Cover
Cover | 3 Months Ended |
Mar. 31, 2022shares | |
Cover [Abstract] | |
Document Type | 10-Q |
Document Quarterly Report | true |
Document Period End Date | Mar. 31, 2022 |
Document Transition Report | false |
Entity File Number | 1-5231 |
Entity Registrant Name | McDONALD’S CORPORATION |
Entity Incorporation, State or Country Code | DE |
Entity Tax Identification Number | 36-2361282 |
Entity Address, Address Line One | 110 North Carpenter Street |
Entity Address, City or Town | Chicago, |
Entity Address, State or Province | IL |
Entity Address, Postal Zip Code | 60607 |
City Area Code | 630 |
Local Phone Number | 623-3000 |
Title of 12(b) Security | Common Stock, $0.01 par value |
Trading Symbol | MCD |
Security Exchange Name | NYSE |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Small Business | false |
Entity Emerging Growth Company | false |
Entity Shell Company | false |
Entity Common Stock, Shares Outstanding | 739,546,930 |
Document Fiscal Period Focus | Q1 |
Amendment Flag | false |
Document Fiscal Year Focus | 2022 |
Current Fiscal Year End Date | --12-31 |
Entity Central Index Key | 0000063908 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheet - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash and equivalents | $ 2,335.7 | $ 4,709.2 |
Accounts and notes receivable | 1,674.1 | 1,872.4 |
Inventories, at cost, not in excess of market | 49.6 | 55.6 |
Prepaid expenses and other current assets | 597 | 511.3 |
Total current assets | 4,656.4 | 7,148.5 |
Other assets | ||
Investments in and advances to affiliates | 1,177.2 | 1,201.2 |
Goodwill | 2,813.9 | 2,782.5 |
Miscellaneous | 4,416.9 | 4,449.5 |
Total other assets | 8,408 | 8,433.2 |
Lease right-of-use asset, net | 13,378.6 | 13,552 |
Property and equipment | ||
Property and equipment, at cost | 41,773.1 | 41,916.6 |
Accumulated depreciation and amortization | (17,338.4) | (17,196) |
Net property and equipment | 24,434.7 | 24,720.6 |
Total assets | 50,877.7 | 53,854.3 |
Current liabilities | ||
Accounts payable | 718.6 | 1,006.8 |
Lease liability | 691.9 | 705.5 |
Income taxes | 593.5 | 360.7 |
Other taxes | 270.7 | 236.7 |
Accrued interest | 322.4 | 363.3 |
Accrued payroll and other liabilities | 1,637.5 | 1,347 |
Total current liabilities | 4,234.6 | 4,020 |
Long-term debt | 33,988.8 | 35,622.7 |
Long-term lease liability | 12,871.8 | 13,020.9 |
Long-term income taxes | 1,889.8 | 1,896.8 |
Deferred revenues - initial franchise fees | 743 | 738.3 |
Other long-term liabilities | 1,092 | 1,081 |
Deferred income taxes | 2,048.5 | 2,075.6 |
Shareholders’ equity (deficit) | ||
Preferred stock, no par value; authorized – 165.0 million shares; issued – none | 0 | 0 |
Common stock, $.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares | 16.6 | 16.6 |
Additional paid-in capital | 8,307.1 | 8,231.6 |
Retained earnings | 57,614 | 57,534.7 |
Accumulated other comprehensive income (loss) | (2,641.9) | (2,573.7) |
Common stock in treasury, at cost; 921.1 and 915.8 million shares | (69,286.6) | (67,810.2) |
Total shareholders’ equity (deficit) | (5,990.8) | (4,601) |
Total liabilities and shareholders’ equity (deficit) | $ 50,877.7 | $ 53,854.3 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheet (Parenthetical) - $ / shares | Mar. 31, 2022 | Dec. 31, 2021 |
Preferred stock, par value | $ 0 | $ 0 |
Preferred stock, authorized | 165,000,000 | 165,000,000 |
Preferred stock, issued | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, authorized | 3,500,000,000 | 3,500,000,000 |
Common stock, issued | 1,660,600,000 | 1,660,600,000 |
Common stock in treasury, shares | 913,400,000 | 915,200,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statement of Income - USD ($) shares in Millions, $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Revenues | ||
Sales by Company-operated restaurants | $ 2,302.4 | $ 2,161.5 |
Revenues from franchised restaurants | 3,262.8 | 2,877.4 |
Other revenues | 100.4 | 85.7 |
Total revenues | 5,665.6 | 5,124.6 |
Operating costs and expenses | ||
Company-operated restaurant expenses | 1,959.2 | 1,817.6 |
Franchised restaurants-occupancy expenses | 584 | 571.5 |
Other restaurant expenses | 72.3 | 67.2 |
Selling, general & administrative expenses | ||
Depreciation and amortization | 92.7 | 76 |
Other | 584.3 | 490.4 |
Other operating (income) expense, net | 60.5 | (179.4) |
Total operating costs and expenses | 3,353 | 2,843.3 |
Operating income | 2,312.6 | 2,281.3 |
Interest expense | 287.3 | 300 |
Nonoperating (income) expense, net | 484.1 | 28.6 |
Income before provision for income taxes | 1,541.2 | 1,952.7 |
