SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE):
/ X / ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to ___________
Commission file number 1-5231
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
McDonald's Corporation Profit Sharing Program
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
McDonald's Corporation
McDonald's Plaza
Oak Brook, Illinois 60523
FINANCIAL STATEMENTS AND EXHIBIT
(a) Financial Statements
McDonald's Corporation Profit Sharing Program Financial Statements
Report of Independent Auditors 1
Statements of Net Assets Available for Benefits, with Fund Information
at December 31, 2000 and 1999 2
Statements of Changes in Net Assets Available for Benefits, with Fund
Information For The Years Ended December 31, 2000 and 1999 3
Notes to Financial Statements 4
(b) Exhibit
Exhibit 23 - Consent of Independent Auditors
McDonald's Corporation Profit Sharing Program
Financial Statements
Years ended December 31, 2000 and 1999
Contents
Report of Independent Auditors.................................................1
Financial Statements
Statements of Net Assets Available for Benefits................................2
Statements of Changes in Net Assets Available for Benefits.....................3
Notes to Financial Statements..................................................4
Report of Independent Auditors
To Administrative Committee
McDonald's Corporation Profit Sharing Program
We have audited the accompanying statements of net assets available for benefits
of McDonald's Corporation Profit Sharing Program as of December 31, 2000 and
1999, and the related statements of changes in net assets available for benefits
for the years then ended. These financial statements are the responsibility of
the Program's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of McDonald's
Corporation Profit Sharing Program at December 31, 2000 and 1999, and the
changes in its net assets available for benefits for the years then ended, in
conformity with accounting principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The Fund Information in the statements of net
assets available for benefits and the statements of changes in net assets
available for the benefits is presented for purposes of additional analysis
rather than to present the net assets available for benefits and changes in net
assets available for benefits of each fund. The Fund Information has been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
ERNST & YOUNG LLP
April 26, 2001
1
McDonald's Corporation Profit Sharing Program
Statements of Net Assets Available for Benefits
(In Thousands)
December 31, 2000
------------------------------------------------------------------
McDESOP and
Leveraged ESOP
------------------------------------
Profit
Sharing Allocated Unallocated
Plan Funds Funds Total
------------------------------------------------------------------
Assets
Investments, at fair value:
Commercial paper and other short-term investments $ 53,946 $ 8,199 $ 4,185 $ 66,330
Corporate bonds 500 - - 500
Asset-backed securities - - - -
Common and preferred stocks other than McDonald's Corporation 330,670 - - 330,670
McDonald's Corporation common stock:
49,298,732 shares in 2000; 53,784,192 shares in 1999 309,278 1,034,877 331,966 1,676,121
Common trust funds 51,148 - - 51,148
Investment, at contract value:
Insurance contracts 265,699 - - 265,699
------------------------------------------------------------------
Total investments 1,011,241 1,043,076 336,151 2,390,468
Receivables:
Company contributions 10,408 (117) - 10,291
Accrued income 421 41 21 483
Other 833 201 - 1,034
------------------------------------------------------------------
Total receivables 11,662 125 21 11,808
------------------------------------------------------------------
Total assets 1,022,903 1,043,201 336,172 2,402,276
Liabilities
Management and administrative expenses payable 975 471 - 1,446
Accrued interest expense - - 3,283 3,283
Notes payable:
Current - - 8,003 8,003
Long-term - - 115,865 115,865
Other liabilities 542 2,528 - 3,070
------------------------------------------------------------------
Total liabilities 1,517 2,999 127,151 131,667
------------------------------------------------------------------
Net assets available for benefits
Allocated net assets 1,021,386 1,040,202 - 2,061,588
Unallocated net assets - - 209,021 209,021
------------------------------------------------------------------
Net assets available for benefits $1,021,386 $1,040,202 $209,021 $2,270,609
==================================================================
December 31, 1999
----------------------------------------------------------------
McDESOP and
Leveraged ESOP
----------------------------------
Profit
Sharing Allocated Unallocated
Plan Account Account Total
----------------------------------------------------------------
Assets
Investments, at fair value:
Commercial paper and other short-term investments $ 52,131 $ 3,591 $ - $ 55,722
Corporate bonds 2,496 - - 2,496
Asset-backed securities 1,000 - - 1,000
Common and preferred stocks other than McDonald's Corporation 319,503 - - 319,503
McDonald's Corporation common stock:
49,298,732 shares in 2000; 53,784,192 shares in 1999 409,026 1,313,032 446,112 2,168,170
Common trust funds 59,238 - - 59,238
Investment, at contract value:
Insurance contracts 260,422 - - 260,422
----------------------------------------------------------------
Total investments 1,103,816 1,316,623 446,112 2,866,551
Receivables:
Company contributions 10,797 (24) 951 11,724
Accrued income 362 11 18 391
Other 1 607 - 608
----------------------------------------------------------------
Total receivables 11,160 594 969 12,723
----------------------------------------------------------------
Total assets 1,114,976 1,317,217 447,081 2,879,274
Liabilities
Management and administrative expenses payable 1,089 614 - 1,703
Accrued interest expense - - 314 314
Notes payable:
Current - - 20,045 20,045
Long-term - - 123,868 123,868
Other liabilities 1,767 3,623 - 5,390
----------------------------------------------------------------
Total liabilities 2,856 4,237 144,227 151,320
----------------------------------------------------------------
Net assets available for benefits
Allocated net assets 1,112,120 1,312,980 - 2,425,100
Unallocated net assets - - 302,854 302,854
----------------------------------------------------------------
Net assets available for benefits $1,112,120 $1,312,980 $302,854 $2,727,954
================================================================
The accompanying notes are an integral part of these financial statements.
