McDonald's Serves Up Another Quarter of Strong Results - Third Quarter EPS Rises 17%
PRNewswire-FirstCall
OAK BROOK, Ill.
Oct 19, 2006
McDonald's Corporation (NYSE: MCD) today announced strong operating results for the third quarter and nine months ended September 30, 2006.
The Company reported the following highlights for the quarter:
-- Global comparable sales rose 5.8%
-- Company-operated and franchised restaurant margins improved in all
geographic segments for the third consecutive quarter
-- Consolidated results reflect double-digit growth in revenues (10%) and
operating income (12%)
-- Earnings per share increased 17% to $0.68
-- The Company increased the annual dividend for 2006 by nearly 50% to
$1.00 per share
Chief Executive Officer Jim Skinner commented, "We generated impressive third quarter results as we continue to raise the bar on operations excellence and leadership marketing to broaden consumer relevance. For the quarter, global comparable sales were at their highest quarterly level in two years, and we delivered higher margins across all segments of the business. These results validate the strength of our customer-centric Plan to Win and the power of growing by being better, not just bigger."
In the U.S., we continue to enhance the McDonald's experience by providing innovative menu options, added conveniences and contemporary restaurant locations that are in sync with customers' lifestyles. The stability of McDonald's U.S. performance is a testament to the strength and flexibility of the McDonald's System.
Skinner also noted, "McDonald's Europe generated another quarter of strong operating results driven by robust quarterly sales, more customer visits and the highest Company-operated margins since 2001. We are encouraged by Europe's progress and confident that our strategies to further strengthen the McDonald's Brand through marketing, value and menu initiatives that resonate with consumers will continue to drive growth over the long-term.
"The entire McDonald's System is energized by our current momentum and we remain intent on further enhancing every element of the Brand experience to capture the tremendous opportunities that lie ahead."
KEY HIGHLIGHTS - CONSOLIDATED
Dollars in millions, except per share data
% Inc
Currency Excluding
Quarters ended Translation Currency
September 30, 2006 2005 %Inc Benefit Translation
-------------------------------------------------------------------------
Revenues $5,882.5 $5,327.1 10 $127.6 8
Operating income 1,303.5 1,159.8 12 24.2 10
Net income 843.3 735.4 15 13.3 13
Earnings per
share-diluted* 0.68 0.58 17 0.01 16
%Inc
Currency Excluding
Nine months ended Translation Currency
September 30, 2006 2005 %Inc Benefit/(Loss)Translation
-------------------------------------------------------------------------
Revenues $16,555.7 $15,225.6 9 $ 71.5 8
Operating income 3,366.7 3,086.1 9 (8.4) 9
Net income 2,302.7 1,993.7 15 (3.8) 16
Earnings per
share-diluted** 1.83 1.56 17 (0.01) 18
* The following items, in total, negatively impacted the percentage
increase in diluted earnings per share by 6 percentage points for the
third quarter 2006 compared with 2005:
2006
- $0.01 per share of operating expense primarily in Asia/Pacific, Middle
East and Africa including an additional loss on the transfer of the
Company's ownership interest in Thailand to a developmental licensee
and a goodwill impairment charge in South Korea.
2005
- $0.02 per share of operating income primarily related to the transfer
of the Company's ownership interest in Turkey to a developmental
licensee.
** The following items, in total, negatively impacted the percentage
increase in diluted earnings per share by 3 percentage points for the
nine months ended September 30, 2006 compared with 2005:
2006
- $0.08 per share of operating expense primarily related to: a limited
number of restaurant closings in the U.K. in conjunction with an
overall restaurant portfolio review; costs to buy out certain
litigating franchisees in Brazil; and losses on the transfer of the
Company's ownership interests in Thailand and Bulgaria to developmental
licensees;
- $0.14 per share of nonoperating income due to the IPO of Chipotle
Mexican Grill and the secondary sales of Chipotle shares; and
- $0.01 per share of net incremental tax expense primarily related to the
one-time impact from a tax law change in Canada.
2005
- $0.03 per share of operating income primarily related to the transfer
of the Company's ownership interest in Turkey to a developmental
licensee and a favorable adjustment to certain liabilities established
in prior years due to lower than originally anticipated employee-
related and lease termination costs; and
- $0.05 per share tax benefit due to a favorable audit settlement of the
Company's 2000-2002 U.S. tax returns, partly offset by incremental tax
expense related to the Company's decision to repatriate foreign
earnings under the Homeland Investment Act in 2005.
