--- ticker: MCD company: McDonald's Corporation filing_type: 10-K year_current: 2025 year_prior: 2024 risks_added: 3 risks_removed: 1 risks_modified: 24 risks_unchanged: 53 source: SEC EDGAR url: https://riskdiff.com/mcd/2025-vs-2024/ markdown_url: https://riskdiff.com/mcd/2025-vs-2024/index.md generated: 2026-05-10 --- # McDonald's Corporation: 10-K Risk Factor Changes 2025 vs 2024 > Source: U.S. Securities and Exchange Commission (EDGAR) > Generated: 2026-05-10 > All data extracted directly from official filings. No hallucinated content. > **[AI-Generated Summary]** The paragraph below was produced by a language > model and may contain errors. All other content on this page is deterministically > extracted from the original SEC filing. > McDonald's Corporation's 2025 10-K Risk Factors reflect a modest expansion of disclosure with 3 new risks added and 1 removed, while 24 existing risks underwent substantive modifications. The new disclosures address insider trading policy, recently adopted accounting pronouncements, and fair value hedges, indicating enhanced focus on compliance and financial instrument management. The majority of modifications concentrated on financial instruments, hedging activities, debt obligations, and global business risks, suggesting McDonald's refined its articulation of exposure to geopolitical events, commodity price volatility, and operational complexities across international markets. --- ## Summary | Status | Count | |--------|-------| | New risks added | 3 | | Risks removed | 1 | | Risks modified | 24 | | Unchanged | 53 | --- ## New in Current Filing: INSIDER TRADING POLICY The Company has adopted an insider trading policy governing the purchase and sale and other dispositions of Company securities by our directors, officers and employees. The Company believes this policy is reasonably designed to promote compliance with insider trading laws, rules and regulations, and NYSE listing standards. A copy of the Inside Information and Securities Trading Policy is filed as Exhibit 19 to this Form 10-K. McDonald's Corporation 2024 Annual Report 38 McDonald's Corporation 2024 Annual Report 38 McDonald's Corporation 2024 Annual Report 38 --- ## New in Current Filing: Recently Adopted Accounting Pronouncements Segment Reporting In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). The pronouncement expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. The Company adopted the new standard in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. Refer to the Segment footnote on page 52 of this Form 10-K for the enhanced disclosures added as a result of the adoption of ASU 2023-07. --- ## New in Current Filing: 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 December 31, 2024, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $770 million, which included a decrease of $40 million of cumulative hedging adjustments. For the year ended December 31, 2024, the Company recognized a $22 million gain on the fair value of interest rate swaps, and a corresponding loss on the fair value of the related hedged debt instrument to interest expense. --- ## No Match in Current: SUBSEQUENT EVENTS *This section from the 2024 filing does not have a high-confidence textual match in 2025. It may have been removed, merged, or substantially reworded.* The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission. On January 30, 2024, the Company completed the acquisition of an additional 28% ownership stake in the strategic partnership that operates and manages McDonald's business in mainland China, Hong Kong, and Macau. After acquiring the additional ownership from the global investment firm Carlyle for $1.8 billion, McDonald's will remain a minority partner while increasing its ownership stake from 20% to 48%. The CITIC Consortium, mainly through its equity affiliate CITIC Capital, will maintain its controlling ownership stake of 52%. McDonald's will continue to account for its investment under the equity method and will not consolidate the financial statements of the strategic partnership into its results. There were no other subsequent events that required recognition or disclosure. McDonald's Corporation 2023 Annual Report 60 McDonald's Corporation 2023 Annual Report 60 McDonald's Corporation 2023 Annual Report 60 Management's Assessment of Internal Control Over Financial Reporting The financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequate internal controls over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that: I.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; II.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and III.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time. Management assessed the design and effectiveness of the Company's internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework (2013 Framework). Based on management's assessment using those criteria, as of December 31, 2023, management believes that the Company's internal control over financial reporting is effective. Ernst & Young, LLP, independent registered public accounting firm, has audited the financial statements of the Company for the fiscal years ended December 31, 2023, 2022 and 2021 and the Company's internal control over financial reporting as of December 31, 2023. Their reports are presented on the following pages. The independent registered public accountants and internal auditors advise management of the results of their audits, and make recommendations to improve the system of internal controls. Management evaluates the audit recommendations and takes appropriate action. McDONALD'S CORPORATION February 22, 2024 McDonald's Corporation 2023 Annual Report 61 McDonald's Corporation 2023 Annual Report 61 McDonald's Corporation 2023 Annual Report 61 Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders of McDonald's Corporation --- ## Modified: Opinion on the Financial Statements **Key changes:** - Reworded sentence: "We have audited the accompanying consolidated balance sheets of McDonald's Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements")." - Reworded sentence: "We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2025 expressed an unqualified opinion thereon." **Prior (2024):** We have audited the accompanying consolidated balance sheets of McDonald's Corporation (the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 22, 2024 expressed an unqualified opinion thereon. **Current (2025):** We have audited the accompanying consolidated balance sheets of McDonald's Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 25, 2025 expressed an unqualified opinion thereon. --- ## Modified: The global scope of our business subjects us to risks that could negatively affect our business. **Key changes:** - Reworded sentence: "We encounter differing and evolving 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." - Reworded sentence: "Planned initiatives may not have appeal across multiple markets with McDonald's customers and could drive unanticipated changes in customer perceptions and negatively impact our business results." **Prior (2024):** 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 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, the wars in Ukraine and the Middle East have resulted in unpredictable conditions in regions throughout the world. The impacts of these wars on already-volatile macroeconomic conditions, geopolitical tensions, supply chain availability, 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. While we may face challenges and uncertainties 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 McDonald's Corporation 2023 Annual Report 29 McDonald's Corporation 2023 Annual Report 29 McDonald's Corporation 2023 Annual Report 29 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 adversely affect our business and financial results. **Current (2025):** We encounter differing and evolving 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 negatively impact our business results. Disruptions in operations or price volatility in a market can also result from governmental actions (whether proposed or realized, unilateral or bilateral), 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 McDonald's Corporation 2024 Annual Report 29 McDonald's Corporation 2024 Annual Report 29 McDonald's Corporation 2024 Annual Report 29 or volatility can also result from acts of war, terrorism or other hostilities. The broader impact of acts of war and related sanctions, including on macroeconomic conditions, geopolitical tensions, consumer demand and the ability of us and our franchisees to operate in certain geographic areas, may also have an adverse impact on our business and financial results. While we may face challenges and uncertainties 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 adversely affect our business and financial results. --- ## Modified: If we do not successfully evolve and execute against our business strategies, we may not be able to drive business growth. **Key changes:** - Reworded sentence: "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, including by maximizing our marketing, committing to our core menu items, and doubling down on digital, delivery, drive thru and 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; •build upon our investments to transform and enhance the customer experience, including building one of the world's largest consumer platforms to fuel engagement; •run great restaurants by building the easiest and most efficient restaurant operating platform which enables franchisees to run restaurants more efficiently and utilize the latest cloud-based technology to make it easier for crews to deliver exceptional customer service; •accelerate our existing strategies, including through growth opportunities and building a modern company platform that unlocks speed and innovation throughout the organization; and •evolve and adjust our strategies in response to, among other things, changing consumer behavior, and other events impacting our results of operations and liquidity." **Prior (2024):** 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, including by maximizing our marketing, committing to our core menu items, and doubling down on digital, delivery, drive thru and 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; •build upon our investments to transform and enhance the customer experience; •run great restaurants by driving efficiencies and expanding capacities while prioritizing health and safety; •accelerate our existing strategies, including through growth opportunities; and •evolve and adjust our strategies in response to, among other things, changing consumer behavior, and other events impacting our results of operations and 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. **Current (2025):** 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, including by maximizing our marketing, committing to our core menu items, and doubling down on digital, delivery, drive thru and 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; •build upon our investments to transform and enhance the customer experience, including building one of the world's largest consumer platforms to fuel engagement; •run great restaurants by building the easiest and most efficient restaurant operating platform which enables franchisees to run restaurants more efficiently and utilize the latest cloud-based technology to make it easier for crews to deliver exceptional customer service; •accelerate our existing strategies, including through growth opportunities and building a modern company platform that unlocks speed and innovation throughout the organization; and •evolve and adjust our strategies in response to, among other things, changing consumer behavior, and other events impacting our results of operations and 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. --- ## Modified: (Registrant) **Key changes:** - Reworded sentence: "BordenExecutive Vice President and Global Chief Financial OfficerFebruary 25, 2025" **Prior (2024):** By/s/ Ian F. BordenIan F. BordenExecutive Vice President and Global Chief Financial OfficerFebruary 22, 2024 **Current (2025):** By/s/ Ian F. BordenIan F. BordenExecutive Vice President and Global Chief Financial OfficerFebruary 25, 2025 --- ## Modified: LONG-LIVED ASSETS **Key changes:** - Reworded sentence: "Losses on assets held for disposal are recognized when management and the Company's Board of Directors, as required, have approved and committed to a plan to dispose of the assets, the assets are available for disposal and the disposal is probable of occurring within 12 months, and the net sales proceeds are expected to be less than its net book value, among other factors." - Reworded sentence: "During 2024, the Company acquired restaurants from franchisees (including 228 restaurants in Israel, which are presented within the International Developmental Licensed Markets & Corporate segment) in order to support key franchising initiatives." - Reworded sentence: "Goodwill on the Consolidated Balance Sheet reflects accumulated impairment losses of $1 million and $15 million as of December 31, 2024 and 2023, respectively." **Prior (2024):** Long-lived assets are 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. For purposes of annually reviewing McDonald's restaurant assets for potential impairment, assets are initially grouped together in the U.S. at a field office level, and internationally, at a market level. The Company manages its restaurants as a group or portfolio with significant common costs and promotional activities; as such, an individual restaurant's cash flows are not generally independent of the cash flows of others in a market. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows produced by each individual restaurant within the asset grouping is compared to its carrying value. If an individual restaurant is determined to be impaired, the loss is measured by the excess of the carrying amount of the restaurant over its fair value as determined by an estimate of discounted future cash flows. Losses on assets held for disposal are recognized when management and the Company's Board of Directors, as required, have approved and committed to a plan to dispose of the assets, the assets are available for disposal and the disposal is probable of occurring McDonald's Corporation 2023 Annual Report 44 McDonald's Corporation 2023 Annual Report 44 McDonald's Corporation 2023 Annual Report 44 within 12 months, and the net sales proceeds are expected to be less than its net book value, among other factors. Generally, such losses are related to restaurants that have closed and ceased operations as well as other assets that meet the criteria to be considered "held for sale." GOODWILL Goodwill represents the excess of cost over the net tangible assets and identifiable intangible assets of acquired restaurants and other businesses, and it is generally assigned to the reporting unit (defined as each individual market) expected to benefit from the synergies of the combination. The Company's goodwill primarily results from purchases of McDonald's restaurants from franchisees or transactions in which the Company obtains a controlling interest in subsidiaries or affiliates. When purchasing restaurants from a franchisee, the Company generally uses a discounted cash flow methodology (Level 3 inputs within the valuation hierarchy), which determines the fair value of restaurants acquired based on their expected profitability and cash flows. If a Company-operated restaurant is sold within 24 months of acquisition, the goodwill associated with the acquisition is written off in its entirety. If a Company-operated restaurant is sold beyond 24 months from the acquisition, the amount of goodwill written off is based on the relative fair value of the business sold compared to the reporting unit. Goodwill represents the excess of cost over the net tangible assets and identifiable intangible assets of acquired restaurants and other businesses, and it is generally assigned to the reporting unit (defined as each individual market) expected to benefit from the synergies of the combination. The Company's goodwill primarily results from purchases of McDonald's restaurants from franchisees or transactions in which the Company obtains a controlling interest in subsidiaries or affiliates. When purchasing restaurants from a franchisee, the Company generally uses a discounted cash flow methodology (Level 3 inputs within the valuation hierarchy), which determines the fair value of restaurants acquired based on their expected profitability and cash flows. If a Company-operated restaurant is sold within 24 months of acquisition, the goodwill associated with the acquisition is written off in its entirety. If a Company-operated restaurant is sold beyond 24 months from the acquisition, the amount of goodwill written off is based on the relative fair value of the business sold compared to the reporting unit. The following table presents the 2023 activity in goodwill by segment: In millionsU.S.InternationalOperated MarketsInternational Developmental Licensed Markets & CorporateConsolidatedBalance at December 31, 2022$1,815.2 $1,085.2 $ - $2,900.4 Net restaurant purchases (sales)17.7 89.7 - 107.4 Currency translation - 32.6 - 32.6 Balance at December 31, 2023$1,832.9 $1,207.5 $ - $3,040.4 The Company conducts goodwill impairment testing in the fourth quarter of each year or whenever indicators of impairment exist. If an indicator of impairment exists, the goodwill impairment test compares the fair value of a reporting unit, generally based on discounted future cash flows, with its carrying amount including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. In the current period, the Company performed a qualitative assessment and did not identify any indicators of impairment. Historically, goodwill impairment has not significantly impacted the consolidated financial statements. Goodwill on the Consolidated Balance Sheet reflects accumulated impairment losses of $14.5 million as of December 31, 2023 and 2022. **Current (2025):** Long-lived assets are 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. For purposes of annually reviewing McDonald's restaurant assets for potential impairment, assets are initially grouped together in the U.S. at a field office level, and internationally, at a market level. The Company manages its restaurants as a group or portfolio with significant common costs and promotional activities; as such, an individual restaurant's cash flows are not generally independent of the cash flows of others in a market. If an indicator of impairment exists for any grouping of assets, an estimate of undiscounted future cash flows produced by each individual restaurant within the asset grouping is compared to its carrying value. If an individual restaurant is determined to be impaired, the loss is measured by the excess of the carrying amount of the restaurant over its fair value as determined by an estimate of discounted future cash flows. Losses on assets held for disposal are recognized when management and the Company's Board of Directors, as required, have approved and committed to a plan to dispose of the assets, the assets are available for disposal and the disposal is probable of occurring within 12 months, and the net sales proceeds are expected to be less than its net book value, among other factors. Generally, such losses are related to restaurants that have closed and ceased operations as well as other assets that meet the criteria to be considered "held for sale." GOODWILL Goodwill represents the excess of cost over the net tangible assets and identifiable intangible assets of acquired restaurants and other businesses, and it is generally assigned to the reporting unit (defined as each individual market) expected to benefit from the synergies of the combination. The Company's goodwill primarily results from purchases of McDonald's restaurants from franchisees or transactions in which the Company obtains a controlling interest in subsidiaries or affiliates. When purchasing restaurants from a franchisee, the Company generally uses a discounted cash flow methodology (Level 3 inputs within the valuation hierarchy), which determines the fair value of restaurants acquired based on their expected profitability and cash flows. During 2024, the Company acquired restaurants from franchisees (including 228 restaurants in Israel, which are presented within the International Developmental Licensed Markets & Corporate segment) in order to support key franchising initiatives. Total restaurant acquisitions for the year resulted in the Company recording approximately $150 million of net tangible assets, $270 million of identifiable intangible assets (primarily consisting of reacquired franchise rights) and $240 million of goodwill. These acquisitions did not have a material impact on the amount of recorded revenues or net income of the Company. If a Company-owned and operated restaurant is sold within 24 months of acquisition, the goodwill associated with the acquisition is written off in its entirety. If a Company-owned and operated restaurant is sold beyond 24 months from the acquisition, the amount of goodwill written off is based on the relative fair value of the business sold compared to the reporting unit. The following table presents the 2024 activity in goodwill by segment: In millionsU.S.InternationalOperated MarketsInternational DevelopmentalLicensed Markets &CorporateConsolidatedBalance at December 31, 2023$1,833 $1,207 $ - $3,040 Net restaurant purchases (sales)18 3 158 179 Currency translation - (78)4 (74)Balance at December 31, 2024$1,851 $1,132 $162 $3,145 McDonald's Corporation 2024 Annual Report 47 McDonald's Corporation 2024 Annual Report 47 McDonald's Corporation 2024 Annual Report 47 The Company conducts goodwill impairment testing in the fourth quarter of each year or whenever indicators of impairment exist. If an indicator of impairment exists, the goodwill impairment test compares the fair value of a reporting unit, generally based on discounted future cash flows, with its carrying amount including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded for the difference. In the current period, the Company performed a qualitative assessment and did not identify any indicators of impairment. Historically, goodwill impairment has not significantly impacted the consolidated financial statements. Goodwill on the Consolidated Balance Sheet reflects accumulated impairment losses of $1 million and $15 million as of December 31, 2024 and 2023, respectively. --- ## Modified: LINE OF CREDIT AGREEMENTS **Key changes:** - Reworded sentence: "At December 31, 2024, the Company had a line of credit agreement of $4.0 billion, which expires in June 2028." - Reworded sentence: "The weighted-average interest rate of short-term borrowings was 4.6% at December 31, 2024 (based on $5 million of foreign currency bank line borrowings and $790 million of commercial paper outstanding) and 5.4% at December 31, 2023 (based on $120 million of foreign currency bank line borrowings and $348 million of commercial paper outstanding)." **Prior (2024):** At December 31, 2023, the Company had a line of credit agreement of $4.0 billion, which expires in June 2028. The Company incurs fees of 0.08% per annum on the total commitment, which remained unused. Fees and interest rates on this line are primarily based on the Company's long-term credit rating assigned by Moody's and Standard & Poor's. In addition, the Company's subsidiaries had unused lines of credit that were primarily uncommitted, short-term and denominated in various currencies at local market rates of interest. The weighted-average interest rate of short-term borrowings was 5.4% at December 31, 2023 (based on $119.9 million of foreign currency bank line borrowings and $347.6 million of commercial paper outstanding) and 5.2% at December 31, 2022 (based on $264.5 million of foreign currency bank line borrowings). **Current (2025):** At December 31, 2024, the Company had a line of credit agreement of $4.0 billion, which expires in June 2028. The Company incurs fees of 0.08% per annum on the total commitment, which remained unused. Fees and interest rates on this line are primarily based on the Company's long-term credit rating assigned by Moody's and Standard & Poor's. In addition, the Company's subsidiaries had unused lines of credit that were primarily uncommitted, short-term and denominated in various currencies at local market rates of interest. The weighted-average interest rate of short-term borrowings was 4.6% at December 31, 2024 (based on $5 million of foreign currency bank line borrowings and $790 million of commercial paper outstanding) and 5.4% at December 31, 2023 (based on $120 million of foreign currency bank line borrowings and $348 million of commercial paper outstanding). At December 31, 2024, $795 million of short-term borrowings and $3.0 billion of current maturities of other debt obligations, were classified as Long-term debt on the Consolidated Balance Sheet as they are supported by a long-term line of credit agreement expiring in June 2028. --- ## Modified: Cash Flow Hedges **Key changes:** - Reworded sentence: "As of December 31, 2024, the Company had derivatives outstanding with an equivalent notional amount of $2.0 billion that hedged a portion of forecasted foreign currency denominated cash flows." - Reworded sentence: "As of December 31, 2024, the Company had derivatives outstanding with a notional amount of $500 million that hedge a portion of forecasted cash flows." **Prior (2024):** 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 December 31, 2023, the Company had derivatives outstanding with an equivalent notional amount of $1.9 billion that hedged a portion of forecasted foreign currency denominated cash flows. 