Industry News | March 22, 2002
McDonald's Issues First Quarter 2002 Update
The company said it expects to record a first quarter non-cash charge of approximately $45 million, pre and after tax ($.03 per share), primarily related to the impairment of assets in Latin America and the closing of 32 underperforming restaurants in Turkey, as a result of continued economic weakness. Including this $45 million charge, McDonald's said it expects first quarter earnings per share to be $.26 – $.27, before the cumulative effect of the accounting change described below.
The company is required to adopt SFAS No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002. SFAS 142 indicates that goodwill will no longer be amortized but will be subject to annual impairment tests. In 2001, amortization of goodwill was approximately $30 million after tax ($.02 per share). McDonald's says it expects the elimination of goodwill amortization to benefit 2002 net income by a similar amount. As a result of its initial goodwill impairment tests, McDonald's expects a non-cash charge of approximately $100 million after tax ($.08 per share), in the first quarter for the cumulative effect of this accounting change. The impaired goodwill is primarily in Latin America, where economies have weakened significantly over the last several years.
McDonald's said systemwide sales for the first two months of 2002 were $6.2 billion, up 3 percent in constant currencies over the same period last year. The company expects sales to improve as the year progresses and expect constant currency sales to increase 6 to 7 percent for the year.
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