UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	~~September 30, 2022~~March 31, 2023


☐			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 Incorporation or Organization)		(I.R.S. Employer Identification No.)

110 North Carpenter Street		60607
Chicago,	Illinois
(Address of Principal Executive Offices)		(Zip Code)

(630) 623-3000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	MCD	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~732,423,892~~730,093,896

(Number of shares of common stock

outstanding as of ~~9/30/2022)~~March 31, 2023)

Table of Contents

McDONALD’S CORPORATION

___________________________

INDEX

_______


			Page Reference
Part I. Financial Information

Item 1 – Financial Statements

Condensed Consolidated Balance Sheet, ~~September 30, 202~~2 March 31, 2023 (unaudited) and December 31, 20 212022			3

Condensed Consolidated Statement of Income (unaudited), quarters ended March 31, 2023 and ~~nine months ended September 30, 202~~2 ~~and 20~~212022			4

Condensed Consolidated Statement of Comprehensive Income (unaudited), quarters ended March 31, 2023 and ~~nine months ended September 30, 202~~2 ~~and 2021~~2022			5

Condensed Consolidated Statement of Cash Flows (unaudited), quarters ended March 31, 2023 and ~~nine months ended September 30, 202~~2 ~~and 202~~12022			6

Condensed Consolidated Statement of Shareholders' Equity (unaudited), quarters ended March 31, 2023 and ~~nine months ended September 30, 202~~2 ~~and 202~~12022			7

Notes to Condensed Consolidated Financial Statements (unaudited)			98

Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations			1513

Item 3 – Quantitative and Qualitative Disclosures About Market Risk			3934

Item 4 – Controls and Procedures			3934

Part II. Other Information

Item 1 – Legal Proceedings			4036

Item 1A – Risk Factors			4036

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds			4036

Item 6 – Exhibits			4137

Signature			4339

All trademarks used herein are the property of their respective owners and are used with permission.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements


CONDENSED CONSOLIDATED BALANCE SHEET	CONDENSED CONSOLIDATED BALANCE SHEET					CONDENSED CONSOLIDATED BALANCE SHEET

		(unaudited)					(unaudited)
In millions, except per share data	In millions, except per share data	September 30, 2022		December 31, 2021		In millions, except per share data	March 31, 2023		December 31, 2022
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and equivalents	Cash and equivalents	2,828.3		4,709.2		Cash and equivalents	$	3,708.1	$	2,583.8
Accounts and notes receivable	Accounts and notes receivable	1,889.9		1,872.4		Accounts and notes receivable	2,075.5		2,115.0
Inventories, at cost, not in excess of market	Inventories, at cost, not in excess of market	43.4		55.6		Inventories, at cost, not in excess of market	51.5		52.0
Prepaid expenses and other current assets	Prepaid expenses and other current assets	979.2		511.3		Prepaid expenses and other current assets	963.6		673.4

Total current assets	Total current assets	5,740.8		7,148.5		Total current assets	6,798.7		5,424.2
Other assets	Other assets					Other assets
Investments in and advances to affiliates	Investments in and advances to affiliates	963.8		1,201.2		Investments in and advances to affiliates	1,087.6		1,064.5
Goodwill	Goodwill	2,651.3		2,782.5		Goodwill	2,930.6		2,900.4
Miscellaneous	Miscellaneous	4,254.6		4,449.5		Miscellaneous	4,794.8		4,707.2
Total other assets	Total other assets	7,869.7		8,433.2		Total other assets	8,813.0		8,672.1
Lease right-of-use asset, net	Lease right-of-use asset, net	12,192.8		13,552.0		Lease right-of-use asset, net	12,544.2		12,565.7
Property and equipment	Property and equipment					Property and equipment
Property and equipment, at cost	Property and equipment, at cost	39,096.8		41,916.6		Property and equipment, at cost	41,487.1		41,037.6
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(16,398.5)		(17,196.0)		Accumulated depreciation and amortization	(17,628.6)		(17,264.0)
Net property and equipment	Net property and equipment	22,698.3		24,720.6		Net property and equipment	23,858.5		23,773.6
Total assets	Total assets	$	48,501.6	$	53,854.3	Total assets	$	52,014.4	$	50,435.6
Liabilities and shareholders’ equity	Liabilities and shareholders’ equity					Liabilities and shareholders’ equity
Current liabilities	Current liabilities					Current liabilities

Short-term borrowings and current maturities of long-term debt						Short-term borrowings and current maturities of long-term debt	$	524.2	$	—
Accounts payable	Accounts payable	794.8		1,006.8		Accounts payable	811.8		980.2
Lease liability	Lease liability	654.9		705.5		Lease liability	668.7		661.1
Income taxes	Income taxes	386.3		360.7		Income taxes	795.8		274.9
Other taxes	Other taxes	203.6		236.7		Other taxes	273.0		255.1
Accrued interest	Accrued interest	318.4		363.3		Accrued interest	364.6		393.4
Accrued payroll and other liabilities	Accrued payroll and other liabilities	1,128.1		1,347.0		Accrued payroll and other liabilities	1,186.6		1,237.4

Total current liabilities	Total current liabilities	3,486.1		4,020.0		Total current liabilities	4,624.7		3,802.1
Long-term debt	Long-term debt	34,866.2		35,622.7		Long-term debt	36,603.7		35,903.5
Long-term lease liability	Long-term lease liability	11,766.8		13,020.9		Long-term lease liability	12,122.6		12,134.4
Long-term income taxes	Long-term income taxes	1,085.0		1,896.8		Long-term income taxes	737.1		791.9
Deferred revenues - initial franchise fees	Deferred revenues - initial franchise fees	727.8		738.3		Deferred revenues - initial franchise fees	760.5		757.8
Other long-term liabilities	Other long-term liabilities	990.8		1,081.0		Other long-term liabilities	1,059.4		1,051.8
Deferred income taxes	Deferred income taxes	2,145.1		2,075.6		Deferred income taxes	1,882.5		1,997.5
Shareholders’ equity (deficit)	Shareholders’ equity (deficit)					Shareholders’ equity (deficit)
Preferred stock, no par value; authorized – 165.0 million shares; issued – none	Preferred stock, no par value; authorized – 165.0 million shares; issued – none	—		—		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	Common stock, $0.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares	16.6		16.6		Common stock, $0.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares	16.6		16.6
Additional paid-in capital	Additional paid-in capital	8,460.1		8,231.6		Additional paid-in capital	8,635.5		8,547.1
Retained earnings	Retained earnings	58,752.0		57,534.7		Retained earnings	60,235.0		59,543.9
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(2,559.7)		(2,573.7)		Accumulated other comprehensive income (loss)	(2,489.4)		(2,486.6)
Common stock in treasury, at cost; 928.2 and 915.8 million shares		(71,235.2)		(67,810.2)
Common stock in treasury, at cost; 930.5 and 929.3 million shares						Common stock in treasury, at cost; 930.5 and 929.3 million shares	(72,173.8)		(71,624.4)
Total shareholders’ equity (deficit)	Total shareholders’ equity (deficit)	(6,566.2)		(4,601.0)		Total shareholders’ equity (deficit)	(5,776.1)		(6,003.4)
Total liabilities and shareholders’ equity (deficit)	Total liabilities and shareholders’ equity (deficit)	$	48,501.6	$	53,854.3	Total liabilities and shareholders’ equity (deficit)	$	52,014.4	$	50,435.6

See Notes to condensed consolidated financial statements.

Table of Contents


CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)	CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)									CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

		Quarters Ended				Nine Months Ended					Quarters Ended
		September 30,				September 30,					March 31,
In millions, except per share data	In millions, except per share data	2022		2021		2022		2021		In millions, except per share data	2023		2022
Revenues	Revenues									Revenues
Sales by Company-operated restaurants	Sales by Company-operated restaurants	$	2,124.8	$	2,598.4	$	6,540.0	$	7,248.6	Sales by Company-operated restaurants	$	2,224.3	$	2,302.4
Revenues from franchised restaurants	Revenues from franchised restaurants	3,671.2		3,510.2		10,460.8		9,693.8		Revenues from franchised restaurants	3,587.5		3,262.8
Other revenues	Other revenues	76.1		92.7		255.3		271.4		Other revenues	86.0		100.4
Total revenues	Total revenues	5,872.1		6,201.3		17,256.1		17,213.8		Total revenues	5,897.8		5,665.6
Operating costs and expenses	Operating costs and expenses									Operating costs and expenses
Company-operated restaurant expenses	Company-operated restaurant expenses	1,779.6		2,108.4		5,508.6		5,947.0		Company-operated restaurant expenses	1,923.1		1,959.2
Franchised restaurants-occupancy expenses	Franchised restaurants-occupancy expenses	589.0		592.6		1,761.6		1,743.2		Franchised restaurants-occupancy expenses	598.3		584.0
Other restaurant expenses	Other restaurant expenses	57.4		68.9		187.6		204.4		Other restaurant expenses	62.8		72.3
Selling, general & administrative expenses	Selling, general & administrative expenses									Selling, general & administrative expenses
Depreciation and amortization	Depreciation and amortization	93.3		84.1		279.0		243.2		Depreciation and amortization	99.3		92.7
Other	Other	576.4		559.6		1,771.9		1,622.4		Other	553.3		584.3
Other operating (income) expense, net	Other operating (income) expense, net	12.5		(198.8)		959.1		(505.3)		Other operating (income) expense, net	128.6		60.5
Total operating costs and expenses	Total operating costs and expenses	3,108.2		3,214.8		10,467.8		9,254.9		Total operating costs and expenses	3,365.4		3,353.0
Operating income	Operating income	2,763.9		2,986.5		6,788.3		7,958.9		Operating income	2,532.4		2,312.6
Interest expense	Interest expense	306.2		293.7		884.1		890.2		Interest expense	329.7		287.3
Nonoperating (income) expense, net	Nonoperating (income) expense, net	(78.5)		1.4		417.7		48.6		Nonoperating (income) expense, net	(64.3)		484.1
Income before provision for income taxes	Income before provision for income taxes	2,536.2		2,691.4		5,486.5		7,020.1		Income before provision for income taxes	2,267.0		1,541.2
Provision for income taxes	Provision for income taxes	554.6		541.5		1,212.5		1,113.7		Provision for income taxes	464.7		436.8
Net income	Net income	$	1,981.6	$	2,149.9	$	4,274.0	$	5,906.4	Net income	$	1,802.3	$	1,104.4
Earnings per common share-basic	Earnings per common share-basic	$	2.70	$	2.88	$	5.79	$	7.91	Earnings per common share-basic	$	2.47	$	1.49
Earnings per common share-diluted	Earnings per common share-diluted	$	2.68	$	2.86	$	5.75	$	7.86	Earnings per common share-diluted	$	2.45	$	1.48
Dividends declared per common share	Dividends declared per common share	$	1.38	$	2.67	$	4.14	$	5.25	Dividends declared per common share	$	1.52	$	1.38
Weighted-average shares outstanding-basic	Weighted-average shares outstanding-basic	734.9		747.1		738.3		746.5		Weighted-average shares outstanding-basic	730.9		742.6
Weighted-average shares outstanding-diluted	Weighted-average shares outstanding-diluted	739.5		752.6		743.0		751.9		Weighted-average shares outstanding-diluted	735.5		747.6

See Notes to condensed consolidated financial statements.

Table of Contents

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Quarters Ended Nine Months Ended
September 30, September 30,
In millions 2022 2021 2022 2021
Net income $ 1,981.6 $ 2,149.9 $ 4,274.0 $ 5,906.4
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments:
Gain (loss) recognized in accumulated other comprehensive
income ("AOCI"), including net investment hedges (369.5) (132.8) (644.3) (172.7)
Reclassification of (gain) loss to net income — 14.3 504.1 34.7
Foreign currency translation adjustments-net of tax
benefit (expense) of $(198.7), $(66.1), $(435.7) and $(133.7) (369.5) (118.5) (140.2) (138.0)
Cash flow hedges:
Gain (loss) recognized in AOCI 101.4 26.8 231.8 48.7
Reclassification of (gain) loss to net income (42.5) 4.0 (70.9) 32.4
Cash flow hedges-net of tax benefit (expense) of $(16.9), $(9.2), $(46.2) and $(24.1) 58.9 30.8 160.9 81.1
Defined benefit pension plans:
Gain (loss) recognized in AOCI (0.7) 0.1 (0.6) 0.9
Reclassification of (gain) loss to net income (2.0) (4.4) (6.1) (20.4)
Defined benefit pension plans-net of tax benefit (expense)
of $0.0, $0.0, $0.1 and $0.1 (2.7) (4.3) (6.7) (19.5)
Total other comprehensive income (loss), net of tax (313.3) (92.0) 14.0 (76.4)
Comprehensive income $ 1,668.3 $ 2,057.9 $ 4,288.0 $ 5,830.0


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

	Quarters Ended
	March 31,
In millions	2023		2022
Net income	$	1,802.3	$	1,104.4
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments:
Gain (loss) recognized in accumulated other comprehensive income ("AOCI"), including net investment hedges	15.0		(84.2)
Reclassification of (gain) loss to net income	—		—
Foreign currency translation adjustments-net of tax benefit (expense) of $35.6 and $(59.0)	15.0		(84.2)
Cash flow hedges:
Gain (loss) recognized in AOCI	(8.5)		27.4
Reclassification of (gain) loss to net income	(8.2)		(10.1)
Cash flow hedges-net of tax benefit (expense) of $4.5 and $(5.0)	(16.7)		17.3
Defined benefit pension plans:
Gain (loss) recognized in AOCI	8.4		0.1
Reclassification of (gain) loss to net income	(9.5)		(1.4)
Defined benefit pension plans-net of tax benefit (expense) of $1.1 and $0.0	(1.1)		(1.3)
Total other comprehensive income (loss), net of tax	(2.8)		(68.2)
Comprehensive income	$	1,799.5	$	1,036.2

See Notes to condensed consolidated financial statements.

Table of Contents


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)	CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)									CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

		Quarters Ended				Nine Months Ended					Quarters Ended
		September 30,				September 30,					March 31,
In millions	In millions	2022		2021		2022		2021		In millions	2023		2022
Operating activities	Operating activities									Operating activities
Net income	Net income	$	1,981.6	$	2,149.9	$	4,274.0	$	5,906.4	Net income	$	1,802.3	$	1,104.4
Adjustments to reconcile to cash provided by operations	Adjustments to reconcile to cash provided by operations									Adjustments to reconcile to cash provided by operations
Charges and credits:	Charges and credits:									Charges and credits:
Depreciation and amortization	Depreciation and amortization	465.6		469.2		1,407.5		1,386.5		Depreciation and amortization	490.5		479.7
Deferred income taxes	Deferred income taxes	(196.3)		(45.8)		(383.1)		(416.2)		Deferred income taxes	(86.1)		(50.5)
Share-based compensation	Share-based compensation	38.3		34.1		130.9		97.9		Share-based compensation	49.7		54.3
Other	Other	(45.6)		(163.6)		260.6		(364.8)		Other	(30.8)		72.0
Changes in working capital items	Changes in working capital items	190.3		174.0		(504.6)		(134.8)		Changes in working capital items	195.1		473.4
Cash provided by operations	Cash provided by operations	2,433.9		2,617.8		5,185.3		6,475.0		Cash provided by operations	2,420.7		2,133.3
Investing activities	Investing activities									Investing activities
Capital expenditures	Capital expenditures	(531.2)		(501.5)		(1,370.3)		(1,352.8)		Capital expenditures	(503.3)		(401.2)
Purchases of restaurant businesses	Purchases of restaurant businesses	(152.3)		(28.6)		(349.5)		(116.7)		Purchases of restaurant businesses	(97.6)		(86.7)
Sales of restaurant and other businesses		33.1		60.1		401.3		141.9
Sales of restaurant businesses										Sales of restaurant businesses	20.8		16.5
Sales of property	Sales of property	11.1		41.3		22.3		97.9		Sales of property	18.0		4.9
Other	Other	(93.8)		43.8		(310.6)		186.7		Other	(179.2)		(88.0)
Cash used for investing activities	Cash used for investing activities	(733.1)		(384.9)		(1,606.8)		(1,043.0)		Cash used for investing activities	(741.3)		(554.5)
Financing activities	Financing activities									Financing activities
Net short-term borrowings	Net short-term borrowings	(305.4)		(0.3)		10.7		7.6		Net short-term borrowings	12.8		6.0

Long-term financing issuances	Long-term financing issuances	1,500.0		—		3,374.5		—		Long-term financing issuances	1,054.3		—
Long-term financing repayments	Long-term financing repayments	(0.4)		(0.4)		(2,201.8)		(1,739.4)		Long-term financing repayments	—		(1,350.6)
Treasury stock purchases	Treasury stock purchases	(869.2)		(17.7)		(3,406.9)		(42.2)		Treasury stock purchases	(578.4)		(1,506.5)
Common stock dividends	Common stock dividends	(1,014.7)		(963.9)		(3,056.7)		(2,889.5)		Common stock dividends	(1,111.2)		(1,025.1)
Proceeds from stock option exercises	Proceeds from stock option exercises	62.4		66.6		168.3		198.6		Proceeds from stock option exercises	73.8		58.7
Other	Other	80.9		(11.7)		48.7		(32.7)		Other	(9.7)		(12.6)
Cash used for financing activities	Cash used for financing activities	(546.4)		(927.4)		(5,063.2)		(4,497.6)		Cash used for financing activities	(558.4)		(3,830.1)
Effect of exchange rates on cash and cash equivalents	Effect of exchange rates on cash and cash equivalents	(198.6)		(49.1)		(396.2)		(77.7)		Effect of exchange rates on cash and cash equivalents	3.3		(122.2)
Cash and equivalents increase (decrease)	Cash and equivalents increase (decrease)	955.8		1,256.4		(1,880.9)		856.7		Cash and equivalents increase (decrease)	1,124.3		(2,373.5)
Cash and equivalents at beginning of period	Cash and equivalents at beginning of period	1,872.5		3,049.4		4,709.2		3,449.1		Cash and equivalents at beginning of period	2,583.8		4,709.2
Cash and equivalents at end of period	Cash and equivalents at end of period	$	2,828.3	$	4,305.8	$	2,828.3	$	4,305.8	Cash and equivalents at end of period	$	3,708.1	$	2,335.7

See Notes to condensed consolidated financial statements.