Provision for income taxes | 436.8 | 415.5 |
Net income | $ 1,104.4 | $ 1,537.2 |
Earnings per common share-basic (in dollars per share) | $ 1.49 | $ 2.06 |
Earnings per common share-diluted (in dollars per share) | 1.48 | 2.05 |
Dividends declared per common share (in dollars per share) | $ 1.38 | $ 1.29 |
Weighted average shares outstanding-basic (in shares) | 742.6 | 745.8 |
Weighted average shares outstanding-diluted (in shares) | 747.6 | 751 |
Condensed Consolidated Statem_2
Condensed Consolidated Statement of Comprehensive Income - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 1,104.4 | $ 1,537.2 |
Foreign currency translation adjustments: | ||
Gain (loss) recognized in accumulated other comprehensive income ("AOCI"), including net investment hedges | (84.2) | (87.7) |
Reclassification of (gain) loss to net income | 0 | 10.7 |
Foreign currency translation adjustments-net of tax benefit (expense) of (59.0) and (90.3) | (84.2) | (77) |
Cash flow hedges: | ||
Gain (loss) recognized in AOCI | 27.4 | 23.1 |
Reclassification of (gain) loss to net income | (10.1) | 15 |
Cash flow hedges-net of tax benefit (expense) of (5.0) and (11.2) | 17.3 | 38.1 |
Defined benefit pension plans: | ||
Gain (loss) recognized in AOCI | 0.1 | 0.7 |
Reclassification of (gain) loss to net income | (1.4) | (10.9) |
Defined benefit pension plans-net of tax benefit (expense) of 0.0 and 0.0 | (1.3) | (10.2) |
Total other comprehensive income (loss), net of tax | (68.2) | (49.1) |
Comprehensive income | $ 1,036.2 | $ 1,488.1 |
Condensed Consolidated Statem_3
Condensed Consolidated Statement of Comprehensive Income (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Statement of Comprehensive Income [Abstract] | ||
Other comprehensive income (loss), foreign currency translation adjustment, tax | $ (59) | $ (90.3) |
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification, Tax | (5) | (11.2) |
Other comprehensive income (loss), pension and other postretirement benefit plans, tax | $ 0 | $ 0 |
Condensed Consolidated Statem_4
Condensed Consolidated Statement of Cash Flows - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Operating activities | ||
Net income | $ 1,104.4 | $ 1,537.2 |
Charges and credits: | ||
Depreciation and amortization | 479.7 | 453.9 |
Deferred income taxes | (50.5) | (1.5) |
Share-based compensation | 54.3 | 27.3 |
Other | 72 | (130) |
Changes in working capital items | 473.4 | 237.1 |
Cash provided by operations | 2,133.3 | 2,124 |
Investing activities | ||
Capital expenditures | (401.2) | (368.7) |
Purchases of restaurant businesses | (86.7) | (38.7) |
Sales of restaurant businesses | 16.5 | 29.6 |
Sales of property | 4.9 | 32.8 |
Other | (88) | 100.4 |
Cash used for investing activities | (554.5) | (244.6) |
Financing activities | ||
Net short-term borrowings | 6 | 6.5 |
Long-term financing issuances | 0 | 0 |
Long-term financing repayments | (1,350.6) | (1,337.8) |
Treasury stock purchases | (1,506.5) | (21.5) |
Common stock dividends | (1,025.1) | (962.3) |
Proceeds from stock option exercises | 58.7 | 59.1 |
Other | (12.6) | (7.9) |
Cash used for financing activities | (3,830.1) | (2,263.9) |
Effect of exchange rates on cash and cash equivalents | (122.2) | (44.9) |
Cash and equivalents decrease | (2,373.5) | (429.4) |
Cash and equivalents at beginning of period | 4,709.2 | 3,449.1 |
Cash and equivalents at end of period | $ 2,335.7 | $ 3,019.7 |
Condensed Consolidated Statem_5
Condensed Consolidated Statement of Shareholders' Equity - USD ($) shares in Millions, $ in Millions | Total | Common stock issued | Additional paid-in capital | Retained earnings | Pensions | Cash flow hedges | Foreign currency translation | Common stock in treasury |
Beginning Balance (in shares) at Dec. 31, 2020 | 1,660.6 | 915.2 | ||||||
Beginning Balance at Dec. 31, 2020 | $ (7,824.9) | $ 16.6 | $ 7,903.6 | $ 53,908.1 | $ (287.6) | $ (111.3) | $ (2,187.9) | $ (67,066.4) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 1,537.2 | 1,537.2 | ||||||
Other comprehensive income (loss), net of tax | (49.1) | (10.2) | 38.1 | (77) | ||||
Comprehensive income | 1,488.1 | |||||||
Common stock cash dividends | (962.3) | (962.3) | ||||||
Treasury stock purchases (in shares) | (0.1) | |||||||
Treasury stock purchases | (21.5) | $ (21.5) | ||||||
Share-based compensation | 27.3 | 27.3 | ||||||
Stock option exercises and other (in shares) | 0.8 | |||||||
Stock option exercises and other | 57.8 | 28.2 | $ 29.6 | |||||
Ending Balance (in shares) at Mar. 31, 2021 | 1,660.6 | 914.5 | ||||||
Ending Balance at Mar. 31, 2021 | (7,235.5) | $ 16.6 | 7,959.1 | 54,483 | (297.8) | (73.2) | (2,264.9) | $ (67,058.3) |
