CHICAGO, Oct. 23, 2018 /PRNewswire/ -- McDonald's
Corporation today announced results for the third quarter ended
September 30, 2018.
"In addition to achieving 13 consecutive quarters of positive
global comparable sales, we have made substantial progress
modernising restaurants around the world, enhancing hospitality and
elevating the experience for the millions of customers we serve
every day. We remain confident that our strategy will drive
long-term, profitable growth," said McDonald's President and Chief
Executive Officer Steve Easterbrook.
Third quarter highlights:
- Global comparable sales increased 4.2%, reflecting positive
comparable sales in all segments
- Due to the impact of the Company's strategic refranchising
initiative, consolidated revenues decreased 7% (5% in constant
currencies)
- Systemwide sales increased 5% in constant currencies
- Consolidated operating income decreased 21% (20% in constant
currencies), as a result of the comparison to a gain of
approximately $850 million on the
sale of the Company's businesses in China and Hong
Kong in the prior year. Excluding the impact of the gain, as
well as prior year restructuring and impairment charges,
consolidated operating income increased 2% (4% in constant
currencies)
- Diluted earnings per share of $2.10 decreased 9% (7% in constant currencies).
Excluding the impact of the prior year gain and restructuring and
impairment charges, which totaled $0.56 per share, diluted earnings per share
increased 19% (22% in constant currencies)
- Returned $1.7 billion to
shareholders through share repurchases and dividends. In addition,
the Company announced a 15% increase in its quarterly dividend to
$1.16 per share beginning in the
fourth quarter, and increased the cash return to shareholder target
for the 3-year period ending 2019 to about $25 billion
In the U.S., third quarter comparable sales increased 2.4%,
driven by growth in average check resulting from both product mix
shifts and menu price increases. Operating income for the quarter
increased 3%, as higher franchised margin dollars and G&A
savings were partly offset by lower Company-operated margin
dollars.
In the International Lead segment, third quarter comparable
sales increased 5.4%, reflecting positive results across all
markets, primarily driven by the U.K., Australia and France. The segment's operating income was
flat (increased 3% in constant currencies), as sales-driven
improvements in franchised margin dollars were mostly offset by the
comparison to a prior year gain on the strategic sale of property
in Australia.
In the High Growth segment, third quarter comparable sales
increased 4.6%, led by strong performance in Italy and the
Netherlands, and positive results across most of the
segment. The segment's prior year operating income included a gain
of approximately $850 million related
to the sale of the Company's businesses in China and Hong
Kong, partly offset by unrelated impairment charges.
Excluding these items, the segment's operating income decreased 5%
(1% in constant currencies) due to the impact of refranchising.
In the Foundational markets, third quarter comparable sales
increased 6.0%, reflecting positive sales performance in
Japan and across all geographic
regions. The segment's operating income increased 6% (12% in
constant currencies), fueled by sales-driven improvements in
franchised margin dollars.
Steve Easterbrook concluded, "We
are intensely focused on providing our customers with great
experiences at McDonald's by running great restaurants and
executing our delivery, digital, and Experience of the Future
initiatives at a high level."
KEY HIGHLIGHTS -
CONSOLIDATED
Dollars in millions,
except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
September 30,
|
Nine Months Ended
September 30,
|
|
2018
|
|
2017
|
|
Inc/
(Dec)
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
|
2018
|
|
2017
|
|
Inc/
(Dec)
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
Revenues
|
$
|
5,369.4
|
|
$
|
5,754.6
|
|
(7)%
|
|
(5)%
|
|
$
|
15,862.2
|
|
$
|
17,480.2
|
|
(9)%
|
|
(11)%
|
Operating
income
|
2,417.7
|
|
3,079.4
|
|
(21)
|
|
(20)
|
|
6,823.1
|
|
7,408.5
|
|
(8)
|
|
(10)
|
Net income
|
1,637.3
|
|
1,883.7
|
|
(13)
|
|
(11)
|
|
4,509.0
|
|
4,493.6
|
|
0
|
|
(1)
|
Earnings per
share-diluted
|
$
|
2.10
|
|
$
|
2.32
|
|
(9)%
|
|
(7)%
|
|
$
|
5.72
|
|
$
|
5.48
|
|
4%
|
|
3%
|
Results for the quarter and nine months 2017 reflected a pre-tax
gain of approximately $850 million on
the sale of the Company's businesses in China and Hong
Kong, partly offset by $111
million of unrelated impairment charges, for a net benefit
of $0.56 and $0.52 per share, respectively. Results for the
nine months 2018 included pre-tax strategic restructuring charges
of $94 million, or $0.09 per share (of which $85 million relates to the restructuring of the
U.S. business).
