~~Changes in Systemwide sales are driven by comparable sales and net restaurant unit expansion. The Company expects net restaurant additions to add approximately 1 percentage point to 2016~~


•	Changes in Systemwide sales are driven by comparable sales and net restaurant unit expansion. The Company expects net restaurant additions to add approximately 1 percentage point to 2017 Systemwide sales growth (in constant currencies).

The Company does not generally provide specific guidance on changes in comparable sales. However, as a perspective, assuming no change in cost structure, a 1 percentage point change in comparable sales for either the U.S. or the International Lead ~~Markets~~segment would change annual diluted earnings per share by about 4 to 5 cents.

With about 75% of McDonald's grocery bill comprised of 10 different commodities, a basket of goods approach is the most comprehensive way to look at the Company's commodity costs. For the full-year 2016, costs for the total basket of goods are expected to decrease about 4.5-5.0% in the U.S. and remain relatively flat in the International Lead Markets.

~~The Company expects full-year 2016 selling, general and administrative expenses to be relatively flat in constant currencies. Some volatility may be experienced between quarters.~~

Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full-year 2016 to increase about 40-45% compared with 2015 due to higher average debt balances in connection with the Company's previously-announced plans to optimize its capital structure.

A significant part of the Company's operating income is generated outside the U.S., and about 40% of its total debt is denominated in foreign currencies. Accordingly, earnings are affected by changes in foreign currency exchange rates, particularly the Euro, British Pound, Australian Dollar and Canadian Dollar. Collectively, these currencies represent approximately 65% of the Company's operating income outside the U.S. If all four of these currencies moved by 10% in the same direction, the Company's annual diluted earnings per share would change by up to 25 cents.

The Company expects the effective income tax rate for the full-year 2016 to be in the 31-33% range. Some volatility may be experienced between the quarters resulting in a quarterly tax rate outside of the annual range.


•	With about 75% of McDonald's grocery bill comprised of 10 different commodities, a basket of goods approach is the most comprehensive way to look at the Company's commodity costs. For the full-year 2017, costs for the total basket of goods are expected to increase about 1% in the U.S. and increase about 2% in the International Lead segment.


•	The Company expects full-year 2017 selling, general and administrative expenses to decrease about 7% in constant currencies.


•	Based on current interest and foreign currency exchange rates, the Company expects interest expense for the full-year 2017 to increase about 5% compared with 2016 due to higher average debt balances.

•

A significant part of the Company's operating income is generated outside the U.S., and about 35% of its total debt is denominated in foreign currencies. Accordingly, earnings are affected by changes in foreign currency exchange rates, particularly the Euro, British Pound, Australian Dollar and Canadian Dollar. Collectively, these currencies represent approximately 70% of the Company's operating income outside the U.S. If all four of these currencies moved by 10% in the same direction, the Company's annual diluted earnings per share would change by about 25 cents.


•	The Company expects the effective income tax rate for the full-year 2017 to be in the 32-33% range.

The Company expects capital expenditures for ~~2016~~2017 to be approximately ~~$2.0~~$1.7 billion, ~~less than half~~about one-third of which ~~are expected to~~will be used to open new restaurants. The Company expects to open about 900 restaurants, including about ~~400~~500 restaurants in affiliated and ~~developmental-licensee~~developmental licensee markets where the Company generally does not fund any capital expenditures. The ~~Company expects net additions~~remaining two-thirds of ~~about 400 restaurants. The remaining~~ capital ~~is expected to~~will be used to reinvest in existing ~~locations.~~

~~The Company continues to optimize its capital structure and expects to return~~locations, including about ~~$30 billion to shareholders for the three-year period ending 2016. The cumulative return through the September 30, 2016 was approximately $28 billion.~~

~~Long-term~~

~~The Company expects to refranchise about 4,000 restaurants through 2018 with a long-term goal to become 95% franchised. The majority of the refranchising is expected to take place~~650 reimages in the ~~High Growth and Foundational markets.~~

~~The Company expects~~U.S. When combined with previously modernized restaurants that will be updated with EOTF elements in 2017, we expect to ~~realize net annual G&A savings of~~have about ~~$500 million from our G&A base of $2.6 billion at~~2,500 EOTF restaurants in the ~~beginning of 2015, the vast majority of which is expected to be realized~~U.S. by the end of 2017. These savings will be realized through our refranchising efforts, streamlining across corporate, segment and market organizations, primarily in non-customer facing functions, and realizing greater efficiencies in the Company's Global Business Services platform. This target excludes the impact of foreign currency changes. We expect to realize a cumulative total of at least $150 million in savings by the end of 2016, with about half of these savings already achieved in 2015.

In ~~connection with executing against our refranchising and G&A~~addition, the Company has other long-term targets ~~we may incur additional strategic charges.~~that are detailed in its Form 10-K for the year ended December 31, 2016.

The Following Definitions Apply to these Terms as Used Throughout this Form 10-Q:

~~Information in~~ ~~constant currency~~ is calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation and bases incentive compensation plans on these results because they believe this better represents the Company’s underlying business trends.

~~Systemwide sales~~ include sales at all restaurants, whether operated by the Company or by franchisees. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company’s financial performance because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base.

~~Comparable sales~~ ~~represent sales at all restaurants and~~ ~~comparable guest counts~~ represent the number of transactions at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters. Comparable sales exclude the impact of currency translation. Comparable sales are driven by changes in guest counts and average check, which is affected by changes in pricing and product mix. Typically, pricing has a greater impact on average check than product mix. Management reviews the increase or decrease in comparable sales and comparable guest counts compared with the same period in the prior year to assess business trends.


•	Information in constant currency is calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation and bases incentive compensation plans on these results because they believe this better represents the Company’s underlying business trends.

•

Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company’s financial performance, because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base.

•

Comparable sales represent sales at all restaurants and comparable guest counts represent the number of transactions at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters. Comparable sales exclude the impact of currency translation. Comparable sales are driven by changes in guest counts and average check, which is affected by changes in pricing and product mix. Typically, pricing has a greater impact on average check than product mix. Management reviews the increase or decrease in comparable sales and comparable guest counts compared with the same period in the prior year to assess business trends.


CONSOLIDATED OPERATING RESULTS	CONSOLIDATED OPERATING RESULTS											CONSOLIDATED OPERATING RESULTS

	Quarter Ended					Nine Months Ended						Quarter Ended						Nine Months Ended
Dollars in millions, except per share data	September 30, 2016					September 30, 2016						September 30, 2017						September 30, 2017
	Amount			Increase/ (Decrease)		Amount				Increase/ (Decrease)		Amount				Increase/ (Decrease)		Amount				Increase/ (Decrease)
Revenues
Sales by Company-operated restaurants		$	3,972.1	(7	)%		$	11,642.2		(7	)%		$	3,064.3		(23	)%		$	10,045.8		(14	)%
Revenues from franchised restaurants		2,452.0		5			6,950.8			5			2,690.3			10			7,434.4			7
Total revenues		6,424.1		(3	)		18,593.0			(3	)		5,754.6			(10	)		17,480.2			(6	)
Operating costs and expenses
Company-operated restaurant expenses		3,239.5		(10	)		9,662.9			(8	)		2,479.8			(23	)		8,199.5			(15	)
Franchised restaurants—occupancy expenses		437.6		5			1,283.6			4
Franchised restaurants-occupancy expenses													457.3			4			1,325.4			3
Selling, general & administrative expenses		582.9		0			1,757.0			0			567.0			(3	)		1,613.7			(8	)
Other operating (income) expense, net		26.8		n/m			114.0			(56	)		(828.9		)	n/m			(1,066.9		)	n/m
Total operating costs and expenses		4,286.8		(6	)		12,817.5			(7	)		2,675.2			(38	)		10,071.7			(21	)
Operating income		2,137.3		5			5,775.5			10			3,079.4			44			7,408.5			28
Interest expense		221.4		38			663.6			45			236.7			7			686.2			3
Nonoperating (income) expense, net		11.4		n/m			(19.2		)	48			23.2			n/m			33.9			n/m
Income before provision for income taxes		1,904.5		1			5,131.1			6			2,819.5			48			6,688.4			30
Provision for income taxes		629.1		11			1,638.0			8			935.8			49			2,194.8			34
Net income		$	1,275.4	(3	)%		$	3,493.1		5	%		$	1,883.7		48	%		$	4,493.6		29	%
Earnings per common share-basic		$	1.52	8	%		$	4.04		15	%		$	2.34		54	%		$	5.54		37	%
Earnings per common share-diluted		$	1.50	7	%		$	4.01		15	%		$	2.32		55	%		$	5.48		37	%

n/m Not meaningful

Impact of Foreign Currency Translation

While changes in foreign currency exchange rates affect reported results, McDonald's mitigates exposures, where practical, by purchasing goods and services in local currencies, financing in local currencies and hedging certain foreign-denominated cash flows. Management reviews and analyzes business results excluding the effect of foreign currency translation and bases incentive compensation plans on these results, because the Company believes this better represents underlying business trends. Results excluding the effect of foreign currency translation (also referred to as constant currency) are calculated by translating current year results at prior year average exchange rates.


IMPACT OF FOREIGN CURRENCY TRANSLATION
Dollars in millions, except per share data
					Currency Translation Benefit/ (Cost)								Currency Translation Benefit/ (Cost)
Quarters Ended September 30,	2016		2015			2016			2017		2016			2017
Revenues	$	6,424.1	$	6,615.1		$	(113.6	)	$	5,754.6	$	6,424.1		$	114.1
Company-operated margins	732.6		675.2			(18.5		)	584.5		732.6			15.7
Franchised margins	2,014.4		1,916.1			(14.3		)	2,233.0		2,014.4			29.9
Selling, general & administrative expenses	582.9		584.0			4.1			567.0		582.9			(6.5		)
Operating income	2,137.3		2,030.3			(26.8		)	3,079.4		2,137.3			36.3
Net income	1,275.4		1,309.2			(19.0		)	1,883.7		1,275.4			13.6
Earnings per share-diluted	$	1.50	$	1.40		$	(0.03	)	$	2.32	$	1.50		$	0.02

					Currency Translation Benefit/ (Cost)								Currency Translation Benefit/ (Cost)
Nine Months Ended September 30,	2016		2015			2016			2017		2016			2017
Revenues	$	18,593.0	$	19,071.7		$	(552.2	)	$	17,480.2	$	18,593.0		$	(4.4	)
Company-operated margins	1,979.3		1,899.8			(70.9		)	1,846.3		1,979.3			(3.5		)
Franchised margins	5,667.2		5,382.9			(87.0		)	6,109.0		5,667.2			(29.5		)
Selling, general & administrative expenses	1,757.0		1,759.2			21.5			1,613.7		1,757.0			1.7
Operating income	5,775.5		5,265.1			(136.8		)	7,408.5		5,775.5			(38.1		)
Net income	3,493.1		3,323.1			(73.8		)	4,493.6		3,493.1			(30.0		)
Earnings per share-diluted	$	4.01	$	3.49		$	(0.08	)	$	5.48	$	4.01		$	(0.04	)

The positive impact of foreign currency translation on consolidated operating results for the quarter primarily reflected the stronger Euro. The negative impact for the nine months primarily reflected the weaker British Pound. ~~The nine months reflected the strengthening of the U.S. Dollar against the British Pound and most other currencies.~~

Net Income and Diluted Earnings per Common Share

For the quarter, net income ~~decreased 3% (1%~~increased 48% (47% in constant currencies) to ~~$1,275.4~~$1,883.7 million, and diluted earnings per share increased ~~7% (up 9%~~ 55% (53% in constant currencies) to ~~$1.50.~~$2.32. Foreign currency translation had a positive impact of $0.02 on diluted earnings per share.

