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MCDONALDS CORP - Quarter Report: 2025 March (Form 10-Q)

  Long-term debt  Long-term lease liability  Long-term income taxes  Deferred revenues - initial franchise fees  Other long-term liabilities  Deferred income taxes  Shareholders’ equity (deficit)
Preferred stock, par value; authorized – million shares; issued –
  
Common stock, $ par value; authorized – billion shares; issued –  million shares
  Additional paid-in capital  Retained earnings  Accumulated other comprehensive income (loss)()()
Common stock in treasury, at cost; and million shares
()()Total shareholders’ equity (deficit)()()Total liabilities and shareholders’ equity (deficit)$ $ 
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
In millions, except per share data20252024
Revenues
Revenues from franchised restaurants$ $ 
Sales by Company-owned and operated restaurants  
Other revenues  
Total revenues  
Operating costs and expenses
Franchised restaurants-occupancy expenses  
Company-owned and operated restaurant expenses  
Other restaurant expenses  
Selling, general & administrative expenses
Depreciation and amortization  
Other  
Other operating (income) expense, net ()
Total operating costs and expenses  
Operating income  
Interest expense  
Nonoperating (income) expense, net()()
Income before provision for income taxes  
Provision for income taxes  
Net income$ $ 
Earnings per common share-basic$ $ 
Earnings per common share-diluted$ $ 
Dividends declared per common share$ $ 
Weighted-average shares outstanding-basic  
Weighted-average shares outstanding-diluted  
See Notes to Condensed Consolidated Financial Statements.
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CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
In millions20252024
Net income$ $ 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments:
Gain (loss) recognized in accumulated other comprehensive
income ("AOCI"), including net investment hedges
 ()
Reclassification of (gain) loss to net income  
Foreign currency translation adjustments-net of tax
benefit (expense) of $ and $()
 ()
Cash flow hedges:
Gain (loss) recognized in AOCI() 
Reclassification of (gain) loss to net income() 
Cash flow hedges-net of tax benefit (expense) of $ and $()
() 
Defined benefit pension plans:
Gain (loss) recognized in AOCI() 
Reclassification of (gain) loss to net income()()
Defined benefit pension plans-net of tax benefit (expense)
of $ and $
() 
Total other comprehensive income (loss), net of tax()()
Comprehensive income$ $ 
      
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.

million shares and million shares for the quarters ended March 31, 2025 and March 31, 2024, respectively. Share-based compensation awards that would have been antidilutive, and therefore were not included in the calculation of diluted weighted-average shares, totaled million shares and million shares for the quarters ended March 31, 2025 and March 31, 2024, respectively.


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 million and $ million of restructuring charges related to Accelerating the Organization in the three months ended March 31, 2025 and 2024, respectively. These restructuring charges were recorded in the Other operating (income) expense, net line within the Condensed Consolidated Statement of Income. There were no significant non-cash impairment charges included in the amounts listed in the table below. $ $ $ Restructuring Costs Incurred    Cash Payments() ()()Other Non-Cash Items    Accrued Balance at March 31, 2025$ $ $ $ 
Of the $ million of restructuring charges incurred in the three months ended March 31, 2025, $ million was recorded primarily at Corporate and $ million was recorded in the International Operated Markets.
Substantially all of the accrued restructuring balance recorded at March 31, 2025, related to the Company's Accelerating the Organization initiative, is expected to be paid out over the next twelve months.
The Company continues to evolve its ways of working by driving efficiency and effectiveness across the organization, primarily led by its Global Business Services ("GBS") organization. Transformation efforts under Accelerating the Organization will continue to result in various restructuring charges as the strategy progresses through its anticipated completion during 2027, with $ million of total restructuring charges incurred since the initiative commenced in 2023. The Company currently expects to incur approximately $ million of restructuring charges in 2025, primarily related to professional services costs.

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 %N/A$  %N/A$ McDonald's Japan Holdings Co., Ltd %$ $  %$ $ 
As of March 31, 2025, the aggregate carrying amount of the Company's investments in these equity method investees exceeded its proportionate share of the net assets of these equity method investees by $ billion. This difference is not amortized. Management has concluded that there are no indicators of impairment related to these investments.
The following table summarizes the amounts recorded related to the Company's primary equity method investments during the three months ended March 31, 2025 and March 31, 2024, respectively.
Quarters Ended March 31,
In Millions20252024
Revenue$ $ 
Equity in Earnings$ $ 
Accounts Receivable$ $ 
Dividends Received$ $ 

% and % for the three months ended March 31, 2025 and 2024, respectively.

billion, compared to a carrying amount of $ 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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 $ Accrued payroll and other liabilities$()$()Interest ratePrepaid expenses and other current assets  Accrued payroll and other liabilities()()Foreign currencyMiscellaneous other assets  Other long-term liabilities() Interest rateMiscellaneous other assets
  Other long-term liabilities()()Total derivatives designated as hedging instruments$ $  $()$()Derivatives not designated as hedging instrumentsEquityPrepaid expenses and other current assets

