CHICAGO, July 28, 2020 /PRNewswire/ -- McDonald's Corporation today announced results for the second quarter ended June 30, 2020.
"Throughout our history, McDonald's has demonstrated the strategic foresight necessary to position our business for the future. Our strong drive-thru presence and the investments we've made in delivery and digital over the past few years have served us well through these uncertain times. We saw continued improvement in our results throughout the second quarter as markets reopened around the world," said McDonald's President and Chief Executive Officer Chris Kempczinski. "I'm especially proud of the way the McDonald's System continues to provide a safe environment for both customers and crew, building on our 65 year legacy as a responsible and reliable choice for safe food. We're confident that the strong foundation we've built, combined with the unique advantages of our System, position us well to continue operating successfully during this pandemic and emerge even stronger."
Second quarter operational update and financial performance:
COMPARABLE SALES* | |||||||||||||
Increase/(Decrease) | |||||||||||||
Month Ended | Quarters Ended June 30, | ||||||||||||
April 30, 2020 | May 31, 2020 | June 30, 2020 | 2020 | 2019 | |||||||||
U.S. | (19.2)% | (5.1)% | (2.3)% | (8.7)% | 5.7% | ||||||||
International Operated Markets | (66.7) | (40.5) | (18.4) | (41.4) | 6.6 | ||||||||
International Developmental Licensed Markets & Corporate | (32.3) | (20.0) | (20.3) | (24.2) | 7.9 | ||||||||
Total | (39.0)% | (20.9)% | (12.3)% | (23.9)% | 6.5% |
* | Comparable sales are compared to the same period in the prior year and represent sales at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months, including those temporarily closed. |
KEY FINANCIAL METRICS - CONSOLIDATED Dollars in millions, except per share data | |||||||||||||||||||||||||||||||
Quarters Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | 2020 |
2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | ||||||||||||||||||||||||
Revenues | $ | 3,761.5 | $ | 5,409.8 | (30)% | (29)% | $ | 8,475.9 | $ | 10,433.9 | (19)% | (17)% | |||||||||||||||||||
Operating income | 961.1 | 2,273.9 | (58) | (57) | 2,654.7 | 4,367.9 | (39) | (38) | |||||||||||||||||||||||
Net income | 483.8 | 1,516.9 | (68) | (67) | 1,590.7 | 2,845.3 | (44) | (43) | |||||||||||||||||||||||
Earnings per share-diluted | $ | 0.65 | $ | 1.97 | (67)% | (66)% | $ | 2.12 | $ | 3.69 | (43)% | (42)% |
Results for the quarter and six months reflected sales performance declines due to temporary restaurant closures, limited operations and dramatic changes in consumer behavior as a result of COVID-19.
Results for the quarter and six months also included the following:
Foreign currency translation had a negative impact of $0.01 and $0.03 on diluted earnings per share for the quarter and six months, respectively.
Outlined below is additional information for the quarter and six months ended June 30, 2020:
EARNINGS PER SHARE-DILUTED RECONCILIATION | |||||||||||||||||||||||||||||||
Quarters Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | 2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | ||||||||||||||||||||||||
GAAP earnings per share-diluted | $ | 0.65 | $ | 1.97 | (67)% | (66)% | $ | 2.12 | $ | 3.69 | (43)% | (42)% | |||||||||||||||||||
Strategic charges | 0.01 | 0.08 | 0.01 | 0.08 | |||||||||||||||||||||||||||
Non-GAAP earnings per share-diluted | $ | 0.66 | $ | 2.05 | (68)% | (67)% | $ | 2.13 | $ | 3.77 | (44)% | (43)% |
Results for the quarter and six months 2020 included $0.01 per share of pre-tax strategic charges primarily due to the write-off of impaired software that was no longer being used of $12 million and $26 million, respectively. The six months was offset by $13 million of income primarily comprised of a reversal of a reserve associated with the Company's sale of its business in the India Delhi market in January 2020.
Results for the quarter and six months 2019 included $78 million of pre-tax strategic charges, or $0.08 per share, primarily related to impairment associated with the purchase of our joint venture partner's interest in the India Delhi market, partly offset by gains on the sales of property at the former Corporate headquarters.
