OAK BROOK, Ill., Jan. 30, 2018 /PRNewswire/ -- McDonald's
Corporation today announced results for the fourth quarter and year
ended December 31, 2017.
"2017 was a strong year for McDonald's as customers responded to
the many ways we are making their experience more convenient and
enjoyable," said McDonald's President and Chief Executive Officer
Steve Easterbrook. "We served more
customers more often, achieved our best comparable sales
performance in six years, gained share in markets around the world
and made tremendous progress with growth platforms such as
delivery, mobile order and pay and Experience of the Future."
Fourth quarter highlights:
- Global comparable sales increased 5.5%, reflecting positive
guest counts in all segments
- Due to the impact of the Company's strategic refranchising
initiative, consolidated revenues decreased 11% (15% in constant
currencies)
- Systemwide sales increased 8% in constant currencies
- Consolidated operating income increased 9% (6% in constant
currencies)
- Diluted earnings per share of $0.87 decreased 40% (42% in constant currencies),
reflecting a net tax cost associated with the Tax Cuts and Jobs Act
of 2017 ("Tax Act"), which totaled $0.84 per share. Excluding the impact of the Tax
Act, diluted earnings per share was $1.71, an increase of 19% (16% in constant
currencies)
Full year highlights:
- Global comparable sales increased 5.3%, reflecting positive
guest counts in all segments
- Due to the impact of the Company's strategic refranchising
initiative, consolidated revenues decreased 7% (8% in constant
currencies)
- Systemwide sales increased 7% in constant currencies
- Consolidated operating income increased 23% (23% 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 current and prior year impairment and
strategic charges, consolidated operating income increased 9% (9%
in constant currencies)
- Diluted earnings per share increased 17% (17% in constant
currencies)
- Returned $7.7 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
On January 25, 2018, McDonald's
Board of Directors declared a quarterly cash dividend of
$1.01 per share of common stock
payable on March 15, 2018 to
shareholders of record at the close of business on March 1, 2018.
In the U.S., fourth quarter comparable sales increased 4.5% as a
result of strong performance of core menu items featured under the
McPick 2 platform and beverage value, as well as strong consumer
response to the new Buttermilk Crispy Tenders and delivery.
Operating income for the quarter increased 4%, reflecting higher
franchised margin dollars and G&A savings, partly offset by
lower Company-operated margin dollars.
Comparable sales for the International Lead segment increased
6.0% 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 14% (7% in constant currencies), fueled by sales-driven
improvements in franchised margin dollars.
In the High Growth segment, fourth quarter comparable sales
increased 4.0%, led by strong performance in China and positive results across the majority
of the segment, partly offset by continued challenges in
South Korea.
In the Foundational markets, fourth quarter comparable sales
rose 8.0%, reflecting positive sales performance across all
geographic regions.
"For 2018, we plan to invest about $2.4
billion of capital, the majority of which will be dedicated
to reinvesting in our existing locations through accelerated
deployment of Experience of the Future in the U.S.," said
McDonald's Chief Financial Officer Kevin
Ozan. "Our development plans also include the opening of
about 1,000 new McDonald's restaurants, 75% of which will be funded
by our expanded network of developmental licensees and affiliates
around the world. At the same time, we plan to continue making
meaningful investments in technology to modernize the customer
experience and redefine convenience. I'm confident that now is the
opportune time to strategically invest in our business and our
restaurants to drive profitable growth and become an even better
McDonald's."
Steve Easterbrook concluded, "Our
Velocity Growth Plan is working and we're focused on aggressive
execution in 2018 to achieve the even greater ambitions we have for
our business and brand in the years ahead. With the commitment the
McDonald's system has to running great restaurants and maximizing
our growth initiatives, we are confident that we will accelerate
our momentum by capitalizing on our strong business model and
distinct brand advantages in convenience, menu variety and
value."