For the nine months, net income increased 29% (30% in constant currencies) to $4,493.6 million, and diluted earnings per share increased 37% (38% in constant currencies) to $5.48. Foreign currency translation had a negative impact of ~~$0.03~~$0.04 on diluted earnings per share.

For the nine months, net income increased 5% (7% in constant currencies) to $3,493.1 million, and diluted earnings per share increased 15% (17% in constant currencies) to $4.01. Foreign currency translation had a negative impact of $0.08 on diluted earnings per share.

Results for the quarter and nine months ~~benefited from~~reflected stronger operating performance and ~~higher gains~~G&A savings. The nine months also benefited from lower depreciation expense, primarily in China and Hong Kong, that in accordance with Held for Sale accounting rules ceased recording depreciation, and improved performance in Japan.

In addition, results for both periods benefited from the Company's sale of its businesses in China and Hong Kong, which closed on ~~sales~~July 31, 2017. The Company recorded a pre-tax gain of ~~restaurant businesses, partly~~approximately $850 million related to this sale. For the quarter, this gain was partially offset by $111 million of unrelated pre-tax ~~restructuring and~~ non-cash impairment charges. Results for 2016 included pre-tax strategic charges of $128 million infor the quarter and $357 million for the nine months, consisting primarily of charges related to the ~~Company’s~~Company's global G&A and refranchising initiatives. ~~The nine months of 2015 included pre-tax strategic charges primarily related to store closing costs, restructuring and other asset write-offs totaling $240 million.~~

Excluding the impact of ~~the~~these current year and prior year ~~charges,~~items, diluted earnings per share increased ~~16% (17%~~9% (7% in constant currencies) for the quarter, and ~~17% (19%~~15% (16% in constant currencies) for the nine months. ~~This supplemental information is provided to help investors understand the impact of the current and prior year charges on the Company’s results.~~

Diluted earnings per share for both periods benefited from a decrease in diluted weighted-average shares outstanding due to share repurchases. During the quarter, the Company repurchased ~~23.3~~13.8 million shares of stock for ~~$2.7~~$2.2 billion, bringing total purchases for the nine months to ~~80.4~~27.3 million shares or ~~$9.8~~$4.0 billion. In addition, the Company paid a quarterly dividend of ~~$0.89~~$0.94 per share, or ~~$745.1~~$755.3 million, bringing the total dividends paid for the nine months to $2.3 billion.

Revenues

Revenues consist of sales by Company-operated restaurants and fees from restaurants operated by franchisees. Revenues from conventional franchised restaurants include rent and royalties based on a percent of sales ~~along~~ with minimum rent payments and initial fees. Revenues from franchised restaurants that are licensed to affiliates and developmental licensees include a royalty based on a percent of sales and generally include initial fees.

The Company ~~is accelerating~~has accelerated the pace of refranchising to optimize its restaurant ownership mix, generate more stable and predictable revenue and cash flow streams, and operate with a less resource-intensive structure. The shift to a greater percentage of franchised restaurants negatively impacts consolidated revenues as Company-operated sales are replaced by franchised sales, where the Company receives rent and/or royalty revenue based on a percentage of sales.


REVENUES
Dollars in millions
Quarters Ended September 30,	2016		2015		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		2017		2016		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Company-operated sales
U.S.	$	910.3	$	1,062.2	(14	)%	(14	)%	$	798.7	$	910.3	(12	)%	(12	)%
International Lead Markets	1,098.8		1,233.0		(11	)	(6	)	1,076.3		1,098.8		(2	)	(5	)
High Growth Markets	1,441.5		1,450.9		(1	)	2		1,054.9		1,441.5		(27	)	(30	)
Foundational Markets & Corporate	521.5		536.8		(3	)	(2	)	134.4		521.5		(74	)	(75	)
Total	$	3,972.1	$	4,282.9	(7	)%	(5	)%	$	3,064.3	$	3,972.1	(23	)%	(25	)%
Franchised revenues
U.S.	$	1,162.2	$	1,127.1	3	%	3	%	$	1,224.6	$	1,162.2	5	%	5	%
International Lead Markets	782.4		738.6		6		8		894.2		782.4		14		10
High Growth Markets	209.8		194.3		8		9		267.2		209.8		27		23
Foundational Markets & Corporate	297.6		272.2		9		10		304.3		297.6		2		3
Total	$	2,452.0	$	2,332.2	5	%	6	%	$	2,690.3	$	2,452.0	10	%	8	%
Total revenues
U.S.	$	2,072.5	$	2,189.3	(5	)%	(5	)%	$	2,023.3	$	2,072.5	(2	)%	(2	)%
International Lead Markets	1,881.2		1,971.6		(5	)	(1	)	1,970.5		1,881.2		5		1
High Growth Markets	1,651.3		1,645.2		0		2		1,322.1		1,651.3		(20	)	(23	)
Foundational Markets & Corporate	819.1		809.0		1		2		438.7		819.1		(46	)	(47	)
Total	$	6,424.1	$	6,615.1	(3	)%	(1	)%	$	5,754.6	$	6,424.1	(10	)%	(12	)%

Nine Months Ended September 30,									2017		2016		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Company-operated sales
U.S.									$	2,483.8	$	2,852.0	(13	)%	(13	)%
International Lead Markets									3,038.9		3,250.7		(7	)	(4	)
High Growth Markets									3,859.5		4,063.5		(5	)	(7	)
Foundational Markets & Corporate									663.6		1,476.0		(55	)	(56	)
Total									$	10,045.8	$	11,642.2	(14	)%	(14	)%
Franchised revenues
U.S.									$	3,516.9	$	3,363.2	5	%	5	%
International Lead Markets									2,388.3		2,201.8		8		9
High Growth Markets									679.0		580.6		17		17
Foundational Markets & Corporate									850.2		805.2		6		8
Total									$	7,434.4	$	6,950.8	7	%	7	%
Total revenues
U.S.									$	6,000.7	$	6,215.2	(3	)%	(3	)%
International Lead Markets									5,427.2		5,452.5		0		1
High Growth Markets									4,538.5		4,644.1		(2	)	(4	)
Foundational Markets & Corporate									1,513.8		2,281.2		(34	)	(34	)
Total									$	17,480.2	$	18,593.0	(6	)%	(6	)%

~~Foundational Markets and Corporate:~~ ~~The constant currency operating income decrease~~charges (gains), net for the quarter and nine months primarily reflected the ~~impact~~gain on the Company's sale of its businesses in China and Hong Kong of approximately $850 million, partly offset by $111 million of unrelated non-cash impairment charges. The prior year quarter and nine months reflected strategic charges, consisting of restructuring and non-cash impairment charges related to the Company's global G&A and refranchising initiatives. In addition, for the nine months, Corporate selling, general and administrative expenses were higher largely due to the centralization of certain costs. For both periods, results benefited from Japan's strong performance.

Operating Income



OPERATING INCOME
Dollars in millions
Quarters Ended September 30,	2017		2016			Inc/ (Dec)		Increase Excluding Currency Translation
U.S.	$	1,034.6	$	977.5		6	%	6	%
International Lead Markets	913.6		754.1			21		17
High Growth Markets	1,073.8		320.1			n/m		n/m
Foundational Markets & Corporate	57.4		85.6			(33	)	(27	)
Total	$	3,079.4	$	2,137.3		44	%	42	%

Nine Months Ended September 30,	2017		2016			Inc/ (Dec)		Increase Excluding Currency Translation
U.S.	$	3,055.4	$	2,836.6		8	%	8	%
International Lead Markets	2,356.2		2,127.2			11		12
High Growth Markets	1,724.0		814.7			n/m		n/m
Foundational Markets & Corporate	272.9		(3.0		)	n/m		n/m
Total	$	7,408.5	$	5,775.5		28	%	29	%

~~Operating Margin:~~ ~~Operating margin is defined as operating income as a percent of total revenues. Operating margin was 31.1% and 27.6% for the nine months ended 2016 and 2015, respectively.~~n/m Not meaningful

•

Operating Income: Operating income increased $942.1 million or 44% (42% in constant currencies) for the quarter and increased $1,633.0 million or 28% (29% in constant currencies) for the nine months. Both periods included the benefit of approximately $850 million due to the gain on the sale of the Company's businesses in China and Hong Kong, partly offset by unrelated non-cash impairment charges. Results in 2016 included strategic charges of $128 million for the quarter and $357 million for the nine months. Excluding these current year and prior year items, operating income increased $109 million or 5% (3% in constant currencies) for the quarter and increased $588 million or 10% (10% in constant currencies) for the nine months.


•	U.S.: The increase in operating income for the quarter and nine months reflected higher franchised margin dollars and G&A savings, partly offset by lower Company-operated margin dollars. The nine months also benefited from a gain on the strategic sale of a restaurant property in 2017.


•	International Lead Markets: The constant currency operating income increase for the quarter and nine months was primarily due to improvements in franchised margin dollars across allmarkets and a property disposition gain in Australia.

•

High Growth Markets: Excluding the gain on the sale of the Company's businesses in China and Hong Kong as well as unrelated non-cash impairment charges, operating income increased 7% (3% in constant currencies) for the quarter and 21% (20% in constant currencies) for the nine months. Results reflect sales driven performance and the impact of refranchising. The nine months included a benefit of $92 million due to lower depreciation expense in China and Hong Kong.

•

Foundational Markets & Corporate: The constant currency operating income decrease for the quarter reflects the Company's refranchising initiatives, and higher G&A costs at the Corporate level due to restaurant technology spending, partly offset by the benefit from comparison to the prior year's strategic charges. The constant currency operating income increase for the nine months reflects the benefit from comparison to the prior year's strategic charges and Japan's improved performance.


•	Operating Margin: Operating margin is defined as operating income as a percent of total revenues. Operating margin was 42.4% and 31.1% for the nine months ended 2017 and 2016, respectively. Excluding the previously described current year gain and current and prior year strategic charges, operating margin was 38.4% and 33.0% for the nine months ended 2017 and 2016, respectively.

Interest Expense

~~Interest expense~~ ~~increased~~ 38% for the quarter and 45% for the nine months primarily due to higher average debt balances in connection with the Company's previously-announced plans to optimize its capital structure, partly offset by lower average interest rates.


•	Interest expense increased 7% (6% in constant currencies) for the quarter and increased 3% (4% in constant currencies) for the nine months, primarily reflecting higher average debt balances, partly offset by lower average interest rates.

Nonoperating (Income) Expense, Net


NONOPERATING (INCOME) EXPENSE, NET	NONOPERATING (INCOME) EXPENSE, NET
Dollars in millions	Dollars in millions
	Quarters Ended					Nine Months Ended						Quarters Ended					Nine Months Ended
	September 30,					September 30,						September 30,					September 30,
	2016		2015			2016			2015			2017			2016		2017			2016
Interest Income	$	0.8	$	(3.2	)	$	(6.0	)	$	(7.2	)
Interest income												$	(6.5	)	$	0.8	$	(6.4	)	$	(6.0	)
Foreign currency and hedging activity	4.5		(10.7		)	(23.2		)	(45.6		)	15.4			4.5		11.1			(23.2		)
Other (income) expense, net	6.1		4.9			10.0			15.6			14.3			6.1		29.2			10.0
Total	$	11.4	$	(9.0	)	$	(19.2	)	$	(37.2	)	$	23.2		$	11.4	$	33.9		$	(19.2	)

Income Taxes

The effective income tax rate was ~~33.0%~~33.2% and ~~30.3%~~33.0% for the quarters ended ~~2016~~2017 and ~~2015,~~2016, respectively, and ~~31.9%~~32.8% and ~~31.4%~~31.9% for the nine months ended 2017 and 2016, ~~and 2015,~~ respectively. The higher effective tax rate for the quarter was primarily due to lower tax benefits associated with the Company's ongoing foreign cash repatriation, partially offset by a favorable shift in the mix of income. The effective income tax rate for both periods benefited from the early adoption of new accounting guidance related to share-based compensation.

