MCDONALDS CORP 10-Q

Item 1. Financial Statements CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) In millions, except per share data March 31, 2024 December 31, 2023 Assets Current assets Cash and equivalents $ 838 $ 4,579 Accounts and notes receivable 2,238 2,488 Inventories, at cost, not in excess of market 46 53 Prepaid expenses and other current assets 935 866 Total current assets 4,057 7,986 Other assets Investments in and advances to affiliates 2,883 1,080 Goodwill 3,028 3,040 Miscellaneous 5,586 5,618 Total other assets 11,497 9,738 Lease right-of-use asset, net 13,277 13,514 Property and equipment Property and equipment, at cost 43,432 43,570 Accumulated depreciation and amortization ( 18,750 ) ( 18,662 ) Net property and equipment 24,682 24,908 Total assets $ 53,513 $ 56,147 Liabilities and shareholders’ equity Current liabilities Short-term borrowings and current maturities of long-term debt $ 604 $ 2,192 Accounts payable 936 1,103 Lease liability 685 688 Income taxes 873 705 Other taxes 279 268 Accrued interest 372 469 Accrued payroll and other liabilities 1,136 1,434 Total current liabilities 4,886 6,859 Long-term debt 36,764 37,153 Long-term lease liability 12,828 13,058 Long-term income taxes 361 363 Deferred revenues - initial franchise fees 784 790 Other long-term liabilities 927 950 Deferred income taxes 1,796 1,681 Shareholders’ equity (deficit) Preferred stock, no par value; authorized – 165.0 million shares; issued – none — — Common stock, $ 0.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares 17 17 Additional paid-in capital 9,001 8,893 Retained earnings 64,203 63,480 Accumulated other comprehensive income (loss) ( 2,533 ) ( 2,456 ) Common stock in treasury, at cost; 939.9 and 937.9 million shares ( 75,520 ) ( 74,640 ) Total shareholders’ equity (deficit) ( 4,833 ) ( 4,707 ) Total liabilities and shareholders’ equity (deficit) $ 53,513 $ 56,147 See Notes to condensed consolidated financial statements. 3 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Quarters Ended March 31, In millions, except per share data 2024 2023 Revenues Sales by Company-owned and operated restaurants $ 2,355 $ 2,224 Revenues from franchised restaurants 3,723 3,588 Other revenues 91 86 Total revenues 6,169 5,898 Operating costs and expenses Company-owned and operated restaurant expenses 2,035 1,923 Franchised restaurants-occupancy expenses 627 598 Other restaurant expenses 68 63 Selling, general & administrative expenses Depreciation and amortization 99 99 Other 622 553 Other operating (income) expense, net ( 17 ) 129 Total operating costs and expenses 3,433 3,365 Operating income 2,736 2,532 Interest expense 372 330 Nonoperating (income) expense, net ( 45 ) ( 64 ) Income before provision for income taxes 2,409 2,267 Provision for income taxes 479 465 Net income $ 1,929 $ 1,802 Earnings per common share-basic $ 2.67 $ 2.47 Earnings per common share-diluted $ 2.66 $ 2.45 Dividends declared per common share $ 1.67 $ 1.52 Weighted-average shares outstanding-basic 721.8 730.9 Weighted-average shares outstanding-diluted 725.9 735.5 See Notes to condensed consolidated financial statements. 4 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) Quarters Ended March 31, In millions 2024 2023 Net income $ 1,929 $ 1,802 Other comprehensive income (loss), net of tax Foreign currency translation adjustments: Gain (loss) recognized in accumulated other comprehensive income ("AOCI"), including net investment hedges ( 115 ) 15 Reclassification of (gain) loss to net income — — Foreign currency translation adjustments-net of tax benefit (expense) of $( 93 ) and $ 36 ( 115 ) 15 Cash flow hedges: Gain (loss) recognized in AOCI 36 ( 9 ) Reclassification of (gain) loss to net income 1 ( 8 ) Cash flow hedges-net of tax benefit (expense) of $( 12 ) and $ 5 37 ( 17 ) Defined benefit pension plans: Gain (loss) recognized in AOCI 11 8 Reclassification of (gain) loss to net income ( 10 ) ( 9 ) Defined benefit pension plans-net of tax benefit (expense) of $ 1 and $ 1 1 ( 1 ) Total other comprehensive income (loss), net of tax ( 77 ) ( 3 ) Comprehensive income $ 1,852 $ 1,799 See Notes to condensed consolidated financial statements. 5 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Quarters Ended March 31, In millions 2024 2023 Operating activities Net income $ 1,929 $ 1,802 Adjustments to reconcile to cash provided by operations Charges and credits: Depreciation and amortization 510 490 Deferred income taxes ( 138 ) ( 86 ) Share-based compensation 50 50 Other ( 31 ) ( 31 ) Changes in working capital items 70 195 Cash provided by operations 2,390 2,420 Investing activities Capital expenditures ( 547 ) ( 503 ) Purchases of restaurant businesses (52) ( 98 ) Purchases of equity method investments (1,820) — Sales of restaurant businesses 42 21 Sales of property 8 18 Other ( 124 ) ( 179 ) Cash used for investing activities ( 2,493 ) ( 741 ) Financing activities Net short-term borrowings ( 339 ) 13 Long-term financing issuances — 1,054 Long-term financing repayments ( 1,285 ) — Treasury stock purchases ( 918 ) ( 578 ) Common stock dividends ( 1,206 ) ( 1,111 ) Proceeds from stock option exercises 99 74 Other ( 12 ) ( 10 ) Cash used for financing activities ( 3,661 ) ( 558 ) Effect of exchange rates on cash and cash equivalents 21 3 Cash and equivalents increase (decrease) ( 3,742 ) 1,124 Cash and equivalents at beginning of period 4,579 2,584 Cash and equivalents at end of period $ 838 $ 3,708 See Notes to condensed consolidated financial statements. 