McDonald’s: Reports Q4 And Full Year 2019 Results

Chicago / IL. (mdc) McDonald’s Corporation announced results for the fourth quarter and year ended December 31, 2019. «2019 marked a year of significant milestones for McDonald’s – including surpassing USD 100 billion in Systemwide sales and achieving our highest global comparable sales growth in over a decade,» said McDonald’s President and Chief Executive Officer Chris Kempczinski. «Through the execution of our Velocity Growth Plan, we once again served more customers the food they crave, marking three consecutive years of global comparable guest count growth.»

Fourth quarter highlights

  • Strong global comparable sales growth of 5.9 percent demonstrated broad-based strength with increases in the International Operated segment of 6.2 percent, the U.S. of 5.1 percent, and the International Developmental Licensed segment of 6.6 percent.
  • Consolidated revenues increased 4 percent (4 percent in constant currencies).
  • Systemwide sales increased 6 percent (7 percent in constant currencies).
  • Consolidated operating income increased 15 percent (16 percent in constant currencies), reflecting USD 140 million of prior year impairment charges. Excluding these charges, operating income increased 7 percent (9 percent in constant currencies).
  • Diluted earnings per share of USD 2.08 increased 14 percent (15 percent in constant currencies). Results for the fourth quarter 2019 included USD 0.11 per share of income tax benefit due to new regulations issued in the fourth quarter 2019 related to the Tax Cuts and Jobs Act of 2017 (Tax Act). Excluding this item, diluted earnings per share was USD 1.97.

Full year highlights

  • Global comparable sales grew 5.9 percent, reflecting increases in the International Operated segment of 6.1 percent, the U.S. of 5.0 percent, and the International Developmental Licensed segment of 7.2 percent.
  • Consolidated revenues were relatively flat with the prior year (increased 3 percent in constant currencies) at USD 21.1 billion.
  • Systemwide sales increased 4 percent (7 percent in constant currencies) to USD 100.2 billion.
  • Diluted earnings per share of USD 7.88 increased 5 percent (7 percent in constant currencies).
  • Cash provided by operations was USD 8.1 billion and free cash flow was USD 5.7 billion, a 36 percent increase over the prior year.

The Company returned USD 2.3 billion to shareholders through share repurchases and dividends in the fourth quarter and USD 8.6 billion for the full year, marking successful achievement of the Company’s targeted return of USD 25 billion for the three-year period ended 2019.

On January 23, 2020, McDonald’s Board of Directors declared a quarterly cash dividend of USD 1.25 per share of common stock payable on March 16, 2020 to shareholders of record at the close of business on March 2, 2020.

«In 2019, we completed our three-year cash return to shareholders target of USD 25 billion. This was a significant achievement given our substantial investments in Experience of the Future and technology,» said Kevin Ozan, McDonald’s Chief Financial Officer. «Our Velocity Growth Plan helped produce strong operating performance over the past several years, and our underlying financial strength continues to build long-term value for our shareholders. As we begin 2020, we remain committed to our capital allocation philosophy to reinvest in the business to drive profitable growth and return all free cash flow to shareholders through a combination of dividends and share repurchases.»

Kempczinski concluded, «The broad-based momentum around the world continues to demonstrate the strength of the Velocity Growth Plan and the dedication of millions of global crew members executing that plan in McDonald’s restaurants each and every day.  As we look to 2020, we will continue to deliver delicious food and optimize our investments as we further transform the experience for our customers through added convenience and digital engagement.»

20200129-MCDONALDS-Q4-2019.

Key highlights – consolidated

Dollars in millions, except per share data Quarters Ended December 31, Years Ended December 31,
2019 2018 Change Change Excluding Currency Translation 2019 2018 Change Change Excluding Currency Translation
Revenues USD 5,349.0 USD 5,163.0 4% 4% USD 21,076.5 USD 21,025.2 0% 3%
Operating income 2,292.6 1,999.5 15 16 9,069.8 8,822.6 3 6
Net income 1,572.2 1,415.3 11 12 6,025.4 5,924.3 2 4
Earnings per share-diluted USD 2.08 USD 1.82 14% 15% USD 7.88 USD 7.54 5% 7%

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Results for the quarter and year reflected stronger operating performance primarily due to an increase in sales-driven franchised margin dollars, partly offset by higher G+A spend. Results for the year also reflected lower gains on sales of restaurant businesses, mostly in the U.S.

Foreign currency translation had a negative impact of USD 0.02 and USD 0.21 on diluted earnings per share for the quarter and year, respectively.

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

Earnings per share-diluted reconciliation

Quarters Ended December 31, Years Ended December 31,
2019 2018 Change Change Excluding Currency Translation 2019 2018 Change Change Excluding Currency Translation
GAAP earnings per share-diluted USD 2.08 USD 1.82 14% 15% USD 7.88 USD 7.54 5% 7%
Income tax (benefit) cost, net (0.11) (0.03) (0.11) 0.10
Strategic charges 0.18 0.07 0.26
Non-GAAP earnings per share-diluted USD 1.97 USD 1.97 0% 1% USD 7.84 USD 7.90 (1)% 2%

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Fourth Quarter

  • Fourth quarter 2019 diluted earnings per share of USD 2.08 increased 14 percent (15 percent in constant currencies). Included in the fourth quarter 2019 results was:
    • USD 84 million, or USD 0.11 per share, of income tax benefit due to new regulations issued in the fourth quarter 2019 related to the Tax Act.
  • Included in the fourth quarter 2018 results were:
    • USD 140 million of pre-tax, non-cash impairment charges, or USD 0.18 per share; and
    • USD 24 million, or USD 0.03 per share, of income tax benefit associated with the final 2018 adjustments to the provisional amounts recorded in December 2017 under the Tax Act.
  • Excluding the above current year and prior year items, net income for the quarter decreased 3 percent (2 percent in constant currencies) and diluted earnings per share was flat with the prior year (increased 1 percent in constant currencies).

Full Year

  • Full year 2019 diluted earnings per share of USD 7.88 increased 5 percent (7 percent in constant currencies). Included in the full year 2019 results were:
    • USD 84 million, or USD 0.11 per share, of income tax benefit due to new regulations issued in the fourth quarter 2019 related to the Tax Act; and
    • USD 74 million of pre-tax strategic charges, or USD 0.07 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.
  • Included in the full year 2018 results were:
    • USD 140 million of pre-tax, non-cash impairment charges, or USD 0.17 per share;
    • USD 94 million of pre-tax strategic restructuring charges, or USD 0.09 per share; and
    • USD 75 million, or USD 0.10 per share, of net tax cost associated with the final 2018 adjustments to the provisional amounts recorded in December 2017 under the Tax Act.
  • Excluding the above current year and prior year items, net income for the full year decreased 3 percent (1 percent in constant currencies) and diluted earnings per share decreased 1 percent (increased 2 percent in constant currencies).
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