CHICAGO, Jan. 28, 2021 /PRNewswire/ -- McDonald's Corporation today announced results for the fourth quarter and year ended December 31, 2020.
"2020 will be remembered as one of McDonald's most challenging, yet inspiring, moments in our long history. The resilience of the McDonald's System was on display – making safety and service a priority, putting our customers and people first, and running great restaurants," said McDonald's President and Chief Executive Officer Chris Kempczinski. "Against an uncertain backdrop, we are committed to staying true to our values and our brand purpose to feed and foster communities. By investing for the future and leveraging competitive strengths within our Accelerating the Arches strategy in drive-thru, delivery, and our growing digital presence, we're confident we can continue to capture market share and drive long-term sustainable growth for all stakeholders."
Fourth quarter financial performance:
Full year financial performance:
* See page 3 for additional details on full year strategic gains and charges.
FOURTH QUARTER COMPARABLE SALES | ||||||||
Increase/(Decrease) | ||||||||
Quarters Ended December 31, | ||||||||
2020 | 2019 | |||||||
U.S. | 5.5% | 5.1% | ||||||
International Operated Markets | (7.4) | 6.2 | ||||||
International Developmental Licensed Markets & Corporate | (3.6) | 6.6 | ||||||
Total | (1.3)% | 5.9% |
KEY FINANCIAL METRICS - CONSOLIDATED Dollars in millions, except per share data | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarters Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | 2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | $ | 5,313.8 | $ | 5,428.2 | (2)% | (3)% | $ | 19,207.8 | $ | 21,364.4 | (10)% | (10)% | |||||||||||||||||||||||||||||||||||||||||||||||
Operating income | 2,142.9 | 2,292.6 | (7) | (9) | 7,324.0 | 9,069.8 | (19) | (20) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Net income* | 1,377.2 | 1,572.2 | (12) | (14) | 4,730.5 | 6,025.4 | (21) | (22) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per share-diluted* | $ | 1.84 | $ | 2.08 | (12)% | (13)% | $ | 6.31 | $ | 7.88 | (20)% | (20)% |
* See page 3 for additional details.
Results for the quarter and year reflected sales declines in the International Operated Markets and International Developmental Licensed Markets segments as a result of COVID-19 resurgences and government restrictions. For the quarter, these results were partly offset by stronger operating performance in the U.S. due to higher sales-driven restaurant margins.
Results also included the following:
Foreign currency translation had a positive impact of $0.04 on diluted earnings per share for both the quarter and year.
Outlined below is additional information for the quarter and full year:
EARNINGS PER SHARE-DILUTED RECONCILIATION | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarters Ended December 31, | Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | 2020 | 2019 | Inc/ (Dec) | Inc/ (Dec) Excluding Currency Translation | ||||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP earnings per share-diluted | $ | 1.84 | $ | 2.08 | (12)% | (13)% | $ | 6.31 | $ | 7.88 | (20)% | (20)% | |||||||||||||||||||||||||||||||||||||||||||||||
Strategic (gains) charges | (0.14) | — | (0.26) | 0.07 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax benefit | — | (0.11) | — | (0.11) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP earnings per share-diluted | $ | 1.70 | $ | 1.97 | (14)% | (15)% | $ | 6.05 | $ | 7.84 | (23)% | (23)% |
2020 results included:
2019 results included:
Excluding the above current year and prior year items, net income decreased 14% (16% in constant currencies) for the quarter and 24% (25% in constant currencies) for the year, and diluted earnings per share decreased 14% (15% in constant currencies) for the quarter and 23% (23% in constant currencies) for the year.
RESTAURANT UPDATE
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.
As a result of COVID-19 resurgences, throughout the quarter, there have been numerous instances of additional government restrictions on restaurant operating hours, limited dine-in capacity in most countries and, in some cases, mandated dining room closures particularly in the International Operated Markets. These restrictions, which have carried into 2021, are impacting most of the Company's key markets outside of the U.S., particularly those with fewer drive-thru restaurant locations. The Company expects some restrictions in various markets so long as the COVID-19 pandemic continues.
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 Act, 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 (including restaurants temporarily closed due to COVID-19 in 2020). Comparable sales exclude the impact of currency translation and the sales of any market considered hyper-inflationary (generally identified as those markets whose cumulative inflation rate over a three-year period exceeds 100%), which management believes more accurately reflects 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. Changes in Systemwide sales are primarily driven by comparable sales and net restaurant unit expansion.