2
EIN 36-2361282
Plan #001
McDonald's Corporation Profit Sharing Program
Statements of Changes in Net Assets Available for Benefits
(In Thousands)
December 31, 2000
------------------------------------------------------------------------
McDESOP and
Leveraged ESOP
------------------------------------
Profit
Sharing Allocated Unallocated
Plan Funds Funds Total
------------------------------------------------------------------------
Net investment income (loss)
Dividend income $ 6,637 $ 6,418 $ 2,289 $ 15,344
Interest income 22,088 499 22 22,609
Net realized and unrealized (depreciation) appreciation
in fair value of investments (94,977) (207,691) (70,539) (373,207)
Interest expense - - (9,362) (9,362)
Management and administrative fees (3,117) (685) - (3,802)
------------------------------------------------------------------------
Total net investment income (loss) (69,369) (201,459) (77,590) (348,418)
Contributions
Company 10,408 20 24,590 35,018
Participants 4,921 41,374 - 46,295
------------------------------------------------------------------------
Total contributions 15,329 41,394 24,590 81,313
Allocations
Half a Buck Matching with Profit Sharing Forfeitures (82) 82 - -
Half a Buck Matching with Leveraged ESOP Shares - 16,419 - 16,419
Leveraged ESOP year-end allocations:
Common Stock:
1989 $200 million Leveraged ESOP - 15,899 (26,845) (10,946)
1991 $100 million Leveraged ESOP - 8,515 (13,988) (5,473)
------------------------------------------------------------------------
Total allocations (82) 40,915 (40,833) -
Other changes
Benefits paid to terminated participants (94,437) (96,008) - (190,445)
Interfund transfers (net) 57,688 (57,688) - -
Other 137 68 - 205
------------------------------------------------------------------------
Total other changes (36,612) (153,628) - (190,240)
------------------------------------------------------------------------
Increase (decrease) in net assets available for benefits (90,734) (272,778) (93,833) (457,345)
Net assets available for benefits at beginning of year 1,112,120 1,312,980 302,854 2,727,954
------------------------------------------------------------------------
Net assets available for benefits at end of year $1,021,386 $1,040,202 $209,021 $2,270,609
========================================================================
December 31, 1999
-----------------------------------------------------------------------
McDESOP and
Leveraged ESOP
------------------------------------
Profit
Sharing Allocated Unallocated
Plan Account Account Total
-----------------------------------------------------------------------
Net investment income (loss)
Dividend income $ 6,431 $ 6,299 $ 2,378 $ 15,108
Interest income 24,089 173 339 24,601
Net realized and unrealized (depreciation) appreciation
in fair value of investments 82,059 68,232 25,612 175,903
Interest expense - - (11,125) (11,125)
Management and administrative fees (3,030) (851) - (3,881)
-----------------------------------------------------------------------
Total net investment income (loss) 109,549 73,853 17,204 200,606
Contributions
Company 10,797 - 19,810 30,607
Participants 3,303 37,016 - 40,319
-----------------------------------------------------------------------
Total contributions 14,100 37,016 19,810 70,926
Allocations
Half a Buck Matching with Profit Sharing Forfeitures (368) - - (368)
Half a Buck Matching with Leveraged ESOP Shares - 14,734 - 14,734
Leveraged ESOP year-end allocations:
Common Stock:
1989 $200 million Leveraged ESOP - 24,557 (34,380) (9,823)
1991 $100 million Leveraged ESOP 13,052 (17,963) (4,911)
-----------------------------------------------------------------------
Total allocations (368) 52,343 (52,343) (368)
Other changes
Benefits paid to terminated participants (79,711) (99,918) - (179,629)
Interfund transfers (net) 29,138 (29,138) - -
Other 152 576 - 728
-----------------------------------------------------------------------
Total other changes (50,421) (128,480) - (178,901)
-----------------------------------------------------------------------
Increase (decrease) in net assets available for benefits 72,860 34,732 (15,329) 92,263
Net assets available for benefits at beginning of year 1,039,260 1,278,248 318,183 2,635,691
-----------------------------------------------------------------------
Net assets available for benefits at end of year $1,112,120 $1,312,980 $302,854 $2,727,954
=======================================================================
The accompanying notes are an integral part of these financial statements.
