OAK BROOK, Ill., Oct. 21, 2014 /PRNewswire/ -- McDonald's
Corporation today announced results for the third quarter ended
September 30, 2014, reflecting lower
revenues, operating income and earnings per share.
"McDonald's third quarter results reflect a significant decline
versus a year ago, with our business and financial performance
pressured by a variety of factors - from a higher effective tax
rate, to unusual events in the operating environments in APMEA and
Europe, to under-performance in
the U.S., our largest geographic segment," said McDonald's
President and Chief Executive Officer Don
Thompson. "While our ability to withstand these factors is a
testament to the Company's enduring brand and strong financial
foundation, by all measures our performance fell short of our
expectations."
Don Thompson continued, "We
recognize that we must demonstrate to our customers and the entire
McDonald's System that we understand the problems we face and are
taking decisive action to fundamentally change the way we approach
our business."
The Company is implementing a new global approach designed to
increase its relevance with customers and drive guest traffic. This
is focused on three specific areas:
- McDonald's Experience of the Future - a comprehensive
restaurant execution concept that elevates the menu and customer
experience elements that are hallmarks of the McDonald's brand, and
capitalizes on investments in reimaging, service and technology
enhancements to improve the look, feel and convenience of the
McDonald's experience in ways that are in-tune with today's
consumer needs,
- Digital Strategy - a global strategy built around
simplifying the customer journey across ordering, payment and
mobile offers - beginning with the implementation of exciting and
relevant new options, such as Apple Pay,
- Resourcing for Growth - a diligent review of the
organization's structure and use of resources in order to redirect
spending toward those initiatives, such as the digital strategy and
the McDonald's Experience of the Future, that will support the
Company's key long-term growth initiatives.
Third quarter results included:
- Global comparable sales decrease of 3.3%, reflecting
negative guest traffic in all major segments and the impact of the
previously-disclosed supplier issue in certain markets in
APMEA
- Consolidated revenues decrease of 5% (4% in constant
currencies), partly due to the impact of the supplier
issue
- Consolidated operating income decrease of 14% (14% in
constant currencies), approximately half due to the impact of the
supplier issue, and the remainder largely due to soft operating
performance in the U.S. and certain markets in Europe
- Effective tax rate of 44.4%, primarily due to an increase
in tax reserves related to certain foreign tax matters
- Diluted earnings per share of $1.09, a decrease of 28% (28% in constant
currencies). The following items, which total $0.42 per share, negatively impacted diluted
earnings per share by 28% (28% in constant currencies) for the
quarter:
- $0.26 per share due to an
increase in tax reserves related to certain foreign tax
matters
- $0.15 per share due to the
estimated impact of the supplier issue resulting from lost sales
and profitability
- $0.01 per share due to the
estimated impact of temporary store closures in Russia and Ukraine
- Excluding the impact of these items, earnings per share
for the quarter would have been relatively flat compared to last
year. This supplemental information is provided to help investors
understand the impact of recent events on the Company's
results.
- Returned $4.6 billion
year-to-date September to shareholders through dividends and share
repurchases, in connection with our $18-$20
billion, 3-year cash return target
In addition, the Company previously announced the following:
- On September 18, 2014,
McDonald's Board of Directors increased the quarterly cash dividend
by 5% to $0.85 per share - the
equivalent of $3.40 per share
annually - effective for the fourth quarter 2014
In the U.S., third quarter comparable sales decreased 3.3%
driven by negative guest traffic amid sustained competitive
activity. Operating income for the quarter declined 10% as
initiatives to address the current market dynamics did not
translate into improved financial results. Under the
leadership of the segment's recently elected President,
Mike Andres, McDonald's U.S. is
moving quickly to implement new initiatives designed to
deliver:
- A flatter, more nimble organization that ensures key
business decisions are made closer to the customer, by people with
local market expertise,
- A revamped marketing approach that links national
messaging around our food quality, brand transparency and people
initiatives - complemented by local ad campaigns that are
responsive to individual market preferences, and
- A simplified menu that showcases the Company's core
products and features locally-relevant menu options - available in
new, customizable ways.
Europe's third quarter
comparable sales declined 1.4% and operating income decreased 2%
(2% in constant currencies). While consumer confidence and other
issues related to the operating environment in Russia and Ukraine and ongoing weakness in Germany negatively impacted the segment's
quarterly results, the U.K. delivered positive comparable sales and
operating income performance. Looking ahead, McDonald's
Europe will work to build guest
traffic by pursuing targeted opportunities that leverage everyday
value, classic core favorites, blended-ice beverages and key
daypart initiatives.
