McDonalds 2013 Annual Report Download - page 20

12 | McDonald’s Corporation 2013 Annual Report
Consolidated Operating Results
Globally, our approach to offering variety and value across the
menu to our customers is complemented by a focus on driving
operating efficiencies, and leveraging our scale and supply chain
infrastructure to manage costs. In 2013, we maintained a full-year
combined operating margin of 31.2%, as we grew revenues 2%
and managed our expenses.
We continued our long-standing commitment to fiscal
discipline and maintained a strong financial foundation. Cash from
operations benefits from our heavily franchised business model as
the rent and royalty income we receive from franchisees provides
a stable revenue stream that has relatively low costs. In addition,
the franchise business model is less capital intensive than the
Company-owned model. We believe locally-owned and operated
restaurants are important to McDonald's being not just a global
brand, but also a locally-relevant one.
In 2013, cash from operations was $7.1 billion. Our
substantial cash flow, strong credit rating and continued access to
credit provided us flexibility to fund capital expenditures as well as
return cash to shareholders. Capital expenditures of approximately
$2.8 billion were invested in our business, of which more than half
was devoted to new restaurant openings and the remainder was
reinvested in our existing restaurants. Across the System, 1,438
restaurants were opened and over 1,500 existing locations were
reimaged.
We continued to return all free cash flow (cash from
operations less capital expenditures) to shareholders, and in 2013
returned $4.9 billion to shareholders consisting of $3.1 billion in
dividends and $1.8 billion in share repurchases.
RESULTS FROM THE YEAR:
Global comparable sales increased 0.2% and comparable
guest counts declined 1.9%.
Consolidated revenues increased 2% (2% in constant
currencies).
Consolidated operating income increased 2% (3% in
constant currencies).
Diluted earnings per share was $5.55, an increase of 4%
(4% in constant currencies).
Cash provided by operations was $7.1 billion.
One-year ROIIC was 11.4% and three-year ROIIC was
20.2% for the period ended December 31, 2013.
The Company increased the quarterly cash dividend per
share 5% to $0.81 for the fourth quarter, equivalent to an
annual dividend of $3.24 per share.
The Company returned $4.9 billion to shareholders through
dividends and share repurchases.
OUTLOOK FOR 2014
We are focused on delivering great-tasting, high-quality, affordable
food and beverages and an exceptional experience for our
customers. By leveraging our competitive advantages, we are
well-positioned to pursue the long-term opportunities that exist in
the over $1 trillion IEO segment.
We do not expect significant changes in market dynamics in
2014 given modest growth projections for the IEO segment. We
will remain focused on matters within our control, with the
customer as our first priority. We plan to strengthen our
relationship with the customer through better restaurant execution
and by further leveraging consumer insights in our efforts to
optimize current initiatives for greater relevance and broader
consumer reach.
We remain committed to adapting to keep pace with evolving
customer needs and investing today to meet future demand. In
addition, we are prioritizing our near-term efforts on improving
performance in key opportunity markets that are significant
contributors to consolidated results. These include Germany,
Japan and the U.S., which have experienced weak or negative
performance.
We will continue to execute against our three global growth
priorities to optimize our menu, modernize the customer
experience and broaden accessibility to Brand McDonald’s.
Our focus will be on our core classics, as well as menu items
in the beef, chicken, breakfast and beverages categories, where
we believe there is the most growth opportunity relative to other
categories in the industry. In addition, we plan to introduce new
ingredients and greater choice to broaden the appeal of our menu.
We will enhance the customer experience by continuing to
reimage our building interiors and exteriors, expand our service
offerings and develop our digital strategies. At the same time, we
remain committed to Quality, Service and Cleanliness, which is
foundational to everything we do in the restaurants.
To broaden our accessibility, we plan to expand through
geographically diversified new restaurant development, extend
hours in more restaurants, improve the efficiency of our drive-thrus
and provide more delivery service and dessert kiosks. In addition,
we will continue to evolve our value platform, offering more
choices at every price tier.
Furthermore, McDonald’s is committed to growing our
business sustainably and making a positive difference in society.
Our key areas of focus include improving customer perceptions of
our food, sustainable sourcing, providing job opportunities and
training for our people, developing environmentally efficient
restaurants and having a positive impact in the communities we
serve.
U.S.
In 2014, the U.S. will make adjustments designed to regain
momentum, including providing greater customer relevance and
better restaurant execution. Our 2014 menu strategies better
balance affordability, core products, new choices and limited-time
offers. We will also adjust the pace of product introductions to
improve restaurant operations and marketing execution in order to
provide a better customer experience. These initiatives are
complemented by a consistent focus on core equities, such as
breakfast. We will enhance the breakfast experience by
emphasizing coffee through high-quality McCafé products paired
with delicious foods - both existing and new. Bold new flavor
extensions will be introduced to build upon our core and lay the
groundwork for future innovations. We plan to open about 250
new restaurants and to continue our reimaging program by
updating approximately 300 existing restaurants in 2014, a slightly
slower pace as we prioritize other kitchen investments.
Europe
In Europe, we plan to optimize the menu through value menu
enhancements, premium menu additions and limited-time offers,
and will continue to expand the breakfast daypart by leveraging
our strong foundation in coffee. In addition, following the U.K.’s
successful rollout of McCafé smoothies and frappés, we anticipate
about 4,500 restaurants in Europe will have the blended-ice
platform by the end of 2014.
To modernize the way we interact with our customers, we
plan to leverage the use of technology, such as self-order kiosks
and mobile and web ordering. We will focus on broadening
accessibility by continuing to extend operating hours, optimizing
drive-thrus, and expanding everyday value platforms. We plan to
open over 300 new restaurants and reimage approximately 400
existing restaurants in 2014.