McDonald's Reports Second Quarter Earnings And Record Sales Reflecting Revitalization Progress
PRNewswire-FirstCall
OAK BROOK, Ill.
Jul 29, 2003
McDonald's Corporation (NYSE: MCD) today reported record second quarter and first half sales spurred by enthusiasm for its new food offerings and improvement in food taste and service initiatives.
Chairman and CEO Jim Cantalupo said, "I'm pleased with the strong customer response to our innovative new products, Happy Meals and value offerings, generating early signs of progress in our U.S. operations. But I'm far from satisfied. This upturn reflects only the beginning of our worldwide revitalization plan to deliver a dramatic new difference in service, taste and relevance -- with consistency -- in all of our restaurants".
Cantalupo reported the following highlights of the quarter and first half:
* Revenues rose 11% (5% in constant currencies) to an all-time high for
the quarter and increased 8% (3% in constant currencies) for the six
months.
* Systemwide sales were up 10% (4% in constant currencies) setting a
record for the quarter and up 7% (2% in constant currencies) for the
first half.
* Comparable unit sales increased 4.9% for U.S. Brand McDonald's
restaurants -- the highest growth rate in five years -- and 1.2%
worldwide for the quarter.
* Diluted earnings per share for the quarter were 37 cents vs. 39 cents
a year ago; and for the first half were 66 cents for both years before
the effect of accounting changes.
Key highlights - Consolidated
Dollars in millions, except per common share data Percent
Increase/(Decrease)
--------------------------------------------------------------------------
As Constant
Quarters ended June 30 2003 2002 Reported Currency*
--------------------------------------------------------------------------
Systemwide sales** $11,471.7 $10,429.9 10 4
Total revenues 4,280.8 3,862.1 11 5
Operating income 826.2 845.2 (2) (10)
Net income 470.9 497.5 (5) (12)
Net income per common
share diluted 0.37 0.39 (5) (13)
--------------------------------------------------------------------------
Six months ended June 30
--------------------------------------------------------------------------
Systemwide sales $21,623.6 $20,128.4 7 2
Total revenues 8,080.5 7,459.5 8 3
Operating income 1,500.8 1,486.5 1 (7)
Income before
cumulative effect
of accounting
changes 835.1 849.2 (2) (9)
Cumulative effect of
accounting changes,
net of tax (36.8) (98.6) n/m n/m
Net income 798.3 750.6 6 (2)
Per common share -
diluted:
Income before
cumulative effect
of accounting
changes 0.66 0.66 - (8)
Cumulative effect of
accounting changes (0.03) (0.08) n/m n/m
Net income 0.63 0.58 9 -
* Information in constant currencies excludes the effect of foreign
currency translation on reported results, except for
hyperinflationary economies, whose functional currency is the U.S.
Dollar. Constant currency results are calculated by translating
current year results at prior year average exchange rates. See the
table later in this release for a reconciliation of reported
results to constant currency results.
** Systemwide sales include sales by all Brand McDonald's and Partner
Brand restaurants, whether operated by the Company, by franchisees or
by affiliates operating under joint-venture agreements.
n/m Not meaningful
Cantalupo commented that "While we still have a challenging job ahead of us, important progress is being made to ensure that our restaurants provide an outstanding customer experience. We've implemented value programs in most of our markets, introduced innovative new products like our premium salads with Newman's Own all-natural salad dressings and the McGriddle breakfast concept, and experimented with ideas to expand the experience, like our Wi-Fi laptop wireless internet connections at selected restaurants. And as part of our Healthy Lifestyle Initiative, we're developing additional wholesome menu choices and have partnered with experts in nutrition and fitness. At the same time, we're improving our training programs and quality control systems and are rolling out an exciting new global marketing theme and program in the third quarter.
"Meanwhile, we have reduced capital spending and eliminated non- essential projects to focus full attention on improving the core business. We are investing in the business through strategic incremental advertising, and managing costs and capital with a focused and disciplined approach. We incurred additional costs this quarter due to our previously announced reduction in openings. Yet, we remain on track to meet our capital spending and selling, general and administrative expense targets for the year. Around the world, our management teams are aligned with our Plan to Win. They are focused on the drivers of exceptional customer experiences - people, product, place, price and promotion.
"This focus drove the U.S. comparable restaurant sales increase of 4.9% this quarter - the highest in five years. In fact, U.S. average sales volumes in June were the second highest in McDonald's history. While we are very pleased with these results, we know we have significant opportunities, especially in the area of service -- our top priority.
"In Europe, we face economic and other challenges in certain key markets. However, we are confident we are taking the right actions to improve results in this difficult environment. We are offering customers everyday value to address lower consumer spending and more menu variety to become more relevant to customers' changing lifestyles and interests.
"I'm excited about our plans and opportunities and believe we have just scratched the surface of what we are capable of delivering."
OUTLOOK
The information provided below is as of July 2003 and excludes any impact from changes in foreign currency exchange rates.