3
McDonald's Corporation Profit Sharing Program
Notes to Financial Statements
Years ended December 31, 2000 and 1999
1. Description of the Program
The McDonald's Corporation Profit Sharing Program ("the Program") was formed
January 1, 1989, when the McDonald's Corporation Savings and Profit Sharing Plan
("Profit Sharing Plan") was merged with the McDonald's Matching and Deferred
Stock Ownership Plan ("McDESOP"). The Profit Sharing Plan is a noncontributory,
defined-contribution plan. The Profit Sharing Plan includes the Investment
Savings account, which permitted participants to contribute after-tax dollars to
the Profit Sharing Plan prior to 1987 and is no longer contributory. McDESOP
consists of two components. The first component is a salary deferral plan with
Company matching allocations, and the second component is an employee stock
ownership plan ("Leveraged ESOP"). Effective December 29, 1995, the McDonald's
Corporation Stock Sharing Plan ("Stock Sharing Plan") was merged with the
Program ("Merged Plan"). The assets of the Stock Sharing Plan were transferred
into McDESOP. The Plan documents with respect to the respective portions of the
Merged Plan remained in effect until the Program, as amended and restated
effective January 1, 1997, became effective. The Program was since amended and
restated effective November 1, 1998. In addition, the Program has three
amendments effective June 1, 2000, January 1, 2001, and March 1, 2001,
respectively. The Program is administered by a committee of employees
("Administrative Committee") of McDonald's Corporation ("the Company" or "Plan
Sponsor") as selected by the Board of Directors of the Company. The following
description of the Program provides only general information. Participants
should refer to the Program Summary Plan Description and Prospectus for a more
complete description.
Eligibility
Under provisions of the Program, an employee becomes eligible for participation
at age 21 or older and after one year of "eligibility service" as defined by the
Program documents. Employees enter the Program on the first entry date, either
January 1 or July 1, following completion of eligibility requirements.
4
1. Description of the Program (continued)
Investments and Elections
All Profit Sharing investments other than those in the Blended Stock/Bond Fund
are held by The Northern Trust Company ("the Custodian") under a custodial
agreement dated September 27, 1989. Blended Stock/Bond Fund investments are held
and managed by Wellington Trust Company, National Association. T. Rowe Price
Associates, Inc. manages the Money Market Fund. PRIMCO Capital Management
manages the Stable Value Fund. Jennison Associates, Institutional Captial
Corporation, Blackrock Financial Management Inc., and Chartwell Investment
Partners are investment managers for the Diversified Stock Fund. The S&P Index
Fund is a mutual fund managed by Vanguard Group, and the International Stock
fund is comprised of two mutual funds, managed by Morgan Stanley Asset
Management and Dresdner RCM Global Investors. Subject to the objectives and
restrictions of the individual investment funds, the fund managers have
discretionary authority for the purchase and sale of investments other than
McDonald's Corporation Common Stock. The Northern Trust Company is the
administrator for the Profit Sharing Plan's McDonald's Common Stock Fund.
The Trustees (employees of the Company appointed by the Board of Directors) are
authorized to invest all of the assets of McDESOP and Leveraged ESOP in shares
of Company stock. The allocated assets are held by The Northern Trust Company.
The unallocated Leveraged ESOP shares are also held at The Northern Trust
Company as custodian for McDonald's Corporation and Wachovia Bank. Proceeds from
the Leveraged ESOP common stock dividends are invested in an interest-bearing
account until the note payment is due.
Participants may elect, as often as 12 times per year, to have their Profit
Sharing account balances invested in 5% increments in one or any combination of
the Plan's investment funds.
