McDonalds 2013 Annual Report Download - page 21

McDonald’s Corporation 2013 Annual Report | 13
APMEA
In 2014, APMEA’s growth opportunities include menu variety,
convenience, value evolution and restaurant expansion. We will
balance core and limited-time offers and execute a series of
exciting food events. APMEA will shift existing value platforms
toward more compelling offers that resonate with customers and
generate incremental visits, including “mid-tier” options to fill the
gap between entry-level options and Extra Value Meals. Our
efforts around reimaging will continue as we expect to modernize
approximately 400 existing restaurants. Our plan is to open
around 800 new restaurants, with about 300 expected in China. In
addition, we will evolve our franchising strategy to include more
conventional franchisees and developmental licensees, enabling
an increased pace of development and enhanced profitability.
Consolidated
In making capital allocation decisions, our goal is to make
investments that elevate the McDonald's experience and drive
sustainable long-term growth in sales and market share. We focus
on markets that generate strong returns or have opportunities for
long-term growth. We remain committed to returning all of our free
cash flow (cash from operations less capital expenditures) to
shareholders over the long-term via dividends and share
repurchases.
McDonald's does not provide specific guidance on diluted
earnings per share. The following information is provided to assist
in forecasting the Company's future results:
Changes in Systemwide sales are driven by comparable
sales and net restaurant unit expansion. The Company
expects net restaurant additions to add approximately 2.5
percentage points to 2014 Systemwide sales growth (in
constant currencies), most of which will be due to the 949 net
restaurants (1,098 net traditional openings less 149 net
satellite closings) added in 2013.
The Company does not generally provide specific guidance
on changes in comparable sales. However, as a perspective,
assuming no change in cost structure, a 1 percentage point
change in comparable sales for either the U.S. or Europe
would change annual diluted earnings per share by about 4
cents.
With about 75% of McDonald's grocery bill comprised of 10
different commodities, a basket of goods approach is the
most comprehensive way to look at the Company's
commodity costs. For the full year 2014, the total basket of
goods cost is expected to increase 1.0-2.0% in the U.S. and
Europe.
The Company expects full-year 2014 selling, general and
administrative expenses to increase approximately 8% in
constant currencies, with fluctuations expected between the
quarters. The increase is primarily due to the impact of
below target 2013 incentive-based compensation, expenses
associated with our Worldwide Owner/Operator Convention
and sponsorship of the Winter Olympic games, and costs
related to other initiatives.
Based on current interest and foreign currency exchange
rates, the Company expects interest expense for the full year
2014 to increase approximately 5-7% compared with 2013.
A significant part of the Company's operating income is
generated outside the U.S., and about 40% of its total debt is
denominated in foreign currencies. Accordingly, earnings are
affected by changes in foreign currency exchange rates,
particularly the Euro, British Pound, Australian Dollar and
Canadian Dollar. Collectively, these currencies represent
approximately 65% of the Company's operating income
outside the U.S. If all four of these currencies moved by 10%
in the same direction, the Company's annual diluted earnings
per share would change by about 25 cents.
The Company expects the effective income tax rate for the
full-year 2014 to be 31% to 33%. Some volatility may be
experienced between the quarters resulting in a quarterly tax
rate that is outside the annual range.
The Company expects capital expenditures for 2014 to be
between $2.9 - $3.0 billion. Over half of this amount will be
used to open new restaurants. The Company expects to
open about 1,500 - 1,600 restaurants including about 500
restaurants in affiliated and developmental licensee markets,
such as Japan and Latin America, where the Company does
not fund any capital expenditures. The Company expects net
additions of between 1,000 - 1,100 restaurants. The
remaining capital will be used to reinvest in existing
locations, in part through reimaging. Over 1,000 restaurants
worldwide are expected to be reimaged, including locations
in affiliated and developmental licensee markets that require
no capital investment from the Company.
The Company expects to return approximately $5 billion to
shareholders through dividends and share repurchases in
2014.