Beginning Balance (in shares) at Dec. 31, 2021 | 1,660.6 | 915.8 | ||||||
Beginning Balance at Dec. 31, 2021 | (4,601) | $ 16.6 | 8,231.6 | 57,534.7 | (179.5) | (24.8) | (2,369.4) | $ (67,810.2) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||
Net income | 1,104.4 | 1,104.4 | ||||||
Other comprehensive income (loss), net of tax | (68.2) | (1.3) | 17.3 | (84.2) | ||||
Comprehensive income | 1,036.2 | |||||||
Common stock cash dividends | (1,025.1) | (1,025.1) | ||||||
Treasury stock purchases (in shares) | (6.1) | |||||||
Treasury stock purchases | (1,506.5) | $ (1,506.5) | ||||||
Share-based compensation | 54.3 | 54.3 | ||||||
Stock option exercises and other (in shares) | 0.8 | |||||||
Stock option exercises and other | 51.3 | 21.2 | $ 30.1 | |||||
Ending Balance (in shares) at Mar. 31, 2022 | 1,660.6 | 921.1 | ||||||
Ending Balance at Mar. 31, 2022 | $ (5,990.8) | $ 16.6 | $ 8,307.1 | $ 57,614 | $ (180.8) | $ (7.5) | $ (2,453.6) | $ (69,286.6) |
Condensed Consolidated Statem_6
Condensed Consolidated Statement of Shareholders' Equity (Parenthetical) - $ / shares | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Statement of Stockholders' Equity [Abstract] | ||
Common stock cash dividends (in dollars per share) | $ 1.38 | $ 1.29 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 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 ended March 31, 2022 do not necessarily indicate the results that may be expected for the full year. |
Restaurant Information
Restaurant Information | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Restaurant Information | Restaurant Information The following table presents restaurant information by ownership type: Restaurants at March 31, 2022 2021 Conventional franchised 21,558 21,496 Developmental licensed 7,981 7,705 Foreign affiliated 8,013 7,283 Total Franchised 37,552 36,484 Company-operated 2,792 2,676 Total Systemwide restaurants 40,344 39,160 Company-operated restaurants include 827 restaurants in Russia and Ukraine that were temporarily closed during the first quarter 2022 due to the ongoing military conflict in the region. |
Per Common Share Information
Per Common Share Information | 3 Months Ended |
Mar. 31, 2022 | |
Earnings Per Share [Abstract] | |
Per Common Share Information | Per Common Share InformationDiluted earnings per common share is calculated using 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 5.0 million shares and 5.2 million shares for the quarters 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 1.7 million shares and 3.6 million shares for the quarters 2022 and 2021, respectively. |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Adopted Accounting Pronouncements Leases In July 2021, 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 amends 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. 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. The recent military conflict between Russia and Ukraine has created significant uncertainty and risk in these McDonald’s markets. As such, the Company conducted an analysis after temporarily suspending operations in Russia and Ukraine during the first quarter of 2022. The Company continues to monitor the economic uncertainty, while assessing the financial impact and outlook for restaurant operations in these markets. As a result of the Company's analysis, and in consideration of the totality of events and circumstances, there was no impairment recorded during the first quarter of 2022. As of March 31, 2022, the Company’s net investment in Russia and Ukraine was approximately $600 million, primarily consisting of building and equipment assets. In addition, there was approximately $725 million of cumulative foreign currency translation losses reflected in the AOCI section of the condensed consolidated statement of shareholder’s equity at March 31, 2022. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | |
Income Tax Disclosure | Income Taxes The effective income tax rate was 28.3% and 21.3% for the quarters ended 2022 and 2021, respectively. The tax rate for the quarter ended 2022 was impacted by the non-deductibility for tax purposes of the $500 million of nonoperating expense to reserve for a potential settlement related to an international tax matter. Excluding the impacts of the $500 million of nonoperating expense and current and prior year strategic gains and charges, the effective income tax rate was 21.3% and 20.9% for the quarters ended 2022 and 2021, respectively. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2022 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements The Company measures certain financial assets and liabilities at fair value. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The Company did not have any significant changes to the valuation techniques used to measure fair value as described in the Company's December 31, 2021 Annual Report on Form 10-K. |