Cash Flows and Financial Position

The Company generates significant cash from operations and has substantial credit capacity to fund operating and discretionary spending such as capital expenditures, debt repayments, dividends and share repurchases.

Cash provided by operations totaled ~~$5.2~~$4.4 billion and exceeded capital expenditures by ~~$4.1~~$3.2 billion for the nine months ~~2016.~~2017. Cash provided by operations ~~increased $84~~decreased $803 million compared with the nine months ~~2015,~~2016, primarily due to ~~improved operating results,~~changes in working capital related to our global G&A and refranchising initiatives and higher income tax payments, partly offset by ~~the impact from weaker foreign currencies.~~better operating results.

Cash ~~used for~~provided by investing activities totaled ~~$811 million~~$1.2 billion for the nine months ~~2016, a decrease~~2017, an increase of ~~$304 million~~$2.0 billion compared with the nine months ~~2015,~~2016, primarily due to ~~higher~~proceeds associated with the sale of the Company's businesses in China and Hong Kong, as well as proceeds from ~~sales~~the sale of ~~restaurant businesses.~~its businesses in Denmark, Finland, Norway and Sweden (referred to as the "Nordics") and Taiwan.

Cash used for financing activities totaled ~~$9.9~~$4.6 billion for the nine months ~~2016, an increase~~2017, a decrease of ~~$6.4~~$5.3 billion compared with the nine months ~~2015,~~2016, primarily due to ~~higher~~lower treasury stock purchases, ~~and a decrease in~~partly offset by lower net ~~borrowings.~~debt issuances.

Debt obligations at September 30, ~~2016~~2017 totaled ~~$26.0~~$28.6 billion compared with ~~$24.1~~$26.0 billion at December 31, ~~2015.~~2016. The increase was primarily due to ~~long-term~~net debt issuances and the impact of ~~$3.4 billion, party offset by net debt repayments of $1.6 billion.~~foreign currency translation.

Recently Issued Accounting Standards

~~Employee Share-Based Payment Accounting~~

~~In March 2016, the Financial Accounting Standards Board (“FASB”)~~Recently issued ~~Accounting Standards Update (“ASU”) 2016-09, “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The goal~~accounting standards are discussed in Part I, Item 1, page 9 of this update is to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This update is effective beginning January 1, 2017 with early adoption permitted.

The Company elected to early adopt ASU 2016-09 in the second quarter 2016, which required reflection of any adjustments as of January 1, 2016. The primary impact of adoption was the recognition of excess tax benefits as a reduction to the provision for income taxes for all periods reported in fiscal year 2016.

Additional amendments to ASU 2016-09 related to income taxes and minimum statutory withholding tax requirements had no impact to retained earnings, where the cumulative effect of these changes are required to be recorded. The Company also elected to continue estimating forfeitures when determining the amount of compensation costs to be recognized in each period.

The presentation requirements for cash flows related to excess tax benefits were applied prospectively; as such, prior years have not been restated. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in the consolidated statement of cash flows, since such cash flows have historically been presented in financing activities.

~~Lease Accounting~~

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company anticipates ASU 2016-02 to have a material impact on the consolidated balance sheet.

~~The impact on the Company’s consolidated statement of income is currently being evaluated. The impact of ASU 2016-02 is non-cash in nature, as such, it will not affect the Company’s cash position.~~

~~Revenue Recognition~~

In May 2014, the FASB issued guidance codified in ASC 606, “Revenue Recognition - Revenue from Contracts with Customers,” which amends the guidance in former ASC 605, “Revenue Recognition.” In July 2015, the FASB made a decision to defer by one year the effective date of its new standard to January 1, 2018, although early adoption is permitted as of January 1, 2017. The Company is currently evaluating the impact of ASC 606.Form 10-Q.

Risk Factors and Cautionary Statement Regarding Forward-Looking Statements

TheThe information in this report includes forward-looking statements about future events and circumstances and their effects upon revenues, expenses and business opportunities. Generally speaking, any statement in this report not based upon historical fact is a forward-looking statement. Forward-looking statements can also be identified by the use of forward-looking words, such as “may,” “will,” “expect,” ~~“believe”~~“believe,” “anticipate” and “plan” or similar expressions. In particular, statements regarding our plans, strategies, prospects and expectations regarding our business and industry, including those under "Outlook", are forward-looking statements. They reflect our expectations, are not guarantees of performance and speak only as of the date of this report. Except as required by law, we do not undertake to update them. Our expectations (or the underlying assumptions) may change or not be realized, and you should not rely unduly on forward-looking statements. Our business results are subject to a variety of risks, including those that are reflected in the following considerations and factors, as well as elsewhere in our filings with the SEC. If any of these considerations or risks materialize, our expectations may change and our performance may be adversely affected.

If we do not successfully ~~design~~evolve and execute against our business strategies, we may not be able to increase operating ~~income or market share.~~income.

To drive future results, ~~we must design~~our business strategies tomust be effective in delivering increased guest counts to drive operating income growth. Whether ~~we successfully execute~~ these strategies are successful depends mainly on our System’s ability to:

Continue to innovate and differentiate ~~in all aspects of~~ the McDonald’s experience by preparing and serving our food in a way that balances value and convenience to our customers with profitability;

~~Reinvest~~Capitalize on our global scale, iconic brand and local market presence to enhance our ability to retain, regain and convert key customer groups;

Utilize our more adaptive organizational structure to execute against our initiatives at an accelerated pace;

Strengthen customer appeal and augment our digital initiatives, including mobile ordering and delivery, along with EOTF, particularly in ~~our restaurants and identify~~the U.S.;

Identify and develop restaurant sites consistent with our ~~System’s~~ plans for net growth of ~~System-wide~~Systemwide restaurants; and

~~Provide clean and friendly environments that deliver a consistent McDonald's experience and demonstrate~~Operate restaurants with high service ~~levels;~~

~~Drive restaurant improvements that achieve~~levels and optimal capacity ~~particularly during peak mealtime hours; and~~

~~Manage~~while managing the increasing complexity of our restaurant operations.

If we are delayed or unsuccessful in executing our strategies, or if our strategies do not yield the desired results, our business, financial condition and results of operations may suffer.

~~The implementation~~Our investments to enhance the customer experience, including through technology, may not generate the expected returns.

We will continue to build upon our investments in EOTF, which focus on restaurant modernization and technology and digital engagement in order to transform the restaurant experience. As we accelerate our pace of converting restaurants to EOTF, we are placing renewed emphasis on improving our ~~turnaround plan~~service model and strengthening relationships with customers, in part through digital channels and loyalty initiatives, as well as mobile ordering and payment systems. We also continue to build on delivery initiatives, which may ~~intensify~~not generate expected returns. We may not fully realize the ~~risks we face and~~intended benefits of these significant investments, or these initiatives may not be ~~successful in driving improved performance.~~well executed, and therefore our business results may suffer.

If we do not anticipate and address evolving consumer preferences, our business could suffer.

Our ~~turnaround plan includes~~continued success depends on our System’s ability to anticipate and respond effectively to continuously shifting consumer demographics, and trends in food sourcing, food preparation, food offerings and consumer preferences in the “informal eating out” (IEO) segment. In order to deliver a relevant experience for our customers amidst a highly competitive, value-driven operating environment, we must implement initiatives to adapt at an ~~accelerated pace of~~aggressive pace. There is no assurance that these initiatives will be successful and, if they are not, our financial results could be adversely impacted.

Activities relating to our refranchising and cost savings initiatives remain ongoing and ~~global restructuring. In addition, we have increased our leverage.~~entail various risks.

Our previously announced refranchising and cost saving initiatives remain ongoing. As we continue ~~to implement our plans,~~on those initiatives, the existing risks we face in our business may be intensified. Our efforts to reduce costs and capital expenditures depend, in part, upon our refranchising efforts, which, in turn, depend upon our ~~ability to identify qualified and~~selection of capable ~~franchisees and licensees.~~third parties. Our cost savings initiatives also depend upon a variety of factors, including our ability to achieve efficiencies through the consolidation of global, back-office functions. ~~Therefore, if our turnaround-related~~If these various initiatives are not successful, take longer to complete than initially projected, or are not well executed, ~~well,~~ or if our cost reduction efforts adversely impact our effectiveness, our business operations, financial results and results of operations could be adversely affected.

If pricing, promotional and marketing plans are not effective, our results may be negatively impacted.

Our results depend on the impact of pricing, promotional and marketing plans across the System, and the ability to adjust these plans to respond quickly and effectively to evolving customer preferences, as well as shifting economic and competitive conditions. Existing or future pricing strategies, and the value proposition they represent, are expected to continue to be important components of

our business strategy; however, they may not be successful and could negatively impact sales and margins. Further, the promotion of menu offerings may yield results below the desired levels.

Additionally, we operate in a complex and costly advertising environment. Our marketing and advertising programs may not be successful, and we may fail to attract and retain customers. Our success depends in part on whether the allocation of our advertising and marketing resources across different channels allows us to reach our customers effectively. If the advertising and marketing programs are not successful, or are not as successful as those of our competitors, our sales, guest counts and market share could decrease.

Failure to preserve the value and relevance of our brand could have an adverse impact on our financial results.

To be successful in the future, we believe we must preserve, enhance and leverage the value of our brand. Brand value is based in part on consumer perceptions. Those perceptions are affected by a variety of factors, including the nutritional content and preparation of our food, the ingredients we use, our business practices and the manner in which we source the commodities we use. Consumer acceptance of our offerings is subject to change for a variety of reasons, and some changes can occur rapidly. For example, nutritional, health and other scientific studies and conclusions, which constantly evolve and may have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that affect the IEO segment or perceptions of our brand generally or relative to available alternatives. Consumer perceptions may also be affected by third parties presenting or promoting adverse commentary or portrayals of the quick-service category of the IEO segment, our brand and/or our operations, our suppliers or our franchisees. If we are unsuccessful in addressing such adverse commentary or portrayals, our brand and our financial results may suffer.

Additionally, the ongoing relevance of our brand may depend on the success of our sustainability initiatives, which require System- wide coordination and alignment. If we are not effective in addressing social responsibility matters or achieving relevant sustainability goals, consumer trust in our brand may suffer. In particular, business incidents or practices that erode consumer trust or confidence, particularly if such incidents or practices receive considerable publicity or result in litigation, can significantly reduce brand value and have a negative impact on our financial results.

We face intense competition in our markets, which could hurt our business.

We compete primarily in the ~~“informal eating out” (IEO)~~IEO segment, which is highly competitive. We ~~are facing slowing restaurant industry trends in several key markets, including the U.S., as well as~~also face sustained, intense competition from traditional, fast casual and other competitors, which may include many non-traditional market participants such as convenience stores, grocery stores and coffee shops. We expect our environment to continue to be highly competitive, and our results in any particular reporting period ~~our results~~ may be impacted by new or continuing actions of our competitors, which may have a short- or long-term impact on our results.

