RESULTS OVER 1997 - EXCLUDING SPECIAL CHARGE - -------------------------------------------------------------------------------- <TABLE> <CAPTION> Dollars in millions, except Six months ended Quarter ended per common share data June 30 June 30 - --------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> OPERATING INCOME $91.8 7% $63.3 9% - --------------------------------------------------------------------------------------------------- NET INCOME 46.7 6 29.0 7 - --------------------------------------------------------------------------------------------------- NET INCOME PER COMMON SHARE - DILUTED 0.09 8 0.05 8 - --------------------------------------------------------------------------------------------------- </TABLE> -8-
CONSOLIDATED OPERATING RESULTS McDonald's previously announced the results of the home office productivity initiative designed to improve staff alignment, focus and productivity and reduce ongoing selling, general and administrative expenses. As a result of this initiative, in the second quarter, the Company recorded a $160 million pre-tax special charge ($110 million after tax or $0.16 per diluted share) in U.S. operating income. The charge was primarily comprised of costs associated with employee severance and outplacement and with the consolidation of certain home office facilities. As a result of the productivity initiative, the Company expects to save about $100 million of selling, general & administrative expenses per year beginning in 2000, with about two-thirds of the savings expected to be realized in 1999. McDonald's also previously announced plans to introduce the "Made For You" food preparation system in all restaurants in the United States and Canada by the end of 1999. The $190 million estimated cost to implement this system consists primarily of financial incentive payments the Company is committed to provide to owner/operators to defray the cost of equipment made obsolete as a result of conversion to this new system. The Company will record charges to earnings for these incentive payments as they are made. Excluding the special charge, net income and diluted net income per common share increased six and eight percent for the six months and seven and eight percent for the quarter, respectively. Changing foreign currencies significantly reduced reported results. Excluding the foreign currency translation effect and the special charge, net income would have increased nine percent for both the six months and the quarter and diluted net income per common share would have increased 11 percent for both the six months and the quarter. Net income and diluted net income per common share, including the special charge, decreased eight and six percent for the six months, respectively, and both decreased 18 percent for the quarter. During the second quarter, McDonald's repurchased $389 million of the Company's common stock, bringing total share repurchases for the six months to $516 million. The spreads between the percent change in diluted net income per common share compared with net income resulted from fewer shares outstanding for the six months and the absence of preferred dividends in the six months and second quarter 1998, due to the retirement of our remaining Series E Preferred Stock in December 1997. <TABLE> <CAPTION> =============================================================================================== Systemwide sales Dollars in millions 1998 1997 Increase/(Decrease) =============================================================================================== As In Constant Reported Currencies (1) - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Six months ended June 30 - ----------------------------------------------------------------------------------------------- U.S. $ 9,038.8 $ 8,409.3 7% n/a - ----------------------------------------------------------------------------------------------- Europe 4,132.0 3,725.2 11 17% - ----------------------------------------------------------------------------------------------- Asia/Pacific 2,630.9 2,756.2 (5) 11 - ----------------------------------------------------------------------------------------------- Latin America 830.8 683.5 22 27 - ----------------------------------------------------------------------------------------------- Other 784.8 734.0 7 12 - ----------------------------------------------------------------------------------------------- Total Systemwide sales $17,417.3 $16,308.2 7% 11% - ----------------------------------------------------------------------------------------------- Quarters ended June 30 - ----------------------------------------------------------------------------------------------- U.S. $ 4,919.6 $ 4,420.4 11% n/a - ----------------------------------------------------------------------------------------------- Europe 2,182.1 1,924.2 13 17% - ----------------------------------------------------------------------------------------------- Asia/Pacific 1,296.9 1,378.5 (6) 11 - ----------------------------------------------------------------------------------------------- Latin America 420.2 354.9 18 24 - ----------------------------------------------------------------------------------------------- Other 428.8 397.1 8 13 - ----------------------------------------------------------------------------------------------- Total Systemwide sales $ 9,247.6 $ 8,475.1 9% 13% =============================================================================================== </TABLE> (1) Excluding the effect of foreign currency translation on reported results. n/a Not applicable Systemwide sales represent sales by Company-operated, franchised and affiliated restaurants. Comparable sales are measured on a constant currency basis. Constant currency information excludes the effect of foreign currency translation on reported results. Total revenues include sales by Company- operated restaurants and fees from restaurants operated by franchisees and affiliates. These fees include rent, service fees and royalties that are based on a percent of sales with specified minimum payments along with initial fees. -9-
