Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEET
						(unaudited)
In millions, except per share data						September 30, 2024									December 31, 2023
Assets
Current assets
Cash and equivalents						$	1,221								$	4,579
Accounts and notes receivable						2,460									2,488
Inventories, at cost, not in excess of market						54									53
Prepaid expenses and other current assets						1,176									866
Total current assets						4,912									7,986
Other assets
Investments in and advances to affiliates						2,960									1,080
Goodwill						3,220									3,040
Miscellaneous						5,673									5,618
Total other assets						11,853									9,738
Lease right-of-use asset, net						13,632									13,514
Property and equipment
Property and equipment, at cost						45,178									43,570
Accumulated depreciation and amortization						(19,403)									(18,662)
Net property and equipment						25,775									24,908
Total assets						$	56,172								$	56,147
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings and current maturities of long-term debt						$	596								$	2,192
Accounts payable						944									1,103
Dividend Payable						1,265									—
Lease liability						668									688
Income taxes						786									705
Other taxes						263									268
Accrued interest						433									469
Accrued payroll and other liabilities						1,353									1,434
Total current liabilities						6,308									6,859
Long-term debt						38,990									37,153
Long-term lease liability						13,157									13,058
Long-term income taxes						74									363
Deferred revenues - initial franchise fees						800									790
Other long-term liabilities						855									950
Deferred income taxes						1,166									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 shares						17									17
Additional paid-in capital						9,194									8,893
Retained earnings						64,819									63,480
Accumulated other comprehensive income (loss)						(2,337)									(2,456)
Common stock in treasury, at cost; 944.0 and 937.9 million shares						(76,870)									(74,640)
Total shareholders’ equity (deficit)						(5,177)									(4,707)
Total liabilities and shareholders’ equity (deficit)						$	56,172								$	56,147

See Notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
						Quarters Ended																		Nine Months Ended
						September 30,																		September 30,
In millions, except per share data						2024									2023									2024									2023
Revenues
Sales by Company-owned and operated restaurants						$	2,656								$	2,556								$	7,472								$	7,267
Revenues from franchised restaurants						4,094									4,047									11,756									11,568
Other revenues						124									89									304									252
Total revenues						6,873									6,692									19,532									19,088
Operating costs and expenses
Company-owned and operated restaurant expenses						2,248									2,135									6,358									6,149
Franchised restaurants-occupancy expenses						646									625									1,902									1,842
Other restaurant expenses						104									68									241									188
Selling, general & administrative expenses
Depreciation and amortization						111									97									311									291
Other						536									584									1,748									1,704
Other operating (income) expense, net						39									(25)									129									68
Total operating costs and expenses						3,685									3,484									10,688									10,243
Operating income						3,188									3,208									8,844									8,845
Interest expense						381									341									1,126									1,001
Nonoperating (income) expense, net						(36)									(56)									(90)									(163)
Income before provision for income taxes						2,843									2,924									7,807									8,007
Provision for income taxes						588									606									1,600									1,577
Net income						$	2,255								$	2,317								$	6,207								$	6,430
Earnings per common share-basic						$	3.15								$	3.19								$	8.63								$	8.82
Earnings per common share-diluted						$	3.13								$	3.17								$	8.59								$	8.76
Dividends declared per common share						$	3.44								$	1.52								$	6.78								$	4.56
Weighted-average shares outstanding-basic						716.7									727.2									719.1									729.2
Weighted-average shares outstanding-diluted						720.0									731.6									722.7									733.8

See Notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
						Quarters Ended																		Nine Months Ended
						September 30,																		September 30,
In millions						2024									2023									2024									2023
Net income						$	2,255								$	2,317								$	6,207								$	6,430
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments:
Gain (loss) recognized in accumulated other comprehensive income ("AOCI"), including net investment hedges						188									(145)									101									(90)
Reclassification of (gain) loss to net income						(6)									—									35									—
Foreign currency translation adjustments-net of tax benefit (expense) of $158, $(98), $36 and $(44)						182									(145)									136									(90)
Cash flow hedges:
Gain (loss) recognized in AOCI						(54)									50									(14)									43
Reclassification of (gain) loss to net income						8									1									7									(12)
Cash flow hedges-net of tax benefit (expense) of $15, $(14), $2 and $(8)						(46)									51									(7)									31
Defined benefit pension plans:
Gain (loss) recognized in AOCI						(11)									4									—									10
Reclassification of (gain) loss to net income						—									—									(10)									(10)
Defined benefit pension plans-net of tax benefit (expense) of $0, $0, $1 and $1						(11)									4									(10)									—
Total other comprehensive income (loss), net of tax						125									(90)									119									(59)
Comprehensive income						$	2,380								$	2,227								$	6,326								$	6,371

See Notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
						Quarters Ended												Nine Months Ended
						September 30,												September 30,
In millions						2024						2023						2024						2023
Operating activities
Net income						$	2,255					$	2,317					$	6,207					$	6,430
Adjustments to reconcile to cash provided by operations
Charges and credits:
Depreciation and amortization						532						498						1,544						1,481
Deferred income taxes						(137)						(176)						(501)						(415)
Share-based compensation						40						43						128						138
Other						(33)						(106)						(48)						(183)
Changes in working capital items						79						453						(514)						(328)
Cash provided by operations						2,736						3,029						6,816						7,123
Investing activities
Capital expenditures						(794)						(570)						(1,968)						(1,600)
Purchases of restaurant businesses						(433)						(92)						(595)						(304)
Purchases of equity method investments						—						—						(1,837)						—
Sales of restaurant businesses						54						16						156						96
Sales of property						10						14						32						35
Other						(103)						(301)						(392)						(572)
Cash used for investing activities						(1,266)						(933)						(4,604)						(2,345)
Financing activities
Net short-term borrowings (repayments)						474						6						133						(137)
Long-term financing issuances						—						1,996						1,731						3,050
Long-term financing repayments						—						—						(1,785)						(1,377)
Treasury stock purchases						(469)						(1,054)						(2,321)						(2,203)
Common stock dividends						(1,197)						(1,105)						(3,602)						(3,325)
Proceeds from stock option exercises						132						62						253						211
Other						(27)						(42)						(26)						(7)
Cash used for financing activities						(1,087)						(137)						(5,617)						(3,788)
Effect of exchange rates on cash and cash equivalents						46						(89)						47						(77)
Cash and equivalents increase (decrease)						429						1,871						(3,358)						913
Cash and equivalents at beginning of period						792						1,626						4,579						2,584
Cash and equivalents at end of period						$	1,221					$	3,496					$	1,221					$	3,496

See Notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the nine months ended September 30, 2023
			Common stock issued																								Accumulated other comprehensive income (loss)																		Common stock in treasury									Total shareholders’ equity (deficit)
Additional paid-in capital									Retained earnings			Pensions						Cash flow hedges						Foreign currency translation
In millions, except per share data			Shares			Amount						Shares						Amount
Balance at December 31, 2022			1,660.6						$	17					$	8,547					$	59,544					$	(298)					$	31					$	(2,219)					(929.3)						$	(71,624)					$	(6,003)
Net income																					6,430																																				6,430
Other comprehensive income (loss), net of tax																											—						31						(90)																		(59)
Comprehensive income																																																									6,371
Common stock cash dividends ($4.56 per share)																					(3,325)																																				(3,325)
Treasury stock purchases																																													(7.8)						(2,246)						(2,246)
Share-based compensation															138																																										138
Stock option exercises and other															140																														1.8						71						211
Balance at September 30, 2023			1,660.6						$	17					$	8,825					$	62,649					$	(298)					$	62					$	(2,310)					(935.3)						$	(73,799)					$	(4,855)