Financial Instruments and Hedgi
Financial Instruments and Hedging Activities | 3 Months Ended |
Mar. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Financial Instruments and Hedging Activities | Financial Instruments and Hedging Activities The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not hold or issue derivatives for trading purposes. The following table presents the fair values of derivative instruments included on the Condensed Consolidated Balance Sheet: Derivative Assets Derivative Liabilities In millions Balance Sheet Classification March 31, 2022 December 31, 2021 Balance Sheet Classification March 31, 2022 December 31, 2021 Derivatives designated as hedging instruments Foreign currency Prepaid expenses and other current assets $ 39.8 $ 42.4 Accrued payroll and other liabilities $ (6.2) $ (3.3) Interest rate Prepaid expenses and other current assets 21.8 0.3 Accrued payroll and other liabilities — — Foreign currency Miscellaneous other assets 32.6 28.0 Other long-term liabilities (1.6) (0.5) Interest rate Miscellaneous other assets — 8.6 Other long-term liabilities (41.3) (4.1) Total derivatives designated as hedging instruments $ 94.2 $ 79.3 $ (49.1) $ (7.9) Derivatives not designated as hedging instruments Equity Prepaid expenses and other current assets $ 3.2 $ 9.5 Accrued payroll and other liabilities $ — $ — Foreign currency Prepaid expenses and other current assets — 0.5 Accrued payroll and other liabilities (4.0) — Equity Miscellaneous other assets 185.1 200.3 Total derivatives not designated as hedging instruments $ 188.3 $ 210.3 $ (4.0) $ — Total derivatives $ 282.5 $ 289.6 $ (53.1) $ (7.9) The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the quarters ended March 31, 2022 and 2021, respectively: Location of gain or loss Gain (loss) Gain (loss) Gain (loss) recognized in In millions 2022 2021 2022 2021 2022 2021 Foreign currency Nonoperating income/expense $ 13.5 $ 29.9 $ 14.1 $ (17.8) Interest rate Interest expense 21.8 — (1.1) (1.6) Cash flow hedges $ 35.3 $ 29.9 $ 13.0 $ (19.4) Foreign currency denominated debt Nonoperating income/expense $ 259.0 $ 379.7 $ — $ 16.2 Foreign currency derivatives Nonoperating income/expense 4.4 26.6 Foreign currency derivatives (1) Interest expense $ 2.3 $ 3.7 Net investment hedges $ 263.4 $ 406.3 $ — $ 16.2 $ 2.3 $ 3.7 Foreign currency Nonoperating income/expense $ (4.5) $ 2.3 Equity Selling, general & administrative expenses (21.5) 20.4 Equity Other operating income/expense, net — (4.7) Undesignated derivatives $ (26.0) $ 18.0 (1) The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. Fair Value Hedges The Company enters into fair value hedges to reduce the exposure to changes in fair values of certain liabilities. The Company enters into fair value hedges that convert a portion of its fixed rate debt into floating rate debt by use of interest rate swaps. At March 31, 2022, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $1.0 billion, which included a decrease of $41.3 million of cumulative hedging adjustments. For the quarter ended March 31, 2022, the Company recognized a $46.1 million loss on the fair value of interest rate swaps, and a corresponding gain on the fair value of the related hedged debt instrument to interest expense. Cash Flow Hedges The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. To protect against the reduction in value of forecasted foreign currency cash flows (such as royalties denominated in foreign currencies), the Company uses foreign currency forwards to hedge a portion of anticipated exposures. The hedges cover up to the next 18 months for certain exposures and are denominated in various currencies. As of March 31, 2022, the Company had foreign currency derivatives outstanding with an equivalent notional amount of $1.4 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 March 31, 2022, the Company had derivatives outstanding with a notional amount of $500 million that hedge a portion of forecasted cash flows. Based on market conditions at March 31, 2022, the $7.5 million in cumulative cash flow hedging losses, after tax, is not expected to have a significant effect on earnings over the next 12 months. Net Investment Hedges The Company uses foreign currency denominated debt (third-party