NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - DESCRIPTION OF PLAN
General
: The McDonalds Corporation Profit Sharing and Savings Plan (the Plan) was amended and restated in its entirety as
of January 1, 2015. The Plan has been amended one time subsequent to this date, on December 10, 2015.
The Plan is administered by a
committee of officers (Administrative Committee) appointed by the Chief Executive Officer of McDonalds Corporation (the Company or McDonalds). Participants should refer to the Summary Plan Description and Prospectus for a complete
description and up-to-date information.
Eligibility
: In order to participate in the 401(k) feature of the Plan, all eligible
employees must be at least 21 years of age, have a valid Social Security number, and be on the U.S. payroll of the Company or a participating employer. The term Company includes McDonalds Corporation and all participating employers
in describing eligibility and contributions below.
Restaurant management employees and staff employees (including part-time staff
employees) are eligible to make 401(k) contributions, up to 50% of eligible compensation, beginning the first day of the month after completing one full calendar month of employment. All other employees are eligible to make 401(k) contributions
after one year of eligibility service as defined by the Plan document. Restaurant management employees, who are not contributing to the Plan, are enrolled automatically at a 1% contribution level as soon as they have completed one year of service
and attained age 21. Matching contributions are provided to eligible employees after one year of eligibility service as defined by the Plan document.
Contributions
: Each year, participants may contribute up to 50% of their eligible pre-tax annual compensation, as defined by the Plan subject to Internal Revenue Service (IRS) annual limits. Highly
compensated employees under IRS rules are not able to make 401(k) contributions in their second calendar year of employment until the first of the month on or after they complete one anniversary year with at least 1,000 hours of service under the
Plan.
Participants who have attained age 50 before the end of the Plan year are eligible to make catch-up contributions subject to IRS
limits, and in addition, may contribute more than 50% if payroll tax and other withholding requirements are met. In accordance with Plan procedures, participants may roll over money into the Plan if it is from a: Qualified Plan, Section 403(b)
tax-sheltered annuity plan, Section 457 deferred compensation plan of a state or local government entity, SIMPLE 401(k) plan, Section 403(a) annuity plan, Traditional IRA, SIMPLE IRA with at least two years participation, IRA set up to
receive a distribution from an eligible employer plan or Federal thrift plan under section 7701(j).
Participants direct the investment of
their contributions and Company contributions into various investment options offered by the Plan. The investment funds under the Plan are Stable Value Fund, Intermediate Bond Fund, Global Bond Fund, Blended Stock/Bond Fund, Diversified Stock Fund,
S&P 500 Index Fund, International Stock Fund, International Stock Index Fund, Real Estate Securities Fund, Small Cap Index Fund, Aggressive Stock Fund, McDonalds Common Stock Fund, and the McDonalds ESOP Stock Fund. No more than 20%
of a participants future 401(k) contributions may be invested in the McDonalds Common Stock Fund.
The Company matches (after one
year of eligibility service and attainment of age 21) 300% of the first 1% of eligible compensation (as defined by the Plan) and 100% of the next 4% of eligible compensation that a participant contributes to the Plan. ESOP shares, to the extent
available, are used to make matching contributions.
A discretionary profit-sharing match may be contributed at the option of the Compensation
Committee of the Board of Directors of the Company (the Board). For the year ended December 31, 2015, the Board approved a 2% discretionary profit sharing match to the Plan. The discretionary match was contributed after the end of the year, and
allocated to participants eligible to share in matching contributions based on participant 401(k) contributions up to 1% of eligible compensation.
(Continued)
5.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - DESCRIPTION OF PLAN
(Continued)
Participant Accounts
: Participants can elect, on a daily basis, to have their account balances,
as well as future deferrals and Company contributions, invested in 1% increments in one or any combination of the Plans investment funds, including Company stock. A participant may change how his/her existing account balance is invested at any
time, but a participant may not transfer any amount into and out of the same fund more than two times within any rolling 90 day period. Participants are always able to transfer out of any fund into the Stable Value Fund even if they exceed this
limit. For participants who are automatically enrolled, all contributions to the plan, both participant and company contributions, are invested in the Blended Stock/Bond Fund and after 30 days are managed by Guided Choice, a managed account
provider, unless the participant makes an investment election.