We compete on the basis of product choice, quality, affordability, service and location. In particular, we believe our ability to compete successfully in the current market environment depends on our ability to improve existing products, develop new products, price our products appropriately, deliver a relevant customer experience, manage the complexity of our restaurant operations and respond effectively to our competitors’ ~~actions.~~actions or disruptive actions from others which we do not foresee. Recognizing these dependencies, we have intensified our focus in recent periods on strategies to achieve these goals, ~~including the turnaround plan described above,~~ and we will likely continue to modify our strategies and implement new strategies in the future. There can be no assurance these strategies will be effective, and some strategies may be effective at improving some metrics while adversely affecting other metrics.

~~If we do not anticipate and address evolving consumer preferences, our business could suffer.~~

Our continued success depends on our System’s ability to anticipate and respond effectively to continuously shifting consumer demographics, trends in food sourcing, food preparation and consumer preferences in the IEO segment. In order to deliver a relevant experience for our customers amidst a highly competitive, value-driven operating environment, we must implement initiatives to adapt at an aggressive pace. There is no assurance that these initiatives will be successful and, if they are not, our financial results could be adversely impacted.

~~If our pricing, promotional and marketing plans are not effective, our results may be negatively impacted.~~

Our results depend on the impact of our pricing, promotional and marketing plans and our System’s ability to efficiently adjust these plans to respond quickly and effectively to evolving customer preferences, as well as economic and competitive conditions. Our existing or future pricing strategies and the value proposition they represent will continue to be important components of our overall plan, may not be successful and could negatively impact sales and margins. The promotion of our menu offerings, including through expanded digital engagement with our customers, may yield results below desired levels.

Additionally, we operate in an increasingly complex and costly advertising environment. Our marketing and advertising programs may not be successful and we may fail to attract and retain customers. We have expanded engagement with our customers through digital media and loyalty initiatives. Our success depends in part on whether our allocation of our advertising and marketing resources across different channels allows us to effectively reach our customers. If our advertising and marketing programs are not successful, or are not as successful as those of our competitors, our sales, guest counts and market share could decrease.

~~Failure to preserve the value and relevance of our brand could have a negative impact on our financial results.~~

To be successful in the future, we believe we must preserve, enhance and leverage the value of our brand. Brand value is based in part on consumer perceptions on a variety of factors, including the nutritional content and preparation of our food, the ingredients we use, our business practices and the manner in which we source the commodities we use. Consumer acceptance of our offerings is subject to change for a variety of reasons. For example, nutritional, health and other scientific studies and conclusions, which constantly evolve and often have contradictory implications, drive popular opinion, litigation and regulation (including initiatives intended to drive consumer behavior) in ways that affect the IEO segment or perceptions of our brand and could be material to our business. Perceptions may also be affected by third parties presenting or promoting adverse commentary or perceptions of the quick-service category of the IEO segment, our brand and/or our operations, our suppliers or our franchisees. If we are unsuccessful in addressing such adverse commentary or perceptions, our brand and our financial results may suffer.

Additionally, the ongoing relevance of our brand may depend on the success of our sustainability initiatives, which will require System-wide coordination and alignment. If we are not effective in addressing social responsibility matters, trust in our brand may suffer. Also, if we are unable to articulate and achieve relevant sustainability goals, consumers may lose confidence in our brand. In particular, business incidents that erode consumer trust or confidence, particularly if such incidents receive considerable publicity or result in litigation, can significantly reduce brand value and have a negative impact on our financial results.

Unfavorable general economic conditions could adversely affect our business and financial results.

Our results of operations are substantially affected by economic conditions, which can vary significantly by market and can impact consumer disposable income levels and spending habits. Economic conditions can also be impacted by a variety of factors including hostilities, epidemics and actions taken by governments to manage national and international economic matters, whether through austerity or stimulus measures or trade measures, and initiatives intended to control wages, unemployment, credit availability, inflation, taxation and other economic drivers. Continued adverse economic conditions or adverse changes in economic conditions in our markets could pressure our operating performance, and our business and financial results may suffer.

Our results of operations are also affected by fluctuations in currency exchange rates, which may adversely affect reported earnings.

Supply chain interruptions may increase costs or reduce revenues.

We depend on the effectiveness of our supply chain management to assure reliable and sufficient product supply, including on favorable terms. Although many of the products we sell are sourced from a wide variety of suppliers in countries around the world, certain products have limited suppliers, which may increase our reliance on those suppliers. Supply chain interruptions, including ~~due to lack of supply or~~shortages and transportation issues, and price increases can adversely affect us ~~or the~~as well as our suppliers and franchisees ~~that are also part of our System and~~ whose performance ~~has~~may have a significant impact on our results. Such shortages or disruptions could be caused by factors beyond the control of our suppliers, franchisees or us. If we experience interruptions in our System’s supply chain, our costs could increase and it could limit the availability of products critical to our System’s operations.

Food safety concerns may have an adverse effect on our business.

Our ability to increase sales and profits depends on our System’s ability to meet expectations for safe food and on our ability to manage the potential impact on McDonald’s of food-borne illnesses and food or product safety issues that may arise in the future. Food safety is a top priority, and we dedicate substantial resources to ensure that our customers enjoy safe food products, including as our menu ~~evolves.~~and service model evolve. However, food safety events, including instances of food-borne illness, have occurred in the food industry in the past, and could occur in the future. Instances of food tampering, food contamination or food-borne illness, whether actual or perceived, could adversely affect our brand and reputation as well as our revenues and profits.

Our franchise business model presents a number of risks.

Our success increasingly relies ~~in part~~ on the financial success and cooperation of our franchisees, including our developmental licensees and affiliates, yet we have limited influence over their operations. Our restaurant margins arise from two sources: ~~Company-operated~~fees from franchised restaurants (e.g., rent and ~~franchised~~royalties based on a percentage of sales) and, to a lesser degree, sales from Company-operated restaurants. Our franchisees manage their businesses independently, and therefore are responsible for the day-to-day operation of their restaurants. The revenues we realize from franchised restaurants are largely dependent on the ability of our franchisees to grow their sales. If our franchisees do not experience sales growth, our revenues and margins could be negatively affected as a result. Also, if sales trends worsen for franchisees,

their financial results may deteriorate, which could result in, among other things, restaurant closures, or delayed or reduced payments to us. Our refranchising effort will increase that dependence and the effect of those factors.

Our success also increasingly depends on the willingness and ability of our independent franchisees and affiliates to implement major initiatives, which may include financial investment, and to remain aligned with us on operating, promotional and capital-intensive reinvestment plans. ~~The~~Franchisees’ ability ~~of our franchisees~~ to contribute to the achievement of our plans is dependent in large part on the availability to them of funding at reasonable interest rates and may be negatively impacted by the financial markets in general or by the creditworthiness of our franchisees or the Company. Our operating performance could also be negatively affected if our franchisees experience food safety or other operational problems or project ~~a brand~~an image inconsistent with our brand and values, particularly if our contractual and other rights and remedies are limited, costly to exercise or ~~subject~~subjected to litigation. If franchisees do not successfully operate restaurants in a manner consistent with our required standards, the brand’s image and reputation could be harmed, which in turn could hurt our business and operating results.

Our ownership mix also affects our results and financial condition. The decision to own restaurants or to operate under franchise or license agreements is driven by many factors whose interrelationship is complex and changing. Our ability to achieve the benefits of our refranchising strategy, which involves a ~~shift to a~~ greater percentage of franchised restaurants, ~~in a timely manner or at all, will depend~~including an increased number of restaurants run by developmental licensees and affiliates, depends on various factors. Those factors ~~including our ability to timely and~~include whether we have effectively ~~identify~~selected franchisees, licensees and/or ~~licensees~~affiliates that meet our rigorous standards, ~~and/or to complete transactions on favorable terms and to manage associated risks, and will also depend on the performance of our franchisees,~~ and whether their performance and the resulting ownership mix supports our brand and financial objectives.

~~Changes in commodity~~Challenges with respect to talent management could harm our business.

Effective succession planning is important to our long-term success. Failure to effectively identify, develop and ~~other operating costs~~retain key personnel, recruit high-quality candidates and ensure smooth management and personnel transitions could disrupt our business and adversely affect our ~~results of operations.~~results.

~~The profitability of our Company-operated restaurants~~Our success depends in part on our System’s ability to ~~anticipate~~recruit, motivate and ~~react~~retain a qualified workforce to ~~changes~~work in ~~commodity~~our restaurants in an intensely competitive environment. Increased costs ~~including food, paper, supply, fuel, utilities, distribution~~associated with recruiting, motivating and retaining qualified employees to work in our Company-operated restaurants could have a negative impact on our Company-operated margins. Similar concerns apply to our franchisees.

We are also impacted by the costs and other ~~operating costs. Any volatility~~effects of compliance with U.S. and international regulations affecting our workforce, which includes our staff and employees working in ~~certain commodity prices~~our Company-operated restaurants. These regulations are increasingly focused on employment issues, including wage and hour, healthcare, immigration, retirement and other employee benefits and workplace practices. Our potential exposure to reputational and other harm regarding our workplace practices or conditions or those of our independent franchisees or suppliers (or perceptions thereof) could have a negative impact on consumer perceptions of us and our business. Additionally, economic action, such as boycotts, protests, work stoppages or campaigns by labor organizations, could adversely affect us (including our ~~operating results by impacting restaurant profitability. The commodity market for some~~ability to recruit and retain talent) or the franchisees and suppliers that are also part of the ~~ingredients we use, such as beef~~McDonald's System and chicken, is particularly volatile and is subject to significant price fluctuations due to seasonal shifts, climate conditions, industry demand, international commodity markets, food safety concerns, product recalls, government regulation and other factors, all of which are beyond our control and, in many instances, unpredictable. We can only partially address future price risk through hedging and other activities, and therefore increases in commodity costs couldwhose performance may have ~~an adverse~~a material impact on our ~~profitability.~~results.

Information technology system failures or interruptions, or breaches of network security, may interrupt our operations.

We are increasingly reliant on technological systems, such as point-of-sale and other in-store systems or platforms, technologies supporting McDonald’s delivery and digital solutions, as well as technologies that facilitate communication and collaboration internally, with affiliated entities, customers or independent third parties to conduct our business, including technology-enabled systems provided to us by third parties. Any failure of these systems could significantly impact our operations and customer experience and perceptions.

Despite the implementation of security measures, those technology systems and solutions could become vulnerable to damage, disability or failures due to theft, fire, power loss, telecommunications failure or other catastrophic events. The third party systems also present the risks faced by the third party’s business, including the credit risk of those parties. If those systems were to fail or otherwise be unavailable, and we were unable to recover in a timely way, we could experience an interruption in our operations.

Furthermore, security breaches have from time to time occurred and may in the future occur involving our systems, the systems of the parties we communicate or collaborate with (including franchisees), or those of third party providers. These may include such things as unauthorized access, denial of service, computer viruses, introduction of malware or ransomware and other disruptive problems caused by hackers. Our information technology systems contain personal, financial and other information that is entrusted to us by our customers, our employees and other third parties, as well as financial, proprietary and other confidential information related to our business. An actual or alleged security breach could result in disruptions, shutdowns, theft or unauthorized disclosure of personal, financial, proprietary or other confidential information. The occurrence of any of these incidents could result in reputational damage, adverse publicity, loss of consumer confidence, reduced sales and profits, complications in executing our growth initiatives and criminal penalties or civil liabilities.

The global scope of our business subjects us to risks that could negatively affect our business.

