10-QPeriod: Q3 FY2013

MCDONALDS CORP Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 30, 2013For Securities:MCD

Summary

McDonald's Corporation reported its third-quarter and nine-month results for the period ending September 29, 2013. The company demonstrated modest revenue growth, with total revenues increasing by 2% for both the quarter and the nine-month period, driven primarily by restaurant expansion. While consolidated operating income saw a 6% increase for the quarter (6% in constant currencies), the nine-month period showed a more modest 2% increase (3% in constant currencies). Diluted earnings per share also saw a 6% increase for the quarter to $1.52, and a 5% increase for the nine months to $4.16, with a slight negative impact from foreign currency translation. The company continued its commitment to returning capital to shareholders, with significant dividend payments and share repurchases throughout the period. Management acknowledged a challenging operating environment characterized by flat to declining informal eating out markets, increased competition, and pressure on pricing power, which is expected to persist.

Financial Statements
Beta
Revenue$7.32B
SG&A Expenses$554.30M
Operating Expenses$4.91B
Operating Income$2.42B
Interest Expense$130.50M
Net Income$1.52B
EPS (Basic)$1.53
EPS (Diluted)$1.52
Shares Outstanding (Basic)997.30M
Shares Outstanding (Diluted)1.00B

Key Highlights

  • 1Total revenues grew 2% year-over-year for both the quarter and the nine months, reaching $7.32 billion and $21.01 billion, respectively, primarily driven by restaurant expansion.
  • 2Diluted earnings per share (EPS) increased by 6% to $1.52 for the quarter and by 5% to $4.16 for the nine months, demonstrating growth despite challenging market conditions.
  • 3Global comparable sales showed modest growth of 0.9% for the quarter and 0.3% for the nine months, indicating the company's ability to attract customers in a difficult economic climate.
  • 4Operating income increased by 6% for the quarter to $2.42 billion and by 2% for the nine months to $6.56 billion, reflecting improved operational efficiency.
  • 5The company returned significant capital to shareholders, with $2.3 billion in dividends and $1.3 billion in share repurchases for the nine-month period.
  • 6Selling, general, and administrative expenses decreased by 11% for the quarter and 4% for the nine months, contributing positively to profitability.
  • 7The company continued to invest in its future, with capital expenditures of $1.92 billion for the nine months, primarily focused on opening new restaurants and reimaging existing ones.

Frequently Asked Questions

Revenue growth was primarily driven by the expansion of restaurant locations. While comparable sales showed some growth, it was modest, indicating that new store openings were the main contributor to the overall revenue increase.

Foreign currency translation had a negative impact on consolidated operating results. For the quarter, it negatively impacted diluted EPS by $0.01, and for the nine months, it had a negative impact of $0.03 on diluted EPS. Management believes that analyzing results in constant currency better represents the underlying business trends.

Management anticipates that the challenging operating environment, characterized by flat to declining informal eating out markets, reduced pricing power, and heightened competition, will persist. They expect global comparable sales performance to remain in line with recent quarterly trends, with restaurant margin percentages potentially declining.

McDonald's demonstrated a strong commitment to returning capital through both dividends and share repurchases. For the nine months ended September 30, 2013, the company paid $2.3 billion in dividends and repurchased $1.3 billion worth of its stock. The quarterly cash dividend was also increased by 5% to $0.81 per share for the fourth quarter of 2013.