Each participants account is credited with the participants
contribution and allocations of (a) the Companys matching contribution and discretionary profit sharing match (if any) and (b) Plan earnings, and charged with an allocated portion of investment expenses. Allocations are based on
participant earnings or account balances as defined in the Plan.
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 McDonalds Series B Convertible Preferred Stock. The Preferred shares were redeemed by the Company for Common Stock in
1992 and 1995. In April 1991, the leveraged ESOP borrowed $100 million to purchase 12,075,468 shares of McDonalds Series C Convertible Preferred Stock, which were redeemed by the Company for Common Stock in 1995.
The Company is required to make sufficient cash contributions to the Plan to pay the principal and interest on the loans. Released ESOP shares are used
to make matching Company allocations. The ESOP shares allocated to participant accounts are held by The Northern Trust Company (Northern Trust), the trustee of the Plan (Trustee). The unallocated ESOP shares are also held at Northern Trust as
collateral for loans from the Company to the Plan. Unallocated ESOP dividends are invested in an interest-bearing account until the note payment is due. In 1999, the Leveraged ESOP loans were refinanced as discussed in Note 5, so that the last
loan payment and allocation of ESOP Common Stock will occur in 2018.
During 2015, 382,121 shares were released from the unallocated ESOP
shares with a fair value of approximately $37,540,000.
Vesting
: All participants accounts under the Plan are 100% vested.
Diversification
: All participants can elect to fully diversify all accounts in the Plan.
Loans
: Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their
vested balance reduced by the participants highest outstanding loan balance during the preceding 12-month period. All loans are currently subject to a $75 processing fee. Loan terms range from 12 months up to 4.5 years. Participants may not
have more than one loan from the Plan outstanding at any time. The loans are secured by the balance in the participants account and bear interest based on the prime rate in effect on the first day of the month in which the loan is requested,
plus 1%. Principal and interest are paid ratably through payroll deductions.
Payment of Benefits
:
Participants who terminate their employment with the Company and all other companies or entities that are owned or controlled 80% or more by the Company are entitled to receive the balance in their Plan accounts within a reasonable time following
their termination. A terminated participant with benefits in excess of $1,000 will not receive a distribution from the Plan until age 70
1
/
2
unless an earlier distribution is elected.
(Continued)
6.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 1 - DESCRIPTION OF PLAN
(Continued)
Such accounts will continue to share in the allocation of investment income, and accounts will continue
to be invested in accordance with the participants investment elections (See Note 1, Contributions). Distributions may be in the form of a lump sum or installment payments or a combination of lump sum and installment payments.
Participants who terminate employment after satisfying the requirements to make deferrals and are subsequently rehired can resume making deferrals as
soon as administratively feasible.
Forfeitures
: Amounts unclaimed for two years are considered forfeitures. These forfeitures,
resulting from unclaimed amounts, are used to make a portion of the Company contribution.
In-Service Withdrawals
:
Participants 59
1
/
2
or older and terminated participants may withdraw all or any part of their account balances under the Plan at any time. Participants may also withdraw up to 100% of their ESOP, Profit Sharing, Investment
Savings, Stock Sharing, and Rollover accounts at any time.
Pass Through Dividend Election
: Participants may choose whether
dividends earned on shares of McDonalds common stock will be paid directly to them in cash or reinvested in their accounts in McDonalds stock.
Voting
: Participants may direct the Trustee to vote shares of McDonalds stock credited to their accounts as well as those shares not voted by other participants and unallocated shares held in
the ESOP feature of the Plan.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
: The financial statements of the Plan are prepared on the accrual basis of accounting.
Use of Estimates
: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires the Administrative Committee to make estimates and assumptions that affect the reported amounts of assets, liabilities, and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those
estimates.
Reclassifications
: Certain amounts have been reclassified to conform to the current year presentation.