On a global basis, the increases in sales and revenues were due to expansion and positive comparable sales trends, offset in part by weaker foreign currencies. U.S. sales increased due to positive comparable sales trends and restaurant expansion in both periods. Successful Monopoly and Teenie Beanie Baby promotions, combined with local market initiatives and favorable comparisons with the second quarter of 1997, contributed to the strong sales increases for both periods. While this exceptionally strong level of performance is not expected to continue in the second half of the year, the outlook for the remainder of the year is for strong growth in operating income. In Europe, the constant currency sales increase was driven by expansion and positive comparable sales trends in both periods. England, France, Italy and Spain were the primary contributors to the strong sales performance in both periods. In addition, Germany continued to show improved results from the value campaign initiated early this year. In Asia/Pacific, the constant currency sales increase in both periods was due to expansion, partly offset by negative comparable sales trends. Difficult economic conditions in Japan and Southeast Asia continued to negatively impact consumer spending. In Latin America, the constant currency sales increase was driven by expansion and positive comparable sales trends in both periods. For the six months, expansion and positive comparable sales trends in Argentina, Brazil, Mexico and Venezuela contributed to Latin America's strong performance, with Brazil accounting for about half of the sales growth. For the quarter, the strong performance was driven by expansion in Argentina and Brazil, and by expansion and positive comparable sales trends in Mexico and Venezuela. Revenues increased at a faster rate than sales for the six months and the quarter. This was primarily due to the weakening Japanese Yen, which had a greater negative effect on sales than revenues due to our affiliate structure in Japan, and the higher growth rate in Company-operated versus franchised restaurants. <TABLE> <CAPTION> ================================================================================================================= Consolidated operating margins Six months ended Quarters ended June 30 June 30 -------------------------------------------------- 1998 1997 1998 1997 ================================================================================================================= <S> <C> <C> <C> <C> Dollars in millions - ----------------------------------------------------------------------------------------------------------------- Company-operated $ 777.6 $ 700.1 $ 426.7 $ 374.0 - ----------------------------------------------------------------------------------------------------------------- Franchised 1,376.4 1,283.5 743.9 667.4 - ----------------------------------------------------------------------------------------------------------------- Combined operating margins $2,154.0 $1,983.6 $1,170.6 $1,041.4 - ----------------------------------------------------------------------------------------------------------------- Percent of sales/revenues - ----------------------------------------------------------------------------------------------------------------- Company-operated 18.1% 18.1% 18.8% 18.6% - ----------------------------------------------------------------------------------------------------------------- Franchised 80.9 81.1 81.7 81.5 ================================================================================================================= </TABLE> Company-operated margins as a percent of sales were flat for the six months and increased slightly for the quarter. Occupancy & other operating expenses increased as a percent of sales for both periods, while food & paper and payroll costs decreased. U.S. Company-operated margins as a percent of sales increased for the six months and the quarter, while Company-operated margins outside the U.S. declined for both periods. In the U.S., food & paper costs decreased as a percent of sales for both the six months and the quarter. Payroll costs as a percent of sales increased for the six months and decreased for the quarter, while occupancy & other operating expenses decreased for the six months and increased for the quarter. Outside the U.S., as a percent of sales, increases in food & paper costs and occupancy & other operating expenses for both periods were offset in part by decreased payroll costs. 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 decreased slightly for the six months and increased slightly for the quarter, franchised margin dollars increased seven percent and 11 percent, respectively. As a percent of revenues, franchised margins increased in the U.S. for both periods, while franchised margins as a percent of revenues outside the U.S. decreased. The increases in the U.S. were driven by positive comparable sales trends for both periods. The declines outside the U.S. reflected the negative impacts from the consolidation of several of -10-