The following definitions apply to these terms as used through this release
-- Comparable sales represent sales at all McDonald's restaurants,
including those operated by the Company, franchisees and affiliates,
in operation at least thirteen months including those temporarily
closed, excluding the impact of currency translation. Some of the
reasons restaurants may be closed include road construction, reimaging
or remodeling, and natural disasters. Management reviews the increase
or decrease in comparable sales compared with the same period in the
prior year to assess business trends.
-- Information in constant currency is calculated by translating current
year results at prior year average exchange rates.
Related Communications
McDonald's Corporation will broadcast its investor conference call live over the Internet at 10:30 a.m. Central Time on October 19, 2006. A link to the live webcast will be available at http://www.investor.mcdonalds.com/ and an archived replay of this webcast will be available for a limited time.
See 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, 2006.
The Company plans to release October 2006 sales information on November 8, 2006.
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.
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
--------------------------------------------------------------------
Dollars and shares in millions, except per share data
--------------------------------------------------------------------
Quarters ended Inc / (Dec)
September 30, 2006 2005 $ %
--------------------------------------------------------------------
Revenues
Sales by Company-operated
restaurants $4,433.6 $4,000.7 432.9 11
Revenues from franchised
and affiliated restaurants 1,448.9 1,326.4 122.5 9
TOTAL REVENUES 5,882.5 5,327.1 555.4 10
Operating costs and expenses
Company-operated
restaurant expenses 3,692.7 3,389.9 302.8 9
Franchised restaurants-
occupancy expenses 273.0 256.6 16.4 6
Selling, general &
administrative expenses 580.8 547.3 33.5 6
Impairment and other charges
(credits), net 17.3 (31.7) 49.0 n/m
Other operating
expense, net 15.2 5.2 10.0 n/m
Total operating costs
and expenses 4,579.0 4,167.3 411.7 10
OPERATING INCOME 1,303.5 1,159.8 143.7 12
Interest expense 103.1 86.6 16.5 19
Nonoperating income, net (28.1) (12.6) 15.5 n/m
Income before provision
for income taxes 1,228.5 1,085.8 142.7 13
Provision for income taxes 385.2 350.4 34.8 10
NET INCOME $ 843.3 $ 735.4 107.9 15
EARNINGS PER SHARE-DILUTED $ 0.68 $ 0.58 0.10 17
Weighted average
shares outstanding-diluted 1,245.7 1,271.6 (25.9) (2)
--------------------------------------------------------------------
n/m Not meaningful
McDONALD'S CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
--------------------------------------------------------------------
Dollars and shares in millions, except per share data
--------------------------------------------------------------------
Inc / (Dec)
Nine months ended September 30, 2006 2005 $ %
--------------------------------------------------------------------
Revenues
Sales by Company-operated
restaurants $12,489.4 $11,411.4 1,078.0 9
Revenues from franchised
and affiliated restaurants 4,066.3 3,814.2 252.1 7
TOTAL REVENUES 16,555.7 15,225.6 1,330.1 9
Operating costs and expenses
Company-operated
restaurant expenses 10,532.2 9,761.6 770.6 8
Franchised restaurants-
occupancy expenses 785.4 767.4 18.0 2
Selling, general &
administrative expenses 1,726.6 1,605.0 121.6 8
Impairment and other charges
(credits), net 125.5 (50.4) 175.9 n/m
Other operating
expense, net 19.3 55.9 (36.6) (65)
Total operating costs
and expenses 13,189.0 12,139.5 1,049.5 9
OPERATING INCOME 3,366.7 3,086.1 280.6 9
Interest expense 303.2 264.7 38.5 15
Nonoperating income, net (84.2) (29.9) 54.3 n/m
Gain on Chipotle IPO and
secondary sales (248.6) -- 248.6 n/m
Income before provision
for income taxes 3,396.3 2,851.3 545.0 19
Provision for income taxes 1,093.6 857.6 236.0 28
NET INCOME $2,302.7 $1,993.7 309.0 15
EARNINGS PER SHARE-DILUTED $ 1.83 $ 1.56 0.27 17
Weighted average shares
outstanding-diluted 1,255.0 1,277.7 (22.7) (2)
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n/m Not meaningful
First Call Analyst:
FCMN Contact: katie.hayes@us.mcd.com
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SOURCE: McDonald's Corporation
CONTACT: Investors, Mary Kay Shaw, +1-630-623-7559, or Media, Lisa
Howard, +1-630-623-5044, both of McDonald's Corporation
Web site: http://www.mcdonalds.com/
http://www.investor.mcdonalds.com/