and intercompany) as well as foreign currency derivatives to hedge its investments in certain foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges are included in shareholders' equity in the foreign currency translation component of Other comprehensive income ("OCI") and offset translation adjustments on the underlying net assets of foreign subsidiaries and affiliates, which also are recorded in OCI. As of March 31, 2022, $12.2 billion of the Company's third-party foreign currency denominated debt, $1.5 billion of the Company's intercompany foreign currency denominated debt, and $267.4 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. The changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, along with the currency gain or loss from the hedged balance sheet position. Credit Risk The Company is exposed to credit-related losses in the event of non-performance by its derivative counterparties. The Company did not have significant exposure to any individual counterparty at March 31, 2022 and has master agreements that contain netting arrangements. For financial reporting purposes, the Company presents gross derivative balances in the financial statements and supplementary data, including for counterparties subject to netting arrangements. Some of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At March 31, 2022, the Company was required to post an immaterial amount 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. |
Franchise Arrangements
Franchise Arrangements | 3 Months Ended |
Mar. 31, 2022 | |
Leases [Abstract] | |
Franchise Arrangements | Franchise Arrangements Revenues from franchised restaurants consisted of: Quarters Ended March 31, In millions 2022 2021 Rents $ 2,081.1 $ 1,826.1 Royalties 1,168.7 1,038.7 Initial fees 13.0 12.6 Revenues from franchised restaurants $ 3,262.8 $ 2,877.4 |
Segment Information
Segment Information | 3 Months Ended |
Mar. 31, 2022 | |
Segment Reporting [Abstract] | |
Segment Information | Segment Information The Company operates under an organizational structure with the following global business segments reflecting how management reviews and evaluates operating performance: • U.S. - the Company's largest market. The segment is 95% franchised as of March 31, 2022. • International Operated Markets - comprised of markets or countries in which the Company operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, the Netherlands, Russia, Spain and the U.K. The segment is 83% franchised as of March 31, 2022. As of March 31, 2022, all Company-owned restaurants in Russia and Ukraine were temporarily closed due to the ongoing military conflict in the region. • 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 March 31, 2022. The following table presents the Company’s revenues and operating income by segment: Quarters Ended March 31, In millions 2022 2021 Revenues U.S. $ 2,175.6 $ 2,075.5 International Operated Markets 2,922.1 2,556.2 International Developmental Licensed Markets & Corporate 567.9 492.9 Total revenues $ 5,665.6 $ 5,124.6 Operating Income U.S. $ 1,151.0 $ 1,125.5 International Operated Markets 1,129.2 953.8 International Developmental Licensed Markets & Corporate 32.4 202.0 Total operating income $ 2,312.6 $ 2,281.3 |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. On April 1, 2022, the Company completed the sale of Dynamic Yield, a technology company acquired in 2019, which specializes in personalization and decision logic technology. Dynamic Yield’s technology has been deployed to McDonald’s drive thrus and ordering kiosks in several markets globally. The Company expects to record a pre-tax gain on the sale of approximately $260 million and cash proceeds of approximately $320 million (subject to final working capital adjustments) in the second quarter of 2022. There were no other subsequent events that required recognition or disclosure. |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 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 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 ended March 31, 2022 do not necessarily indicate the results that may be expected for the full year. |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Mar. 31, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recently Adopted Accounting Pronouncements Leases In July 2021, 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 amends 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. 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. |
Long-lived Assets and Goodwill | Long-lived Assets and GoodwillLong-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. |