Adoption of New Accounting Standards
: In May and July 2015, the Financial Accounting Standards Board (FASB) amended existing guidance
related to the measurement and reporting disclosure of fully benefit-responsive investment contracts (FBRICs) and certain investment disclosures. The new guidance requires FBRICs to be measured, presented, and disclosed only at contract value.
Adoption of the new guidance resulted in removal of FBRICs and investments for which fair value is measured at net asset value (or its equivalent) from the fair value hierarchy, the reporting of investments within the fair value hierarchy by general
type rather than by classes of investments, and other changes in investment disclosure requirements. The new guidance also eliminates the need to disclose individual investments with a value equal to or greater than 5% of net assets available for
benefits and simplifies the disclosure of net appreciation or depreciation in fair value of investments. The Plan elected early adoption of these standards, each of which requires retrospective application to all periods presented. The adoption of
these standards had no effect on the Plans net assets available for benefits or changes therein. However, Investments at fair value of $456,327,000 from the amount previously reported as of December 31, 2014, were reclassified as
investments at contract value and therefore, no adjustment from fair value to contract value is necessary.
(Continued)
7.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Investment Valuation
: Other than fully benefit-responsive investment contracts which are valued
at contract value, the Plans investments are reported at fair value. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Fair value is the price that would be received by the Plan for an asset or paid by the Plan to transfer a liability (an exit price) in an
orderly transaction between market participants on the measurement date in the Plans principal or most advantageous market for the asset or liability. Fair value measurements are determined by maximizing the use of observable inputs and
minimizing the use of unobservable inputs when measuring fair value. The hierarchy places the highest priority on unadjusted quoted market prices in active markets for identical assets or liabilities (level 1 measurements) and gives the lowest
priority to unobservable inputs (level 3 measurements). The three levels of inputs within the fair value hierarchy are defined as follows:
|
|
|
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the Plan has the ability to access as of the measurement
date.
|
|
|
|
Level 2: Significant other observable inputs other than level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
|
|
|
Level 3: Significant unobservable inputs that reflect the Plans own assumptions about the assumptions that market participants would use in
pricing an asset or liability.
|
In some cases, a valuation technique used to measure fair value may include inputs from
multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The following are descriptions of the valuation methods and assumptions used for investments of the Plan.
Cash:
Interest Bearing Cash held at Northern Trust is valued at quoted market prices (level 1 inputs).
U.S. Treasury securities
: Fair values of U.S. Treasury bonds reflect the closing price reported in the active market in which the security is traded (level 1 inputs).
Mortgage-backed securities
: Mortgage-backed securities (MBS) are types of asset-backed securities that are secured by a mortgage, or more commonly
a collection (pool) of mortgages. The mortgages are sold to a group of individuals (a government agency or investment bank) that securitizes, or packages, the loans together into a security that can be sold to investors. The
mortgages of MBS may be residential or commercial, depending on whether it is an Agency MBS or a Non-Agency MBS. The structure of an MBS may be known as pass-through, where the interest and principal payments from the borrower or
homebuyer pass through it to the MBS holder, or it may be more complex, made up of a pool of other MBSs. Other types of MBS include collateralized mortgage obligations (CMOs, often structured as real estate mortgage investment conduits) and
collateralized debt obligations (CDOs). These are classified within level 2 of the fair value hierarchy. Fair value is estimated based on models that consider the estimated cash flows of each debt tranche of the issuer, establish a benchmark yield,
and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche including, but not limited to, the prepayment speed assumptions and attributes of the collateral.
(Continued)
8.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Corporate bonds
: Corporate bonds are debt securities issued by corporations and sold to investors
and are valued using recently executed transactions, market price quotations (where observable), bond spreads or credit default swap spreads. When observable price quotations are not available, fair value is determined based on cash flow models with
yield curves, bond, or single-name credit default swap spreads and recovery rates based on collateral values as key inputs. Corporate bonds are categorized within level 2 of the fair value hierarchy.
Mutual funds:
The fair values of mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held by the Plan are
open-end mutual funds that are registered with the Securities and Exchange Commission (level 1 inputs). These funds are required to publish their daily net asset value (NAV) and to transact at that price. The mutual funds held by the
Plan are deemed to be actively traded.
