EXHIBIT 99.2
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Investor Release
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FOR IMMEDIATE RELEASE FOR MORE INFORMATION CONTACT:
09/17/02 Investors: Xxxx Xxxxx, 000-000-0000
Media: Xxxx Xxxxxxxx, 000-000-0000
McDONALD'S THIRD QUARTER 2002 UPDATE
OAK BROOK, IL - McDonald's Corporation announced today that it is lowering
its 2002 earnings expectations for the full year, primarily due to lower than
expected sales in the U.S. and Europe in the third quarter and a more cautious
outlook on the fourth quarter. The Company currently expects 2002 earnings per
share to be $1.43 or better, excluding charges in the first quarter(1).
Including the charges, the Company expects annual earnings per share to be $1.31
or better, compared with $1.25(2) in 2001. The Company expects third quarter
2002 earnings per share of $.38 to $.39, compared with $.42 last year including
special items and $.38 excluding special items(3). These expectations reflect a
foreign currency translation benefit of one to two cents for the third quarter,
and one to three cents for the year. McDonald's also reported that Systemwide
sales for the first two months of third quarter 2002 were $7.5 billion, up 3
percent compared with the same period in 2001.
Xxxx Xxxxxxxxx, Chairman and Chief Executive Officer, noted, "The U.S.
marketplace continues to be extremely competitive and customers have many
choices. This is why we have recently announced an acceleration of our plans to
give customers even better value, service, menu choice and experience. In
addition, the U.S. system will feature a more focused, consistent national
advertising message. These actions are designed to move our U.S. business to a
higher level, strengthen our competitive position and increase restaurant sales
and profits for the company and our franchisees. However, it will take time
before we see the full benefit of these initiatives in our earnings. We will
launch our national value advertising in October as we continue to enhance
restaurant-level training and service systems.
"In connection with this plan, beginning in 2003, we will further enhance
customers' experience through targeted investments in sales building initiatives
over the next 18 to 24 months. As part of this plan, we expect to invest
$300 million to $400 million in existing U.S. franchised restaurants in 2003.
The funding decisions will be made on an individual restaurant basis for those
restaurants meeting specified standards and will be based on return on
investment criteria. To fund the additional capital expenditures related to U.S.
initiatives, we expect to moderate share repurchases to approximately $500
million in 2003 as well as reduce global new restaurant openings."
Xxxxxxxxx added, "In Europe, sales were weaker than expected, particularly in
Germany where the economy continues to contract and in the U.K, where retail
sales have slowed. In addition, our marketing messages in these countries did
not resonate as well with consumers as we had hoped. Therefore, we are making
adjustments and are optimistic that sales in these countries will improve in the
fourth quarter as our aggressive marketing plans feature new tastes and value.
France continued to perform well in the first two months of the quarter."
McDonald's also reported the following sales results and expectations.
Through year-to-date August, Systemwide sales were $27.7 billion, up 2 percent
in constant currencies(4) over the same period last year. Systemwide sales are
expected to increase in low-single digits for the year in constant currencies.
U.S. sales were relatively flat for the first two months of the third quarter
and grew one percent through year-to-date August compared with the same periods
last year. For the year, U.S. sales and operating income are expected to
increase in low-single digits (excluding special charges of $181.0 million in
2001(5)).
In constant currencies, European sales increased 4 percent for the first two
months of the third quarter and 7 percent through year-to-date August compared
with the same periods last year. Europe's
constant currency sales and operating income are expected to increase in
mid-single digits for the year (excluding special charges of $45.8 million in
2001(6)).
Constant currency sales in Asia/Pacific/Middle East/Africa (APMEA) declined
2 percent for the first two months of the third quarter and 3 percent through
year-to-date August. Australia continues to perform well and we have seen
improvement in Japan as a result of their value initiative.
McDonald's is the world's leading food service retailer with more than
30,000 local restaurants in 121 countries serving 46 million customers each day.
Certain forward-looking statements are included in this release. They use
such words as "may," "will," "expect," "believe," "plan" and other similar
terminology. These statements reflect management's current expectations
regarding future events and operating performance and speak only as of the date
of this release. These forward-looking statements involve a number of risks and
uncertainties. The following are some of the factors that could cause actual
results to differ materially from those expressed in or underlying our
forward-looking statements: the effectiveness of operating initiatives and
advertising and promotional efforts, as well as changes in: global and local
business and economic conditions; currency exchange and interest rates; food,
labor and other operating costs; political or economic instability in local
markets; competition; consumer preferences, spending patterns and demographic
trends; legislation and governmental regulation; and accounting policies and
practices. The foregoing list of important factors is not exclusive.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
(1) The charges excluded from the guidance of $1.43 or better include a first
quarter 2002 non-cash charge of $43 million, pre and after tax ($.04 per
share), primarily related to the impairment of assets in Latin America and
the closing of underperforming restaurants in Turkey, as a result of
continued economic weakness. This guidance also excludes a first quarter
2002 non-cash charge of $99 million after tax ($.08 per share) for the
cumulative effect of adopting SFAS 142, "Goodwill and Other Intangible
Assets".
(2) Includes $253 million of net pretax expense ($143 million after tax or $.11
per share) consisting primarily of special charges related to the U.S.
business reorganization and other global change initiatives and the closing
of 163 underperforming restaurants in international markets, partly offset
by a gain on the initial public offering of XxXxxxxx'x Japan.
(3) Third quarter 2001 results included a $137 million after-tax gain related
to the initial public offering of XxXxxxxx'x Japan and after-tax charges of
$84 million, related to the closing of 154 underperforming restaurants in
international markets and the write-off of technology costs. These charges
and gain totaled $.04 per share.
(4) Information in constant currencies excludes the effect of foreign currency
translation on reported results, except for hyperinflationary economies,
whose functional currency is the U.S. Dollar. Constant currency results are
calculated by translating the current year results at prior year monthly
average exchange rates.
(5) U.S. results in fourth quarter 2001 included $181.0 million in special
charges related to the U.S. business reorganization and costs incurred in
connection with the theft of promotional game pieces and related
termination of a supplier.
(6) Europe's results in third and fourth quarters of 2001 included $45.8
million in special charges related to the closing of underperforming
restaurants and global change initiatives.
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