* McDonald's expects sales from new restaurants to add approximately two
to three percentage points to sales growth in 2003. Most of this
anticipated growth will be a result of restaurants opened in 2002
rather than in 2003.
In 2002, the Company opened 1,363 traditional restaurants and 392
satellite McDonald's restaurants. Net of closings, worldwide
restaurant additions totaled 1,015, with 781 net traditional and 234
net satellite restaurants. In 2003, the Company expects to open about
620 traditional restaurants and 340 satellite McDonald's restaurants,
for a total of 960 new restaurants worldwide. Net of planned
closings, worldwide restaurant additions are expected to total 360,
with 200 net traditional and 160 net satellite restaurants.
McDonald's expects new restaurants to add approximately one percentage
point to sales growth in 2004.
* Worldwide comparable sales were -2.1% and -1.3% for full years 2002
and 2001. McDonald's strategies for 2003 are designed to reverse the
negative comparable sales trend through a heightened focus on
restaurant-level execution and marketing. Our outlook remains
cautious until we see continued improved performance in our key
markets. As a guideline, generally, one percentage point of
comparable sales in the U.S. impacts annual earnings per share by 1.5
cents, and one percentage point of comparable sales in Europe impacts
annual earnings per share by about one cent, assuming no change in
profit margins.
* McDonald's expects 2003 selling, general & administrative expenses to
be relatively flat in constant currencies compared with 2002.
* A significant part of McDonald's operating income is from outside the
U.S., and more than 60% of total debt is denominated in foreign
currencies. The Euro and the British Pound are the most significant
currencies impacting our business. If the Euro and the British Pound
both move 10% (compared with 2002 average rates), McDonald's annual
reported earnings per share would change by about 4 to 5 cents.
Through year-to-date June 2003, foreign currency translation benefited
diluted earnings per share by 5 cents.
* McDonald's expects to decrease its debt level in 2003 by $300 million
to $700 million (as measured in constant currencies). McDonald's
fixed percentage of debt was 64% at June 30. The weighted average
interest rate for debt was 4.2% for year-to-date June 2003.
* McDonald's expects the effective income tax rate for full year 2003 to
be in the range of 33.5% to 34.5%.
* McDonald's expects capital expenditures for 2003 to be about $1.2
billion in constant currencies.
* McDonald's expects to return cash to shareholders through dividends
and share repurchase (combined $500 million to $1 billion) in 2003.
* The Company's goals beginning in 2005 include achieving sustainable
annual Systemwide sales growth of 3% to 5%, operating income growth of
6% to 7%, and return on incremental invested capital in the high
teens.
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------------
Inc/(Dec)
Quarters ended June 30, 2003 2002 $ %
--------------------------------------------------------------------
Revenues
Sales by Company-operated
restaurants $3,189.7 $2,869.0 320.7 11
Revenues from franchised
and affiliated restaurants 1,091.1 993.1 98.0 10
TOTAL REVENUES 4,280.8 3,862.1 418.7 11
Operating costs and expenses
Company-operated restaurant
expenses 2,744.0 2,453.9 290.1 12
Franchised restaurants
--occupancy expenses 231.0 206.0 25.0 12
Selling, general &
administrative expenses 466.4 402.9 63.5 16
Other operating (income)
expense, net 13.2 (45.9) 59.1 n/m
Total operating costs
and expenses 3,454.6 3,016.9 437.7 15
OPERATING INCOME 826.2 845.2 (19.0) (2)
Interest expense 101.7 93.4 8.3 9
Nonoperating expense, net 16.3 20.6 (4.3) n/m
Income before provision for
income taxes 708.2 731.2 (23.0) (3)
Provision for income taxes 237.3 233.7 3.6 2
NET INCOME $ 470.9 $ 497.5 (26.6) (5)
NET INCOME PER
COMMON SHARE-DILUTED $ 0.37 $ 0.39 (0.02) (5)
Weighted average common
shares outstanding-diluted 1,277.5 1,290.6
n/m Not meaningful
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
Dollars and shares in millions, except per common share data
--------------------------------------------------------------------
Inc/(Dec)
Six months ended June 30, 2003 2002 $ %
--------------------------------------------------------------------
Revenues
Sales by Company-operated
restaurants $6,045.8 $5,547.5 498.3 9
Revenues from franchised
and affiliated restaurants 2,034.7 1,912.0 122.7 6
TOTAL REVENUES 8,080.5 7,459.5 621.0 8
Operating costs and expenses
Company-operated restaurant
expenses 5,253.4 4,763.5 489.9 10
Franchised restaurants
--occupancy costs 454.3 408.7 45.6 11
Selling, general &
administrative expenses 862.8 787.8 75.0 10
Other operating
expense, net 9.2 13.0 (3.8) n/m
Total operating costs
and expenses 6,579.7 5,973.0 606.7 10
OPERATING INCOME 1,500.8 1,486.5 14.3 1
Interest expense 203.5 185.7 17.8 10
Nonoperating expense, net 41.5 32.4 9.1 n/m
Income before provision for
income taxes 1,255.8 1,268.4 (12.6) (1)
Provision for income taxes 420.7 419.2 1.5 -
Income before cumulative
effect of accounting changes 835.1 849.2 (14.1) (2)
Cumulative effect of
accounting changes, net
of tax (36.8) (98.6) n/m n/m
NET INCOME $ 798.3 $ 750.6 47.7 6