Free cash flow, defined as cash provided by operations less capital expenditures, and free cash flow conversion rate, defined as free cash flow divided by net income, are measures reviewed by management in order to evaluate the Company's ability to convert net profits into cash resources, after reinvesting in the core business, that can be used to pursue opportunities to enhance shareholder value.
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 year ended December 31, 2020.
McDonald's Corporation will broadcast its investor earnings conference call live over the Internet at 7:30 a.m. (Central Time) on January 28, 2021. 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'SMcDonald'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, 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 January 28, 2021. 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 December 31, | 2020 | 2019 | Inc/ (Dec) | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Sales by Company-operated restaurants | $ | 2,233.3 | $ | 2,363.3 | $ | (130.0) | (5) | % | |||||||||||||||
Revenues from franchised restaurants | 2,985.3 | 2,985.7 | (0.4) | 0 | |||||||||||||||||||
Other revenues | 95.2 | 79.2 | 16.0 | 20 | |||||||||||||||||||
TOTAL REVENUES | 5,313.8 | 5,428.2 | (114.4) | (2) | |||||||||||||||||||
Operating costs and expenses | |||||||||||||||||||||||
Company-operated restaurant expenses | 1,903.7 | 1,939.6 | (35.9) | (2) | |||||||||||||||||||
Franchised restaurants-occupancy expenses | 560.9 | 563.3 | (2.4) | 0 | |||||||||||||||||||
Other restaurant expenses | 69.0 | 57.6 | 11.4 | 20 | |||||||||||||||||||
Selling, general & administrative expenses | |||||||||||||||||||||||
Depreciation and amortization | 80.3 | 68.9 | 11.4 | 16 | |||||||||||||||||||
Other | 698.0 | 584.7 | 113.3 | 19 | |||||||||||||||||||
Other operating (income) expense, net | (141.0) | (78.5) | (62.5) | (80) | |||||||||||||||||||
Total operating costs and expenses | 3,170.9 | 3,135.6 | 35.3 | 1 | |||||||||||||||||||
OPERATING INCOME | 2,142.9 | 2,292.6 | (149.7) | (7) | |||||||||||||||||||
Interest expense | 308.9 | 283.0 | 25.9 | 9 | |||||||||||||||||||
Nonoperating (income) expense, net | 4.0 | (17.2) | 21.2 | n/m | |||||||||||||||||||
Income before provision for income taxes | 1,830.0 | 2,026.8 | (196.8) | (10) | |||||||||||||||||||
Provision for income taxes | 452.8 | 454.6 | (1.8) | 0 | |||||||||||||||||||
NET INCOME | $ | 1,377.2 | $ | 1,572.2 | $ | (195.0) | (12) | % | |||||||||||||||
EARNINGS PER SHARE-DILUTED | $ | 1.84 | $ | 2.08 | $ | (0.24) | (12) | % | |||||||||||||||
Weighted average shares outstanding-diluted | 751.0 | 755.6 | (4.6) | (1) | % |
n/m Not meaningful |
McDONALD'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | |||||||||||||||||||||||
Dollars and shares in millions, except per share data | |||||||||||||||||||||||
Years Ended December 31, | 2020 | 2019 | Inc/ (Dec) | ||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Sales by Company-operated restaurants | $ | 8,139.2 | $ | 9,420.8 | $ | (1,281.6) | (14) | % | |||||||||||||||
Revenues from franchised restaurants | 10,726.1 | 11,655.7 | (929.6) | (8) | |||||||||||||||||||
Other revenues | 342.5 | 287.9 | 54.6 | 19 | |||||||||||||||||||
TOTAL REVENUES | 19,207.8 | 21,364.4 | (2,156.6) | (10) | |||||||||||||||||||
Operating costs and expenses | |||||||||||||||||||||||
Company-operated restaurant expenses | 6,981.2 | 7,760.6 | (779.4) | (10) | |||||||||||||||||||
Franchised restaurants-occupancy expenses | 2,207.5 | 2,200.6 | 6.9 | 0 | |||||||||||||||||||
Other restaurant expenses | 267.0 | 223.8 | 43.2 | 19 | |||||||||||||||||||
Selling, general & administrative expenses | |||||||||||||||||||||||
Depreciation and amortization | 300.6 | 262.5 | 38.1 | 14 | |||||||||||||||||||