APMEA's third quarter comparable sales decreased 9.9% and
operating income declined 55% (56% in constant currencies) due
primarily to the impact of the supplier issue on sales and
profitability in China,
Japan and certain other markets.
APMEA is diligently working to restore consumer trust and
confidence in McDonald's brand and strengthen the segment's
financial results to continue driving the long-term potential of
this segment.
Don Thompson concluded, "We began
2014 mindful of the challenges we faced in driving sales and
profitability. The internal factors and external headwinds have
proven more formidable than expected and will continue into the
fourth quarter, with global comparable sales for October expected
to be negative. These significant challenges call for equally
significant changes in the way we do business. In the U.S.,
we are driving decision making from headquarters back into the
field, where our restaurants serve the daily needs of our customers
in their local communities. In our international markets, we
are taking action to restore customer trust and regain business
momentum. We understand the depth of the challenges and we are
responding with the sense of urgency required to improve our
performance."
KEY HIGHLIGHTS -
CONSOLIDATED
Dollars in millions,
except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2014
|
|
|
2013
|
|
|
(Dec)
|
|
|
(Decrease)
Excluding
Currency
Translation
|
|
|
2014
|
|
|
2013
|
|
|
(Dec)
|
|
|
(Decrease)
Excluding
Currency
Translation
|
Revenues
|
$
|
6,987.1
|
|
|
$
|
7,323.4
|
|
|
(5)%
|
|
|
(4)%
|
|
|
$
|
20,869.1
|
|
|
$
|
21,012.5
|
|
|
(1)%
|
|
|
0%
|
Operating
income
|
2,072.5
|
|
|
2,416.7
|
|
|
(14)
|
|
|
(14)
|
|
|
6,197.5
|
|
|
6,563.9
|
|
|
(6)
|
|
|
(5)
|
Net income
|
1,068.4
|
|
|
1,522.2
|
|
|
(30)
|
|
|
(29)
|
|
|
3,660.3
|
|
|
4,188.9
|
|
|
(13)
|
|
|
(12)
|
Earnings per
share-diluted*
|
$
|
1.09
|
|
|
$
|
1.52
|
|
|
(28)%
|
|
|
(28)%
|
|
|
$
|
3.69
|
|
|
$
|
4.16
|
|
|
(11)%
|
|
|
(10)%
|
*The following items, which total $0.42 per share, negatively impacted diluted
earnings per share by 28% (28% in constant currencies) for the
quarter and 10% (10% in constant currencies) for the nine
months:
- $0.26 per share due to an
increase in tax reserves for 2003-2008 resulting from an
unfavorable lower tax court ruling in a foreign tax jurisdiction,
as well as an increase in tax reserves related to audit progression
in other foreign tax jurisdictions.
- $0.15 per share due to the
estimated impact of the previously-disclosed supplier issue in
China. In mid-July, food quality
issues were discovered at a supplier to McDonald's and other food
companies in China. As a
consequence, results in China,
Japan and certain other markets
were negatively impacted due to lost sales and profitability,
including expenses associated with our recovery
efforts.
- $0.01 per share due to the
estimated impact of temporary store closures in Russia and Ukraine.
- Excluding the impact of these items, earnings per share
for the quarter would have been relatively flat compared to last
year. This supplemental information is provided to help investors
understand the impact of recent events on the Company's
results.
In addition, foreign currency translation had a negative impact
of $0.01 and $0.04 on diluted earnings per share for the
quarter and nine 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. 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. The number
of weekdays and weekend days, referred to as the calendar
shift/trading day adjustment, can impact comparable sales and guest
counts. In addition, the timing of holidays can impact comparable
sales and guest counts.
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 ended
September 30, 2014.
McDonald's Corporation will broadcast its investor conference
call live over the Internet at 10:00 a.m.
Central Time on October 21,
2014. A link to the live webcast will be available at
www.investor.mcdonalds.com. There will also be an archived webcast
and podcast available for a limited time.
The Company plans to release October
2014 sales information on November
10, 2014.
ABOUT McDONALD'S
McDonald's is the world's leading global foodservice retailer
with over 35,000 locations serving approximately 70 million
customers in over 100 countries each day. More than 80% 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, such
as its annual and quarterly reports and current reports on Form
8-K.