PER COMMON SHARE-DILUTED:
Income before cumulative
effect of accounting changes $ 0.66 $ 0.66 - -
Cumulative effect of
accounting changes $ (0.03) $ (0.08) n/m n/m
Net income $ 0.63 $ 0.58 0.05 9
Weighted average common
shares outstanding-diluted 1,273.0 1,291.3
n/m Not meaningful
McDONALD'S CORPORATION
CONSOLIDATED BALANCE SHEET
Dollars in millions
--------------------------------------------------------------------------
June 30, December 31,
2003 2002
--------------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $ 520.4 $ 330.4
Accounts and notes receivable 807.1 855.3
Inventories 111.5 111.7
Prepaid expenses and other current assets 465.0 418.0
Total current assets 1,904.0 1,715.4
Other assets
Investments in and advances to affiliates 1,036.4 1,037.7
Goodwill, net 1,717.6 1,559.8
Miscellaneous 1,102.8 1,074.2
Total other assets 3,856.8 3,671.7
Property and equipment
Property and equipment, at cost 27,586.5 26,218.6
Accumulated depreciation and amortization (8,254.4) (7,635.2)
Net property and equipment 19,332.1 18,583.4
Total assets $25,092.9 $23,970.5
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 533.4 $ 635.8
Income taxes 113.0 16.3
Other taxes 212.3 191.8
Accrued interest 189.9 199.4
Accrued restructuring and restaurant
closing costs 202.8 328.5
Accrued payroll and other liabilities 772.6 774.7
Current maturities of long-term debt 406.9 275.8
Total current liabilities 2,430.9 2,422.3
Long-term debt 9,447.1 9,703.6
Other long-term liabilities and
minority interests 620.7 560.0
Deferred income taxes 930.2 1,003.7
Shareholders' equity
Common stock 16.6 16.6
Additional paid-in capital 1,787.6 1,747.3
Unearned ESOP compensation (98.1) (98.4)
Retained earnings 20,003.5 19,204.4
Accumulated other comprehensive income (loss) (1,067.3) (1,601.3)
Common stock in treasury (8,978.3) (8,987.7)
Total shareholders' equity 11,664.0 10,280.9
Total liabilities and shareholders' equity $25,092.9 $23,970.5
SUPPLEMENTAL INFORMATION
OPERATING RESULTS
The Company operates in the food service industry and primarily operates and franchises quick-service restaurant businesses under the McDonald's brand (McDonald's restaurants). The Company also operates other restaurant concepts under its Partner Brands.
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. Foreign currency translation had a positive impact on the growth rates of consolidated revenue, operating income and earnings per share for the quarter and six months, primarily due to the stronger Euro and British Pound.
Information in constant currencies excludes the effect of foreign currency translation on reported results. Management reviews and analyzes business results in constant currencies and bases certain compensation plans on these results because it believes these results better represent the Company's underlying business trends. See the tables later in this release for a reconciliation of reported results to constant currency results.
Net Income and Diluted Net Income Per Common Share
For the quarter, net income decreased $26.6 million or 5%, and diluted net income per common share decreased $0.02 or 5%.
For the six months, income before the cumulative effect of accounting changes decreased $14.1 million or 2%, and diluted income per common share before the cumulative effect of accounting changes was flat at $0.66. Net income, including the cumulative effect of the accounting changes, increased $47.7 million or 6% and diluted net income per common share increased $0.05 or 9%.
Diluted weighted average shares outstanding were lower for both periods compared with the prior year due to a less dilutive effect from outstanding stock options and shares repurchased during 2002.
In June, the Company repurchased $26.0 million of its common stock. Cumulative Effect of Accounting Changes
Effective January 1, 2003, the Company adopted SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time the obligations are incurred. In first quarter 2003, the Company recorded a charge of $36.8 million after tax ($0.03 per diluted share) related to lease obligations in certain international markets to reflect the cumulative effect of this accounting change.
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," which eliminated the amortization of goodwill and instead subjects it to annual impairment tests. As a result of the initial required goodwill impairment test, the Company recorded a charge of $98.6 million after tax ($0.08 per diluted share) in first quarter 2002 to reflect the cumulative effect of this accounting change. The impaired goodwill was primarily in Argentina, Uruguay and other markets in Latin America and the Middle East, where economies had weakened significantly.
Systemwide Sales and Revenues
Systemwide sales include sales by all restaurants, whether operated by the Company, by franchisees or by affiliates operating under joint-venture agreements. Management believes that Systemwide sales information is useful in analyzing the Company's revenues because franchisees and affiliates pay rent, service fees and/or royalties that generally are based on a percent of sales with specified minimum payments. These fees received from franchisees and affiliates along with sales from Company-operated restaurants are reported as revenues.
