What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 55 added, 54 removed, 396 unchanged (22% of the section changed)

1 unchanged sentence

CONDENSED CONSOLIDATED BALANCE SHEET

In millions, except per share data June 30,

In millions, except per share data September 30,

2024 December 31,

19 unchanged sentences

Accounts payable 944 1,103

Dividend Payable 1,265 —

Lease liability 668 688

27 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

Quarters Ended Six Months Ended

June 30, June 30,

Quarters Ended Nine Months Ended

September 30, September 30,

In millions, except per share data 2024 2023 2024 2023

25 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

Quarters Ended Six Months Ended

June 30, June 30,

Quarters Ended Nine Months Ended

September 30, September 30,

In millions 2024 2023 2024 2023

24 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

Quarters Ended Six Months Ended

June 30, June 30,

Quarters Ended Nine Months Ended

September 30, September 30,

In millions 2024 2023 2024 2023

32 unchanged sentences

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

issued Accumulated other

18 unchanged sentences

Stock option exercises and other 140 1.8 71 211

Balance at June 30, 2023 1,660.6 $ 17 $ 8,736 $ 61,437 $ ( 303 ) $ 11 $ ( 2,164 ) ( 931.9 ) $ ( 72,733 ) $ ( 4,999 )

For the six months ended June 30, 2024

Balance at September 30, 2023 1,660.6 $ 17 $ 8,825 $ 62,649 $ ( 298 ) $ 62 $ ( 2,310 ) ( 935.3 ) $ ( 73,799 ) $ ( 4,855 )

For the nine months ended September 30, 2024

issued Accumulated other

18 unchanged sentences

Stock option exercises and other 173 2.3 81 254

Balance at June 30, 2024 1,660.6 $ 17 $ 9,055 $ 65,026 $ ( 367 ) $ 33 $ ( 2,129 ) ( 943.3 ) $ ( 76,459 ) $ ( 4,824 )

Balance at September 30, 2024 1,660.6 $ 17 $ 9,194 $ 64,819 $ ( 377 ) $ ( 13 ) $ ( 1,947 ) ( 944.0 ) $ ( 76,870 ) $ ( 5,177 )

See Notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

For the quarter ended June 30, 2023

For the quarter ended September 30, 2023

issued Accumulated other

7 unchanged sentences

In millions, except per share data Shares Amount Shares Amount

Balance at March 31, 2023 1,660.6 $ 17 $ 8,636 $ 60,235 $ ( 299 ) $ 14 $ ( 2,204 ) ( 930.5 ) $ ( 72,174 ) $ ( 5,776 )

Balance at June 30, 2023 1,660.6 $ 17 $ 8,736 $ 61,437 $ ( 303 ) $ 11 $ ( 2,164 ) ( 931.9 ) $ ( 72,733 ) $ ( 4,999 )

Net income 2,317 2,317

8 unchanged sentences

Stock option exercises and other 46 0.2 16 62

Balance at June 30, 2023 1,660.6 $ 17 $ 8,736 $ 61,437 $ ( 303 ) $ 11 $ ( 2,164 ) ( 931.9 ) $ ( 72,733 ) $ ( 4,999 )

For the quarter ended June 30, 2024

Balance at September 30, 2023 1,660.6 $ 17 $ 8,825 $ 62,649 $ ( 298 ) $ 62 $ ( 2,310 ) ( 935.3 ) $ ( 73,799 ) $ ( 4,855 )

For the quarter ended September 30, 2024

issued Accumulated other

7 unchanged sentences

In millions, except per share data Shares Amount Shares Amount

Balance at March 31, 2024 1,660.6 $ 17 $ 9,001 $ 64,203 $ ( 367 ) $ 32 $ ( 2,198 ) ( 939.9 ) $ ( 75,520 ) $ ( 4,833 )

Balance at June 30, 2024 1,660.6 $ 17 $ 9,055 $ 65,026 $ ( 367 ) $ 33 $ ( 2,129 ) ( 943.3 ) $ ( 76,459 ) $ ( 4,824 )

Net income 2,255 2,255

8 unchanged sentences

Stock option exercises and other 100 1.0 33 133

Balance at June 30, 2024 1,660.6 $ 17 $ 9,055 $ 65,026 $ ( 367 ) $ 33 $ ( 2,129 ) ( 943.3 ) $ ( 76,459 ) $ ( 4,824 )

Balance at September 30, 2024 1,660.6 $ 17 $ 9,194 $ 64,819 $ ( 377 ) $ ( 13 ) $ ( 1,947 ) ( 944.0 ) $ ( 76,870 ) $ ( 5,177 )

See Notes to condensed consolidated financial statements.

