McDonald's Reports Global Results
OAK BROOK, Ill.
Jul 25, 2000
McDonald's Corporation (NYSE: MCD) today announced global results for the quarter and six months ended June 30, 2000.
* Diluted net income per common share was 39 cents for the quarter, an increase of 5%; 8% in constant currencies. For the six months, diluted net income per common share increased 9%; 12% in constant currencies. * For the first time, Systemwide sales exceeded $10 billion for a quarter, increasing 5% for the quarter and 7% for the six months in constant currencies. * Revenues increased 8% for the quarter and 10% for the six months in constant currencies. * The Company repurchased nearly $1.3 billion of stock during the six months. Key highlights - Consolidated 2000 1999 Increase/(Decrease) Dollars in millions, except per As In Constant common share data Reported Currencies* Quarters ended June 30 Systemwide sales $10,237.6 $ 9,920.4 3% 5% Total revenues 3,560.6 3,407.1 5 8 Operating income 876.3 883.5 (1) 2 Net income 525.9 518.1 2 4 Net income per common share - diluted. .39 .37 5 8 Six months ended June 30 Systemwide sales $19,744.3 $18,743.2 5% 7% Total revenues 6,904.4 6,442.2 7 10 Operating income 1,644.9 1,595.1 3 6 Net income 976.8 920.8 6 9 Net income per common share - diluted .71 .65 9 12 * Information in constant currencies excludes the effect of foreign currency translation on reported results, except for hyperinflationary economies, such as Russia, whose functional currency is the U.S. dollar. SUMMARY COMMENTARY
Chairman and Chief Executive Officer Jack M. Greenberg commented, "McDonald's global food service business delivered good results in the first six months of 2000 with Systemwide sales increasing seven percent, revenues increasing 10 percent and diluted earnings per share increasing 12 percent in constant currencies. Second quarter growth was affected by challenging year-over-year comparisons, due to exceptional performance in several key markets in 1999. However, we remain confident that we will regain stronger sales momentum in the second half of the year and improve operating results. This expectation is based on our solid operating fundamentals, strong marketing and promotional calendars, and less challenging comparisons in several key markets in the last half of the year.
"We continue to believe McDonald's stock is undervalued and therefore have been an aggressive buyer, purchasing about $700 million, or 19.1 million shares, of our common stock in the second quarter. This brought year-to-date purchases to nearly $1.3 billion and the cumulative purchases under our $4.5 billion, three-year share repurchase program to $2.5 billion, or 70 million shares."
Jim Cantalupo, Vice Chairman and President McDonald's Corporation said, "The fundamentals of our business remain very strong. We opened 546 McDonald's restaurants year-to-date and remain on track to add about 1,800 - 1,900 this year.
"Europe and the U.S., which together comprise about 80 percent of operating income, each faced difficult comparisons driven by exceptionally strong non-food promotions last year. The challenges in Europe were compounded by unusually hot weather and high television viewership of the Euro 2000 Soccer Championship, which reduced eating out activity. With these factors behind us, we expect significant improvement in Europe's results in the second half of the year.
"In Asia/Pacific, Japan's new value strategy is beginning to gain momentum. The segment also benefited from outstanding results in China and South Korea, while Australia's challenging comparisons and a drop in retail spending hurt results. In Latin America, we have experienced some improvement in Brazil, although we continue to be adversely affected by difficult economic conditions in most markets. We remain optimistic that we will experience improvement as we progress throughout 2000."
Alan Feldman, President McDonald's USA said, "This year's Teenie Beanie Babies was a terrific Happy Meal promotion, ranking as the fourth most successful ever in the United States. However, it did not match last year's exceptional sales level. If it had, U.S. sales would have been up about five percent for the quarter.
"I'm excited about our second half marketing calendar featuring our new advertising campaign, 'We Love to See You Smile.' The campaign highlights six customer service initiatives including: faster, more accurate drive-thrus; everyday value offerings; tasty new products; a new system that delivers food 'Hot. Fresh. Just For You!'; a 'Fresh Look' for restaurants including new painting and landscaping; and better trained and motivated people. In addition, we have a great line up of promotions. For example, in August, McDonald's Summer Music Event will offer three new CDs featuring Britney Spears and *NSYNC, as well as other popular artists. And later this year, we'll feature a promotion linked to Disney's live-action movie, 102 Dalmatians. With the improvements we've made in our restaurants and our strong promotions, we look forward to exciting our customers and bringing them back again and again."
McDonald's operates primarily in the quick-service hamburger restaurant business. In addition, the Company operates other restaurant concepts: Aroma Cafe, Chipotle Mexican Grill, Donatos Pizza and, effective May 26th, Boston Market. Collectively these four businesses are referred to as "Other Brands." Throughout this release, Other Brands financial information is included in the Other segment, except where specifically noted.
Impact of Foreign Currencies on Reported Results
While changing foreign currencies affect reported results, McDonald's lessens exposures, where practical, by financing in local currencies, hedging certain foreign-denominated cash flows and by purchasing goods and services in local currencies.
The primary currencies negatively affecting reported results for the quarter and six months were the Euro, which is the currency in 11 of our European markets including France and Germany, the Australian Dollar and the British Pound. This negative effect was partly offset by the stronger Japanese Yen in both periods.
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SOURCE: McDonald's Corporation
Contact: Investors, Mary Healy, 630-623-6429, or Media, Anna Rozenich,
630-623-7316, both of McDonald's Corporation