our affiliate markets, principally Singapore and the Philippines. In addition, margins outside the U.S. reflected higher occupancy costs, including rent expense, driven by an increase in the number of leased sites. The increase in selling, general & administrative expenses for the six months and the quarter was primarily due to strategic global spending to support restaurant development, value initiatives and execution strategies, offset in part by the translation effect of weaker foreign currencies. <TABLE> <CAPTION> ================================================================================================================ Other operating (income) expense-net Six months ended Quarters ended June 30 June 30 Dollars in millions 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Gains on sales of restaurant businesses $(22.0) $(27.6) $(14.0) $(20.0) - ---------------------------------------------------------------------------------------------------------------- Equity in earnings of unconsolidated affiliates (34.4) (33.2) (22.0) (17.3) - ---------------------------------------------------------------------------------------------------------------- Other (income) expense 53.0 5.5 34.9 (12.0) - ---------------------------------------------------------------------------------------------------------------- Other operating (income) expense-net $ (3.4) $(55.3) $ (1.1) $(49.3) ================================================================================================================ </TABLE> Other operating (income) expense-net consists of transactions related to franchising and the food service business. Other expenses increased for both periods reflecting higher provisions for property dispositions and certain non- recurring income items outside the U.S. recognized in second quarter 1997. <TABLE> <CAPTION> =========================================================================================== Operating income Dollars in millions Increase/(Decrease) =========================================================================================== As In Constant 1998 1997 Reported Currencies (1) <S> <C> <C> <C> <C> - ------------------------------------------------------------------------------------------- Six months ended June 30 - ------------------------------------------------------------------------------------------- U.S. (2) $ 511.8 $ 611.4 (16)% n/a - ------------------------------------------------------------------------------------------- Europe 512.6 461.7 11 16% - ------------------------------------------------------------------------------------------- Asia/Pacific 159.0 181.3 (12) 2 - ------------------------------------------------------------------------------------------- Latin America 79.7 71.7 11 18 - ------------------------------------------------------------------------------------------- Other 58.6 58.2 1 5 - ------------------------------------------------------------------------------------------- Corporate SG&A (32.2) (26.6) 21 n/a - ------------------------------------------------------------------------------------------- Total operating income (2) $1,289.5 $1,357.7 (5)% (1)% - ------------------------------------------------------------------------------------------- Quarters ended June 30 - ------------------------------------------------------------------------------------------- U.S. (2) $ 227.3 $ 340.2 (33)% n/a - ------------------------------------------------------------------------------------------- Europe 284.0 256.7 11 14% - ------------------------------------------------------------------------------------------- Asia/Pacific 77.5 86.2 (10) 10 - ------------------------------------------------------------------------------------------- Latin America 39.9 38.9 3 9 - ------------------------------------------------------------------------------------------- Other 34.7 35.0 (1) 4 - ------------------------------------------------------------------------------------------- Corporate SG&A (16.6) (13.5) 23 n/a - ------------------------------------------------------------------------------------------- Total operating income (2) $ 646.8 $ 743.5 (13)% (9)% =========================================================================================== </TABLE> (1) Excluding the effect of foreign currency translation on reported results. (2) Includes the $160 million pre-tax special charge related to the home office productivity initiative recorded in the second quarter 1998. Excluding the special charge, U.S. operating income was $671.8, or an increase of 10%, for the six months and $387.3, or an increase of 14%, for the quarter ended June 30, 1998. Total operating income was $1,449.5, or an increase of 7%, for the six months and $806.8, or an increase of 9%, for the quarter ended June 30, 1998. n/a Not applicable -11-