Restaurant Update
Below is a summary of the operating status of McDonald's restaurants around the world as of June 30, 2020. The Company has continued to follow the guidance of expert health authorities to ensure the appropriate precautionary steps are taken to protect the health and safety of our people and our customers.
PERCENT OF OPERATING RESTAURANTS* | ||||
As of June 30, 2020 | ||||
U.S. | 99% | |||
International Operated Markets | 94 | |||
International Developmental Licensed Markets | 94 | |||
Total | 96% | |||
* Restaurants include those with limited operations including drive-thru, delivery, and/or take-away. |
U.S.:
International Operated Markets:
International Developmental Licensed Markets:
THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED THROUGHOUT THIS RELEASE
Constant currency results exclude the effects of foreign currency translation and are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results excluding the effect of foreign currency translation, impairment and other strategic charges and gains, as well as income tax provision adjustments related to the Tax Cuts and Jobs Act of 2017, and bases incentive compensation plans on these results, because the Company believes this better represents underlying business trends.
Comparable sales are compared to the same period in the prior year and represent sales at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters (which includes restaurants temporarily closed due to COVID-19 in 2020). Comparable sales exclude the impact of currency translation, and, since 2017, also exclude sales from Venezuela due to its hyper-inflation. Management generally identifies hyper-inflationary markets as those markets whose cumulative inflation rate over a three-year period exceeds 100%. Management believes that these exclusions more accurately reflect the underlying business trends. Comparable sales are driven by changes in guest counts and average check, which is affected by changes in pricing and product mix. The goal is to achieve a relatively balanced contribution from both guest counts and average check.
Comparable guest counts represent the number of transactions at all restaurants, whether operated by the Company or by franchisees, in operation at least thirteen months including those temporarily closed.
Systemwide sales include sales at all restaurants, whether operated by the Company or by franchisees. While franchised sales are not recorded as revenues by the Company, management believes the information is important in understanding the Company's financial performance, because these sales are the basis on which the Company calculates and records franchised revenues and are indicative of the financial health of the franchisee base. The Company's revenues consist solely of sales by Company-operated restaurants and fees from franchised restaurants operated by conventional franchisees, developmental licensees and affiliates.
RELATED COMMUNICATIONS
This press release should be read in conjunction with Exhibit 99.2 in the Company's Form 8-K filing for supplemental information related to the Company's results for the quarter and six months ended June 30, 2020.
McDonald's Corporation will broadcast its investor earnings conference call live over the Internet at 7:30 a.m. (Central Time) on July 28, 2020. A link to the live webcast will be available at www.investor.mcdonalds.com. There will also be an archived webcast available for a limited time thereafter.
UPCOMING COMMUNICATIONS
For important news and information regarding McDonald's, including the timing of future investor conferences and earnings calls, visit the Investor Relations section of the Company's Internet home page at www.investor.mcdonalds.com. McDonald's uses this website as a primary channel for disclosing key information to its investors, some of which may contain material and previously non-public information.
ABOUT McDONALD'S
McDonald's is the world's leading global foodservice retailer with about 39,000 locations in over 100 countries. Approximately 93% of McDonald's restaurants worldwide are owned and operated by independent local business owners.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements, including statements regarding the impacts that the COVID-19 pandemic and our responses thereto may have on our future operations, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements involve a number of risks and uncertainties. Factors that could cause actual results to differ materially from our expectations are detailed in the Company's filings with the Securities and Exchange Commission, including the risk factors discussed in Exhibit 99.2 in the Company's Form 8-K filing on July 28, 2020. The Company undertakes no obligation to update such forward-looking statements, except as may otherwise be required by law.