For the nine months ended September 30, 2024
			Common stock issued																								Accumulated other comprehensive income (loss)																		Common stock in treasury									Total shareholders’ equity (deficit)
Additional paid-in capital									Retained earnings			Pensions						Cash flow hedges						Foreign currency translation
In millions, except per share data			Shares			Amount						Shares						Amount
Balance at December 31, 2023			1,660.6						$	17					$	8,893					$	63,480					$	(367)					$	(6)					$	(2,083)					(937.9)						$	(74,640)					$	(4,707)
Net income																					6,207																																				6,207
Other comprehensive income (loss), net of tax																											(10)						(7)						136																		119
Comprehensive income																																																									6,326
Common stock cash dividends ($6.78 per share)																					(4,867)																																				(4,867)
Treasury stock purchases																																													(8.3)						(2,310)						(2,310)
Share-based compensation															128																																										128
Stock option exercises and other															173																														2.3						81						254
Balance at September 30, 2024			1,660.6						$	17					$	9,194					$	64,819					$	(377)					$	(13)					$	(1,947)					(944.0)						$	(76,870)					$	(5,177)

See Notes to condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the quarter ended September 30, 2023
			Common stock issued																								Accumulated other comprehensive income (loss)																		Common stock in treasury									Total shareholders’ equity (deficit)
Additional paid-in capital									Retained earnings			Pensions						Cash flow hedges						Foreign currency translation
In millions, except per share data			Shares			Amount						Shares						Amount
Balance at June 30, 2023			1,660.6						$	17					$	8,736					$	61,437					$	(303)					$	11					$	(2,164)					(931.9)						$	(72,733)					$	(4,999)
Net income																					2,317																																				2,317
Other comprehensive income (loss), net of tax																											4						51						(145)																		(90)
Comprehensive income																																																									2,227
Common stock cash dividends ($1.52 per share)																					(1,105)																																				(1,105)
Treasury stock purchases																																													(3.6)						(1,083)						(1,083)
Share-based compensation															43																																										43
Stock option exercises and other															46																														0.2						16						62
Balance at September 30, 2023			1,660.6						$	17					$	8,825					$	62,649					$	(298)					$	62					$	(2,310)					(935.3)						$	(73,799)					$	(4,855)

For the quarter ended September 30, 2024
			Common stock issued																								Accumulated other comprehensive income (loss)																		Common stock in treasury									Total shareholders’ equity (deficit)
Additional paid-in capital									Retained earnings			Pensions						Cash flow hedges						Foreign currency translation
In millions, except per share data			Shares			Amount						Shares						Amount
Balance at June 30, 2024			1,660.6						$	17					$	9,055					$	65,026					$	(367)					$	33					$	(2,129)					(943.3)						$	(76,459)					$	(4,824)
Net income																					2,255																																				2,255
Other comprehensive income (loss), net of tax																											(11)						(46)						182																		125
Comprehensive income																																																									2,380
Common stock cash dividends ($3.44 per share)																					(2,462)																																				(2,462)
Treasury stock purchases																																													(1.6)						(443)						(443)
Share-based compensation															40																																										40
Stock option exercises and other															100																														1.0						33						133
Balance at September 30, 2024			1,660.6						$	17					$	9,194					$	64,819					$	(377)					$	(13)					$	(1,947)					(944.0)						$	(76,870)					$	(5,177)

See Notes to condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

McDonald’s Corporation, the registrant, together with its subsidiaries, is referred to herein as the "Company." The Company, its franchisees and suppliers, are referred to herein as the "System."

Basis of Presentation

The accompanying condensed consolidated financial statements should be read in conjunction with the Consolidated Financial Statements contained in the Company’s December 31, 2023 Annual Report on Form 10-K. In the opinion of management, all normal recurring adjustments necessary for a fair presentation have been included. The results for the quarter and nine months ended September 30, 2024 do not necessarily indicate the results that may be expected for the full year.