Table of Contents


CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)	CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)																	CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the nine months ended September 30, 2021
For the quarter ended March 31, 2022																		For the quarter ended March 31, 2022
		Common stock issued							Accumulated other comprehensive income (loss)					Common stock in treasury		Total shareholders’ equity (deficit)			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											Additional paid-in capital			Retained earnings		Pensions			Cash flow hedges			Foreign currency translation
In millions, except per share data	In millions, except per share data	Shares	Amount											Shares	Amount			In millions, except per share data	Shares	Amount																	Shares	Amount
Balance at December 31, 2020		1,660.6		16.6		7,903.6	53,908.1		(287.6)		(111.3)		(2,187.9)	(915.2)	(67,066.4)		(7,824.9)
Balance at December 31, 2021																		Balance at December 31, 2021	1,660.6		$	16.6		$	8,231.6	$	57,534.7		$	(179.5)		$	(24.8)		$	(2,369.4)	(915.8)	$	(67,810.2)		$	(4,601.0)
Net income	Net income						5,906.4										5,906.4	Net income								1,104.4															1,104.4
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax								(19.5)		81.1		(138.0)				(76.4)	Other comprehensive income (loss), net of tax											(1.3)			17.3			(84.2)						(68.2)
Comprehensive income	Comprehensive income																5,830.0	Comprehensive income																							1,036.2
Common stock cash dividends ($5.25 per share)							(3,916.8)										(3,916.8)
Common stock cash dividends ($1.38 per share)																		Common stock cash dividends ($1.38 per share)								(1,025.1)															(1,025.1)
Treasury stock purchases	Treasury stock purchases													(0.2)	(59.0)		(59.0)	Treasury stock purchases																			(6.1)	(1,506.5)			(1,506.5)
Share-based compensation	Share-based compensation					97.9											97.9	Share-based compensation						54.3																	54.3
Stock option exercises and other	Stock option exercises and other					124.3								2.0	73.5		197.8	Stock option exercises and other						21.2													0.8	30.1			51.3
Balance at September 30, 2021		1,660.6		16.6		8,125.8	55,897.7		(307.1)		(30.2)		(2,325.9)	(913.4)	(67,051.9)		(5,675.0)
Balance at March 31, 2022																		Balance at March 31, 2022	1,660.6		$	16.6		$	8,307.1	$	57,614.0		$	(180.8)		$	(7.5)		$	(2,453.6)	(921.1)	$	(69,286.6)		$	(5,990.8)

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the nine months ended September 30, 2022
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, 2021 1,660.6 $ 16.6 $ 8,231.6 $ 57,534.7 $ (179.5) $ (24.8) $ (2,369.4) (915.8) $ (67,810.2) $ (4,601.0)
Net income 4,274.0 4,274.0
Other comprehensive income (loss),
net of tax (6.7) 160.9 (140.2) 14.0
Comprehensive income 4,288.0
Common stock cash dividends
($4.14 per share)
(3,056.7) (3,056.7)
Treasury stock purchases (14.1) (3,486.8) (3,486.8)
Share-based compensation 130.9 130.9
Stock option exercises and other 97.6 1.7 61.8 159.4
Balance at September 30, 2022 1,660.6 $ 16.6 $ 8,460.1 $ 58,752.0 $ (186.2) $ 136.1 $ (2,509.6) (928.2) $ (71,235.2) $ (6,566.2)

~~See Notes to condensed consolidated financial statements.~~

~~Table of Contents~~

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the quarter ended September 30, 2021
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 June 30, 2021 1,660.6 $ 16.6 $ 8,046.0 $ 55,739.0 $ (302.8) $ (61.0) $ (2,207.4) (913.8) $ (67,038.4) $ (5,808.0)
Net income 2,149.9 2,149.9
Other comprehensive income (loss),
net of tax (4.3) 30.8 (118.5) (92.0)
Comprehensive income 2,057.9
Common stock cash dividends
($2.67 per share)
(1,991.2) (1,991.2)
Treasury stock purchases (0.1) (34.5) (34.5)
Share-based compensation 34.1 34.1
Stock option exercises and other 45.7 0.5 21.0 66.7
Balance at September 30, 2021 1,660.6 $ 16.6 $ 8,125.8 $ 55,897.7 $ (307.1) $ (30.2) $ (2,325.9) (913.4) $ (67,051.9) $ (5,675.0)


CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

For the quarter ended September 30, 2022

For the quarter ended March 31, 2023																										For the quarter ended March 31, 2023
		Common stock issued										Accumulated other comprehensive income (loss)								Common stock in treasury			Total shareholders’ equity (deficit)				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														Additional paid-in capital			Retained earnings		Pensions			Cash flow hedges			Foreign currency translation
In millions, except per share data	In millions, except per share data	Shares	Amount																	Shares	Amount					In millions, except per share data	Shares	Amount																	Shares	Amount
Balance at June 30, 2022		1,660.6		$	16.6		$	8,378.7	$	57,785.1		$	(183.5)		$	77.2		$	(2,140.1)	(924.9)	$	(70,303.8)		$	(6,369.8)
Balance at December 31, 2022																										Balance at December 31, 2022	1,660.6		$	16.6		$	8,547.1	$	59,543.9		$	(298.2)		$	30.7		$	(2,219.1)	(929.3)	$	(71,624.4)		$	(6,003.4)
Net income	Net income								1,981.6															1,981.6		Net income								1,802.3															1,802.3
Other comprehensive income (loss), net of tax	Other comprehensive income (loss), net of tax											(2.7)			58.9			(369.5)						(313.3)		Other comprehensive income (loss), net of tax											(1.1)			(16.7)			15.0						(2.8)
Comprehensive income	Comprehensive income																							1,668.3		Comprehensive income																							1,799.5
Common stock cash dividends ($1.38 per share)									(1,014.7)															(1,014.7)
Common stock cash dividends ($1.52 per share)																										Common stock cash dividends ($1.52 per share)								(1,111.2)															(1,111.2)
Treasury stock purchases	Treasury stock purchases																			(3.7)	(949.1)			(949.1)		Treasury stock purchases																			(2.2)	(584.5)			(584.5)
Share-based compensation	Share-based compensation						38.3																	38.3		Share-based compensation						49.7																	49.7
Stock option exercises and other	Stock option exercises and other						43.1													0.4	17.7			60.8		Stock option exercises and other						38.7													1.0	35.1			73.8
Balance at September 30, 2022		1,660.6		$	16.6		$	8,460.1	$	58,752.0		$	(186.2)		$	136.1		$	(2,509.6)	(928.2)	$	(71,235.2)		$	(6,566.2)
Balance at March 31, 2023																										Balance at March 31, 2023	1,660.6		$	16.6		$	8,635.5	$	60,235.0		$	(299.3)		$	14.0		$	(2,204.1)	(930.5)	$	(72,173.8)		$	(5,776.1)

See Notes to condensed consolidated financial statements.

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, ~~2021~~2022 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. The results for the quarter ~~and nine months~~ ended ~~September 30, 2022~~March 31, 2023 do not necessarily indicate the results that may be expected for the full year.

In the first quarter of 2022, the Company temporarily closed restaurants in Russia and Ukraine due to the ongoing war in the region. Beginning in September 2022, the Company began reopening certain restaurants in Ukraine.

In June 2022, the Company completed the sale of its Russian business, resulting in a total exit from the market. The Company recorded a charge of $1,281 million for the nine months, comprised primarily of the write-off of the Company’s net investment in Russia, along with related cumulative foreign currency translation losses.

Restaurant Information

The following table presents restaurant information by ownership type:


Restaurants at September 30,		2022		2021
Restaurants at March 31,					Restaurants at March 31,	2023	2022
Conventional franchised	Conventional franchised	21,641		21,552	Conventional franchised	21,701	21,558
Developmental licensed	Developmental licensed	8,144		7,795	Developmental licensed	8,289	7,981
Foreign affiliated	Foreign affiliated	8,145		7,639	Foreign affiliated	8,427	8,013
Total Franchised	Total Franchised	37,930		36,986	Total Franchised	38,417	37,552
Company-operated	Company-operated	2,050		2,690	Company-operated	2,118	2,792
Total Systemwide restaurants	Total Systemwide restaurants	39,980	*	39,676	Total Systemwide restaurants	40,535	40,344

*ReflectsRestaurant information reflects the sale of over 850 restaurants in conjunction with the exit of our business in Russia in the second quarter of 2022, most of which were Company-operated.

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 4.6 million shares and ~~5.5~~5.0 million shares for the quarters ~~2022~~2023 and ~~2021, respectively, and 4.7 million shares and 5.4 million shares for the nine months~~ 2022, ~~and 2021,~~ respectively. Share-based compensation awards that would have been antidilutive, and therefore were not included in the calculation of diluted weighted-average shares, totaled ~~1.5~~2.3 million shares and ~~1.4~~1.7 million shares for the quarters ~~2022~~2023 and ~~2021, respectively, and 1.5 million shares and 3.0 million shares for the nine months~~ 2022, ~~and 2021,~~ respectively.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~Leases~~

~~In July 2021,~~There have been no recent accounting pronouncements or changes in accounting pronouncements during the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2021-05, "Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments" ("ASU 2021-05"). The pronouncement amendsthree months ended March 31, 2023 that are of significance or potential significance to the current guidance on classification for a lease that includes variable lease payments that do not depend on an index or rate. Under the amended guidance, a lessor must classify as an operating lease any lease that would otherwise be classified as a sales-type or direct financing lease and that would result in the recognition of a selling loss at lease commencement. ASU 2021-05 is effective for fiscal years beginning after December 15, 2021, including applicable interim periods. The Company adopted the new standard effective January 1, 2022. The adoption of this standard did not have a material effect on the Company’s consolidated financial statements.Company.

~~Table of Contents~~

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~Reference Rate Reform~~

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" (“ASU 2020-04”). The pronouncement provides temporary optional expedients and exceptions to the current guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The adoption of ASU 2020-04 will not have a material impact on the Company's consolidated financial statements.

~~Updates to Significant Accounting Policies~~

~~Long-lived Assets and Goodwill~~

Long-lived assets and Goodwill are typically reviewed for impairment annually in the fourth quarter and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable or if an indicator of impairment exists. During the first quarter of 2022, the Company temporarily closed restaurants in Russia and Ukraine due to the ongoing war in the region. Restaurants remained closed in Russia through the Company's sale of its Russian business in the second quarter 2022. Beginning in September 2022, the Company began reopening certain restaurants in Ukraine. While the Company continues to monitor economic uncertainty resulting from the ongoing war and to assess the financial impact on restaurant operations in certain regions of Ukraine, based on its analysis and in consideration of the totality of events and circumstances, there were no indicators of impairment during the third quarter of 2022.

As of September 30, 2022, the Company’s net investment in Ukraine was approximately $75 million, primarily consisting of building and equipment assets. In addition, there was approximately $150 million of cumulative foreign currency translation losses reflected in the AOCI section of the condensed consolidated statement of shareholder’s equity at September 30, 2022.

~~Income Taxes~~

The effective income tax rate was 21.9% and 20.1% for the quarters 2022 and 2021, respectively, and 22.1% and 15.9% for the nine months 2022 and 2021, respectively. The effective tax rate for the nine months 2022 reflected the tax impacts of current year pre-tax charges of $1,281 million related to the sale of the Company's business in Russia and a pre-tax gain of $271 million related to the Company's sale of its Dynamic Yield business. The nine months 2022 also reflected $537 million of nonoperating expense related to the settlement of a tax audit in France.

The effective tax rates for the quarter and nine months 2021 reflected the tax impacts of net pre-tax gains of $106 million and $339 million, respectively, primarily related to the sale of McDonald's Japan stock as well as a benefit of $364 million in the nine months related to the remeasurement of deferred taxes as a result of a change in the U.K. statutory income tax rate.

As of September 30, 2022 and December 31, 2021, the Company’s gross unrecognized tax benefits totaled $616.4 million and $1,504.9 million, respectively. The Company continues to engage with various tax jurisdictions to resolve tax audits. During the nine months 2022, the Company finalized and settled certain tax examinations and remeasured other income tax reserves based on audit progression. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:


~~In millions~~	~~2022~~
~~Balance at January 1~~	$	~~1,504.9~~
~~Decreases for positions taken in prior years~~	~~(575.6)~~
~~Increases for positions taken in prior years~~	~~64.3~~
~~Increases for positions in the current year~~	~~30.3~~
~~Decreases due to settlements with taxing authorities~~	~~(407.5)~~
~~Decreases due to the lapsing of statutes of limitations~~	—
~~Balance at September 30~~	$	~~616.4~~

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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 include 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 modernizes the way it works by focusing on becoming faster, more innovative and more efficient at solving problems for its customers and people.

The Company expects to incur between $200 million and $250 million of expenses related to this strategic initiative in 2023, of which $180 million was incurred in the three months ended March 31, 2023. These expenses were recorded in the Other operating (income) expense, net line within the consolidated statement of income. Restructuring expenses primarily consist of employee termination benefits, costs to terminate contracts, including lease terminations, and professional services and other costs. Professional services and other costs primarily relate to expenses incurred for legal 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
2023
Beginning Balance	$	—	$	—	$	—	$	—
Restructuring Costs Incurred	110.3		26.9		43.3		180.5
Cash Payments	(1.5)		(1.4)		(0.3)		(3.2)
Other Non-Cash Items	—		—		(14.1)		(14.1)
Accrued Balance at End of Period	$	108.8	$	25.5	$	28.9	$	163.2

Of the $180 million of restructuring costs incurred in the three months ended March 31, 2023, $58 million was recorded in the U.S., $71 million was recorded in the International Operated Markets segment and $51 million was recorded in the International Developmental Licensed Markets & Corporate segment, the majority of which was recorded at Corporate.

Substantially all of the accrued restructuring balance recorded at March 31, 2023, related to the Company’s Accelerating the Organization initiative, is expected to be paid out by the end of 2023.

As part of Accelerating the Organization, the Company is also in the initial stages of developing a strategy that will utilize an enterprise-wide Global Business Services model to deliver business services at scale with greater efficiency. Additional costs will be incurred as the strategy progresses; however, at this point in time these future costs cannot be estimated. The expectation is that the Company will complete the majority of its Global Business Services strategy by the end of 2027.

Income Taxes

The effective income tax rate was 20.5% and 28.3% for the quarters ended March 31, 2023 and 2022, respectively. The tax rate for the quarter ended March 31, 2022 was impacted by the non-deductibility for tax purposes of $500 million of nonoperating expense related to a tax audit in France. Excluding the impacts of the $500 million of nonoperating expense, current year restructuring charges related to Accelerating the Organization and prior year charges, primarily related to Russia, the effective income tax rate was 20.9% and 21.3% for the quarters ended March 31, 2023 and 2022, 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. There were no significant changes to the valuation techniques used to measure fair value as described in the Company's December 31, ~~2021~~2022 Annual Report on Form 10-K.

At ~~September 30, 2022,~~March 31, 2023, the fair value of the Company’s debt obligations was estimated at ~~$31.9~~$35.6 billion, compared to a carrying amount of ~~$34.9~~$37.1 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.

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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						Derivative Assets					Derivative Liabilities
In millions	In millions	Balance Sheet Classification	September 30, 2022		December 31, 2021		Balance Sheet Classification	September 30, 2022		December 31, 2021		In millions	Balance Sheet Classification	March 31, 2023		December 31, 2022		Balance Sheet Classification	March 31, 2023		December 31, 2022
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments											Derivatives designated as hedging instruments
Foreign currency	Foreign currency	Prepaid expenses and other current assets	$	141.3	$	42.4	Accrued payroll and other liabilities	$	—	$	(3.3)	Foreign currency	Prepaid expenses and other current assets	$	39.9	$	53.3	Accrued payroll and other liabilities	$	(23.0)	$	(17.9)
Interest rate	Interest rate	Prepaid expenses and other current assets	—		0.3		Accrued payroll and other liabilities	—		—		Interest rate	Prepaid expenses and other current assets	—		—		Accrued payroll and other liabilities	(1.5)		—
Foreign currency	Foreign currency	Miscellaneous other assets	76.7		28.0		Other long-term liabilities	—		(0.5)		Foreign currency	Miscellaneous other assets	32.3		28.7		Other long-term liabilities	(27.6)		(30.7)
Interest rate	Interest rate	Miscellaneous other assets	—		8.6		Other long-term liabilities	(92.0)		(4.1)		Interest rate	Miscellaneous other assets	—		—		Other long-term liabilities	(79.0)		(91.5)
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments		$	218.0	$	79.3		$	(92.0)	$	(7.9)	Total derivatives designated as hedging instruments		$	72.2	$	82.0		$	(131.1)	$	(140.1)
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments											Derivatives not designated as hedging instruments
Equity	Equity	Prepaid expenses and other current assets	$	173.8	$	9.5	Accrued payroll and other liabilities	$	(14.3)	$	—	Equity	Prepaid expenses and other current assets	$	219.3	$	200.5	Accrued payroll and other liabilities	$	(0.1)	$	(1.6)
Foreign currency	Foreign currency	Prepaid expenses and other current assets	16.4		0.5		Accrued payroll and other liabilities	—		—		Foreign currency	Prepaid expenses and other current assets	0.6		—		Accrued payroll and other liabilities	—		—
Equity	Equity	Miscellaneous other assets	—		200.3							Equity	Miscellaneous other assets	—		—
Total derivatives not designated as hedging instruments	Total derivatives not designated as hedging instruments		$	190.2	$	210.3		$	(14.3)	$	—	Total derivatives not designated as hedging instruments		$	219.9	$	200.5		$	(0.1)	$	(1.6)
Total derivatives	Total derivatives		$	408.2	$	289.6		$	(106.3)	$	(7.9)	Total derivatives		$	292.1	$	282.5		$	(131.2)	$	(141.7)

The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ 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						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	In millions							2022											2021								2022							2021									2022				2021		In millions			2023	2022	2023	2022	2023	2022
Foreign currency	Foreign currency		Nonoperating income/expense					$	214.5						$	63.1			$	94.4					$	(37.4)						Foreign currency	Nonoperating income/expense				$	(9.2)			$	13.5			$	10.3				$	14.1
Interest rate	Interest rate	Interest expense		83.9		—					(3.0)		(4.7)											Interest rate		Interest expense	(1.5)			21.8				0.1					(1.1)
Cash flow hedges	Cash flow hedges			$	298.4	$	63.1				$	91.4	$	(42.1)										Cash flow hedges			$	(10.7)		$	35.3			$	10.4				$	13.0

Foreign currency denominated debt	Foreign currency denominated debt	Nonoperating income/expense		$	1,917.0	$	574.3						$	47.1										Foreign currency denominated debt		Nonoperating income/expense	$	(162.9)		$	259.0								$	—
Foreign currency derivatives	Foreign currency derivatives	Nonoperating income/expense		37.1		31.4																		Foreign currency derivatives		Nonoperating income/expense	7.6			4.4
Foreign currency derivatives(1)	Foreign currency derivatives(1)	Interest expense															$	6.6				$	11.0	Foreign currency derivatives(1)		Interest expense																	$	5.7			$	2.3
Net investment hedges	Net investment hedges			$	1,954.1	$	605.7						$	47.1			$	6.6				$	11.0	Net investment hedges			$	(155.3)		$	263.4								$	—			$	5.7			$	2.3

Foreign currency	Foreign currency	Nonoperating income/expense															$	15.9				$	10.4	Foreign currency		Nonoperating income/expense																	$	2.1			$	(4.5)
Equity	Equity	Selling, general & administrative expenses															(50.4)					54.4		Equity		Selling, general & administrative expenses																	$	15.6			$	(21.5)
Equity		Other operating income/expense, net															—					(7.8)

Undesignated derivatives	Undesignated derivatives																$	(34.5)				$	57.0	Undesignated derivatives																			$	17.7			$	(26.0)
(1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.	(1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.														(1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.