McDONALD'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | ||||||||||||||
Dollars and shares in millions, except per share data | ||||||||||||||
Quarters Ended June 30, | 2020 | 2019 | Inc/ (Dec) | |||||||||||
Revenues | ||||||||||||||
Sales by Company-operated restaurants | $ | 1,593.7 | $ | 2,400.4 | $ | (806.7) | (34)% | |||||||
Revenues from franchised restaurants | 2,088.0 | 2,940.9 | (852.9) | (29) | ||||||||||
Other revenues | 79.8 | 68.5 | 11.3 | 16 | ||||||||||
TOTAL REVENUES | 3,761.5 | 5,409.8 | (1,648.3) | (30) | ||||||||||
Operating costs and expenses | ||||||||||||||
Company-operated restaurant expenses | 1,448.4 | 1,967.1 | (518.7) | (26) | ||||||||||
Franchised restaurants-occupancy expenses | 524.5 | 544.7 | (20.2) | (4) | ||||||||||
Other restaurant expenses | 63.3 | 55.4 | 7.9 | 14 | ||||||||||
Selling, general & administrative expenses | ||||||||||||||
Depreciation and amortization | 71.0 | 63.2 | 7.8 | 12 | ||||||||||
Other | 576.0 | 469.9 | 106.1 | 23 | ||||||||||
Other operating (income) expense, net | 117.2 | 35.6 | 81.6 | n/m | ||||||||||
Total operating costs and expenses | 2,800.4 | 3,135.9 | (335.5) | (11) | ||||||||||
OPERATING INCOME | 961.1 | 2,273.9 | (1,312.8) | (58) | ||||||||||
Interest expense | 319.1 | 284.2 | 34.9 | 12 | ||||||||||
Nonoperating (income) expense, net | (6.7) | (18.1) | 11.4 | 63 | ||||||||||
Income before provision for income taxes | 648.7 | 2,007.8 | (1,359.1) | (68) | ||||||||||
Provision for income taxes | 164.9 | 490.9 | (326.0) | (66) | ||||||||||
NET INCOME | $ | 483.8 | $ | 1,516.9 | $ | (1,033.1) | (68)% | |||||||
EARNINGS PER SHARE-DILUTED | $ | 0.65 | $ | 1.97 | $ | (1.32) | (67)% | |||||||
Weighted average shares outstanding-diluted | 748.6 | 768.7 | (20.1) | (3)% |
n/m Not meaningful |
McDONALD'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | ||||||||||||||
Dollars and shares in millions, except per share data | ||||||||||||||
Six Months Ended June 30, | 2020 | 2019 | Inc/ (Dec) | |||||||||||
Revenues | ||||||||||||||
Sales by Company-operated restaurants | $ | 3,619.5 | $ | 4,640.9 | $ | (1,021.4) | (22)% | |||||||
Revenues from franchised restaurants | 4,696.0 | 5,656.0 | (960.0) | (17) | ||||||||||
Other revenues | 160.4 | 137.0 | 23.4 | 17 | ||||||||||
TOTAL REVENUES | 8,475.9 | 10,433.9 | (1,958.0) | (19) | ||||||||||
Operating costs and expenses | ||||||||||||||
Company-operated restaurant expenses | 3,201.2 | 3,853.3 | (652.1) | (17) | ||||||||||
Franchised restaurants-occupancy expenses | 1,078.7 | 1,077.8 | 0.9 | 0 | ||||||||||
Other restaurant expenses | 128.8 | 108.7 | 20.1 | 18 | ||||||||||
Selling, general & administrative expenses | ||||||||||||||
Depreciation and amortization | 144.5 | 124.6 | 19.9 | 16 | ||||||||||
Other | 1,092.3 | 907.6 | 184.7 | 20 | ||||||||||
Other operating (income) expense, net | 175.7 | (6.0) | 181.7 | n/m | ||||||||||
Total operating costs and expenses | 5,821.2 | 6,066.0 | (244.8) | (4) | ||||||||||
OPERATING INCOME | 2,654.7 | 4,367.9 | (1,713.2) | (39) | ||||||||||
Interest expense | 599.1 | 558.3 | 40.8 | 7 | ||||||||||
Nonoperating (income) expense, net | (38.0) | (29.5) | (8.5) | (29) | ||||||||||
Income before provision for income taxes | 2,093.6 | 3,839.1 | (1,745.5) | (45) | ||||||||||
Provision for income taxes | 502.9 | 993.8 | (490.9) | (49) | ||||||||||
NET INCOME | $ | 1,590.7 | $ | 2,845.3 | $ | (1,254.6) | (44)% | |||||||
EARNINGS PER SHARE-DILUTED | $ | 2.12 | $ | 3.69 | $ | (1.57) | (43)% | |||||||
Weighted average shares outstanding-diluted | 749.6 | 770.2 | (20.6) | (3)% |
n/m Not meaningful |
SOURCE McDonald's Corporation
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