Systemwide sales and revenues may grow at different rates during a given period, primarily due to a change in the mix of Company-operated, franchised and affiliated restaurants. For example, this mix is impacted by purchases and sales of restaurants between the Company and franchisees. For the six months ended June 30, 2003 and 2002, Company-operated restaurants generated about 30% of Systemwide sales and about 75% of revenues.
Systemwide sales increased 10% for the quarter and 7% for the six months. On a global basis, the increases in Systemwide sales and revenues were due to expansion for the quarter and the six months, and positive comparable sales for the quarter. On a global basis, comparable sales were negative for the six months.
U.S. sales increased 8% for the quarter and 4% for the six months due to positive comparable sales and expansion. Strong customer response to the new premium salads and McGriddles breakfast sandwiches, popular Happy Meals, continued everyday value and focus on improved food taste and service, all contributed to the sales increases. The strong U.S. comparable sales performance has continued in July. U.S. revenues increased at a higher rate than sales for both periods due to a slightly higher percentage of Company- operated restaurants.
In Europe, constant currency sales were relatively flat for the quarter and six months as restaurant expansion offset negative comparable sales. Continued negative results in the U.K. and Germany were offset by expansion in France and strong performances in Russia and Spain. Comparable sales trends in Europe continue to be negative in July. Revenues increased at a lower rate than sales for both periods, primarily due to a higher percentage of franchised restaurants in 2003.
Constant currency sales results in APMEA declined 4% for the quarter and the six months due to negative comparable sales in most markets. The segment's decline was driven by weak results in Japan and other key markets, compounded by concerns about SARS (Severe Acute Respiratory Syndrome). We expect the impact of SARS to be less in the second half of the year.
In Latin America, constant currency sales increased 8% for the quarter and 4% for the six months, primarily due to positive comparable sales in many markets. Revenues increased at a higher rate than sales for both periods, primarily due to a higher percentage of Company-operated restaurants in 2003.
Partner Brands sales and revenue increased in both periods, due to expansion and positive comparable sales at Chipotle Mexican Grill.
Combined Operating Margins
The following combined operating margin information represents margins for McDonald's restaurant business only and excludes Partner Brands.
Combined operating margins
Quarters ended Six months ended
June 30 June 30
Dollars in millions 2003 2002 2003 2002
--------------------------------------------------------------------------
Company-operated $ 422.1 $ 396.7 $ 750.8 $ 747.0
Franchised 859.6 786.6 1,579.5 1,502.5
Combined operating
margins $1,281.7 $1,183.3 $2,330.3 $2,249.5
--------------------------------------------------------------------------
Percent of sales/revenues
--------------------------------------------------------------------------
Company-operated 14.5% 15.2% 13.7% 14.8%
Franchised 78.8 79.2 77.7 78.6
Combined operating margin dollars increased $98.4 million or 8% for the quarter and $80.8 million or 4% for the six months. The U.S. and Europe segments accounted for more than 80% of the combined margin dollars in both periods of 2003 and 2002.
Consolidated food & paper costs decreased as a percent of sales for both the quarter and six months, while payroll costs and occupancy & other operating expenses increased as a percent of sales for both periods.
The U.S. Company-operated margin percent increased for the quarter primarily due to positive comparable sales. As a percent of sales, food & paper costs increased, while payroll costs and occupancy & other operating expenses decreased for the quarter. The U.S. Company-operated margin percent decreased for the six months due to an increase in food & paper costs and occupancy & other operating expenses as a percent of sales, partly offset by a decrease in payroll costs as a percent of sales.
The Company-operated margin percent in Europe declined for the quarter and six months. Payroll and occupancy & other operating expenses as a percent of sales increased for both periods, partly offset for the six months by lower food and paper costs as a percent of sales.
The decline in the consolidated franchised margin percent for the quarter and six months reflects higher occupancy costs due, in part, to an increased proportion of leased sites, partly offset by positive comparable sales for the quarter.
Selling, General & Administrative Expenses
Selling, general & administrative expenses increased 16% for the quarter and 10% for the six months partly due to approximately $14 million in severance costs, primarily associated with streamlining restaurant development functions, and $11 million of incremental marketing. In addition, stronger foreign currencies impacted selling, general & administrative expenses by $17.9 million for the quarter and $29.6 million for the six months, contributing to the increases.
Other Operating (Income) Expense, Net
Other operating (income) expense, net
Quarters ended Six months ended
June 30 June 30
Dollars in millions 2003 2002 2003 2002
--------------------------------------------------------------------------
Gains on sales of
restaurant businesses $(12.4) $(30.3) $(30.8) $(40.4)
Equity in earnings of
unconsolidated affiliates (2.7) (7.1) (3.5) (15.4)
Front counter service
system payments - U.S. - - - 21.6
Asset impairment - Latin
America and Turkey - - - 43.0
Other (income) expense 28.3 (8.5) 43.5 4.2
Total $ 13.2 $(45.9) $ 9.2 $ 13.0
Equity in earnings of unconsolidated affiliates decreased for the quarter and six months due to weaker results from our Japanese affiliate in 2003. Other expense increased for both periods primarily due to about $25 million of costs in the U.S. as a result of management's decision to significantly reduce capital expenditures.