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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 the use of interest rate swaps. At ~~September 30, 2022,~~March 31, 2023, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of ~~$952.1 million,~~$1.2 billion, which included a decrease of ~~$92.0~~$79 million of cumulative hedging adjustments. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized a ~~$96.8~~$12.5 million ~~loss~~gain on the fair value of interest rate swaps, and a corresponding ~~gain~~loss 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 ~~September 30, 2022,~~March 31, 2023, the Company had foreign currency derivatives outstanding with an equivalent notional amount of ~~$1.4~~$1.6 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, 2022,~~March 31, 2023, the Company ~~did not have any~~had derivatives outstanding with a notional amount of ~~these derivatives outstanding.~~$500 million that hedge a portion of forecasted cash flows.

Based on market conditions at ~~September 30, 2022,~~March 31, 2023, the ~~$136.1~~$14 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 ~~September 30, 2022, $11.7~~March 31, 2023, $13.9 billion of the Company's third-party foreign currency denominated debt, ~~$826.5 million~~$1.0 billion of the Company's intercompany foreign currency denominated debt and ~~$224.9~~$662 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. Changes in the fair value of these derivatives 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. Changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, together 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 ~~September 30, 2022~~March 31, 2023 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 ~~September 30, 2022,~~March 31, 2023, the Company was required to post ~~an immaterial amount~~$120 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.

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Franchise Arrangements

Revenues from franchised restaurants consisted of:


		Quarters Ended				Nine Months Ended					Quarters Ended
		September 30,				September 30,					March 31,
In millions	In millions	2022		2021		2022		2021		In millions	2023		2022

Rents	Rents	$	2,357.5	$	2,254.1	$	6,713.8	$	6,205.9	Rents	$	2,269.8	$	2,081.1
Royalties	Royalties	1,300.7		1,243.1		3,709.0		3,449.6		Royalties	1,303.0		1,168.7
Initial fees	Initial fees	13.0		13.0		38.0		38.3		Initial fees	14.7		13.0
Revenues from franchised restaurants	Revenues from franchised restaurants	$	3,671.2	$	3,510.2	$	10,460.8	$	9,693.8	Revenues from franchised restaurants	$	3,587.5	$	3,262.8

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 ~~September 30, 2022.~~March 31, 2023.

•International Operated Markets - comprised of markets or countries in which the Company operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, the Netherlands, Spain and the U.K. The segment is 89% franchised as of ~~September 30, 2022.~~March 31, 2023. During the second quarter of 2022, the Company completed the sale of its business in ~~Russia.~~Russia, resulting in a total exit from the market.

•International Developmental Licensed Markets & Corporate - comprised primarily of developmental licensee and affiliate markets in the McDonald’s System. Corporate activities are also reported in this segment. The segment is 98% franchised as of ~~September 30, 2022.~~March 31, 2023.

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


		Quarters Ended				Nine Months Ended					Quarters Ended
		September 30,				September 30,					March 31,
In millions	In millions	2022		2021		2022		2021		In millions	2023		2022
Revenues	Revenues									Revenues
U.S.	U.S.	$	2,456.6	$	2,260.7	$	7,042.2	$	6,615.0	U.S.	$	2,487.6	$	2,175.6
International Operated Markets	International Operated Markets	2,817.8		3,372.7		8,487.4		9,007.6		International Operated Markets	2,794.8		2,922.1
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	597.7		567.9		1,726.5		1,591.2		International Developmental Licensed Markets & Corporate	615.4		567.9
Total revenues	Total revenues	$	5,872.1	$	6,201.3	$	17,256.1	$	17,213.8	Total revenues	$	5,897.8	$	5,665.6
Operating Income	Operating Income									Operating Income
U.S.	U.S.	$	1,326.6	$	1,254.9	$	3,797.5	$	3,647.9	U.S.	$	1,295.1	$	1,151.0
International Operated Markets	International Operated Markets	1,374.4		1,519.6		2,639.9		3,745.4		International Operated Markets	1,192.7		1,129.2
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	62.9		212.0		350.9		565.6		International Developmental Licensed Markets & Corporate	44.6		32.4
Total operating income*		$	2,763.9	$	2,986.5	$	6,788.3	$	7,958.9
Total operating income										Total operating income	$	2,532.4	$	2,312.6

*Results for the nine months 2022 included pre-tax charges of $1,281 million related to the sale of the Company's business in Russia, as well as $271 million of gains related to the Company's sale of its Dynamic Yield business. The quarter and nine months 2021 reflected $106 million and $339 million, respectively, of net gains, primarily related to the sale of McDonald's Japan stock.

Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. There were no subsequent events that required recognition or disclosure.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The Company franchises and operates McDonald’s restaurants, which serve a locally relevant menu of quality food and beverages in communities across ~~118~~more than 100 countries. Of the ~~39,980~~40,535 McDonald's restaurants at ~~September 30, 2022, 37,930, or~~March 31, 2023, 95%, were franchised.

The Company’s reporting segments are aligned with its strategic priorities and reflect how management reviews and evaluates operating performance. Significant reportable segments include the United States ("U.S.") and International Operated Markets. In addition, there is the International Developmental Licensed Markets & Corporate segment, which includes ~~markets in~~the results of over 8075 countries, as well as Corporate activities.

McDonald’s franchised restaurants are owned and operated under one of the following structures - conventional franchise, developmental license or affiliate. The optimal ownership structure for an individual restaurant, trading area or market (country) is based on a variety of factors, including the availability of individuals with entrepreneurial experience and financial resources, as well as the local legal and regulatory environment in critical areas such as property ownership and franchising. The business relationship between the Company and its independent franchisees is supported by adhering to standards and policies, including McDonald's Global Brand Standards, and is of fundamental importance to overall performance and to protecting the McDonald’s brand.

The Company is primarily a franchisor and believes franchising is paramount to delivering great-tasting food, locally relevant customer experiences and driving profitability. Franchising enables an individual to be their own employer and maintain control over all employment related matters, marketing and pricing decisions, while also benefiting from the strength of McDonald’s global brand, operating system and financial resources.

Directly operating McDonald’s restaurants contributes significantly to the Company's ability to act as a credible franchisor. One of the strengths of the franchising model is that the expertise from operating Company-owned restaurants allows McDonald’s to improve the operations and success of all restaurants while innovations from franchisees can be tested and, when viable, efficiently implemented across relevant restaurants. Having Company-owned and operated restaurants provides Company personnel with a venue for restaurant operations training experience. In addition, in our Company-owned and operated restaurants, and in collaboration with franchisees, the Company is able to further develop and refine operating standards, marketing concepts and product and pricing strategies that will ultimately benefit McDonald’s restaurants.

The Company’s revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Fees vary by type of site, amount of Company investment, if any, and local business conditions. These fees, along with occupancy and operating rights, are stipulated in franchise/license agreements that generally have 20-year terms. The Company’s Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology platforms, revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand and, for periods prior to its sale on April 1, 2022, ~~third~~-~~party~~third-party revenues for the Company's Dynamic Yield business.

Conventional Franchise

Under a conventional franchise arrangement, the Company generally owns or secures a long-term lease on the land and building for the restaurant location and the franchisee pays for equipment, signs, seating and décor. The Company believes that ownership of real estate, combined with the co-investment by franchisees, enables it to achieve restaurant performance levels that are among the highest in the industry.

Franchisees are responsible for reinvesting capital in their businesses over time. In addition, to accelerate implementation of certain initiatives, the Company may co-invest with franchisees to fund improvements to their restaurants or operating systems. These investments, developed in collaboration with franchisees, are designed to cater to consumer preferences, improve local business performance and increase the value of the McDonald's brand through the development of modernized, more attractive and higher revenue generating restaurants.

The Company requires franchisees to meet rigorous standards and generally does not work with passive investors. The business relationship with franchisees is designed to facilitate consistency and high quality at all McDonald’s restaurants. Conventional franchisees contribute to the Company’s revenue, primarily through the payment of rent and royalties based upon a percent of sales, with specified minimum rent payments, along with initial fees paid upon the opening of a new restaurant or grant of a new franchise. The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.

Developmental License or Affiliate

Under a developmental license or affiliate arrangement, licensees are responsible for operating and managing their businesses, providing capital (including the real estate interest) and developing and opening new restaurants. The Company generally does not invest any capital under a developmental license or affiliate arrangement, and it receives a royalty based on a percent of sales, and generally receives initial fees upon the opening of a new restaurant or grant of a new license.

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While developmental license and affiliate arrangements are largely the same, affiliate arrangements are used in a limited number of foreign markets (primarily China and Japan) within the International Developmental Licensed Markets segment as well as a limited number of individual restaurants within the International Operated Markets segment, where the Company also has an equity investment and records its share of net results in equity in earnings of unconsolidated affiliates.

~~Impact of the War in Ukraine~~

During the first quarter of 2022, McDonald’s temporarily closed restaurants in Russia and Ukraine due to the ongoing war in the region. Restaurants remained closed in Russia through the Company's sale of its Russian business in the second quarter 2022.

~~Beginning in September 2022, the Company began reopening certain restaurants in Ukraine.~~

~~Impact of COVID-19 Restrictions on the Business~~

~~COVID-19 resurgences continued to result in instances of government restrictions on restaurant operations, primarily in China.~~

Strategic Direction

The Company’s growth strategy, Accelerating the Arches (the “Strategy”), encompasses all aspects of McDonald’s business as the leading global omni-channel restaurant brand. The Strategy reflects ~~our~~the Company’s purpose, mission and values, as well as growth pillars that build on the Company’s competitive advantages.

Purpose, Mission and Values

~~Our~~The following purpose, mission and values underpin ~~our~~the Company’s success and are at the heart of ~~our~~the Strategy. ~~The~~

Through its size and scale, the Company embraces and prioritizes its role and ~~commitments~~commitment to the communities in which it operates through ~~our:~~

•~~Purpose~~its purpose to feed and foster ~~communities;~~

•~~Mission~~ communities, and its mission to create delicious feel-good moments for ~~everyone; and~~

•~~Core Values~~everyone. The Company is guided by five core values that define who ~~we are~~it is and how ~~we run our~~it runs its business across the three-legged stool of ~~McDonald’s~~ franchisees, suppliers and employees:

◦1.Serve - ~~: we~~We put our customers and people ~~first,~~ first;

◦2.Inclusion -~~: we~~ We open our doors to ~~everyone,~~everyone;

3.Integrity - We do the right thing;

◦~~Integrity: we do the right thing,~~

◦4.Community -~~: we~~ We are good ~~neighbors,~~neighbors; and

◦5.Family -~~: we~~ We get better together.

The Company believes that its people, all around the world, set it apart and bring these values to life on a daily basis.

Growth Pillars

The following growth pillars, ~~— MCD — are rooted in~~M-C-D, build on the Company’s ~~identity, build on~~ historic strengths and articulate areas of further opportunity. Under the Strategy, the Company will:

•Maximize our Marketing by investing in new, culturally relevant approaches, grounded in ~~Fan Truths,~~fan truths, to effectively communicate the story of the Company’s brand, food and purpose. This is exemplified by campaigns that elevate the entire brand and continue to be repeated and scaled around the globe, such as the Famous Orders platform ~~to effectively communicate~~and the ~~story of our brand, food and purpose. This also includes enhancing digital capabilities that provide a more personal connection with customers.~~Raise Your Arches campaign. The Company is committed to a marketing strategy that highlights value at every tier of the menu, as affordability remains a cornerstone of the McDonald’s brand and is especially important to ~~our~~ customers in uncertain economic environments.

•Commit to the Coremenu by tapping into customer demand for the familiar and focusing on serving ~~delicious burgers, chicken~~the Company’s iconic products, such as its World Famous Fries, the Big Mac, Chicken McNuggets and ~~coffee.~~the McFlurry. Globally, the Company possesses over 10 of these "billion-dollar brand equities." The Company continues to ~~prioritize chicken and beef offerings, as we expect they represent the largest growth opportunities. The Company recognizes there is significant opportunity to expand~~improve on its ~~chicken offerings~~classics, including by leveraging line extensions of customer favorites, such as the Crispy Chicken Sandwich that launched in the U.S. in 2021, and emerging equities, such as the McSpicy limited time offerings that were featured in several markets around the world in 2021 and 2022. The Company is implementing a series of operational and formulation changes designed to ~~improve upon~~deliver hotter, juicer, tastier burgers across the ~~great taste of our burgers. We~~globe. While leaning into core icons like Chicken McNuggets, the Company will continue to focus on scaling emerging equities such as the McSpicy and McCrispy Chicken Sandwiches. This is exemplified by the U.S. leveraging learnings from the U.K., Canada and Germany to relaunch its Crispy Chicken Sandwich under the McCrispy global equity umbrella. The Company also ~~continue~~continues to see a significant opportunity with coffee, ~~and~~demonstrated by markets ~~are~~ leveraging the McCafé brand, customer experience, value and quality to drive long-term growth.

•Double Down on the ~~3D's:~~4D's: Digital, Delivery, ~~and~~ Drive Thru and, the recently added, Restaurant Development by leveraging the Company’s competitive strengths and building a powerful digital experience growth engine to ~~enhance the~~deliver a personalized and convenient customer experience. To unlock further growth, the Company ~~is continuing~~expects to continue to accelerate the pace of restaurant openings and technology innovation so that whenever and however customers choose to interact with McDonald’s, they can enjoy a fast, easy experience that meets their needs. In the ~~third~~first quarter of ~~2022,~~2023, digital channels (the mobile app, delivery and kiosk) comprised

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~~over one-third~~ almost 40% of Systemwide sales in ~~our~~the Company’s top six ~~markets, representing nearly $7~~markets. This represented over $7.5 billion ofin digital Systemwide sales ~~an increase~~and growth of ~~approximately 40%~~ over $2.0 billion, or 30%, compared to the prior ~~year:~~year.

◦Digital: The Company’s digital experience growth engine — “MyMcDonald’s” — is transforming its offerings across drive thru, takeaway, delivery, curbside pick-up and ~~dine-in with digital enhancements.~~dine-in. Through the digital tools, customers can access ~~tailored~~personalized offers, participate in a loyalty program, order through the mobile app and receive McDonald's food through the channel of their choice. ~~The~~A recent digital enhancement piloting in the U.S. enables crew to begin assembling a customer’s mobile order prior to their arrival at the restaurant to expedite service and elevate customer satisfaction.

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Additionally, the Company has successful loyalty programs in ~~about~~ 50 markets around the world, including all of its top six markets. The Company’s loyalty customers have proven to be highly engaged, with ~~over 43~~nearly 50 million active loyalty members inacross the ~~last 90-days,~~Company’s top six markets during the first quarter of 2023, including over 2528 million in the U.S.~~, as of September 30, 2022.~~

◦Delivery: ~~The Company has continued to expand the number of~~Delivery is now offered in over 35,000 restaurants ~~offering delivery to over 34,000,~~across about 100 markets, representing over 85% of ~~McDonald's~~McDonald’s restaurants. ~~Delivery is available in about 100 markets, and the~~The Company is continuing to build on and enhance the delivery experience for customers, including by adding the ability to place a delivery order on the McDonald's mobile ~~app. This capability~~app (a feature that is now available in some of the Company’s largest markets, including the U.S., the U.K., ~~is currently rolling out in the U.S. and the Company plans to expand this capability to~~ Canada and ~~Australia before the end of 2022.~~Australia). The Company has also ~~has~~put in place long-term strategic partnerships with delivery providers such as UberEats, DoorDash, Just Eat Takeaway.com and Deliveroo. These partnerships are expected to benefit the Company, ~~and its~~ customers and franchisees by optimizing operational efficiencies and creating a seamless customer experience.

◦Drive Thru: The Company has drive thru locations in over 26,000 restaurants globally, including nearly 95% of the ~~over 13,000~~approximately 13,500 locations in the U.S. This channel remains a competitive advantage, and ~~we expect~~the Company expects that it will become even more critical to meeting customers’ demand for flexibility and choice. The Company continues to build on its drive thru advantage, as the vast majority of new restaurant openings in the U.S. and International Operated Markets ~~segments~~ will include a drive thru.