We ~~face~~encounter differing cultural, regulatory and economic environments ~~that exist~~ within and among the more than 100 countries where McDonald’s restaurants operate, and our ability to achieve our business objectives depends on the System's success in these environments. Meeting customer expectations is complicated by the risks inherent in our global operating environment, and our global success is partially dependent on our System’s ability to leverage operating successes across markets. Planned initiatives may not have ~~broad~~ appeal across multiple markets with McDonald's customers and could drive unanticipated changes in customer perceptions and guest counts.

Disruptions in operations or price volatility in a market can also result from governmental actions, such as price, foreign exchange or ~~import-export~~changes in trade-related tariffs or controls, ~~increased tariffs,~~ government-mandated closure of our, our franchisees' or our suppliers’ operations, and asset seizures. The cost and disruption of responding to governmental investigations or inquiries, whether or not they have merit, may impact our results and could cause reputational or other harm. Our international success depends in part on the effectiveness of our strategies and brand-building initiatives to reduce our exposure to such governmental investigations or inquiries. ~~Our results of operations and financial condition are also affected by fluctuations in currency exchange rates, which may adversely affect reported earnings.~~

Additionally, challenges and uncertainties are associated with operating in developing markets, which may entail a relatively higher risk of political instability, economic volatility, crime, corruption and social and ethnic unrest. Such challenges ~~are~~may be exacerbated in many cases by a lack of an independent and experienced judiciary and uncertainties in how local law is applied and enforced, including in areas most relevant to commercial transactions and foreign investment. An inability to manage effectively ~~manage~~ the risks associated with our international operations could have a material adverse effect on our business and financial condition.

~~The U.K.'s decision to leave the European Union could adversely affect our business.~~

AsWe may also face challenges and uncertainties in developed markets. For example, as a result of the U.K.'s decision to leave the European Union through a negotiated exit over a period of time, including its recent formal commencement of exit proceedings, it is possible that there will be increased regulatory complexities, as well as potential referenda in the U.K. and/or other European countries, that could cause uncertainty in European or worldwide economic conditions. In the short term, the decision created volatility in certain foreign currency exchange rates, ~~which~~and the resulting depression in those exchange rates may continue. Any of these effects, and others we cannot anticipate, could adversely affect our business, results of operations, financial condition and cash flows.

~~Challenges~~Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.

We are subject to income and other taxes in the United States and foreign jurisdictions, and our operations, plans and results are affected by tax and other initiatives around the world. In particular, we are affected by the impact of changes to tax laws or policy or related authoritative interpretations, including changes resulting from proposals for comprehensive or corporate tax reforms that may become a key component of budgetary initiatives in the United States or elsewhere. We are also impacted by settlements of pending or any future adjustments proposed by taxing authorities inside and outside of the U.S. in connection with ~~respect to talent management~~our tax audits, all of which will depend on their timing, nature and scope. Any increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could ~~harm~~have a material adverse impact on our ~~business.~~financial results.

~~Effective succession planning is important to our long-term success. Failure to effectively identify, develop~~Changes in commodity and ~~retain key personnel, recruit high-quality candidates and ensure smooth management and personnel transitions~~other operating costs could ~~disrupt our business and~~ adversely affect our ~~results.~~results of operations.

~~Our success~~The profitability of our Company-operated restaurants depends in part on our ~~System’s~~ ability to ~~identify, recruit, motivate~~anticipate and ~~retain a qualified workforce~~react to ~~work~~changes in commodity costs, including food, paper, supplies, fuel, utilities and distribution, and other operating costs, including labor. Any volatility in certain commodity prices could adversely affect our ~~restaurants~~operating results by impacting restaurant profitability. The commodity markets for some of the ingredients we use, such as beef and chicken, are particularly volatile due to factors such as seasonal shifts, climate conditions, industry demand, international commodity markets, food safety concerns, product recalls and government regulation, all of which are beyond our control and, in ~~an intensely competitive environment. Increased~~many instances, unpredictable. We can only partially address future price risk through hedging and other activities, and therefore increases in commodity costs ~~associated with recruiting, motivating and retaining qualified employees to work in our Company-operated restaurants~~ could have ~~a negative~~an adverse impact on our ~~Company-operated margins.~~profitability.

We are also impacted by the costs and other effects of compliance with U.S. and international regulations affecting our workforce, which includes our staff and employees working in our Company-operated restaurants. These regulations are increasingly focused on employment issues including wage and hour, healthcare, immigration, retirement and other employee benefits and unlawful workplace discrimination. Our potential exposure to reputational and other harm regarding our workplace practices or conditions or those of our independent franchisees or suppliers (or perceptions thereof) could have a negative impact on our business. Additionally, economic action, such as boycotts, protests, work stoppages or campaigns by labor organizations, could adversely affect (including the ability to recruit and retain talent) us or the franchisees and suppliers that are also part of the McDonald's System and whose performance may have a material impact on our results.

~~Information technology system failures or interruptions or breaches of network security may interrupt our operations.~~

We are increasingly reliant on technological systems (e.g., point-of-sale and other in-store systems or platforms) as well as technologies which facilitate communication and collaboration internally, with affiliated entities, or with independent third parties to conduct our business, including technology-enabled solutions provided to us by third parties; and any failure of these systems could significantly impact our operations and customer perceptions. Despite the implementation of security measures, those technology systems and solutions could become vulnerable to damage, disability or failures due to theft, fire, power loss, telecommunications failure or other catastrophic events. The third party solutions also present the risks faced by the third party’s business. If those systems or solutions were to fail or otherwise be unavailable, and we were unable to recover in a timely way, we could experience an interruption in our operations. We may also not fully realize the benefits of the significant investments we are making to enhance the customer experience through digital engagement and social media. Furthermore, security breaches involving our systems, the systems of the parties we communicate or collaborate with, or those of third party providers may occur, such as unauthorized access, denial of service, computer viruses and other disruptive problems caused by hackers. Our information technology systems contain personal, financial and other information that is entrusted to us by our customers and employees as well as financial, proprietary and other confidential information related to our business. An actual or alleged security breach could result in system disruptions, shutdowns, theft or unauthorized disclosure of confidential information. The occurrence of any of these incidents could result in adverse publicity, loss of consumer confidence, reduced sales and profits, and criminal penalties or civil liabilities.

Increasing regulatory complexity may adversely affect restaurant operations and our financial results.

Our regulatory environment worldwide exposes us to complex compliance and similar risks that could affect our operations and results in material ways. In many of our markets, we are subject to increasing regulation, which has increased our cost of doing business. We are affected by the cost, compliance and other risks associated with the often conflicting and highly prescriptive regulations we face, including where inconsistent standards imposed by multiple governmental authorities can adversely affect our business and increase our exposure to litigation or governmental investigations or proceedings.

Our success depends in part on our ability to manage the impact of new, potential or changing regulations that can affect our business ~~plans.~~plans and operations. These regulations ~~may relate to, among others,~~include product packaging, marketing, ~~and~~ the nutritional content and safety of our food and other products, labeling and other disclosure ~~practices,~~practices. Compliance efforts with those regulations may be affected by ordinary variations in food preparation among our own restaurants and the need to rely on the accuracy and completeness of information from third-party suppliers (particularly given varying requirements and practices for testing and disclosure).

Additionally, we are working to manage the risks and costs to us, our franchisees and our supply chain of the effects of climate change, greenhouse gases, and diminishing energy and water resources. ~~The~~These risks include the increased public focus, including by governmental and nongovernmental organizations, on these and other environmental sustainability matters, ~~(e.g.,~~such as packaging and waste, animal health and welfare, deforestation and land ~~use) and~~use. These risks also include the increased pressure to make commitments, set targets or establish additional goals and take actions to meet ~~them,~~them. These risks could expose us to market, operational and execution costs or risks. If we are unable to effectively manage the risks associated with our complex regulatory environment, it could have a material adverse effect on our business and financial condition.

We are subject to increasing legal complexity and could be party to litigation that could adversely affect us.

Increasing legal complexity will continue to affect our operations and results in material ways. We could be subject to legal proceedings that may adversely affect our business, including class actions, administrative proceedings, government investigations, employment and personal injury claims, landlord/tenant disputes, disputes with current or former suppliers, claims by current or former franchisees and intellectual property claims (including claims that we infringed another party’s trademarks, copyrights or patents).

Inconsistent standards imposed by governmental authorities can adversely affect our business and increase our exposure to regulatory proceedings or litigation.

Litigation involving our relationship with franchisees and the legal distinction between our franchisees and us for employment law purposes, if determined adversely, could increase costs, negatively impact the business prospects of our franchisees and subject us to incremental liability for their actions. Similarly, although our commercial relationships with our suppliers remain independent, there may be attempts to challenge that independence, which, if determined adversely, could also increase costs, negatively impact the business prospects of our suppliers, and subject us to incremental liability for their actions. We are also subject to legal and compliance risks and associated liability, such as in the areas of privacy and data collection, protection and management, as it relates to information we collect and share when we provide optional technology-related services and platforms to third parties.

Our operating results could also be affected by the following:

The relative level of our defense costs, which vary from period to period depending on the number, nature and procedural status of pending proceedings;

The cost and other effects of settlements, judgments or consent decrees, which may require us to make disclosures or take other actions that may affect perceptions of our brand and products;

Adverse results of pending or future litigation, including litigation challenging the composition and preparation of our products, or the appropriateness or accuracy of our marketing or other communication practices; and

The scope and terms of insurance or indemnification protections that we may have.

A judgment significantly in excess of any applicable insurance coverage or third party indemnity could materially adversely affect our financial condition or results of operations. Further, adverse publicity resulting from these claims may hurt our business.

We may not be able to adequately protect our intellectual property or adequately ensure that we are not infringing the intellectual property of others, which could harm the value of the McDonald’s brand and our business.

The success of our business depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products in both domestic and international markets. We rely on a combination of trademarks, copyrights, service marks, trade secrets, patents and other intellectual property rights to protect our brand and branded products. ~~We cannot ensure that franchisees and other third parties who hold licenses to our intellectual property will not take actions that hurt the value of our intellectual property.~~

We have registered certain trademarks and have other trademark registrations pending in the United States and certain foreign jurisdictions. The trademarks that we currently use have not been registered in all of the countries outside of the United States in which we do business or may do business in the future and may never be registered in all of these countries. The steps we have taken to protect our intellectual property in the United States and foreign countries may not be adequate. In addition, the steps we have taken may not

adequately ensure that we do not infringe the intellectual property of others, and third parties may claim infringement by us in the future. In particular, we may be involved in intellectual property claims, including often aggressive or opportunistic attempts to enforce patents used in information technology systems, which might affect our operations and results. Any claim of infringement, whether or not it has merit, could be time-consuming, ~~could~~ result in costly litigation and ~~could~~ harm our business.

~~Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.~~

We ~~are subject to income~~cannot ensure that franchisees and other ~~taxes in~~third parties who hold licenses to our intellectual property will not take actions that hurt the ~~United States and foreign jurisdictions, and~~value of our operations, plans and results are affected by tax and other initiatives around the world. In particular, we are affected by the impact of changes to tax laws or related authoritative interpretations, particularly if corporate tax reform becomes a key component of budgetary initiatives in the United States and elsewhere. We are also impacted by settlements of pending or any future adjustments proposed by the IRS or other taxing authorities in connection with our tax audits, all of which will depend on their timing, nature and scope. Any increases in income tax rates, changes in income tax laws or unfavorable resolution of tax matters could have a material adverse impact on our financial results.intellectual property.