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 December 31, 2023, the Company had derivatives outstanding with a notional amount of $150.0 million that hedge a portion of forecasted cash flows. Based on market conditions at December 31, 2023, the $5.6 million in cumulative cash flow hedging losses, after tax, is not expected to have a significant effect on earnings over the next 12 months. McDonald's Corporation 2023 Annual Report 47 McDonald's Corporation 2023 Annual Report 47 McDonald's Corporation 2023 Annual Report 47 **Current (2025):** 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 December 31, 2024, the Company had derivatives outstanding with an equivalent notional amount of $2.0 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 December 31, 2024, the Company had derivatives outstanding with a notional amount of $500 million that hedge a portion of forecasted cash flows. Based on market conditions at December 31, 2024, the $119 million in cumulative cash flow hedging gains, after tax, is not expected to have a significant effect on earnings over the next 12 months. McDonald's Corporation 2024 Annual Report 50 McDonald's Corporation 2024 Annual Report 50 McDonald's Corporation 2024 Annual Report 50 --- ## Modified: DEBT OBLIGATIONS **Key changes:** - Reworded sentence: "DollarsMaturity dates2024202320242023Fixed4.2 %4.2 %$24,134 $23,383 Floating5.7 6.9 1,290 1,097 Total U.S." - Reworded sentence: "(2)Consists of Swiss Francs and Polish Zloty." - Reworded sentence: "McDonald's Corporation 2024 Annual Report 62 McDonald's Corporation 2024 Annual Report 62 McDonald's Corporation 2024 Annual Report 62 Share-based Compensation The Company maintains a share-based compensation plan, which authorizes the granting of various equity-based incentives including stock options and RSUs to employees and nonemployee directors." **Prior (2024):** The Company has incurred debt obligations principally through public and private offerings and bank loans. There are no provisions in the Company's debt obligations that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company's business. Certain of the Company's debt obligations contain cross-acceleration provisions, and restrictions on Company and subsidiary mortgages and the long-term debt of certain subsidiaries. Under certain agreements, the Company has the option to retire debt prior to maturity, either at par or at a premium over par. The Company has no current plans to retire a significant amount of its debt prior to maturity, but continues to look for ways to optimize its debt portfolio. The following table summarizes the Company's debt obligations (interest rates and debt amounts reflected in the table include the effects of interest rate swaps used to hedge debt). Interest rates(1)December 31Amounts outstandingDecember 31In millions of U.S. DollarsMaturity dates2023202220232022Fixed4.2 %4.0 %$23,382.6 $22,382.0 Floating6.9 6.6 1,097.5 750.0 Total U.S. Dollar2024-205324,480.1 23,132.0 Fixed2.4 1.6 10,780.6 8,704.1 Floating6.6 5.1 331.2 321.2 Total Euro2024-203511,111.8 9,025.3 Fixed3.4 3.4 748.8 748.7 Floating5.5 4.3 204.4 204.4 Total Australian Dollar2024-2029953.2 953.1 Total British Pounds Sterling - Fixed2032-20544.1 4.1 1,585.1 1,504.1 Total Canadian Dollar - Fixed20253.1 3.1 754.9 737.3 Total Japanese Yen - Fixed20302.9 2.9 88.6 95.3 Fixed0.2 0.2 475.4 432.6 Floating4.9 5.2 118.0 262.7 Total other currencies(2)2024593.4 695.3 Debt obligations before fair value adjustments and deferred debt costs(3)39,567.1 36,142.4 Fair value adjustments(4)(61.8)(91.5)Deferred debt costs(160.0)(147.4)Total debt obligations$39,345.3 $35,903.5 Interest rates(1) December 31 Total other currencies(2) Debt obligations before fair value adjustments and deferred debt costs(3) Fair value adjustments(4) (1)Weighted-average effective rate, computed on a semi-annual basis. Weighted-average effective rate, computed on a semi-annual basis. (2)Consists of Swiss Francs and Korean Won. (3)Aggregate maturities for 2023 debt balances, before fair value adjustments and deferred debt costs, are as follows (in millions): 2024-$2,192.4; 2025-$3,092.7; 2026-$2,436.3; 2027-$3,113.0; 2028-$4,293.4; Thereafter-$24,439.3. These amounts include a reclassification of short-term obligations totaling $1.1 billion to long-term obligations as they are supported by a long-term line of credit agreement expiring in June 2028. (4)The carrying value of underlying items in fair value hedges, in this case debt obligations, are adjusted for fair value changes to the extent they are attributable to the risk designated as being hedged. The related hedging instruments are also recorded at fair value on the Consolidated Balance Sheet. The carrying value of underlying items in fair value hedges, in this case debt obligations, are adjusted for fair value changes to the extent they are attributable to the risk designated as being hedged. The related hedging instruments are also recorded at fair value on the Consolidated Balance Sheet. McDonald's Corporation 2023 Annual Report 58 McDonald's Corporation 2023 Annual Report 58 McDonald's Corporation 2023 Annual Report 58 Share-based Compensation The Company maintains a share-based compensation plan, which authorizes the granting of various equity-based incentives including stock options and RSUs to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plan was 32.1 million at December 31, 2023, including 20.4 million available for future grants. Share-based compensation expense and the effect on diluted earnings per common share were as follows: In millions, except per share data202320222021Share-based compensation expense$175.2 $166.7 $139.2 After tax$155.4 $145.9 $120.4 Earnings per common share-diluted$0.21 $0.20 $0.16 As of December 31, 2023, there was $176.5 million of total unrecognized compensation cost related to nonvested share-based compensation that is expected to be recognized over a weighted-average period of 2.0 years. **Current (2025):** The Company has incurred debt obligations principally through public and private offerings and bank loans. There are no provisions in the Company's debt obligations that would accelerate repayment of debt as a result of a change in credit ratings or a material adverse change in the Company's business. Certain of the Company's debt obligations contain cross-acceleration provisions, and restrictions on Company and subsidiary mortgages and the long-term debt of certain subsidiaries. Under certain agreements, the Company has the option to retire debt prior to maturity, either at par or at a premium over par. The Company has no current plans to retire a significant amount of its debt prior to maturity, but continues to look for ways to optimize its debt portfolio. The following table summarizes the Company's debt obligations (interest rates and debt amounts reflected in the table include the effects of interest rate swaps used to hedge debt). Interest rates(1)December 31Amounts outstandingDecember 31In millions of U.S. DollarsMaturity dates2024202320242023Fixed4.2 %4.2 %$24,134 $23,383 Floating5.7 6.9 1,290 1,097 Total U.S. Dollar2025-205325,424 24,480 Fixed2.5 2.4 8,875 10,781 Floating5.3 6.6 311 331 Total Euro2025-20359,186 11,112 Fixed3.7 3.4 371 749 Floating - 5.5 - 204 Total Australian Dollar2026-2029371 953 Total British Pounds Sterling - Fixed2032-20544.1 4.1 1,559 1,585 Total Canadian Dollar - Fixed2025-20314.0 3.1 1,390 755 Total Japanese Yen - Fixed20302.9 2.9 79 89 Fixed1.2 0.2 605 475 Floating0.7 4.9 2 118 Total other currencies(2)2025-2032607 593 Debt obligations before fair value adjustments and deferred debt costs(3)38,616 39,567 Fair value adjustments(4)(40)(62)Deferred debt costs(152)(160)Total debt obligations$38,424 $39,345 Interest rates(1) December 31 Total other currencies(2) Debt obligations before fair value adjustments and deferred debt costs(3) Fair value adjustments(4) (1)Weighted-average effective rate, computed on a semi-annual basis. Weighted-average effective rate, computed on a semi-annual basis. (2)Consists of Swiss Francs and Polish Zloty. (3)Aggregate maturities for 2024 debt balances, before fair value adjustments and deferred debt costs, are as follows (in millions): 2025-$0; 2026-$2,392; 2027-$3,036; 2028-$7,221; 2029-$3,394; Thereafter-$22,573. These amounts include a reclassification of short-term obligations totaling $3.8 billion to long-term obligations as they are supported by a long-term line of credit agreement expiring in June 2028. (4)The carrying value of underlying items in fair value hedges, in this case debt obligations, are adjusted for fair value changes to the extent they are attributable to the risk designated as being hedged. The related hedging instruments are also recorded at fair value on the Consolidated Balance Sheet. The carrying value of underlying items in fair value hedges, in this case debt obligations, are adjusted for fair value changes to the extent they are attributable to the risk designated as being hedged. The related hedging instruments are also recorded at fair value on the Consolidated Balance Sheet. McDonald's Corporation 2024 Annual Report 62 McDonald's Corporation 2024 Annual Report 62 McDonald's Corporation 2024 Annual Report 62 Share-based Compensation The Company maintains a share-based compensation plan, which authorizes the granting of various equity-based incentives including stock options and RSUs to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plan was 29.7 million at December 31, 2024, including 19.1 million available for future grants. Share-based compensation expense and the effect on diluted earnings per common share were as follows: In millions, except per share data202420232022Share-based compensation expense$172 $175 $167 After tax$136 $155 $146 Earnings per common share-diluted$0.19 $0.21 $0.20 As of December 31, 2024, there was $187 million of total unrecognized compensation cost related to nonvested share-based compensation that is expected to be recognized over a weighted-average period of 1.4 years. --- ## Modified: FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES **Key changes:** - Reworded sentence: "The Company has entered into equity derivative contracts to hedge market-driven changes in certain of its supplemental benefit plan liabilities." - Reworded sentence: "McDonald's Corporation 2024 Annual Report 49 McDonald's Corporation 2024 Annual Report 49 McDonald's Corporation 2024 Annual Report 49 The following table presents the fair values of derivative instruments included on the Consolidated Balance Sheet as of December 31, 2024 and 2023: Derivative AssetsDerivative LiabilitiesIn millionsBalance Sheet Classification20242023Balance Sheet Classification20242023Derivatives designated as hedging instrumentsForeign currencyPrepaid expenses and other current assets$125 $9 Accrued payroll and other liabilities$(1)$(37)Interest ratePrepaid expenses and other current assets34 4 Accrued payroll and other liabilities(6)(4)Foreign currencyMiscellaneous other assets40 2 Other long-term liabilities - (14)Interest rateMiscellaneous other assets - - Other long-term liabilities(34)(58)Total derivatives designated as hedging instruments$199 $15 $(41)$(113)Derivatives not designated as hedging instrumentsEquityPrepaid expenses and other current assets$135 $ - Foreign currencyPrepaid expenses and other current assets - 6 Accrued payroll and other liabilities$ - $(5)EquityMiscellaneous other assets - 189 Total derivatives not designated as hedging instruments$135 $195 $ - $(5)Total derivatives$334 $210 $(41)$(118) Prepaid expenses and other current assets Accrued payroll and other liabilities Prepaid expenses and other current assets Accrued payroll and other liabilities Accrued payroll and other liabilities The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the year ended December 31, 2024 and 2023, respectively: Location of gain or lossrecognized in income onderivativeGain (loss)recognized in AOCIGain (loss) reclassifiedinto income from AOCIGain (loss) recognized inincome on derivativeIn millions202420232024202320242023Foreign currencyNonoperating income/expense$126 $(40)$(1)$20 Interest rateInterest expense38 15 1 1 Cash flow hedges$164 $(25)$ - $21 Foreign currency denominated debtNonoperating income/expense$891 $(435)Foreign currency derivativesNonoperating income/expense114 40 Foreign currency derivatives(1)Interest expense$45 $26 Net investment hedges$1,005 $(395)$45 $26 Foreign currencyNonoperating income/expense$(3)$4 EquitySelling, general & administrative expenses(9)27 Undesignated derivatives$(12)$31 (1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing." **Prior (2024):** 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 Company documents its risk management objective and strategy for undertaking hedging transactions, as well as all relationships between hedging instruments and hedged items. The Company's derivatives that are designated for hedge accounting consist mainly of interest rate swaps, foreign currency forwards, and cross-currency interest rate swaps, and are classified as either fair value, cash flow or net investment hedges. Further details are explained in the "Fair Value," "Cash Flow" and "Net Investment" hedge sections. The Company enters into certain derivatives that are not designated for hedge accounting. The Company has entered into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its 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. Further details are explained in the "Undesignated Derivatives" section. All derivatives (including those not designated for hedge accounting) are recognized on the Consolidated Balance Sheet at fair value and classified based on the instruments' maturity dates. Changes in the fair value measurements of the derivative instruments are reflected as adjustments to AOCI and/or current earnings. McDonald's Corporation 2023 Annual Report 46 McDonald's Corporation 2023 Annual Report 46 McDonald's Corporation 2023 Annual Report 46 The following table presents the fair values of derivative instruments included on the Consolidated Balance Sheet as of December 31, 2023 and 2022: Derivative AssetsDerivative LiabilitiesIn millionsBalance Sheet Classification20232022Balance Sheet Classification20232022Derivatives designated as hedging instrumentsForeign currencyPrepaid expenses and other current assets$8.5 $53.3 Accrued payroll and other liabilities$(37.3)$(17.9)Interest ratePrepaid expenses and other current assets4.3 $ - Accrued payroll and other liabilities(3.6) - Foreign currencyMiscellaneous other assets2.4 28.7 Other long-term liabilities(14.3)(30.7)Interest rateMiscellaneous other assets - - Other long-term liabilities(58.2)(91.5)Total derivatives designated as hedging instruments$15.2 $82.0 $(113.4)$(140.1)Derivatives not designated as hedging instrumentsEquityPrepaid expenses and other current assets$ - $200.5 Accrued payroll and other liabilitiesForeign currencyPrepaid expenses and other current assets5.5 - Accrued payroll and other liabilities(4.8)(1.6)EquityMiscellaneous other assets188.6 - Total derivatives not designated as hedging instruments$194.1 $200.5 $(4.8)$(1.6)Total derivatives$209.3 $282.5 $(118.2)$(141.7) Prepaid expenses and other current assets Accrued payroll and other liabilities Prepaid expenses and other current assets Accrued payroll and other liabilities Accrued payroll and other liabilities Accrued payroll and other liabilities The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the year ended December 31, 2023 and 2022, respectively: Location of gain or lossrecognized in income onderivativeGain (loss)recognized in AOCIGain (loss) reclassifiedinto income from AOCIGain (loss) recognized inincome on derivativeIn millions202320222023202220232022Foreign currencyNonoperating income/expense$(39.7)$122.5 $20.2 $137.8 Interest rateInterest expense14.6 83.9 0.9 (2.9)Cash flow hedges$(25.1)$206.4 $21.1 $134.9 Foreign currency denominated debtNonoperating income/expense$(435.2)$902.8 Foreign currency derivativesNonoperating income/expense40.1 (12.0)Foreign currency derivatives(1)Interest expense$25.8 $11.2 Net investment hedges$(395.1)$890.8 $25.8 $11.2 Foreign currencyNonoperating income/expense$4.3 $9.3 EquitySelling, general & administrative expenses26.8 (9.3)Undesignated derivatives$31.1 (1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.Fair Value Hedges Foreign currency derivatives(1) (1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. 