Operating Income
Consolidated operating income decreased $19.0 million or 2% for the quarter, and increased $14.3 million or 1% for the six months.
U.S. operating income decreased 3% for the quarter and 1% for the six months. Higher combined operating margin dollars were more than offset by higher selling, general & administrative expenses and higher other operating expenses for both periods.
Europe's operating income decreased 7% for both periods in constant currencies, primarily due to continued weak results in the U.K. and Germany.
APMEA's operating income decreased 43% for the quarter and 28% for the six months in constant currencies, primarily due to continued weak results in most markets. Results for the six months 2002 include $15.9 million of asset impairment charges in Turkey.
Latin America's operating results declined significantly for the quarter and six months as most markets in the segment continue to experience difficult economic conditions. In addition, Latin America's results for the six months were negatively impacted by the national strike in Venezuela. Results for the six months 2002 include $27.1 million of asset impairment charges.
INTEREST, NONOPERATING EXPENSE AND INCOME TAXES
Interest expense increased for the quarter and six months primarily due to stronger foreign currencies.
Nonoperating expense for the quarter reflected lower foreign currency translation losses in 2003 compared with 2002, while the six months reflected higher foreign currency translation losses in 2003 compared with 2002.
The effective income tax rate for both periods in 2003 was 33.5% compared with 32.0% for second quarter 2002 and 33.0% for the six months 2002.
FORWARD-LOOKING STATEMENTS
Certain forward-looking statements are included in this release. They use such words as "may," "will," "expect," "believe," "plan" and other similar terminology. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this release. These forward-looking statements involve a number of risks and uncertainties. The following are some of the factors that could cause actual results to differ materially from those expressed in or underlying our forward-looking statements: effectiveness of operating initiatives; success in advertising and promotional efforts; changes in global and local business and economic conditions, including their impact on consumer confidence; fluctuations in currency exchange and interest rates; food, labor and other operating costs; political or economic instability in local markets, including the effects of war and terrorist activities; competition, including pricing and marketing initiatives and new product offerings by the Company's competitors; consumer preferences or perceptions concerning the Company's product offerings; spending patterns and demographic trends; availability of qualified restaurant personnel; severe weather conditions; existence of positive or negative publicity regarding the Company or its industry generally; effects of legal claims; cost and deployment of capital; changes in future effective tax rates; changes in governmental regulations; and changes in applicable accounting policies and practices. The foregoing list of important factors is not all inclusive.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
RELATED COMMUNICATIONS
In conjunction with its first quarter earnings release, McDonald's Corporation will broadcast its investor conference call live over the Internet at 11:00 a.m. Central Time on July 29, 2003. To access this webcast, go to www.investor.mcdonalds.com and select "Webcast." An archived replay of this webcast will be available for a limited time.
The Company plans to release monthly sales information on August 8 and September 9.
McDONALD'S CORPORATION
RECONCILIATION OF REPORTED AMOUNTS TO CONSTANT CURRENCY AMOUNTS
-------------------------------------------------------------------------
Systemwide sales 2003 2002
Dollars in --------------------------- ------
millions Currency As Constant
translation Rept'd currency*
Quarters ended As (Inc) Constant As % Inc % Inc
June 30 Rept'd dec currency* Rept'd (dec) (dec)
--------------------------------------------------------------------------
U.S. $ 5,655.6 n/a $ 5,655.6 $ 5,252.9 8 n/a
Europe 3,077.4 $ (495.2) 2,582.2 2,552.1 21 1
APMEA 1,664.5 (107.0) 1,557.5 1,623.3 3 (4)
Latin America 343.5 46.8 390.3 359.8 (5) 8
Canada 434.5 (44.4) 390.1 377.9 15 3
Partner Brands 296.2 (0.4) 295.8 263.9 12 12
Total sales $11,471.7 $ (600.2) $10,871.5 $10,429.9 10 4
--------------------------------------------------------------------------
Six months ended June 30