Excluding the special charge, constant currency consolidated operating income increased $148 million or 11 percent for the six months and $92 million or 12 percent for the quarter. For both periods, consolidated operating income, excluding the special charge, reflected higher combined operating margin dollars, offset in part by higher selling, general & administrative expenses and lower other operating income. Including the special charge, reported consolidated operating income decreased $68 million or 5 percent for the six months and $97 million or 13 percent for the quarter. U.S. operating income, excluding the special charge, increased $60 million or 10 percent for the six months and $47 million or 14 percent for the quarter. The increases primarily reflected higher combined operating margin dollars, partially offset by lower other operating income. Including the special charge, U.S. operating income decreased $100 million or 16 percent for the six months and $113 million or 33 percent for the quarter. Europe's operating income increased 16 percent for the six months and 14 percent for the quarter in constant currencies. This performance was primarily due to strong results in England, Germany, Italy and Spain. Asia/Pacific's operating income increased two percent for the six months and ten percent for the quarter in constant currencies. This segment's operating income benefited from the consolidation of several of our affiliate markets, principally Singapore and the Philippines, and a tax law change recognized in Japan in second quarter 1998. Latin America's operating income increased 18 percent for the six months and nine percent for the quarter in constant currencies, primarily driven by strong results in Argentina, Mexico and Venezuela for both periods. Brazil experienced strong operating results for the six months; however, weakening economic conditions dampened growth in the second quarter. Results outside the U.S. were negatively affected by the strong U.S. dollar and economic difficulties in a number of markets, and the Company expects these factors to continue to impact results in the second half of the year. Higher interest expense reflected higher debt levels and slightly higher average interest rates, offset in part by weaker foreign currencies. The higher debt levels were primarily due to borrowings in the last half of 1997 to fund the retirement of preferred stock issued by a foreign subsidiary and the Company's Series E Preferred Stock. Nonoperating (income) expense-net for the six months and for the quarter reflected lower charges for minority interests. The effective income tax rate was about 33 percent for both periods of 1998 compared with 32.5 percent for the six months and 31.9 percent for the second quarter of 1997. IMPACT OF FOREIGN CURRENCIES ON REPORTED RESULTS While changing foreign currencies affect reported results, McDonald's lessens exposures by financing in local currencies, hedging certain foreign- denominated cash flows and, where practical, by purchasing goods and services in local currencies. The weakening Australian Dollar, Deutsche Mark, French Franc and Japanese Yen, as well as the significantly weakened Southeast Asian currencies, were the primary foreign currencies that negatively affected reported results for the six months and the quarter. The following table presents 1998 results, excluding the special charge, translated at 1997 rates compared with reported results. -12-
<TABLE> <CAPTION> - ------------------------------------------------------------------------------------------------------------------------------ Effect of foreign currency translation on worldwide reported results excluding special charge ------------------------------------------------------------------------------------------------ Increase ------------------------------------------------------------------------------------------------ Dollars in millions, except As In Constant As In Constant per common share data Reported Currencies* Change Reported Currencies (1) - ------------------------------------------------------------------------------------------------------------------------------ Six months ended June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------------ <S> <C> <C> <C> <C> <C> Systemwide sales $17,417.3 $18,119.4 $702.1 7% 11% - ------------------------------------------------------------------------------------------------------------------------------ Total revenues 5,985.7 6,236.4 250.7 10 14 - ------------------------------------------------------------------------------------------------------------------------------ Operating income 1,449.5 1,505.6 56.1 7 11 - ------------------------------------------------------------------------------------------------------------------------------ Net income 829.4 853.3 23.9 6 9 - ------------------------------------------------------------------------------------------------------------------------------ Net income per common share - diluted 1.18 1.21 .03 8 11 - ------------------------------------------------------------------------------------------------------------------------------ Quarter ended June 30, 1998 - ------------------------------------------------------------------------------------------------------------------------------ Systemwide