6 Table of Contents CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) For the quarter ended March 31, 2023 Common stock issued Accumulated other comprehensive income (loss) Common stock in treasury Total shareholders’ equity (deficit) Additional paid-in capital Retained earnings Pensions Cash flow hedges Foreign currency translation In millions, except per share data Shares Amount Shares Amount Balance at December 31, 2022 1,660.6 $ 17 $ 8,547 $ 59,544 $ ( 298 ) $ 31 $ ( 2,219 ) ( 929.3 ) $ ( 71,624 ) $ ( 6,003 ) Net income 1,802 1,802 Other comprehensive income (loss), net of tax ( 1 ) ( 17 ) 15 ( 3 ) Comprehensive income 1,799 Common stock cash dividends ($ 1.52 per share) ( 1,111 ) ( 1,111 ) Treasury stock purchases ( 2.2 ) ( 585 ) ( 585 ) Share-based compensation 50 50 Stock option exercises and other 39 1.0 35 74 Balance at March 31, 2023 1,660.6 $ 17 $ 8,636 $ 60,235 $ ( 299 ) $ 14 $ ( 2,204 ) ( 930.5 ) $ ( 72,174 ) $ ( 5,776 ) For the quarter ended March 31, 2024 Common stock issued Accumulated other comprehensive income (loss) Common stock in treasury Total shareholders’ equity (deficit) Additional paid-in capital Retained earnings Pensions Cash flow hedges Foreign currency translation In millions, except per share data Shares Amount Shares Amount Balance at December 31, 2023 1,660.6 $ 17 $ 8,893 $ 63,480 $ ( 367 ) $ ( 6 ) $ ( 2,083 ) ( 937.9 ) $ ( 74,640 ) $ ( 4,707 ) Net income 1,929 1,929 Other comprehensive income (loss), net of tax 1 37 ( 115 ) ( 77 ) Comprehensive income 1,852 Common stock cash dividends ($ 1.67 per share) ( 1,206 ) ( 1,206 ) Treasury stock purchases ( 3.2 ) ( 921 ) ( 921 ) Share-based compensation 50 50 Stock option exercises and other 58 1.2 41 99 Balance at March 31, 2024 1,660.6 $ 17 $ 9,001 $ 64,203 $ ( 367 ) $ 32 $ ( 2,198 ) ( 939.9 ) $ ( 75,520 ) $ ( 4,833 ) See Notes to condensed consolidated financial statements. 7 Table of Contents NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) McDonald’s Corporation, the registrant, together with its subsidiaries, is referred to herein as the "Company." The Company, its franchisees and suppliers, are referred to herein as the "System." Basis of Presentation The accompanying condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s December 31, 2023 Annual Report on Form 10-K. In the opinion of management, all normal recurring adjustments necessary for a fair presentation have been included. The results for the quarter ended March 31, 2024 do not necessarily indicate the results that may be expected for the full year. Change in Presentation In the first quarter of 2024, the Company changed its rounding presentation to the nearest whole number in millions of reported amounts, except per share data or as otherwise designated. The change in rounding presentation has been applied to all prior year amounts presented. In certain circumstances, this change adjusted previously reported balances, however, these changes were not significant, and no other changes were made to previously reported financial information. Additionally, certain columns and rows within the financial statements and tables presented may not add due to rounding. Percentages have been calculated from the underlying whole-dollar amounts for all periods presented. Restaurant Information The following table presents restaurant information by ownership type: Restaurants at March 31, 2024 2023 Conventional franchised 21,841 21,701 Developmental licensed 8,741 8,289 Foreign affiliated 9,283 8,427 Total Franchised 39,865 38,417 Company-owned and operated 2,153 2,118 Total Systemwide restaurants 42,018 40,535 The results of operations of restaurant businesses purchased and sold in transactions with franchisees were not material either individually or in the aggregate to the accompanying condensed consolidated financial statements for the periods prior to purchase and sale. Per Common Share Information Diluted earnings per common share is calculated as net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation, calculated using the treasury stock method, of 4.1 million shares and 4.6 million shares for the quarters 2024 and 2023, respectively. Share-based compensation awards that would have been antidilutive, and therefore