Restaurant Information (Tables)
Restaurant Information (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Restaurant Information by Ownership Type | The following table presents restaurant information by ownership type: Restaurants at March 31, 2022 2021 Conventional franchised 21,558 21,496 Developmental licensed 7,981 7,705 Foreign affiliated 8,013 7,283 Total Franchised 37,552 36,484 Company-operated 2,792 2,676 Total Systemwide restaurants 40,344 39,160 |
Financial Instruments and Hed_2
Financial Instruments and Hedging Activities (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Fair Values of Derivative Instruments Included on Consolidated Balance Sheet | The following table presents the fair values of derivative instruments included on the Condensed Consolidated Balance Sheet: Derivative Assets Derivative Liabilities In millions Balance Sheet Classification March 31, 2022 December 31, 2021 Balance Sheet Classification March 31, 2022 December 31, 2021 Derivatives designated as hedging instruments Foreign currency Prepaid expenses and other current assets $ 39.8 $ 42.4 Accrued payroll and other liabilities $ (6.2) $ (3.3) Interest rate Prepaid expenses and other current assets 21.8 0.3 Accrued payroll and other liabilities — — Foreign currency Miscellaneous other assets 32.6 28.0 Other long-term liabilities (1.6) (0.5) Interest rate Miscellaneous other assets — 8.6 Other long-term liabilities (41.3) (4.1) Total derivatives designated as hedging instruments $ 94.2 $ 79.3 $ (49.1) $ (7.9) Derivatives not designated as hedging instruments Equity Prepaid expenses and other current assets $ 3.2 $ 9.5 Accrued payroll and other liabilities $ — $ — Foreign currency Prepaid expenses and other current assets — 0.5 Accrued payroll and other liabilities (4.0) — Equity Miscellaneous other assets 185.1 200.3 Total derivatives not designated as hedging instruments $ 188.3 $ 210.3 $ (4.0) $ — Total derivatives $ 282.5 $ 289.6 $ (53.1) $ (7.9) |
Derivatives Pretax Amounts Affecting Income and Other Comprehensive Income | The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the quarters ended March 31, 2022 and 2021, respectively: Location of gain or loss Gain (loss) Gain (loss) Gain (loss) recognized in In millions 2022 2021 2022 2021 2022 2021 Foreign currency Nonoperating income/expense $ 13.5 $ 29.9 $ 14.1 $ (17.8) Interest rate Interest expense 21.8 — (1.1) (1.6) Cash flow hedges $ 35.3 $ 29.9 $ 13.0 $ (19.4) Foreign currency denominated debt Nonoperating income/expense $ 259.0 $ 379.7 $ — $ 16.2 Foreign currency derivatives Nonoperating income/expense 4.4 26.6 Foreign currency derivatives (1) Interest expense $ 2.3 $ 3.7 Net investment hedges $ 263.4 $ 406.3 $ — $ 16.2 $ 2.3 $ 3.7 Foreign currency Nonoperating income/expense $ (4.5) $ 2.3 Equity Selling, general & administrative expenses (21.5) 20.4 Equity Other operating income/expense, net — (4.7) Undesignated derivatives $ (26.0) $ 18.0 (1) The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. |
Franchise Arrangements (Tables)
Franchise Arrangements (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Leases [Abstract] | |
Revenues from Franchised Restaurants | Revenues from franchised restaurants consisted of: Quarters Ended March 31, In millions 2022 2021 Rents $ 2,081.1 $ 1,826.1 Royalties 1,168.7 1,038.7 Initial fees 13.0 12.6 Revenues from franchised restaurants $ 3,262.8 $ 2,877.4 |
Segment Information (Tables)
Segment Information (Tables) | 3 Months Ended |
Mar. 31, 2022 | |
Segment Reporting [Abstract] | |
Revenues and Operating Income by Segment | The following table presents the Company’s revenues and operating income by segment: Quarters Ended March 31, In millions 2022 2021 Revenues U.S. $ 2,175.6 $ 2,075.5 International Operated Markets 2,922.1 2,556.2 International Developmental Licensed Markets & Corporate 567.9 492.9 Total revenues $ 5,665.6 $ 5,124.6 Operating Income U.S. $ 1,151.0 $ 1,125.5 International Operated Markets 1,129.2 953.8 International Developmental Licensed Markets & Corporate 32.4 202.0 Total operating income $ 2,312.6 $ 2,281.3 |
Restaurant Information (Restaur
Restaurant Information (Restaurant Information by Ownership Type) (Details) - Restaurant | Mar. 31, 2022 | Mar. 31, 2021 |
Franchisor Disclosure [Line Items] | ||
Number of restaurants | 40,344 | 39,160 |
Franchised | ||
Franchisor Disclosure [Line Items] | ||
Number of restaurants | 37,552 | 36,484 |
Franchised | Conventional franchised | ||
Franchisor Disclosure [Line Items] | ||
Number of restaurants | 21,558 | 21,496 |
Franchised | Developmental licensed | ||