$ $ Accrued payroll and other liabilities$ $ Foreign currencyPrepaid expenses and other current assets

  Accrued payroll and other liabilities  )  )   )
n/m Not meaningful
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Impact of the War in the Middle East
The Company’s Systemwide sales and revenue have continued to be negatively impacted by the war in the Middle East, primarily in the International Developmental Licensed Markets, where the majority of restaurants are under a developmental license or affiliate arrangement. The Company is monitoring the evolving situation, which it expects to continue to have a negative impact on Systemwide sales and revenue until the war concludes and the macroeconomic conditions recover. The Company generally does not invest any restaurant 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.
Impact of Foreign Currency Translation
The impact of foreign currency translation on consolidated operating results for the quarter primarily reflected the weakening of all major currencies against the U.S. Dollar, primarily driven by the Euro.
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 March 31,202520242025
Revenues$ $ $(114)
Franchised margins3,041 3,096 (55)
Company-owned and operated margins273 320 (7)
Selling, general & administrative expenses682 720 5 
Operating income  (59)
Net income  (30)
Earnings per share-diluted$ $ $(0.04)
Net Income and Diluted Earnings per Share
Net income decreased 3% (2% in constant currencies) to $ million, and diluted earnings per share decreased 2% (1% in constant currencies) to $. Foreign currency translation had a negative impact of $0.04 on diluted earnings per share.
Results included pre-tax charges of $66 million, or $0.07 per share, for the three months ended March 31, 2025 and $35 million, or $0.04 per share, for the three months ended March 31, 2024, primarily related to restructuring charges associated with the Company's internal effort to modernize ways of working (Accelerating the Organization).
Excluding the above items, operating income performance was primarily driven by lower Franchised and Company-owned and operated margins.
During the quarter, the Company paid a quarterly dividend of $1.77 per share, or $1.3 billion. Additionally, the Company repurchased 1.5 million shares of stock for $447 million.

NET INCOME AND EARNINGS PER SHARE-DILUTED RECONCILIATION
Dollars in millions, except per share data
Quarters Ended March 31,
Net IncomeEarnings per share - diluted
20252024Inc/ (Dec)Inc/ (Dec)
Excluding
Currency
Translation		20252024Inc/ (Dec)Inc/ (Dec)
Excluding
Currency
Translation
GAAP$ $ (3)%(2)%$ $ (2)%(1)%
(Gains)/Charges51 27 0.07 0.04 
Non-GAAP$1,919 $1,957 (2)%— %$2.67 $2.70 (1)%1 %



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Revenues
The Company's revenues consist of fees from restaurants owned and operated by franchisees, developmental licensees and affiliates and sales by Company-owned and operated restaurants. 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 primarily comprised of fees paid by franchisees to recover a portion of costs incurred by the Company for various technology and digital platforms and revenues from brand licensing arrangements to market and sell consumer packaged goods using the McDonald’s brand.
Franchised restaurants represented approximately 95% of McDonald's restaurants worldwide at March 31, 2025. 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    
Dollars in millions    
Quarters Ended March 31,20252024Inc/ (Dec)Inc/ (Dec)
Excluding
Currency
Translation
Franchised revenues   
U.S.$1,679 $1,728 (3)%(3)%
International Operated Markets1,554 1,585 (2)1 
International Developmental Licensed Markets & Corporate429 409 5 9 
Total$3,661 $3,723 (2)%— %
Company-owned and operated sales    
U.S.$724 $781 (7)%(7)%
International Operated Markets1,309 1,362 (4)— 
International Developmental Licensed Markets & Corporate99 212 (53)n/m
Total$2,132 $2,355 (9)%(7)%
Total Franchised revenues and Company-owned and operated sales   
U.S.$2,403 $2,509 (4)%(4)%
International Operated Markets2,862 2,947 (3)— 
International Developmental Licensed Markets & Corporate528 621 (15)(13)
Total$5,793 $6,078 (5)%(3)%
Total Other revenues$ $ 78 %81 %
Total Revenues$ $ (3)%(2)%
*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.
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 three months ended March 31, 2025 and 2024:

FRANCHISED SALES
Dollars in millions
Quarters Ended March 31,20252024Inc/ (Dec)Inc/ (Dec)
Excluding
Currency
Translation
U.S.$11,771 $12,086 (3)%(3)%
International Operated Markets8,984 9,166 (2)1 
International Developmental Licensed Markets8,048 7,565 6 10 
Total$28,804 $28,816 — %2 %
Ownership type
Conventional franchised$20,632 $21,165 (3)%(1)%
Developmental licensed4,944 4,611 7 13 
Foreign affiliated3,227 3,040 6 8 
Total$28,804 $28,816 — %2 %
•Equity in earnings of unconsolidated affiliates reflected higher equity in earnings in China as a result of improved operating performance and the Company's increased ownership in Grand Foods Holding when compared to the same period in 2024.
•Impairment and other charges (gains), net reflected pre-tax charges of $66 million and $35 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