◦Restaurant Development: The Company expects to continue to accelerate the pace of restaurant openings, with plans to open approximately 1,900 new restaurants across the globe in 2023, which will contribute to nearly 4% unit growth (net of closures). The Company believes there is opportunity for further growth in many of its largest markets and to explore new formats under the McDonald’s brand over the coming years.

Foundation

Foundational to ~~Accelerating~~ the ~~Arches~~Strategy is keeping the customer and restaurant crew at the center of everything ~~we do,~~the Company does, along with a relentless focus on running great ~~restaurants.~~ restaurants, empowering its people and modernizing ways of working through Accelerating the Organization.

These efforts, coupled with investments in innovation, are designed to enhance the customer experience and deliver long-term profitable growth for all stakeholders. The Strategy is aligned with the Company’s capital allocation philosophy of investing in opportunities to grow the business (through new restaurants and reinvesting in existing restaurants) and returning free cash flow to shareholders over time through dividends and share repurchases.

The Company believes the Strategy builds on ~~our~~its inherent strengths by harnessing ~~our~~its competitive advantages while leveraging ~~our~~its size, scale and agility to adapt and adjust to uncertain economic and operating environments to meet ~~consumer~~customer demands. The Strategy is supported by a strong global senior leadership team aimed at executing against the MCD growth pillars and accelerating the Company’s broad-based business momentum.

~~The Company believes the employee experience is critical to its success and, in 2022, implemented Global Brand Standards which are designed to create a culture~~

Table of safety for both employees and customers in McDonald’s restaurants around the world. These efforts, coupled with investments in innovation, are designed to enhance the customer experience and deliver long-term profitable growth, which is aligned with the Company’s capital allocation philosophy of investing in new restaurants and opportunities to grow the business, reinvesting in existing restaurants, and returning all free cash flow to shareholders over time through dividends and share repurchases.Contents

~~Third~~First Quarter ~~and Nine Months 2022~~2023 Financial Performance

Global comparable sales increased ~~9.5%~~12.6% for the quarter, ~~and 10.3% for the nine months.~~reflecting strong comparable sales of 12.6% across each segment.

•U.S. comparable sales ~~increased 6.1% for the quarter and 4.5% for the nine months. Comparable sales growth for both periods was driven by~~results benefited from strategic menu price increases and positive comparable guest count growth. Successful operational execution in McDonald’s restaurants, effective marketing campaigns featuring the core menu and continued digital and delivery growth ~~as well as successful marketing promotions featuring the core menu.~~contributed to strong comparable sales results.

•International Operated Markets segment ~~comparable sales increased 8.5% for the quarter and 13.5% for the nine months. Strong operating performance drove positive~~results reflected strong comparable sales across the ~~segment, led by strong positive comparable sales in France~~Big Five* and ~~Germany for both periods, with~~ the ~~quarter also benefiting from strong positive comparable sales in Australia.~~majority of other markets.

•International Developmental Licensed Markets segment ~~comparable sales increased 16.7% for the quarter and 15.9% for the nine months. Both periods~~results reflected strong comparable sales ~~driven~~led by ~~Brazil and~~ Japan, ~~partly offset by negative comparable sales in China due to continued COVID-19 related government restrictions.~~along with all geographic regions.

In addition to the comparable sales results, the Company had the following financial results for the ~~quarter and nine months, which were negatively impacted by foreign currency translation due to the weakening of all major currencies against the U.S. Dollar:~~quarter:

•Consolidated revenues ~~decreased 5% (increased 2%~~increased 4% (8% in constant currencies) ~~for the quarter and were flat (increased 6% in constant currencies) for the nine months.~~.

•Systemwide sales increased ~~2% (9%~~9% (13% in constant currencies) ~~for the quarter and 5% (11% in constant currencies) for the nine months.~~.

•Consolidated operating income ~~decreased 7% (increased 1%~~increased 10% (14% in constant currencies) for the quarter and decreased 15% (9% in constant currencies) for the nine months. Excluding the current and prior year charges and gains detailed in the Operating Income & Operating Margin section on page 29 of this report, consolidated operating income decreased 4% (increased 4% in constant currencies) for the quarter and increased 2% (9% in constant currencies) for the nine months..

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•Diluted earnings per share was ~~$2.68 for the quarter, a decrease~~$2.45, an increase of ~~6% (flat in constant currencies) and $5.75 for the nine months, a decrease of 27% (22%~~66% (72% in constant currencies). Excluding $0.18 per share of current year restructuring charges related to Accelerating the ~~current and~~Organization, diluted earnings per share was $2.63, an increase of 15% (19% in constant currencies) when also excluding prior year charges ~~and gains~~ detailed in the Net Income and Diluted Earnings Per Share section on page 2319 of this ~~report, diluted earnings per share for the quarter decreased 3% (increased 4% in constant currencies) and increased 7% (12% in constant currencies) for the nine months.~~report.

Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other strategic charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.

*Australia, Canada, France, Germany and the U.K. are collectively referred to as the "Big Five" international markets.

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The Following Definitions Apply to these Terms as Used Throughout this Report:

•Constant currency results exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other ~~strategic~~ charges and gains, as well as material regulatory and other income tax impacts, and bases incentive compensation plans on these results because the Company believes this better represents underlying business trends.

•Comparable sales and comparable guest counts are compared to the same period in the prior year and represent sales and transactions, respectively, at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction, natural disasters and acts of war, terrorism or other hostilities (including restaurants temporarily closed due to COVID-19, as well as those that remain closed in Ukraine). Restaurants in Russia were treated as permanently closed as of April 1, 2022 and therefore excluded from the calculation of comparable sales and comparable guest counts beginning in the second quarter of 2022. Comparable sales exclude the impact of currency translation and the sales of any market considered ~~hyper-inflationary~~hyperinflationary (generally identified as those markets whose cumulative inflation rate over a three-year period exceeds 100%), which management believes more accurately reflects the underlying business trends. Beginning in the first quarter of 2023, McDonald's excluded results from Argentina and Lebanon in the calculation of comparable sales due to hyperinflation (Venezuela continues to be excluded). Comparable sales are driven by changes in guest counts and average check, the latter of which is affected by changes in pricing and product mix.

•Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. This includes sales from digital channels, which are comprised of the mobile app, delivery and kiosk at both Company-operated and franchised restaurants. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The Company's revenues consist of sales by Company-operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates. Changes in Systemwide sales are primarily driven by comparable sales and net restaurant unit expansion.

•Free cash flow, defined as cash provided by operations less capital expenditures, and free cash flow conversion rate, defined as free cash flow divided by net income, are measures reviewed by management in order to evaluate the Company’s ability to convert net profits into cash resources, after reinvesting in the core business, that can be used to pursue opportunities to enhance shareholder value.

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CONSOLIDATED OPERATING RESULTS	CONSOLIDATED OPERATING RESULTS											CONSOLIDATED OPERATING RESULTS

		Quarter Ended					Nine Months Ended						Quarter Ended
Dollars in millions, except per share data	Dollars in millions, except per share data	September 30, 2022					September 30, 2022					Dollars in millions, except per share data	March 31, 2023
		Amount			Increase/ (Decrease)		Amount			Increase/ (Decrease)			Amount			Increase/ (Decrease)
Revenues	Revenues											Revenues
Sales by Company-operated restaurants	Sales by Company-operated restaurants		$	2,124.8	(18)	%		$	6,540.0	(10)	%	Sales by Company-operated restaurants		$	2,224.3	(3)	%
Revenues from franchised restaurants	Revenues from franchised restaurants		3,671.2		5			10,460.8		8		Revenues from franchised restaurants		3,587.5		10
Other revenues	Other revenues		76.1		(18)			255.3		(6)		Other revenues		86.0		(14)
Total revenues	Total revenues		5,872.1		(5)			17,256.1		—		Total revenues		5,897.8		4
Operating costs and expenses	Operating costs and expenses											Operating costs and expenses
Company-operated restaurant expenses	Company-operated restaurant expenses		1,779.6		(16)			5,508.6		(7)		Company-operated restaurant expenses		1,923.1		(2)
Franchised restaurants-occupancy expenses	Franchised restaurants-occupancy expenses		589.0		(1)			1,761.6		1		Franchised restaurants-occupancy expenses		598.3		2
Other restaurant expenses	Other restaurant expenses		57.4		(17)			187.6		(8)		Other restaurant expenses		62.8		(13)
Selling, general & administrative expenses	Selling, general & administrative expenses											Selling, general & administrative expenses
Depreciation and amortization	Depreciation and amortization		93.3		11			279.0		15		Depreciation and amortization		99.3		7
Other	Other		576.4		3			1,771.9		9		Other		553.3		(5)
Other operating (income) expense, net	Other operating (income) expense, net		12.5		n/m			959.1		n/m		Other operating (income) expense, net		128.6		n/m
Total operating costs and expenses	Total operating costs and expenses		3,108.2		(3)			10,467.8		13		Total operating costs and expenses		3,365.4		—
Operating income	Operating income		2,763.9		(7)			6,788.3		(15)		Operating income		2,532.4		10
Interest expense	Interest expense		306.2		4			884.1		(1)		Interest expense		329.7		15
Nonoperating (income) expense, net	Nonoperating (income) expense, net		(78.5)		n/m			417.7		n/m		Nonoperating (income) expense, net		(64.3)		n/m
Income before provision for income taxes	Income before provision for income taxes		2,536.2		(6)			5,486.5		(22)		Income before provision for income taxes		2,267.0		47
Provision for income taxes	Provision for income taxes		554.6		2			1,212.5		9		Provision for income taxes		464.7		6
Net income	Net income		$	1,981.6	(8)	%		$	4,274.0	(28)	%	Net income		$	1,802.3	63	%
Earnings per common share-basic	Earnings per common share-basic		$	2.70	(6)	%		$	5.79	(27)	%	Earnings per common share-basic		$	2.47	65	%
Earnings per common share-diluted	Earnings per common share-diluted		$	2.68	(6)	%		$	5.75	(27)	%	Earnings per common share-diluted		$	2.45	66	%

n/m Not meaningful

2018

Table of Contents

Impact of Foreign Currency Translation

The impact of foreign currency translation on consolidated operating results for ~~both periods reflected~~the quarter continued to reflect the weakening of all major currencies against the U.S. Dollar, ~~driven by~~including the Euro, British Pound and Australian Dollar.

While changes in foreign currency exchange rates affect reported results, McDonald's mitigates exposures, where practical, by purchasing goods and services in local currencies, financing in local currencies and hedging certain foreign-denominated cash flows. Results excluding the effect of foreign currency translation (referred to as constant currency) are calculated by translating current year results at prior year average exchange rates.

IMPACT OF FOREIGN CURRENCY TRANSLATION
Dollars in millions, except per share data
Currency
Translation
Benefit/ (Cost)
Quarters Ended September 30, 2022 2021 2022
Revenues $ 5,872.1 $ 6,201.3 $ (464.4)
Company-operated margins 345.2 490.0 (31.8)
Franchised margins 3,082.1 2,917.6 (224.3)
Selling, general & administrative expenses 669.7 643.7 19.7
Operating income 2,763.9 2,986.5 (243.4)
Net income 1,981.6 2,149.9 (142.5)
Earnings per share-diluted $ 2.68 $ 2.86 $ (0.19)
Currency
Translation
Benefit/ (Cost)
Nine Months Ended September 30, 2022 2021 2022
Revenues $ 17,256.1 $ 17,213.8 $ (1,011.2)
Company-operated margins 1,031.4 1,301.6 (72.2)
Franchised margins 8,699.1 7,950.6 (456.8)
Selling, general & administrative expenses 2,050.9 1,865.6 44.0
Operating income 6,788.3 7,958.9 (449.5)
Net income 4,274.0 5,906.4 (264.9)
Earnings per share-diluted $ 5.75 $ 7.86 $ (0.36)

~~Table of Contents~~


IMPACT OF FOREIGN CURRENCY TRANSLATION
Dollars in millions, except per share data
					Currency Translation Benefit/ (Cost)
Quarters Ended March 31,	2023		2022			2023
Revenues	$	5,897.8	$	5,665.6		$	(215.0)
Company-operated margins	301.2		343.2			(11.8)
Franchised margins	2,989.3		2,678.8			(94.7)
Selling, general & administrative expenses	652.6		677.0			9.0
Operating income	2,532.4		2,312.6			(99.0)
Net income	1,802.3		1,104.4			(65.5)
Earnings per share-diluted	$	2.45	$	1.48		$	(0.09)

Net Income and Diluted Earnings per Share

~~For the quarter, net~~Net income ~~decreased 8% (1%~~increased 63% (69% in constant currencies) to ~~$1,981.6~~$1,802.3 million, and diluted earnings per share ~~decreased 6% (flat in~~increased 66% (72% constant currencies) to ~~$2.68.~~$2.45. Foreign currency translation had a negative impact of ~~$0.19~~$0.09 on diluted earnings per share.

Results for 2023 included the following:

~~For the nine months, net income decreased 28% (23% in constant currencies) to $4,274.0~~•Pre-tax restructuring charges of $180 million, ~~and diluted earnings~~or $0.18 per share, ~~decreased 27% (22% in constant currencies)~~related to ~~$5.75. Foreign currency translation had a negative impact of~~ ~~$0.36~~ ~~on diluted earnings per share.~~Accelerating the Organization

Results for 2022 included the following:

•Pre-tax ~~charges~~expenses of ~~$1,281~~$127 million, or ~~$1.44~~$0.13 per share, ~~for the nine months,~~primarily related to ~~the sale of the Company's business in~~ Russia

•~~Pre-tax gain of $271~~$500 million, or ~~$0.40~~$0.67 per share, ~~for the nine months, related to the Company's sale of its Dynamic Yield business~~

•~~$537 million, or $0.72 per share, for the nine months,~~ of nonoperating expense related to the settlement of a tax audit in France

~~Results~~Excluding the above items, results reflected strong operating performance driven primarily by higher sales-driven Franchised margins.

During the quarter, the Company repurchased 2.2 million shares of stock for ~~2021 included~~$584.5 million. Additionally, the ~~following:~~

•~~Net pre-tax gains~~Company paid a quarterly dividend of ~~$106 million, or $0.10~~$1.52 per share, ~~for the quarter and $339 million,~~ or ~~$0.33 per share, for the nine months, primarily related to the sale of McDonald's Japan stock~~

•~~$364 million, or $0.48 per share, for the nine months related to the remeasurement of deferred taxes as a result of a change in the U.K. statutory income tax rate~~$1.1 billion.

NET INCOME AND EARNINGS PER SHARE-DILUTED RECONCILIATION

Dollars in millions, except per share data

Quarters Ended September 30,
Net Income Earnings per share - diluted
2022 2021 Inc/ (Dec) Inc/ (Dec)
Excluding
Currency
Translation 2022 2021 Inc/ (Dec) Inc/ (Dec)
Excluding
Currency
Translation
GAAP $ 1,981.6 $ 2,149.9 (8) % (1) % $ 2.68 $ 2.86 (6) % — %
(Gains)/charges — (73.7) — (0.10)
Change in U.K. statutory tax rate — — — —
France tax settlement — — — —
Non-GAAP $ 1,981.6 $ 2,076.2 (5) % 2 % $ 2.68 $ 2.76 (3) % 4 %


		Nine Months Ended September 30,																	Quarters Ended March 31,
		Net Income								Earnings per share - diluted									Net Income								Earnings per share - diluted
		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation			2023		2022		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		2023		2022		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
GAAP	GAAP	$	4,274.0	$	5,906.4	(28)	%	(23)	%	$	5.75	$	7.86	(27)	%	(22)	%	GAAP	$	1,802.3	$	1,104.4	63	%	69	%	$	2.45	$	1.48	66	%	72	%
(Gains)/charges	(Gains)/charges	770.7		(243.4)						1.04		(0.33)						(Gains)/charges	134.4		102.1						0.18		0.13
Change in U.K. statutory tax rate		—		(363.7)						—		(0.48)
France tax settlement		537.2		—						0.72		—

Tax settlement																		Tax settlement	—		500.0						—		0.67
Non-GAAP	Non-GAAP	$	5,581.9	$	5,299.3	5	%	11	%	$	7.51	$	7.05	7	%	12	%	Non-GAAP	$	1,936.7	$	1,706.5	13	%	17	%	$	2.63	$	2.28	15	%	19	%

Results for the quarter and nine months 2022 were negatively impacted by foreign currency translation due to the weakening of all major currencies against the U.S. Dollar. In constant currencies, results for both periods reflected strong operating performance driven by higher sales-driven Franchised margins. Company-operated margins were negatively impacted for both periods by the permanent restaurant closures in Russia and the temporary restaurant closures in Ukraine, as well as by inflationary cost pressures. The nine months also reflected an income tax benefit associated with global tax audit progression.

~~During the quarter, the Company repurchased 3.8 million shares of stock for $949 million, bringing total purchases for the~~

~~nine months to 14.2~~ ~~million shares or $3.5 billion. Additionally, the Company paid a quarterly dividend of $1.38 per share, or $1.0 billion, bringing total dividends paid for the~~ ~~nine months to~~ ~~$3.1 billion.~~ ~~In October 2022, the Company declared a 10% increase in its quarterly cash dividend to $1.52 per share, payable on December 15, 2022.~~

2219

Table of Contents

Revenues

The Company's revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees, developmental licensees and affiliates. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales with minimum rent payments, and initial fees. Revenues from restaurants licensed to developmental licensees and affiliates include a royalty based on a percent of sales, and generally include initial fees. The Company’s Other revenues are comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology platforms, revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand and, for periods prior to its sale on April 1, 2022, third-party revenues for the Company's Dynamic Yield business.

Franchised restaurants represented95% of McDonald's restaurants worldwide at ~~September 30, 2022.~~March 31, 2023. The Company's heavily franchised business model is designed to generate stable and predictable revenue, which is largely a function of franchisee sales, and resulting cash flow streams.