Franchisor Disclosure [Line Items] | ||
Number of restaurants | 7,981 | 7,705 |
Franchised | Affiliated | ||
Franchisor Disclosure [Line Items] | ||
Number of restaurants | 8,013 | 7,283 |
Company-operated | ||
Franchisor Disclosure [Line Items] | ||
Number of restaurants | 2,792 | 2,676 |
Restaurant Information (Additio
Restaurant Information (Additional Information) (Details) | 3 Months Ended |
Mar. 31, 2022Restaurant | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of restaurants, suspended operations | 827 |
Per Common Share Information (D
Per Common Share Information (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Earnings Per Share [Abstract] | ||
Dilutive effect of share-based compensation (in shares) | 5 | 5.2 |
Antidilutive share-based compensation awards (in shares) | 1.7 | 3.6 |
Recent Accounting Pronounceme_3
Recent Accounting Pronouncements (Details) | 3 Months Ended |
Mar. 31, 2022USD ($) | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |
Impairment of long-lived assets and goodwill | $ 0 |
Cumulative foreign currency translation losses | 725,000,000 |
Russia and Ukraine | |
Revenues from External Customers and Long-Lived Assets [Line Items] | |
Building and equipment assets in Russia and Ukraine | $ 600,000,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate | 28.30% | 21.30% |
Tax impacts of reserve for international tax settlement | $ 500 | |
Effective income tax rate excluding international tax settlement reserve | 21.30% | 20.90% |
Fair Value Measurements (Detail
Fair Value Measurements (Details) $ in Billions | Mar. 31, 2022USD ($) |
Fair Value Disclosures [Abstract] | |
Debt obligations, fair value | $ 35.4 |
Debt obligations, carrying amount | $ 34 |
Financial Instruments and Hed_3
Financial Instruments and Hedging Activities (Fair Values of Derivative Instruments Included on Consolidated Balance Sheet) (Details) - USD ($) $ in Millions | Mar. 31, 2022 | Dec. 31, 2021 |
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | $ 282.5 | $ 289.6 |
Derivative Liabilities | (53.1) | (7.9) |
Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 94.2 | 79.3 |
Derivative Liabilities | (49.1) | (7.9) |
Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 188.3 | 210.3 |
Derivative Liabilities | (4) | 0 |
Foreign currency | Prepaid expenses and other current assets | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 39.8 | 42.4 |
Foreign currency | Prepaid expenses and other current assets | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 0 | 0.5 |
Foreign currency | Accrued payroll and other liabilities | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities | (6.2) | (3.3) |
Foreign currency | Accrued payroll and other liabilities | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities | (4) | 0 |
Foreign currency | Miscellaneous other assets | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 32.6 | 28 |
Foreign currency | Other long-term liabilities | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities | (1.6) | (0.5) |
Equity | Prepaid expenses and other current assets | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 3.2 | 9.5 |
Equity | Accrued payroll and other liabilities | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities | 0 | 0 |
Equity | Miscellaneous other assets | Derivatives not designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 185.1 | 200.3 |
Interest rate | Prepaid expenses and other current assets | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 21.8 | 0.3 |
Interest rate | Accrued payroll and other liabilities | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities | 0 | 0 |
Interest rate | Miscellaneous other assets | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Assets | 0 | 8.6 |
Interest rate | Other long-term liabilities | Derivatives designated as hedging instruments | ||
Derivatives, Fair Value [Line Items] | ||
Derivative Liabilities | $ (41.3) | $ (4.1) |
Financial Instruments and Hed_4
Financial Instruments and Hedging Activities (Derivatives Pretax Amounts Affecting Income and Other Comprehensive Income) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Cash flow hedges | ||
Cash flow hedges | ||
Gain (loss) recognized in AOCI | $ 35.3 | $ 29.9 |
Gain (loss) reclassified into income from AOCI | 13 | (19.4) |
Net investment hedges | ||
Net investment hedges | ||
Gain (loss) recognized in AOCI | 263.4 | 406.3 |
Gain (loss) reclassified into income from AOCI | 0 | 16.2 |
Gain (loss) recognized in income on derivative | 2.3 | 3.7 |
Derivatives not designated as hedging instruments | ||
Net investment hedges | ||