were not included in the calculation of diluted weighted-average shares, totaled 2.1 million shares and 2.3 million shares for the quarters 2024 and 2023, respectively. Recent Accounting Pronouncements Recent Accounting Pronouncements Not Yet Adopted Segment Reporting In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). The pronouncement expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-07 will have on the Company's consolidated financial statement disclosures. Income Taxes In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures. 8 Table of Contents Accelerating the Organization In January 2023, the Company announced an evolution of its successful Accelerating the Arches strategy. Enhancements to the strategy included the addition of Restaurant Development to the Company’s growth pillars and an internal effort to modernize ways of working, Accelerating the Organization , both of which are aimed at elevating the Company’s performance. Accelerating the Organization is designed to unlock further growth as the Company focuses on becoming faster, more innovative and more efficient for its customers and people. The Company incurred $ 44 million of charges related to Accelerating the Organization in the three months ended March 31, 2024. These charges were recorded in the Other operating (income) expense, net line within the consolidated statement of income, and primarily recorded within the Corporate segment. For the period presented, restructuring charges primarily consisted of professional services and consulting activities. There were no significant non-cash impairment charges included in the amounts listed in the table below. The following table summarizes the balance of accrued expenses related to this strategic initiative (in millions): Employee Termination Benefits Costs to Terminate Contracts Other Related Costs Total 2024 Accrued Balance at Beginning of Year $ 41 $ 11 $ 7 59 Restructuring Costs Incurred — — 44 44 Cash Payments ( 14 ) ( 5 ) ( 44 ) ( 63 ) Other Non-Cash Items — — ( 1 ) ( 1 ) Accrued Balance at March 31, 2024 $ 27 $ 6 $ 6 $ 39 The Company continues to evolve its ways of working by driving efficiency and effectiveness across the organization, primarily led by its Global Business Services organization. Transformation efforts under Accelerating the Organization will continue to result in various restructuring charges as the strategy progresses through its anticipated end date of 2027. The Company expects to incur up to $ 250 million of restructuring charges in 2024, primarily related to consulting activities. 9 Table of Contents Equity Method Investments The Company has various investments accounted for using the equity method. Under the equity method of accounting, the Company records our proportionate share of the net income or loss of each equity method investee, with a corresponding change to the carrying value of the investment. The carrying value of the investment is also adjusted for any dividends received and the effect of foreign exchange. The Company records its proportionate share of net income or loss within the Other operating (income) expense, net line on the consolidated statement of net income. The carrying value of the investments are recorded within the Miscellaneous other assets line on the consolidated balance sheet. The Company’s primary equity method investments include partial ownership in Grand Foods Holding, an entity that operates and manages McDonald's business in mainland China, Hong Kong and Macau, and partial ownership in McDonald’s Japan Holdings Co., Ltd, an entity that operates and manages McDonald’s business in Japan. The Company has granted these entities the right to operate the McDonald's business as part of a Master Franchise Agreement. Revenue related to these agreements are accounted for in a manner consistent with the Company’s other franchise arrangements. The following table summarizes the amounts related to the Company’s primary equity method investees during the periods presented. March 31, 2024 December 31, 2023 In Millions Percentage Ownership Fair Value (Level 1) Carrying Amount Percentage Ownership Fair Value (Level 1) Carrying Amount Grand Foods Holding 48 % N/A $ 2,092 20 % N/A $ 238 McDonald's Japan Holdings Co., Ltd 35 % $ 2,128 $ 563 35 % $ 2,034 $ 597 On January 30, 2024, the Company acquired an additional 28 % ownership stake in Grand Foods Holding from the global investment firm Carlyle in exchange for $ 1.8 billion in cash. The acquisition increased the Company's equity ownership to 48 %, but did not result in control of the entity. As such, the Company remains a minority partner and will continue to account for the investment under the equity method. As of March 31, 2024, the aggregate carrying amount of our investments in these equity method investees exceeded our proportionate share of the net assets of these equity method investees by $ 1,448 million. This difference is not amortized. Management has concluded that there are no indicators of impairment related to these investments. The following table summarizes the amounts recorded related to the Company's primary equity method investments during the periods presented. Quarters Ended March 31, In Millions 2024 2023 Revenue $ 134 $ 122 Equity in Earnings $ 34 $ 27 Accounts Receivable $ 112 $ 114 Dividends Received $ 13 $ 14 10 Table of Contents Income Taxes The effective income tax rate was 19.9 % and 20.5 % for the quarters ended 2024 and 2023, respectively. Fair Value Measurements The Company measures certain financial assets and liabilities at fair value. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date and are defined as follows: • Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. • Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. • Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. There were no significant changes to the valuation techniques used to measure fair value as described in the Company's December 31, 2023 Annual Report on Form 10-K. At March 31, 2024, the fair value of the Company’s debt obligations was estimated at $ 35.7 billion, compared to a carrying amount of $ 37.4 billion. The fair value of debt obligations is based upon quoted market prices, classified as Level 2 within the valuation hierarchy. The carrying amount of cash and equivalents and notes receivable approximate fair value. 11 Table of Contents Financial Instruments and Hedging Activities The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not hold or issue derivatives for trading purposes. The following table presents the fair values of derivative instruments included on the condensed consolidated balance sheet: Derivative Assets Derivative Liabilities In millions Balance Sheet Classification March 31, 2024 December 31, 2023 Balance Sheet Classification March 31, 2024 December 31, 2023 Derivatives designated as hedging instruments Foreign currency Prepaid expenses and other current assets $ 35 $ 9 Accrued payroll and other liabilities $ ( 10 ) $ ( 37 ) Interest rate Prepaid expenses and other current assets $ — $ 4 Accrued payroll and other liabilities $ ( 2 ) $ ( 4 ) Foreign currency Miscellaneous other assets $ 18 $ 2 Other long-term liabilities $ ( 1 ) $ ( 14 ) Interest rate Miscellaneous other assets $ — $ — Other long-term liabilities $ ( 62 ) $ ( 58 ) Total derivatives designated as hedging instruments $ 53 $ 15 $ ( 75 ) $ ( 113 ) Derivatives not designated as hedging instruments Equity Prepaid expenses and other current assets $ — $ — Accrued payroll and other liabilities $ — $ — Foreign currency Prepaid expenses and other current assets $ — $ 6 Accrued payroll and other liabilities $ — $ ( 5 ) Equity Miscellaneous other assets $ 180 $ 189 Total derivatives not designated as hedging instruments $ 180 $ 195 $ — $ ( 5 ) Total derivatives $ 233 $ 210 $ ( 75 ) $ ( 118 ) The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the three months ended March 31, 2024 and 2023, respectively: Location of gain or loss recognized in income on derivative Gain (loss) recognized in AOCI Gain (loss) reclassified into income from AOCI Gain (loss) recognized in income on derivative In millions 2024 2023 2024 2023 2024 2023 Foreign currency Nonoperating income/expense $ 43 $ ( 9 ) $ ( 2 ) $ 10 Interest rate Interest expense $ 4 $ ( 2 ) $ — $ — Cash flow hedges $ 47 $ ( 11 ) $ ( 2 ) $ 10 Foreign currency denominated debt Nonoperating income/expense $ 349 $ ( 163 ) Foreign currency derivatives Nonoperating income/expense $ 37 $ 8 Foreign currency derivatives (1) Interest expense $ 7 $ 6 Net investment hedges $ 386 $ ( 155 ) $ — $ 7 $ 6 Foreign currency Nonoperating income/expense $ 1 $ 2 Equity Selling, general & administrative expenses $ ( 9 ) $ 16 Undesignated derivatives $ ( 8 ) $ 18 (1) The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. 12 Table of Contents Fair Value Hedges The Company enters into fair value hedges to reduce the exposure to changes in fair values of certain liabilities. The Company enters into fair value hedges that convert a portion of its fixed rate debt into floating rate debt by use of interest rate swaps. At March 31, 2024, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $ 1.0 billion, which included a decrease of $ 64 million of cumulative hedging adjustments. For the three months ended March 31, 2024, the Company recognized a $ 2 million loss on the fair value of interest rate swaps, and a corresponding gain on the fair value of the related hedged debt instrument to interest expense. Cash Flow Hedges The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. To protect against the reduction in value of forecasted foreign currency cash flows (such as royalties denominated in foreign currencies), the Company uses foreign currency forwards