McDONALD'S
CORPORATION
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
|
Quarters Ended
September 30,
|
2014
|
|
2013
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
4,596.2
|
|
|
$
|
4,923.1
|
|
|
$
|
(326.9)
|
|
|
(7)%
|
|
Revenues from
franchised restaurants
|
2,390.9
|
|
|
2,400.3
|
|
|
(9.4)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
6,987.1
|
|
|
7,323.4
|
|
|
(336.3)
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
3,874.7
|
|
|
4,004.4
|
|
|
(129.7)
|
|
|
(3)
|
|
Franchised
restaurants—occupancy expenses
|
431.2
|
|
|
408.4
|
|
|
22.8
|
|
|
6
|
|
Selling,
general & administrative expenses
|
575.8
|
|
|
554.3
|
|
|
21.5
|
|
|
4
|
|
Other operating
(income) expense, net
|
32.9
|
|
|
(60.4)
|
|
|
93.3
|
|
|
n/m
|
|
Total operating costs
and expenses
|
4,914.6
|
|
|
4,906.7
|
|
|
7.9
|
|
|
0
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
2,072.5
|
|
|
2,416.7
|
|
|
(344.2)
|
|
|
(14)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
149.3
|
|
|
130.5
|
|
|
18.8
|
|
|
14
|
|
Nonoperating (income)
expense, net
|
2.1
|
|
|
13.6
|
|
|
(11.5)
|
|
|
(84)
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
1,921.1
|
|
|
2,272.6
|
|
|
(351.5)
|
|
|
(15)
|
|
Provision for income
taxes
|
852.7
|
|
|
750.4
|
|
|
102.3
|
|
|
14
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
1,068.4
|
|
|
$
|
1,522.2
|
|
|
$
|
(453.8)
|
|
|
(30)%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
1.09
|
|
|
$
|
1.52
|
|
|
$
|
(0.43)
|
|
|
(28)%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
983.8
|
|
|
1,004.2
|
|
|
(20.4)
|
|
|
(2)%
|
|
|
n/m Not
meaningful
|
McDONALD'S
CORPORATION
CONDENSED
CONSOLIDATED STATEMENT OF INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
|
Nine Months Ended
September 30,
|
2014
|
|
2013
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
13,872.6
|
|
|
$
|
14,129.9
|
|
|
$
|
(257.3)
|
|
|
(2)%
|
|
Revenues from
franchised restaurants
|
6,996.5
|
|
|
6,882.6
|
|
|
113.9
|
|
|
2
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
20,869.1
|
|
|
21,012.5
|
|
|
(143.4)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
11,611.6
|
|
|
11,649.9
|
|
|
(38.3)
|
|
|
0
|
|
Franchised
restaurants—occupancy expenses
|
1,275.9
|
|
|
1,202.7
|
|
|
73.2
|
|
|
6
|
|
Selling,
general & administrative expenses
|
1,825.4
|
|
|
1,757.8
|
|
|
67.6
|
|
|
4
|
|
Other operating
(income) expense, net
|
(41.3)
|
|
|
(161.8)
|
|
|
120.5
|
|
|
75
|
|
Total operating costs
and expenses
|
14,671.6
|
|
|
14,448.6
|
|
|
223.0
|
|
|
2
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
6,197.5
|
|
|
6,563.9
|
|
|
(366.4)
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
422.7
|
|
|
388.4
|
|
|
34.3
|
|
|
9
|
|
Nonoperating (income)
expense, net
|
(1.1)
|
|
|
26.2
|
|
|
(27.3)
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
5,775.9
|
|
|
6,149.3
|
|
|
(373.4)
|
|
|
(6)
|
|
Provision for income
taxes
|
2,115.6
|
|
|
1,960.4
|
|
|
155.2
|
|
|
8
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
3,660.3
|
|
|
$
|
4,188.9
|
|
|
$
|
(528.6)
|
|
|
(13)%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
3.69
|
|
|
$
|
4.16
|
|
|
$
|
(0.47)
|
|
|
(11)%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
991.1
|
|
|
1,008.2
|
|
|
(17.1)
|
|
|
(2)%
|
|
|
n/m Not
meaningful
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/mcdonalds-reports-third-quarter-2014-results-380388239.html
SOURCE McDonald's