Change in Presentation

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.

Restaurant Information

The following table presents restaurant information by ownership type:

Restaurants at September 30,			2024									2023
Conventional franchised			21,864									21,761
Developmental licensed			9,077									8,450
Foreign affiliated			9,814									8,843
Total Franchised			40,755									39,054
Company-owned and operated			2,064									2,144
Total Systemwide restaurants			42,819									41,198

The results of operations of restaurant businesses purchased and sold in transactions with franchisees were not material either individually or in the aggregate to the accompanying condensed consolidated financial statements.

Per Common Share Information

Diluted earnings per common share is calculated as net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of share-based compensation, calculated using the treasury stock method, of 3.3 million shares and 4.4 million shares for the quarters ended 2024 and 2023, respectively, and 3.6 million shares and 4.6 million shares for the nine months ended 2024 and 2023, respectively. Share-based compensation awards that would have been antidilutive, and therefore were not included in the calculation of diluted weighted-average shares, totaled 2.0 million shares and 1.2 million shares for the quarters ended 2024 and 2023, respectively, and 2.0 million shares and 2.1 million shares for the nine months ended 2024 and 2023, respectively.

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

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 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.

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 $146 million of restructuring charges related to Accelerating the Organization in the nine months ended September 30, 2024. These charges were recorded in the Other operating (income) expense, net line within the consolidated statement of income, and primarily recorded within the Corporate segment. For the period presented, 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.

The following table summarizes the balance of accrued expenses related to this strategic initiative (in millions):

			Employee Termination Benefits			Costs to Terminate Contracts			Professional Services and Other Costs			Total
2024
Accrued Balance at Beginning of Year			$	41		$	11		$	7		$	59
Restructuring Costs Incurred			—			—			44			44
Cash Payments			(14)			(5)			(44)			(63)
Other Non-Cash Items			—			—			(1)			(1)
Accrued Balance at March 31, 2024			$	27		$	6		$	6		$	39
Restructuring Costs Incurred			(1)			—			58			57
Cash Payments			(5)			(1)			(50)			(56)
Other Non-Cash Items			—			—			—			—
Accrued Balance at June 30, 2024			$	21		$	5		$	14		$	40
Restructuring Costs Incurred			(1)			—			47			46
Cash Payments			(3)			(1)			(41)			(45)
Other Non-Cash Items			—			—			1			1
Accrued Balance at September 30, 2024			$	17		$	4		$	21		$	42

The Company continues to evolve its ways of working by driving efficiency and effectiveness across the organization, primarily led by its Global Business Services 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 expects to incur approximately $250 million of restructuring charges in 2024, primarily related to professional services costs.

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’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.

			September 30, 2024																		December 31, 2023
In Millions			Percentage Ownership						Fair Value (Level 1)						Carrying Amount						Percentage Ownership						Fair Value (Level 1)						Carrying Amount
Grand Foods Holding			48		%				N/A						$	2,140					20		%				N/A						$	238
McDonald's Japan Holdings Co., Ltd			35		%				$	2,236					$	630					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 September 30, 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 $1.4 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 nine months ended September 30, 2024 and September 30, 2023, respectively.

			Nine Months Ended September 30,
In Millions			2024						2023
Revenue			$	402					$	364
Equity in Earnings			$	107					$	84
Accounts Receivable			$	125					$	114
Dividends Received			$	13					$	14

Income Taxes

The effective income tax rate was 20.7% and 20.7% for the quarters ended 2024 and 2023, respectively, and 20.5% and 19.7% for the nine months ended 2024 and 2023, respectively.

Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value. Fair value disclosures are reflected in a three-level hierarchy, maximizing the use of observable inputs and minimizing the use of unobservable inputs. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date and are defined as follows:

• Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market.

• Level 2 – inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

• Level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability.

There were no significant changes to the valuation techniques used to measure fair value as described in the Company's December 31, 2023 Annual Report on Form 10-K.