to hedge a portion of anticipated exposures. The hedges cover up to the next 18 months for certain exposures and are denominated in various currencies. As of March 31, 2024, the Company had derivatives outstanding with an equivalent notional amount of $ 1.9 billion that hedged a portion of forecasted foreign currency denominated cash flows. Based on market conditions at March 31, 2024, the $ 32 million in cumulative cash flow hedging gains, after tax, is not expected to have a significant effect on the Company's earnings over the next 12 months. Net Investment Hedges The Company uses foreign currency denominated debt (third-party and intercompany) and foreign currency derivatives to hedge its investments in certain foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges are included in shareholders' equity in the foreign currency translation component of Other comprehensive income ("OCI") and offset translation adjustments on the underlying net assets of foreign subsidiaries and affiliates, which also are recorded in OCI. As of March 31, 2024, $ 13.1 billion of the Company's third-party foreign currency denominated debt, $ 542 million of the Company's intercompany foreign currency denominated debt and $ 565 million of foreign currency derivatives were designated to hedge investments in certain foreign subsidiaries and affiliates. Undesignated Derivatives The Company enters into certain derivatives that are not designated for hedge accounting. Therefore, the changes in the fair value of these derivatives are recognized immediately in earnings together with the gain or loss from the hedged balance sheet position. As an example, the Company enters into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. The Company may also use certain investments to hedge changes in these liabilities. Changes in the fair value of these derivatives or investments are recorded in Selling, general & administrative expenses together with the changes in the supplemental benefit plan liabilities. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. The changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, along with the currency gain or loss from the hedged balance sheet position. Credit Risk The Company is exposed to credit-related losses in the event of non-performance by its derivative counterparties. The Company did not have significant exposure to any individual counterparty at March 31, 2024 and has master agreements that contain netting arrangements. For financial reporting purposes, the Company presents gross derivative balances in its financial statements and supplementary data, including for counterparties subject to netting arrangements. Some of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At March 31, 2024, the Company was required to post $78 million of collateral due to the negative fair value of certain derivative positions. The Company's counterparties were not required to post collateral on any derivative position, other than on certain hedges of the Company’s supplemental benefit plan liabilities where the counterparties were required to post collateral on their liability positions. 13 Table of Contents Franchise Arrangements Revenues from franchised restaurants consisted of: Quarters Ended March 31, In millions 2024 2023 Rents $ 2,381 $ 2,270 Royalties 1,326 1,303 Initial fees 15 15 Revenues from franchised restaurants $ 3,723 $ 3,588 Segment Information The Company operates under an organizational structure with the following global business segments reflecting how management reviews and evaluates operating performance: • U.S. - the Company's largest market. The segment is 95 % franchised as of March 31, 2024. • International Operated Markets - comprised of markets or countries in which the Company owns and operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K. The segment is 89 % franchised as of March 31, 2024 . • International Developmental Licensed Markets & Corporate - comprised primarily of developmental licensee and affiliate markets in the McDonald’s System, including equity method investments in China and Japan. Corporate activities are also reported in this segment. The segment is 98 % franchised as of March 31, 2024. The following table presents the Company’s revenues and operating income by segment: Quarters Ended March 31, In millions 2024 2023 Revenues U.S. $ 2,560 $ 2,488 International Operated Markets 2,987 2,795 International Developmental Licensed Markets & Corporate 621 615 Total revenues $ 6,169 $ 5,898 Operating Income U.S. $ 1,395 $ 1,295 International Operated Markets 1,365 1,193 International Developmental Licensed Markets & Corporate ( 25 ) 45 Total operating income $ 2,736 $ 2,532 Subsequent Events The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission ("SEC"). There were no subsequent events that required recognition or disclosure. 14 Table of Contents