McDESOP and Leveraged ESOP Investments
Participant elected contributions to McDESOP are invested by The Northern Trust
Company on behalf of the Trustees in shares of common stock of the Company
unless the participant chooses alternative investment funds. Participants may
elect, as often as 12 times per year, to have their own 401(k) contribution
account balances invested in 5% increments in one or any combination of the
Plan's investment funds. Shares of common stock for McDESOP are purchased in the
open market through a national securities exchange. Proceeds from the Leveraged
ESOP loans have been used to purchase common stock of the Company.
5
1. Description of the Program (continued)
Any dividends or other distributions paid on shares owned by the Program (see
Note 7 regarding Leveraged ESOP stock dividends) are used to repay the Leveraged
ESOP loans, and common stock equal to the value of the dividends on allocated
shares are transferred from unallocated shares and allocated to participants'
accounts.
Allocation of Contributions and Earnings
Company contributions to the Profit Sharing Plan are determined by the Board of
Directors. The Board may elect to make this discretionary contribution in the
form of cash or McDonald's common stock or any combination of the two. In
addition, the Board may define eligibility requirements to receive this
contribution based on employee age, hours of service, and pay class. The Profit
Sharing Plan contribution is allocated to eligible participants who are 21 years
old, have received credit for at least 1,000 hours of service during the year,
and are employed at the end of the year. In addition, participants who terminate
before the last day of the year due to the sale of a Company restaurant, death,
disability, retirement on or after age 55, or who have 10 years of credited
service in the Program prior to termination, share in the allocation of the
Profit Sharing contribution in the year their employment terminates. The
allocation to participants is based on their respective considered compensation
compared to all eligible participants, as defined. As soon as administratively
possible after year-end, the Profit Sharing contribution is reinvested in
accordance with participants' investment elections in effect at that time.
Participant elected salary reductions for McDESOP are credited directly to
participants' accounts. Company matching allocations are credited based on 50%
of each participant's salary reductions up to the matched level. The matched
level varies depending on pay class and employer.
Program net investment income or loss is allocated to participants semimonthly
based on their respective account balances at the beginning of the semimonthly
period. Participants' Profit Sharing accounts are credited with the income,
gains, and losses of the investment fund(s) in which their accounts are
invested.
6
1. Description of the Program (continued)
Leveraged Employee Stock Ownership Plan (Leveraged ESOP)
In September 1989, the Leveraged ESOP borrowed $200 million and used the
proceeds of the loan to purchase 27,826,084 shares of McDonald's Series B
Convertible Preferred Stock at an issue price of $7.188 per share. These
preferred shares were held exclusively by the Leveraged ESOP and were not traded
on the open market. The Company paid a cash dividend on the stock of 7% of the
issue price, or $0.12579 per share each quarter. In September 1992, the Company
redeemed 16,000,000 shares of unallocated Series B Preferred shares held by the
Leveraged ESOP. In August 1995, the Company redeemed the remaining 6,230,058
unallocated Series B preferred shares, and in December 1995, the remaining
4,176,122 allocated Series B preferred shares were redeemed. Prior to each
redemption, the Program's Trustees converted each share of Preferred Stock into
.7692 shares of McDonald's Common Stock, or 12,307,200, 4,792,159, and 3,212,271
shares, respectively. The unallocated shares will be released for allocation to
participants as Company contributions are made to the Program. Effective
November 1, 1998, released shares are first used to make matching McDESOP
allocations and any remaining shares released are allocated annually to eligible
participants' accounts based on their respective considered compensation. Due to
the Leveraged ESOP refinancing discussed in Note 7, the last allocation will
occur in 2018 when the refinanced loan is completely repaid.
In April 1991, the Leveraged ESOP borrowed $100 million and used the proceeds of
the loan to purchase 12,075,468 shares of McDonald's Series C Convertible
Preferred Stock at an issue price of $8.281 per share. These preferred shares
were held exclusively by the Leveraged ESOP, and were not traded on the open
market. The Company paid a cash dividend on the stock of 7% of the issue price
or $0.1449 per share each quarter. In August 1995, the Company redeemed the
remaining 8,928,110 unallocated Series C preferred shares, and in December 1995,
the remaining 2,710,514 allocated Series C preferred shares were redeemed. Prior
to each redemption, the Program's Trustees converted each share of Preferred
Stock into .8 shares of McDonald's Common Stock or 7,142,486 and 2,168,409
shares, respectively. The unallocated shares will be released for allocation to
participants as Company contributions are made to the Program. Effective
November 1, 1998, released shares are first used to make matching McDESOP
allocations and any remaining shares released are allocated to eligible
participants' accounts based on their respective considered compensation. Due to
the 1999 Leveraged ESOP refinancing discussed in Note 7, the last allocation
will occur in 2018 when the refinanced loan is completely repaid.