American Depository Receipts, Common Stocks including McDonalds common stock
: The fair
values of American Depository Receipts (ADR) and publicly traded common stocks are determined by obtaining quoted prices on nationally recognized securities exchanges (level 1 inputs).
Collective trusts
: The fair values of investments in collective trusts are valued as determined by the custodian based on their net asset values and recent transaction prices. The investment
objectives and underlying investments of the collective trusts vary, with some holding short term investments for principal preservation, diversified portfolios of domestic or international stocks, some holding securities of companies in a
particular industry sectors, some holding short-term and/or medium-term corporate, government and government agency bonds, some holding a blend of asset back securities and corporate bonds, and others holding a blend of various domestic and
international stocks. Each collective trust provides for daily redemptions by the Plan at reported net asset values per share, with no advance notice requirement.
(Continued)
9.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Investments measured at fair value on a recurring basis as of December 31, 2015 and 2014 are
summarized below (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of December 31, 2015
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
Investment Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2
|
|
US Treasury Securities
|
|
|
20,978
|
|
|
|
|
|
|
|
|
|
|
|
20,978
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
24,985
|
|
|
|
|
|
|
|
24,985
|
|
Corporate bonds
|
|
|
|
|
|
|
11,104
|
|
|
|
|
|
|
|
11,104
|
|
Mutual Funds
|
|
|
227,659
|
|
|
|
|
|
|
|
|
|
|
|
227,659
|
|
ADR & common stock, other than McDonalds Corp.
|
|
|
307,420
|
|
|
|
|
|
|
|
|
|
|
|
307,420
|
|
McDonalds Corp. common stock
|
|
|
1,296,957
|
|
|
|
|
|
|
|
|
|
|
|
1,296,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets in the fair value hierarchy
|
|
|
1,853,016
|
|
|
|
36,089
|
|
|
|
|
|
|
|
1,889,105
|
|
Investments measured at net asset value (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collective Trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
831,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value
|
|
$
|
1,853,016
|
|
|
$
|
36,089
|
|
|
$
|
|
|
|
$
|
2,720,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets at Fair Value as of December 31, 2014
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
Investment Type
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury securities
|
|
$
|
31,582
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
31,582
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
16,519
|
|
|
|
|
|
|
|
16,519
|
|
Corporate bonds
|
|
|
|
|
|
|
7,006
|
|
|
|
|
|
|
|
7,006
|
|
Mutual Funds
|
|
|
274,031
|
|
|
|
|
|
|
|
|
|
|
|
274,031
|
|
ADR & common stock, other than McDonalds Corp.
|
|
|
335,716
|
|
|
|
|
|
|
|
|
|
|
|
335,716
|
|
McDonalds Corp. common stock
|
|
|
1,158,742
|
|
|
|
|
|
|
|
|
|
|
|
1,158,742
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets in the fair value hierarchy
|
|
|
1,800,071
|
|
|
|
23,525
|
|
|
|
|
|
|
|
1,823,596
|
|
Investments measured at net asset value (a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collective Trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
896,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at fair value
|
|
$
|
1,800,071
|
|
|
$
|
23,525
|
|
|
$
|
|
|
|
$
|
2,720,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value
hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.
|
(Continued)
10.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Participant Loans
: Participant loans are reported at their unpaid principal balance plus any
accrued but unpaid interest, with no allowance for credit losses, as repayments of principal and interest are received through payroll deductions and the notes are collateralized by the participants account balances.
Fair Value of Long-Term Debt
: The fair value of the Plans long-term debt is estimated based on the current rates available to the Plan for
debt of the same remaining maturities (level 2). As of December 31, 2015, the estimated fair value and carrying value of the Plans long-term debt was $10,145,000 and $9,233,000 respectively. As of December 31, 2014, the estimated
fair value and carrying value of the Plans long-term debt was $17,929,000 and $15,971,000, respectively.
