McDonald's Reports Third Quarter 2017 Results
"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
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 inChina andHong 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
In the High Growth segment, third quarter comparable sales increased 6.2%, led by strong performance in
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
KEY HIGHLIGHTS - CONSOLIDATED |
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Dollars in millions, except per share data |
|||||||||||||||||||||||||||
Quarters Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||||||
2017 |
2016 |
Inc/ |
Inc/ (Dec) Excluding Currency Translation |
2017 |
2016 |
Inc/ |
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
In addition, results for both periods benefited from the Company's sale of its businesses in
Foreign currency translation had a positive impact of
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.
ABOUT
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
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)% |
n/m Not meaningful |
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)% |
n/m Not meaningful |
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SOURCE
Investors: Mike Flores, 630-623-3519 or Media: Terri Hickey, 630-623-5593