Gain (loss) recognized in income on derivative | (26) | 18 |
Foreign currency | Cash flow hedges | ||
Cash flow hedges | ||
Gain (loss) recognized in AOCI | 13.5 | 29.9 |
Gain (loss) reclassified into income from AOCI | 14.1 | (17.8) |
Foreign currency | Derivatives not designated as hedging instruments | ||
Net investment hedges | ||
Gain (loss) recognized in income on derivative | (4.5) | 2.3 |
Interest rate | Cash flow hedges | ||
Cash flow hedges | ||
Gain (loss) recognized in AOCI | 21.8 | 0 |
Gain (loss) reclassified into income from AOCI | (1.1) | (1.6) |
Foreign currency denominated debt | Net investment hedges | ||
Net investment hedges | ||
Gain (loss) recognized in AOCI | 259 | 379.7 |
Gain (loss) reclassified into income from AOCI | 0 | 16.2 |
Foreign currency derivatives | Net investment hedges | ||
Net investment hedges | ||
Gain (loss) recognized in AOCI | 4.4 | 26.6 |
Foreign currency derivatives | Net investment hedges | ||
Net investment hedges | ||
Gain (loss) recognized in income on derivative | 2.3 | 3.7 |
Equity | Derivatives not designated as hedging instruments | ||
Net investment hedges | ||
Gain (loss) recognized in income on derivative | (21.5) | 20.4 |
Equity | Derivatives not designated as hedging instruments | ||
Net investment hedges | ||
Gain (loss) recognized in income on derivative | $ 0 | $ (4.7) |
Financial Instruments and Hed_5
Financial Instruments and Hedging Activities (Additional Information) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Cumulative cash flow hedging gain (losses), after tax | $ (7.5) | |
Debt | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Foreign currency denominated debt designated to hedge investments in certain foreign subsidiaries and affiliates | 12,200 | |
Intercompany Debt | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Foreign currency denominated debt designated to hedge investments in certain foreign subsidiaries and affiliates | 1,500 | |
Cash flow hedges | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Derivative, notional amount | 500 | |
Net investment hedges | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Derivative, notional amount | 267.4 | |
Gain (loss) on the fair value of interest rate swaps | 2.3 | $ 3.7 |
Interest Rate Risk | Fair Value Hedging | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Increase (decrease) of cumulative hedging adjustments | (41.3) | |
Gain (loss) on the fair value of interest rate swaps | (46.1) | |
Royalty Arrangement | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Derivative, notional amount | $ 1,400 | |
Period covered by hedge | 18 months | |
Interest Rate Swap | ||
Derivative Instruments and Hedging Activities Disclosure [Line Items] | ||
Derivative, notional amount | $ 1,000 |
Franchise Arrangements (Detail)
Franchise Arrangements (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Leases [Abstract] | ||
Rents | $ 2,081.1 | $ 1,826.1 |
Royalties | 1,168.7 | 1,038.7 |
Initial fees | 13 | 12.6 |
Revenues from franchised restaurants | $ 3,262.8 | $ 2,877.4 |
Segment Information (Additional
Segment Information (Additional Information) (Details) | Mar. 31, 2022 |
U.S. | |
Noncontrolling Interest [Line Items] | |
Percentage of segment franchised | 95.00% |
International Operated Markets | |
Noncontrolling Interest [Line Items] | |
Percentage of segment franchised | 83.00% |
International Developmental Licensed Markets & Corporate | |
Noncontrolling Interest [Line Items] | |
Percentage of segment franchised | 98.00% |
Segment Information (Revenues a
Segment Information (Revenues and Operating Income by Segment) (Details) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2022 | Mar. 31, 2021 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 5,665.6 | $ 5,124.6 |
Operating Income | 2,312.6 | 2,281.3 |
U.S. | ||
Segment Reporting Information [Line Items] | ||
Revenues | 2,175.6 | 2,075.5 |
Operating Income | 1,151 | 1,125.5 |
International Operated Markets | ||
Segment Reporting Information [Line Items] | ||
Revenues | 2,922.1 | 2,556.2 |
Operating Income | 1,129.2 | 953.8 |
International Developmental Licensed Markets & Corporate | ||
Segment Reporting Information [Line Items] | ||
Revenues | 567.9 | 492.9 |
Operating Income | $ 32.4 | $ 202 |
Subsequent Events Subsequent Ev
Subsequent Events Subsequent Events (Details) - Dynamic Yield - Disposal Group, Disposed of by Sale, Not Discontinued Operations - Forecast $ in Millions | 3 Months Ended |
Jun. 30, 2022USD ($) | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Pre-tax gain (loss) on disposal | $ 260 |
Cash proceeds of disposal | $ 320 |