7
1. Description of the Program (continued)
Vesting
McDESOP accounts are fully vested and nonforfeitable regardless of the
participant's length of employment with the Company. For participants
terminating employment prior to January 1, 2000, Profit Sharing and Leveraged
ESOP accounts are 5% vested at the end of two years of credited service and 20%
vested at the end of three years, increasing by 20% at the end of each
subsequent year to 100% at the completion of seven years. Effective January 1,
2000, for employees who are active on or after that date, participants vest 20%
for each year of credited service until they reach a 100% vested status after
completing five years of credited service. If termination of employment is by
reason of death, permanent disability, or retirement on or after attaining age
55, or if the Program is terminated, the participant's interest in these
accounts is 100% vested.
Diversification
Effective September 1, 2000, participants at least age 50 are eligible to
diversify portions of their existing Leveraged ESOP balances and any future
contributions into the Profit Sharing Plan investment funds. Participants age 50
or older can diversify all or a portion of their existing McDESOP balances and
future contributions. All participants in McDESOP may elect to diversify all or
a portion of both existing and future participant contributions and related
earnings into the Profit Sharing Plan Investment Funds in increments of 5%.
Company matching contributions are not eligible to be diversified by those who
are not yet age 50, and will remain invested in McDonald's common stock.
Termination and Forfeitures
Participants who terminate their employment with the Company are entitled to
receive the vested interest in their Program accounts within a reasonable time
following the close of the year in which the termination has occurred. The
nonvested balance is forfeited at the end of the year in which the participant
has five consecutive breaks-in-service, or upon distribution of the vested
balance, whichever is earlier. If the participant resumes employment with the
Company before incurring five consecutive breaks-in-service and requalifies to
enter the Program, the forfeited nonvested balance is reinstated. If a
participant does not terminate but has less than 500 hours of credited service
during a calendar year, a break-in-service occurs.
Profit Sharing forfeitures are first used to fund participants' McDESOP account
adjustments and then are used to fund the McDESOP Company match.
8
1. Description of the Program (continued)
Leveraged ESOP forfeitures are allocated at the end of the calendar year to
participants in the same manner as the allocation of the Company Leveraged ESOP
contributions.
Forfeitures also include amounts forfeited as a result of unclaimed payouts
greater than two years old for the Profit Sharing Plan, Leveraged ESOP, and
McDESOP.
A terminated participant with vested benefits in excess of $5,000 will not
receive a distribution from the Program until age 70 1/2 unless an earlier
distribution is elected. Such accounts will continue to share in the allocation
of investment income, and Profit Sharing Plan accounts will continue to be
invested in accordance with the participant's investment elections.
Rollovers
The Program allows employees who were in a tax-qualified plan elsewhere to roll
over all or part of their previous plan money into the Program where it can be
invested in one or a combination of the Profit Sharing Plan investment funds. To
qualify, the employee must contribute all or part of the amount received,
excluding the employee's after-tax contributions, to the Program within 60 days
after receiving a payout from the other plan.
Voting
Participants are entitled to direct the Trustees in voting shares of McDonald's
Stock credited to their accounts. In addition, participants who are employees
may direct the vote on unallocated and unvoted shares based on the relative
allocated shares credited to their accounts.
Program Termination
Although it has not expressed any intent to do so, the Company has the right
under the Program to discontinue its contributions at any time and to terminate
the Program subject to the provisions of the Employee Retirement Income Security
Act of 1974 (ERISA). In the event of Program termination, participants will
become fully vested in their accounts.
9
1. Description of the Program (continued)
Stock Split
On January 29, 1999, McDonald's Corporation announced a two-for-one stock split
which was effected in the form of a stock dividend and was payable on March 5,
1999, to shareholders of record on February 12, 1999. Common stock amounts
included in the accompanying financial statements reflect the two-for-one stock
split.
Investments
The Program holds a beneficial interest in the McDonald's Savings and Profit
Sharing Master Trust (Master Trust). Earnings, market adjustments, fees, and
expenses relating to investment transactions of the Master Trust are allocated
to the participating plans (the Program and MHDC Partners Savings and Profit
Sharing Plan) based on each plan's share of the Trust assets.