Unallocated Net Assets
Available for Benefits
: Unallocated net assets available for benefits represents the fair value of shares of McDonalds common stock purchased through the ESOP which have not been released for allocation to participants accounts
offset by the balance of the debt issued by the ESOP. Unallocated net assets available for benefits are reduced by the fair value of the shares as they are allocated to participants as Company matching contributions.
Payment of Benefits
: Benefits are recorded at the time of payment.
NOTE 3 - FULLY BENEFIT RESPONSIVE INVESTMENT CONTRACTS
The Plan investments include a
Stable Value Fund, managed by JPMorgan, which is a unitized fund established solely for the investment of assets of the Plan. The account is credited with earnings on the underlying investments and charged for Plan withdrawals and administrative
expenses. The Stable Value Fund holds synthetic guaranteed investment contracts, with collective funds, US treasuries, mortgage-backed securities, corporate bonds and short-term investments as underlying investments. At December, 31, 2014, the
Stable Value fund consisted of synthetic guaranteed investment contracts with collective funds as underlying investments. These synthetic investment contracts are included in the financial statements at contract value. Contract value represents
contributions made under the contracts, plus earnings, less participant withdrawals and administrative expenses.
The wrapper contracts within
the Stable Value Fund specify certain conditions under which distributions from the contracts would be payable at amounts below contract value. Such circumstances include the termination of the Plan, a material adverse change to the provisions of
the Plan, if the employer elects to withdraw from a wrapper contract in order to switch to a different investment provider, or if the terms of a successor plan (in the event of the spin-off or sale of a division) do not meet the wrapper contract
issuers underwriting criteria for issuance of a clone wrapper contract. The contracts limit the circumstances under which the issuer may terminate the contracts. Examples of circumstances which would allow the issuer to terminate the contracts
include the Plans loss of its qualified status, un-cured material breaches of responsibilities, or material and adverse changes to the provisions of the Plan. If one of these events were to occur, the issuer could terminate the contracts at
the market value of the underlying investments. Currently, the occurrence of an event that would cause the Plan to transact contract distributions at less than contract value is not probable.
The crediting interest rates of the contracts are based on agreed-upon formulas with the issuers, as defined in the contract agreements, but cannot be less than zero. The interest rates are reviewed on a
quarterly basis for resetting. The key factors that influence future interest crediting rates could include the following: the level of market interest rates; the amount and timing of participant contributions; transfers and withdrawals into/out of
the contracts; and the duration of the underlying investments backing the contracts.
(Continued)
11.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 4 - NONPARTICIPANT-DIRECTED INVESTMENTS
The nonparticipant directed net assets of the Plan and changes therein consist of those reflected in the financial statements as
ESOP Unallocated Account.
NOTE 5 - 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 refinanced the outstanding debt
for 19 years with a final maturity of July 15, 2018.The remaining outstanding ESOP Notes are loans directly between the ESOP and the Company. 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.
The ESOP debt is collateralized by unallocated shares of
McDonalds common stock, valued at $60,111,297 at December 31, 2015. The Company has no recourse against the assets of the ESOP, except for such collateralized shares, cash contributions to ESOP, and earnings attributable to such
collateralized shares or contributions. The unallocated shares of McDonalds common stock may be released from collateral under certain circumstances without the consent of the Company.
Following are maturities of the ESOP debt for each of the next three years (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
Notes
|
|
|
Series B
Notes
|
|
|
Total
|
|
2016
|
|
$
|
2,721
|
|
|
$
|
1,371
|
|
|
$
|
4,092
|
|
2017
|
|
|
1,962
|
|
|
|
988
|
|
|
|
2,950
|
|
2018
|
|
|
1,457
|
|
|
|
734
|
|
|
|
2,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total over remaining life of notes
|
|
$
|
6,140
|
|
|
$
|
3,093
|
|
|
$
|
9,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6 - PLAN TERMINATION
Although it has not expressed any intent to do so, the McDonalds Corporation has the right under the Plan to allow an employer to discontinue its contributions at any time and the Company may
terminate the Plan subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).