Operating Income
OPERATING INCOME & OPERATING MARGIN
Dollars in millions
Quarters Ended March 31,20252024Inc/ (Dec)Inc/ (Dec)
Excluding
Currency
Translation
U.S.$ $ (7)%(7)%
International Operated Markets  (6)(2)
International Developmental Licensed Markets & Corporate ()n/mn/m
Total $ $ (3)%(1)%
Operating margin44.5 %44.3 %
•Operating income decreased $87 million or 3% (1% in constant currencies). Results reflected pre-tax charges of $66 million and $35 million for the three months ended March 31, 2025 and 2024, respectively, primarily related to restructuring charges associated with Accelerating the Organization.

OPERATING INCOME & OPERATING MARGIN RECONCILIATION*
Dollars in millions
20252024Inc/ (Dec)Inc/ (Dec)
Excluding
Currency
Translation
GAAP operating income$$(3)%(1)%
(Gains)/charges6635
Non-GAAP operating income$2,714$2,771(2)%— %
Non-GAAP operating margin45.6 %44.9 %
*Refer to the Impairment and other charges (gains), net line within the Other Operating (Income) Expense, Net section above for details of the charges in this table.

•Excluding the charges for the three months ended March 31, 2025 and 2024 shown in the table above, operating income decreased 2% (flat in constant currencies). Results primarily reflected lower sales-driven Franchised and Company-owned and operated margins in the U.S. and International Operated Markets, partly offset by positive operating results in International Developmental Licensed Markets & Corporate primarily due to lower Selling, general, and administrative expenses.
•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 Company-owned and operated restaurants. Additionally, temporary restaurant closures, which vary by segment, impact the contribution of each segment to the consolidated operating margin.
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The increase in non-GAAP operating margin was primarily due to the prior year sale of McDonald's business in South Korea and lower Selling, general and administrative expenses, partly offset by the prior year acquisition of McDonald's business in Israel and lower Franchised and Company-owned and operated margin dollars.
Interest Expense
•Interest expense increased 1% (2% in constant currencies) primarily due to higher average debt balances as well as higher average interest rates.
Nonoperating (Income) Expense, Net
NONOPERATING (INCOME) EXPENSE, NET
Dollars in millions
Interest income$(17)$(47)
Foreign currency and hedging activity(18)5 
Other (income) expense, net(23)(3)
Total$()$()
January 1-31, 2025797,922 $287.94 797,922 $14,770,243,410 February 1-28, 2025389,627 299.80 389,627 14,653,432,226 March 1-31, 2025326,548 306.27 326,548 14,553,420,121 Total1,514,097 $294.95 1,514,097 
*    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)As disclosed on February 25, 2025 in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, the Company's Board of Directors approved a share repurchase program on November 21, 2024, effective January 1, 2025 with no specified expiration date, that authorized the purchase of up to $15.0 billion of the Company's outstanding common stock.
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Item 5. Other Information
Rule 10b5-1 Trading Plans
In accordance with the disclosure requirement set forth in Item 408(a) of Regulation S-K, the following table discloses the officers (as defined in Rule 16a-1(f) under the Exchange Act) and directors who adopted a contract, instruction or written plan for the sale of the Company’s securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) during the quarter ended March 31, 2025. Each of these trading plans was adopted during an open trading window.
Name / TitleType of PlanAdoption DateEnd DateAggregate Number of Securities to be SoldPlan Description
Christopher Kempczinski / Chairman, President and Chief Executive OfficerRule 10b5-1 trading planFebruary 14, 2025May 10, 202652,553Exercise and sale of stock options
Morgan Flatley / EVP – Global Chief Marketing Officer and New Business VenturesRule 10b5-1 trading planFebruary 20, 2025June 21, 202613,042Exercise and sale of stock options, and sale of shares
Ian Borden / EVP – Global Chief Financial OfficerRule 10b5-1 trading planFebruary 20, 2025February 11, 202617,134Exercise and sale of stock options
Desiree Ralls-Morrison / EVP – Global Chief Legal Officer Rule 10b5-1 trading planFebruary 27, 2025December 31, 20254,973Sale of shares
Other than as disclosed above, no officer or director adopted, modified, or terminated a contract, instruction or written plan for the purchase or sale of the Company’s securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or a non-Rule 10b5-1 trading arrangement.
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Item 6. Exhibits
Exhibit No.
Description
(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 Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2)
Certification pursuant to 18 U.S.C. Section 1350 by the Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(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.

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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:May 12, 2025Ian F. Borden
Executive Vice President and Global Chief Financial Officer

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