At September 30, 2024, the fair value of the Company’s debt obligations was estimated at $38.8 billion, compared to a carrying amount of $39.6 billion. The fair value of debt obligations is based upon quoted market prices, classified as Level 2 within the valuation hierarchy. The carrying amount of cash and equivalents and notes receivable approximate fair value.

Financial Instruments and Hedging Activities

The Company is exposed to global market risks, including the effect of changes in interest rates and foreign currency fluctuations. The Company uses foreign currency denominated debt and derivative instruments to mitigate the impact of these changes. The Company does not hold or issue derivatives for trading purposes.

The following table presents the fair values of derivative instruments included on the condensed consolidated balance sheet:

			Derivative Assets																		Derivative Liabilities
In millions			Balance Sheet Classification						September 30, 2024						December 31, 2023						Balance Sheet Classification						September 30, 2024						December 31, 2023
Derivatives designated as hedging instruments
Foreign currency			Prepaid expenses and other current assets						$	4					$	9					Accrued payroll and other liabilities						$	(79)					$	(37)
Interest rate			Prepaid expenses and other current assets						$	4					$	4					Accrued payroll and other liabilities						$	—					$	(4)
Foreign currency			Miscellaneous other assets						$	—					$	2					Other long-term liabilities						$	(42)					$	(14)
Interest rate			Miscellaneous other assets						$	—					$	—					Other long-term liabilities						$	(39)					$	(58)
Total derivatives designated as hedging instruments									$	8					$	15											$	(160)					$	(113)
Derivatives not designated as hedging instruments
Equity			Prepaid expenses and other current assets						$	141					$	—					Accrued payroll and other liabilities						$	—					$	—
Foreign currency			Prepaid expenses and other current assets						$	—					$	6					Accrued payroll and other liabilities						$	(6)					$	(5)
Equity			Miscellaneous other assets						$	—					$	189
Total derivatives not designated as hedging instruments									$	141					$	195											$	(6)					$	(5)
Total derivatives									$	149					$	210											$	(166)					$	(118)

The following table presents the pre-tax amounts from derivative instruments affecting income and AOCI for the nine months ended September 30, 2024 and 2023, respectively:

			Location of gain or loss recognized in income on derivative									Gain (loss) recognized in AOCI															Gain (loss) reclassified into income from AOCI															Gain (loss) recognized in income on derivative
In millions												2024									2023									2024									2023									2024									2023
Foreign currency			Nonoperating income/expense									$	(25)								$	33								$	(10)								$	15
Interest rate			Interest expense									$	7								$	22								$	1								$	1
Cash flow hedges												$	(18)								$	55								$	(9)								$	16
Foreign currency denominated debt			Nonoperating income/expense									$	(133)								$	157
Foreign currency derivatives			Nonoperating income/expense									$	(18)								$	65
Foreign currency derivatives(1)			Interest expense																																													$	32								$	18
Net investment hedges												$	(151)								$	222																										$	32								$	18
Foreign currency			Nonoperating income/expense																																													$	(10)								$	7
Equity			Selling, general & administrative expenses																																													$	(2)								$	5
Undesignated derivatives																																																$	(12)								$	12
(1)The amount of gain (loss) recognized in income related to components excluded from effectiveness testing.

Fair Value Hedges

The Company enters into fair value hedges to reduce the exposure to changes in fair values of certain liabilities. The Company enters into fair value hedges that convert a portion of its fixed rate debt into floating rate debt by use of interest rate swaps. At September 30, 2024, the carrying amount of fixed-rate debt that was effectively converted was an equivalent notional amount of $795 million, which included a decrease of $39 million of cumulative hedging adjustments. For the nine months ended September 30, 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.