NOTE 7 - ADMINISTRATIVE FEES
The investment managers fees applicable to each investment fund are netted against the related investment income before
investment income is allocated to participants accounts. Fees for managed account services provided by an independent third-party are charged directly to participant accounts only for individuals that use this service. Revenue sharing received
from investments in mutual funds is returned to participants invested in those funds. Administrative fees associated with the Plan are paid by the Company.
(Continued)
12.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 8 - INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by letter dated September 24, 2013, that the Plan and related trust are designed, including amendments adopted through
October 18, 2012, in accordance with applicable sections of the Internal Revenue Code (IRC). Although the Plan has been amended and restated, effective January 1, 2015, to reflect the change to a corporate trustee, Plan management believes
that the Plan is designed and being operated in compliance with the applicable requirements of the IRC. Therefore, they continue to believe that the Plan is qualified and the related trust was tax-exempt as of the financial statement date.
Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan.
Plan management has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2015 and 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset)
or disclosure in the financial statements. The plan is subject to routine audits by taxing authorities; however, there are currently no audits for any tax periods in progress.
NOTE 9 - TRANSACTIONS WITH PARTIES IN INTEREST
During 2015, the Plan received $39,468,951
in common stock dividends from the Company. The Leveraged ESOP loan discussed in Note 5, is intended to be an exempt loan under Section 408(b)(3) of ERISA and Section 4975(d)(3) of the IRC.
During 2015, fees totaling $3,402,000 were paid by the Plan to the managers of the investments held in the Plan and an advisor to Plan participants.
These transactions qualify as party-in-interest transactions.
Certain Plan assets are held in participant loans or investments issued by
Northern Trust, therefore these transactions qualify as party-in-interest. The Plan holds investments issued by various investment managers of the Plan; these qualify as party-in-interest. A portion of the Plans assets are also invested in
Company stock.
Certain administrative functions are performed by officers or employees of the Company. No such officer or employee receives
compensation from the Plan.
NOTE 10 - RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, liquidity and credit risks. Due to the level of risk associated with
certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants account balances and the amounts
reported in the statements of net assets available for benefits.
NOTE 11 - FORM 5500 RECONCILIATION
Following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2015 and 2014 to net assets per the
Form 5500 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
Net assets available for benefits per the financial statements
|
|
$
|
3,202,394
|
|
|
$
|
3,197,568
|
|
Adjustment from contract value to fair value for fully benefit responsive investment contracts
|
|
|
(3,569
|
)
|
|
|
1,238
|
|
|
|
|
|
|
|
|
|
|
Net assets per the Form 5500
|
|
$
|
3,198,825
|
|
|
$
|
3,198,806
|
|
|
|
|
|
|
|
|
|
|
(Continued)
13.
McDONALDS CORPORATION PROFIT SHARING AND SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2015 and 2014
NOTE 11 - FORM 5500 RECONCILIATION
(Continued)
Following is a reconciliation of the increase (decrease) in net assets available for benefits per the
financial statements for the year ended December 31, 2015, to the net income per the Form 5500 (amounts in thousands):
|
|
|
|
|
Increase in net assets available for benefits per the financial statements
|
|
$
|
4,826
|
|
Change in the adjustment from contract value to fair value for fully benefit responsive investment contracts at December 31,
2015
|
|
|
(4,807
|
)
|
|
|
|
|
|
Net income per the Form 5500
|
|
$
|
19
|
|
|
|
|
|
|
NOTE 12 - SUBSEQUENT EVENTS
Effective January 1, 2016, Fiduciary Counselors will act as independent fiduciary to oversee certain aspects of the McDonalds Common Stock Fund and the McDonalds ESOP Stock Fund, under
the Plan. Fees for Fiduciary Counselors are netted against the related investment income for McDonalds Stock for individuals who invest in company shares.
For QDROs (Qualified Domestic Relations Order) received on or after January 1, 2016 there will be a QDRO review and processing fee of $550 for each QDRO. The $550 fee will be subtracted from the
divorced participants account unless the QDRO states the fee is to be split between the participant and the alternate payee.
(Continued)
14.