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 December 31, 2023, 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 $61.8 million of cumulative hedging adjustments. For the year ended December 31, 2023, the Company recognized a $29.7 million gain on the fair value of interest rate swaps, and a corresponding loss on the fair value of the related hedged debt instrument to interest expense. **Current (2025):** 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 Company documents its risk management objective and strategy for undertaking hedging transactions, as well as all relationships between hedging instruments and hedged items. The Company's derivatives that are designated for hedge accounting consist mainly of interest rate swaps, foreign currency forwards, and cross-currency interest rate swaps, and are classified as either fair value, cash flow or net investment hedges. Further details are explained in the "Fair Value," "Cash Flow" and "Net Investment" hedge sections. The Company enters into certain derivatives that are not designated for hedge accounting. The Company has entered into equity derivative contracts to hedge market-driven changes in certain of its 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. Further details are explained in the "Undesignated Derivatives" section. All derivatives (including those not designated for hedge accounting) are recognized on the Consolidated Balance Sheet at fair value and classified based on the instruments' maturity dates. Changes in the fair value measurements of the derivative instruments are reflected as adjustments to AOCI and/or current earnings. McDonald's Corporation 2024 Annual Report 49 McDonald's Corporation 2024 Annual Report 49 McDonald's Corporation 2024 Annual Report 49 The following table presents the fair values of derivative instruments included on the Consolidated Balance Sheet as of December 31, 2024 and 2023: Derivative AssetsDerivative LiabilitiesIn millionsBalance Sheet Classification20242023Balance Sheet Classification20242023Derivatives designated as hedging instrumentsForeign currencyPrepaid expenses and other current assets$125 $9 Accrued payroll and other liabilities$(1)$(37)Interest ratePrepaid expenses and other current assets34 4 Accrued payroll and other liabilities(6)(4)Foreign currencyMiscellaneous other assets40 2 Other long-term liabilities - (14)Interest rateMiscellaneous other assets - - Other long-term liabilities(34)(58)Total derivatives designated as hedging instruments$199 $15 $(41)$(113)Derivatives not designated as hedging instrumentsEquityPrepaid expenses and other current assets$135 $ - Foreign currencyPrepaid expenses and other current assets - 6 Accrued payroll and other liabilities$ - $(5)EquityMiscellaneous other assets - 189 Total derivatives not designated as hedging instruments$135 $195 $ - $(5)Total derivatives$334 $210 $(41)$(118) Prepaid expenses and other current assets Accrued payroll and other liabilities Prepaid expenses and other current assets Accrued payroll and other liabilities Accrued payroll and other liabilities The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the year ended December 31, 2024 and 2023, respectively: Location of gain or lossrecognized in income onderivativeGain (loss)recognized in AOCIGain (loss) reclassifiedinto income from AOCIGain (loss) recognized inincome on derivativeIn millions202420232024202320242023Foreign currencyNonoperating income/expense$126 $(40)$(1)$20 Interest rateInterest expense38 15 1 1 Cash flow hedges$164 $(25)$ - $21 Foreign currency denominated debtNonoperating income/expense$891 $(435)Foreign currency derivativesNonoperating income/expense114 40 Foreign currency derivatives(1)Interest expense$45 $26 Net investment hedges$1,005 $(395)$45 $26 Foreign currencyNonoperating income/expense$(3)$4 EquitySelling, general & administrative expenses(9)27 Undesignated derivatives$(12)$31 (1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. Foreign currency derivatives(1) (1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing. --- ## Modified: Events such as severe weather conditions, natural disasters, hostilities, social and geopolitical unrest and climate change, among others, can adversely affect our results and prospects. **Key changes:** - Reworded sentence: "Severe weather conditions, natural disasters, acts of war, terrorism or other hostilities, social and geopolitical unrest or climate change (or expectations about them) can adversely affect consumer behavior and confidence levels, supply availability and costs and local operations, including temporary restaurant closures and delayed new restaurant openings, in impacted markets, all of which can affect our results and prospects." - Reworded sentence: "McDonald's Corporation 2024 Annual Report 34 McDonald's Corporation 2024 Annual Report 34 McDonald's Corporation 2024 Annual Report 34" **Prior (2024):** 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. McDonald's Corporation 2023 Annual Report 33 McDonald's Corporation 2023 Annual Report 33 McDonald's Corporation 2023 Annual Report 33 **Current (2025):** Severe weather conditions, natural disasters, acts of war, terrorism or other hostilities, social and geopolitical unrest or climate change (or expectations about them) can adversely affect consumer behavior and confidence levels, supply availability and costs and local operations, including temporary restaurant closures and delayed new restaurant openings, 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. McDonald's Corporation 2024 Annual Report 34 McDonald's Corporation 2024 Annual Report 34 McDonald's Corporation 2024 Annual Report 34 --- ## Modified: Credit Risk **Key changes:** - Reworded sentence: "The Company did not have significant exposure to any individual counterparty at December 31, 2024 and has master agreements that contain netting arrangements." - Reworded sentence: "At December 31, 2024, the Company was required to post $21 million of collateral due to the negative fair value of certain derivative positions." **Prior (2024):** 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 December 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 December 31, 2023, the Company was required to post $82.8 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. **Current (2025):** 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 December 31, 2024 and has master agreements that contain netting arrangements. For financial reporting purposes, the Company presents gross derivative balances in its financial statements and supplementary data, including for counterparties subject to netting arrangements. Some of these agreements also require each party to post collateral if credit ratings fall below, or aggregate exposures exceed, certain contractual limits. At December 31, 2024, the Company was required to post $21 million of collateral due to the negative fair value of certain derivative positions. --- ## Modified: CASH AND EQUIVALENTS **Key changes:** - Reworded sentence: "As of December 31, 2024, Cash and equivalents was $1.1 billion of which $451 million consisted of certificates of deposit." - Reworded sentence: "The segment is 95% franchised as of December 31, 2024." - Reworded sentence: "The segment is 89% franchised as of December 31, 2024." - Reworded sentence: "The segment is 99% franchised as of December 31, 2024." - Reworded sentence: "McDonald's Corporation 2024 Annual Report 52 McDonald's Corporation 2024 Annual Report 52 McDonald's Corporation 2024 Annual Report 52 In millions202420232022U.S.$10,631 $10,568 $9,588 International Operated Markets12,628 12,382 11,297 International Developmental Licensed Markets & Corporate2,661 2,543 2,297 Total Revenues$25,920 $25,494 $23,183 U.S.$1,294 $1,286 $1,244 International Operated Markets1,231 1,170 1,086 International Developmental Licensed Markets & Corporate11 19 20 Total Franchised restaurants-occupancy expenses$2,536 $2,475 $2,350 U.S.$2,780 $2,732 $2,406 International Operated Markets4,765 4,707 4,266 International Developmental Licensed Markets & Corporate790 785 709 Total Company-operated restaurant expenses$8,334 $8,224 $7,381 U.S.$654 $661 $692 International Operated Markets631 635 629 International Developmental Licensed Markets & Corporate1,573 1,521 1,541 Total Selling, general & administrative expenses$2,858 $2,817 $2,863 U.S.$170 $195 $110 International Operated Markets55 39 1,390 International Developmental Licensed Markets & Corporate254 97 (282)Total Other segment items*$480 $331 $1,218 U.S.$5,733 $5,694 $5,136 International Operated Markets5,946 5,831 3,926 International Developmental Licensed Markets & Corporate33 121 309 Total Operating income$11,712 $11,647 $9,371 U.S.$22,547 $22,477 $21,793 International Operated Markets23,491 23,947 21,979 International Developmental Licensed Markets & Corporate9,143 9,723 6,663 Total Assets$55,182 $56,147 $50,436 U.S.$1,055 $963 $860 International Operated Markets1,661 1,340 1,015 International Developmental Licensed Markets & Corporate58 54 24 Total Capital expenditures$2,775 $2,357 $1,899 U.S.$980 $969 $912 International Operated Markets730 679 641 International Developmental Licensed Markets & Corporate387 330 318 Total Depreciation & amortization**$2,097 $1,978 $1,871 *Other segment items is the difference between revenues less the significant expenses disclosed and operating income." **Prior (2024):** The Company considers short-term, highly liquid investments with an original maturity of 90 days or less to be cash equivalents. As of December 31, 2023, Cash and equivalents was $4.6 billion of which $4.0 billion consisted of certificates of deposit. McDonald's Corporation 2023 Annual Report 48 McDonald's Corporation 2023 Annual Report 48 McDonald's Corporation 2023 Annual Report 48 Segment and Geographic Information McDonald's 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 December 31, 2023. •International Operated Markets - comprised of markets, or countries in which the Company operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K. The segment is 89% franchised as of December 31, 2023. •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 December 31, 2023. In December 2021 and April 2022, the Company completed the divestitures of Apprente (McD Tech Labs) and Dynamic Yield, respectively. Additionally, in June 2022, the Company sold its business in Russia. Prior to their respective dates of sale, financial performance relating to Dynamic Yield and McD Tech Labs is reflected within the International Developmental Licensed Markets & Corporate segment and financial performance relating to Russia is reflected in the International Operated Markets segment. All intercompany revenues and expenses are eliminated in computing revenues and operating income. Corporate general and administrative expenses consist of corporate office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Corporate assets include corporate cash and equivalents, financial instruments and office facilities. In millions202320222021U.S.$10,568.4 $9,588.4 $8,865.0 International Operated Markets12,382.0 11,297.0 12,219.8 International Developmental Licensed Markets & Corporate2,543.3 2,297.2 2,138.1 Total revenues$25,493.7 $23,182.6 $23,222.9 U.S.$5,694.4 $5,136.4 $4,754.7 International Operated Markets5,831.5 3,926.0 5,130.6 International Developmental Licensed Markets & Corporate120.8 308.6 470.7 Total operating income $11,646.7 $9,371.0 $10,356.0 U.S.$22,477.0 $21,793.0 $21,280.3 International Operated Markets23,946.9 21,979.3 24,186.1 International Developmental Licensed Markets & Corporate9,722.9 6,663.3 8,387.9 Total assets$56,146.8 $50,435.6 $53,854.3 U.S.$962.5 $860.0 $940.7 International Operated Markets1,340.5 1,015.2 1,050.6 International Developmental Licensed Markets & Corporate54.4 24.0 48.7 Total capital expenditures$2,357.4 $1,899.2 $2,040.0 U.S.$968.9 $912.4 $840.7 International Operated Markets679.5 640.6 726.4 International Developmental Licensed Markets & Corporate329.8 317.6 301.0 Total depreciation and amortization$1,978.2 $1,870.6 $1,868.1 Total long-lived assets, primarily property and equipment and the Company's Lease right-of-use asset, were (in millions)-Consolidated: 2023-$39,477.8; 2022-$37,403.0; U.S. based: 2023-$19,943.9; 2022-$19,416.3. McDonald's Corporation 2023 Annual Report 49 McDonald's Corporation 2023 Annual Report 49 McDonald's Corporation 2023 Annual Report 49 Property and Equipment Net property and equipment consisted of: In millions'December 31, 20232022Land$7,081.3 $6,686.3 Buildings and improvements on owned land 20,059.3 18,934.2 Buildings and improvements on leased land 13,322.3 12,492.0 Equipment, signs and seating2,692.7 2,498.6 Other414.4 426.5 Property and equipment, at cost 43,570.0 41,037.6 Accumulated depreciation and amortization(18,662.4)(17,264.0)Net property and equipment$24,907.6 $23,773.6 'December 31, 2023 Depreciation and amortization expense for property and equipment was (in millions): 2023-$1,501.5; 2022-$1,454.0; 2021-$1,530.7. The increase in Net property and equipment was primarily driven by higher capital expenditures as a result of the addition of Restaurant Development to the Company's growth pillars under its Accelerating the Arches strategy. Franchise Arrangements Conventional franchise arrangements generally include a lease and a license and provide for payment of initial fees, as well as continuing rent and royalties to the Company based upon a percent of sales with minimum rent payments. Minimum rent payments are based on the Company's underlying investment in owned sites and parallel the Company's underlying leases and escalations on properties that are leased. Under the franchise arrangement, franchisees are granted the right to operate a restaurant using the McDonald's System and, in most cases, the use of a restaurant facility, generally for a period of 20 years. At the end of the 20-year franchise arrangement, the Company maintains control of the underlying real estate and building and can either enter into a new 20-year franchise arrangement with the existing franchisee or a different franchisee, or close the restaurant. Franchisees generally pay related occupancy costs including property taxes, insurance and site maintenance. Developmental licensees and affiliates operating under license agreements pay a royalty to the Company based upon a percent of sales, and generally pay initial fees. McDonald's has elected to allocate consideration in the franchise contract among lease and non-lease components in the same manner that it has historically: rental income (lease), royalty income (non-lease) and initial fee income (non-lease). This disaggregation and presentation of revenue is based on the nature, amount, timing and certainty of the revenue and cash flows. The allocation has been determined based on a mix of both observable and estimated standalone selling prices (the price at which an entity would sell a promised good or service separately to a customer). Revenues from franchised restaurants consisted of: In millions202320222021Rents$9,840.0 $9,045.7 $8,381.1 Royalties5,530.9 5,005.6 4,645.1 Initial fees65.6 54.5 59.2 Revenues from franchised restaurants$15,436.5 $14,105.8 $13,085.4 Future gross minimum rent payments due to the Company under existing conventional franchise arrangements are: In millionsOwned sitesLeased sitesTotal 2024$1,511.7 $1,468.6 $2,980.3 20251,470.4 1,407.6 2,878.0 20261,417.3 1,350.5 2,767.8 20271,370.9 1,294.1 2,665.0 20281,312.3 1,223.5 2,535.8 Thereafter9,108.3 8,227.2 17,335.5 Total minimum payments$16,190.9 $14,971.5 $31,162.4 At December 31, 2023, net property and equipment under franchise arrangements totaled $20.1 billion (including land of $6.2 billion) after deducting accumulated depreciation and amortization of $14.5 billion. McDonald's Corporation 2023 Annual Report 50 McDonald's Corporation 2023 Annual Report 50 McDonald's Corporation 2023 Annual Report 50 Leasing Arrangements The Company is the lessee in a significant real estate portfolio, primarily through ground leases (the Company leases the land and generally owns the building) and through improved leases (the Company leases the land and buildings). The Company determines whether an arrangement is a lease at inception. Lease terms for most restaurants, where market conditions allow, are generally for 20 years and, in many cases, provide for rent escalations and renewal options. Renewal options are typically solely at the Company's discretion. Escalation terms vary by market with examples including fixed-rent escalations, escalations based on an inflation index and fair-value market adjustments. The timing of these escalations generally range from annually to every five years. The following table provides detail of rent expense: In millions202320222021Restaurants$1,491.0 $1,416.4 $1,486.3 Other51.3 59.7 74.0 Total rent expense$1,542.3 $1,476.1 $1,560.3 Rent expense included percent rents in excess of minimum rents (in millions) as follows-Company-operated restaurants: 2023-$56.1; 2022-$39.6; 2021-$69.2. Franchised restaurants: 2023-$261.4; 2022-$209.0; 2021-$160.0. These variable rent payments are based on a percent of sales. The Lease right-of-use asset and Lease liability reflect the present value of the Company's estimated future minimum lease payments over the lease term, which includes options that are reasonably certain of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably certain of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the sales performance of the restaurant remains strong. Therefore, the Lease right-of-use asset and Lease liability include an assumption on renewal options that have not yet been exercised by the Company, and are not currently a future obligation. In light of the introduction of Restaurant Development as a growth pillar in 2023 and as part of the Company's ongoing evaluation of its estimates, the Company refined its assumption on renewal options that have not yet been exercised to reflect the expected increase in renewal option exercises under this new growth pillar. This was the primary driver of the increase in the Lease right-of-use asset and Lease liability. The following table details amounts related to operating and finance leases recorded within the Company's Consolidated Balance Sheet. December 31, 2023In millionsOperatingFinanceTotalLease right-of use asset, net11,724.2 1,790.2 13,514.4 Current lease liability642.6 45.5 688.1 Long-term lease liability11,527.7 1,530.0 13,057.7 December 31, 2022In millionsOperatingFinanceTotalLease right-of use asset, net11,052.1 1,513.6 12,565.7 Current lease liability639.6 21.5 661.1 Long-term lease liability10,834.1 1,300.2 12,134.4 As the rate implicit in each lease is not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. The following table summarizes the weighted average remaining lease term and discount rate used for leases as of December 31, 2023 and 2022: 20232022Weighted-average remaining lease term - operating leases17 years18 yearsWeighted-average remaining lease term - finance leases28 years29 yearsWeighted-average discount rate - operating leases4.0 %3.6 %Weighted-average discount rate - finance leases3.6 %3.0 % The Company makes cash payments related to its operating and finance lease liabilities, of which the majority are recorded within operating activities on the Consolidated Statement of Cash Flows. For each of the three years reflected within its cash flow statement, the Company made total payments of approximately $1.5 billion. Of these total payments, approximately 3% related to the Company's repayment of the principal portion of finance lease liabilities, and were recorded within financing activities on the Consolidated Statement of Cash Flows. Lease right-of-use assets obtained in exchange for operating and finance lease liabilities totaled approximately $1.0 billion and $0.3 billion, respectively, during the year ended December 31, 2023. McDonald's Corporation 2023 Annual Report 51 McDonald's Corporation 2023 Annual Report 51 McDonald's Corporation 2023 Annual Report 51 As of December 31, 2023, maturities of lease liabilities for the Company's lease portfolio were as follows: In millionsOperatingFinanceTotal*2024$1,126.3 $78.0 $1,204.3 20251,093.7 79.3 1,173.0 20261,046.2 80.0 1,126.2 20271,018.1 80.6 1,098.7 2028981.1 81.2 1,062.3 Thereafter12,132.2 2,083.1 14,215.3 Total lease payments$17,397.6 $2,482.2 $19,879.8 Less: imputed interest5,227.3 906.7 6,134.0 Present value of lease liability$12,170.3 $1,575.5 $13,745.8 Present value of lease liability * Total lease payments include option periods that are reasonably certain of being exercised. The increase in the present value of the lease liability since December 31, 2022 is approximately $950 million. The lease liability will continue to be impacted by new leases, lease modifications, lease terminations, reevaluation of lease terms, and foreign currency. McDonald's Corporation 2023 Annual Report 52 McDonald's Corporation 2023 Annual Report 52 McDonald's Corporation 2023 Annual Report 52 Contingencies In the ordinary course of business, the Company is subject to proceedings, lawsuits and other claims primarily related to competitors, customers, employees, franchisees, government agencies, intellectual property, shareholders and suppliers. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in a particular matter or changes in approach such as a change in settlement strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition or results of operations. Other Operating (Income) Expense, Net In millions202320222021Gains on sales of restaurant businesses$(103.2)$(59.8)$(96.6)Equity in earnings of unconsolidated affiliates(153.4)(113.2)(176.7)Asset dispositions and other (income) expense, net(6.8)136.8 75.4 Impairment and other charges (gains), net362.3 1,009.8 (285.4)Total$98.9 $973.6 $(483.3) **Current (2025):** The Company considers short-term, highly liquid investments with an original maturity of 90 days or less to be cash equivalents. As of December 31, 2024, Cash and equivalents was $1.1 billion of which $451 million consisted of certificates of deposit. McDonald's Corporation 2024 Annual Report 51 McDonald's Corporation 2024 Annual Report 51 McDonald's Corporation 2024 Annual Report 51 Segment and Geographic Information McDonald's 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 December 31, 2024. •International Operated Markets - comprised of markets, or countries in which the Company operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K. The segment is 89% franchised as of December 31, 2024. •International Developmental Licensed Markets & Corporate - comprised primarily of developmental licensee and affiliate markets in the McDonald's system, including equity method investments in China and Japan. Corporate activities are also reported in this segment. The segment is 99% franchised as of December 31, 2024. In April 2022, the Company completed the divestiture of Dynamic Yield. Prior to this date, financial performance relating to Dynamic Yield is reflected within the International Developmental Licensed Markets & Corporate segment. The Company's chief operating decision makers are the President and CEO and the Executive Vice President and Global Chief Financial Officer ("CFO"). Segment performance and resource allocation are evaluated based on one measure of a segment's profit or loss, operating income. All intercompany revenues and expenses are eliminated in computing revenues and operating income. Corporate general and administrative expenses consist of corporate office support costs in areas such as facilities, finance, human resources, information technology, legal, marketing, restaurant operations, supply chain and training. Corporate assets include corporate cash and equivalents, financial instruments and office facilities. McDonald's Corporation 2024 Annual Report 52 McDonald's Corporation 2024 Annual Report 52 McDonald's Corporation 2024 Annual Report 52 In millions202420232022U.S.$10,631 $10,568 $9,588 International Operated Markets12,628 12,382 11,297 International Developmental Licensed Markets & Corporate2,661 2,543 2,297 Total Revenues$25,920 $25,494 $23,183 U.S.$1,294 $1,286 $1,244 International Operated Markets1,231 1,170 1,086 International Developmental Licensed Markets & Corporate11 19 20 Total Franchised restaurants-occupancy expenses$2,536 $2,475 $2,350 U.S.$2,780 $2,732 $2,406 International Operated Markets4,765 4,707 4,266 International Developmental Licensed Markets & Corporate790 785 709 Total Company-operated restaurant expenses$8,334 $8,224 $7,381 U.S.$654 $661 $692 International Operated Markets631 635 629 International Developmental Licensed Markets & Corporate1,573 1,521 1,541 Total Selling, general & administrative expenses$2,858 $2,817 $2,863 U.S.$170 $195 $110 International Operated Markets55 39 1,390 International Developmental Licensed Markets & Corporate254 97 (282)Total Other segment items*$480 $331 $1,218 U.S.$5,733 $5,694 $5,136 International Operated Markets5,946 5,831 3,926 International Developmental Licensed Markets & Corporate33 121 309 Total Operating income$11,712 $11,647 $9,371 U.S.$22,547 $22,477 $21,793 International Operated Markets23,491 23,947 21,979 International Developmental Licensed Markets & Corporate9,143 9,723 6,663 Total Assets$55,182 $56,147 $50,436 U.S.$1,055 $963 $860 International Operated Markets1,661 1,340 1,015 International Developmental Licensed Markets & Corporate58 54 24 Total Capital expenditures$2,775 $2,357 $1,899 U.S.