--------------------------------------------------------------------------
U.S. $10,485.3 n/a $10,485.3 $10,045.6 4 n/a
Europe 5,795.4 $ (930.8) 4,864.6 4,860.8 19 -
APMEA 3,360.5 (243.2) 3,117.3 3,255.4 3 (4)
Latin America 647.5 135.3 782.8 750.0 (14) 4
Canada 767.3 (62.2) 705.1 698.0 10 1
Partner Brands 567.6 (0.5) 567.1 518.6 9 9
Total sales $21,623.6 $(1,101.4) $20,522.2 $20,128.4 7 2
--------------------------------------------------------------------------
Total revenues 2003 2002
Dollars in --------------------------- ------
millions Currency As Constant
translation Rept'd currency*
Quarters ended As (Inc) Constant As % Inc % Inc
June 30 Rept'd dec currency* Rept'd (dec) (dec)
--------------------------------------------------------------------------
U.S. $ 1,551.0 n/a $ 1,551.0 $ 1,401.9 11 n/a
Europe 1,463.3 $ (211.4) 1,251.9 1,262.1 16 (1)
APMEA 570.8 (26.6) 544.2 580.3 (2) (6)
Latin America 212.7 27.5 240.2 201.0 6 20
Canada 196.7 (20.1) 176.6 162.6 21 9
Partner Brands 286.3 (0.3) 286.0 254.2 13 13
Total revenues $ 4,280.8 $ (230.9) $ 4,049.9 $ 3,862.1 11 5
--------------------------------------------------------------------------
Six months ended June 30
--------------------------------------------------------------------------
U.S. $ 2,867.1 n/a $ 2,867.1 $ 2,668.2 7 n/a
Europe 2,765.8 $ (401.3) 2,364.5 2,408.4 15 (2)
APMEA 1,152.5 (56.1) 1,096.4 1,164.3 (1) (6)
Latin America 399.1 86.8 485.9 418.2 (5) 16
Canada 347.8 (28.2) 319.6 300.8 16 6
Partner Brands 548.2 (0.5) 547.7 499.6 10 10
Total revenues $ 8,080.5 $ (399.3) $ 7,681.2 $ 7,459.5 8 3
* Information in constant currencies excludes the effect of foreign
currency translation on reported results.
n/a Not applicable
McDONALD'S CORPORATION
RECONCILIATION OF REPORTED AMOUNTS TO CONSTANT CURRENCY AMOUNTS
--------------------------------------------------------------------------
Operating income 2003 2002
Dollars in --------------------------- ------
millions Currency As Constant
translation Rept'd currency*
Quarters ended As (Inc) Constant As % Inc % Inc
June 30 Rept'd dec currency* Rept'd (dec) (dec)
--------------------------------------------------------------------------
U.S. $ 503.3 n/a $ 503.3 $ 518.0 (3) n/a
Europe 329.8 $ (52.5) 277.3 298.5 10 (7)
APMEA 47.9 (5.9) 42.0 74.2 (35) (43)
Latin America 2.8 0.2 3.0 3.8 (26) (21)
Canada 40.9 (4.3) 36.6 37.9 8 (3)
Partner Brands (10.3) 0.4 (9.9) (7.0) (47) (41)
Corporate (88.2) n/a (88.2) (80.2) (10) n/a
Total operating
income $ 826.2 $ (62.1) $ 764.1 $ 845.2 (2) (10)
--------------------------------------------------------------------------
Six months ended June 30
--------------------------------------------------------------------------
U.S. $ 909.0 n/a $ 909.0 $ 920.1 (1) n/a
Europe 598.2 $ (95.5) 502.7 541.4 10 (7)
APMEA 117.3 (12.0) 105.3 145.4 (19) (28)
Latin America 5.0 (3.7) 1.3 (9.4) n/m n/m
Canada 67.1 (5.7) 61.4 65.5 2 (6)
Partner Brands (23.2) 0.8 (22.4) (18.6) (25) (20)
Corporate (172.6) n/a (172.6) (157.9) (9) n/a
Total operating
income $1,500.8 $(116.1) $1,384.7 $1,486.5 1 (7)
* Information in constant currencies excludes the effect of foreign
currency translation on reported results.
n/m Not meaningful
n/a Not applicable
McDONALD'S CORPORATION
RECONCILIATION OF REPORTED AMOUNTS TO CONSTANT CURRENCY AMOUNTS
--------------------------------------------------------------------------
Key Highlights 2003 2002
Dollars in --------------------------- ------
millions, except per
common share data Currency As Constant
translation Rept'd currency*
Quarters ended As (Inc) Constant As % Inc % Inc
June 30 Rept'd dec currency* Rept'd (dec) (dec)
--------------------------------------------------------------------------
Net income $470.9 $(34.4) $436.5 $497.5 (5) (12)
Net income per
common share
diluted 0.37 (0.03) 0.34 0.39 (5) (13)
--------------------------------------------------------------------------
Six months ended June 30
--------------------------------------------------------------------------
Income before
cumulative effect
of accounting
changes $835.1 $(59.9) $775.2 $849.2 (2) (9)
Net income 798.3 (59.9) 738.4 750.6 6 (2)
Per common share -
diluted:
Income before
cumulative effect
of accounting
changes 0.66 (0.05) 0.61 0.66 - (8)
Net income 0.63 (0.05) 0.58 0.58 9 -
* Information in constant currencies excludes the effect of foreign
currency translation on reported results.
McDONALD'S SYSTEMWIDE SALES
Dollars in millions
--------------------------------------------------------------------------
% Inc/(Dec)
As Constant
Quarters ended June 30, 2003 2002 Reported Currency*
--------------------------------------------------------------------------
U.S.