REVENUES	REVENUES									REVENUES
Dollars in millions	Dollars in millions									Dollars in millions
Quarters Ended September 30,		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Quarters Ended March 31,										Quarters Ended March 31,	2023		2022		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Company-operated sales	Company-operated sales									Company-operated sales
U.S.	U.S.	$	713.6	$	655.5	9	%	9	%	U.S.	$	761.3	$	639.0	19	%	19	%
International Operated Markets	International Operated Markets	1,220.2		1,754.0		(30)		(21)		International Operated Markets	1,270.4		1,480.7		(14)		(8)

International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	191.0		188.9		1		17		International Developmental Licensed Markets & Corporate	192.6		182.7		5		11
Total	Total	$	2,124.8	$	2,598.4	(18)	%	(11)	%	Total	$	2,224.3	$	2,302.4	(3)	%	1	%
Franchised revenues	Franchised revenues									Franchised revenues
U.S.	U.S.	$	1,699.9	$	1,562.7	9	%	9	%	U.S.	$	1,678.5	$	1,493.5	12	%	12	%
International Operated Markets	International Operated Markets	1,564.6		1,586.1		(1)		13		International Operated Markets	1,486.2		1,403.3		6		12

International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	406.7		361.4		13		24		International Developmental Licensed Markets & Corporate	422.8		366.0		16		22
Total	Total	$	3,671.2	$	3,510.2	5	%	12	%	Total	$	3,587.5	$	3,262.8	10	%	13	%
Total Company-operated sales and Franchised revenues	Total Company-operated sales and Franchised revenues									Total Company-operated sales and Franchised revenues
U.S.	U.S.	$	2,413.5	$	2,218.2	9	%	9	%	U.S.	$	2,439.8	$	2,132.5	14	%	14	%
International Operated Markets	International Operated Markets	2,784.8		3,340.1		(17)		(5)		International Operated Markets	2,756.6		2,884.0		(4)		2

International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	597.7		550.3		9		22		International Developmental Licensed Markets & Corporate	615.4		548.7		12		19
Total	Total	$	5,796.0	$	6,108.6	(5)	%	2	%	Total	$	5,811.8	$	5,565.2	4	%	8	%

Total Other revenues	Total Other revenues	$	76.1	$	92.7	(18)	%	(14)	%	Total Other revenues	$	86.0	$	100.4	(14)	%	(12)	%

Total Revenues	Total Revenues	$	5,872.1	$	6,201.3	(5)	%	2	%	Total Revenues	$	5,897.8	$	5,665.6	4	%	8	%
Nine Months Ended September 30,		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Company-operated sales
U.S.		$	2,057.2	$	1,942.0	6	%	6	%
International Operated Markets		3,924.0		4,769.0		(18)		(9)

International Developmental Licensed Markets & Corporate		558.8		537.6		4		16
Total		$	6,540.0	$	7,248.6	(10)	%	(3)	%
Franchised revenues
U.S.		$	4,856.8	$	4,550.9	7	%	7	%
International Operated Markets		4,464.1		4,141.0		8		19

International Developmental Licensed Markets & Corporate		1,139.9		1,001.9		14		22
Total		$	10,460.8	$	9,693.8	8	%	14	%
Total Company-operated sales and Franchised revenues
U.S.		$	6,914.0	$	6,492.9	6	%	6	%
International Operated Markets		8,388.1		8,910.0		(6)		4

International Developmental Licensed Markets & Corporate		1,698.7		1,539.5		10		20
Total		$	17,000.8	$	16,942.4	—	%	6	%

Total Other revenues		$	255.3	$	271.4	(6)	%	(3)	%

Total Revenues		$	17,256.1	$	17,213.8	—	%	6	%

~~Table of Contents~~

•Total Company-operated sales and franchised revenues ~~decreased 5% (increased 2%~~increased 4% (8% in constant currencies) ~~for the quarter and were flat (increased 6%~~, benefiting from strong sales performance across all segments. Revenue growth in ~~constant currencies) for the nine months. For both periods, revenues were negatively impacted by foreign currency translation due to the weakening of all major currencies against the U.S. Dollar.~~

•In the International Operated Markets segment ~~both periods reflected positive~~in constant ~~currency sales performance, driven by France and Germany, while results for the quarter also benefited from positive sales performance in Australia. Company-operated sales growth for both periods~~currencies was ~~more than~~partly offset by the impact of the ~~permanent restaurant closures in~~Company's exit from Russia ~~and the temporary restaurant closures in Ukraine.~~

•~~Results~~ in the ~~International Developmental Licensed segment for both periods reflected positive sales performance across all geographic regions in constant currencies, including China, as a result~~second quarter of ~~restaurant expansion.~~

Comparable Sales*

~~The following table presents the percent change in comparable sales for the quarters and nine months ended September 30, 2022 and 2021:~~

Increase/(Decrease)
Quarters Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
U.S. 6.1 % 9.6 % 4.5 % 16.1 %
International Operated Markets 8.5 13.9 13.5 23.6
International Developmental Licensed Markets & Corporate 16.7 16.7 15.9 17.5
Total 9.5 % 12.7 % 10.3 % 18.8 %

*For both International Operated Markets and Total comparable sales calculations for the nine months 2022, restaurants in Russia were treated as permanently closed starting April 1, 2022 and therefore excluded from the calculations. Restaurants in Ukraine were treated as temporarily closed and therefore included in the calculations. Beginning in September 2022, the Company began reopening certain restaurants in Ukraine.

2022.

2420

Table of Contents

Comparable Sales

The following table presents the percent change in comparable sales for the quarters ended March 31, 2023 and 2022:


	Increase/(Decrease)
	Quarters Ended March 31,
	2023		2022
U.S.	12.6	%	3.5	%
International Operated Markets	12.6		20.4
International Developmental Licensed Markets & Corporate	12.6		14.7
Total	12.6	%	11.8	%

Systemwide Sales and Franchised Sales

The following table presents the percent change in Systemwide sales for the quarter ~~and nine months~~ ended ~~September 30, 2022:~~March 31, 2023:


SYSTEMWIDE SALES*	SYSTEMWIDE SALES*									SYSTEMWIDE SALES*
		Quarter Ended September 30, 2022				Nine Months Ended September 30, 2022					Quarter Ended March 31, 2023
		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation			Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.	U.S.	6	%	6	%	5	%	5	%	U.S.	13	%	13	%
International Operated Markets	International Operated Markets	(8)		5		1		12		International Operated Markets	4		10
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	8		22		11		21		International Developmental Licensed Markets & Corporate	10		17
Total	Total	2	%	9	%	5	%	11	%	Total	9	%	13	%

*Unlike comparable sales, the Company has not excluded sales from hyperinflationary markets from Systemwide sales as these sales are the basis on which the Company calculates and records revenues. ~~2022 results included Ukraine for both periods and Russia for the nine months, while 2021 results included both Russia and Ukraine for both periods.~~

Franchised sales are not recorded as revenues by the Company, but are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The following table presents Franchised sales and the related increases/(decreases) for the quarters ended March 31, 2023 and ~~nine months ended September 30, 2022 and 2021:~~2022:


FRANCHISED SALES	FRANCHISED SALES									FRANCHISED SALES
Dollars in millions	Dollars in millions									Dollars in millions
Quarters Ended September 30,		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Quarters Ended March 31,										Quarters Ended March 31,	2023		2022		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.	U.S.	$	11,838.2	$	11,155.0	6	%	6	%	U.S.	$	11,742.1	$	10,429.1	13	%	13	%
International Operated Markets	International Operated Markets	8,896.9		9,212.8		(3)		10		International Operated Markets	8,668.1		8,111.9		7		13
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	7,574.8		6,981.9		8		22		International Developmental Licensed Markets & Corporate	7,640.4		6,946.7		10		18
Total	Total	$	28,309.9	$	27,349.7	4	%	11	%	Total	$	28,050.6	$	25,487.7	10	%	14	%

Ownership type	Ownership type									Ownership type
Conventional franchised	Conventional franchised	$	20,671.0	$	20,199.7	2	%	8	%	Conventional franchised	$	20,345.7	$	18,443.3	10	%	13	%
Developmental licensed	Developmental licensed	4,778.0		4,078.8		17		30		Developmental licensed	4,719.5		4,131.3		14		21
Foreign affiliated	Foreign affiliated	2,860.9		3,071.2		(7)		7		Foreign affiliated	2,985.4		2,913.1		2		13
Total	Total	$	28,309.9	$	27,349.7	4	%	11	%	Total	$	28,050.6	$	25,487.7	10	%	14	%

Nine Months Ended September 30,		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.		$	33,866.0	$	32,419.7	4	%	4	%
International Operated Markets		25,704.9		24,444.4		5		16

International Developmental Licensed Markets & Corporate		21,517.2		19,296.1		12		21
Total		$	81,088.1	$	76,160.2	6	%	12	%

Ownership type
Conventional franchised		$	59,266.9	$	56,535.9	5	%	9	%
Developmental licensed		13,471.2		10,924.2		23		32
Foreign affiliated		8,350.0		8,700.1		(4)		5
Total		$	81,088.1	$	76,160.2	6	%	12	%

2521

Table of Contents

Restaurant Margins

Franchised restaurant margins are measured as revenues from franchised restaurants less franchised restaurant occupancy costs. Franchised revenues include rent and royalties based on a percent of sales, and initial fees. Franchised restaurant occupancy costs include lease expense and depreciation, as the Company generally owns or secures a long-term lease on the land and building for the restaurant location.

Company-operated restaurant margins are measured as sales from Company-operated restaurants less costs for food & paper, payroll & employee benefits and occupancy & other operating expenses necessary to run an individual restaurant. Company-operated margins exclude costs that are not allocated to individual restaurants, primarily payroll & employee benefit costs of non-restaurant support staff, which are included in Selling, general and administrative expenses.


RESTAURANT MARGINS	RESTAURANT MARGINS											RESTAURANT MARGINS
Dollars in millions	Dollars in millions						Dollars in millions
		Amount			Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation					Amount	Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation
Quarters Ended September 30,			2022				2021
Quarters Ended March 31,												Quarters Ended March 31,				2023			Inc/ (Dec)		2022		Inc/ (Dec) Excluding Currency Translation
Franchised	Franchised											Franchised
U.S.	U.S.		$	1,383.7	$	1,260.1		10	%	10	%	U.S.		$	1,361.9		$	1,192.5			14	%			14	%
International Operated Markets	International Operated Markets		1,296.6		1,302.4			—		14		International Operated Markets		1,209.3			1,125.7		7				14
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate		401.8		355.1			13		25		International Developmental Licensed Markets & Corporate		418.1			360.6		16				23
Total	Total		$	3,082.1	$	2,917.6		6	%	13	%	Total		$	2,989.3		$	2,678.8	12	%			15	%
Company-operated	Company-operated											Company-operated
U.S.	U.S.		$	105.6	$	126.6		(17)	%	(17)	%	U.S.		$	109.1		$	98.3	11	%			11	%
International Operated Markets	International Operated Markets		230.5		355.5			(35)		(27)		International Operated Markets		192.0			241.2		(20)				(16)
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate		n/m		n/m			n/m		n/m		International Developmental Licensed Markets & Corporate		n/m			n/m		n/m				n/m
Total	Total		$	345.2	$	490.0		(30)	%	(23)	%	Total		$	301.2		$	343.2	(12)	%			(9)	%
Total restaurant margins	Total restaurant margins											Total restaurant margins
U.S.	U.S.		$	1,489.3	$	1,386.7		7	%	7	%	U.S.		$	1,471.0		$	1,290.8	14	%			14	%
International Operated Markets	International Operated Markets		1,527.1		1,657.9			(8)		5		International Operated Markets		1,401.3			1,366.9		3				9
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate		n/m		n/m			n/m		n/m		International Developmental Licensed Markets & Corporate		n/m			n/m		n/m				n/m
Total	Total		$	3,427.3	$	3,407.6		1	%	8	%	Total		$	3,290.5		$	3,022.0	9	%			12	%

		Amount			Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation
Nine Months Ended September 30,			2022				2021
Franchised
U.S.			$	3,927.8	$	3,667.0		7	%	7	%
International Operated Markets			3,646.8		3,300.5			10		22

International Developmental Licensed Markets & Corporate			1,124.5		983.1			14		22
Total			$	8,699.1	$	7,950.6		9	%	15	%
Company-operated
U.S.			$	316.1	$	399.8		(21)	%	(21)	%
International Operated Markets			695.2		885.6			(21)		(14)

International Developmental Licensed Markets & Corporate			n/m		n/m			n/m		n/m
Total			$	1,031.4	$	1,301.6		(21)	%	(15)	%
Total restaurant margins
U.S.			$	4,243.9	$	4,066.8		4	%	4	%
International Operated Markets			4,342.0		4,186.1			4		14
International Developmental Licensed Markets & Corporate			n/m		n/m			n/m		n/m
Total			$	9,730.5	$	9,252.2		5	%	11	%

n/m Not meaningful

•Total restaurant margins increased ~~$19.7~~$268.5 million, or ~~1% (8%~~9% (12% in constant currencies)~~, for the quarter and $478.3 million, or 5% (11% in constant currencies), for the nine months.~~. Franchised margins represented ~~nearly~~over 90% of restaurant margin ~~dollars for the quarter and nine months.~~dollars.

•~~Total restaurant margin growth was negatively impacted~~Results in ~~both periods by foreign currency translation due to the weakening of~~ all ~~major currencies against the U.S. Dollar.~~

~~Table of Contents~~

•~~U.S. franchised margins for both periods~~segments reflected ~~higher depreciation costs related to investments in restaurant modernization.~~strong sales-driven Franchised margins.

•Company-operated margins in the U.S. and International Operated Markets segment ~~for both periods~~ reflected strong positive sales performance, ~~driven by strategic menu price increases, which was more than offset by inflationary pressures on labor and commodities.~~

•~~Company-operated margins in~~with results for the International Operated Markets segment ~~for both periods were negatively impacted~~more than offset by the ~~restaurant closures~~impact of the Company's exit from Russia in ~~Russia~~the second quarter of 2022 and ~~Ukraine.~~by ongoing inflationary cost pressures.

•Total restaurant margins included depreciation and amortization expense of ~~$367.4 million for the quarter and $1.1 billion for the nine months.~~$391.3 million.

Selling, General & Administrative Expenses

•Selling, general and administrative expenses ~~increased $26.0~~decreased $24.4 million, or 4% ~~(7%~~(2% in constant currencies)~~, for~~. Results primarily reflect the quarter and $185.3 million, or 10% (12% in constant currencies), for the nine months. Both periods reflected higher costs for investments in restaurant technology, as well as the impact of inflationary cost pressures. The nine months also reflected incrementalcomparison to prior year costs related to the ~~Company's~~ 2022 Worldwide Owner/Operator ~~Convention and proxy contest.~~convention.

•Selling, general and administrative expenses as a percent of Systemwide sales were ~~2.3%~~2.2% and ~~2.2%~~2.4% for the ~~nine months~~quarters ended ~~2022~~2023 and ~~2021,~~2022, respectively.

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Other Operating (Income) Expense, Net

OTHER OPERATING (INCOME) EXPENSE, NET
Dollars in millions
Quarters Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Gains on sales of restaurant businesses $ (18.3) $ (37.8) $ (33.0) $ (82.5)
Equity in earnings of unconsolidated affiliates (37.3) (49.0) (88.5) (126.9)
Asset dispositions and other (income) expense, net 68.1 (5.6) 70.8 43.5
Impairment and other charges (gains), net — (106.4) 1,009.8 (339.4)
Total $ 12.5 $ (198.8) $ 959.1 $ (505.3)

•~~Gains on sales of restaurant businesses decreased for both periods, primarily due to fewer restaurant sales in the U.S.~~

•Equity in earnings of unconsolidated affiliates for the nine months reflected lower equity in earnings in Japan as a result of the Company's reduced ownership in McDonald's Japan when compared to the same period in 2021 as well as the continued impact of COVID-19 related government restrictions in China.


OTHER OPERATING (INCOME) EXPENSE, NET
Dollars in millions

	Quarters Ended
	March 31,
	2023		2022
Gains on sales of restaurant businesses	$	(13.1)	$	(5.8)
Equity in earnings of unconsolidated affiliates	(39.2)		(31.3)
Asset dispositions and other (income) expense, net	0.4		(29.5)
Impairment and other charges (gains), net	180.5		127.1
Total	$	128.6	$	60.5

•Asset dispositions and other (income) expense, net ~~for both periods~~ primarily reflected ~~costs incurred to support the Company’s business in Ukraine, higher asset write-offs and~~ the comparison to a prior year gain ~~on the strategic sale~~as a result of ~~restaurant properties. Results for the nine months reflected~~ an increase to fair value of an existing restaurant joint venture in connection with the buyout of a joint venture partner within the International Operated Markets segment.

•Impairment and other charges (gains), net ~~for the nine months 2022~~ reflected ~~$1,281~~$180 million of pre-tax restructuring charges related to Accelerating the ~~sale of the Company's business in Russia and a pre-tax gain of $271 million related to the Company's sale of its Dynamic Yield business.~~Organization.

Results for the ~~quarter and nine months 2021~~prior year reflected ~~$106~~net pre-tax expenses of $127 million, ~~and $339 million, respectively, of net gains,~~ primarily related to ~~the sale of McDonald’s Japan stock.~~Russia.

