10-QPeriod: Q2 FY2012

MCDONALDS CORP Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 6, 2012For Securities:MCD

Summary

McDonald's Corporation reported flat revenue growth for the second quarter of 2012, with a slight decrease in net income. However, when excluding the negative impact of foreign currency translation, revenues and net income showed positive growth, indicating underlying business strength. The company continues to focus on its "Plan to Win" strategy, emphasizing menu optimization, customer experience modernization, and accessibility. Despite a challenging global economic environment, McDonald's achieved positive comparable sales growth across all geographic segments, demonstrating resilience. Key financial highlights for the period include a slight increase in operating income in constant currency and a year-over-year increase in diluted earnings per share in constant currency, driven by positive comparable sales and share repurchases. The company also returned significant capital to shareholders through dividends and share buybacks. Management remains committed to its strategic initiatives and expects continued growth, though it acknowledges the persistent economic headwinds.

Financial Highlights

47 data points
Beta

Revenue

$6.92B

Net Income

$1.35B

19.5% Net Margin

EPS (Diluted)

$1.32

Total Assets

$33.33B

Cash & Equivalents

$2.48B

Free Cash Flow

$771.10M

Financial Statements
Beta
Revenue$6.92B
SG&A Expenses$617.30M
Operating Expenses$4.76B
Operating Income$2.15B
Interest Expense$130.00M
Net Income$1.35B
EPS (Basic)$1.33
EPS (Diluted)$1.32
Shares Outstanding (Basic)1.01B
Shares Outstanding (Diluted)1.02B

Key Highlights

  • 1Consolidated revenues were flat year-over-year for the quarter ($6,915.9 million), but increased 5% in constant currencies, indicating underlying operational strength despite currency headwinds.
  • 2Net income for the quarter decreased by 4% to $1,347.0 million, or $1.32 per diluted share, a 2% decrease. However, in constant currency, net income and diluted EPS increased by 1% and 3%, respectively.
  • 3Global comparable sales increased by 3.7% for the quarter, with positive comparable sales reported in all geographic segments, demonstrating consistent customer traffic and spending.
  • 4The company returned significant capital to shareholders, repurchasing $856.2 million of stock during the quarter and paying $709.3 million in dividends.
  • 5Operating income saw a slight decrease of 2% to $2,155.0 million, but in constant currency, it increased by 3%, suggesting operational efficiencies and strong performance management.
  • 6Total assets grew to $33,332.4 million as of June 30, 2012, up from $32,989.9 million at the end of 2011, reflecting continued investment in the business.
  • 7While franchised revenues saw a 2% increase, company-operated restaurant sales decreased slightly by 1% for the quarter.

Frequently Asked Questions

Foreign currency translation had a negative impact on McDonald's reported results for the quarter. Specifically, it negatively impacted consolidated revenues by $333.3 million and net income by $78.1 million. Diluted earnings per share were negatively impacted by $0.07 due to these currency fluctuations.

McDonald's expects net restaurant additions to contribute approximately 2 percentage points to Systemwide sales growth in 2012 (in constant currencies). This growth is largely attributed to the 872 net traditional restaurants added in 2011.

McDonald's expects the total basket of goods cost to increase by 3.5-4.5% in the U.S. and 2.5-3.5% in Europe for the full year 2012. They anticipate less pressure on these costs in the second half of the year. The company manages these costs through a basket of goods approach, pricing, hedging, and working with franchisees and suppliers.

The company plans to reinvest capital in existing restaurants, with nearly half of this reinvestment dedicated to reimaging more than 2,400 locations worldwide. This initiative aims to modernize the customer experience and enhance restaurant appeal.