McDonalds 2008 Annual Report Download - page 55

The following table summarizes the Company’s debt obligations. (Interest rates and debt amounts reflected in the table include the
effects of interest rate exchange agreements.)
Interest rates(1) December 31 Amounts outstanding December 31
In millions of U.S. Dollars Maturity dates 2008 2007 2008 2007
Fixed 5.6% 5.5% $ 4,726.1 $3,042.3
Floating 2.3 4.8 857.1 160.0
Total U.S. Dollars 2009-2038 5,583.2 3,202.3
Fixed 5.0 2.7 704.1 121.8
Floating 5.2 4.8 829.4 2,093.3
Total Euro 2009-2015 1,533.5 2,215.1
Fixed 6.0 6.0 654.9 1,078.8
Floating 3.6 6.5 2.0 689.9
Total British Pounds Sterling 2009-2032 656.9 1,768.7
Fixed 2.2 2.2 720.1 585.0
Floating 1.6 440.2
Total Japanese Yen 2010-2030 1,160.3 585.0
Fixed 2.8 3.4 453.8 497.8
Floating 5.6 5.7 722.5 946.9
Total other currencies(2) 2009-2014 1,176.3 1,444.7
Debt obligations before fair value adjustments(3) 10,110.2 9,215.8
Fair value adjustments(4) 107.6 85.3
Total debt obligations(5) $10,217.8 $9,301.1
(1) Weighted-average effective rate, computed on a semi-annual basis.
(2) Primarily consists of Chinese Renminbi, Swiss Francs, Korean Won, and Singapore Dollars.
(3) Aggregate maturities for 2008 debt balances, before fair value adjustments, were as follows (in millions): 2009–$31.8; 2010–$616.5; 2011–$610.9; 2012–$2,214.3;
2013–$657.0; Thereafter–$5,979.7. These amounts include a reclassification of short-term obligations totaling $1.3 billion to long-term obligations as they are supported by a long-
term line of credit agreement expiring in 2012.
(4) SFAS No. 133 requires that the carrying value of underlying items in fair value hedges, in this case debt obligations, be adjusted for fair value changes to the extent they are attributable
to the risk designated as being hedged. The related hedging instrument is also recorded at fair value in either miscellaneous other assets or other long-term liabilities. A portion
($25.1 million) of the adjustments at December 31, 2008 related to interest rate exchange agreements that were terminated in December 2002 and will amortize as a reduction of
interest expense over the remaining life of the debt.
(5) Includes notes payable, current maturities of long-term debt and long-term debt included on the Consolidated balance sheet. The increase in debt obligations from December 31, 2007
to December 31, 2008 was due to (in millions): net issuances ($1,045.7), SFAS No. 133 noncash fair value adjustments ($22.3) and other changes ($4.0), partly offset by changes in
exchange rates on foreign currency denominated debt ($155.3).
ESOP loans
Borrowings related to the leveraged Employee Stock Ownership
Plan (ESOP) at December 31, 2008, which include $63.6 million
of loans from the Company to the ESOP, are reflected as debt with
a corresponding reduction of shareholders’ equity (additional
paid-in capital included a balance of $56.4 million and $63.8 mil-
lion at December 31, 2008 and 2007, respectively). The ESOP is
repaying the loans and interest through 2018 using Company
contributions and dividends from its McDonald’s common stock
holdings. As the principal amount of the borrowings is repaid, the
debt and the unearned ESOP compensation (additional paid-in
capital) are reduced.
EMPLOYEE BENEFIT PLANS
The Company’s Profit Sharing and Savings Plan for U.S.-based
employees includes a 401(k) feature, an ESOP feature, and a dis-
cretionary employer profit sharing match. The 401(k) feature
allows participants to make pretax contributions that are partly
matched from shares released under the ESOP. The Profit Sharing
and Savings Plan also provides for a discretionary employer profit
sharing match after the end of the year for those participants eligi-
ble to share in the match who have contributed to the 401(k)
feature.
All contributions and related earnings can be invested in sev-
eral investment alternatives as well as McDonald’s common stock
in accordance with each participant’s elections. Beginning in 2007,
participants’ annual contributions to the 401(k) feature and the
discretionary employer match are limited to 20% investment in
McDonald’s common stock.
The Company also maintains certain supplemental benefit
plans that allow participants to (i) make tax-deferred contributions
and (ii) receive Company-provided allocations that cannot be made
under the Profit Sharing and Savings Plan because of Internal
Revenue Service limitations. The investment alternatives and
returns are based on certain market-rate investment alternatives
under the Profit Sharing and Savings Plan. Total liabilities were
$389.7 million at December 31, 2008 and $415.3 million at
December 31, 2007 and were primarily included in other long-
term liabilities on the Consolidated balance sheet.
The Company has entered into derivative contracts to hedge
market-driven changes in certain of the liabilities. At December 31,
2008, derivatives with a fair value of $90.2 million indexed to the
Company’s stock as well as an investment totaling $60.7 million
indexed to certain market indices were included in miscellaneous
other assets on the Consolidated balance sheet. All changes in
liabilities for these nonqualified plans and in the fair value of the
derivatives are recorded in selling, general & administrative
expenses. Changes in fair value of the derivatives indexed to the
Company’s stock are recorded in the income statement because
the contracts provide the counterparty with a choice to settle in
cash or shares.
McDonald’s Corporation Annual Report 2008 53