KEY HIGHLIGHTS -
CONSOLIDATED
|
Dollars in millions,
except per share data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarters Ended
December 31,
|
|
Years Ended
December 31,
|
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
|
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
|
|
Inc/
(Dec)
Excluding
Currency
Translation
|
|
Revenues
|
$
|
5,340.2
|
|
|
$
|
6,028.9
|
|
|
(11)%
|
|
|
(15)%
|
|
|
$
|
22,820.4
|
|
|
$
|
24,621.9
|
|
|
(7)%
|
|
|
(8)%
|
|
Operating
income
|
2,144.2
|
|
|
1,969.0
|
|
|
9
|
|
|
6
|
|
|
9,552.7
|
|
|
7,744.5
|
|
|
23
|
|
|
23
|
|
Net income
|
698.7
|
|
|
1,193.4
|
|
|
(41)
|
|
|
(44)
|
|
|
5,192.3
|
|
|
4,686.5
|
|
|
11
|
|
|
11
|
|
Earnings per
share-diluted
|
$
|
0.87
|
|
|
$
|
1.44
|
|
|
(40)%
|
|
|
(42)%
|
|
|
$
|
6.37
|
|
|
$
|
5.44
|
|
|
17%
|
|
|
17%
|
|
Results for the quarter and year reflected stronger operating
performance, G&A savings and improved performance in
Japan, which enabled the reversal
of a valuation allowance on a deferred tax asset in Japan.
Foreign currency translation had a positive impact of
$0.04 for the quarter and no impact
for the year on diluted earnings per share.
In December 2017, the U.S.
government enacted the Tax Act, which makes broad and complex
changes to the U.S. tax code, including a transition to a new
territorial tax system for U.S. corporate taxpayers. As such, the
Company incurred a deemed repatriation tax on its undistributed
foreign earnings. In addition, the Tax Act provided for a reduction
of the U.S. corporate tax rate from 35% to 21%, which resulted in
the revaluation of the Company's deferred tax assets and
liabilities. The Company's 2017 results include estimates based on
these changes, which may be refined and adjusted throughout the
measurement period ending on December 22,
2018.
Outlined below is additional information for the quarter and
full year:
Fourth Quarter
- Fourth quarter diluted earnings per share of $0.87 decreased 40% (42% in constant currencies).
Included in the quarter results is:
-
- approximately $700 million, or
$0.84 per share, of net tax cost as a
result of the Tax Act, consisting primarily of $1.2 billion of tax cost on deemed repatriation
of foreign earnings, partly offset by a benefit of $500 million due to revaluing deferred tax assets
and liabilities to the lower enacted U.S. corporate tax rate. This
net incremental tax cost for the quarter increased the tax rate by
35.5 percentage points to 62.9%.
- Excluding the above, fourth quarter net income was $1.4 billion, an increase of 15% (12% in constant
currencies), diluted earnings per share was $1.71, an increase of 19% (16% in constant
currencies), and the fourth quarter tax rate was 27.4%. The lower
tax rate for the quarter compared with the prior year was primarily
due to foreign tax law changes.
Full Year
- Full-year diluted earnings per share of $6.37 increased 17% (17% in constant currencies).
Included in full-year results are:
-
- approximately $700 million, or
$0.82 per share, of net tax cost
associated with the Tax Act; and
- a pre-tax gain of approximately $850
million on the sale of the Company's businesses in
China and Hong Kong, offset in part by $150 million of current year restructuring and
impairment charges in connection with the Company's global G&A
and refranchising initiatives, for a net benefit of $0.53 per share.
- Excluding the above items, as well as the $342 million or $0.28 per share of prior year strategic charges,
full year net income was $5.4
billion, an increase of 10% (10% in constant currencies),
and diluted earnings per share was $6.66, an increase of 16% (16% in constant
currencies).
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 beginning in the fourth quarter of 2017, also
exclude sales from Venezuela due
to its hyper-inflation. 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 (see Exhibit 99.2 in the Company's Form
8-K filing for information regarding the impact of excluding
Venezuela). 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 the effects from the
recently enacted 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 year ended
December 31, 2017.
McDonald's Corporation will broadcast its investor earnings
conference call live over the Internet at 10:00 a.m. (Central Time) on January 30,
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.
