Jan. 24 (Bloomberg) -- McDonald's Corp., the world's largest restaurant company, said quarterly net income rose by the most in two years, spurred by rebounding sales in Europe and a gain from its Chipotle Mexican Grill Inc. spinoff.

Fourth-quarter net income more than doubled to $1.24 billion, or $1 a share, from $608.5 million, or 48 cents, a year earlier, Oak Brook, Illinois-based McDonald's said. Revenue increased 11 percent to $5.63 billion, the biggest increase in almost three years.

Operating margins climbed in all geographic regions for the fourth consecutive quarter after Chief Executive Officer Jim Skinner extended the U.S. menu of $1 double cheeseburgers and more-expensive chicken sandwiches to Europe. Sales in Europe climbed 15 percent, twice the pace of the U.S. McDonald's affirmed plans to spend at least $10 billion on dividends and share buybacks through 2008.

``You can't argue with the amazingly strong sales growth and improving profit margins in every single region,'' David Kolpak, who helps manage $61 billion including 2.4 million McDonald's shares at Cleveland-based Victory Capital Management, said today. ``In Europe, it's a matter of keeping the momentum going.''

Excluding the 39-cent-a-share gain from the Chipotle spinoff, McDonald's would have earned 61 cents, the company said today in a statement, confirming preliminary figures released a week ago. McDonald's had reported per-share profit that exceeded the average analysts' estimate by 3 cents.

$10 Billion

The company reiterated on a conference call its Sept. 27 commitment to return at least $10 billion to shareholders from 2006 to 2008. It paid almost $5 billion in 2006 including a dividend increase of 49 percent to $1 a share.

Shares of McDonald's, which operates 32,000 restaurants in 118 countries, fell 69 cents, or 1.5 percent, to $44.16 at 4 p.m. in New York Stock Exchange composite trading. They climbed 31 percent last year, the largest annual gain in three years.

Some investors are concerned a lower tax rate helped McDonald's fourth-quarter profit, Kolpak said. In addition, the average number of outstanding shares was more than analysts estimated even after last year's buyback, he said.

The lower tax rate added about 3 cents per share to profit, CIBC World Markets Corp. analyst John Glass wrote today. The Boston-based analyst rates McDonald's as ``sector outperformer.''

Every region improved quarterly and full-year margins, or the percentage of sales remaining after deducting product and selling costs. Rising comparable-store sales muted higher costs for labor, paper and energy, the company said in a filing with the U.S. Securities and Exchange Commission.

Operating Margins

Operating margins at company-owned restaurants expanded to 16.5 percent in the fourth quarter from 15.3 percent a year earlier, helped by the closing of underperforming units in the U.K. Margins of franchised restaurants expanded to 80.8 percent from 80.3 percent, according to the filing.

In the U.S., McDonald's expects chicken costs to rise and beef expenses to fall, while in Europe it expects both to gain.

The company said it will spend $1.9 billion this year building 800 stores and renovating others, up from $1.8 billion last year. It will open 200 new locations in the U.S. this year, and another 150 in Europe and 375 in Asia.

Skinner, 62, told analysts that openings in Europe will focus on Russia, Italy and France where McDonald's European President Denis Hennequin has increased local offerings such as croissants and pasta salads. He also opened restaurants to public tours to ease nutritional concerns.

Decrease Restaurant Ownership

McDonald's reiterated plans to sell about 2,300 restaurants to independent operators known as development licensees through 2008 in as many as 20 countries.

Separately, it plan to decrease restaurant ownership includes selling about 100 units to U.K. franchisees through 2008, Chief Financial Officer Matthew Paull said on the call. McDonald's last year entered franchise agreements and joint ventures for 118 of its 1,214 U.K. stores, he said.

In the U.S., prices for food sold away from home will probably increase 3.5 percent this year, up from 3 percent in 2005 and 2006, as some restaurant operators prepare for a possible rise in the minimum wage, Paull said.

``I'd expect food away from home to inflate a little bit more and we'll try to stay below that number,'' Paull said, after prices at the company's U.S. restaurants increased ``slightly less than 3 percent'' annually in the past two years. Franchisees set their own prices, he said.

McDonald's completed a tax-free share swap with its shareholders in October for its remaining stake in Denver-based Chipotle, a burrito chain with 550 locations. Some 18.6 million McDonald's shares were exchanged for the company's remaining stake of 16.5 million Chipotle shares, valued at $947 million as of Oct. 12 and more than double what they were when Chipotle went public in January 2006.

Europe Sales Increase

Europe, McDonald's biggest region by revenue last year, posted the largest fourth-quarter increase in sales at locations open at least 13 months, the company reported Jan. 17. Comparable-store sales climbed 7.3 percent, helped by a new bacon cheeseburger in the U.K. and a Monopoly game promotion in Germany that offered cars and burgers as prizes.

As reported, worldwide same-store sales gained 6.3 percent, the sharpest quarterly rise in 2 ½ years. Demand for a $1.29 chicken snack wrap and a stronger coffee blend lifted U.S. comparable sales by 5.9 percent. Sales in the region that encompasses Asia, the Pacific, the Middle East and Africa increased 4.6 percent, led by gains in Japan and Australia.

``The steps they took in the U.S., they also took in Europe, and it worked,'' Bernard Diggins, a partner at Gardner Lewis Asset Management, said Jan. 18. The Chadds Ford, Pennsylvania-based firm has $8 billion under management.

Salads, Chicken Strips

Gardner Lewis bought 1.9 million McDonald's shares in the third quarter after Diggins' wife started taking their children to the chain for salads and all-white meat chicken strips, sparking the firm's research into the stock, Diggins said.

``I noticed they still have their core customers --truck drivers and people on the move during the day -- but I also saw moms with kids,'' Diggins said. ``The restaurants are busy.''

This year, McDonald's will probably add new foods, including a southwestern chicken salad, and new flavors of the chicken snack wrap in the U.S., analysts said. The company's also testing lattes and iced coffee, a breakfast burrito and ``premium'' burgers, Skinner told analysts.

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina at cburritt@bloomberg.net.

Last Updated: January 24, 2007 16:12 EST