10-QPeriod: Q2 FY2013

MCDONALDS CORP Quarterly Report for Q2 Ended Jun 30, 2013

Filed July 31, 2013For Securities:MCD

Summary

McDonald's Corporation's second-quarter and first-half 2013 performance showed modest growth, primarily driven by a slight increase in consolidated revenues (2% for both periods) and a 5% rise in diluted EPS for the quarter, reaching $1.38. This growth was achieved despite a challenging economic environment, characterized by flat to declining informal eating out markets, cost pressures, and heightened competition. The company is actively working to optimize its menu, modernize the customer experience, and broaden accessibility, aligning with its "Plan to Win" strategy. While global comparable sales were flat for the six months (up 1.0% for the quarter), performance varied by segment. Europe and APMEA experienced slight declines in comparable sales, while the U.S. saw a marginal decrease for the six months but a small increase for the quarter. The company continued its commitment to shareholder returns, returning $1.5 billion in dividends and repurchasing $786 million in stock during the first half of the year. Management anticipates ongoing challenges for the remainder of 2013 but remains focused on executing its strategic priorities to drive long-term sustainable profitable growth.

Financial Highlights

46 data points
Beta

Revenue

$7.08B

Net Income

$1.40B

19.7% Net Margin

EPS (Diluted)

$1.38

Total Assets

$34.45B

Cash & Equivalents

$2.28B

Free Cash Flow

$910.40M

Financial Statements
Beta
Revenue$7.08B
SG&A Expenses$607.00M
Operating Expenses$4.89B
Operating Income$2.20B
Interest Expense$129.80M
Net Income$1.40B
EPS (Basic)$1.39
EPS (Diluted)$1.38
Shares Outstanding (Basic)1.00B
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Consolidated revenues increased by 2% for both the second quarter and the first six months of 2013, reaching $7.1 billion and $13.7 billion respectively.
  • 2Diluted earnings per share (EPS) for the second quarter were $1.38, a 5% increase compared to the prior year's quarter, while six-month diluted EPS reached $2.64, a 4% increase.
  • 3Global comparable sales showed a slight increase of 1.0% for the second quarter but were flat for the first six months of 2013, indicating a challenging sales environment.
  • 4The company returned significant capital to shareholders, with $1.5 billion in dividends and $786 million in share repurchases during the first six months of 2013.
  • 5Despite overall revenue growth, comparable sales declined in Europe (-0.1% for the quarter, -0.6% for the six months) and APMEA (-0.3% for the quarter, -1.9% for the six months), highlighting regional performance variations.
  • 6The U.S. segment experienced mixed comparable sales performance: a 1.0% increase for the quarter, but a 0.1% decrease for the six months.
  • 7Management anticipates continued challenges for the remainder of 2013 due to persistent economic pressures and competitive activity.

Frequently Asked Questions

For the second quarter of 2013, McDonald's reported consolidated revenues of $7.08 billion, a 2% increase compared to the same period in 2012. Net income rose to $1.40 billion, a 4% increase. Diluted earnings per share (EPS) were $1.38, up 5% year-over-year. For the first six months of 2013, consolidated revenues were $13.69 billion, a 2% increase, with net income at $2.67 billion and diluted EPS at $2.64, a 4% increase.

Global comparable sales increased by 1.0% for the second quarter but were flat for the first six months of 2013. The U.S. segment saw a 1.0% increase in comparable sales for the quarter, but a slight decrease of 0.1% for the six months. Europe's comparable sales decreased by 0.1% for the quarter and 0.6% for the six months. APMEA's comparable sales decreased by 0.3% for the quarter and 1.9% for the six months, reflecting challenging market conditions in key regions like Japan and China.

McDonald's demonstrated a strong commitment to returning capital to shareholders. In the first six months of 2013, the company paid $1.5 billion in dividends and repurchased approximately $786 million worth of its stock. The company's balance sheet remains solid, with debt levels at $13.4 billion at the end of June 2013, slightly down from $13.6 billion at the end of 2012, primarily due to foreign currency exchange rate effects.

Management anticipates that the challenging operating environment will persist throughout the remainder of 2013. Key challenges include flat to declining informal eating out (IEO) markets, limited ability to raise menu prices, ongoing cost pressures, and intensified competitive activity. The company expects these factors to continue to pressure financial performance, although strategic initiatives like menu optimization and customer experience modernization are in place to mitigate these effects and drive long-term growth.