Market Overview

McDonald's Reports Fourth Quarter And Full Year 2018 Results And Quarterly Cash Dividend

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CHICAGO, Jan. 30, 2019 /PRNewswire/ -- McDonald's Corporation today announced results for the fourth quarter and year ended December 31, 2018.

"Our performance in 2018 was strong, driven by the Velocity Growth Plan with broad-based momentum across each of our global segments. We continued to transform our business by making substantial progress on modernising our restaurants and offering more convenience, choice and value to our customers," said McDonald's President and Chief Executive Officer Steve Easterbrook. "We've now achieved 14 consecutive quarters of positive global comparable sales and our customers rewarded us with more visits in 2018, helping us to achieve two consecutive years of global guest count growth for the first time since 2012."  

Fourth quarter highlights:

  • Global comparable sales increased 4.4%, reflecting positive comparable sales across all segments.
  • Due to the impact of the Company's strategic refranchising initiative, consolidated revenues decreased 3% (flat in constant currencies).
  • Systemwide sales increased 5% in constant currencies.
  • Consolidated operating income decreased 7% (4% in constant currencies) primarily due to non-cash impairment charges. Excluding these charges, consolidated operating income was flat (increased 3% in constant currencies).
  • Diluted earnings per share was $1.82, reflecting non-cash impairment charges of $0.18 per share, partly offset by an income tax benefit of $0.03 per share associated with the final 2018 adjustments to the provisional amounts recorded in the prior year under the Tax Cuts and Jobs Act of 2017 ("Tax Act"). Excluding these items, diluted earnings per share was $1.97, an increase of 15% (18% in constant currencies) over prior year earnings per share (excluding $0.84 per share of prior year net tax cost under the Tax Act).

Full year highlights:

  • Global comparable sales increased 4.5%, reflecting positive comparable sales across all segments.
  • Due to the impact of the Company's strategic refranchising initiative, consolidated revenues decreased 8% (8% in constant currencies).
  • Consolidated operating income decreased 8% (8% in constant currencies). 2018 results included non-cash impairment and strategic restructuring charges. 2017 results reflected a gain on the sale of the Company's businesses in China and Hong Kong, partly offset by restructuring and impairment charges. Excluding these items in both years, consolidated operating income increased 2% (2% in constant currencies).
  • Diluted earnings per share of $7.54 increased 18% (18% in constant currencies). Refer to the Key Highlights - Consolidated page for additional details.
  • Cash provided by operations was $7.0 billion and free cash flow was $4.2 billion, a 14% increase over the prior year.
  • The Company returned $8.5 billion to shareholders through share repurchases and dividends. In addition, the Company announced a 15% increase in its quarterly dividend to $1.16 per share beginning in the fourth quarter 2018, and increased the cash return to shareholder target for the 3-year period ending 2019 to about $25 billion.

On January 24, 2019, McDonald's Board of Directors declared a quarterly cash dividend of $1.16 per share of common stock payable on March 15, 2019 to shareholders of record at the close of business on March 1, 2019.

In the U.S., fourth quarter comparable sales increased 2.3%, driven by growth in average check resulting from both product mix shifts and menu price increases. Operating income for the quarter decreased 1.0%, reflecting lower Company-operated margin dollars and lower gains on sales of restaurant businesses, partly offset by higher franchised margin dollars and G&A savings.

In the International Lead segment, fourth quarter comparable sales increased 5.2%, reflecting positive results across all markets, primarily driven by the U.K., Germany and Australia. The segment's operating income increased 8% (12% in constant currencies), due to sales-driven improvements in franchised margin dollars and higher gains on sales of restaurant businesses in the U.K. and Australia.

In the High Growth segment, fourth quarter comparable sales increased 4.8%, led by continued strong performance in Italy and the Netherlands, and positive results across most of the segment. The segment's operating income decreased 44% (41% in constant currencies), reflecting non-cash impairment charges. Excluding these charges, the segment's operating income decreased 2% (increased 2% in constant currencies).

In the Foundational markets, fourth quarter comparable sales increased 7.1%, reflecting positive sales performance in Japan and across all geographic regions.

Steve Easterbrook concluded, "As we begin 2019, we have confidence in our plan and the continued growth opportunities from delivery, Experience of the Future and digital. We remain committed to running great restaurants, which will continue to make a difference for our customers and drive long-term sustainable growth."

KEY HIGHLIGHTS - CONSOLIDATED

Dollars in millions, except per share data























Quarters Ended December 31,


Years Ended December 31,


2018


2017


Inc/ (Dec)


Inc/ (Dec)

Excluding

Currency

Translation


2018


2017


Inc/ (Dec)


Inc/ (Dec)

Excluding

Currency

Translation

Revenues

$

5,163.0


$

5,340.2


(3)%


0%


$

21,025.2


$

22,820.4


(8)%


(8)%

Operating income

1,999.5


2,144.2


(7)


(4)


8,822.6


9,552.7


(8)


(8)

Net income

1,415.3


698.7


103


108


5,924.3


5,192.3


14


13

Earnings per share-diluted

$

1.82


$

0.87


109%


115%


$

7.54


$

6.37


18%


18%

Results for the quarter and year reflected a lower effective tax rate, and stronger operating performance due to an increase in sales-driven franchised margin dollars, partly offset by the comparison to a prior year tax benefit in Japan in the fourth quarter 2017 and by lower Company-operated margin dollars due to the impact of refranchising.

Foreign currency translation had a negative impact of $0.05 on diluted earnings per share for the quarter and a positive impact of $0.04 for the year.

Outlined below is additional information for the quarter and full year:

Fourth Quarter:

  • Fourth quarter diluted earnings per share was $1.82. Included in the quarter results were:
    • approximately $140 million, or $0.18 per share, of non-cash impairment charges; and
    • approximately $25 million, or $0.03 per share, of income tax benefit associated with the final 2018 adjustments to the provisional amounts recorded in the prior year under the Tax Act.
  • Excluding the above items, as well as the prior year provisional net tax cost of approximately $700 million under the Tax Act, or $0.84 per share, fourth quarter net income was $1,527.5 million, an increase of 11% (15% in constant currencies), and diluted earnings per share was $1.97, an increase of 15% (18% in constant currencies).

Full Year:

  • Full year diluted earnings per share of $7.54 increased 18% (18% in constant currencies). Included in the full year results were:
    • approximately $140 million, or $0.17 per share, of non-cash impairment charges;
    • pre-tax strategic restructuring charges of $94 million, or $0.09 per share (of which $85 million relates to the restructuring of the U.S. business); and
    • approximately $75 million, or $0.10 per share, of net tax cost associated with 2018 adjustments to the provisional amounts recorded in the prior year under the Tax Act.
  • Excluding the above items, as well as the prior year provisional net tax cost of approximately $700 million under the Tax Act, a pre-tax gain of approximately $850 million on the sale of the Company's businesses in
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