Excluding the above items, net income for the quarter increased
14% (17% in constant currencies) and diluted earnings per share
increased 19% (22% in constant currencies), and for the nine months
net income increased 13% (11% in constant currencies) and diluted
earnings per share increased 17% (15% in constant currencies).
Results for the quarter and nine months reflected an increase in
sales-driven franchised margin dollars and a lower effective tax
rate, partly offset by lower Company-operated margin dollars due to
the impact of refranchising.
Foreign currency translation had a negative impact of
$0.05 on diluted earnings per share
for the quarter and a positive impact of $0.09 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 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 Cuts and Jobs Act of 2017, 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 nine months
ended September 30, 2018.
McDonald's Corporation will broadcast its investor earnings
conference call live over the Internet at 10:00 a.m. (Central Time) on October 23,
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 October 23, 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
September 30,
|
2018
|
|
|
2017
|
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
2,511.0
|
|
|
$
|
3,064.3
|
|
|
$
|
(553.3)
|
|
|
(18)%
|
|
Revenues from
franchised restaurants
|
2,858.4
|
|
|
2,690.3
|
|
|
168.1
|
|
|
6
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
5,369.4
|
|
|
5,754.6
|
|
|
(385.2)
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
2,047.9
|
|
|
2,479.8
|
|
|
(431.9)
|
|
|
(17)
|
|
Franchised
restaurants-occupancy expenses
|
499.4
|
|
|
457.3
|
|
|
42.1
|
|
|
9
|
|
Selling,
general & administrative expenses
|
515.2
|
|
|
567.0
|
|
|
(51.8)
|
|
|
(9)
|
|
Other operating
(income) expense, net
|
(110.8)
|
|
|
(828.9)
|
|
|
718.1
|
|
|
87
|
|
Total operating costs
and expenses
|
2,951.7
|
|
|
2,675.2
|
|
|
276.5
|
|
|
10
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
2,417.7
|
|
|
3,079.4
|
|
|
(661.7)
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
250.1
|
|
|
236.7
|
|
|
13.4
|
|
|
6
|
|
Nonoperating (income)
expense, net
|
8.9
|
|
|
23.2
|
|
|
(14.3)
|
|
|
(62)
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
2,158.7
|
|
|
2,819.5
|
|
|
(660.8)
|
|
|
(23)
|
|
Provision for income
taxes
|
521.4
|
|
|
935.8
|
|
|
(414.4)
|
|
|
(44)
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
1,637.3
|
|
|
$
|
1,883.7
|
|
|
$
|
(246.4)
|
|
|
(13)%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
2.10
|
|
|
$
|
2.32
|
|
|
$
|
(0.22)
|
|
|
(9)%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
779.6
|
|
|
813.5
|
|
|
(33.9)
|
|
|
(4)%
|
|
McDONALD'S
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
|
Nine Months Ended
September 30,
|
2018
|
|
|
2017
|
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
7,641.5
|
|
|
$
|
10,045.8
|
|
|
$
|
(2,404.3)
|
|
|
(24)%
|
|
Revenues from
franchised restaurants
|
8,220.7
|
|
|
7,434.4
|
|
|
786.3
|
|
|
11
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
15,862.2
|
|
|
17,480.2
|
|
|
(1,618.0)
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
6,309.3
|
|
|
8,199.5
|
|
|
(1,890.2)
|
|
|
(23)
|
|
Franchised
restaurants—occupancy expenses
|
1,463.6
|
|
|
1,325.4
|
|
|
138.2
|
|
|
10
|
|
Selling,
general & administrative expenses
|
1,590.4
|
|
|
1,613.7
|
|
|
(23.3)
|
|
|
(1)
|
|
Other operating
(income) expense, net
|
(324.2)
|
|
|
(1,066.9)
|
|
|
742.7
|
|
|
70
|
|
Total operating costs
and expenses
|
9,039.1
|
|
|
10,071.7
|
|
|
(1,032.6)
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
6,823.1
|
|
|
7,408.5
|
|
|
(585.4)
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
727.1
|
|
|
686.2
|
|
|
40.9
|
|
|
6
|
|
Nonoperating (income)
expense, net
|
31.3
|
|
|
33.9
|
|
|
(2.6)
|
|
|
(8)
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
6,064.7
|
|
|
6,688.4
|
|
|
(623.7)
|
|
|
(9)
|
|
Provision for income
taxes
|
1,555.7
|
|
|
2,194.8
|
|
|
(639.1)
|
|
|
(29)
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
4,509.0
|
|
|
$
|
4,493.6
|
|
|
$
|
15.4
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
5.72
|
|
|
$
|
5.48
|
|
|
$
|
0.24
|
|
|
4%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
788.5
|
|
|
819.4
|
|
|
(30.9)
|
|
|
(4)%
|
|
View original
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SOURCE McDonald's Corporation