Investments (except for those in insurance contracts) are stated at fair market
value. Investments in common and preferred stocks and corporate bonds are valued
at the closing exchange prices reported by the New York Stock Exchange. The
market values for commercial paper and other short-term investments are cost
plus accrued interest which approximates current market value. The values of the
common trust funds are based on quoted redemption values. Such redemption values
primarily reflect quoted market prices for the underlying securities. The
insurance contracts are stated at contract value which represents cost plus
accrued interest less withdrawals.
Purchases and sales of securities are accounted for on the trade date. Realized
gains or losses on the sale of securities are based on the average cost of the
securities. Dividend income is recorded on the ex-dividend date. Interest income
is recorded as earned on the accrual basis.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Administrative Committee to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
10
2. Summary of Significant Accounting Policies (continued)
Company Contributions
Company contributions to the Profit Sharing, Leveraged ESOP, and McDESOP Plans
are recorded as expense to the Company on an accrual basis. Profit Sharing Plan
and Leveraged ESOP contributions are recorded in participants' accounts when
received annually. The McDESOP Company matching allocations are recorded in
participants' accounts semimonthly, and participant elected salary reductions
are recorded in participants' accounts at the end of the applicable payroll
period. Participants' rollover contributions are recorded when received.
Unallocated Net Assets Available for Benefits
Unallocated net assets available for benefits represents the market value of
shares of McDonald's common stock purchased through the Leveraged ESOP which has
not been released for allocation to participants' accounts, offset by the
balance of the debt issued by the Leveraged ESOP. Unallocated net assets
available for benefits is reduced by the market value of the shares as they are
allocated to participants.
Reclassifications
Certain amounts in the 1999 financial statements have been reclassified to
conform to the 2000 presentation.
3. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500 (in thousands):
December 31
2000 1999
----------------------------
Net assets available for benefits per the
financial statements $2,270,609 $2,727,954
Amounts allocated to withdrawing participants (30,297) (15,654)
----------------------------
Net assets available for benefits per the Form
5500 $2,240,312 $2,712,300
============================
11
3. Differences Between Financial Statements and Form 5500 (continued)
Amounts allocated to withdrawing participants by investment are as follows (in
thousands):
December 31
2000 1999
---------------------------
Holding Accounts $ 205 $ 19
Money Market Fund 687 492
Stable Value Fund 2,863 1,274
Blended Stock/Bond Fund 534 386
Diversified Stock Fund 4,753 1,353
S&P 500 Index Fund 1,183 399
International Stock Fund 585 -
McDonald's Common Stock 19,487 11,731
---------------------------
$ 30,297 $ 15,654
===========================
The following is a reconciliation of benefits paid to terminated participants
per the financial statements to Form 5500 (in thousands):
Year ended December 31
2000 1999
---------------------------
Benefits paid to terminated participants per the
financial statements $190,445 $179,629
Add: Amounts allocated on Form 5500 to withdrawing
participants at end of year 30,297 15,654
Less: Amounts allocated on Form 5500 to withdrawing
participants at beginning of year (15,654) (31,588)
----------------------------
Benefits paid to participants per the Form 5500 $205,088 $163,695
============================
Amounts allocated to withdrawing participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to
year-end but not yet paid.
12
4. Investments
During 2000 and 1999, the Plan's investments (including investments bought,
sold, and held during the year) appreciated (depreciated) as follows (in
thousands):
December 31
2000 1999
------------------------------------------------------------------
Net Realized Net Realized
and Unrealized and Unrealized
Appreciation Appreciation
(Depreciation) (Depreciation)
in Value in Value
During the During the
Value Year Value Year
------------------------------------------------------------------
Investments, at fair value:
Commercial paper and other
short-term investments $ 66,330 $ 103 $ 55,722 $ 68
Corporate Bonds 500 (1) 2,496 -
Government Bonds - - - 7
Asset-Backed Securities - - 1,000 -
Common and preferred stocks 330,670 (28,085) 319,503 65,946
McDonald's Corporation Common
Stock 1,676,121* (343,115) 2,168,170* 13,634
Common Trust funds 51,148 (2,109) 59,238 (3,752)
Investments, at contract value:
Pacific Life Insurance Contract 2,038 - 752 -
Caisse Des Depots Insurance Contract 7,067 - 2,254 -
Allstate Life Guaranteed Insurance
Contact 20,845 - 13,036 -
Pacific Life Insurance Contract 23,381 - 23,370 -
Pacific Life - MBIA Insured 28,002 - 26,249 -
Principal Life Insurance Contract 34,133 - 40,422 -
Principal Life Insurance Contract 34,514 - 32,267 -
Caisse Des Depots Insurance Contract 34,771 - 21,285 -
Pacific Mutual Guaranteed Interest
Contract 80,948 - 100,787 -
------------------------------------------------------------------
$ 2,390,468 $ (373,207) $ 2,866,551 $ 175,903
==================================================================
*Individual investment which represents 5% or more of net assets available for
benefits.