4 unchanged sentences

In the opinion of management, all normal recurring adjustments necessary for a fair presentation have been included.

The results for the quarter and six months ended June 30, 2024 do not necessarily indicate the results that may be expected for the full year.

The results for the quarter and nine months ended September 30, 2024 do not necessarily indicate the results that may be expected for the full year.

Change in Presentation

6 unchanged sentences

The following table presents restaurant information by ownership type:

Restaurants at June 30, 2024 2023

Restaurants at September 30, 2024 2023

Conventional franchised 21,864 21,761

4 unchanged sentences

Total Systemwide restaurants 42,819 41,198

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 3.2 million shares and 4.7 million shares for the quarters ended 2024 and 2023, respectively, and 3.7 million shares and 4.6 million shares for the six months ended 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 3.2 million shares and 1.2 million shares for the quarters ended 2024 and 2023, respectively, and 2.2 million shares and 2.1 million shares for the six months ended 2024 and 2023, respectively.

Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation, calculated using the treasury stock method, of 3.3 million shares and 4.4 million shares for the quarters ended 2024 and 2023, respectively, and 3.6 million shares and 4.6 million shares for the nine months ended 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 2.0 million shares and 1.2 million shares for the quarters ended 2024 and 2023, respectively, and 2.0 million shares and 2.1 million shares for the nine months ended 2024 and 2023, respectively.

Recent Accounting Pronouncements

17 unchanged sentences

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 $ 101 million of charges related to Accelerating the Organization in the six months ended June 30, 2024.

The Company incurred $ 146 million of restructuring charges related to Accelerating the Organization in the nine months ended September 30, 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.

12 unchanged sentences

Accrued Balance at June 30, 2024 $ 21 $ 5 $ 14 $ 40

Restructuring Costs Incurred ( 1 ) — 47 46

Cash Payments ( 3 ) ( 1 ) ( 41 ) ( 45 )

Other Non-Cash Items — — 1 1

Accrued Balance at September 30, 2024 $ 17 $ 4 $ 21 $ 42

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.

5 unchanged sentences

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 Company records its proportionate share of net income or loss within the Other operating (income) expense, net line on the consolidated statement of income.

The carrying value of the investments are recorded within the Investments in and advances to affiliates line on the consolidated balance sheet.

3 unchanged sentences

The following table summarizes the amounts related to the Company’s primary equity method investees during the periods presented.

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

In Millions Percentage Ownership Fair Value (Level 1) Carrying Amount Percentage Ownership Fair Value (Level 1) Carrying Amount

4 unchanged sentences

As such, the Company remains a minority partner and will continue to account for the investment under the equity method.

As of June 30, 2024, the aggregate carrying amount of the Company's investments in these equity method investees exceeded its proportionate share of the net assets of these equity method investees by $ 1.5 billion.

As of September 30, 2024, the aggregate carrying amount of the Company's investments in these equity method investees exceeded its proportionate share of the net assets of these equity method investees by $ 1.4 billion.

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 six months ended June 30, 2024 and June 30, 2023, respectively.

Six Months Ended June 30,

The following table summarizes the amounts recorded related to the Company's primary equity method investments during the nine months ended September 30, 2024 and September 30, 2023, respectively.

Nine Months Ended September 30,

In Millions 2024 2023

3 unchanged sentences

Dividends Received $ 13 $ 14

The effective income tax rate was 20.9 % and 18.0 % for the quarters ended 2024 and 2023, respectively, and 20.4 % and 19.1 % for the six months ended 2024 and 2023, respectively.

The effective tax rate for both periods of 2023 reflected an income tax benefit of $ 55 million related to the remeasurement of a deferred tax liability.

The effective income tax rate was 20.7 % and 20.7 % for the quarters ended 2024 and 2023, respectively, and 20.5 % and 19.7 % for the nine months ended 2024 and 2023, respectively.

Fair Value Measurements

6 unchanged sentences

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 June 30, 2024, the fair value of the Company’s debt obligations was estimated at $ 36.4 billion, compared to a carrying amount of $ 38.5 billion.

At September 30, 2024, the fair value of the Company’s debt obligations was estimated at $ 38.8 billion, compared to a carrying amount of $ 39.6 billion.

The fair value of debt obligations is based upon quoted market prices, classified as Level 2 within the valuation hierarchy.