Kevin Ozan, McDonald's Chief
Financial Officer, will participate in the Bank of America Merrill
Lynch Consumer & Retail Technology Conference at 8:00 a.m. (Eastern Time) on March 14, 2018. 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 first quarter results before the
market opens on April 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 January 30, 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
December 31,
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
2,673.1
|
|
|
$
|
3,652.8
|
|
|
$
|
(979.7)
|
|
|
(27)%
|
|
Revenues from
franchised restaurants
|
2,667.1
|
|
|
2,376.1
|
|
|
291.0
|
|
|
12
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
5,340.2
|
|
|
6,028.9
|
|
|
(688.7)
|
|
|
(11)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
2,210.1
|
|
|
3,035.9
|
|
|
(825.8)
|
|
|
(27)
|
|
Franchised
restaurants-occupancy expenses
|
464.6
|
|
|
434.8
|
|
|
29.8
|
|
|
7
|
|
Selling,
general & administrative expenses
|
617.6
|
|
|
627.5
|
|
|
(9.9)
|
|
|
(2)
|
|
Other operating
(income) expense, net
|
(96.3)
|
|
|
(38.3)
|
|
|
(58.0)
|
|
|
n/m
|
|
Total operating costs
and expenses
|
3,196.0
|
|
|
4,059.9
|
|
|
(863.9)
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
2,144.2
|
|
|
1,969.0
|
|
|
175.2
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
235.1
|
|
|
221.2
|
|
|
13.9
|
|
|
6
|
|
Nonoperating (income)
expense, net
|
24.0
|
|
|
12.9
|
|
|
11.1
|
|
|
86
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
1,885.1
|
|
|
1,734.9
|
|
|
150.2
|
|
|
9
|
|
Provision for income
taxes
|
1,186.4
|
|
|
541.5
|
|
|
644.9
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
698.7
|
|
|
$
|
1,193.4
|
|
|
$
|
(494.7)
|
|
|
(41)%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
0.87
|
|
|
$
|
1.44
|
|
|
$
|
(0.57)
|
|
|
(40)%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
803.0
|
|
|
829.7
|
|
|
(26.7)
|
|
|
(3)%
|
|
McDONALD'S
CORPORATION
|
CONDENSED
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars and shares
in millions, except per share data
|
|
|
|
|
|
Years Ended
December 31,
|
2017
|
|
|
2016
|
|
|
Inc/
(Dec)
|
Revenues
|
|
|
|
|
|
|
|
Sales by
Company-operated restaurants
|
$
|
12,718.9
|
|
|
$
|
15,295.0
|
|
|
$
|
(2,576.1)
|
|
|
(17)%
|
|
Revenues from
franchised restaurants
|
10,101.5
|
|
|
9,326.9
|
|
|
774.6
|
|
|
8
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUES
|
22,820.4
|
|
|
24,621.9
|
|
|
(1,801.5)
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
Operating costs and
expenses
|
|
|
|
|
|
|
|
Company-operated
restaurant expenses
|
10,409.6
|
|
|
12,698.8
|
|
|
(2,289.2)
|
|
|
(18)
|
|
Franchised
restaurants-occupancy expenses
|
1,790.0
|
|
|
1,718.4
|
|
|
71.6
|
|
|
4
|
|
Selling,
general & administrative expenses
|
2,231.3
|
|
|
2,384.5
|
|
|
(153.2)
|
|
|
(6)
|
|
Other operating
(income) expense, net
|
(1,163.2)
|
|
|
75.7
|
|
|
(1,238.9)
|
|
|
n/m
|
|
Total operating costs
and expenses
|
13,267.7
|
|
|
16,877.4
|
|
|
(3,609.7)
|
|
|
(21)
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME
|
9,552.7
|
|
|
7,744.5
|
|
|
1,808.2
|
|
|
23
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
921.3
|
|
|
884.8
|
|
|
36.5
|
|
|
4
|
|
Nonoperating (income)
expense, net
|
57.9
|
|
|
(6.3)
|
|
|
64.2
|
|
|
n/m
|
|
|
|
|
|
|
|
|
|
Income before
provision for income taxes
|
8,573.5
|
|
|
6,866.0
|
|
|
1,707.5
|
|
|
25
|
|
Provision for income
taxes
|
3,381.2
|
|
|
2,179.5
|
|
|
1,201.7
|
|
|
55
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
$
|
5,192.3
|
|
|
$
|
4,686.5
|
|
|
$
|
505.8
|
|
|
11%
|
|
|
|
|
|
|
|
|
|
EARNINGS PER
SHARE-DILUTED
|
$
|
6.37
|
|
|
$
|
5.44
|
|
|
$
|
0.93
|
|
|
17%
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding-diluted
|
815.5
|
|
|
861.2
|
|
|
(45.7)
|
|
|
(5)%
|
|
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SOURCE McDonald's Corporation