13
4. Investments (continued)
The following is a summary of each insurance contract held at December 31, 2000:
2000 1999
2000 1999 Crediting Crediting Fair Fair
Average Average Interest Interest Book Market Value of
Yield Yield Rate* Rate Value Value Wrapper
----------------------------------------------------------------------------------------
Pacific Life Insurance Contract 7.65% 6.27% 7.92% 7.04% $ 2,038,058 $ 2,116,976 $ -
Caisse Des Depots Insurance Contract 6.18% 4.52% 5.68% 5.98% 7,066,884 7,064,845 -
Allstate Life Guaranteed Insurance Contact 5.79% 5.90% 5.83% 5.74% 20,845,649 21,229,656 (384,007)
Pacific Life Insurance Contract 7.19% 6.26% 6.83% 6.55% 23,381,062 23,485,419 -
Pacific Life - MBIA Insured 6.66% 6.68% 6.49% 6.49% 28,002,491 28,348,927 -
Principal Life Insurance Contract 8.07% 7.99% 10.38% 7.42% 34,133,682 37,454,645 -
Principal Life Insurance Contract 6.94% 7.22% 6.94% 6.91% 34,514,381 36,545,182 -
Caisse Des Depots Insurance Contract 7.27% 6.91% 8.36% 7.06% 34,772,251 35,026,034 -
Pacific Mutual Guaranteed Interest Contract 6.36% 7.57% 6.38% 7.57% 80,950,075 81,524,574 (574,499)
---------------------------------
265,704,533 272,796,258
Less:MHDC Partners (5,672) (5,672)
---------------------------------
$265,698,861 $272,790,586
=================================
*The crediting interest rate is determined at the beginning of each calendar
year.
14
McDonald's Corporation Profit Sharing Program
Notes to Financial Statements (continued)
5. Nonparticipant-Directed Investments
Information about the assets and the significant components of the changes in
assets relating to the nonparticipant-directed investment is as follows:
December 31
2000 1999
-----------------------------
Assets
McDonald's common stock $433,275 $611,209
Year ended December 31
2000 1999
-----------------------------
Changes in assets:
Company contributions $ 17,002 $ 24,287
Benefit payments (39,875) (46,363)
Management and administrative expenses (285) (395)
Net realized and unrealized appreciation
(depreciation) in fair value of common stock (86,261) 31,661
6. Master Trust Summarized Information
The following represents the summarized information of the net assets of the
McDonald's Savings and Profit Sharing Master Trust as of December 31 (in
thousands):
2000 1999
-----------------------------
Total investments $2,391,249 $2,867,468
Total receivables 11,820 12,737
Total liabilities (131,668) (151,320)
-----------------------------
Net assets $2,271,401 $2,728,885
=============================
Program's share of net assets $2,270,609 $2,727,954
=============================
Dividend income $ 15,347 $ 15,113
Interest income 22,611 24,602
Net realized and unrealized appreciation
(depreciation) in fair value of investments (373,348) 175,953
Total expenses (13,166) (15,006)
-----------------------------
Total net investment income $ (348,556) $ 200,662
=============================
Program's share of net investment income (loss) $ (348,418) $ 200,606
=============================
The Program held a 99.9% interest in the Master Trust December 31, 2000 and
1999.
15
McDonald's Corporation Profit Sharing Program
Notes to Financial Statements (continued)
7. Notes Payable
In September 1989, the Leveraged ESOP issued $200 million of 7.67% Guaranteed
ESOP Notes, Series A, for 15 years with a final maturity of September 15, 2004.
In April 1991, the Leveraged ESOP issued $100 million of 7.30% Guaranteed ESOP
Notes, Series B, for 15 years with a final maturity of June 1, 2006. In November
1999, the Leveraged ESOP paid down $84,740,000 of these notes and refinanced
both the Series A and Series B notes. At that time, the Leveraged ESOP issued a
$104,672,800, 7.11% ESOP Note, for 19 years with a final maturity of July 15,
2018, and a $28,305,658, 7.11% ESOP Note, for 3 years with a final maturity of
July 15, 2002. Principal and interest payments are made according to the
applicable loan schedules. Dividends on the converted common stock and Company
contributions are used to repay the loans.