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Operating Income


OPERATING INCOME & OPERATING MARGIN	OPERATING INCOME & OPERATING MARGIN											OPERATING INCOME & OPERATING MARGIN
Dollars in millions	Dollars in millions											Dollars in millions
Quarters Ended September 30,		2022			2021			Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Quarters Ended March 31,												Quarters Ended March 31,	2023			2022			Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.	U.S.	$	1,326.6		$	1,254.9		6	%	6	%	U.S.	$	1,295.1		$	1,151.0		13	%	13	%
International Operated Markets	International Operated Markets	1,374.4			1,519.6			(10)		3		International Operated Markets	1,192.7			1,129.2			6		12
International Developmental Licensed Markets & Corporate	International Developmental Licensed Markets & Corporate	62.9			212.0			(70)		(46)		International Developmental Licensed Markets & Corporate	44.6			32.4			38		n/m
Total	Total	$	2,763.9		$	2,986.5		(7)	%	1	%	Total	$	2,532.4		$	2,312.6		10	%	14	%

Operating margin												Operating margin	42.9		%	40.8		%

Nine Months Ended September 30,		2022			2021			Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.		$	3,797.5		$	3,647.9		4	%	4	%
International Operated Markets		2,639.9			3,745.4			(30)		(20)

International Developmental Licensed Markets & Corporate		350.9			565.6			(38)		(22)
Total		$	6,788.3		$	7,958.9		(15)	%	(9)	%

Operating margin		39.3		%	46.2		%

•Operating Income: Operating income ~~decreased $222.6~~increased $219.8 million, or ~~7% (increased 1%~~10% (14% in constant currencies),. Results reflected $180 million of pre-tax restructuring charges related to Accelerating the Organization. Results for the ~~quarter and decreased $1,170.6~~prior year reflected $127 million ~~or 15% (9% in constant currencies), for the nine months. Results for both periods were negatively impacted by foreign currency translation due~~of costs, primarily related to ~~the weakening of all major currencies against the U.S. Dollar.~~Russia.

OPERATING INCOME & OPERATING MARGIN RECONCILIATION*

Dollars in millions


		Quarters Ended September 30,						Nine Months Ended September 30,									Quarters Ended March 31,
		2022	2021	Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		2022		2021		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation			2023		2022		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
GAAP operating income	GAAP operating income	$2,763.9	$2,986.5	(7)	%	1	%	$6,788.3		$7,958.9		(15)	%	(9)	%	GAAP operating income	$2,532.4		$2,312.6		10	%	14	%
Russia sale charge		—	—					1,280.5		—
Dynamic Yield sale gain		—	—					(270.7)		—
Japan stock sale gains		—	(106.4)					—		(339.4)

(Gains)/charges																(Gains)/charges	180.5		127.1
Non-GAAP operating income	Non-GAAP operating income	$2,763.9	$2,880.1	(4)	%	4	%	$7,798.1		$7,619.5		2	%	9	%	Non-GAAP operating income	$2,712.9		$2,439.7		11	%	15	%

Non-GAAP operating margin	Non-GAAP operating margin							45.2	%	44.3	%					Non-GAAP operating margin	46.0	%	43.1	%

*Refer to the Impairment and other charges (gains), net line within the Other Operating (Income) Expense, Net section on page 2823 of this report for details of ~~gains and~~the charges in this table.

•Excluding the current and prior year ~~gains and~~ charges shown in the table above, operating income ~~decreased 4% (increased 4%~~increased 11% (15% in constant currencies) ~~for the quarter and increased 2% (9% in constant currencies) for the nine months.~~.

•U.S.: Operating income ~~for both periods~~ primarily reflected sales-driven growth in Franchised ~~margins, partly offset by inflationary pressures on labor and commodities in Company-operated restaurant~~ margins.

•International Operated Markets: ~~Constant currency results in both periods~~Results reflected ~~positive sales~~strong operating performance ~~led by France and Germany, while results for~~across the ~~quarter also benefited from positive sales performance in Australia. Results were partly offset by~~majority of the ~~impact of restaurant closures in Russia and Ukraine as well as inflationary pressures on labor and commodities in Company-operated restaurant margins.~~segment.

•International Developmental Licensed Markets & Corporate: Results ~~for both periods~~ reflected ~~higher Corporate selling, general and administrative expenses, partly offset~~strong operating performance across the segment, led by ~~strong sales performance, primarily in~~ Brazil and ~~Japan.~~China.

•Operating Margin: Operating margin is defined as operating income as a percent of total revenues. The contributions to operating margin differ by segment due to each segment's ownership structure, primarily due to the relative percentage of franchised versus

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Company-operated restaurants. Additionally, temporary restaurant closures, which vary by segment, impact the contribution of each segment to the consolidated operating margin.

~~Excluding the current and prior year items shown in the table above, the~~The increase in non-GAAP operating margin ~~for the nine months~~ was due primarily to sales-driven growth in Franchised margins, partly offset by the impact of the permanent restaurant closures in Russia and the temporary restaurant closures in Ukraine, inflationary cost pressures on Company-operated margins and higher Corporate selling, general and administrative expenses.margins.

Interest Expense

•Interest expense increased ~~4% (8%~~15% (16% in constant currencies) ~~for the quarter and decreased 1% (increased 2% in constant currencies) for the nine months. Both periods benefited from the impact of foreign currency translation and lower~~, primarily due to higher average interest rates as well as higher average debt balances ~~with results for~~when compared to the ~~quarter more than offset by higher average interest rates.~~prior year.

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Nonoperating (Income) Expense, Net


NONOPERATING (INCOME) EXPENSE, NET	NONOPERATING (INCOME) EXPENSE, NET									NONOPERATING (INCOME) EXPENSE, NET
Dollars in millions	Dollars in millions									Dollars in millions
		Quarters Ended				Nine Months Ended					Quarters Ended
		September 30,				September 30,					March 31,
		2022		2021		2022		2021			2023		2022
Interest income	Interest income	$	(10.8)	$	(2.3)	$	(18.0)	$	(6.5)	Interest income	$	(37.9)	$	(2.6)
Foreign currency and hedging activity	Foreign currency and hedging activity	(50.4)		2.9		(88.7)		42.3		Foreign currency and hedging activity	(12.9)		(11.3)
Other (income) expense, net	Other (income) expense, net	(17.3)		0.8		524.4		12.8		Other (income) expense, net	(13.5)		498.0
Total	Total	$	(78.5)	$	1.4	$	417.7	$	48.6	Total	$	(64.3)	$	484.1

•Interest income increased, primarily due to higher average interest rates when compared to the prior year.

•Foreign currency and hedging activity includes net gains or losses on certain hedges that reduce the exposure to variability on certain intercompany foreign currency cash flow streams.

•Other (income) expense, net for the ~~nine months~~prior year included ~~$537~~$500 million of nonoperating expense related to the settlement of a tax audit in France.

Income Taxes

•The effective income tax rate was ~~21.9%~~20.5% and ~~20.1%~~28.3% for the quarters ended ~~2022~~March 31, 2023 and ~~2021, respectively, and 22.1% and 15.9% for the nine months ended~~ 2022, ~~and 2021,~~ respectively.

•Excluding the tax impacts of current and prior year ~~gains and~~ charges (as described within the Operating Income & Operating Margin Reconciliation on page 2924 of this report), and the ~~current~~prior year nonoperating expense related to ~~the France~~an international tax ~~settlement and the prior year impact of a change in the U.K. statutory income tax rate,~~audit, the effective income tax rate for the ~~nine months~~quarters ended March 31, 2023 and 2022 was 20.9% and ~~2021 was 20.6% and 20.7%~~21.3%, respectively.

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Cash Flows

The Company has a long history of generating significant cash from operations and has substantial credit capacity to fund operating and discretionary spending such as capital expenditures, debt repayments, dividends and share repurchases.

Cash provided by operations totaled ~~$5.2~~$2.4 billion and exceeded capital expenditures by ~~$3.8 billion for the nine months 2022.~~$1.9 billion. Cash provided by operations ~~decreased $1.3 billion compared with the nine months 2021,~~increased $287 million, primarily due to ~~the impact of foreign currency rates on~~improved operating ~~results and payments made related to the settlement of a tax audit in France.~~results.

Cash used for investing activities totaled ~~$1.6 billion for the nine months 2022,~~$741 million, an increase of ~~$563.8 million compared with the nine months 2021. Investing activities reflect~~$187 million. The increase was primarily due to higher ~~purchases of restaurant businesses in the nine months 2022, proceeds from the sale of Dynamic Yield in 2022 and proceeds from the sale of McDonald's Japan stock in 2021.~~capital expenditures.

Cash used for financing activities totaled ~~$5.1 billion for the nine months 2022, an increase~~$558 million, a decrease of ~~$565.6 million compared with the nine months 2021. Cash used for financing for the nine months 2022 reflects $3.4 billion in~~$3.3 billion. The decrease was primarily due to lower treasury stock purchases and ~~$2.2~~$1.1 billion of debt issuances in the first quarter 2023 compared to $1.4 billion in debt repayments ~~partly offset by $3.4 billion~~ in ~~debt issuances. Cash used for financing for~~ the ~~nine months 2021 reflects $1.7 billion in debt repayments.~~first quarter 2022.

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Outlook

Based on current conditions, the following is provided to assist in forecasting the Company's future results for ~~2022.~~2023.

•~~Excluding the closure of all restaurants in Russia, the~~The Company expects net restaurant unit expansion will contribute ~~about~~nearly 1.5% to ~~2022~~2023 Systemwide sales growth, in constant currencies.

•The Company expects full year ~~2022~~2023 selling, general and administrative expenses of about ~~2.3%~~2.2% to ~~2.4%~~2.3% of Systemwide sales.

•The Company expects 2022 operating margin to be in the 40% range as a result of charges related to the sale of the Company's business in Russia. Excluding impairment and other charges and gains, the Company expects adjusted2023 operating margin percent to be ~~in the mid 40% range.~~about 45%.

•Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full year ~~2022~~2023 to increase ~~approximately 2%~~between 10% and 12%, driven primarily by higher average interest rates.

•The Company expects the effective income tax rate for the full year ~~2022~~2023 to be in the ~~21%~~20% to 22% range. Some volatility may result in a quarterly tax rate outside of the annual range.

•The Company expects ~~2022~~2023 capital expenditures to be ~~approximately $2.0~~between $2.2 and $2.4 billion, about half of which will be directed towards new restaurant unit expansion across the U.S. and International Operated Markets. ~~Over 40% will be dedicated to the U.S. business, most of which will go towards reinvestment, including the completion of restaurant modernization efforts.~~ Globally, the Company expects to open about ~~1,700~~1,900 restaurants. The Company will open ~~about 375~~more than 400 restaurants in the U.S. and International Operated Markets segments, and developmental licensees and affiliates will contribute capital towards ~~over 1,300~~about 1,500 restaurant openings in their respective markets. ~~Excluding the closure of all restaurants in Russia, the~~The Company expects about ~~1,300~~1,500 net restaurant additions in ~~2022.~~2023.

•The Company expects to achieve a free cash flow conversion rate greater than 90%.

~~Recent Accounting Pronouncements~~

~~Recent accounting pronouncements are discussed in the "Recent Accounting Pronouncements" section in Part I, Item 1 of this report.~~

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Cautionary Statement Regarding Forward-Looking Statements

The information in this report contains forward-looking statements about future events and circumstances and their effects upon revenues, expenses and business opportunities. Generally speaking, any statement in this report not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking or conditional words, such as “could,” “should,” “can,” “continue,” “estimate,” “forecast,” “intend,” “look,” “may,” “will,” “expect,” “believe,” “anticipate,” “plan,” “remain,” “confident” and “commit” or similar expressions. In particular, statements regarding our plans, strategies, prospects and expectations regarding our business and industry are forward-looking statements. They reflect our expectations, are not guarantees of performance and speak only as of the dates the statements are made. Except as required by law, we do not undertake to update such forward-looking statements. You should not rely unduly on forward-looking statements.

Risk Factors

Our business results are subject to a variety of risks, including those that are described below and elsewhere in our filings with the

Securities and Exchange Commission. The risks described below are not the only risks we face. Additional risks not currently known to us or that we currently deem to be immaterial may also significantly adversely affect our business. If any of these risks were to materialize or intensify, our expectations (or the underlying assumptions) may change and our performance may be adversely affected.

~~GLOBAL PANDEMIC~~

~~The COVID-19 pandemic has adversely affected and may continue to adversely affect our financial results, condition and outlook.~~

Health epidemics or pandemics can adversely affect consumer spending and confidence levels and supply availability and costs, as well as the local operations in impacted markets, all of which can affect our financial results, condition and outlook. Importantly, the global pandemic resulting from COVID-19 has disrupted global health, economic and market conditions, consumer behavior and McDonald’s global restaurant operations since early 2020, and has resulted in increased pressure on labor availability and supply chain management. Local and national governmental mandates or recommendations and public perceptions of the risks associated with the COVID-19 pandemic have caused, and may continue to cause, consumer behavior to change, worsening or volatile economic conditions in certain markets, and increased regulatory complexity and compliance costs, each of which could continue to adversely affect our business. In addition, our global operations have been, and may continue to be, disrupted to varying degrees in different markets given the unpredictability of the virus, its resurgences and variants and government responses thereto, as well as potentially permanent changes to the industry in which we operate. While we cannot predict the duration or scope of the COVID-19 pandemic, the resurgence of infections, the emergence of new variants in one or more markets, the impact of changing governmental restrictions, or the availability, acceptance or effectiveness of vaccines or vaccination rates across the globe, the pandemic has negatively impacted our business and may continue to negatively impact our financial results, condition and outlook in a way that may be material.

The COVID-19 pandemic may also heighten other risks disclosed in these Risk Factors, including, but not limited to, those related to labor availability and costs, supply chain interruptions, commodity costs, consumer behavior, consumer perceptions of our brand and competition.

STRATEGY AND BRAND

If we do not successfully evolve and execute against our business strategies, ~~including the Accelerating the Arches strategy,~~ we may not be able to drive business growth.

To drive Systemwide sales, operating income and free cash flow growth, our business strategies – including the components of our Accelerating the Arches growth strategy – must be effective in maintaining and strengthening customer appeal and capturing additional market share. Whether these strategies are successful depends mainly on our System’s continued ability to:

•capitalize on our global scale, iconic brand and local market presence to build upon our historic strengths and competitive advantages, ~~such as~~including by maximizing our marketing, committing to our core menu items, and doubling down on digital, delivery, drive thru and ~~drive thru;~~restaurant development;

•innovate and differentiate the McDonald’s experience, including by preparing and serving our food in a way that balances value and convenience to our customers with profitability;

•~~accelerate technology~~build upon our investments ~~for a fast~~to transform and ~~easy~~enhance the customer experience;

•run great restaurants by driving efficiencies and expanding capacities while ~~continuing to prioritize~~prioritizing health and safety;

•~~identify and develop restaurant sites consistent with our plans for net growth of Systemwide restaurants;~~

•accelerate our existing strategies, including through growth ~~opportunities and potential acquisitions, investments and partnerships;~~opportunities; and

•evolve and adjust our ~~business~~ strategies in response to, among other things, changing consumer behavior, ~~operational restrictions~~ and ~~impacts to~~other events impacting our results of operations and ~~liquidity, including as a result of the COVID-19 pandemic.~~liquidity.

If we are delayed or unsuccessful in evolving or executing against our strategies, if the execution of our strategies proves to be more difficult, costly or time consuming than expected, or if our strategies do not yield the desired results, our business, financial condition and results of operations may suffer.

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Failure to preserve the value and relevance of our brand could have an adverse impact on our financial results.

To continue to be successful in the future, we believe we must preserve, enhance and leverage the value and relevance of our brand, including our corporate purpose, mission and values. Brand value is based in part on consumer perceptions, which are affected by a variety of factors, including the nutritional content and preparation of our food, the ingredients we use, the manner in which we source commodities and general business practices across the System, including the people practices at McDonald’s restaurants. Consumer acceptance of our offerings is subject to change for a variety of reasons, and some changes can occur rapidly. For example, nutritional, health, environmental and other scientific studies and conclusions, which continuously evolve and may have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that affect the “informal eating out” (“IEO”) segment or perceptions of our brand, generally or relative to available alternatives. Our business could also be impacted by business incidents or practices, whether actual or perceived, particularly if they receive considerable publicity or result in litigation, as well as by our position or perceived lack of position on environmental, social responsibility, public policy, geopolitical and similar matters. Consumer perceptions may also be affected by adverse commentary from third parties, including through social media or conventional media outlets, regarding the quick-service category of the IEO segment or our brand, culture, operations, suppliers or franchisees. If we are unsuccessful in addressing adverse commentary or perceptions, whether or not accurate, our brand and financial results may suffer.

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If we do not anticipate and address industry trends and evolving consumer preferences and effectively execute our pricing, promotional and marketing plans, our business could suffer.

Our continued success depends on our System’s ability to build upon our historic strengths and competitive advantages. In order to do so, we need to anticipate and respond effectively to continuously shifting consumer demographics and industry trends in food sourcing, food preparation, food offerings, and consumer behavior and preferences, including with respect to the use of digital channels and environmental and social responsibility matters. If we are not able to predict, or quickly and effectively respond to, these changes, or if our competitors are able to do so more effectively, our financial results could be adversely impacted.

Our ability to build upon our strengths and advantages also depends on the impact of pricing, promotional and marketing plans across the System, and the ability to adjust these plans to respond quickly and effectively to evolving customer behavior and preferences, as well as shifting economic and competitive conditions. Existing or future pricing strategies and marketing plans, as well as the value proposition they represent, are expected to continue to be important components of our business strategy. However, they may not be successful, or may not be as successful as the efforts of our competitors, which could negatively impact sales, guest counts and market share.

Additionally, we operate in a complex and costly advertising environment. Our marketing and advertising programs may not be successful in reaching ~~our customers~~consumers in the way we intend. Our success depends in part on whether the allocation of our advertising and marketing resources across different channels, including digital, allows us to reach ~~our customers~~consumers effectively, efficiently and in ways that are meaningful to them. If our advertising and marketing programs are not successful, or are not as successful as those of our competitors, our sales, guest counts and market share could decrease.

Our investments to transform and enhance the customer experience, including through technology, may not generate the expected results.

Our long-term business objectives depend on the successful Systemwide execution of our strategies. We continue to build upon our investments in ~~technology,~~ restaurant ~~modernization,~~development, technology, digital engagement and delivery in order to transform and enhance the customer experience. As part of these investments, we are continuing to place emphasis on improving our service model and strengthening relationships with customers, in part through digital channels and loyalty initiatives, mobile ordering and payment systems, and enhancing our drive thru technologies, which efforts may not generate expected results. We also continue to expand and refine our delivery initiatives, including through ~~growing awareness~~integrating delivery and ~~trial.~~mobile ordering. Utilizing a third-party delivery service may not have the same level of profitability as a non-delivery transaction, and may introduce additional food quality, food safety and customer satisfaction risks. If these customer experience initiatives are not ~~well~~successfully executed, or if we do not fully realize the intended benefits of these significant investments, our business results may suffer.