$980 $969 $912 International Operated Markets730 679 641 International Developmental Licensed Markets & Corporate387 330 318 Total Depreciation & amortization**$2,097 $1,978 $1,871 *Other segment items is the difference between revenues less the significant expenses disclosed and operating income. This includes other restaurant expenses and other operating expenses detailed in the Other operating (income) expense, net footnote on page 56 of this Form 10-K. **Total depreciation & amortization is included within the respective expense lines disclosed above, such as Company-operated restaurant expenses, Franchised restaurants-occupancy expenses, and Selling, general & administrative expenses. Total long-lived assets, primarily property and equipment and the Company's Lease right-of-use asset, were (in billions)-Consolidated: 2024-$39.6; 2023-$39.5; U.S. based: 2024-$20.2; 2023-$19.9. McDonald's Corporation 2024 Annual Report 53 McDonald's Corporation 2024 Annual Report 53 McDonald's Corporation 2024 Annual Report 53 Property and Equipment Net property and equipment consisted of: In millions'December 31, 20242023Land$7,253 $7,081 Buildings and improvements on owned land 20,487 20,059 Buildings and improvements on leased land 13,417 13,322 Equipment, signs and seating2,586 2,693 Other434 414 Property and equipment, at cost 44,177 43,570 Accumulated depreciation and amortization(18,882)(18,662)Net property and equipment$25,295 $24,908 'December 31, 2024 Depreciation and amortization expense for property and equipment was $1.5 billion for the years ended December 31, 2024, 2023 and 2022. The increase in Net property and equipment was primarily driven by higher capital expenditures as a result of the Company's Restaurant Development growth pillar under its Accelerating the Arches strategy. Depreciation and amortization expense for property and equipment was $1.5 billion for the years ended December 31, 2024, 2023 and 2022. The increase in Net property and equipment was primarily driven by higher capital expenditures as a result of the Company's Restaurant Development growth pillar under its Accelerating the Arches Franchise Arrangements Conventional franchise arrangements generally include a lease and a license and provide for payment of initial fees, as well as continuing rent and royalties to the Company based upon a percent of sales with minimum rent payments. Minimum rent payments are based on the Company's underlying investment in owned sites and parallel the Company's underlying leases and escalations on properties that are leased. Under the franchise arrangement, franchisees are granted the right to operate a restaurant using the McDonald's System and, in most cases, the use of a restaurant facility, generally for a period of 20 years. At the end of the 20-year franchise arrangement, the Company maintains control of the underlying real estate and building and can either enter into a new 20-year franchise arrangement with the existing franchisee or a different franchisee, or close the restaurant. Franchisees generally pay related occupancy costs including property taxes, insurance and site maintenance. Developmental licensees and affiliates operating under license agreements pay a royalty to the Company based upon a percent of sales, and generally pay initial fees. McDonald's has elected to allocate consideration in the franchise contract among lease and non-lease components in the same manner that it has historically: rental income (lease), royalty income (non-lease) and initial fee income (non-lease). This disaggregation and presentation of revenue is based on the nature, amount, timing and certainty of the revenue and cash flows. The allocation has been determined based on a mix of both observable and estimated standalone selling prices (the price at which an entity would sell a promised good or service separately to a customer). Revenues from franchised restaurants consisted of: In millions202420232022Rents$10,017 $9,840 $9,046 Royalties5,606 5,531 5,006 Initial fees92 66 54 Revenues from franchised restaurants$15,715 $15,437 $14,106 Future gross minimum rent payments due to the Company under existing conventional franchise arrangements are: In millionsOwned sitesLeased sitesTotal 2025$1,455 $1,425 $2,880 20261,401 1,361 2,762 20271,353 1,301 2,654 20281,298 1,236 2,534 20291,227 1,166 2,393 Thereafter8,462 7,913 16,375 Total minimum payments$15,196 $14,402 $29,598 At December 31, 2024, net property and equipment under franchise arrangements totaled $20.6 billion (including land of $6.4 billion) after deducting accumulated depreciation and amortization of $14.9 billion. McDonald's Corporation 2024 Annual Report 54 McDonald's Corporation 2024 Annual Report 54 McDonald's Corporation 2024 Annual Report 54 Leasing Arrangements The Company is the lessee in a significant real estate portfolio, primarily through ground leases (the Company leases the land and generally owns the building) and through improved leases (the Company leases the land and buildings). The Company determines whether an arrangement is a lease at inception. Lease terms for most restaurants, where market conditions allow, are generally for 20 years and, in many cases, provide for rent escalations and renewal options. Renewal options are typically solely at the Company's discretion. Escalation terms vary by market with examples including fixed-rent escalations, escalations based on an inflation index and fair-value market adjustments. The timing of these escalations generally range from annually to every five years. The following table provides detail of rent expense: In millions202420232022Restaurants$1,531 $1,491 $1,416 Other51 51 60 Total rent expense$1,582 $1,542 $1,476 Rent expense included variable lease payments in excess of minimum rents (in millions) as follows-Company-owned and operated restaurants: 2024-$55; 2023-$56; 2022-$40. Franchised restaurants: 2024-$271; 2023-$261; 2022-$209. These variable lease payments are primarily based on a percent of sales. The Lease right-of-use asset and Lease liability reflect the present value of the Company's estimated future minimum lease payments over the lease term, which includes options that are reasonably certain of being exercised, discounted using a collateralized incremental borrowing rate. Typically, renewal options are considered reasonably certain of being exercised if the associated asset lives of the building or leasehold improvements exceed that of the initial lease term, and the sales performance of the restaurant remains strong. Therefore, the Lease right-of-use asset and Lease liability include an assumption on renewal options that have not yet been exercised by the Company, and are not currently a future obligation. The following table details amounts related to operating and finance leases recorded within the Company's Consolidated Balance Sheet. December 31, 2024In millionsOperatingFinanceTotalLease right-of use asset, net$11,319 $2,020 $13,339 Current lease liability625 11 636 Long-term lease liability11,118 1,770 12,888 December 31, 2023In millionsOperatingFinanceTotalLease right-of use asset, net$11,724 $1,790 $13,514 Current lease liability643 45 688 Long-term lease liability11,528 1,530 13,058 As the rate implicit in each lease is not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease within a particular currency environment. The following table summarizes the weighted average remaining lease term and discount rate used for leases as of December 31, 2024 and 2023: 20242023Weighted-average remaining lease term - operating leases17 years17 yearsWeighted-average remaining lease term - finance leases28 years28 yearsWeighted-average discount rate - operating leases4.1 %4.0 %Weighted-average discount rate - finance leases4.0 %3.6 % The Company makes cash payments related to its operating and finance lease liabilities, of which the majority are recorded within operating activities on the Consolidated Statement of Cash Flows. For each of the three years reflected within its cash flow statement, the Company made total payments of approximately $1.5 billion. Of these total payments, approximately 3% related to the Company's repayment of the principal portion of finance lease liabilities, and were recorded within financing activities on the Consolidated Statement of Cash Flows. Lease right-of-use assets obtained in exchange for operating and finance lease liabilities totaled approximately $626 million and $297 million, respectively, during the year ended December 31, 2024. McDonald's Corporation 2024 Annual Report 55 McDonald's Corporation 2024 Annual Report 55 McDonald's Corporation 2024 Annual Report 55 As of December 31, 2024, maturities of lease liabilities for the Company's lease portfolio were as follows: In millionsOperatingFinanceTotal*2025$1,087 $91 $1,178 20261,042 93 1,135 20271,013 94 1,107 2028972 95 1,067 2029939 96 1,035 Thereafter10,897 2,543 13,440 Total lease payments$15,950 $3,012 $18,962 Less: imputed interest4,206 1,232 5,438 Present value of lease liability$11,744 $1,780 $13,524 Present value of lease liability * Total lease payments include option periods that are reasonably certain of being exercised. The decrease in the present value of the lease liability since December 31, 2023 is approximately $222 million. The lease liability will continue to be impacted by new leases, lease modifications, lease terminations, reevaluation of lease terms, and foreign currency. Contingencies In the ordinary course of business, the Company is subject to proceedings, lawsuits and other claims primarily related to competitors, customers, employees, franchisees, government agencies, intellectual property, shareholders and suppliers. The Company is required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of accrual required, if any, for these contingencies is made after careful analysis of each matter. The required accrual may change in the future due to new developments in a particular matter or changes in approach such as a change in settlement strategy in dealing with these matters. The Company does not believe that any such matter currently being reviewed will have a material adverse effect on its financial condition or results of operations. Other Operating (Income) Expense, Net In millions202420232022Gains on sales of restaurant businesses$(94)$(103)$(60)Equity in earnings of unconsolidated affiliates(157)(153)(113)Asset dispositions and other (income) expense, net100 (7)137 Impairment and other charges (gains), net291 362 1,010 Total$139 $99 $974 --- ## Modified: ▪Certain Financial Assets and Liabilities Measured at Fair Value **Key changes:** - Reworded sentence: "The following tables present financial assets and liabilities measured at fair value on a recurring basis by the valuation hierarchy as defined in the fair value guidance: December 31, 2024In millionsLevel 1 (1)Level 2Total CarryingValueInvestments$226 $226 Derivative assets$135 $199 $334 Derivative liabilities$(41)$(41)December 31, 2023In millionsLevel 1 (1)Level 2 Total CarryingValueInvestments$192 $192 Derivative assets$189 $21 $210 Derivative liabilities$(118)$(118) Level 1 (1) Level 1 (1) (1) Level 1 is comprised of derivatives and investments that hedge market driven changes in liabilities associated with the Company's supplemental benefit plans." **Prior (2024):** The following tables present financial assets and liabilities measured at fair value on a recurring basis by the valuation hierarchy as defined in the fair value guidance: December 31, 2023In millionsLevel 1 (1)Level 2Total CarryingValueInvestments$191.5 $191.5 Derivative assets$188.6 $20.7 $209.3 Derivative liabilities$(118.2)$(118.2)December 31, 2022In millionsLevel 1 (1)Level 2 Total CarryingValueDerivative assets$200.5 $82.0 $282.5 Derivative liabilities$(141.7)$(141.7) Level 1 (1) Level 1 (1) (1) Level 1 is comprised of derivatives and investments that hedge market driven changes in liabilities associated with the Company's supplemental benefit plans. **Current (2025):** The following tables present financial assets and liabilities measured at fair value on a recurring basis by the valuation hierarchy as defined in the fair value guidance: December 31, 2024In millionsLevel 1 (1)Level 2Total CarryingValueInvestments$226 $226 Derivative assets$135 $199 $334 Derivative liabilities$(41)$(41)December 31, 2023In millionsLevel 1 (1)Level 2 Total CarryingValueInvestments$192 $192 Derivative assets$189 $21 $210 Derivative liabilities$(118)$(118) Level 1 (1) Level 1 (1) (1) Level 1 is comprised of derivatives and investments that hedge market driven changes in liabilities associated with the Company's supplemental benefit plans. --- ## Modified: AVAILABILITY OF COMPANY INFORMATION **Key changes:** - Reworded sentence: "The Company also posts the following documents on the "Corporate Governance" section of its investor website: the Company's Corporate Governance Principles; the charters for each standing committee of the Company's Board of Directors, including the Audit & Finance Committee, Compensation Committee, Governance Committee, and Corporate Responsibility Committee; the Code of Conduct for the Company's Board of Directors; and the Company's Standards of Business Conduct, which applies to all officers and employees." - Reworded sentence: "Financial Statements and Supplementary DataIndex to consolidated financial statementsPage referenceConsolidated statement of income for each of the three years in the period ended December 31, 202440Consolidated statement of comprehensive income for each of the three years in the period ended December 31, 202441Consolidated balance sheet at December 31, 2024 and 202342Consolidated statement of cash flows for each of the three years in the period ended December 31, 202443Consolidated statement of shareholders' equity for each of the three years in the period ended December 31, 202444Notes to consolidated financial statements45Management's assessment of internal control over financial reporting65Report of independent registered public accounting firm-PCAOB ID:4266Report of independent registered public accounting firm on internal control over financial reporting68 Financial Statements and Supplementary Data 40 41 42 43 44 45 65 Report of independent registered public accounting firm-PCAOB ID:42 66 68 McDonald's Corporation 2024 Annual Report 39 McDonald's Corporation 2024 Annual Report 39 McDonald's Corporation 2024 Annual Report 39 Consolidated Statement of Income In millions, except per share dataYears ended December 31, 202420232022REVENUESRevenues from franchised restaurants$15,715 $15,437 $14,106 Sales by Company-owned and operated restaurants9,782 9,742 8,748 Other revenues423 316 328 Total revenues25,920 25,494 23,183 OPERATING COSTS AND EXPENSESFranchised restaurants-occupancy expenses2,536 2,475 2,350 Company-owned and operated restaurant expensesFood & paper2,995 3,039 2,737 Payroll & employee benefits2,959 2,886 2,617 Occupancy & other operating expenses2,381 2,299 2,026 Other restaurant expenses339 232 245 Selling, general & administrative expensesDepreciation and amortization447 382 370 Other2,412 2,435 2,492 Other operating (income) expense, net139 99 974 Total operating costs and expenses14,208 13,847 13,812 Operating income11,712 11,647 9,371 Interest expense-net of capitalized interest of $22, $14 and $91,506 1,361 1,207 Nonoperating (income) expense, net(139)(236)339 Income before provision for income taxes10,345 10,522 7,825 Provision for income taxes2,121 2,053 1,648 Net income$8,223 $8,469 $6,177 Earnings per common share-basic$11.45 $11.63 $8.39 Earnings per common share-diluted$11.39 $11.56 $8.33 Dividends declared per common share$6.78 $6.23 $5.66 Weighted-average shares outstanding-basic718.3 727.9 736.5 Weighted-average shares outstanding-diluted721.9 732.3 741.3 Years ended December 31, 2024 Interest expense-net of capitalized interest of $22, $14 and $9 See Notes to consolidated financial statements." **Prior (2024):** The Company is subject to the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and therefore files periodic reports, proxy statements and other information with the SEC. Such information may be obtained by visiting the SEC's website at www.sec.gov. The Company also uses its investor website at www.investor.mcdonalds.com as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information. The Company makes available on such website, free of charge, copies of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing or furnishing such material to the SEC. Copies of such information and reports are also available free of charge by calling (800) 228-9623. The Company also posts the following documents on the "Corporate Governance" section of its investor website: the Company's Corporate Governance Principles; the charters for each standing committee of the Company's Board of Directors, including the Audit & Finance Committee, Compensation Committee, Governance Committee, Public Policy & Strategy Committee, and Sustainability & Corporate Responsibility Committee; the Code of Conduct for the Company's Board of Directors; and the Company's Standards of Business Conduct, which applies to all officers and employees. Copies of these documents are also available free of charge by calling (800) 228-9623. The Company intends to satisfy the disclosure requirements regarding any applicable amendment to, or waiver from, a provision of its Standards of Business Conduct by disclosing such information at the website address specified above. The websites included in this Form 10-K, including those of the Company and the SEC, are provided for convenience only. Information contained on or accessible through such websites is not incorporated herein and does not constitute a part of this Form 10-K or the Company's other filings with the SEC. Financial Statements and Supplementary DataIndex to consolidated financial statementsPage referenceConsolidated statement of income for each of the three years in the period ended December 31, 202338Consolidated statement of comprehensive income for each of the three years in the period ended December 31, 202339Consolidated balance sheet at December 31, 2023 and 202240Consolidated statement of cash flows for each of the three years in the period ended December 31, 202341Consolidated statement of shareholders' equity for each of the three years in the period ended December 31, 202342Notes to consolidated financial statements43Management's assessment of internal control over financial reporting61Report of independent registered public accounting firm-PCAOB ID:4262Report of independent registered public accounting firm on internal control over financial reporting64 Financial Statements and Supplementary Data 38 39 40 41 42 43 61 Report of independent registered public accounting firm-PCAOB ID:42 62 64 McDonald's Corporation 2023 Annual Report 37 McDonald's Corporation 2023 Annual Report 37 McDonald's Corporation 2023 Annual Report 37 Consolidated Statement of Income In millions, except per share dataYears ended December 31, 202320222021REVENUESSales by Company-operated restaurants$9,741.6 $8,748.4 $9,787.4 Revenues from franchised restaurants15,436.5 14,105.8 13,085.4 Other revenues315.6 328.4 350.1 Total revenues25,493.7 23,182.6 23,222.9 OPERATING COSTS AND EXPENSESCompany-operated restaurant expensesFood & paper3,039.0 2,737.3 3,096.8 Payroll & employee benefits2,885.8 2,617.4 2,677.2 Occupancy & other operating expenses2,299.3 2,026.2 2,273.3 Franchised restaurants-occupancy expenses2,474.6 2,349.7 2,335.0 Other restaurant expenses232.5 244.8 260.4 Selling, general & administrative expensesDepreciation and amortization381.7 370.4 329.7 Other2,435.2 2,492.2 2,377.8 Other operating (income) expense, net98.9 973.6 (483.3)Total operating costs and expenses13,847.0 13,811.6 12,866.9 Operating income11,646.7 9,371.0 10,356.0 Interest expense-net of capitalized interest of $14.5, $9.5 and $6.81,360.8 1,207.0 1,185.8 Nonoperating (income) expense, net(236.3)338.6 42.3 Income before provision for income taxes10,522.2 7,825.4 9,127.9 Provision for income taxes2,053.4 1,648.0 1,582.7 Net income$8,468.8 $6,177.4 $7,545.2 Earnings per common share-basic$11.63 $8.39 $10.11 Earnings per common share-diluted$11.56 $8.33 $10.04 Dividends declared per common share$6.23 $5.66 $5.25 Weighted-average shares outstanding-basic727.9 736.5 746.3 Weighted-average shares outstanding-diluted732.3 741.3 751.8 Years ended December 31, 2023 Interest expense-net of capitalized interest of $14.5, $9.5 and $6.8 See Notes to consolidated financial statements. McDonald's Corporation 2023 Annual Report 38 McDonald's Corporation 2023 Annual Report 38 McDonald's Corporation 2023 Annual Report 38 Consolidated Statement of Comprehensive IncomeIn millionsYears ended December 31, 202320222021Net income$8,468.8 $6,177.4 $7,545.2 Other comprehensive income (loss), net of taxForeign currency translation adjustments:Gain (loss) recognized in accumulated other comprehensiveincome (AOCI), including net investment hedges136.1 (354.1)(216.2)Reclassification of (gain) loss to net income - 504.4 34.7 Foreign currency translation adjustments-net of taxbenefit (expense) of $94.1, $(207.6), and $(186.5)136.1 150.3 (181.5)Cash flow hedges:Gain (loss) recognized in AOCI(19.8)160.3 57.6 Reclassification of (gain) loss to net income(16.6)(104.8)28.9 Cash flow hedges-net of tax benefit (expense) of $9.8, $(16.0), and $(24.9)(36.4)55.5 86.5 Defined benefit pension plans:Gain (loss) recognized in AOCI(69.5)(118.7)108.1 Reclassification of (gain) loss to net income0.4 - - Defined benefit pension plans-net of tax benefit (expense)of $22.2, $43.2, and $(36.6)(69.1)(118.7)108.1 Total other comprehensive income (loss), net of tax30.6 87.1 13.1 Comprehensive income$8,499.4 $6,264.5 $7,558.3 Years ended December 31, 2023 Gain (loss) recognized in accumulated other comprehensive income (AOCI), including net investment hedges **Current (2025):** The Company is subject to the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and therefore files periodic reports, proxy statements and other information with the SEC. Such information may be obtained by visiting the SEC's website at www.sec.gov. The Company also uses its investor website at www.investor.mcdonalds.com as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information. The Company makes available on such website, free of charge, copies of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after filing or furnishing such material to the SEC. Copies of such information and reports are also available free of charge by calling (800) 228-9623. The Company also posts the following documents on the "Corporate Governance" section of its investor website: the Company's Corporate Governance Principles; the charters for each standing committee of the Company's Board of Directors, including the Audit & Finance Committee, Compensation Committee, Governance Committee, and Corporate