Cash Flow Hedges

The Company enters into cash flow hedges to reduce the exposure to variability in certain expected future cash flows. To protect against the reduction in value of forecasted foreign currency cash flows (such as royalties denominated in foreign currencies), the Company uses foreign currency forwards to hedge a portion of anticipated exposures. The hedges cover up to the next 18 months for certain exposures and are denominated in various currencies. As of September 30, 2024, the Company had derivatives outstanding with an equivalent notional amount of $2.2 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 September 30, 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 September 30, 2024, the $12 million in cumulative cash flow hedging losses, after tax, is not expected to have a significant effect on the Company's earnings over the next 12 months.

Net Investment Hedges

The Company uses foreign currency denominated debt (third-party and intercompany) and foreign currency derivatives to hedge its investments in certain foreign subsidiaries and affiliates. Realized and unrealized translation adjustments from these hedges are included in shareholders' equity in the foreign currency translation component of Other comprehensive income ("OCI") and offset translation adjustments on the underlying net assets of foreign subsidiaries and affiliates, which also are recorded in OCI. As of September 30, 2024, $14.3 billion of the Company's third-party foreign currency denominated debt, $560 million of the Company's intercompany foreign currency denominated debt and $1.8 billion of foreign currency derivatives were designated to hedge investments in certain foreign subsidiaries and affiliates.

Undesignated Hedges

The Company enters into certain derivatives that are not designated for hedge accounting. Therefore, the changes in the fair value of these derivatives are recognized immediately in earnings together with the gain or loss from the hedged balance sheet position. As an example, the Company enters into equity derivative contracts, including total return swaps, to hedge market-driven changes in certain of its supplemental benefit plan liabilities. The Company may also use certain investments to hedge changes in these liabilities. Changes in the fair value of these derivatives or investments are recorded in Selling, general & administrative expenses together with the changes in the supplemental benefit plan liabilities. In addition, the Company uses foreign currency forwards to mitigate the change in fair value of certain foreign currency denominated assets and liabilities. The changes in the fair value of these derivatives are recognized in Nonoperating (income) expense, net, along with the currency gain or loss from the hedged balance sheet position.

Credit Risk

The Company is exposed to credit-related losses in the event of non-performance by its derivative counterparties. The Company did not have significant exposure to any individual counterparty at September 30, 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 September 30, 2024, the Company was required to post $122 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.

Franchise Arrangements

Revenues from franchised restaurants consisted of:

			Quarters Ended												Nine Months Ended
			September 30,												September 30,
In millions			2024						2023						2024						2023
Rents			$	2,609					$	2,570					$	7,512					$	7,348
Royalties			1,463						1,462						4,191						4,175
Initial fees			22						16						53						45
Revenues from franchised restaurants			$	4,094					$	4,047					$	11,756					$	11,568

Segment Information

The Company operates under an organizational structure with the following global business segments reflecting how management reviews and evaluates operating performance:

• U.S. - the Company's largest market. The segment is 95% franchised as of September 30, 2024.

• International Operated Markets - comprised of markets or countries in which the Company owns and operates and franchises restaurants, including Australia, Canada, France, Germany, Italy, Poland, Spain and the U.K. The segment is 89% franchised as of September 30, 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 September 30, 2024.

The following table presents the Company’s revenues and operating income by segment:

			Quarters Ended												Nine Months Ended
			September 30,												September 30,
In millions			2024						2023						2024						2023
Revenues
U.S.			$	2,739					$	2,704					$	7,997					$	7,893
International Operated Markets			3,309						3,300						9,443						9,251
International Developmental Licensed Markets & Corporate			825						688						2,092						1,944
Total revenues			$	6,873					$	6,692					$	19,532					$	19,088
Operating Income
U.S.			$	1,493					$	1,478					$	4,400					$	4,268
International Operated Markets			1,602						1,585						4,459						4,295
International Developmental Licensed Markets & Corporate			93						146						(15)						282
Total operating income			$	3,188					$	3,208					$	8,844					$	8,845

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Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued and filed with the Securities and Exchange Commission ("SEC"). There were no subsequent events that required recognition or disclosure.