OAK BROOK, Ill., Oct. 24, 2017 /PRNewswire/ -- McDonald's
Corporation today announced results for the third quarter ended
September 30, 2017.
"We are serving more customers, more often by offering great
tasting food at a good value with the quick service and friendly
hospitality they expect from McDonald's," said McDonald's President
and Chief Executive Officer Steve
Easterbrook. "Our positive comparable sales and guest counts
across all of our operating segments during the third quarter
demonstrate broad-based momentum throughout our business that
builds upon our strong first half of 2017."
Third quarter highlights:
- Global comparable sales increased 6.0%, reflecting positive
guest counts in all segments
- Due to the impact of the Company's strategic refranchising
initiative, consolidated revenues decreased 10% (12% in constant
currencies)
- Systemwide sales increased 7% in constant currencies, due to
strong comparable sales performance and restaurant expansion
- Consolidated operating income increased 44% (42% in constant
currencies), which benefited from a gain of approximately
$850 million on the sale of the
Company's businesses in China and
Hong Kong. Excluding the impact of
the gain, as well as unrelated strategic charges, consisting of
current quarter and prior year restructuring and non-cash
impairment charges in connection with the Company's global G&A
and refranchising initiatives, consolidated operating income
increased 5% (3% in constant currencies), primarily due to strong
comparable sales performance across all segments
- Diluted earnings per share of $2.32 increased 55% (53% in constant currencies).
Excluding the impact of the current year gain and these unrelated
strategic charges, which total $0.56
per share, diluted earnings per share was $1.76. Excluding these 2017 items as well as the
$0.12 per share of prior year
strategic charges, the Company's diluted earnings per share
increased 9% (7% in constant currencies)
- Returned $2.9 billion to
shareholders through share repurchases and dividends. In addition,
the Company announced a 7% increase in its quarterly dividend to
$1.01 beginning in the fourth
quarter, demonstrating management's continued confidence in the
Company's performance
In the U.S., third quarter comparable sales increased 4.1%,
reflecting the national beverage and McPick 2 value promotions,
along with the continued success of the Signature Crafted premium
sandwich platform. Operating income for the quarter increased 6%,
reflecting higher sales-driven franchised margin dollars and
G&A savings.
Comparable sales for the International Lead segment increased
5.7% for the quarter, led by continued momentum in the U.K. and
Canada, as well as positive
results across all other markets. The segment's operating income
increased 21% (17% in constant currencies), fueled by sales-driven
improvements in franchised margin dollars.
In the High Growth segment, third quarter comparable sales
increased 6.2%, led by strong performance in China and positive results across the majority
of the segment. The segment's operating income for the quarter
included a gain of approximately $850
million related to the refranchising of China and Hong
Kong, partly offset by unrelated non-cash impairment
charges. Excluding these items, the segment's operating income for
the quarter increased 7% (3% in constant currencies), reflecting
higher sales-driven margin dollars.
In the Foundational markets, third quarter comparable sales rose
10.2%, reflecting positive sales performance across all geographic
regions. For the segment, operating income decreased due to the
Company's refranchising initiatives and higher restaurant
technology spending, partly offset by the benefit from comparison
to the prior year's strategic charges.
"During the quarter, we refranchised our businesses in
China and Hong Kong, reaching our target to refranchise
4,000 restaurants more than a year ahead of schedule," said
McDonald's Chief Financial Officer, Kevin
Ozan. "Completing this transaction brings us closer to the
customers and communities we serve in these markets and creates a
better opportunity to unlock their full growth potential. Our more
heavily franchised structure will continue to drive shareholder
value by providing a more stable revenue and income stream with
higher returns on invested capital."
Steve Easterbrook concluded, "Our
Velocity Growth Plan is the right strategy for McDonald's to
achieve long-term, profitable growth and we are on track to succeed
with our commitment and focus on execution. We've made progress in
many areas of our business already, including optimizing our
restaurant ownership mix and running better restaurants. At the
same time, we also are making strides with initiatives such as
delivery, mobile order and pay, as well as the Experience of the
Future transformation of our restaurants that will make the
experience more convenient, personalized and enjoyable for our
customers."
KEY HIGHLIGHTS -
CONSOLIDATED
|
Dollars in millions,
except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
|
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
|
Revenues
|
$
|
5,754.6
|
|
|
$
|
6,424.1
|
|
|
(10)%
|
|
|
(12)%
|
|
|
$
|
17,480.2
|
|
|
$
|
18,593.0
|
|
|
(6)%
|
|
|
(6)%
|
|
Operating
income
|
3,079.4
|
|
|
2,137.3
|
|
|
44
|
|
|
42
|
|
|
7,408.5
|
|
|
5,775.5
|
|
|
28
|
|
|
29
|
|
Net income
|
1,883.7
|
|
|
1,275.4
|
|
|
48
|
|
|
47
|
|
|
4,493.6
|
|
|
3,493.1
|
|
|
29
|
|
|
30
|
|
Earnings per
share-diluted
|
$
|
2.32
|
|
|
$
|
1.50
|
|
|
55%
|
|
|
53%
|
|
|
$
|
5.48
|
|
|
$
|
4.01
|
|
|
37%
|
|
|
38%
|
|
Results for the quarter and nine months reflected stronger
operating performance and 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 July 31,
2017. The Company recorded a pre-tax gain of approximately
$850 million related to this sale.
For the quarter, this gain was partially offset by $111 million of unrelated pre-tax non-cash
impairment charges. Results for 2016 included pre-tax strategic
charges of $128 million for the
quarter and $357 million for the nine
months, consisting primarily of charges related to the Company's
global G&A and refranchising initiatives. Excluding the impact
of these current year and prior year items, diluted earnings per
share increased 9% (7% in constant currencies) for the quarter, and
15% (16% in constant currencies) for the nine months.
Foreign currency translation had a positive impact of
$0.02 on diluted earnings per share
for the quarter and a negative impact of $0.04 for the nine months.
THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED
THROUGHOUT THIS RELEASE
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.
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.
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.
RELATED COMMUNICATIONS
This press release should be read in conjunction with Exhibit
99.2 in the Company's Form 8-K filing for supplemental information
related to the Company's results for the quarter and nine months
ended September 30, 2017.
McDonald's Corporation will broadcast its investor earnings
conference call live over the Internet at 10:00 a.m. (Central Time) on October 24,
2017. A link to the live webcast will be available at
www.investor.mcdonalds.com. There will also be an archived webcast
available for a limited time thereafter.
Kevin Ozan, McDonald's Chief
Financial Officer, will participate in the Morgan Stanley Global
Consumer & Retail Conference at 8:00
a.m. (Eastern Time) on November 15,
2017. This presentation will be webcast live and available
for replay for a limited time thereafter at
www.investor.mcdonalds.com.
McDonald's plans to release fourth quarter results before the
market opens on January 30, 2018 and
will host an investor webcast. This webcast will be broadcast live
and available for replay for a limited time thereafter at
www.investor.mcdonalds.com.
ABOUT McDONALD'S
McDonald's is the world's leading global foodservice retailer
with approximately 37,000 locations in over 100 countries. Over 90%
of McDonald's restaurants worldwide are owned and operated by
independent local business men and women.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements, which
reflect management's expectations regarding future events and
operating performance and speak only as of the date hereof. These
forward-looking statements involve a number of risks and
uncertainties. The factors that could cause actual results to
differ materially from our expectations are detailed in the
Company's filings with the Securities and Exchange Commission,
including the risk factors discussed in Exhibit 99.2 in the
Company's Form 8-K filing on October 24, 2017. The Company
undertakes no obligation to update such forward-looking statements,
except as may otherwise be required by law.
McDONALD'S
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
Quarters Ended
September 30,
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
3,064.3
|
|
|
$
|
3,972.1
|
|
|
$
|
(907.8)
|
|
|
(23)%
|
|
Revenues from
franchised restaurants
|
2,690.3
|
|
|
2,452.0
|
|
|
238.3
|
|
|
10
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
5,754.6
|
|
|
6,424.1
|
|
|
(669.5)
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
2,479.8
|
|
|
3,239.5
|
|
|
(759.7)
|
|
|
(23)
|
|
Franchised
restaurants-occupancy expenses
|
457.3
|
|
|
437.6
|
|
|
19.7
|
|
|
4
|
|
Selling,
general & administrative expenses
|
567.0
|
|
|
582.9
|
|
|
(15.9)
|
|
|
(3)
|
|
Other operating
(income) expense, net
|
(828.9)
|
|
|
26.8
|
|
|
(855.7)
|
|
|
n/m
|
|
Total operating costs
and expenses
|
2,675.2
|
|
|
4,286.8
|
|
|
(1,611.6)
|
|
|
(38)
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
3,079.4
|
|
|
2,137.3
|
|
|
942.1
|
|
|
44
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
236.7
|
|
|
221.4
|
|
|
15.3
|
|
|
7
|
|
Nonoperating (income)
expense, net
|
23.2
|
|
|
11.4
|
|
|
11.8
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
2,819.5
|
|
|
1,904.5
|
|
|
915.0
|
|
|
48
|
|
Provision for income
taxes
|
935.8
|
|
|
629.1
|
|
|
306.7
|
|
|
49
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
1,883.7
|
|
|
$
|
1,275.4
|
|
|
$
|
608.3
|
|
|
48%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
2.32
|
|
|
$
|
1.50
|
|
|
$
|
0.82
|
|
|
55%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
813.5
|
|
|
847.7
|
|
|
(34.2)
|
|
|
(4)%
|
|
McDONALD'S
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
Nine Months Ended
September 30,
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
10,045.8
|
|
|
$
|
11,642.2
|
|
|
$
|
(1,596.4)
|
|
|
(14)%
|
|
Revenues from
franchised restaurants
|
7,434.4
|
|
|
6,950.8
|
|
|
483.6
|
|
|
7
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
17,480.2
|
|
|
18,593.0
|
|
|
(1,112.8)
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
8,199.5
|
|
|
9,662.9
|
|
|
(1,463.4)
|
|
|
(15)
|
|
Franchised
restaurants-occupancy expenses
|
1,325.4
|
|
|
1,283.6
|
|
|
41.8
|
|
|
3
|
|
Selling,
general & administrative expenses
|
1,613.7
|
|
|
1,757.0
|
|
|
(143.3)
|
|
|
(8)
|
|
Other operating
(income) expense, net
|
(1,066.9)
|
|
|
114.0
|
|
|
(1,180.9)
|
|
|
n/m
|
|
Total operating costs
and expenses
|
10,071.7
|
|
|
12,817.5
|
|
|
(2,745.8)
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
7,408.5
|
|
|
5,775.5
|
|
|
1,633.0
|
|
|
28
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
686.2
|
|
|
663.6
|
|
|
22.6
|
|
|
3
|
|
Nonoperating (income)
expense, net
|
33.9
|
|
|
(19.2)
|
|
|
53.1
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
6,688.4
|
|
|
5,131.1
|
|
|
1,557.3
|
|
|
30
|
|
Provision for income
taxes
|
2,194.8
|
|
|
1,638.0
|
|
|
556.8
|
|
|
34
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
4,493.6
|
|
|
$
|
3,493.1
|
|
|
$
|
1,000.5
|
|
|
29%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
5.48
|
|
|
$
|
4.01
|
|
|
$
|
1.47
|
|
|
37%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
819.4
|
|
|
871.8
|
|
|
(52.4)
|
|
|
(6)%
|
|
View original
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SOURCE McDonald's Corporation