We face intense competition in our markets, which could hurt our business.

We compete primarily in the IEO segment, which is highly competitive. We also face sustained, intense competition from traditional, fast casual and other competitors, which may include many non-traditional market participants such as convenience stores, grocery stores, coffee shops and online retailers. We expect our environment to continue to be highly competitive, and our results in any particular reporting period may be impacted by a contracting IEO segment or by new or continuing actions, product offerings or consolidation of our competitors and third-party partners, which may have a short- or long-term impact on our results.

We compete primarily on the basis of product choice, quality, affordability, service and location. In particular, we believe our ability to compete successfully in the current market environment depends on our ability to improve existing products, successfully develop and introduce new products, price our products appropriately, deliver a relevant customer experience, manage the complexity of our restaurant operations, manage our investments in ~~technology,~~ restaurant ~~modernization,~~development, technology, digital engagement and delivery, and respond effectively to our competitors’ actions or offerings or to unforeseen disruptive actions. There can be no assurance these strategies will be effective, and some strategies may be effective at improving some metrics while adversely affecting others, which could have the overall effect of harming our business.

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We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of the McDonald’s brand and our business.

~~The~~Our success ~~of our business~~ depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international markets. We rely on a combination of trademarks, copyrights, service marks, trade secrets, patents and other intellectual property rights to protect our brand and branded products.

We have registered certain trademarks and have other trademark registrations pending in the U.S. and certain foreign jurisdictions. The trademarks that we currently use have not been, and may never be, registered in all of the countries outside of the U.S. in which we do business or may do business in the future. It may be costly and time consuming to protect our intellectual property, and the steps we have taken to do so in the U.S. and foreign countries may not be adequate. In addition, the steps we have taken may not adequately ensure that we do not infringe the intellectual property of others, and third parties may claim infringement by us in the future. In particular, we may be involved in intellectual property claims, including often aggressive or opportunistic attempts to enforce patents used in information technology systems, which might affect our operations and results. Any claim of infringement, whether or not it has merit, could be time consuming, result in costly litigation and harm our business.

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In addition, we cannot ensure that franchisees and other third parties who hold licenses to our intellectual property will not take actions that ~~hurt~~adversely affect the value of our intellectual property.

OPERATIONS

The global scope of our business subjects us to risks that could negatively affect our business.

We encounter differing cultural, regulatory, geopolitical and economic environments within and among the more than 100 countries where McDonald’s restaurants operate, and our ability to achieve our business objectives depends on the System’s success in these environments. Meeting customer expectations is complicated by the risks inherent in our global operating environment, and our global success is partially dependent on our System’s ability to leverage operating successes across markets and brand perceptions. Planned initiatives may not have appeal across multiple markets with McDonald’s customers and could drive unanticipated changes in customer perceptions and ~~guest counts.~~market share.

Disruptions in operations or price volatility in a market can also result from governmental actions, such as price, foreign exchange or trade-related tariffs or controls, trade policies and regulations, sanctions and counter sanctions, government-mandated closure of our, our franchisees’ or our suppliers’ operations, and asset seizures. Such disruptions or volatility can also result from acts of war, terrorism or other hostilities. For example, ~~in response to the humanitarian crisis caused by~~ the war between Russia and Ukraine ~~we paused our operations~~has resulted in ~~both countries in March 2022~~volatile and ~~sold our Russian business in June 2022. While we more recently announced plans to reopen certain restaurants in Ukraine,~~unpredictable conditions throughout the region, ~~remain volatile and unpredictable, which may impact our business. The war has also~~ exacerbated volatile macroeconomic conditions and increased pressure on our supply chain and the availability and costs of commodities, including energy, which we expect to continue to impact our financial results. The broader impacts of the war and related sanctions, including on macroeconomic conditions, geopolitical tensions, ~~and~~ consumer demand and the ability of us and our franchisees to operate in certain geographic areas, may also continue to have an adverse impact on our business and financial results. ~~Our international success depends in part on the effectiveness of our strategies and brand-building initiatives to reduce our exposure to such actions and events.~~

~~Additionally, there are~~While we may face challenges and uncertainties ~~associated with operating~~in any of the markets in which we operate, such challenges and uncertainties are often heightened in developing markets, which may entail a relatively higher risk of political instability, economic volatility, crime, corruption and social and ethnic unrest. In many cases, such challenges may be exacerbated by the lack of an independent and experienced judiciary and uncertainty in how local law is applied and enforced, including in areas most relevant to commercial transactions and foreign investment. An inability to manage effectively the risks associated with our international operations could ~~have a material adverse effect on~~adversely affect our business and financial ~~condition.~~

We may also face challenges and uncertainties in developed markets. For example, the U.K.’s exit from the European Union has caused increased regulatory complexities and uncertainty in European economic conditions and may also cause uncertainty in worldwide economic conditions. The decision created volatility in certain foreign currency exchange rates that may or may not continue, and may result in increased supply chain costs for items that are imported from other countries. Any of these effects, and others we cannot anticipate, could adversely affect our business, results of operations, financial condition and cash flows.results.

Supply chain interruptions may increase costs or reduce revenues.

We depend on the effectiveness of our supply chain management to assure a reliable and sufficient supply of quality products, equipment and other materials on favorable terms. Although many of ~~the products we sell~~these items are sourced from a wide variety of suppliers in countries around the world, certain ~~products~~items have limited suppliers, which may increase our reliance on those suppliers. Supply chain interruptions and related price increases ~~can~~have in the past and may in the future adversely affect us as well as our suppliers and franchisees, whose performance may have a significant impact on our results. Such interruptions and price increases could be caused by shortages, inflationary pressures, unexpected increases in demand, transportation-related issues, labor-related issues, technology-related issues, weather-related events, natural disasters, acts of war, terrorism or other hostilities, or other factors beyond the control of us or our suppliers or franchisees. ~~If we experience interruptions~~Interruptions in our System’s supply chain or ifineffective contingency planning ~~is not effective,~~can increase our costs ~~could increase~~ and/or limit the availability of products, equipment and other materials that are critical to our System’s operations ~~could be limited.~~

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or to restaurant development.

Our franchise business model presents a number of risks.

Our success as a heavily franchised business relies to a large degree on the financial success and cooperation of our franchisees, including our developmental licensees and affiliates. Our restaurant margins arise from two sources: fees from franchised restaurants (e.g., rent and royalties based on a percentage of sales) and, to a lesser degree, sales from Company-operated restaurants. Our franchisees and developmental licensees manage their businesses independently and therefore are responsible for the day-to-day operation of their restaurants. The revenues we realize from franchised restaurants are largely dependent on the ability of our franchisees to grow their sales. Business risks affecting our operations also affect our franchisees. ~~In particular, our franchisees have also been impacted by inflationary pressures and the COVID-19 pandemic.~~ If franchisee sales trends worsen, or any of such ~~impacts persist,~~risks materialize or intensify, our financial results could be negatively affected, which may be material.

Our success also relies on the willingness and ability of our independent franchisees and affiliates to implement major initiatives, which may include financial investment, and to remain aligned with us on operating, value/promotional and capital-intensive reinvestment plans. The ability of franchisees to contribute to the achievement of our plans is dependent in large part on the availability to them of funding at reasonable interest rates and may be negatively impacted by the financial markets in general, by their or our creditworthiness or by banks’ lending practices. If our franchisees are unwilling or unable to invest in major initiatives or are unable to obtain financing at commercially reasonable rates, or at all, our future growth and results of operations could be adversely affected.

Our operating performance could also be negatively affected if our franchisees experience food safety or other operational problems or project an image inconsistent with our brand and values, particularly if our contractual and other rights and remedies are limited, costly to exercise or subjected to litigation and potential delays. If franchisees do not successfully operate restaurants in a manner consistent with our required standards, our brand’s image and reputation could be harmed, which in turn could hurt our business and operating results.

Our ownership mix also affects our results and financial condition. The decision to own restaurants or to operate under franchise or license agreements is driven by many factors whose interrelationship is complex. The benefits of our more heavily franchised structure depend on various factors, including whether we have effectively selected franchisees, licensees and/or affiliates that meet our rigorous

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standards, whether we are able to successfully integrate them into our structure and whether their performance and the resulting ownership mix supports our brand and financial objectives.

Challenges with respect to labor, including availability and cost, could impact our business and results of operations.

Our success depends in part on our System’s ability to ~~proactively~~effectively attract, recruit, develop, motivate and retain qualified individuals to work in McDonald’s restaurants and to maintain appropriately-staffed restaurants in an intensely competitive labor market. We and our franchisees have experienced and may continue to experience challenges in adequately staffing certain McDonald’s restaurants, which can negatively impact operations, including speed of service to customers, and customer satisfaction levels. The System’s ability to meet its labor needs is generally subject to external factors, including the availability of sufficient workforce, unemployment levels and prevailing wages in the markets in which we operate.

Further, our System has experienced increased costs and competition associated with attracting, recruiting, developing, motivating and retaining qualified employees, as well as ~~costs associated~~ with promoting awareness of the opportunities of working at McDonald’s restaurants. We and our franchisees ~~are~~ also continue to be impacted by increasingly complex U.S. and international laws and regulations affecting our respective workforces. These laws and regulations are increasingly focused on, and in certain cases impose requirements with respect to, employment matters such as wages and hours, healthcare, immigration, retirement and other employee benefits and workplace practices. Such laws and regulations can expose us and our franchisees to increased costs and other effects of compliance, including potential liability, and all such labor and compliance costs could have a negative impact on our Company-operated margins and franchisee profitability.

Our potential exposure to reputational and other harm regarding our workplace practices or conditions or those of our independent franchisees or suppliers, including those giving rise to claims of harassment or discrimination (or perceptions thereof) or workplace safety, could have a negative impact on consumer perceptions of us and our business. Additionally, economic action, such as boycotts, protests, work stoppages or campaigns by labor organizations, could adversely affect us (including our ability to attract, recruit, develop, motivate and retain talent) or our franchisees and suppliers, whose performance may have a significant impact on our results.

Effective succession planning is important to our continued success.

Effective succession planning for management is important to our long-term success. Failure to effectively ~~identify,~~attract, recruit, develop, motivate and retain qualified key personnel, ~~and ensure~~or to execute smooth ~~management and~~ personnel transitions, could disrupt our business and adversely affect our results.

Food safety concerns may have an adverse effect on our business.

Our ability to increase sales and profits depends on our System’s ability to meet expectations for safe food and on our ability to manage the potential impact on McDonald’s of food-borne illnesses and food or product safety issues that may arise in the future, including in the supply chain, restaurants or delivery. Food safety is a top priority, and we dedicate substantial resources ~~to ensure~~aimed at ensuring that our customers enjoy safe food products, including as our menu and service model evolve. However, food safety events, including instances of food-borne illness, occur within the food industry and our System from time to time and could occur in the future. Instances of food tampering, food contamination or food-borne illness, whether actual or perceived, could adversely affect our brand, ~~and~~ reputation ~~as well as our~~and financial results.

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If we do not effectively manage our real estate portfolio, our operating results may be negatively impacted.

We have significant real estate operations, primarily in connection with our restaurant business. We generally own or secure a long-term lease on the land and building for conventional franchised and Company-operated restaurant sites. We seek to identify and develop restaurant locations that offer convenience to customers and long-term sales and profit potential. As we generally secure long-term real estate interests for our restaurants, we have limited flexibility to quickly alter our real estate portfolio. The competitive business landscape continues to evolve in light of changing business trends, consumer preferences, trade area demographics, consumer use of digital, delivery and drive thru, local competitive positions and other economic factors. If our restaurants are not located in desirable locations, or if we do not evolve in response to these factors, it could adversely affect Systemwide sales and profitability.

Our real estate values and the costs associated with our real estate operations are also impacted by a variety of other factors, including governmental regulations, insurance, zoning, tax and eminent domain laws, interest rate levels, the cost of financing, natural disasters, acts of war, terrorism or other hostilities, or other factors beyond our control. A significant change in real estate values, or an increase in costs as a result of any of these factors, could adversely affect our operating results.

Information technology system failures or interruptions, or breaches of network security, may impact our operations or cause reputational harm.

We are increasingly reliant upon technology systems, such as point-of-sale, that support our business operations, including our digital and delivery solutions, and technologies that facilitate communication and collaboration with affiliated entities, customers, employees, franchisees, suppliers, service providers or other independent third parties to conduct our business, whether developed and maintained by us or provided by third parties. Any failure or interruption of these systems could significantly impact our or our franchisees’ operations, or our customers’ ~~experience~~experiences and perceptions.

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Security incidents or breaches have from time to time occurred and may in the future occur involving our systems, the systems of the parties with whom we communicate or collaborate ~~with~~ (including franchisees) or the systems of third-party providers. These may include such things as unauthorized access, phishing attacks, account takeovers, denial of service, computer viruses, introduction of malware or ransomware and other disruptive problems caused by hackers. Certain of these technology systems contain personal, financial and other information of our customers, employees, franchisees and their employees, suppliers and other third parties, as well as financial, proprietary and other confidential information related to our business. Despite response procedures and measures in place in the event of an incident, a security breach could result in disruptions, shutdowns, or the theft or unauthorized disclosure of such information. The actual or alleged occurrence of any of these incidents could result in mitigation costs, reputational damage, adverse publicity, loss of consumer confidence, reduced sales and profits, complications in executing our growth initiatives and regulatory and legal risk, including criminal penalties or civil liabilities.

Despite the implementation of ~~security~~business continuity measures, any of these technology systems could become vulnerable to damage, disability or failures due to ~~theft,~~ fire, power loss, telecommunications failure or other catastrophic events. Certain technology systems may also become vulnerable, unreliable or inefficient in cases where technology vendors limit or terminate product support and maintenance. Our increasing reliance on third-party systems also subjects us to risks faced by those third-party businesses, including operational, security and credit risks. If technology systems were to fail or otherwise be unavailable, or if business continuity or disaster recovery plans were not effective, and we were unable to recover in a timely manner, we could experience an interruption in our or our franchisees’ operations.

LEGAL AND REGULATORY

Increasing regulatory and legal complexity may adversely affect our business and financial results.

Our regulatory and legal environment worldwide exposes us to complex compliance, litigation and similar risks that could affect our operations and results in material ways. Many of our markets are subject to increasing, conflicting and highly prescriptive regulations involving, among other matters, restaurant operations, product packaging, marketing, the nutritional and allergen content and safety of our food and other products, labeling and other disclosure practices. Compliance efforts with those regulations may be affected by ordinary variations in food preparation among our own restaurants and the need to rely on the accuracy and completeness of information from third-party suppliers. We also are subject to increasing public focus, including by governmental and non-governmental organizations, on environmental, social responsibility and corporate governance (“ESG”) matters. Our success depends in part on our ability to manage the impact of regulations and other initiatives that can affect our business plans and operations, which have increased and may continue to increase our costs of doing business and exposure to litigation, governmental investigations or other proceedings.

We are also subject to legal proceedings that may adversely affect our business, including, but not limited to, class actions, administrative proceedings, government investigations and proceedings, shareholder proceedings, employment and personal injury claims, landlord/tenant disputes, supplier-related disputes, and claims by current or former franchisees. Regardless of whether claims against us are valid or whether we are found to be liable, claims may be expensive to defend and may divert management’s attention away from operations.

Litigation and regulatory action concerning our relationship with franchisees and the legal distinction between our franchisees and us for employment law or other purposes, if determined adversely, could increase costs, negatively impact our business operations and the business prospects of our franchisees and subject us to incremental liability for their actions. Similarly, although our commercial

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relationships with our suppliers remain independent, there may be attempts to challenge that independence, which, if determined adversely, could also increase costs, negatively impact the business prospects of our suppliers, and subject us to incremental liability for their actions.

Our results could also be affected by the following:

•the relative level of our defense costs, which vary from period to period depending on the number, nature and procedural status of pending proceedings;

•the cost and other effects of settlements, judgments or consent decrees, which may require us to make disclosures or take other actions that may affect perceptions of our brand and products; and

•adverse results of pending or future litigation, including litigation challenging the composition and preparation of our products, or the appropriateness or accuracy of our marketing or other communication practices.

A judgment significantly in excess of any applicable insurance coverage or third-party indemnity could materially adversely affect our financial condition or results of operations. Further, adverse publicity resulting from claims may hurt our business. If we are unable to effectively manage the risks associated with our complex regulatory and legal environment, it could have a material adverse effect on our business and financial condition.

Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.

We are subject to income and other taxes in the U.S. and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. In particular, we are affected by the impact of changes to tax laws or policy or related authoritative interpretations. We are also impacted by settlements of pending or any future adjustments proposed by taxing and governmental authorities inside and outside of the U.S. in connection with our tax audits, all of which will depend on their timing, nature and scope. Any significant increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.

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Changes in accounting standards or the recognition of impairment or other charges may adversely affect our future operations and results.

New accounting standards or changes in financial reporting requirements, accounting principles or practices, including with respect to our critical accounting estimates, could adversely affect our future results. We may also be affected by the nature and timing of decisions about underperforming markets or assets, including decisions that result in impairment or other charges that reduce our earnings.

In assessing the recoverability of our long-lived assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors. These estimates are highly subjective and can be significantly impacted by many factors such as global and local business and economic conditions, operating costs, inflation, interest rate levels, competition, consumer and demographic trends and our restructuring activities. If our estimates or underlying assumptions change in the future, we may be required to record impairment charges. ~~If we experience any~~Any such changes ~~they~~ could have a significant adverse effect on our reported results for the affected periods.

If we fail to comply with privacy and data protection laws, we could be subject to legal proceedings and penalties, which could negatively affect our financial results or brand perceptions.

We are subject to legal and compliance risks and associated liability related to privacy and data protection requirements, including those associated with our technology-related services and platforms made available to business partners, customers, employees, franchisees or other third parties. An increasing number of ~~jurisdictions~~our markets have enacted new privacy and data protection requirements (including the European Union’s General Data Protection Regulation and various U.S. state-level laws), and further requirements are likely to be proposed or enacted in the future. Failure to comply with these privacy and data protection laws could result in legal proceedings and substantial penalties and materially adversely impact our financial results or brand perceptions.