Changes in accounting standards or the recognition of impairment or other charges may adversely affect our future operations and results.

New accounting standards or changes in financial reporting requirements, accounting principles or practices, including with respect to our critical accounting estimates, could adversely affect our future results. We may also be affected by the nature and timing of decisions about underperforming markets or assets, including decisions that result in impairment or other charges that reduce our earnings. In assessing the recoverability of our long-lived assets, we consider changes in economic conditions and make assumptions regarding estimated future cash flows and other factors. These estimates are highly subjective and can be significantly impacted by many factors such as global and local business and economic conditions, operating costs, inflation, competition, consumer and demographic trends, and our restructuring activities. If our estimates or underlying assumptions change in the future, we may be required to record impairment charges. If we experience any such changes, they could have a significant adverse effect on our reported results for the affected periods.

A decrease in our credit ratings or an increase in our funding costs could adversely affect our profitability.

WeOur credit ratings may be negatively affected by ~~the impact~~our results of operations or changes in our debt ~~levels or~~levels. As a result, our ~~results of operations on our credit ratings,~~ interest expense, the availability of acceptable counterparties, our ability to obtain funding on favorable terms, orcollateral requirements and our operating or financial flexibility could all be negatively affected, especially if lenders impose new operating or financial covenants.

Our operations may also be impacted by regulations affecting capital flows, financial markets or financial institutions, which can limit our ability to manage and deploy our liquidity or increase our funding costs. If any of these events were to occur, they could have a material adverse effect on our business and financial condition.

Trading volatility and price of our common stock may be adversely affected by many factors.

Many factors affect the volatility and price of our common stock in addition to our operating results and prospects. The most important of these factors, some of which are outside our control, are the following:

The continuing unpredictable global economic and market conditions;

Governmental action or inaction in light of key indicators of economic activity or events that can significantly influence financial markets, particularly in the United States, which is the principal trading market for our common stock, and media reports and commentary about economic or other matters, even when the matter in question does not directly relate to our business;

Trading activity in our common stock or trading activity in derivative instruments with respect to our common stock or debt securities, which can be affected by market commentary (including commentary that may be unreliable or incomplete); unauthorized disclosures about our performance, plans or expectations about our business; our actual performance and creditworthiness; investor confidence, ~~generally;~~driven in part by expectations about our performance; actions by shareholders and others seeking to influence our business strategies; portfolio transactions in our stock by significant shareholders; or trading activity that results from the ordinary course rebalancing of stock indices in which McDonald’s may be included, such as the S&P 500 Index and the Dow Jones Industrial Average;

The impact of our stock repurchase program or dividend rate; and

The impact on our results of corporate actions and market and third-party perceptions and assessments of such actions, such as those we may take from time to time as we ~~review~~implement our ~~corporate structure and~~ strategies in light of changing business, legal and tax ~~considerations.~~considerations and evolve our corporate structure.

~~Our results and prospects can be adversely affected by events~~Events such as severe weather conditions, natural disasters, hostilities and social unrest, among ~~others.~~others, can adversely affect our results and prospects.

Severe weather conditions, natural disasters, hostilities and social unrest, terrorist activities, health epidemics or pandemics (or expectations about them) can adversely affect consumer spending and confidence levels ~~or other factors that~~and supply availability and costs, as well as the local operations in impacted markets, all of which can affect our results and ~~prospects, such as commodity costs.~~prospects. Our receipt of proceeds under any insurance we maintain with respect to ~~certain~~some of these risks may be delayed or the proceeds may be insufficient to ~~offset~~cover our losses fully.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the disclosure made in our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 regarding this matter.



Delaware		36-2361282
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

One McDonald’s Plaza Oak Brook, Illinois		60523
(Address of Principal Executive Offices)		(Zip Code)



	Large accelerated filer x		Accelerated filer ¨

	Non-accelerated filer ¨ (do not check if a smaller reporting company)		Smaller reporting company ¨

	Emerging growth company ¨

	If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨



	Page Reference
Part I. Financial Information

Item 1 – Financial Statements

Condensed consolidated balance sheet, September 30, ~~2016~~2017 (unaudited) and December 31, ~~2015~~2016	3

Condensed consolidated statement of income (unaudited), quarters and nine months ended September 30, ~~2016~~2017 and ~~2015~~2016	4

Condensed consolidated statement of comprehensive income (unaudited), quarters and nine months ended September 30, ~~2016~~2017 and ~~2015~~2016	5

Condensed consolidated statement of cash flows (unaudited), quarters and nine months ended September 30, ~~2016~~2017 and ~~2015~~2016	6

Notes to condensed consolidated financial statements (unaudited)	7

Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations	1011

Item 3 – Quantitative and Qualitative Disclosures About Market Risk	28

Item 4 – Controls and Procedures	28

~~Part II. Other Information~~

~~Item 1 –~~ ~~Legal Proceedings~~	29

~~Item 1A –~~ ~~Risk Factors~~Part II. Other Information	29

Item 21 – ~~Unregistered Sales of Equity Securities and Use of Proceeds~~	29

~~Item 6 –~~ ~~Exhibits~~Legal Proceedings	30

Item 1A – Risk Factors	30

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 6 – Exhibits	31

Signature	33

															CONDENSED CONSOLIDATED BALANCE SHEET

	(unaudited)								(unaudited)
In millions, except per share data	September 30, 2016				December 31, 2015				September 30, 2017			December 31, 2016
Assets
Current assets
Cash and equivalents		$	2,266.7			$	7,685.5		$	2,671.2		$	1,223.4
Accounts and notes receivable		1,349.8				1,298.7			1,569.0			1,474.1
Inventories, at cost, not in excess of market		90.5				100.1			54.2			58.9
Prepaid expenses and other current assets		595.1				558.7			495.9			565.2
Assets of businesses held for sale									—			1,527.0
Total current assets		4,302.1				9,643.0			4,790.3			4,848.6
Other assets
Investments in and advances to affiliates		878.0				792.7			999.8			725.9
Goodwill		2,504.7				2,516.3			2,373.3			2,336.5
Miscellaneous		1,816.4				1,869.1			2,417.6			1,855.3
Total other assets		5,199.1				5,178.1			5,790.7			4,917.7
Property and equipment
Property and equipment, at cost		37,931.1				37,692.4			36,038.9			34,443.4
Accumulated depreciation and amortization		(14,945.4		)		(14,574.8		)	(14,060.3		)	(13,185.8		)
Net property and equipment		22,985.7				23,117.6			21,978.6			21,257.6
Total assets		$	32,486.9			$	37,938.7		$	32,559.6		$	31,023.9
Liabilities and shareholders’ equity
Current liabilities
Accounts payable		$	852.2			$	874.7		$	685.2		$	756.0
Dividends payable		772.9				—			797.4			—
Income taxes		561.3				154.8			347.7			267.2
Other taxes		295.3				309.0			291.7			266.3
Accrued interest		263.6				233.1			279.2			247.5
Accrued payroll and other liabilities		1,731.4				1,378.8			1,123.2			1,159.3
Current maturities of long-term debt									215.8			77.2
Liabilities of businesses held for sale									—			694.8
Total current liabilities		4,476.7				2,950.4			3,740.2			3,468.3
Long-term debt		26,007.0				24,122.1			28,402.6			25,878.5
Other long-term liabilities		2,248.5				2,074.0			2,292.3			2,064.3
Deferred income taxes		1,378.8				1,704.3			1,602.1			1,817.1
Shareholders’ equity
Shareholders’ equity (deficit)
Preferred stock, no par value; authorized – 165.0 million shares; issued – none		—				—			—			—
Common stock, $.01 par value; authorized – 3.5 billion shares; issued – 1,660.6 million shares		16.6				16.6			16.6			16.6
Additional paid-in capital		6,712.8				6,533.4			6,994.1			6,757.9
Retained earnings		45,030.0				44,594.5			47,631.5			46,222.7
Accumulated other comprehensive income		(2,622.6		)		(2,879.8		)
Common stock in treasury, at cost; 830.2 and 753.8 million shares		(50,760.9		)		(41,176.8		)
Total shareholders’ equity		(1,624.1		)		7,087.9
Total liabilities and shareholders’ equity		$	32,486.9			$	37,938.7
Accumulated other comprehensive income (loss)									(2,236.7		)	(3,092.9		)
Common stock in treasury, at cost; 863.4 and 841.3 million shares									(55,883.1		)	(52,108.6		)
Total shareholders’ equity (deficit)									(3,477.6		)	(2,204.3		)
Total liabilities and shareholders’ equity (deficit)									$	32,559.6		$	31,023.9


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)	CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)													CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

		Quarters Ended						Nine Months Ended							Quarters Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
In millions		2016			2015			2016			2015				2017			2016			2017			2016
Net income		$	1,275.4		$	1,309.2		$	3,493.1		$	3,323.1			$	1,883.7		$	1,275.4		$	4,493.6		$	3,493.1
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments:
Gain (loss) recognized in accumulated other comprehensive income (AOCI), including net investment hedges	Gain (loss) recognized in accumulated other comprehensive income (AOCI), including net investment hedges	50.7			(492.6		)	255.0			(1,083.1		)	Gain (loss) recognized in accumulated other comprehensive income (AOCI), including net investment hedges	247.3			50.7			780.6			255.0
Reclassification of (gain) loss to net income	Reclassification of (gain) loss to net income	—			—			18.3			0.2			Reclassification of (gain) loss to net income	4.9			—			109.3			18.3
Foreign currency translation adjustments-net of tax benefit (expense) of $30.4, $0.3, $(66.9) and $(92.6)		50.7			(492.6		)	273.3			(1,082.9		)
Foreign currency translation adjustments-net of tax benefit (expense) of $104.0, $30.4, $376.4, and $(66.9)														Foreign currency translation adjustments-net of tax benefit (expense) of $104.0, $30.4, $376.4, and $(66.9)	252.2			50.7			889.9			273.3
Cash flow hedges:
Gain (loss) recognized in AOCI	Gain (loss) recognized in AOCI	(1.3		)	1.7			(8.4		)	13.7			Gain (loss) recognized in AOCI	(14.5		)	(1.3		)	(44.8		)	(8.4		)
Reclassification of (gain) loss to net income	Reclassification of (gain) loss to net income	1.8			(8.3		)	(10.2		)	(23.0		)	Reclassification of (gain) loss to net income	9.1			1.8			3.2			(10.2		)
Cash flow hedges-net of tax benefit (expense) of $(0.1), $3.8 and $10.6, $5.3		0.5			(6.6		)	(18.6		)	(9.3		)
Cash flow hedges-net of tax benefit (expense) of $3.1, $(0.1),$23.5, and $10.6														Cash flow hedges-net of tax benefit (expense) of $3.1, $(0.1),$23.5, and $10.6	(5.4		)	0.5			(41.6		)	(18.6		)
Defined benefit pension plans:
Gain (loss) recognized in AOCI	Gain (loss) recognized in AOCI	(0.1		)	—			(0.9		)	(1.4		)	Gain (loss) recognized in AOCI	—			(0.1		)	(0.3		)	(0.9		)
Reclassification of (gain) loss to net income	Reclassification of (gain) loss to net income	1.1			1.7			3.4			5.8			Reclassification of (gain) loss to net income	2.9			1.1			8.2			3.4
Defined benefit pension plans-net of tax benefit (expense) of $0.1, $0.1 and $0.1, $0.7		1.0			1.7			2.5			4.4
Defined benefit pension plans-net of tax benefit (expense) of $0.0, $0.1, $(0.5), and $0.1														Defined benefit pension plans-net of tax benefit (expense) of $0.0, $0.1, $(0.5), and $0.1	2.9			1.0			7.9			2.5
Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	52.2			(497.5		)	257.2			(1,087.8		)	Total other comprehensive income (loss), net of tax	249.7			52.2			856.2			257.2
Comprehensive income (loss)		$	1,327.6		$	811.7		$	3,750.3		$	2,235.3			$	2,133.4		$	1,327.6		$	5,349.8		$	3,750.3



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, ~~2016~~2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to



Restaurants at September 30,	2017	2016
Conventional franchised	21,214	21,456
Developmental licensed	6,824	5,742
Foreign affiliated	5,708	3,361
Total Franchised	33,746	30,559
Company-operated	3,230	6,056
Systemwide restaurants	36,976	36,615



	Derivative Assets						Derivative Liabilities
In millions	September 30, 2017			December 31, 2016			September 30, 2017				December 31, 2016
Total derivatives designated as hedging instruments		$	11.0		$	36.9		$	(42.7	)		$	(3.7	)
Total derivatives not designated as hedging instruments		152.6			144.4			(12.0		)		(1.9		)
Total derivatives		$	163.6		$	181.3		$	(54.7	)		$	(5.6	)



	Gain (Loss) Recognized in Accumulated OCI								Gain (Loss) Reclassified into Income from Accumulated OCI								Gain (Loss) Recognized in Income on Derivative


In millions	2017				2016				2017				2016				2017			2016
Cash Flow Hedges		$	(70.1	)		$	(13.6	)		$	(5.0	)		$	15.6
Net Investment Hedges		$	(1,393.5	)		$	(96.5	)		$	8.6			$	(18.3	)
Undesignated derivatives																		$	40.3		$	(4.1	)


~~(1)~~	~~Includes amounts excluded from effectiveness testing, ineffectiveness, and undesignated gains (losses).~~


•	Due to the impact of the Company's strategic refranchising initiative, consolidated revenues decreased 10% (12% in constant currencies) for the quarter and 6% (6% in constant currencies) for the nine months


•	Systemwide sales increased 7% in constant currencies for both the quarter and the nine months, due to strong comparable sales performance and restaurant expansion


•	Returned $2.9 billion to shareholders through share repurchases and dividends for the quarter. This brings the year-to-date return to shareholders to $6.3 billion


•	Revenues: Revenues decreased 10% (12% in constant currencies) for the quarter and decreased 6% (6% in constant currencies) for the nine months.


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)	CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)													CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

		Quarters Ended						Nine Months Ended							Quarters Ended						Nine Months Ended
		September 30,						September 30,							September 30,						September 30,
In millions		2016			2015			2016			2015				2017			2016			2017			2016
Operating activities
Net income		$	1,275.4		$	1,309.2		$	3,493.1		$	3,323.1			$	1,883.7		$	1,275.4		$	4,493.6		$	3,493.1
Adjustments to reconcile to cash provided by operations
Charges and credits:
Depreciation and amortization		370.6			387.7			1,137.6			1,166.0				355.8			370.6			1,020.6			1,137.6
Deferred income taxes		(216.0		)	(0.1		)	(374.7		)	15.2				225.1			(216.0		)	375.6			(374.7		)
Share-based compensation		34.3			29.0			102.1			76.7				39.5			34.3			83.5			102.1
Net gain on sale of restaurant businesses															(902.0		)	(69.1		)	(1,065.2		)	(208.1		)
Other		2.9			27.2			189.1			289.3				(42.3		)	72.0			(67.8		)	397.2
Changes in working capital items		783.9			194.4			697.5			290.1				124.7			783.9			(398.4		)	697.5
Cash provided by operations		2,251.1			1,947.4			5,244.7			5,160.4				1,684.5			2,251.1			4,441.9			5,244.7
Investing activities
Capital expenditures		(405.3		)	(412.7		)	(1,149.6		)	(1,221.2		)		(416.9		)	(405.3		)	(1,213.3		)	(1,149.6		)
Sales and purchases of restaurant businesses and property sales		103.9			38.2			421.3			136.8
Purchases of restaurant businesses															(20.8		)	(38.3		)	(38.9		)	(75.3		)
Sales of restaurant businesses															1.9			125.4			851.8			441.4
Proceeds from sale of businesses in China and Hong Kong															1,597.0			—			1,597.0			—
Sales of property															59.2			16.8			153.3			55.2
Other		(49.7		)	(44.0		)	(82.4		)	(29.8		)		(45.7		)	(49.7		)	(183.9		)	(82.4		)
Cash used for investing activities		(351.1		)	(418.5		)	(810.7		)	(1,114.2		)
Cash provided by (used for) investing activities															1,174.7			(351.1		)	1,166.0			(810.7		)
Financing activities
Net short-term borrowings		(80.0		)	170.2			(742.9		)	131.4				(55.8		)	(80.0		)	(834.3		)	(742.9		)
Long-term financing issuances		0.6			1.4			3,372.7			4,229.2				0.4			0.6			2,530.5			3,372.7
Long-term financing repayments		(5.7		)	(6.2		)	(819.6		)	(1,052.9		)		(3.6		)	(5.7		)	(407.1		)	(819.6		)
Treasury stock purchases		(1,969.8		)	(2,392.3		)	(9,662.2		)	(4,554.1		)		(2,081.7		)	(1,969.8		)	(3,937.4		)	(9,662.2		)
Common stock dividends		(745.1		)	(789.1		)	(2,285.2		)	(2,416.4		)		(755.3		)	(745.1		)	(2,287.4		)	(2,285.2		)
Proceeds from stock option exercises		36.1			35.7			249.9			170.9				82.5			36.1			373.1			249.9
Excess tax benefit on share-based compensation		—			4.6			—			30.0
Other		(11.8		)	(2.9		)	(3.9		)	(22.4		)		3.5			(11.8		)	(1.1		)	(3.9		)
Cash used for financing activities		(2,775.7		)	(2,978.6		)	(9,891.2		)	(3,484.3		)		(2,810.0		)	(2,775.7		)	(4,563.7		)	(9,891.2		)
Effect of exchange rates on cash and cash equivalents		14.4			(96.3		)	38.4			(187.3		)		76.2			14.4			229.6			38.4
Cash and equivalents increase (decrease)		(861.3		)	(1,546.0		)	(5,418.8		)	374.6				125.4			(861.3		)	1,273.8			(5,418.8		)
Change in cash balances of businesses held for sale															153.4			—			174.0			—


•	U.S.: Revenues decreased for both periods as positive comparable sales were more than offset by the impact of refranchising.


•	International Lead Markets: Revenues increased for the quarter due to positive comparable sales across all markets, partly offset by the impact of refranchising. For the nine months, revenues were flat as the benefit from positive comparable sales was offset by foreign currency translation and the impact of refranchising.


•	High Growth Markets: Revenues decreased for both periods as positive comparable sales across most markets were more than offset by the impact of refranchising businesses in China and Hong Kong.


COMPARABLE SALES
	Increase/ (Decrease)								Increase/ (Decrease)
	Quarters Ended				Nine Months Ended				Quarters Ended				Nine Months Ended
	September 30,				September 30,*				September 30,				September 30,
	2016		2015		2016		2015		2017		2016		2017		2016
U.S.	1.3	%	0.9	%	2.7	%	(1.2	)%	4.1	%	1.3	%	3.3	%	2.7	%
International Lead Markets	3.3		4.6		3.6		3.2		5.7		3.3		5.0		3.6
High Growth Markets	1.5		8.9		2.2		1.4		6.2		1.5		5.7		2.2
Foundational Markets & Corporate	10.1		6.1		9.6		(0.9	)	10.2		10.1		11.3		9.6
Total	3.5	%	4.0	%	4.2	%	0.4	%	6.0	%	3.5	%	5.6	%	4.2	%


*	On a consolidated basis, comparable guest counts (the number of transactions at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months, including those temporarily closed) increased 2.1% and decreased 0.1% ~~and 3.1%~~ for the nine months ended 2017 and 2016, ~~and 2015,~~ respectively.


SYSTEMWIDE SALES	SYSTEMWIDE SALES
	Quarter Ended				Nine Months Ended				Quarter Ended				Nine Months Ended
	September 30, 2016				September 30, 2016				September 30, 2017				September 30, 2017
	Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.	1	%	1	%	3	%	3	%	4	%	4	%	3	%	3	%
International Lead Markets	2		5		2		5		11		7		5		6
High Growth Markets	3		5		2		6		14		11		11		10
Foundational Markets & Corporate	13		12		7		11		8		12		10		13
Total	4	%	4	%	3	%	5	%	8	%	7	%	6	%	7	%


FRANCHISED SALES
Dollars in millions
Quarters Ended September 30,	2016		2015		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		2017		2016		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.	$	8,391.0	$	8,139.9	3	%	3	%	$	8,869.2	$	8,391.0	6	%	6	%
International Lead Markets	4,534.1		4,290.5		6		8		5,175.7		4,534.1		14		10
High Growth Markets	1,305.4		1,216.6		7		9		2,083.6		1,305.4		60		55
Foundational Markets & Corporate	4,126.0		3,592.7		15		14		4,876.1		4,126.0		18		23
Total*	$	18,356.5	$	17,239.7	6	%	7	%
Total									$	21,004.6	$	18,356.5	14	%	14	%

Ownership type
Conventional franchised									$	15,611.2	$	14,650.9	7	%	5	%
Developmental licensed									3,436.5		2,432.8		41		46
Foreign affiliated									1,956.9		1,272.8		54		61
Total									$	21,004.6	$	18,356.5	14	%	14	%

Nine Months Ended September 30,	2016		2015		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation		2017		2016		Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
U.S.	$	24,356.4	$	23,389.7	4	%	4	%	$	25,574.8	$	24,356.4	5	%	5	%
International Lead Markets	12,760.8		12,158.6		5		8		13,787.1		12,760.8		8		9
High Growth Markets	3,636.0		3,407.9		7		9		4,709.3		3,636.0		30		29
Foundational Markets & Corporate	11,117.8		10,247.3		8		13		13,227.8		11,117.8		19		22
Total*	$	51,871.0	$	49,203.5	5	%	7	%
Total									$	57,299.0	$	51,871.0	10	%	11	%

Ownership type
Conventional franchised									$	43,856.6	$	41,881.0	5	%	5	%
Developmental licensed									9,111.2		6,612.4		38		41
Foreign affiliated									4,331.2		3,377.6		28		32
Total									$	57,299.0	$	51,871.0	10	%	11	%

																													FRANCHISED AND COMPANY-OPERATED RESTAURANT MARGINS	Dollars in millions
	Percent				Amount				Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation		Percent						Amount					Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Quarters Ended September 30,	2016		2015		2016		2015				2017	Inc/ (Dec) Excluding Currency Translation				2016			2017			2016			Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Franchised									Inc/ (Dec)
U.S.	82.7	%	83.1	%	$	961.4	$	937.0	3	%		3	%	82.9	%		82.7	%		$	1,014.9		$	961.4	6	%	6	%
International Lead Markets	81.2		80.8		635.4		596.7		6			8		81.6			81.2			729.5			635.4		15		11
High Growth Markets	71.6		72.3		150.1		140.4		7			8		76.0			71.6			203.1			150.1		35		30
Foundational Markets & Corporate	89.8		88.8		267.5		242.0		11			11		93.8			89.8			285.5			267.5		7		8
Total	82.1	%	82.2	%	$	2,014.4	$	1,916.1	5	%		6	%	83.0	%		82.1	%		$	2,233.0		$	2,014.4	11	%	9	%
Company-operated
U.S.	16.9	%	12.4	%	$	153.9	$	132.2	16	%		16	%	15.5	%		16.9	%		$	124.2		$	153.9	(19	)%	(19	)%
International Lead Markets	21.6		20.8		237.9		256.8		(7	)		(3	)	21.9			21.6			235.5			237.9		(1	)	(4	)
High Growth Markets	17.0		14.3		245.2		207.5		18			21		18.5			17.0			195.5			245.2		(20	)	(24	)
Foundational Markets & Corporate	18.4		14.7		95.6		78.7		22			23		21.8			18.4			29.3			95.6		(69	)	(70	)
Total	18.4	%	15.8	%	$	732.6	$	675.2	9	%		11	%	19.1	%		18.4	%		$	584.5		$	732.6	(20	)%	(22	)%