Responsibility Committee; the Code of Conduct for the Company's Board of Directors; and the Company's Standards of Business Conduct, which applies to all officers and employees. Copies of these documents are also available free of charge by calling (800) 228-9623. The Company intends to satisfy the disclosure requirements regarding any applicable amendment to, or waiver from, a provision of its Standards of Business Conduct by disclosing such information at the website address specified above. The websites included in this Form 10-K, including those of the Company and the SEC, are provided for convenience only. Information contained on or accessible through such websites is not incorporated herein and does not constitute a part of this Form 10-K or the Company's other filings with the SEC. Financial Statements and Supplementary DataIndex to consolidated financial statementsPage referenceConsolidated statement of income for each of the three years in the period ended December 31, 202440Consolidated statement of comprehensive income for each of the three years in the period ended December 31, 202441Consolidated balance sheet at December 31, 2024 and 202342Consolidated statement of cash flows for each of the three years in the period ended December 31, 202443Consolidated statement of shareholders' equity for each of the three years in the period ended December 31, 202444Notes to consolidated financial statements45Management's assessment of internal control over financial reporting65Report of independent registered public accounting firm-PCAOB ID:4266Report of independent registered public accounting firm on internal control over financial reporting68 Financial Statements and Supplementary Data 40 41 42 43 44 45 65 Report of independent registered public accounting firm-PCAOB ID:42 66 68 McDonald's Corporation 2024 Annual Report 39 McDonald's Corporation 2024 Annual Report 39 McDonald's Corporation 2024 Annual Report 39 Consolidated Statement of Income In millions, except per share dataYears ended December 31, 202420232022REVENUESRevenues from franchised restaurants$15,715 $15,437 $14,106 Sales by Company-owned and operated restaurants9,782 9,742 8,748 Other revenues423 316 328 Total revenues25,920 25,494 23,183 OPERATING COSTS AND EXPENSESFranchised restaurants-occupancy expenses2,536 2,475 2,350 Company-owned and operated restaurant expensesFood & paper2,995 3,039 2,737 Payroll & employee benefits2,959 2,886 2,617 Occupancy & other operating expenses2,381 2,299 2,026 Other restaurant expenses339 232 245 Selling, general & administrative expensesDepreciation and amortization447 382 370 Other2,412 2,435 2,492 Other operating (income) expense, net139 99 974 Total operating costs and expenses14,208 13,847 13,812 Operating income11,712 11,647 9,371 Interest expense-net of capitalized interest of $22, $14 and $91,506 1,361 1,207 Nonoperating (income) expense, net(139)(236)339 Income before provision for income taxes10,345 10,522 7,825 Provision for income taxes2,121 2,053 1,648 Net income$8,223 $8,469 $6,177 Earnings per common share-basic$11.45 $11.63 $8.39 Earnings per common share-diluted$11.39 $11.56 $8.33 Dividends declared per common share$6.78 $6.23 $5.66 Weighted-average shares outstanding-basic718.3 727.9 736.5 Weighted-average shares outstanding-diluted721.9 732.3 741.3 Years ended December 31, 2024 Interest expense-net of capitalized interest of $22, $14 and $9 See Notes to consolidated financial statements. McDonald's Corporation 2024 Annual Report 40 McDonald's Corporation 2024 Annual Report 40 McDonald's Corporation 2024 Annual Report 40 Consolidated Statement of Comprehensive IncomeIn millionsYears ended December 31, 202420232022Net income$8,223 $8,469 $6,177 Other comprehensive income (loss), net of taxForeign currency translation adjustments:Gain (loss) recognized in accumulated other comprehensiveincome (AOCI), including net investment hedges(231)136 (354)Reclassification of (gain) loss to net income35 - 504 Foreign currency translation adjustments-net of taxbenefit (expense) of $(241), $94, and $(208)(196)136 150 Cash flow hedges:Gain (loss) recognized in AOCI125 (20)161 Reclassification of (gain) loss to net income - (17)(105)Cash flow hedges-net of tax benefit (expense) of $(39), $10, and $(16)125 (37)56 Defined benefit pension plans:Gain (loss) recognized in AOCI(15)(69)(119)Reclassification of (gain) loss to net income(10) - - Defined benefit pension plans-net of tax benefit (expense)of $1, $22, and $43(25)(69)(119)Total other comprehensive income (loss), net of tax(96)30 87 Comprehensive income$8,127 $8,499 $6,264 Years ended December 31, 2024 Gain (loss) recognized in accumulated other comprehensive income (AOCI), including net investment hedges --- ## Modified: ▪Impairment and other charges (gains), net **Key changes:** - Reworded sentence: "In 2024 this category reflected $221 million of pre-tax restructuring charges primarily related to Accelerating the Organization and net pre-tax charges of $70 million primarily consisting of property sale gains, transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel." - Removed sentence: "Additionally, in 2021 this category reflected pre-tax gains on the sale of McDonald's Japan stock, which reduced the Company's ownership in McDonald's Japan to 35%." - Reworded sentence: "In 2024 this category reflected $221 million of pre-tax restructuring charges primarily related to Accelerating the Organization and net pre-tax charges of $70 million primarily consisting of property sale gains, transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel." - Reworded sentence: "The Company incurred $221 million of restructuring charges related to Accelerating the Organization for the year ended December 31, 2024, which brings total restructuring charges to $471 million since the initiative commenced." - Reworded sentence: "Other operating (income) expense The following table summarizes the balance of accrued expenses related to this strategic initiative (in millions): Employee Termination BenefitsCosts to Terminate ContractsProfessional Services and Other CostsTotal2023Accrued Balance at Beginning of Year$ - $ - $ - $ - Restructuring Costs Incurred96 32 122 250 Cash Payments(52)(21)(99)(172)Other Non-Cash Items(3) - (16)(19)Accrued Balance at December 31, 2023$41 $11 $7 $59 2024Accrued Balance at Beginning of Year$41 $11 $7 $59 Restructuring Costs Incurred6 1 214 221 Cash Payments(24)(8)(205)(237)Other Non-Cash Items - - (1)(1)Accrued Balance at December 31, 2024$23 $4 $15 $42 Of the $221 million of restructuring charges incurred for the year ended December 31, 2024, $218 million was recorded in the International Developmental Licensed Markets & Corporate segment, the majority of which was recorded at Corporate, $2 million was recorded in the International Operated Markets segment and $1 million was recorded in the U.S." **Prior (2024):** Impairment and other charges (gains), net includes losses that result from the write down of goodwill and long-lived assets from their carrying value to their fair value, charges associated with strategic initiatives, such as refranchising and restructuring activities, as well as realized gains/losses from the divestiture of ownership percentages of subsidiaries. In 2023 this category reflected $290 million of pre-tax charges related to the Company's Accelerating the Arches growth strategy, including restructuring costs associated with Accelerating the Organization, and $72 million of pre-tax charges related to the write-off of impaired software no longer in use. In 2022 this category included $1.3 billion of pre-tax charges 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. Additionally, in 2021 this category reflected pre-tax gains on the sale of McDonald's Japan stock, which reduced the Company's ownership in McDonald's Japan to 35%. Impairment and other charges (gains), net includes losses that result from the write down of goodwill and long-lived assets from their carrying value to their fair value, charges associated with strategic initiatives, such as refranchising and restructuring activities, as well as realized gains/losses from the divestiture of ownership percentages of subsidiaries. In 2023 this category reflected $290 million of pre-tax charges related to the Company's Accelerating the Arches growth strategy, including restructuring costs associated with Accelerating the Organization, McDonald's Corporation 2023 Annual Report 53 McDonald's Corporation 2023 Annual Report 53 McDonald's Corporation 2023 Annual Report 53 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 focuses on becoming faster, more innovative and more efficient for its customers and people. The Company incurred $249.7 million of costs related to Accelerating the Organization for the year ended December 31, 2023. These costs were recorded in the Other operating (income) expense, net line within the consolidated statement of income. Restructuring costs primarily consist of employee termination benefits, costs to terminate contracts, including lease terminations, and professional services and other costs. Professional services and other costs primarily relate to expenses incurred for legal and consulting activities. There were no significant non-cash impairment charges included in the amounts listed in the table below. Other operating (income) expense The following table summarizes the balance of accrued expenses related to this strategic initiative (in millions): Employee Termination BenefitsCosts to Terminate ContractsOther Related CostsTotal2023Beginning Balance$ - $ - $ - $ - Restructuring Costs Incurred110.3 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 March 31, 2023$108.8 $25.5 $28.9 $163.2 Restructuring Costs Incurred(8.8)5.6 21.9 18.7 Cash Payments(27.7)(11.7)(46.8)(86.2)Other Non-Cash Items - - (2.5)(2.5)Accrued Balance at June 30, 2023$72.3 $19.4 $1.5 $93.2 Restructuring Costs Incurred(0.9) - 21.4 20.5 Cash Payments(13.0)(7.4)(15.3)(35.7)Other Non-Cash Items(2.5) - 0.1 (2.4)Accrued Balance at September 30, 2023$55.9 $12.0 $7.7 $75.6 Restructuring Costs Incurred(5.0) - 35.0 30.0 Cash Payments(9.6)(0.8)(36.2)(46.6)Other Non-Cash Items - - 0.5 0.5 Accrued Balance at December 31, 2023$41.3 $11.2 $7.0 $59.5 Of the $249.7 million of restructuring costs incurred for the year ended December 31, 2023, $62.4 million was recorded in the U.S., $65.6 million was recorded in the International Operated Markets segment and $121.7 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 December 31, 2023, related to the Company's Accelerating the Organization initiative, is expected to be paid out over the next twelve months. As the Company furthers its operating model and technology transformation, primarily through its Global Businesses Services strategy, under Accelerating the Organization it will continue to incur various restructuring costs as the strategy progresses through its anticipated end date of 2027. Restructuring costs in 2024 are expected to be similar to what was incurred in 2023, and are expected to primarily consist of professional service fees. As the Company furthers its operating model and technology transformation, primarily through its Global Businesses Services strategy, under Accelerating the Organization McDonald's Corporation 2023 Annual Report 54 McDonald's Corporation 2023 Annual Report 54 McDonald's Corporation 2023 Annual Report 54 Income Taxes Income Taxes Income before provision for income taxes, classified by source of income, was as follows: In millions202320222021U.S.$3,665.0 $1,845.6 $2,413.9 Outside the U.S.6,857.2 5,979.8 6,714.0 Income before provision for income taxes *$10,522.2 $7,825.4 $9,127.9 *Income before provision for income taxes increased in 2023 primarily due to strong operating performance and prior year net charges detailed in the Net Income and Diluted Earnings Per Share section on page 13 of this Form 10-K. The provision for income taxes, classified by the timing and location of payment, was as follows: In millions202320222021U.S. federal$1,340.0 $517.3 $887.6 U.S. state262.7 246.3 228.1 Outside the U.S.1,137.1 1,230.1 895.3 Current tax provision2,739.8 1,993.7 2,011.0 U.S. federal(146.0)(80.0)(177.4)U.S. state(29.6)(46.2)(24.1)Outside the U.S.(510.8)(219.5)(226.8)Deferred tax provision(686.4)(345.7)(428.3)Provision for income taxes$2,053.4 $1,648.0 $1,582.7 Net deferred tax (assets) liabilities consisted of: In millionsDecember 31, 20232022Lease right-of-use asset$3,322.5 $3,045.0 Property and equipment1,668.5 1,706.3 Intangible assets264.0 296.7 Other284.8 595.4 Total deferred tax liabilities5,539.8 5,643.4 Lease liability(3,384.0)(3,099.9)Intangible assets(3,018.2)(2,658.9)Property and equipment(641.8)(676.3)Deferred foreign tax credits(81.6)(74.5)Employee benefit plans(191.6)(180.6)Deferred revenue(166.9)(165.8)Operating loss carryforwards(266.5)(76.6)Other(281.0)(267.4)Total deferred tax assets before valuation allowance(8,031.6)(7,200.0)Valuation allowance1,149.8 1,077.1 Net deferred tax (assets) liabilities$(1,342.0)$(479.5)Balance sheet presentation:Deferred income taxes$1,680.9 $1,997.5 Other assets-miscellaneous(3,022.9)(2,477.0)Net deferred tax (assets) liabilities$(1,342.0)$(479.5) At December 31, 2023, the Company had net operating loss carryforwards of $1,112.8 million, of which $924.8 million has an indefinite carryforward. The remainder will expire at various dates from 2024 to 2040. McDonald's Corporation 2023 Annual Report 55 McDonald's Corporation 2023 Annual Report 55 McDonald's Corporation 2023 Annual Report 55 The statutory U.S. federal income tax rate reconciles to the effective income tax rates as follows: 202320222021Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %State income taxes, net of related federal income tax benefit1.8 2.0 1.8 Foreign income taxed at different rates1.9 1.1 0.9 Tax impact of intercompany transactions(0.7)0.2 0.1 Global intangible low-tax income ("GILTI") 0.5 0.4 0.3 Foreign-derived intangible income ("FDII")(2.7)(4.2)(2.6)U.S./Foreign tax law changes - - (3.9)Nonoperating expense related to France audit settlement - 1.4 - Other, net(2.3)(0.8)(0.3)Effective income tax rates19.5 %21.1 %17.3 % Results for 2022 reflected $239 million of net tax benefits related to the sale of the Company's Russia and Dynamic Yield businesses and the unfavorable impact of the non-deductible $537 million of non-operating expense related to the settlement of the tax audit in France. In 2021, U.S./Foreign tax law changes included a $364 million income tax benefit related to the remeasurement of deferred taxes as a result of a change in the U.K. statutory income tax rate. As of December 31, 2023 and 2022, the Company's gross unrecognized tax benefits totaled $587.7 million and $647.0 million, respectively. After considering the deferred tax accounting impact, it is expected that about $588 million of the total as of December 31, 2023 would favorably affect the effective tax rate if resolved in the Company's favor. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits: In millions20232022Balance at January 1$647.0 $1,504.9 Decreases for positions taken in prior years(82.1)(579.4)Increases for positions taken in prior years27.5 49.8 Increases for positions related to the current year40.5 100.3 Settlements with taxing authorities(45.2)(428.1)Lapsing of statutes of limitations - (0.5)Balance at December 31(1)$587.7 $647.0 Balance at December 31(1) (1)Of this amount, $318.5 million and $619.6 million are included in Long-term income taxes for 2023 and 2022, respectively, and $269.2 million and $27.3 million are included in Income taxes for 2023 and 2022, respectively, on the Consolidated Balance Sheet. (1) Of this amount, $318.5 million and $619.6 million are included in Long-term income taxes for 2023 and 2022, respectively, and $269.2 million and $27.3 million are included in Income taxes for 2023 and 2022, respectively, on the Consolidated Balance Sheet. The Company is currently under audit with the U.S. Internal Revenue Service (the "IRS") for tax years 2011 through 2018. In February 2023, the Company finalized a settlement agreement with the IRS appeals team related to the disagreed transfer pricing matters for the years 2009 and 2010. All results of this settlement have been reported in the Company's financial statements. As of December 31, 2023, the IRS examination for tax years 2011 and 2012 are awaiting final resolution with the IRS appeals team. The Company has reflected anticipated settlement results in the financial statements. In 2023, the IRS issued a Revenue Agent's Report for the 2013 through 2015 examination period, and the Company's results reflect expected resolution. Examination years 2016 through 2018 remain open as of the end of the period. The Company is also under audit in multiple foreign tax jurisdictions, primarily related to transfer pricing, as well as multiple state tax jurisdictions. While the Company cannot estimate the impact to the effective tax rate, it is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $262 million within the next 12 months. This would be due to the possible resolution of the aforementioned U.S. Federal, foreign and U.S. state tax audits and the expiration of the statute of limitations in multiple tax jurisdictions. During 2023, the Company finalized and settled certain tax examinations and remeasured other income tax reserves based on audit progression. It is reasonably possible that, as a result of audit progression in both the U.S. and foreign tax audits within the next 12 months, there may be new information that causes the Company to reassess the total amount of unrecognized tax benefits recorded. While the Company cannot estimate the impact that new information may have on the unrecognized tax benefit balance, it believes that the liabilities recorded are appropriate and adequate. The Company operates within multiple tax jurisdictions and is subject to audit in these jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2009. The Company accrued $24.9 million and $24.7 million for interest and penalties related to tax matters at December 31, 2023 and 2022, respectively. Costs recognized for interest and penalties related to tax matters in 2023 were immaterial and were $90.5 million and $24.4 million in 2022 and 2021, respectively. These amounts are included in the provision for income taxes. As of December 31, 2023, the Company has accumulated undistributed earnings generated by its foreign subsidiaries, which were predominantly taxed in the U.S. as a result of the transition tax provisions enacted under the Tax Cuts and Jobs Act of 2017. Management does not assert that these previously-taxed unremitted earnings are indefinitely reinvested in operations outside the U.S. Accordingly, the Company has provided deferred taxes for the tax effects incremental to the transition tax. The Company has not provided for deferred taxes on outside basis differences in its investments in its foreign subsidiaries that are unrelated to these accumulated undistributed earnings, as these outside basis differences are indefinitely reinvested. A determination of the unrecognized deferred taxes related to these other components of the outside basis differences is not practicable. McDonald's Corporation 2023 Annual Report 56 McDonald's Corporation 2023 Annual Report 56 McDonald's Corporation 2023 Annual Report 56 Employee Benefit Plans The Company's 401(k) Plan is maintained for U.S.