In December 1994, the Leveraged ESOP issued a total of $17,460,000 of 6.52%,
6.59%, and 6.57% Guaranteed ESOP Notes, Series C, with final maturities of
September 15, 2004, June 1, 2006, and December 1, 2005, respectively. In
November 1999, $8,684,656 of these notes were paid down, leaving a total of
$8,775,344 remaining. In December 1995, the Leveraged ESOP issued a total of
$18,970,000 of 6.74%, 6.75%, 6.72%, and 6.68% Guaranteed ESOP Notes, Series C,
with final maturities of December 1, 2004 and 2005, September 15, 2004, and
December 15, 2003, respectively. In November 1999, $11,771,030 of these notes
were paid down, leaving a total of $7,198,970 remaining. In December 1996, the
Leveraged ESOP issued a total of $20,220,000 of 6.82%, 6.75%, and 6.77%
Guaranteed ESOP Notes, Series C, with final maturities of December 1, 2004,
December 15, 2002, and December 15, 2003, respectively. In November 1999,
$14,181,859 of these notes were paid down, leaving a total of $6,038,141
remaining. In December 1997, the Leveraged ESOP issued a total of $18,350,000 of
6.89%, 6.86%, and 6.81% Guaranteed ESOP Notes, Series C, with final maturities
of December 1, 2004, December 1, 2003, and December 15, 2002, respectively. In
November 1999, $13,600,913 of these notes were paid down, leaving a total of
$4,749,087 remaining. All proceeds were used for prepayment of the Series A and
B Guaranteed ESOP Notes. The terms of the Series C Notes require semiannual
interest payments with lump-sum principal payments at maturity date.
The Series A, Series B, and Series C Notes are collateralized by unallocated
shares of McDonald's common stock, valued at $184,737,000, $91,450,000, and
$55,779,000, respectively, at December 31, 2000. All Notes are guaranteed by
McDonald's Corporation. Holders of the Notes have no recourse against the assets
of the Leveraged ESOP, except for such collateralized shares, cash contributions
to the Leveraged ESOP, and earnings attributable to such collateralized shares
or contributions which were valued at approximately $336,151,000 at December 31,
2000. The unallocated shares of McDonald's common stock may be released from
collateral under certain circumstances without the consent of the holders of the
Notes.
16
McDonald's Corporation Profit Sharing Program
Notes to Financial Statements (continued)
7. Notes Payable (continued)
Following are maturities of the Notes for each of the next five years (in
thousands):
Series A Series B Series C
Notes Notes Notes Total
---------------------------------------------------
2001 $ 5,322 $ 2,681 $ - $ 8,003
2002 2,142 1,079 4,182 7,403
2003 - - 7,181 7,181
2004 - - 7,895 7,895
2005 1,164 586 5,203 6,953
Beyond 2005 55,948 28,185 2,300 86,433
---------------------------------------------------
Total over remaining
life of Notes $64,576 $32,531 $26,761 $123,868
===================================================
8. Administrative Fees
The custodian and investment managers' fees applicable to each investment fund
are netted against the related investment income before investment income is
allocated to participants' accounts. Certain administrative expenses directly
associated with the Program are paid by the Program and charged to participants'
accounts, including salary expenses for certain McDonald's employees. The
Company provides other administrative services to the Program without charge.
9. Income Tax Status
The Program has received a favorable determination letter dated July 6, 1999,
from the Internal Revenue Service (the IRS) stating that the Program is
qualified under Section 401(a) of the Internal Revenue Code (IRC) and that the
Leveraged ESOP component of the Program constitutes an employee stock ownership
plan that meets the requirements of Section 4975 of the IRC. The Trusts
established in connection with the Program appear to be exempt from federal
income taxes.
10. Transactions With Parties In Interest
During 2000 and 1999, the Program received $10,688,000 and $10,691,000,
respectively, in common stock dividends from the Company. In connection with the
Leveraged ESOP refinancing discussed in Note 7, $132,978,458 of debt, at an
interest rate of 7.11%, was issued directly by the Company to the Plan in 1999.
This loan is intended to be an exempt loan under Section 408(b)(3) of ERISA and
Section 4975(d)(3) of the IRC. Fees paid during the year for accounting and
other services rendered by parties in interest were based on customary and
reasonable rates for such services.
17
SIGNATURE
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
McDONALD'S CORPORATION
PROFIT SHARING PROGRAM
By: ADMINISTRATIVE COMMITTEE
Date: June 21, 2001 By: /s/ Eugene J. Stachowiak
----------------------------
Vice President, Trustee, and
Member of the Administrative
Committee
18