sales $ 9,247.6 $ 9,592.5 $344.9 9% 13% - ------------------------------------------------------------------------------------------------------------------------------ Total revenues 3,180.8 3,301.0 120.2 12 17 - ------------------------------------------------------------------------------------------------------------------------------ Operating income 806.8 835.7 28.9 9 12 - ------------------------------------------------------------------------------------------------------------------------------ Net income 467.2 479.5 12.3 7 9 - ------------------------------------------------------------------------------------------------------------------------------ Net income per common share - diluted .66 .68 .02 8 11 - ------------------------------------------------------------------------------------------------------------------------------ </TABLE> (1) Excluding the effect of foreign currency translation on reported results. FINANCIAL POSITION Free cash flow - cash provided by operations less capital expenditures -for the six months ended June 30, 1998 increased $319.0 million to $337.9 million. Together with other sources of cash such as borrowings, free cash flow was used primarily for debt repayments, share repurchases and dividends. The consolidated capital expenditure decrease of 10% for the six months ended June 30, 1998 was primarily due to a decrease in U.S. capital expenditures. The Company plans to add about 2,100 restaurants worldwide in 1998, with about 85% being outside the U.S. The Company expects to use cash provided by operations to fund the cash costs related to the productivity initiative and the financial incentive payments the Company has committed to provide to owner/operators in connection with the implementation of the "Made For You" initiative. NEW ACCOUNTING STANDARD - FINANCIAL INSTRUMENTS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which is required to be adopted in years beginning after June 15, 1999. The Statement permits early adoption as of the beginning of any fiscal quarter after its issuance and will require the Company to recognize all derivatives on the balance sheet at fair value. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The Company has not yet determined when it will adopt the new Statement, however, management does not anticipate that the adoption of the Statement will have a significant effect on earnings or financial position. FORWARD-LOOKING STATEMENTS Certain forward-looking statements are included in this report. They use such words as "may," "will," "expect," "believe," "plan" and other similar terminology. These statements reflect management's current expectations and involve a number of risks and uncertainties. Actual results could differ materially due to the success of operating initiatives and advertising and promotional efforts and changes in: global and local business and economic conditions; currency exchange and interest rates; food, labor and other operating costs; political or economic instability in local markets; competition; consumer preferences, spending patterns and demographic trends; availability and cost of land and construction; legislation and government regulation; and accounting policies and practices. -13-
- -------------------------------------------------------------------------------- SIX MONTHS AND SECOND QUARTER HIGHLIGHTS - -------------------------------------------------------------------------------- FINANCIAL INFORMATION <TABLE> <CAPTION> Six months ended June 30 Quarters ended June 30 Dollars in millions 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> Systemwide sales by type Operated by franchisees $10,861.7 $10,161.9 $5,831.5 $5,297.8 Operated by the Company 4,284.7 3,867.3 2,270.4 2,014.1 Operated by affiliates 2,270.9 2,279.0 1,145.7 1,163.2 - ---------------------------------------------------------------------------------------------------------------------------- Systemwide sales 17,417.3 16,308.2 9,247.6 8,475.1 - ---------------------------------------------------------------------------------------------------------------------------- Revenues U.S. 2,418.8 2,262.1 1,316.8 1,178.2 Europe 2,088.2 1,848.8 1,097.9 958.3 Asia/Pacific 774.9 711.2 398.6 359.4 Latin America 389.7 319.6 196.8 170.5 Other 314.1 308.5 170.7 166.2 - ---------------------------------------------------------------------------------------------------------------------------- Total revenues 5,985.7 5,450.2 3,180.8 2,832.6 - ---------------------------------------------------------------------------------------------------------------------------- Restaurant margins Company-operated ---------------- U.S. 17.8% 16.9% 18.9% 17.7% Outside the U.S. 18.3% 18.7% 18.7% 19.0% Franchised ---------- U.S. 81.4% 81.0% 82.4% 81.4% Outside the U.S. 80.3% 81.2% 80.7% 81.7% - ---------------------------------------------------------------------------------------------------------------------------- Operating income (1) 1,289.5 $ 1,357.7 $ 646.8 $ 743.5 Income before provision for income taxes (1) 1,074.0 1,158.8 533.8 643.1 Net income (1) 719.4 782.7 357.2 438.2 Net income per common share (1) 1.05 1.11 .52 .63 Net income per common share - diluted (1) 1.02 1.09 .50 .61 - ---------------------------------------------------------------------------------------------------------------------------- Cash