10-QPeriod: Q1 FY2014

MCDONALDS CORP Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 6, 2014For Securities:MCD

Summary

McDonald's Corporation reported its first quarter 2014 results, indicating a slight increase in consolidated revenues to $6.7 billion, representing a 1% rise (3% in constant currencies). While total revenues saw modest growth, net income declined by 5% to $1.2 billion, or $1.21 per diluted share, a 4% decrease from the prior year. This decline was partly attributed to a higher effective income tax rate compared to the previous year, which benefited from a tax credit, and increased selling, general, and administrative expenses. The company continued its commitment to shareholder returns, paying dividends of $801.7 million and repurchasing $432.4 million worth of shares during the quarter. Despite a challenging global economic environment and heightened competition, McDonald's is focused on its "Plan to Win" strategy, emphasizing menu optimization, modernizing the customer experience, and broadening accessibility to drive long-term sustainable growth.

Financial Highlights

47 data points
Beta

Revenue

$6.70B

Net Income

$1.20B

18.0% Net Margin

EPS (Diluted)

$1.21

Total Assets

$36.37B

Cash & Equivalents

$2.74B

Free Cash Flow

$1.34B

Financial Statements
Beta
Revenue$6.70B
SG&A Expenses$620.40M
Operating Expenses$4.76B
Operating Income$1.94B
Interest Expense$135.50M
Net Income$1.20B
EPS (Basic)$1.22
EPS (Diluted)$1.21
Shares Outstanding (Basic)989.60M
Shares Outstanding (Diluted)995.90M

Key Highlights

  • 1Consolidated revenues increased 1% to $6.7 billion (3% in constant currencies), driven by global expansion.
  • 2Net income decreased 5% to $1.2 billion, and diluted EPS fell 4% to $1.21, impacted by a higher effective tax rate and increased SG&A expenses.
  • 3Global comparable sales saw a modest increase of 0.5%, but comparable guest counts declined by 3.1%, highlighting a need to drive traffic.
  • 4The U.S. segment experienced a comparable sales decrease of 1.7%, facing challenging industry dynamics and severe winter weather.
  • 5Europe showed a comparable sales increase of 1.4%, with positive contributions from the UK, France, and Russia, though Germany remained weak.
  • 6The company returned approximately $1.23 billion to shareholders through dividends ($801.7 million) and share repurchases ($432.4 million) in the quarter.
  • 7McDonald's maintains a strong focus on its "Plan to Win" strategy, with key priorities including menu optimization, customer experience modernization, and broadening brand accessibility.

Frequently Asked Questions

In the first quarter of 2014, McDonald's reported a 1% increase in total revenues to $6.7 billion, though net income decreased by 5% to $1.2 billion, resulting in diluted earnings per share of $1.21, down 4% from the previous year. This decline was influenced by factors such as a higher effective income tax rate and increased operating expenses.

Globally, comparable sales increased by 0.5%, driven by a higher average check. However, comparable guest counts decreased by 3.1%. The U.S. segment saw a 1.7% decrease in comparable sales. Europe experienced a 1.4% increase, while APMEA reported a 0.8% increase.

McDonald's continues to execute its "Plan to Win" strategy, focusing on three global growth priorities: optimizing its menu, modernizing the customer experience, and broadening accessibility to the brand. The company also plans to open approximately 1,000-1,100 net new restaurants globally in 2014 and return approximately $5 billion to shareholders through dividends and share repurchases.

Profitability was impacted by a decrease in net income and diluted EPS. Key factors included a higher effective income tax rate compared to the prior year (which had a tax benefit), and an increase in selling, general, and administrative expenses, partly due to costs associated with the 2014 Winter Olympics. Foreign currency translation also had a negative impact of $0.03 on diluted earnings per share.