6 unchanged sentences

Derivative Assets Derivative Liabilities

In millions Balance Sheet Classification June 30, 2024 December 31, 2023 Balance Sheet Classification June 30, 2024 December 31, 2023

In millions Balance Sheet Classification September 30, 2024 December 31, 2023 Balance Sheet Classification September 30, 2024 December 31, 2023

Derivatives designated as hedging instruments

13 unchanged sentences

Total derivatives $ 149 $ 210 $ ( 166 ) $ ( 118 )

The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the six months ended June 30, 2024 and 2023, respectively:

The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the nine months ended September 30, 2024 and 2023, respectively:

Location of gain or loss

20 unchanged sentences

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 June 30, 2024, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $ 763 million, which included a decrease of $ 58 million of cumulative hedging adjustments.

For the six months ended June 30, 2024, the Company recognized a $ 4 million gain on the fair value of interest rate swaps, and a corresponding loss on the fair value of the related hedged debt instrument to interest expense.

At September 30, 2024, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $ 795 million, which included a decrease of $ 39 million of cumulative hedging adjustments.

For the nine months ended September 30, 2024, the Company recognized a $ 22 million gain on the fair value of interest rate swaps, and a corresponding loss on the fair value of the related hedged debt instrument to interest expense.

Cash Flow Hedges

2 unchanged sentences

The hedges cover up to the next 18 months for certain exposures and are denominated in various currencies.

As of June 30, 2024, the Company had derivatives outstanding with an equivalent notional amount of $ 2.2 billion that hedged a portion of forecasted foreign currency denominated cash flows.

Based on market conditions at June 30, 2024, the $ 33 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.

As of September 30, 2024, the Company had derivatives outstanding with an equivalent notional amount of $ 2.2 billion that hedged a portion of forecasted foreign currency denominated cash flows.

To protect against the variability of interest rates on anticipated bond issuances, the Company may use treasury locks to hedge a portion of expected future cash flows.

As of September 30, 2024, the Company had derivatives outstanding with a notional amount of $ 500 million that hedge a portion of forecasted cash flows.

Based on market conditions at September 30, 2024, the $ 12 million in cumulative cash flow hedging losses, after tax, is not expected to have a significant effect on the Company's earnings over the next 12 months.

Net Investment Hedges

1 unchanged sentence

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 June 30, 2024, $ 13.6 billion of the Company's third-party foreign currency denominated debt, $ 539 million of the Company's intercompany foreign currency denominated debt and $ 1.7 billion of foreign currency derivatives were designated to hedge investments in certain foreign subsidiaries and affiliates.

As of September 30, 2024, $ 14.3 billion of the Company's third-party foreign currency denominated debt, $ 560 million of the Company's intercompany foreign currency denominated debt and $ 1.8 billion of foreign currency derivatives were designated to hedge investments in certain foreign subsidiaries and affiliates.

Undesignated Hedges

7 unchanged sentences

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 June 30, 2024 and has master agreements that contain netting arrangements.

The Company did not have significant exposure to any individual counterparty at September 30, 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 June 30, 2024, the Company was required to post $ 61 million of collateral due to the negative fair value of certain derivative positions.

At September 30, 2024, the Company was required to post $ 122 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.

1 unchanged sentence

Revenues from franchised restaurants consisted of:

Quarters Ended Six Months Ended

June 30, June 30,

Quarters Ended Nine Months Ended

September 30, September 30,

In millions 2024 2023 2024 2023

6 unchanged sentences

- the Company's largest market.

The segment is 95 % franchised as of June 30, 2024.

The segment is 95 % franchised as of September 30, 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 June 30, 2024.

The segment is 89 % franchised as of September 30, 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 June 30, 2024.

The segment is 99 % franchised as of September 30, 2024.

The following table presents the Company’s revenues and operating income by segment:

Quarters Ended Six Months Ended

June 30, June 30,

Quarters Ended Nine Months Ended

September 30, September 30,

In millions 2024 2023 2024 2023

9 unchanged sentences

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission.

On July 2, 2024, the Company completed the acquisition of Alonyal Limited, which owns and operates 228 McDonald’s restaurants in Israel.

As a result of this acquisition, McDonald’s will now consolidate the financial statements of Alonyal Limited into its results.

Revenues from these restaurants will now be reflected as Company-owned and operated sales, rather than royalties charged to the former developmental licensee partner based on a percentage of sales being recorded within Franchised revenue.

The Company will continue to report results from this market within the International Developmental Licensed Markets & Corporate segment.

The Company is currently in the process of accounting for this transaction and expects to complete its preliminary allocation of the purchase consideration to the assets acquired and liabilities assumed by the end of the third quarter of 2024.

There were no other subsequent events that required recognition or disclosure.

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements