CHICAGO, July 26, 2018 /PRNewswire/ -- McDonald's
Corporation today announced results for the second quarter ended
June 30, 2018.
"We're seeing good performance across our business as our
customers tell us that they value and appreciate the moves we're
making to elevate the McDonald's experience," said McDonald's
President and Chief Executive Officer Steve
Easterbrook. "We're pleased with the results of our
international business and the progress we're making in the U.S. on
executing on our Velocity Growth Plan priorities. We've now
marked 12 consecutive quarters of positive comparable sales, and we
are confident that we're executing the right strategy to achieve
long-term, profitable growth."
Second quarter highlights:
- Global comparable sales increased 4.0%, reflecting positive
comparable sales in all segments
- Due to the impact of the Company's strategic refranchising
initiative, consolidated revenues decreased 12% (14% in constant
currencies)
- Systemwide sales increased 5% in constant currencies
- Consolidated operating income decreased 1% (4% in constant
currencies), primarily due to $92
million of strategic restructuring charges ($85 million related to the previously disclosed
restructuring charge for the U.S. business). Excluding these
charges, as well as unrelated strategic charges in the prior year,
consolidated operating income increased 2% (decreased 1% in
constant currencies)
- Diluted earnings per share of $1.90 increased 12% (9% in constant currencies),
reflecting $0.09 per share of
strategic restructuring charges. Excluding these charges, diluted
earnings per share was $1.99, an
increase of 15% (12% in constant currencies) over prior year
earnings per share (excluding $0.03
per share of prior year strategic charges)
- Returned $2.5 billion to
shareholders through share repurchases and dividends
In the U.S., second quarter comparable sales increased 2.6%
driven by growth in average check resulting from both product mix
shifts and menu price increases. Operating income for the quarter
decreased 7% primarily due to the strategic restructuring charge.
Excluding this charge, operating income increased 1% as higher
franchised margin dollars were partly offset by lower
Company-operated margin dollars.
Comparable sales for the International Lead segment increased
4.9% for the quarter, reflecting positive results across all
markets, primarily driven by the U.K. and France. The segment's operating income
increased 15% (9% in constant currencies), fueled by sales-driven
improvements in franchised margin dollars.
In the High Growth segment, second quarter comparable sales
increased 2.4%, led by strong performance in Italy and positive results across most of the
segment, partly offset by continued challenges in South Korea.
In the Foundational markets, second quarter comparable sales
rose 6.8%, reflecting positive sales performance across all
geographic regions.
Steve Easterbrook concluded, "We
remain focused on delivering the most enjoyable experience for
every customer, every visit. Whether that is when they visit
a modernised restaurant with inviting hospitality or through the
convenience of having delicious food delivered to their home, we
know that our fundamental day-to-day commitment to our customers is
running great restaurants."
KEY HIGHLIGHTS -
CONSOLIDATED
Dollars in millions,
except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Quarters Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
2018
|
|
2017
|
|
Inc/
(Dec)
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
|
2018
|
|
2017
|
|
Inc/
(Dec)
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
Revenues
|
$
|
5,353.9
|
|
$
|
6,049.7
|
|
(12)%
|
|
(14)%
|
|
$
|
10,492.8
|
|
$
|
11,725.6
|
|
(11)%
|
|
(14)%
|
Operating
income
|
2,262.3
|
|
2,295.1
|
|
(1)
|
|
(4)
|
|
4,405.4
|
|
4,329.1
|
|
2
|
|
(2)
|
Net income
|
1,496.3
|
|
1,395.1
|
|
7
|
|
4
|
|
2,871.7
|
|
2,609.9
|
|
10
|
|
6
|
Earnings per
share-diluted
|
$
|
1.90
|
|
$
|
1.70
|
|
12%
|
|
9%
|
|
$
|
3.62
|
|
$
|
3.17
|
|
14%
|
|
10%
|
Earnings per share for the quarter and six months benefited from
an increase in sales-driven franchised margin dollars and a lower
effective tax rate. Results in both periods were impacted by lower
Company-operated margin dollars driven by refranchising as well as
$92 million ($0.09 per share) of pre-tax strategic
restructuring charges incurred in the current quarter primarily
related to the previously disclosed restructuring of the U.S.
business. The six months also included additional income tax
expense of approximately $52 million
($0.07 per share) related to an
adjustment to the provisional amounts recorded in December 2017 under the Tax Cuts and Jobs Act of
2017 ("Tax Act").
Excluding the above items, as well as $0.03 per share of prior year strategic charges,
diluted earnings per share was $1.99,
an increase of 15% (12% in constant currencies) for the quarter and
$3.78, an increase of 18% (14% in
constant currencies) for the six months.
Foreign currency translation had a positive impact of
$0.05 and $0.13 on diluted earnings per share for the
quarter and six months, respectively.
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 and sales from hyper-inflationary markets (currently
only Venezuela). Management
generally identifies hyper-inflationary markets as those markets
whose cumulative inflation rate over a three-year period exceeds
100%. Management believes that these exclusions more accurately
reflect the underlying business trends. 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, impairment and other
strategic charges and gains, as well as adjustments to the
provisional amounts recorded in December
2017 under the Tax Act, and bases incentive compensation
plans on these results, because the Company believes this better
represents 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 six months
ended June 30, 2018.
McDonald's Corporation will broadcast its investor earnings
conference call live over the Internet at 10:00 a.m. (Central Time) on July 26, 2018.
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.
UPCOMING COMMUNICATIONS
For important news and information regarding McDonald's,
including the timing of future investor conferences and earnings
calls, visit the Investor Relations section of the Company's
Internet home page at www.investor.mcdonalds.com. McDonald's uses
this website as a primary channel for disclosing key information to
its investors, some of which may contain material and previously
non-public information.
ABOUT McDONALD'S
McDonald's is the world's leading global foodservice retailer
with over 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 July 26, 2018. 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
June 30,
|
2018
|
|
2017
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
2,594.9
|
|
$
|
3,569.6
|
|
$
|
(974.7)
|
|
(27)%
|
Revenues from
franchised restaurants
|
2,759.0
|
|
2,480.1
|
|
278.9
|
|
11
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
5,353.9
|
|
6,049.7
|
|
(695.8)
|
|
(12)
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
2,130.5
|
|
2,903.3
|
|
(772.8)
|
|
(27)
|
Franchised
restaurants-occupancy expenses
|
483.9
|
|
438.0
|
|
45.9
|
|
10
|
Selling,
general & administrative expenses
|
542.1
|
|
525.4
|
|
16.7
|
|
3
|
Other operating
(income) expense, net
|
(64.9)
|
|
(112.1)
|
|
47.2
|
|
42
|
Total operating costs
and expenses
|
3,091.6
|
|
3,754.6
|
|
(663.0)
|
|
(18)
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
2,262.3
|
|
2,295.1
|
|
(32.8)
|
|
(1)
|
|
|
|
|
|
|
|
|
Interest
expense
|
240.2
|
|
230.9
|
|
9.3
|
|
4
|
Nonoperating (income)
expense, net
|
4.0
|
|
2.8
|
|
1.2
|
|
39
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
2,018.1
|
|
2,061.4
|
|
(43.3)
|
|
(2)
|
Provision for income
taxes
|
521.8
|
|
666.3
|
|
(144.5)
|
|
(22)
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
1,496.3
|
|
$
|
1,395.1
|
|
$
|
101.2
|
|
7%
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
1.90
|
|
$
|
1.70
|
|
$
|
0.20
|
|
12%
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
787.1
|
|
819.2
|
|
(32.1)
|
|
(4)%
|
McDONALD'S
CORPORATION
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
2018
|
|
2017
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
5,130.5
|
|
$
|
6,981.5
|
|
$
|
(1,851.0)
|
|
(27)%
|
Revenues from
franchised restaurants
|
5,362.3
|
|
4,744.1
|
|
618.2
|
|
13
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
10,492.8
|
|
11,725.6
|
|
(1,232.8)
|
|
(11)
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
4,261.4
|
|
5,719.7
|
|
(1,458.3)
|
|
(25)
|
Franchised
restaurants—occupancy expenses
|
964.2
|
|
868.1
|
|
96.1
|
|
11
|
Selling,
general & administrative expenses
|
1,075.2
|
|
1,046.7
|
|
28.5
|
|
3
|
Other operating
(income) expense, net
|
(213.4)
|
|
(238.0)
|
|
24.6
|
|
10
|
Total operating costs
and expenses
|
6,087.4
|
|
7,396.5
|
|
(1,309.1)
|
|
(18)
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
4,405.4
|
|
4,329.1
|
|
76.3
|
|
2
|
|
|
|
|
|
|
|
|
Interest
expense
|
477.0
|
|
449.5
|
|
27.5
|
|
6
|
Nonoperating (income)
expense, net
|
22.4
|
|
10.7
|
|
11.7
|
|
n/m
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
3,906.0
|
|
3,868.9
|
|
37.1
|
|
1
|
Provision for income
taxes
|
1,034.3
|
|
1,259.0
|
|
(224.7)
|
|
(18)
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
2,871.7
|
|
$
|
2,609.9
|
|
$
|
261.8
|
|
10%
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
3.62
|
|
$
|
3.17
|
|
$
|
0.45
|
|
14%
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
793.0
|
|
822.3
|
|
(29.3)
|
|
(4)%
|
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SOURCE McDonald's Corporation