provided by operations 1,195.4 975.8 674.0 443.9 - ---------------------------------------------------------------------------------------------------------------------------- Total assets 18,849.6 17,562.0 Total shareholders' equity 8,851.7 8,760.3 - ---------------------------------------------------------------------------------------------------------------------------- </TABLE> <TABLE> <CAPTION> RESTAURANTS - ---------------------------------------------------------------------------------------------------------------------------- At June 30, 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- <S> <C> <C> By type Operated by franchisees 14,556 13,703 Operated by the Company 5,283 4,550 Operated by affiliates 3,887 3,530 - ---------------------------------------------------------------------------------------------------------------------------- Systemwide restaurants 23,726 21,783 - ---------------------------------------------------------------------------------------------------------------------------- Six months ended Quarters ended June 30 June 30 1998 1997 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- Additions U.S. 26 84 (7) 74 Europe 190 225 133 164 Asia/Pacific 268 308 177 181 Latin America 69 85 51 55 Other 41 59 26 33 - ---------------------------------------------------------------------------------------------------------------------------- Systemwide additions 594 761 380 507 - ---------------------------------------------------------------------------------------------------------------------------- </TABLE> (1) Includes the $160 million pre-tax special charge ($110 million after tax or $0.16 per share, both basic and diluted) related to the home office productivity initiative recorded in the second quarter 1998. -14-
PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on May 21, 1998. (b) Not Applicable. (c) At the Annual Meeting of Shareholders, the shareholders voted to elect six directors to serve until the 2001 Annual Meeting of Shareholders. Each nominee was elected by a vote of the shareholders as follows: <TABLE> <CAPTION> Director For Withheld -------- --- --------- <S> <C> <C> Jack M. Greenberg 561,092,892 6,835,644 Donald G. Lubin 553,712,838 14,215,698 Walter E. Massey 560,497,346 7,431,190 Andrew J. McKenna 560,674,750 7,253,786 Roger W. Stone 560,903,276 7,025,260 Robert N. Thurston 560,688,920 7,239,616 </TABLE> (d) Not Applicable. Item 5. Other Information Shareholder Proposals Proposals submitted by shareholders pursuant to SEC Rule 14a-8 in connection with a request that the proposal be included in the Company's proxy statement for the 1999 annual meeting of shareholders must be received at the Company's principal executive offices not later than December 8, 1998. Pursuant to the Company's Bylaws, advance notice of proposals of shareholders intended to be presented at the Company's 1999 annual meeting of shareholders must be received by the Secretary of the Company at the Company's principal executive offices not less than 60 days nor more than 90 days prior to the first anniversary of the previous year's annual meeting in order for such proposal to be brought before the meeting. The 1998 annual meeting of shareholders was held on May 21, 1998. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description - -------------- ----------- (3) Restated Certificate of Incorporation, effective as of March 24, 1998, incorporated herein by reference from Form 8-K dated April 17, 1998. By-Laws, effective as of July 8, 1998 filed herewith. (4) Instruments defining the rights of security holders, including Indentures (A): (a) Senior Debt Securities Indenture dated as of October 19, 1996 incorporated herein by reference from Exhibit 4(a) of Form S-3 Registration Statement (File No. 333-14141). -15-
Exhibit Number Description - -------------- ----------- (i) 6 3/8% Debentures due January 8, 2028. Supplemental Indenture No. 1 dated as of January 8, 1998, incorporated herein by reference from Exhibit (4)(a) of Form 8-K dated January 5, 1998. (ii) 5.90% REset Put Securities due 2011. Supplemental Indenture No. 2 dated as of May 11, 1998, incorporated herein by reference from Exhibit 4(a) of Form 8-K dated May 6, 1998. (iii) 6% REset Put Securities due 2012. Supplemental Indenture No. 3 dated as of June 23, 1998, incorporated herein by reference from Exhibit 4(a) of Form 8-K dated June 25, 1998. (iv) Medium-Term Notes, Series F, due from 1 year to 60 years from the Date of Issue. Supplemental Indenture No. 4 incorporated herein by reference from Exhibit (c) of Form S-3 Registration Statement (File No. 333- 59145), dated July 15, 1998. (b) Subordinated Debt Securities Indenture dated as of October 18, 1996, incorporated herein by reference from Form 8-K dated October 18, 1996. (i) 7 1/2% Subordinated Deferrable Interest Debentures due 2036. Supplemental Indenture No. 1 dated as of November 5, 1996, incorporated herein by reference from Exhibit (4)(b) of Form 8-K dated October 18, 1996. (ii) 7 1/2% Subordinated Deferrable Interest Debentures due 2037. Supplemental Indenture No. 2 dated as of January 14, 1997, incorporated herein by reference from Exhibit (4)(b) of Form 8-K dated January 9, 1997. (iii) 7.31% Subordinated Deferrable Interest Debentures due 2027. Supplemental Indenture No. 3 