Operated by franchisees $ 4,428.8 $ 4,156.1 7
Operated by the Company 930.6 816.0 14
Operated by affiliates 296.2 280.8 5
5,655.6 5,252.9 8 n/a
Europe
Operated by franchisees 1,787.2 1,436.6 24
Operated by the Company 1,118.5 981.0 14
Operated by affiliates 171.7 134.5 28
3,077.4 2,552.1 21 1
APMEA
Operated by franchisees 564.1 490.5 15
Operated by the Company 504.2 518.8 (3)
Operated by affiliates 596.2 614.0 (3)
1,664.5 1,623.3 3 (4)
Latin America
Operated by franchisees 143.2 181.6 (21)
Operated by the Company 191.3 169.8 13
Operated by affiliates 9.0 8.4 7
343.5 359.8 (5) 8
Canada
Operated by franchisees 249.7 234.0 7
Operated by the Company 159.4 129.6 23
Operated by affiliates 25.4 14.3 78
434.5 377.9 15 3
Partner Brands
Operated by franchisees 10.5 10.1 4
Operated by the Company 285.7 253.8 13
296.2 263.9 12 12
Systemwide
Operated by franchisees 7,183.5 6,508.9 10
Operated by the Company 3,189.7 2,869.0 11
Operated by affiliates 1,098.5 1,052.0 4
$11,471.7 $10,429.9 10 4
* Excluding the effect of foreign currency translation on reported
results.
n/a Not applicable
McDONALD'S SYSTEMWIDE SALES
Dollars in millions
--------------------------------------------------------------------------
% Inc/(Dec)
As Constant
Six months ended June 30, 2003 2002 Reported Currency*
--------------------------------------------------------------------------
U.S.
Operated by franchisees $ 8,214.5 $ 7,967.5 3
Operated by the Company 1,720.6 1,541.3 12
Operated by affiliates 550.2 536.8 2
10,485.3 10,045.6 4 n/a
Europe
Operated by franchisees 3,350.2 2,739.3 22
Operated by the Company 2,118.4 1,873.9 13
Operated by affiliates 326.8 247.6 32
5,795.4 4,860.8 19 -
APMEA
Operated by franchisees 1,106.3 967.7 14
Operated by the Company 1,021.6 1,040.9 (2)
Operated by affiliates 1,232.6 1,246.8 (1)
3,360.5 3,255.4 3 (4)
Latin America
Operated by franchisees 273.9 380.4 (28)
Operated by the Company 356.5 352.8 1
Operated by affiliates 17.1 16.8 2
647.5 750.0 (14) 4
Canada
Operated by franchisees 444.0 431.7 3
Operated by the Company 281.7 239.9 17
Operated by affiliates 41.6 26.4 58
767.3 698.0 10 1
Partner Brands
Operated by franchisees 20.6 19.9 4
Operated by the Company 547.0 498.7 10
567.6 518.6 9 9
Systemwide
Operated by franchisees 13,409.5 12,506.5 7
Operated by the Company 6,045.8 5,547.5 9
Operated by affiliates 2,168.3 2,074.4 5
$21,623.6 $20,128.4 7 2
* Excluding the effect of foreign currency translation on reported
results.
n/a Not applicable
McDONALD'S COMPARABLE SALES*
McDONALD'S RESTAURANT BUSINESS
-------------------------------------------------------------------------
Percent Increase/(Decrease)
Quarters ended Six months ended
June 30 June 30
2003 2002 2003 2002
-------------------------------------------------------------------------
U.S. 4.9 (1.6) 1.6 (0.9)
Europe (1.8) 2.7 (3.1) 3.9
APMEA (6.6) (11.7) (7.4) (9.8)
Latin America 6.2 (4.3) 4.8 (4.9)
Canada (0.9) (2.1) (3.3) (2.7)
Brand McDonald's 1.2 (2.5) (1.1) (1.7)
* Comparable sales or comparable unit sales represent the percent
change in constant currency sales from the same period in the prior
year for restaurants in operation at least thirteen months.