MACROECONOMIC AND MARKET CONDITIONS

Unfavorable general economic conditions could adversely affect our business and financial results.

Our results of operations are substantially affected by economic conditions, including inflationary pressures, which can vary significantly by market and can impact consumer disposable income levels and spending habits. Economic conditions can ~~also~~ be impacted by a variety of factors, including hostilities, epidemics, pandemics and actions taken by governments to manage national and international economic matters, whether through austerity, stimulus measures or trade measures, and initiatives intended to control wages, unemployment, credit availability, inflation, taxation and other economic drivers. Sustained adverse economic conditions or periodic adverse changes in economic conditions put pressure on our operating performance and business continuity disruption planning, and our business and financial results may suffer as a result.

Our results of operations are also affected by fluctuations in currency exchange rates, and unfavorable currency fluctuations could adversely affect reported earnings.

Health epidemics or pandemics could adversely affect our business and financial results.

Health epidemics or pandemics – such as the global outbreak of COVID-19 in early 2020 – have in the past and may in the future impact macroeconomic conditions, consumer behavior, labor availability and supply chain management, as well as local operations in impacted markets, all of which can adversely affect our business, financial results and outlook. Governmental responses to health epidemics or pandemics, including operational restrictions, can also affect the foregoing items and adversely affect our business and financial results. The duration and scope of a health epidemic or pandemic can be difficult to predict and depends on many factors, including the emergence of new variants and the availability, acceptance and effectiveness of preventative measures. A health epidemic or pandemic may also heighten other risks disclosed in these Risk Factors, including, but not limited to, those related to the availability and costs of labor and commodities, supply chain interruptions, consumer behavior, and consumer perceptions of our brand and industry.

Changes in commodity and other operating costs could adversely affect our results of operations.

The profitability of our Company-operated restaurants depends in part on our ability to anticipate and react to changes in commodity costs, including food, paper, supplies, fuel and utilities, as well as distribution and other operating costs, including labor. Volatility in certain commodity prices and fluctuations in labor costs have adversely affected and in the future could adversely affect our operating results by impacting

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restaurant profitability. The commodity markets for some of the ingredients we use, such as beef, chicken and pork, are particularly volatile due to factors such as seasonal shifts, climate conditions, industry demand and other macroeconomic conditions, international commodity markets, food safety concerns, product recalls, government regulation, and acts of war, terrorism or other hostilities, all of which are beyond our control and, in many instances, unpredictable. Our System can only partially address future price risk through hedging and other activities, and therefore increases in commodity costs could have an adverse impact on our profitability.

A decrease in our credit ratings or an increase in our funding costs could adversely affect our profitability.

Our credit ratings may be negatively affected by our results of operations or changes in our debt levels. As a result, our interest expense, the availability of acceptable counterparties, our ability to obtain funding on favorable terms, our collateral requirements and our operating or financial flexibility could all be negatively affected, especially if lenders were to impose new operating or financial covenants.

Our operations may also be impacted by regulations affecting capital flows, financial markets or financial institutions, which can limit our ability to manage and deploy our liquidity or increase our funding costs. ~~If any of these~~Any such events ~~were to occur, they~~ could have a material adverse effect on our business and financial condition.

~~Trading~~

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The trading volatility and ~~the~~ price of our common stock may be adversely affected by many factors.

Many factors affect the trading volatility and price of our common stock in addition to our operating results and prospects. These factors, ~~some~~many of which are beyond our control, include the following:

•the unpredictable nature of global economic and market conditions;

•governmental action or inaction in light of key indicators of economic activity or events that can significantly influence financial markets, particularly in the U.S., which is the principal trading market for our common stock, and media reports and commentary about economic, trade or other matters, even when the matter in question does not directly relate to our business;

•trading activity in our common stock, in derivative instruments with respect to our common stock or in our debt securities, which can be affected by: market commentary (including commentary that may be unreliable or incomplete); unauthorized disclosures about our performance, plans or expectations about our business; our actual performance and creditworthiness; investor confidence, driven in part by expectations about our performance; actions by shareholders and others seeking to influence our business strategies; portfolio transactions in our common stock by significant shareholders; and trading activity that results from the ordinary course rebalancing of stock indices in which McDonald’s may be included, such as the S&P 500 Index and the Dow Jones Industrial Average;

•the impact of our stock repurchase program or dividend rate; and

•the impact of corporate actions, including changes to our corporate structure, and market and third-party perceptions and assessments of such actions, ~~such as~~including those we may take from time to time as we implement our business strategies ~~including through acquisitions,~~ in light of changing business, legal and tax ~~considerations and evolve our corporate structure.~~considerations.

Our business is subject to an increasing focus on ESG matters.

In recent years, there has been an increasing focus by stakeholders – including employees, franchisees, customers, suppliers, governmental and non-governmental organizations and investors – on ESG matters. A failure, whether real or perceived, to address ESG matters or to achieve progress on our ESG initiatives on the anticipated timing or at all, could adversely affect our business, including by heightening other risks disclosed in these Risk Factors, such as those related to consumer behavior, consumer perceptions of our brand, labor availability and costs, supply chain interruptions, commodity costs, and legal and regulatory complexity. Conversely, our taking a position, whether real or perceived, on ESG, public policy, geopolitical and similar matters could also adversely impact our business.

The standards we set for ourselves regarding ESG matters, and our ability to meet such standards, may also impact our business. For example, we are working to manage risks and costs to our System related to climate change, greenhouse gases, and diminishing energy and water resources, and we have announced initiatives relating to, among other things, ~~environmental~~climate action, sustainability, responsible sourcing and increasing diverse representation across our System. We ~~may face~~have faced increased scrutiny related to reporting on and achieving these initiatives, as well as continued public focus on similar matters, such as packaging and waste, animal health and welfare, deforestation and land use. We ~~may~~have also ~~face~~experienced increased pressure from stakeholders to provide expanded disclosure and establish additional commitments, targets or goals, and take actions to meet them, which could expose us to additional market, operational, execution and reputational costs and risks. Moreover, addressing ESG matters requires Systemwide coordination and alignment, and the standards by which certain ESG matters are measured are evolving and subject to assumptions that could change over time.

Events such as severe weather conditions, natural disasters, hostilities, social unrest and climate change, among others, can adversely affect our results and prospects.

Severe weather conditions, natural disasters, acts of war, terrorism or other hostilities, social unrest or climate change (or expectations about them) can adversely affect consumer behavior and confidence levels, supply availability and costs and local operations in impacted markets, all of which can affect our results and prospects. Climate change may also increase the frequency and severity of weather-related events and natural disasters. Our receipt of proceeds under any insurance we maintain with respect to some of these risks may be delayed or the proceeds may be insufficient to cover our losses fully.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosures made in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 regarding these matters.

Item 4. Controls and Procedures

Disclosure Controls

An evaluation was conducted under the supervision and with the participation of the Company’s management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of ~~September 30, 2022.~~March 31, 2023. Based on that evaluation, the CEO and CFO concluded that the Company’s

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disclosure controls and procedures were effective as of such date to provide reasonable assurances that information required to be disclosed by the Company in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and is accumulated and communicated to the Company's management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

The Company is in the process of implementing a comprehensive, multi-year finance and technology transformation initiative to migrate its general ledger, financial close and consolidation processes onto new financial systems. The Company is performing the implementation in the ordinary course of business to increase efficiency and to modernize the tools and technology used in its key financial processes. This is not in response to any identified deficiency or weakness in the Company's internal control over financial reporting. As the phased implementation of the systems continues, the Company has modified certain processes and procedures to enhance the quality of internal control over financial reporting. The Company will continue to monitor and modify, as needed, the design and operating effectiveness of key control activities to align with the updated business processes and capabilities of the new financial systems.

Except for these changes, the Company’s management, including the CEO and CFO, confirm there has been no change in the Company's internal control over financial reporting during the fiscal quarter ended ~~September 30, 2022~~March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There were no material changes to the disclosure made in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 regarding these matters.

Item 1A. Risk Factors

For a discussion of risk factors affecting the Company's business, refer to the “Risk Factors" section in Part I, Item 2 of this report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities*

The following table presents information related to repurchases of common stock the Company made during the quarter ended ~~September 30, 2022:~~March 31, 2023:

Period Total Number of
Shares Purchased Average Price
Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs (1)
Approximate Dollar
Value of Shares
that May Yet
Be Purchased Under
the Plans or Programs (1)
July 1-31, 2022 635,785 $ 252.20 635,785 $ 10,582,292,747
August 1-31, 2022 782,454 255.90 782,454 10,382,062,619
September 1-30, 2022 2,370,142 248.29 2,370,142 9,793,591,813
Total 3,788,381 $ 250.52 3,788,381


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1)



January 1-31, 2023	1,509	$	266.04	1,509	$	9,384,005,522
February 1-28, 2023	1,237,905	267.98		1,237,905	9,052,266,351
March 1-31, 2023	935,551	269.69		935,551	8,799,954,379
Total	2,174,965	$	268.72	2,174,965

* Subject to applicable law, the Company may repurchase shares directly in the open market, in privately negotiated transactions or pursuant to derivative instruments and plans complying with Rule 10b5-1 under the Exchange Act, among other types of transactions and arrangements.

(1)On December 31, 2019, the Company's Board of Directors approved a share repurchase program, effective January 1, 2020, that authorized the purchase of up to $15 billion of the Company's outstanding common stock.

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Item 6. Exhibits

Exhibit ~~Number~~No.

Description

(3)

Articles of incorporation; bylaws

(a)

Restated Certificate of Incorporation, effective ~~as of~~ May 23, 2019, incorporated herein by reference from Exhibit 3(a) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2019.

(b)

By-Laws, as amended and restated ~~with effect as of December 6, 2019,~~effective January 18, 2023, incorporated herein by reference from Exhibit 33.2 of Form 8-K (File No. 001-05231), filed ~~December 10, 2019.~~January 19, 2023.

(4)

Instruments defining the rights of ~~security~~securities holders, including indentures**

(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), filed October 15, 1996.

(b)

Subordinated Debt Securities Indenture, dated ~~as of~~ October 18, 1996, incorporated herein by reference from Exhibit (4)(b) of Form S-3 ~~Registration Statement~~ (File No. 333-14141), filed October 15, 1996.

(10)

Material contracts

(a)

McDonald’s Corporation Directors’ Deferred Compensation Plan, amended and restated effective ~~as of~~ December 31, 2021, incorporated herein by reference from Exhibit 10(a) of Form 10-K (File No. 001-05231), for the year ended December 31, 2021.**

(b)

McDonald’s Corporation Board of Directors Deferred Compensation Plan, effective ~~as of~~ January 1, 2022, incorporated herein by reference from Exhibit 10(b) of Form 10-K (File No. 001-05231), for the year ended December 31, 2021.**

(c)

McDonald’s Deferred Compensation Plan, effective ~~as of~~ January 1, 2017, incorporated herein by reference from Exhibit 10(b) of Form 10-K ~~(file~~(File No. 001-05231), for the year ended December 31, 2016.**

(i)

First Amendment to the McDonald's Deferred Compensation Plan, effective ~~as of~~ May 1, 2018, incorporated herein by reference from Exhibit 10(b)(i) of Form 10-Q (File No. 001-05231), for the quarter ended September 30, 2018.**

(d)

McDonald’s Amended and Restated Deferred Compensation Plan, effective ~~as of~~ May 26, 2020, incorporated herein by reference from Exhibit 10(c) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2020.**

(i)

First Amendment to the McDonald's Amended and Restated Deferred Compensation Plan, effective ~~as of~~ December 1, 2021, incorporated herein by reference from Exhibit 10(d)(i) of Form 10-K (File No. 001-05231), for the year ended December 31, 2021.**

(e)

McDonald’s Corporation Supplemental Profit Sharing and Savings Plan, effective ~~as of~~ September 1, 2001, incorporated herein by reference from Exhibit 10(c) of Form 10-K (File No. 001-05231), for the year ended December 31, 2001.**

(i)

First Amendment to the McDonald’s Corporation Supplemental Profit Sharing and Savings Plan, effective ~~as of~~ January 1, 2002, incorporated herein by reference from Exhibit 10(c)(i) of Form 10-K (File No. 001-05231), for the year ended December 31, 2002.**

(ii)

Second Amendment to the McDonald’s Corporation Supplemental Profit Sharing and Savings Plan, ~~as amended,~~ effective ~~as of~~ January 1, 2005, incorporated herein by reference from Exhibit 10(c)(ii) of Form 10-K (File No. 001-05231), for the year ended December 31, 2004.**

(f)

McDonald’s Corporation 2012 Omnibus Stock Ownership Plan, effective ~~as of~~ June 1, 2012, incorporated herein by reference from Exhibit 10(h) of Form 10-Q (File No. 001-05231), for the quarter ended September 30, 2012.**

(g)

McDonald’s Corporation Amended and Restated 2012 Omnibus Stock Ownership Plan, effective ~~as of~~ May 21, 2020, incorporated herein by reference from Exhibit 10(g) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2020.**

(h)

Form of 2013 Executive Stock Option Award Agreement in connection with the 2012 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(n) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2013.**

~~(i)~~

Form of 2014 Executive Stock Option Award Agreement in connection with the 2012 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(z) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2014.**

~~(j)~~(i)

Form of Executive Confidentiality, Intellectual Property and Restrictive Covenant Agreement, incorporated herein by reference from Exhibit 10(o) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2017.**

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~~(k)~~(j)

Form of 2018 Executive Stock Option Award Agreement in connection with the 2012 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(q) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2018.**

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~~(l)~~

(k)

McDonald’s Corporation Target Incentive Plan, ~~effective as of January 1, 2013,~~ amended and restated effective ~~as of~~ February 13, 2019, incorporated herein by reference from Exhibit 10(p) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2019.*

(l)

McDonald’s Corporation Officer Severance Plan, amended and restated effective November 1, 2022, incorporated herein by reference from Exhibit 10(l) of Form 10-K (File No. 001-05231), for the year ended December 31, 2022.*

(m)

McDonald’s Corporation Officer Severance Plan, amended and restated effective as of January 1, 2019, incorporated herein by reference from Exhibit 10(q) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2019.**

~~(n)~~

Form of 2019 Executive Stock Option Award Agreement in connection with the 2012 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(r) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2019.**

~~(o)~~(n)

Separation Agreement and General Release between Stephen Easterbrook and the Company, dated October 31, 2019, incorporated herein by reference from Exhibit 10.1 of Form 8-K ~~(File No. 001-05231),~~ filed November 4, 2019.**

~~(p)~~

Separation Agreement and General Release between Silvia Lagnado and the Company, dated August 14, 2019, incorporated herein by reference from Exhibit 10(t) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2020.**

~~(q)~~

Separation Agreement and General Release between Silvia Lagnado and the Company, dated October 31, 2019, incorporated herein by reference from Exhibit 10(u) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2020.**

~~(r)~~(o)

Separation Agreement and General Release between Jerome N. Krulewitch and the Company, dated October 13, 2020, incorporated herein by reference from Exhibit 10(v) of Form 10-K (File No. 001-05231), for the year ended December 31, 2020.**

~~(s)~~(p)

Form of 2021 Executive Time-Based Restricted Stock Unit Award Agreement in connection with the Amended and Restated 2012 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(v) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2021.*

(q)

Form of 2023 Executive Performance-Based Restricted Stock Unit Award Agreement in connection with the Amended and Restated 2012 Omnibus Stock Ownership Plan, filed herewith.*

(r)

Form of 2023 Executive Stock Option Award Agreement in connection with the Amended and Restated 2012 Omnibus Stock Ownership Plan, filed herewith.*

(31.1)

Rule 13a-14(a) Certification of Chief Executive Officer.

(31.2)

Rule 13a-14(a) Certification of Chief Financial Officer.

(32.1)

~~Certification pursuant to~~ 18 U.S.C. ~~Section~~ 1350 ~~by the~~Certification of Chief Executive ~~Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Officer.

(32.2)

~~Certification pursuant to~~ 18 U.S.C. ~~Section~~ 1350 ~~by the~~Certification of Chief Financial ~~Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~Officer.

(101.INS)

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

(101.SCH)

Inline XBRL Taxonomy Extension Schema Document.

(101.CAL)

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

(101.DEF)

Inline XBRL Taxonomy Extension Definition Linkbase Document.

(101.LAB)

Inline XBRL Taxonomy Extension Label Linkbase Document.

(101.PRE)

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

(104)

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.


*			Denotes compensatory plan.
**			~~Other~~Certain instruments defining the rights of holders of long-term debt of the ~~registrant, and all~~Company are omitted pursuant to Item 601(b)(4)(iii) of its subsidiaries for which consolidated financial statements are required to be filed and which are not required to be registered with the Commission, are not included herein as the securities authorized thereunder, individually, do not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis.Regulation S-K. An agreement to furnish a copy of any such instruments ~~to the Commission~~ upon request has been filed with the Securities and Exchange Commission.

**			~~Denotes compensatory plan.~~

4238

Table of Contents

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)

/s/ Ian F. Borden

Date:

~~November 7, 2022~~May 4, 2023

Ian F. Borden

Corporate Executive Vice President and
Chief Financial Officer

4339


CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the quarter ended September 30, 2021
	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 June 30, 2021	1,660.6		$	16.6		$	8,046.0	$	55,739.0		$	(302.8)		$	(61.0)		$	(2,207.4)	(913.8)	$	(67,038.4)		$	(5,808.0)
Net income								2,149.9															2,149.9
Other comprehensive income (loss), net of tax											(4.3)			30.8			(118.5)						(92.0)
Comprehensive income																							2,057.9
Common stock cash dividends ($2.67 per share)								(1,991.2)															(1,991.2)
Treasury stock purchases																			(0.1)	(34.5)			(34.5)
Share-based compensation						34.1																	34.1
Stock option exercises and other						45.7													0.5	21.0			66.7
Balance at September 30, 2021	1,660.6		$	16.6		$	8,125.8	$	55,897.7		$	(307.1)		$	(30.2)		$	(2,325.9)	(913.4)	$	(67,051.9)		$	(5,675.0)