	Percent				Amount				Inc/ (Dec)			Inc/ (Dec) Excluding Currency Translation		Percent						Amount					Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Nine Months Ended September 30,	2016		2015		2016		2015				2017	Inc/ (Dec) Excluding Currency Translation				2016			2017			2016			Inc/ (Dec)		Inc/ (Dec) Excluding Currency Translation
Franchised									Inc/ (Dec)
U.S.	82.7	%	82.5	%	$	2,779.7	$	2,652.1	5	%		5	%	82.4	%		82.7	%		$	2,898.9		$	2,779.7	4	%	4	%
International Lead Markets	80.2		79.9		1,765.8		1,673.0		6			9		80.7			80.2			1,927.5			1,765.8		9		10
High Growth Markets	69.9		71.0		406.0		385.9		5			7		72.8			69.9			494.4			406.0		22		22
Foundational Markets & Corporate	88.9		88.3		715.7		671.9		7			11		92.7			88.9			788.2			715.7		10		12
Total	81.5	%	81.4	%	$	5,667.2	$	5,382.9	5	%		7	%	82.2	%		81.5	%		$	6,109.0		$	5,667.2	8	%	8	%
Company-operated
U.S.	15.9	%	14.7	%	$	454.4	$	460.5	(1	)%		(1	)%	15.8	%		15.9	%		$	392.3		$	454.4	(14	)%	(14	)%
International Lead Markets	20.7		20.0		673.2		719.9		(6	)		(2	)	21.2			20.7			643.2			673.2		(4	)	(2	)
High Growth Markets	15.3		12.6		623.4		526.6		18			25		17.9			15.3			689.6			623.4		11		9
Foundational Markets & Corporate	15.5		12.4		228.3		192.8		18			22		18.3			15.5			121.2			228.3		(47	)	(48	)
Total	17.0	%	15.2	%	$	1,979.3	$	1,899.8	4	%		8	%	18.4	%		17.0	%		$	1,846.3		$	1,979.3	(7	)%	(7	)%


•	Franchised: Franchised margin dollars increased $218.6 million or 11% (9% in constant currencies) for the quarter and increased $441.8 million or 8% (8% in constant currencies) for the nine months. Both periods benefited from expansion and the impact of refranchising, as well as positive comparable sales performance across all segments.


•	U.S.: The franchised margin percent increased for the quarter and decreased for the nine months. Positive comparable sales contributed to both periods, but for the nine months was more than offset by higher occupancy costs.


•	International Lead Markets: The increase in the franchised margin percent for the quarter and nine months primarily reflected the benefit from strong comparable sales performance, partly offset by the impact of refranchising.


•	High Growth Markets: The increase in the franchised margin percent for the quarter and nine months was due to the impact of refranchising, largely related to the China and Hong Kong transaction, and strong comparable sales performance.


•	U.S.: The Company-operated margin percent decreased for the quarter and nine months. Both periods reflected strong comparable sales and higher labor costs, while the quarter also reflected higher commodity costs.

																	CONSOLIDATED COMPANY-OPERATED RESTAURANT EXPENSES AND MARGINS AS A PERCENT OF SALES
	Quarters Ended				Nine Months Ended				Quarters Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2016		2015		2016		2015		2017		2016		2017		2016
Food & paper	31.8	%	33.7	%	32.1	%	33.8	%	31.4	%	31.8	%	31.7	%	32.1	%
Payroll & employee benefits	26.1		26.5		27.0		26.5		27.6		26.1		27.5		27.0
Occupancy & other operating expenses	23.7		24.0		23.9		24.5		21.9		23.7		22.4		23.9
Total expenses	81.6	%	84.2	%	83.0	%	84.8	%	80.9	%	81.6	%	81.6	%	83.0	%
Company-operated margins	18.4	%	15.8	%	17.0	%	15.2	%	19.1	%	18.4	%	18.4	%	17.0	%


•	Selling, general and administrative expenses decreased $15.9 million or 3% (4% in constant currencies) for the quarter and $143.3 million or 8% (8% in constant currencies) for the nine months. The decreases were primarily due to lower employee-related costs resulting from the Company's ongoing G&A and refranchising initiatives, partly offset by higher restaurant technology spending.



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs ⁽¹⁾



July 1-31, 2016	10,222,961	$	122.04	10,222,961	$	6,766,217,434
August 1-31, 2016	7,155,219	117.13		7,155,219	5,928,146,730
September 1-30, 2016	5,939,352	115.75		5,939,352	5,240,643,503
Total	23,317,532	$	118.93	23,317,532


*	Subject to applicable law, the Company may repurchase shares directly in the open market, in privately negotiated transactions, or pursuant to derivative instruments and plans complying with Rule 10b5-1, among other types of transactions and arrangements.



~~Exhibit Number~~Item 6. Exhibits							~~Description~~

Exhibit Number			Description

	(3)		(a)		Restated Certificate of Incorporation, effective as of June 14, 2012, incorporated herein by reference from Exhibit 3(a) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2012.


			(b)		By-Laws, as amended and restated with effect as of October 26, 2015, incorporated herein by reference from Exhibit 3(b) of Form 8-K (File No. 001-05231), filed October 28, 2015.

	(4)			Instruments defining the rights of security holders, including Indentures:*


			(a)		Senior Debt Securities Indenture, ~~dated as of October 19, 1996,~~ incorporated herein by reference from Exhibit (4)(a) of Form S-3 Registration Statement (File No. 333-14141), filed October 15, 1996.

			(b)		Subordinated Debt Securities Indenture, ~~dated as of October 18, 1996,~~ incorporated herein by reference from Exhibit (4)(b) of Form S-3 Registration Statement (File No. 333-14141), filed October 15, 1996.


	(10)			Material Contracts


			(a)		Directors’ Deferred Compensation Plan, effective as of January 1, 2008, incorporated herein by reference from Exhibit 99.4 of Form 8-K (File No. 001-05231), filed December 4, 2007.**

				~~(i)~~		~~Directors’~~ Directors' Deferred Compensation Plan, amended and restated effective as of May 26, 2016, incorporated herein by reference from Exhibit ~~10(i)~~10(a)(i) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2016.**


			(b)		McDonald’s ~~Excess Benefit and~~ Deferred ~~Bonus~~Compensation Plan, effective January 1, ~~2011, as amended and restated March 22, 2010,~~2017, incorporated herein by reference from Exhibit 10(b) of Form ~~10-Q (File~~10-K (file No. 001-05231), for the ~~quarter~~year ended ~~March~~December 31, ~~2010.~~2016.**


			(c)		McDonald’s Corporation Supplemental Profit Sharing and Savings Plan, effective as of September 1, 2001, incorporated herein by reference from Exhibit 10(c) of Form 10-K (File No. 001-05231), for the year ended December 31, 2001.**


				(i)		First Amendment to the McDonald’s Corporation Supplemental Profit Sharing and Savings Plan, effective as of January 1, 2002, incorporated herein by reference from Exhibit 10(c)(i) of Form 10-K (File No. 001-05231), for the year ended December 31, 2002.**


				(ii)		Second Amendment to the McDonald’s Corporation Supplemental Profit Sharing and Savings Plan, effective January 1, 2005, incorporated herein by reference from Exhibit 10(c)(ii) of Form 10-K (File No. 001-05231), for the year ended December 31, 2004.**


			(d)		1992 Stock Ownership Incentive Plan, as amended and restated January 1, 2001, incorporated herein by reference from Exhibit 10(e) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2001.**

				~~(i)~~		First Amendment to McDonald’s Corporation 1992 Stock Ownership Incentive Plan, as amended and restated, effective as of February 14, 2007, incorporated herein by reference from Exhibit 10(e)(i) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2007.**

			~~(e)~~	McDonald’s Corporation Amended and Restated 2001 Omnibus Stock Ownership Plan, effective July 1, 2008, incorporated herein by reference from Exhibit 10(h) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2009.**


				(i)		First Amendment to the McDonald’s Corporation Amended and Restated 2001 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(h)(i) of Form 10-K (File No. 001-05231), for the year ended December 31, 2008.**


				(ii)		Second Amendment to the McDonald’s Corporation Amended and Restated 2001 Omnibus Stock Ownership Plan as amended, effective February 9, 2011, incorporated herein by reference from Exhibit 10(h)(ii) of Form 10-K (File No. 001-05231), for the year ended December 31, 2010.**


		(e)	~~(f)~~		~~McDonald’s~~ McDonald's Corporation 2012 Omnibus Stock Ownership Plan, effective June 1, 2012, incorporated herein by reference from Exhibit 10(h) of Form 10-Q (File No. 001-05231), for the quarter ended September 30, 2012.**


		(f)	~~(g)~~		McDonald’s Corporation 2009 Cash Incentive Plan, effective as of May 27, 2009, incorporated herein by reference from Exhibit 10(j) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2009.**



~~Exhibit Number~~			~~Description~~

	(g)	~~(h)~~		~~McDonald’s~~ McDonald's Corporation Target Incentive Plan, effective January 1, 2013, incorporated herein by reference from Exhibit 10(j) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2013.**


	(h)	~~(i)~~		~~McDonald’s~~ McDonald's Corporation Cash Performance Unit Plan, effective February 13, 2013, incorporated herein by reference from Exhibit 10(k) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2013.**

	(i)	~~(j)~~		Form of Executive Stock Option Grant Agreement in connection with the Amended and Restated 2001 Omnibus Stock Ownership Plan, as amended, incorporated herein by reference from Exhibit 10(j) of Form 10-K (File No. 001-05231), for the year ended December 31, 2011.**


	(j)	~~(k)~~		Form of Executive Stock Option Award Agreement in connection with the 2012 Omnibus Stock Ownership Plan, incorporated herein by reference from Exhibit 10(n) of Form 10-Q (File No. 001-05231), for the quarter ended March 31, 2013.**


	(k)	~~(l)~~		McDonald’s Corporation Severance Plan, as Amended and Restated, effective September 30, 2015, incorporated herein by reference from Exhibit 10(o) of Form 10-Q (File No. 001-05231), for the quarter ended September 30, 2015.**


			(i)		First Amendment to the McDonald's Corporation Severance Plan, effective June 1, 2016, incorporated herein by reference from Exhibit 10(l)(i) of Form 10-Q (File No. 001-05231), for the quarter ended June 30, 2016.**


			~~(ii)~~



~~Exhibit Number~~			~~Description~~

	(31.1)			Rule 13a-14(a) Certification of Chief Executive Officer.

	(31.2)			Rule 13a-14(a) Certification of Chief Financial Officer.

	(32.1)			Certification pursuant to 18 U.S.C. Section 1350 by the Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	(32.2)			Certification pursuant to 18 U.S.C. Section 1350 by the Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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