-based employees and includes a 401(k) feature, as well as an employer match. The 401(k) feature allows eligible participants to make pre-tax contributions that are matched each pay period (with an annual true-up) through cash contributions. All current account balances, future contributions and related earnings can be invested in nine investment alternatives (including a target date fund series), as well as McDonald's stock in accordance with each participant's investment elections. Future participant contributions are limited to 20% investment in McDonald's stock and participants may not transfer their existing account balance into McDonald's stock if the transfer would cause the value of their interest in the fund to exceed 20% of their total 401(k) Plan account balance. Participants may choose to make separate investment choices for current account balances and future contributions. The Company also maintains certain unfunded nonqualified supplemental benefit plans that allow participants to (i) make tax-deferred contributions and (ii) receive an annual Company-match allocation that cannot be made under the 401(k) Plan because of IRS limitations. The investment alternatives and returns are based on certain market-rate investment alternatives under the 401(k) Plan, net of expenses. Total liabilities were $402.7 million and $380.0 million at December 31, 2023 and 2022, respectively, and were primarily included in Other long-term liabilities on the Consolidated Balance Sheet. The Company has entered into contracts to hedge market-driven changes in certain of the liabilities. At December 31, 2023, derivatives with a fair value of $188.6 million indexed to the Company's stock were included in Miscellaneous other assets and an investment totaling $191.5 million indexed to certain market indices was included in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Changes in liabilities for these nonqualified plans and in the fair value of the derivatives and investment are recorded primarily in Selling, general & administrative expenses. Changes in fair value of the derivatives indexed to the Company's stock are recorded in the income statement because the contracts provide the counterparty with a choice to settle in cash or shares. Total U.S. costs for the 401(k) Plan and nonqualified benefits were immaterial to the Consolidated Income Statement. All other post-retirement benefits and post-employment benefits, both in the U.S. and at our international subsidiaries, were also immaterial to the Consolidated Income Statement. McDonald's Corporation 2023 Annual Report 57 McDonald's Corporation 2023 Annual Report 57 McDonald's Corporation 2023 Annual Report 57 Debt Financing **Current (2025):** Impairment and other charges (gains), net includes losses that result from the write down of goodwill and long-lived assets from their carrying value to their fair value, charges associated with strategic initiatives, such as refranchising and restructuring activities, as well as realized gains/losses from the divestiture of ownership percentages of subsidiaries. In 2024 this category reflected $221 million of pre-tax restructuring charges primarily related to Accelerating the Organization and net pre-tax charges of $70 million primarily consisting of property sale gains, transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel. In 2023 this category included $290 million of pre-tax charges related to the Company's Accelerating the Arches growth strategy, including restructuring charges associated with Accelerating the Organization, and $72 million of pre-tax charges related to the write-off of impaired software no longer in use. In 2022 this category included $1.3 billion of pre-tax charges 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. Impairment and other charges (gains), net includes losses that result from the write down of goodwill and long-lived assets from their carrying value to their fair value, charges associated with strategic initiatives, such as refranchising and restructuring activities, as well as realized gains/losses from the divestiture of ownership percentages of subsidiaries. In 2024 this category reflected $221 million of pre-tax restructuring charges primarily related to Accelerating the Organization and net pre-tax charges of $70 million primarily consisting of property sale gains, transaction costs and non-cash impairment charges associated with the sale of McDonald's business in South Korea and transaction costs associated with the acquisition of McDonald's business in Israel. In 2023 this category included $290 million of pre-tax charges related to the Company's Accelerating the Arches growth strategy, including restructuring charges associated with Accelerating the Organization, McDonald's Corporation 2024 Annual Report 56 McDonald's Corporation 2024 Annual Report 56 McDonald's Corporation 2024 Annual Report 56 Accelerating the Organization In January 2023, the Company announced an evolution of its successful Accelerating the Arches strategy. Enhancements to the strategy included the addition of Restaurant Development to the Company's growth pillars and an internal effort to modernize ways of working, Accelerating the Organization, both of which are aimed at elevating the Company's performance. Accelerating the Organization is designed to unlock further growth as the Company focuses on becoming faster, more innovative and more efficient for its customers and people. The Company incurred $221 million of restructuring charges related to Accelerating the Organization for the year ended December 31, 2024, which brings total restructuring charges to $471 million since the initiative commenced. These restructuring charges were recorded in the Other operating (income) expense, net line within the Consolidated Statement of Income. For the current year, restructuring charges primarily consisted of professional services costs. There were no significant non-cash impairment charges included in the amounts listed in the table below. Other operating (income) expense The following table summarizes the balance of accrued expenses related to this strategic initiative (in millions): Employee Termination BenefitsCosts to Terminate ContractsProfessional Services and Other CostsTotal2023Accrued Balance at Beginning of Year$ - $ - $ - $ - Restructuring Costs Incurred96 32 122 250 Cash Payments(52)(21)(99)(172)Other Non-Cash Items(3) - (16)(19)Accrued Balance at December 31, 2023$41 $11 $7 $59 2024Accrued Balance at Beginning of Year$41 $11 $7 $59 Restructuring Costs Incurred6 1 214 221 Cash Payments(24)(8)(205)(237)Other Non-Cash Items - - (1)(1)Accrued Balance at December 31, 2024$23 $4 $15 $42 Of the $221 million of restructuring charges incurred for the year ended December 31, 2024, $218 million was recorded in the International Developmental Licensed Markets & Corporate segment, the majority of which was recorded at Corporate, $2 million was recorded in the International Operated Markets segment and $1 million was recorded in the U.S. Substantially all of the accrued restructuring balance recorded at December 31, 2024, 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 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. The Company currently expects to incur approximately $300 million of restructuring charges in 2025, primarily related to professional services costs. The Company continues to evolve its ways of working by driving efficiency and effectiveness across the organization, primarily led by its GBS organization. Transformation efforts under Accelerating the Organization McDonald's Corporation 2024 Annual Report 57 McDonald's Corporation 2024 Annual Report 57 McDonald's Corporation 2024 Annual Report 57 Equity Method Investments The Company has various investments accounted for using the equity method. Under the equity method of accounting, the Company records its proportionate share of the net income or loss of each equity method investee, with a corresponding change to the carrying value of the investment. The carrying value of the investment is also adjusted for any dividends received and the effect of foreign exchange. The Company records its proportionate share of net income or loss within the Other operating (income) expense, net line on the Consolidated Statement of Income. The carrying value of the investments are recorded within the Investments in and advances to affiliates line on the Consolidated Balance Sheet. The Company has elected to record dividends received from its equity method investments under the nature of distribution approach, which provides for the recording of such distributions within the cash provided by operations section of the Consolidated Statement of Cash Flows to the extent that such distributions are from the normal operating or financing activities of the investee. The Company's primary equity method investments include partial ownership in Grand Foods Holding, an entity that operates and manages McDonald's business in mainland China, Hong Kong and Macau, and partial ownership in McDonald's Japan Holdings Co., Ltd, an entity that operates and manages McDonald's business in Japan. The Company has granted these entities the right to operate the McDonald's business as part of a Master Franchise Agreement. Revenue related to these agreements are accounted for in a manner consistent with the Company's other franchise arrangements. The following table summarizes the amounts related to the Company's primary equity method investees during the periods presented. December 31, 2024December 31, 2023In MillionsPercentage OwnershipFair Value (Level 1)Carrying AmountPercentage OwnershipFair Value (Level 1)Carrying AmountGrand Foods Holding48 %N/A$1,973 20 %N/A$238 McDonald's Japan Holdings Co., Ltd35 %$1,849 $590 35 %$2,034 $597 On January 30, 2024, the Company acquired an additional 28% ownership stake in Grand Foods Holding from the global investment firm Carlyle in exchange for $1.8 billion in cash. The acquisition increased the Company's equity ownership to 48%, but did not result in control of the entity. As such, the Company remains a minority partner and will continue to account for the investment under the equity method. As of December 31, 2024, the aggregate carrying amount of the Company's investments in these equity method investees exceeded its proportionate share of the net assets of these equity method investees by $1.5 billion. 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 year ended December 31, 2024 and December 31, 2023, respectively. Year Ended December 31,In Millions20242023Revenue$538 $481 Equity in Earnings113 97 Accounts Receivable157 155 Dividends Received157 14 McDonald's Corporation 2024 Annual Report 58 McDonald's Corporation 2024 Annual Report 58 McDonald's Corporation 2024 Annual Report 58 Income Taxes Income Taxes Income before provision for income taxes, classified by source of income, was as follows: In millions202420232022U.S.$3,282 $3,665 $1,846 Outside the U.S.7,062 6,857 5,980 Income before provision for income taxes $10,345 $10,522 $7,825 The provision for income taxes, classified by the timing and location of payment, was as follows: In millions202420232022U.S. federal$1,412 $1,340 $517 U.S. state269 263 246 Outside the U.S.1,014 1,137 1,230 Current tax provision2,695 2,740 1,994 U.S. federal(76)(146)(80)U.S. state(20)(30)(46)Outside the U.S.(478)(511)(220)Deferred tax (benefit) provision(574)(686)(346)Provision for income taxes$2,121 $2,053 $1,648 Net deferred tax (assets) liabilities consisted of: In millionsDecember 31, 20242023Lease right-of-use asset$3,213 $3,323 Property and equipment1,568 1,669 Intangible assets187 264 Other437 285 Total deferred tax liabilities5,405 5,541 Lease liability(3,292)(3,384)Intangible assets(3,495)(3,018)Property and equipment(469)(642)Deferred foreign tax credits(50)(82)Employee benefit plans(168)(192)Deferred revenue(113)(167)Operating loss carryforwards(195)(267)Other(170)(281)Total deferred tax assets before valuation allowance(7,951)(8,033)Valuation allowance917 1,150 Net deferred tax (assets) liabilities$(1,629)$(1,342)Balance sheet presentation:Deferred income taxes$1,914 $1,681 Other assets-miscellaneous(3,543)(3,023)Net deferred tax (assets) liabilities$(1,629)$(1,342) At December 31, 2024, the Company had net operating loss carryforwards of $819 million, of which $762 million has an indefinite carryforward. The remainder will expire at various dates from 2025 to 2041. The statutory U.S. federal income tax rate reconciles to the effective income tax rates as follows: 202420232022Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %State income taxes, net of related federal income tax benefit1.9 1.8 2.0 Foreign income taxed at different rates2.4 1.9 1.1 Tax impact of intercompany transactions(1.1)(0.7)0.2 Global intangible low-tax income ("GILTI") 0.5 0.5 0.4 Foreign-derived intangible income ("FDII")(3.4)(2.7)(4.2)Nonoperating expense related to France audit settlement - - 1.4 Other, net(0.8)(2.3)(0.8)Effective income tax rates20.5 %19.5 %21.1 % McDonald's Corporation 2024 Annual Report 59 McDonald's Corporation 2024 Annual Report 59 McDonald's Corporation 2024 Annual Report 59 Results for 2023 reflected income tax benefits primarily related to global audit progression and deferred tax adjustments. Results for 2022 reflected $239 million of net tax benefits related to the sale of the Company's Russia and Dynamic Yield businesses and the unfavorable impact of the non-deductible $537 million of non-operating expense related to the settlement of a tax audit in France. As of December 31, 2024 and 2023, the Company's gross unrecognized tax benefits totaled $461 million and $588 million, respectively. After considering the deferred tax accounting impact, it is expected that about $425 million of the total as of December 31, 2024 would favorably affect the effective tax rate if resolved in the Company's favor. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits: In millions20242023Balance at January 1$588 $647 Decreases for positions taken in prior years(133)(82)Increases for positions taken in prior years131 28 Increases for positions related to the current year47 41 Settlements with taxing authorities(172)(45)Lapsing of statutes of limitations - - Balance at December 31(1)$461 $588 Balance at December 31(1) (1)Of this amount, $421 million and $319 million are included in Long-term income taxes for 2024 and 2023, respectively, and $40 million and $269 million are included in Income taxes for 2024 and 2023, respectively, on the Consolidated Balance Sheet. (1) Of this amount, $421 million and $319 million are included in Long-term income taxes for 2024 and 2023, respectively, and $40 million and $269 million are included in Income taxes for 2024 and 2023, respectively, on the Consolidated Balance Sheet. The Company is currently under audit with the U.S. Internal Revenue Service (the "IRS") for tax years 2011 through 2012 and 2016 through 2021. As of December 31, 2024, the IRS examination for tax years 2011 and 2012 are awaiting final resolution with the IRS appeals team. Examination years 2016 through 2021 remain open as of the end of the period. The Company is also under audit in multiple foreign tax jurisdictions, primarily related to transfer pricing, as well as multiple state tax jurisdictions. While the Company cannot estimate the impact to the effective tax rate, it is reasonably possible that the total amount of unrecognized tax benefits could decrease up to $45 million within the next 12 months. This would be due to the possible resolution of the aforementioned U.S. Federal, foreign and U.S. state tax audits and the expiration of the statute of limitations in multiple tax jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2009. During 2024, the Company finalized and settled certain tax examinations and remeasured other income tax reserves based on audit progression. It is reasonably possible that, as a result of audit progression in both the U.S. and foreign tax audits within the next 12 months, there may be new information that causes the Company to reassess the total amount of unrecognized tax benefits recorded. While the Company cannot estimate the impact that new information may have on the unrecognized tax benefit balance, it believes that the liabilities recorded are appropriate and adequate. The Company accrued $17 million and $25 million for interest and penalties related to tax matters at December 31, 2024 and 2023, respectively. Costs recognized for interest and penalties related to tax matters in 2024 and 2023 were immaterial and $91 million in 2022. These amounts are included in the provision for income taxes. As of December 31, 2024, the Company has accumulated undistributed earnings generated by its foreign subsidiaries, which were predominantly taxed in the U.S. as a result of the transition tax provisions enacted under the Tax Cuts and Jobs Act of 2017. Management does not assert that these previously-taxed unremitted earnings are indefinitely reinvested in operations outside the U.S. Accordingly, the Company has provided deferred taxes for the tax effects incremental to the transition tax. The Company has not provided for deferred taxes on outside basis differences in its investments in its foreign subsidiaries that are unrelated to these accumulated undistributed earnings, as these outside basis differences are indefinitely reinvested. A determination of the unrecognized deferred taxes related to these other components of the outside basis differences is not practicable. McDonald's Corporation 2024 Annual Report 60 McDonald's Corporation 2024 Annual Report 60 McDonald's Corporation 2024 Annual Report 60 Employee Benefit Plans The Company's 401(k) Plan is maintained for U.S.-based employees and includes a 401(k) feature, as well as an employer match. The 401(k) feature allows eligible participants to make pre-tax and Roth contributions that are matched each pay period (with an annual true-up) through cash contributions. All current account balances, future contributions and related earnings can be invested in nine investment alternatives (including a target date fund series), as well as McDonald's stock in accordance with each participant's investment elections. Future participant contributions are limited to 20% investment in McDonald's stock and participants may not transfer their existing account balance into McDonald's stock if the transfer would cause the value of their interest in the fund to exceed 20% of their total 401(k) Plan account balance. Participants may choose to make separate investment choices for current account balances and future contributions. The Company also maintains certain unfunded nonqualified supplemental benefit plans that allow participants to (i) make tax-deferred contributions and (ii) receive an annual Company-match allocation that cannot be made under the 401(k) Plan because of IRS limitations. The investment alternatives and returns are based on certain market-rate investment alternatives under the 401(k) Plan, net of expenses. Total liabilities were $413 million and $403 million at December 31, 2024 and 2023, respectively, and were primarily included in Other long-term liabilities on the Consolidated Balance Sheet. The Company has entered into contracts to hedge market-driven changes in certain of the liabilities. At December 31, 2024, derivatives with a fair value of $135 million indexed to the Company's stock and an investment totaling $226 million indexed to certain market indices were included in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Changes in liabilities for these nonqualified plans and in the fair value of the derivatives and investment are recorded primarily in Selling, general & administrative expenses. Changes in fair value of the derivatives indexed to the Company's stock are recorded in the Consolidated Statement of Income because the contracts provide the counterparty with a choice to settle in cash or shares. Total U.S. costs for the 401(k) Plan and nonqualified benefits were immaterial to the Consolidated Statement of Income. All other post-retirement benefits and post-employment benefits, both in the U.S. and at our international subsidiaries, were also immaterial to the Consolidated Statement of Income. McDonald's Corporation 2024 Annual Report 61 McDonald's Corporation 2024 Annual Report 61 McDonald's Corporation 2024 Annual Report 61 Debt Financing --- ## Modified: CYBERSECURITY **Key changes:** - Added sentence: "Cybersecurity risk is an important and evolving focus for McDonald's." - Added sentence: "Significant resources are devoted to protecting and enhancing the security of computer systems, software, networks, storage devices, and other technology." - Added sentence: "The Company's security efforts are designed to protect against, among other things, cybersecurity attacks that can result in unauthorized access to confidential information, the destruction of data, disruptions to or degradations of service, the sabotaging of systems or other damage." - Added sentence: "McDonald's has implemented measures and controls that it believes are reasonably designed to address the evolving cybersecurity risk environment, including enhanced threat monitoring." - Added sentence: "In addition, McDonald's continues to regularly review its capabilities to address associated risks, such as those relating to the management of administrative access to systems." **Prior (2024):** Governance Management has primary responsibility for enterprise-wide risk management ("ERM"), including cybersecurity risk, within our Company, as detailed below. Our Board of Directors is responsible for overseeing our ERM framework and exercises this oversight both as a full Board and through its standing committees. Our Board's Public Policy & Strategy Committee ("PPS Committee") has oversight responsibility for our strategy and processes relating to cybersecurity risk management. Our PPS Committee receives updates at regular intervals on cybersecurity matters from management, including our Global Chief Information Officer ("CIO") and Chief Information Security Officer ("CISO") who, as discussed below, are responsible for assessing and managing material cybersecurity risks. Such updates include a discussion of the status of our cybersecurity landscape and our cybersecurity strategies, including potential risks and mitigation efforts. If a cybersecurity incident meets our established internal escalation threshold, accelerated reporting of the incident is provided to the applicable members of the Board. The PPS Committee also considers potential remedies to any strategic or process gaps that may be identified during the Company's review of specific cybersecurity incidents. Our Board of Directors recognizes the importance to the Company of effectively identifying, assessing and managing risks that could have a significant impact on our business strategy. The ERM framework leverages internal risk committees comprised of cross-functional leadership who meet regularly to evaluate and prioritize risks, including cybersecurity risk, in the context of our strategy, with further escalation to our CEO, Board and/or Committees, as appropriate. Effective management of cybersecurity risks is critical to the successful execution of our business strategy. **Current (2025):** Cybersecurity risk is an important and evolving focus for McDonald's. Significant resources are devoted to protecting and enhancing the security of computer systems, software, networks, storage devices, and other technology. The Company's security efforts are designed to protect against, among other things, cybersecurity attacks that can result in unauthorized access to confidential information, the destruction of data, disruptions to or degradations of service, the sabotaging of systems or other damage. McDonald's has implemented measures and controls that it believes are reasonably designed to address the evolving cybersecurity risk environment, including enhanced threat monitoring. In addition, McDonald's continues to regularly review its capabilities to address associated risks, such as those relating to the management of administrative access to systems. Third parties that help to facilitate the Company's business activities (e.g., franchisees, vendors, suppliers, service providers, etc.) are also sources of cybersecurity risk to McDonald's, and we have various processes and programs to manage cybersecurity risks associated with our third parties. Despite these risk-mitigation measures, a cybersecurity event impacting a third party may compromise Company data or negatively impact the Company's ability to conduct business, which could have a material adverse effect on our business. Risks from cybersecurity threats, including as a result of any previous cybersecurity events, did not materially affect McDonald's or its business strategy, results of operations or financial condition in 2024. Notwithstanding having what McDonald's believes to be a comprehensive approach to address cybersecurity risk, no company is immune to cybersecurity threats, and McDonald's may not be successful in preventing or mitigating a future cybersecurity incident that could have a material adverse effect on McDonald's or its business strategy, results of operations or financial condition. In evaluating cybersecurity incidents, management considers the potential impact to the Company's results of operations, control framework, and financial condition, as well as the potential impact, if any, to our business strategy and/or reputation. For additional information on risks from cybersecurity threats, please see our Risk Factors beginning on page 28. Governance Management has primary responsibility for enterprise-wide risk management ("ERM"), including cybersecurity risk, within our Company, as detailed below. Our Board of Directors (the "Board") is responsible for overseeing our ERM framework and