McDONALD'S CORPORATION OPERATING MARGINS
COMPANY-OPERATED AND FRANCHISED RESTAURANT MARGINS -
McDONALD'S RESTAURANT BUSINESS*
------------------------------------------------------------
Quarters ended Percent Amount % Inc/
June 30, 2003 2002 2003 2002 (Dec)
------------------------------------------------------------
Company-operated
U.S. 18.5 17.8 $ 171.7 $ 144.9 18
Europe 15.6 15.9 174.1 155.6 12
APMEA 7.5 12.2 38.0 63.3 (40)
Latin America 8.0 7.4 15.3 12.6 21
Canada 14.4 15.7 23.0 20.3 13
Total 14.5 15.2 $ 422.1 $ 396.7 6
Franchised
U.S. 80.5 80.2 $ 499.4 $ 470.0 6
Europe 75.7 77.1 261.0 216.8 20
APMEA 84.4 85.6 56.2 52.7 7
Latin America 64.0 67.0 13.6 20.9 (35)
Canada 78.8 79.4 29.4 26.2 12
Total 78.8 79.2 $ 859.6 $ 786.6 9
------------------------------------------------------------
Six months ended Percent Amount % Inc/
June 30, 2003 2002 2003 2002 (Dec)
------------------------------------------------------------
Company-operated
U.S. 16.6 17.3 $ 286.1 $ 266.4 7
Europe 14.7 15.3 312.2 286.8 9
APMEA 8.6 12.3 88.0 128.3 (31)
Latin America 7.9 8.8 28.2 31.0 (9)
Canada 12.9 14.4 36.3 34.5 5
Total 13.7 14.8 $ 750.8 $ 747.0 1
Franchised
U.S. 79.0 79.4 $ 905.3 $ 895.1 1
Europe 75.0 76.6 485.3 409.2 19
APMEA 84.1 86.1 110.1 106.2 4
Latin America 64.8 67.4 27.6 44.1 (37)
Canada 77.6 78.6 51.2 47.9 7
Total 77.7 78.6 $1,579.5 $1,502.5 5
* Operating margin information relates to McDonald's restaurant
business and excludes Partner Brands.
n/a Not applicable
COMPANY-OPERATED COSTS AND MARGINS AS A PERCENT OF SALES -
McDONALD'S RESTAURANT BUSINESS*
-------------------------------------------------------------------------
Percent Increase/(Decrease)
Quarters ended Six months ended
June 30 June 30
2003 2002 2003 2002
-------------------------------------------------------------------------
Food & paper 33.8 33.9 33.8 34.4
Payroll & employee
benefits 26.7 26.3 26.9 26.2
Occupancy & other
operating expenses 25.0 24.6 25.6 24.6
Total expenses 85.5 84.8 86.3 85.2
Company-operated margins 14.5 15.2 13.7 14.8
* Operating margin information relates to McDonald's restaurant
business and excludes Partner Brands.
McDONALD'S CORPORATION RESTAURANT INFORMATION
SYSTEMWIDE RESTAURANTS
-----------------------------------------------------------------------
At June 30, 2003 2002 Inc/(Dec)
-----------------------------------------------------------------------
U.S.* 13,602 13,223 379
Europe
United Kingdom 1,221 1,194 27
Germany 1,220 1,165 55
France 983 932 51
Spain 332 322 10
Italy 328 324 4
Other 2,021 1,958 63
Total Europe 6,105 5,895 210
APMEA
Japan* 3,838 3,873 (35)
Australia 731 717 14
China 568 493 75
Taiwan 349 356 (7)
South Korea 347 344 3
Other 1,698 1,672 26
Total APMEA 7,531 7,455 76
Latin America
Brazil 584 575 9
Mexico 268 241 27
Other 758 782 (24)
Total Latin America 1,610 1,598 12
Canada* 1,324 1,245 79
Partner Brands 1,104 1,048 56
Systemwide restaurants 31,276 30,464 812
Countries 119 121 (2)
* Includes satellites at June 30, 2003: U.S. 1,219; Japan 1,845;
Canada 340. At June 30, 2002: U.S. 1,034; Japan 1,866; Canada 311.
McDONALD'S CORPORATION RESTAURANT INFORMATION
SYSTEMWIDE RESTAURANTS
-----------------------------------------------------------------------
At June 30, 2003 2002 Inc/(Dec)
-----------------------------------------------------------------------
U.S.
Operated by franchisees 10,751 10,549 202
Operated by the Company 2,109 1,975 134
Operated by affiliates 742 699 43
13,602 13,223 379
Europe
Operated by franchisees 3,551 3,366 185
Operated by the Company 2,267 2,250 17
Operated by affiliates 287 279 8
6,105 5,895 210
APMEA
Operated by franchisees 2,255 2,093 162
Operated by the Company 2,258 2,156 102
Operated by affiliates 3,018 3,206 (188)
7,531 7,455 76
Latin America
Operated by franchisees 611 707 (96)
Operated by the Company 980 849 131
Operated by affiliates 19 42 (23)
1,610 1,598 12
Canada
Operated by franchisees 755 784 (29)
Operated by the Company 481 411 70
Operated by affiliates 88 50 38
1,324 1,245 79
Partner Brands
Operated by franchisees 52 53 (1)
Operated by the Company 1,052 995 57
1,104 1,048 56
Systemwide
Operated by franchisees 17,975 17,552 423
Operated by the Company 9,147 8,636 511
Operated by affiliates 4,154 4,276 (122)
31,276 30,464 812
Photo: http://www.newscom.com/cgi-bin/prnh/19990916/MCDLOGOAP Archive: http://photoarchive.ap.org/
PRN Photo Desk, 888-776-6555 or +1-212-782-2840
SOURCE: McDonald's Corporation
CONTACT: Investors, Mary Healy, +1-630-623-6429, or Media,
Anna Rozenich, +1-630-623-7316, both of McDonald's Corporation
Web site: http://www.mcdonalds.com/