dated September 24, 1997, incorporated herein by reference from Exhibit (4)(b) of Form 8-K dated September 19, 1997. (c) Debt Securities. Indenture dated as of March 1, 1987 incorporated herein by reference from Exhibit 4(a) of Form S-3 Registration Statement (File No. 33-12364). (i) Medium-Term Notes, Series B, due from nine months to 30 years from Date of Issue. Supplemental Indenture No. 12 incorporated herein by reference from Exhibit (4) of Form 8-K dated August 18, 1989 and Forms of Medium-Term Notes, Series B, incorporated herein by reference from Exhibit (4)(b) of Form 8-K dated September 14, 1989. (ii) Medium-Term Notes, Series C, due from nine months to 30 years from Date of Issue. Form of Supplemental Indenture No. 15 incorporated herein by reference from Exhibit 4(b) of Form S-3 Registration Statement (File No. 33-34762), dated May 14, 1990. (iii) Medium-Term Notes, Series C, due from nine months (U.S. Issue)/184 days (Euro Issue) to 30 years from Date of Issue. Amended and restated Supplemental Indenture No. 16 incorporated herein by reference from Exhibit (4) of Form 10-Q for the period ended March 31, 1991. (iv) 8-7/8% Debentures due 2011. Supplemental Indenture No. 17 incorporated herein by reference from Exhibit (4) of Form 8-K dated April 22, 1991. (v) Medium-Term Notes, Series D, due from nine months (U.S. Issue)/184 days (Euro Issue) to 60 years from Date of Issue. Supplemental Indenture No. 18 incorporated -16-
Exhibit Number Description - -------------- ----------- herein by reference from Exhibit 4(b) of Form S-3 Registration Statement (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 (U.S. Issue)/ 184 days (Euro Issue) to 60 years from the Date of Issue. Supplemental Indenture No. 22 incorporated herein by reference from Exhibit 4(b) of Form S-3 Registration Statement (File No. 33-60939), dated July 13, 1995. (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. (d) 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. (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. (e) 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. (f) Form of Supplemental Indenture No. 2 dated as of April 1, 1991, supplemental to the Indenture between McDonald's Matching and Deferred Stock Ownership Trust, McDonald's Corporation and Pittsburgh National Bank in connection with SEC Registration Statement Nos. 33-28684 and 33-28684-01, incorporated herein by reference from Exhibit (4)(c) of Form 8-K dated March 22, 1991. (10) Material Contracts (a) Directors' Stock Plan, as amended and restated, incorporated herein by reference from Exhibit 10(a) of Form 10-Q for the quarter ended September 30, 1997.* (b) Profit Sharing Program, as amended and restated, incorporated herein by reference from Form 10-K for the year ended December 31, 1995.* (i) Amendment No. 1 incorporated herein by reference from Form 10-Q for the quarter ended June 30, 1997. -17-
Exhibit Number Description - -------------- ----------- (ii) Amendment No. 2 incorporated herein by reference from Form 10-Q for the quarter ended June 30, 1997. (iii) Amendment No. 3 incorporated herein by reference from Form 10-Q for the quarter ended June 30, 1997. (iv) Amendment No. 4 incorporated herein by reference from Form 10-K for the year ended December 31, 1997. (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 Form 10-Q for the quarter ended March 31, 1998.* (e) 1992 Stock Ownership Incentive Plan, as amended and restated, incorporated herein by reference from Form 10-Q for the quarter ended March 31, 1998.* (f) McDonald's Corporation Deferred Income Plan, as amended and restated, incorporated herein by reference from Exhibit 10(f) of Form 10-Q for the quarter ended September 30, 1997.* (g) Non-Employee Director Stock Option Plan, incorporated herein 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.* (h) Employment Agreement, incorporated herein by reference from Exhibit 10 (h) of Form 10-Q for the quarter ended September 30, 1997.* (12) Statement re: Computation of ratios (27.1) Financial Data Schedule (27.2) Restated Financial Data Schedule (99) Press Release dated August 10, 1998--"McDonald's Announces Additional Stock Repurchases and Expects Strong Earnings Growth." _____________________________________ * Denotes compensatory plan. Other instruments defining the rights of holders of long-term debt of the registrant and all of its subsidiaries for which consolidated financial statements are required to be filed and which are not required to be registered with the Securities and Exchange Commission, are not included herein as the securities authorized under these instruments, individually, do not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. An agreement to furnish a copy of any such instruments to the Securities and Exchange Commission upon request has been filed with the Commission. -18-
(b) Reports on Form 8-K The following reports on Form 8-K were filed for the last quarter covered by this report, and subsequently through August 14, 1998. <TABLE> <CAPTION> Financial Statements Date of Report Item Number Required to be Filed -------------- ----------- -------------------- <C> <S> <C> 6/18/98 Item 5 No 7/14/98 Item 7 No 7/20/98 Item 7 No 8/14/98 Item 7 No </TABLE> -19-
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 August 14, 1998 - ------------------ -20-