exercises this oversight both as a full Board and through its standing committees. Our Board's Audit & Finance Committee ("A&F Committee") has oversight responsibility for our strategy and processes relating to cybersecurity risk management. Our A&F Committee receives updates at regular intervals on cybersecurity matters from management, including our Global Chief Information Officer ("CIO") and Global Chief Information Security Officer ("CISO") who, as discussed below, are responsible for assessing and managing material cybersecurity risks. Such updates include discussion of the status of our cybersecurity landscape and our cybersecurity strategies, including potential risks and mitigation efforts. For certain significant cybersecurity incidents, our procedures contemplate accelerated reporting of the incident to the applicable members of the Board. The A&F Committee also considers potential remedies to any strategic or process gaps that may be identified during the Company's review of specific cybersecurity incidents. Our Board recognizes the importance to the Company of effectively identifying, assessing and managing risks that could have a significant impact on our business strategy. The ERM framework leverages internal risk committees comprised of cross-functional leadership who meet regularly to evaluate and prioritize risks, including cybersecurity risk, in the context of our strategy, with further escalation to our CEO, Board and/or Committees, as appropriate. Effective management of cybersecurity risks is critical to the successful execution of our business strategy. --- ## Modified: Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated below on the 25th day of February, 2025: **Key changes:** - Reworded sentence: "BordenBy/s/ Michael D." - Reworded sentence: "KempczinskiDirectorChairman of the Board of Directors, President, andChief Executive Officer(Principal Executive Officer)By/s/ Kareem DanielBy/s/ John J." - Reworded sentence: "TaubertDirectorDirectorBy/s/ Lauren EltingBy/s/ Paul S." **Prior (2024):** By/s/ Ian F. BordenBy/s/ Catherine HoovelIan F. BordenCatherine HoovelExecutive Vice President and Global Chief Financial OfficerSenior Vice President - Corporate Controller(Principal Financial Officer)(Principal Accounting Officer)By/s/ Anthony G. CapuanoBy/s/ Christopher J. KempczinskiAnthony G. CapuanoChristopher J. KempczinskiDirectorPresident, Chief Executive Officer and Director(Principal Executive Officer)By/s/ Kareem DanielBy/s/ John J. MulliganKareem DanielJohn J. MulliganDirectorDirectorBy/s/ Lloyd H. DeanBy/s/ Jennifer L. TaubertLloyd H. DeanJennifer L. TaubertDirectorDirectorBy/s/ Catherine M. EngelbertBy/s/ Paul S. WalshCatherine M. EngelbertPaul S. WalshDirectorDirectorBy/s/ Margaret H. GeorgiadisBy/s/ Amy E. WeaverMargaret H. GeorgiadisAmy E. WeaverDirectorDirectorBy/s/ Enrique Hernandez, Jr.By/s/ Miles D. WhiteEnrique Hernandez, Jr.Miles D. WhiteChairman of the Board and DirectorDirector McDonald's Corporation 2023 Annual Report 69 McDonald's Corporation 2023 Annual Report 69 McDonald's Corporation 2023 Annual Report 69 **Current (2025):** By/s/ Ian F. BordenBy/s/ Michael D. HsuIan F. BordenMichael D. HsuExecutive Vice President and Global Chief Financial OfficerDirector(Principal Financial Officer)By/s/ Anthony G. CapuanoBy/s/ Christopher J. KempczinskiAnthony G. CapuanoChristopher J. KempczinskiDirectorChairman of the Board of Directors, President, andChief Executive Officer(Principal Executive Officer)By/s/ Kareem DanielBy/s/ John J. MulliganKareem DanielJohn J. MulliganDirectorDirectorBy/s/ Lloyd H. DeanBy/s/ Jennifer L. TaubertLloyd H. DeanJennifer L. TaubertDirectorDirectorBy/s/ Lauren EltingBy/s/ Paul S. WalshLauren EltingPaul S. WalshVice President - Chief Accounting Officer andDirectorCorporate Controller(Principal Accounting Officer)By/s/ Catherine M. EngelbertBy/s/ Amy E. WeaverCatherine M. EngelbertAmy E. WeaverDirectorDirectorBy/s/ Margaret H. GeorgiadisBy/s/ Miles D. WhiteMargaret H. GeorgiadisMiles D. WhiteDirectorDirector McDonald's Corporation 2024 Annual Report 73 McDonald's Corporation 2024 Annual Report 73 McDonald's Corporation 2024 Annual Report 73 --- ## Modified: of $1, $22, and $43 **Key changes:** - Reworded sentence: "McDonald's Corporation 2024 Annual Report 41 McDonald's Corporation 2024 Annual Report 41 McDonald's Corporation 2024 Annual Report 41 Consolidated Balance Sheet In millions, except per share dataDecember 31, 20242023ASSETSCurrent assetsCash and equivalents$1,085 $4,579 Accounts and notes receivable2,383 2,488 Inventories, at cost, not in excess of market56 53 Prepaid expenses and other current assets1,074 866 Total current assets4,599 7,986 Other assetsInvestments in and advances to affiliates2,710 1,080 Goodwill3,145 3,040 Miscellaneous6,095 5,618 Total other assets11,950 9,738 Lease right-of-use asset, net13,339 13,514 Property and equipmentProperty and equipment, at cost44,177 43,570 Accumulated depreciation and amortization(18,882)(18,662)Net property and equipment25,295 24,908 Total assets$55,182 $56,147 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)Current liabilitiesShort-term borrowings and current maturities of long-term debt$ - $2,192 Accounts payable1,029 1,103 Lease liability636 688 Income taxes361 705 Other taxes224 268 Accrued interest482 469 Accrued payroll and other liabilities1,129 1,434 Total current liabilities3,861 6,859 Long-term debt38,424 37,153 Long-term lease liability12,888 13,058 Long-term income taxes344 363 Deferred revenues - initial franchise fees778 790 Other long-term liabilities771 950 Deferred income taxes1,914 1,681 Shareholders' equity (deficit)Preferred stock, no par value; authorized - 165.0 million shares; issued - none - - Common stock, $0.01 par value; authorized - 3.5 billion shares; issued - 1,660.6 million shares17 17 Additional paid-in capital9,281 8,893 Retained earnings66,834 63,480 Accumulated other comprehensive income (loss)(2,553)(2,456)Common stock in treasury, at cost; 945.4 and 937.9 million shares(77,375)(74,640)Total shareholders' equity (deficit)(3,797)(4,707)Total liabilities and shareholders' equity (deficit)$55,182 $56,147 December 31, 2024 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 in treasury, at cost; 945.4 and 937.9 million shares See Notes to consolidated financial statements." **Prior (2024):** See Notes to consolidated financial statements. McDonald's Corporation 2023 Annual Report 39 McDonald's Corporation 2023 Annual Report 39 McDonald's Corporation 2023 Annual Report 39 Consolidated Balance Sheet In millions, except per share dataDecember 31, 20232022ASSETSCurrent assetsCash and equivalents$4,579.3 $2,583.8 Accounts and notes receivable2,488.0 2,115.0 Inventories, at cost, not in excess of market52.8 52.0 Prepaid expenses and other current assets866.3 673.4 Total current assets7,986.4 5,424.2 Other assetsInvestments in and advances to affiliates1,080.2 1,064.5 Goodwill3,040.4 2,900.4 Miscellaneous5,617.8 4,707.2 Total other assets9,738.4 8,672.1 Lease right-of-use asset, net13,514.4 12,565.7 Property and equipmentProperty and equipment, at cost43,570.0 41,037.6 Accumulated depreciation and amortization(18,662.4)(17,264.0)Net property and equipment24,907.6 23,773.6 Total assets$56,146.8 $50,435.6 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)Current liabilitiesShort-term borrowings and current maturities of long-term debt$2,192.4 $ - Accounts payable1,102.9 980.2 Lease liability688.1 661.1 Income taxes705.1 274.9 Other taxes268.0 255.1 Accrued interest468.9 393.4 Accrued payroll and other liabilities1,433.6 1,237.4 Total current liabilities6,859.0 3,802.1 Long-term debt37,152.9 35,903.5 Long-term lease liability13,057.7 12,134.4 Long-term income taxes363.2 791.9 Deferred revenues - initial franchise fees790.1 757.8 Other long-term liabilities949.7 1,051.8 Deferred income taxes1,680.9 1,997.5 Shareholders' equity (deficit)Preferred stock, no par value; authorized - 165.0 million shares; issued - none - - Common stock, $0.01 par value; authorized - 3.5 billion shares; issued - 1,660.6 million shares16.6 16.6 Additional paid-in capital8,892.9 8,547.1 Retained earnings63,479.9 59,543.9 Accumulated other comprehensive income (loss)(2,456.0)(2,486.6)Common stock in treasury, at cost; 937.9 and 929.3 million shares(74,640.1)(71,624.4)Total shareholders' equity (deficit)(4,706.7)(6,003.4)Total liabilities and shareholders' equity (deficit)$56,146.8 $50,435.6 December 31, 2023 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 in treasury, at cost; 937.9 and 929.3 million shares See Notes to consolidated financial statements. McDonald's Corporation 2023 Annual Report 40 McDonald's Corporation 2023 Annual Report 40 McDonald's Corporation 2023 Annual Report 40 Consolidated Statement of Cash Flows In millionsYears ended December 31, 202320222021Operating activitiesNet income$8,468.8 $6,177.4 $7,545.2 Adjustments to reconcile to cash provided by operationsCharges and credits:Depreciation and amortization 1,978.2 1,870.6 1,868.1 Deferred income taxes(686.4)(345.7)(428.3)Share-based compensation175.2 166.7 139.2 Net (gain) loss on sale of restaurant and other businesses(103.2)732.7 (97.8)Other(112.7)(570.4)(339.1)Changes in working capital items:Accounts receivable(161.0)(264.1)309.9 Inventories, prepaid expenses and other current assets16.7 5.6 (62.2)Accounts payable50.4 31.3 225.0 Income taxes(220.3)(546.7)(302.5)Other accrued liabilities206.2 129.3 284.0 Cash provided by operations9,611.9 7,386.7 9,141.5 Investing activitiesCapital expenditures(2,357.4)(1,899.2)(2,040.0)Purchases of restaurant businesses(441.2)(807.0)(374.2)Sales of restaurant and other businesses195.3 445.9 196.2 Sales of property94.9 38.9 106.2 Other(676.1)(456.7)(53.9)Cash used for investing activities(3,184.5)(2,678.1)(2,165.7)Financing activitiesNet short-term borrowings212.8 25.5 15.1 Long-term financing issuances5,221.1 3,374.5 1,154.4 Long-term financing repayments(2,441.1)(2,202.4)(2,240.0)Treasury stock purchases(3,054.3)(3,896.0)(845.5)Common stock dividends(4,532.8)(4,168.2)(3,918.6)Proceeds from stock option exercises259.8 248.2 285.7 Other(39.6)38.2 (46.7)Cash used for financing activities(4,374.1)(6,580.2)(5,595.6)Effect of exchange rates on cash and equivalents(57.8)(253.8)(120.1)Cash and equivalents increase (decrease)1,995.5 (2,125.4)1,260.1 Cash and equivalents at beginning of year2,583.8 4,709.2 3,449.1 Cash and equivalents at end of year$4,579.3 $2,583.8 $4,709.2 Supplemental cash flow disclosuresInterest paid$1,286.9 $1,183.5 $1,197.3 Income taxes paid2,992.9 3,023.5 2,403.9 Years ended December 31, 2023 See Notes to consolidated financial statements. McDonald's Corporation 2023 Annual Report 41 McDonald's Corporation 2023 Annual Report 41 McDonald's Corporation 2023 Annual Report 41 Consolidated Statement of Shareholders' Equity (Deficit) Common stockissued Accumulated othercomprehensive income (loss)Common stock intreasuryTotalshareholders'equity (deficit)Additionalpaid-incapitalRetainedearningsPensionsCash flowhedgesForeigncurrencytranslationIn millions, except per share dataSharesAmountSharesAmountBalance at December 31, 20201,660.6 $16.6 $7,903.6 $53,908.1 $(287.6)$(111.3)$(2,187.9)(915.2)$(67,066.4)$(7,824.9)Net income7,545.2 7,545.2 Other comprehensive income (loss), net of tax108.1 86.5 (181.5)13.1 Comprehensive income7,558.3 Common stock cash dividends ($5.25 per share)(3,918.6)(3,918.6)Treasury stock purchases(3.4)(845.5)(845.5)Share-based compensation139.2 139.2 Stock option exercises and other188.8 2.8 101.7 290.5 Balance at December 31, 20211,660.6 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 6,177.4 6,177.4 Other comprehensive income (loss),net of tax (118.7)55.5 150.3 87.1 Comprehensive income 6,264.5 Common stock cash dividends ($5.66 per share) (4,168.2) (4,168.2)Treasury stock purchases (15.8)(3,896.0)(3,896.0)Share-based compensation 166.7 166.7 Stock option exercises and other 148.8 2.3 81.8 230.6 Balance at December 31, 20221,660.6 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 8,468.8 8,468.8 Other comprehensive income (loss),net of tax (69.1)(36.4)136.1 30.6 Comprehensive income 8,499.4 Common stock cash dividends ($6.23 per share) (4,532.8) (4,532.8)Treasury stock purchases (11.1)(3,105.1)(3,105.1)Share-based compensation 175.2 175.2 Stock option exercises and other 170.6 2.5 89.4 260.0 Balance at December 31, 20231,660.6 $16.6 $8,892.9 $63,479.9 $(367.3)$(5.7)$(2,083.0)(937.9)$(74,640.1)$(4,706.7) Comprehensive income Common stock cash dividends ($5.25 per share) Other comprehensive income (loss), net of tax Comprehensive income Common stock cash dividends ($5.66 per share) Other comprehensive income (loss), net of tax Comprehensive income Common stock cash dividends ($6.23 per share) See Notes to consolidated financial statements. McDonald's Corporation 2023 Annual Report 42 McDonald's Corporation 2023 Annual Report 42 McDonald's Corporation 2023 Annual Report 42 Notes to Consolidated Financial Statements Summary of Significant Accounting Policies **Current (2025):** See Notes to consolidated financial statements. McDonald's Corporation 2024 Annual Report 41 McDonald's Corporation 2024 Annual Report 41 McDonald's Corporation 2024 Annual Report 41 Consolidated Balance Sheet In millions, except per share dataDecember 31, 20242023ASSETSCurrent assetsCash and equivalents$1,085 $4,579 Accounts and notes receivable2,383 2,488 Inventories, at cost, not in excess of market56 53 Prepaid expenses and other current assets1,074 866 Total current assets4,599 7,986 Other assetsInvestments in and advances to affiliates2,710 1,080 Goodwill3,145 3,040 Miscellaneous6,095 5,618 Total other assets11,950 9,738 Lease right-of-use asset, net13,339 13,514 Property and equipmentProperty and equipment, at cost44,177 43,570 Accumulated depreciation and amortization(18,882)(18,662)Net property and equipment25,295 24,908 Total assets$55,182 $56,147 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)Current liabilitiesShort-term borrowings and current maturities of long-term debt$ - $2,192 Accounts payable1,029 1,103 Lease liability636 688 Income taxes361 705 Other taxes224 268 Accrued interest482 469 Accrued payroll and other liabilities1,129 1,434 Total current liabilities3,861 6,859 Long-term debt38,424 37,153 Long-term lease liability12,888 13,058 Long-term income taxes344 363 Deferred revenues - initial franchise fees778 790 Other long-term liabilities771 950 Deferred income taxes1,914 1,681 Shareholders' equity (deficit)Preferred stock, no par value; authorized - 165.0 million shares; issued - none - - Common stock, $0.01 par value; authorized - 3.5 billion shares; issued - 1,660.6 million shares17 17 Additional paid-in capital9,281 8,893 Retained earnings66,834 63,480 Accumulated other comprehensive income (loss)(2,553)(2,456)Common stock in treasury, at cost; 945.4 and 937.9 million shares(77,375)(74,640)Total shareholders' equity (deficit)(3,797)(4,707)Total liabilities and shareholders' equity (deficit)$55,182 $56,147 December 31, 2024 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 in treasury, at cost; 945.4 and 937.9 million shares See Notes to consolidated financial statements. McDonald's Corporation 2024 Annual Report 42 McDonald's Corporation 2024 Annual Report 42 McDonald's Corporation 2024 Annual Report 42 Consolidated Statement of Cash Flows In millionsYears ended December 31, 202420232022Operating activitiesNet income$8,223 $8,469 $6,177 Adjustments to reconcile to cash provided by operationsCharges and credits:Depreciation and amortization 2,097 1,978 1,871 Deferred income taxes(574)(686)(346)Share-based compensation172 175 167 Net (gain) loss on sale of restaurant and other businesses(37)(103)733 Other3 (113)(570)Changes in working capital items:Accounts receivable10 (161)(264)Inventories, prepaid expenses and other current assets71 17 6 Accounts payable(10)50 31 Income taxes(292)(220)(547)Other accrued liabilities(217)206 129 Cash provided by operations9,447 9,612 7,387 Investing activitiesCapital expenditures(2,775)(2,357)(1,899)Purchases of restaurant businesses(669)(441)(807)Purchases of equity method investments(1,837) - - Sales of restaurant and other businesses311 195 446 Sales of property122 95 39 Other(498)(676)(457)Cash used for investing activities(5,346)(3,185)(2,678)Financing activitiesNet short-term borrowings326 213 26 Long-term financing issuances2,380 5,221 3,374 Long-term financing repayments(2,777)(2,441)(2,202)Treasury stock purchases(2,824)(3,054)(3,896)Common stock dividends(4,870)(4,533)(4,168)Proceeds from stock option exercises328 260 248 Other(56)(40)38 Cash used for financing activities(7,495)(4,374)(6,580)Effect of exchange rates on cash and equivalents(101)(58)(254)Cash and equivalents increase (decrease)(3,494)1,996 (2,126)Cash and equivalents at beginning of year4,579 2,584 4,709 Cash and equivalents at end of year$1,085 $4,579 $2,584 Supplemental cash flow disclosuresInterest paid$1,523 $1,287 $1,184 Income taxes paid2,974 2,993 3,024 Years ended December 31, 2024 See Notes to consolidated financial statements. McDonald's Corporation 2024 Annual Report 43 McDonald's Corporation 2024 Annual Report 43 McDonald's Corporation 2024 Annual Report 43 Consolidated Statement of Shareholders' Equity (Deficit) Common stockissued Accumulated othercomprehensive income (loss)Common stock intreasuryTotalshareholders'equity (deficit)Additionalpaid-incapitalRetainedearningsPensionsCash flowhedgesForeigncurrencytranslationIn millions, except per share dataSharesAmountSharesAmountBalance at December 31, 20211,660.6 $17 $8,232 $57,535 $(180)$(25)$(2,369)(915.8)$(67,810)$(4,601)Net income6,177 6,177 Other comprehensive income (loss), net of tax(119)56 150 87 Comprehensive income6,264 Common stock cash dividends ($5.66 per share)(4,168)(4,168)Treasury stock purchases(15.8)(3,896)(3,896)Share-based compensation167 167 Stock option exercises and other149 2.3 82 231 Balance at December 31, 20221,660.6 17 8,547 59,544 (298)31 (2,219)(929.3)(71,624)(6,003)Net income 8,469 8,469 Other comprehensive income (loss),net of tax (69)(37)136 30 Comprehensive income 8,499 Common stock cash dividends ($6.23 per share) (4,533) (4,533)Treasury stock purchases (11.1)(3,105)(3,105)Share-based compensation 175 175 Stock option exercises and other 171 2.5 89 260 Balance at December 31, 20231,660.6 17 8,893 63,480 (367)(6)(2,083)(937.9)(74,640)(4,707)Net income 8,223 8,223 Other comprehensive income (loss),net of tax (25)125 (196) (96)Comprehensive income 8,127 Common stock cash dividends ($6.78 per share) (4,870) (4,870)Treasury stock purchases (10.1)(2,826)(2,826)Share-based compensation 172 172 Stock option exercises and other 216 2.5 91 307 Balance at December 31, 20241,660.6 $17 $9,281 $66,834 $(393)$119 $(2,279)(945.4)$(77,375)$(3,797) Comprehensive income Common stock cash dividends ($5.66 per share) Other comprehensive income (loss), net of tax Comprehensive income Common stock cash dividends ($6.23 per share) Other comprehensive income (loss), net of tax Comprehensive income Common stock cash dividends ($6.78 per share) See Notes to consolidated financial statements. McDonald's Corporation 2024 Annual Report 44 McDonald's Corporation 2024 Annual Report 44 McDonald's Corporation 2024 Annual Report 44 Notes to Consolidated Financial Statements Summary of Significant Accounting Policies --- ## Modified: Recent Accounting Pronouncements Not Yet Adopted **Key changes:** - Reworded sentence: "Income Taxes In December 2023, the FASB issued ASU No." - Added sentence: "Disaggregation - Income Statement Expenses In November 2024, the FASB issued ASU No." - Added sentence: "2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03")." - Added sentence: "The pronouncement expands the disclosure requirements for expenses, specifically by providing more detailed information about the types of expenses in commonly presented expense captions." - Added sentence: "ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027." **Prior (2024):** Segment Reporting In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). The pronouncement expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-07 will have on the Company's consolidated financial statement disclosures. Income Taxes In December 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures. **Current (2025):** Income Taxes In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("ASU 2023-09"). The pronouncement expands the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. We are currently in the process of determining the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures. Disaggregation - Income Statement Expenses In November 2024, the FASB issued ASU No. 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU 2024-03"). The pronouncement expands the disclosure requirements for expenses, specifically by providing more detailed information about the types of expenses in commonly presented expense captions. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. We are currently in the process of determining the impact that ASU 2024-03 will have on the Company's consolidated financial statement disclosures. --- ## Modified: FOREIGN CURRENCY TRANSLATION **Key changes:** - Added sentence: "McDonald's Corporation 2024 Annual Report 45 McDonald's Corporation 2024 Annual Report 45 McDonald's Corporation 2024 Annual Report 45" **Prior (2024):** Generally, the functional currency of operations outside the U.S. is the respective local currency. **Current (2025):** Generally, the functional currency of operations outside the U.S. is the respective local currency. McDonald's Corporation 2024 Annual Report 45 McDonald's Corporation 2024 Annual Report 45 McDonald's Corporation 2024 Annual Report 45 --- ## Modified: STOCK OPTIONS **Key changes:** - Reworded sentence: "The following table presents the weighted-average assumptions used in the option pricing model for the 2024, 2023 and 2022 stock option grants." - Reworded sentence: "Weighted-average assumptions 202420232022Expected dividend yield2.3 %2.3 %2.2 %Expected stock price volatility21.2 %21.6 %21.3 %Risk-free interest rate4.1 %3.9 %1.9 %Expected life of options (in years)5.85.85.7Fair value per option granted$59.82 $54.35 $42.12 Expected life of options (in years) Intrinsic value for stock options is defined as the difference between the current market value of the Company's stock and the exercise price." - Reworded sentence: "A summary of the status of the Company's stock option grants as of December 31, 2024, 2023 and 2022, and changes during the years then ended, is presented in the following table: 202420232022OptionsShares inmillionsWeighted-averageexercisepriceWeighted-averageremainingcontractuallife in yearsAggregateintrinsicvalue inmillionsShares inmillionsWeighted-averageexercisepriceShares inmillionsWeighted-averageexercisepriceOutstanding at beginning of year10.5 $189.78 11.4 $172.27 12.0 $156.13 Granted1.2 288.92 1.2 266.70 1.6 252.97 Exercised(1.9)151.37 (2.0)133.76 (1.9)128.08 Forfeited/expired(0.3)262.34 (0.1)244.95 (0.3)225.93 Outstanding at end of year9.5 $208.72 5.4$773 10.5 $189.78 11.4 $172.27 Exercisable at end of year6.7 $184.29 4.2$706 7.2 7.7 McDonald's Corporation 2024 Annual Report 63 McDonald's Corporation 2024 Annual Report 63 McDonald's Corporation 2024 Annual Report 63 RSUs RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of the Company's common stock or cash, at the Company's discretion." - Reworded sentence: "A summary of the Company's RSU activity during the years ended December 31, 2024, 2023 and 2022 is presented in the following table: 202420232022RSUsShares inmillionsWeighted-averagegrant datefair valueShares inmillionsWeighted-averagegrant datefair valueShares inmillionsWeighted-averagegrant datefair valueNonvested at beginning of year1.2 $238.21 1.2 $222.32 1.3 $197.10 Granted0.6 277.36 0.5 255.14 0.5 242.82 Vested(0.6)220.87 (0.4)210.03 (0.4)173.31 Forfeited0.0 273.70 (0.1)244.58 (0.2)205.61 Nonvested at end of year1.2 $275.37 1.2 $238.21 1.2 $222.32 The total fair value of RSUs vested during 2024, 2023 and 2022 was $173 million, $127 million and $110 million, respectively." **Prior (2024):** Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company's stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date. The following table presents the weighted-average assumptions used in the option pricing model for the 2023, 2022 and 2021 stock option grants. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends. Expected stock price volatility is generally based on the historical volatility of the Company's stock for a period approximating the expected life. The expected dividend yield is based on the Company's most recent annual dividend rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term equal to the expected life. Weighted-average assumptions 202320222021Expected dividend yield2.3 %2.2 %2.4 %Expected stock price volatility21.6 %21.3 %21.8 %Risk-free interest rate3.9 %1.9 %0.7 %Expected life of options (in years)5.85.75.7Fair value per option granted$54.35 $42.12 $30.91 Expected life of options (in years) Intrinsic value for stock options is defined as the difference between the current market value of the Company's stock and the exercise price. During 2023, 2022 and 2021, the total intrinsic value of stock options exercised was $304.0 million, $242.2 million and $302.0 million, respectively. Cash received from stock options exercised during 2023 was $259.8 million and the tax benefit realized from stock options exercised totaled $69.2 million. The Company uses treasury shares purchased under the Company's share repurchase program to satisfy share-based exercises. A summary of the status of the Company's stock option grants as of December 31, 2023, 2022 and 2021, and changes during the years then ended, is presented in the following table: 202320222021OptionsShares inmillionsWeighted-averageexercisepriceWeighted-averageremainingcontractuallife in yearsAggregateintrinsicvalue inmillionsShares inmillionsWeighted-averageexercisepriceShares inmillionsWeighted-averageexercisepriceOutstanding at beginning of year11.4 $172.27 12.0 $156.13 13.4 $139.44 Granted1.2 266.70 1.6 252.97 2.1 215.73 Exercised(2.0)133.76 (1.9)128.08 (2.4)115.29 Forfeited/expired(0.1)244.95 (0.3)225.93 (1.1)160.50 Outstanding at end of year10.5 $189.78 5.5$1,116.1 11.4 $172.27 12.0 $156.13 Exercisable at end of year7.2 $165.22 4.4$951.7 7.7 7.8 McDonald's Corporation 2023 Annual Report 59 McDonald's Corporation 2023 Annual Report 59 McDonald's Corporation 2023 Annual Report 59 RSUs RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of the Company's common stock or cash, at the Company's discretion. The fair value of each RSU granted is equal to the market price of the Company's stock at date of grant. Separately, Company officers have been awarded RSUs that vest based on Company performance. For performance-based RSUs, the Company includes a relative TSR modifier to determine the number of shares earned at the end of the performance period. The fair value of performance-based RSUs that include the TSR modifier is determined using a Monte Carlo valuation model. A summary of the Company's RSU activity during the years ended December 31, 2023, 2022 and 2021 is presented in the following table: 202320222021RSUsShares inmillionsWeighted-averagegrant datefair valueShares inmillionsWeighted-averagegrant datefair valueShares inmillionsWeighted-averagegrant datefair valueNonvested at beginning of year1.2 $222.32 1.3 $197.10 1.3 $176.81 Granted0.5 255.14 0.5 242.82 0.6 206.92 Vested(0.4)210.03 (0.4)173.31 (0.4)153.55 Forfeited(0.1)244.58 (0.2)205.61 (0.2)168.38 Nonvested at end of year1.2 $238.21 1.2 $222.32 1.3 $197.10 The total fair value of RSUs vested during 2023, 2022 and 2021 was $127.2 million, $110.3 million and $80.0 million, respectively. The tax benefit realized from RSUs vested during 2023 was $25.1 million. **Current (2025):** Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company's stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date. The following table presents the weighted-average assumptions used in the option pricing model for the 2024, 2023 and 2022 stock option grants. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends. Expected stock price volatility is generally based on the historical volatility of the Company's stock for a period approximating the expected life. The expected dividend yield is based on the Company's most recent annual dividend rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term equal to the expected life. Weighted-average assumptions 202420232022Expected dividend yield2.3 %2.3 %2.2 %Expected stock price volatility21.2 %21.6 %21.3 %Risk-free interest rate4.1 %3.9 %1.9 %Expected life of options (in years)5.85.85.7Fair value per option granted$59.82 $54.35 $42.12 Expected life of options (in years) Intrinsic value for stock options is defined as the difference between the current market value of the Company's stock and the exercise price. During 2024, 2023 and 2022, the total intrinsic value of stock options exercised was $269 million, $304 million and $242 million, respectively. Cash received from stock options exercised during 2024 was $328 million and the tax benefit realized from stock options exercised totaled $50 million. The Company uses treasury shares purchased under the Company's share repurchase program to satisfy share-based exercises. A summary of the status of the Company's stock option grants as of December 31, 2024, 2023 and 2022, and changes during the years then ended, is presented in the following table: 202420232022OptionsShares inmillionsWeighted-averageexercisepriceWeighted-averageremainingcontractuallife in yearsAggregateintrinsicvalue inmillionsShares inmillionsWeighted-averageexercisepriceShares inmillionsWeighted-averageexercisepriceOutstanding at beginning of year10.5 $189.78 11.4 $172.27 12.0 $156.13 Granted1.2 288.92 1.2 266.70 1.6 252.97 Exercised(1.9)151.37 (2.0)133.76 (1.9)128.08 Forfeited/expired(0.3)262.34 (0.1)244.95 (0.3)225.93 Outstanding at end of year9.5 $208.72 5.4$773 10.5 $189.78 11.4 $172.27 Exercisable at end of year6.7 $184.29 4.2$706 7.2 7.7 McDonald's Corporation 2024 Annual Report 63 McDonald's Corporation 2024 Annual Report 63 McDonald's Corporation 2024 Annual Report 63 RSUs RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of the Company's common stock or cash, at the Company's discretion. The fair value of each RSU granted is equal to the market price of the Company's stock at date of grant. Separately, Company officers have been awarded RSUs that vest based on Company performance. For performance-based RSUs, the Company includes a relative TSR modifier to determine the number of shares earned at the end of the performance period. The fair value of performance-based RSUs that include the TSR modifier is determined using a Monte Carlo valuation model. A summary of the Company's RSU activity during the years ended December 31, 2024, 2023 and 2022 is presented in the following table: 202420232022RSUsShares inmillionsWeighted-averagegrant datefair valueShares inmillionsWeighted-averagegrant datefair valueShares inmillionsWeighted-averagegrant datefair valueNonvested at beginning of year1.2 $238.21 1.2 $222.32 1.3 $197.10 Granted0.6 277.36 0.5 255.14 0.5 242.82 Vested(0.6)220.87 (0.4)210.03 (0.4)173.31 Forfeited0.0 273.70 (0.1)244.58 (0.2)205.61 Nonvested at end of year1.2 $275.37 1.2 $238.21 1.2 $222.32 The total fair value of RSUs vested during 2024, 2023 and 2022 was $173 million, $127 million and $110 million, respectively. The tax benefit realized from RSUs vested during 2024 was $34 million. McDonald's Corporation 2024 Annual Report 64 McDonald's Corporation 2024 Annual Report 64 McDonald's Corporation 2024 Annual Report 64 Management's Assessment of Internal Control Over Financial ReportingThe financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequate internal controls over financial reporting. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that: I.pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; II.provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and III.provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time. Management assessed the design and effectiveness of the Company's internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework (2013 Framework). Based on management's assessment using those criteria, as of December 31, 2024, management believes that the Company's internal control over financial reporting is effective. Ernst & Young, LLP, independent registered public accounting firm, has audited the financial statements of the Company for the fiscal years ended December 31, 2024, 2023 and 2022 and the Company's internal control over financial reporting as of December 31, 2024. Their reports are presented on the following pages. The independent registered public accountants and internal auditors advise management of the results of their audits, and make recommendations to improve the system of internal controls. Management evaluates the audit recommendations and takes appropriate action. McDONALD'S CORPORATION February 25, 2025 McDonald's Corporation 2024 Annual Report 65 McDonald's Corporation 2024 Annual Report 65 McDonald's Corporation 2024 Annual Report 65 Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of McDonald's Corporation --- ## Modified: NATURE OF BUSINESS **Key changes:** - Reworded sentence: "All restaurants are either owned and operated by the Company or by franchisees, including conventional franchisees under franchised arrangements, and developmental licensees or affiliates under license agreements." **Prior (2024):** The Company franchises and operates McDonald's restaurants in the global restaurant industry. All restaurants are operated either by the Company or by franchisees, including conventional franchisees under franchised arrangements, and developmental licensees or affiliates under license agreements. The following table presents restaurant information by ownership type: Restaurants at December 31,202320222021Conventional franchised21,818 21,720 21,607 Developmental licensed8,684 8,229 7,913 Foreign affiliated9,178 8,220 7,775 Total Franchised39,680 38,169 37,295 Company-operated2,142 2,106 2,736 Total Systemwide restaurants41,822 40,275 40,031 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 consolidated financial statements for periods prior to purchase and sale. **Current (2025):** The Company franchises and operates McDonald's restaurants in the global restaurant industry. All restaurants are either owned and operated by the Company or by franchisees, including conventional franchisees under franchised arrangements, and developmental licensees or affiliates under license agreements. The following table presents restaurant information by ownership type: Restaurants at December 31,202420232022Conventional franchised22,077 21,818 21,720 Developmental licensed9,247 8,684 8,229 Foreign affiliated10,108 9,178 8,220 Total Franchised41,432 39,680 38,169 Company-owned and operated2,045 2,142 2,106 Total Systemwide restaurants43,477 41,822 40,275 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 consolidated financial statements. --- ## Modified: CONSOLIDATION **Key changes:** - Reworded sentence: "The Company has concluded that consolidation of such entities is not appropriate for the periods presented." **Prior (2024):** The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliates owned 50% or less (primarily McDonald's China and Japan) are accounted for by the equity method. On an ongoing basis, the Company evaluates its business relationships such as those with franchisees, joint venture partners, developmental licensees, suppliers and advertising cooperatives to identify potential variable interest entities. Generally, these businesses qualify for a scope exception under the variable interest entity consolidation guidance. The Company has concluded that consolidation of any such entity is not appropriate for the periods presented. **Current (2025):** The consolidated financial statements include the accounts of the Company and its subsidiaries. Investments in affiliates owned 50% or less (primarily McDonald's China and Japan) are accounted for by the equity method. On an ongoing basis, the Company evaluates its business relationships such as those with franchisees, joint venture partners, developmental licensees, suppliers and advertising cooperatives to identify potential variable interest entities. Generally, these businesses qualify for a scope exception under the variable interest entity consolidation guidance. The Company has concluded that consolidation of such entities is not appropriate for the periods presented. In the first quarter of 2024, the Company changed its rounding presentation to the nearest whole number in millions of reported amounts, except per share data or as otherwise designated. The change in rounding presentation has been applied to all prior year amounts presented. In certain circumstances, this change adjusted previously reported balances, however, these changes were not significant, and no other changes were made to previously reported financial information. Additionally, certain columns and rows within the financial statements and tables presented may not add due to rounding. Percentages have been calculated from the underlying whole-dollar amounts for all periods presented. --- ## Modified: Risk Management and Strategy **Key changes:** - Reworded sentence: "The CISO reports to the CIO." - Reworded sentence: "McDonald's Corporation 2024 Annual Report 36 McDonald's Corporation 2024 Annual Report 36 McDonald's Corporation 2024 Annual Report 36" **Prior (2024):** Our CIO and CISO are responsible for assessing and implementing our cybersecurity risk management programs, which are informed by the National Institute of Standards and Technology (NIST) Cybersecurity Framework. These leaders and their teams have significant relevant experience in various fields, such as incident response, application security, data protection, network security and identity and access management, and have implemented and executed security programs across multiple industries at Fortune 100 companies. Our programs are designed to create a comprehensive, cross-functional approach to identify and mitigate cybersecurity risks as well as to prevent cybersecurity incidents in an effort to support business continuity and achieve operational resiliency. We leverage certain third-party providers and local technology support teams to help execute certain aspects of our cybersecurity risk management programs. We also engage third parties in assessments and testing of our policies, processes and standards that are designed to identify and remediate cybersecurity incidents. These efforts include a wide range of activities focused on evaluating the effectiveness of the program, including audits, modeling, tabletop exercises and vulnerability testing. We also periodically engage independent third parties to perform assessments and evaluations of certain aspects of our information security control environment and operation of our program. Further, we have various processes and programs to manage cybersecurity risks associated with our use of third-party vendors and suppliers. We provide regular, mandatory training for employees regarding cybersecurity threats to bring awareness on how they can help prevent and report potential cybersecurity incidents. In addition, key stakeholders involved with our cybersecurity risk management programs receive additional training and regularly participate in scenario-based training exercises to support the effective administration of our programs. We have established and regularly tested incident response processes and controls that identify and risk-rank incidents through a centralized system to promote timely escalation of cybersecurity incidents that exceed a particular level of risk, including escalation of incidents of sufficient magnitude or severity to our CIO and CISO. In evaluating cybersecurity incidents, management considers the potential impact to our results of operations, control framework, and financial condition, as well as the potential impact, if any, to our business strategy or reputation. Cybersecurity threats, including as a result of our previous cybersecurity incidents, have not materially affected our results of operations or financial condition, including our business strategy, in 2023. For additional information on risks from cybersecurity threats, please see our Risk Factors beginning on page 28. McDonald's Corporation 2023 Annual Report 34 McDonald's Corporation 2023 Annual Report 34 McDonald's Corporation 2023 Annual Report 34 **Current (2025):** The CISO reports to the CIO. McDonald's CIO and CISO are responsible for assessing and implementing our cybersecurity risk management programs, which are informed by the National Institute of Standards and Technology (NIST) Cybersecurity Framework. These leaders and their teams have significant relevant experience in various fields, such as incident response, application security, data security, network security and identity and access management, and have implemented and executed security programs across multiple industries at Fortune 100 companies. Our programs are designed to create a comprehensive, cross-functional approach to identify, assess, manage and mitigate cybersecurity risks as well as to mitigate cybersecurity incidents to support business continuity and achieve operational resiliency. The CISO leads the Global Cybersecurity organization, which is responsible for executing the Company's Global Cybersecurity Program and initiatives. This global program is responsible for identifying technology and cybersecurity risks and for implementing and maintaining controls to manage cybersecurity threats. These controls are designed to mitigate, detect and respond to cybersecurity incidents to help safeguard the confidentiality, integrity and availability of McDonald's infrastructure, resources and information. McDonald's Global Cybersecurity Program includes the following functions: •Cybersecurity Services, which is responsible for deploying and operating the frontline security controls that are designed to protect and defend McDonald's against cyber-attacks. Cybersecurity teams are focused on specific areas of a layered defense, including Network Security, Endpoint Protection, Identity and Access Management, Data Protection, and others, to ensure that these controls are integrated into critical systems and processes throughout the McDonald's environment and operating effectively. •Cyber Defense, which is responsible for implementing and maintaining controls designed to detect and respond to cybersecurity incidents against McDonald's and includes a dedicated function for incident response and regular monitoring for cybersecurity threats and vulnerabilities, including those among McDonald's third-party suppliers. The Company has established and regularly tested incident response processes and controls that identify and risk-rank incidents through a centralized system to promote timely escalation of cybersecurity incidents that exceed a particular level of risk, including escalation of incidents of sufficient magnitude or severity to the CIO and CISO. •Cyber Governance, Risk & Compliance, which is responsible for operationalizing technology risk and control frameworks, analyzing regulatory developments that may impact McDonald's, and developing control catalogs and assessments of controls, as well as overseeing governance and reporting of technology and cybersecurity risk. The team provides awareness and training that McDonald's Corporation 2024 Annual Report 35 McDonald's Corporation 2024 Annual Report 35 McDonald's Corporation 2024 Annual Report 35 reinforces information risk and security management practices and compliance with McDonald's policies, standards and practices. The training is mandatory for all employees globally on a periodic basis, and it is supplemented by Company-wide testing initiatives, including periodic phishing tests. •Cyber Market Engagement, which is responsible for working with our market teams, International Developmental Licensee partners, and other entities to ensure a consistent approach for cybersecurity across the McDonald's system. The governance structure for the Global Cybersecurity organization is designed to appropriately identify, escalate, and mitigate cybersecurity risks. Cybersecurity risk management and its governance and oversight are integrated into McDonald's operational risk management framework, including through the escalation of key risk and control issues to management and the development of risk mitigation plans for heightened risk and control issues. As needed, McDonald's engages third-party assessors or auditing firms with industry-recognized expertise on cybersecurity matters to review specific aspects of McDonald's cybersecurity risk management framework, processes and controls. These efforts include a wide range of activities focused on evaluating the effectiveness of the program, including audits, modeling, tabletop exercises and vulnerability testing. McDonald's Corporation 2024 Annual Report 36 McDonald's Corporation 2024 Annual Report 36 McDonald's Corporation 2024 Annual Report 36 --- *Data sourced from SEC EDGAR. Last updated 2026-05-10.*