Other | 2,245.0 | 1,966.9 | 278.1 | 14 | |||||||||||||||||||
Other operating (income) expense, net | (117.5) | (119.8) | 2.3 | 2 | |||||||||||||||||||
Total operating costs and expenses | 11,883.8 | 12,294.6 | (410.8) | (3) | |||||||||||||||||||
OPERATING INCOME | 7,324.0 | 9,069.8 | (1,745.8) | (19) | |||||||||||||||||||
Interest expense | 1,218.1 | 1,121.9 | 96.2 | 9 | |||||||||||||||||||
Nonoperating (income) expense, net | (34.8) | (70.2) | 35.4 | 50 | |||||||||||||||||||
Income before provision for income taxes | 6,140.7 | 8,018.1 | (1,877.4) | (23) | |||||||||||||||||||
Provision for income taxes | 1,410.2 | 1,992.7 | (582.5) | (29) | |||||||||||||||||||
NET INCOME | $ | 4,730.5 | $ | 6,025.4 | $ | (1,294.9) | (21) | % | |||||||||||||||
EARNINGS PER SHARE-DILUTED | $ | 6.31 | $ | 7.88 | $ | (1.57) | (20) | % | |||||||||||||||
Weighted average shares outstanding-diluted | 750.1 | 764.9 | (14.8) | (2) | % |
McDONALD'S CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED) | ||||||||||||||
In millions | December 31, | 2020 | 2019 | |||||||||||
Current assets | ||||||||||||||
Cash and equivalents | $ | 3,449.1 | $ | 898.5 | ||||||||||
Accounts and notes receivable | 2,110.3 | 2,224.2 | ||||||||||||
Other current assets | 683.8 | 435.2 | ||||||||||||
TOTAL CURRENT ASSETS | 6,243.2 | 3,557.9 | ||||||||||||
TOTAL OTHER ASSETS | 7,597.7 | 6,531.7 | ||||||||||||
LEASE RIGHT-OF-USE ASSET, NET | 13,827.7 | 13,261.2 | ||||||||||||
NET PROPERTY AND EQUIPMENT | 24,958.2 | 24,160.0 | ||||||||||||
TOTAL ASSETS | $ | 52,626.8 | $ | 47,510.8 | ||||||||||
TOTAL CURRENT LIABILITIES | $ | 6,181.2 | $ | 3,621.0 | ||||||||||
Long-term debt | 35,196.8 | 34,118.1 | ||||||||||||
Long-term lease liability | 13,321.3 | 12,757.8 | ||||||||||||
Other long-term liabilities | 3,726.8 | 3,906.1 | ||||||||||||
Deferred income taxes | 2,025.6 | 1,318.1 | ||||||||||||
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) | (7,824.9) | (8,210.3) | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | $ | 52,626.8 | $ | 47,510.8 |
McDONALD'S CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) | |||||||||||
In millions | Years ended December 31, | 2020 | 2019 | ||||||||
Operating activities | |||||||||||
Net income | $ | 4,730.5 | $ | 6,025.4 | |||||||
Changes in working capital items | (212.1) | 298.5 | |||||||||
Other | 1,746.8 | 1,798.2 | |||||||||
CASH PROVIDED BY OPERATIONS | 6,265.2 | 8,122.1 | |||||||||
Investing activities | |||||||||||
Capital expenditures | (1,640.8) | (2,393.7) | |||||||||
Sales and purchases of restaurant and other businesses and property sales | 37.6 | (48.9) | |||||||||
Other | 57.4 | (628.5) | |||||||||
CASH USED FOR INVESTING ACTIVITIES | (1,545.8) | (3,071.1) | |||||||||
Financing activities | |||||||||||
Short-term borrowings and long-term financing issuances and payments | 2,238.2 | 3,236.3 | |||||||||
Treasury stock purchases | (907.8) | (4,976.2) | |||||||||
Common stock dividends | (3,752.9) | (3,581.9) | |||||||||
Proceeds from stock option exercises and other | 173.5 | 327.0 | |||||||||
CASH USED FOR FINANCING ACTIVITIES | (2,249.0) | (4,994.8) | |||||||||
EFFECT OF EXCHANGE RATES ON CASH AND EQUIVALENTS | 80.2 | (23.7) | |||||||||
CASH AND EQUIVALENTS INCREASE (DECREASE) | 2,550.6 | 32.5 | |||||||||
Cash and equivalents at beginning of period | 898.5 | 866.0 | |||||||||
CASH AND EQUIVALENTS AT END OF PERIOD | $ | 3,449.1 | $ | 898.5 | |||||||
Supplemental cash flow disclosures | |||||||||||
Cash provided by operations | $ | 6,265.2 | $ | 8,122.1 | |||||||
Less: Capital expenditures | (1,640.8) | (2,393.7) | |||||||||
FREE CASH FLOW | $ | 4,624.4 | $ | 5,728.4 |
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SOURCE McDonald's Corporation