Jack M. Greenberg, Chairman and Chief Executive Officer noted, ``Earnings per share for the first quarter 2002 were $.31, excluding the charges described below, compared with $.29 for the same period last year. This performance was better than anticipated, due primarily to strong sales in Europe during the last two weeks in March and better than expected U.S. profitability.''
As previously announced, the Company recorded a $43 million (pre and after tax) non-cash charge in the first quarter, primarily related to asset impairment in Latin America and restaurant closings in Turkey, as a result of economic weakness. Including these charges, earnings per share were $.27 for the quarter before the cumulative effect of adopting SFAS No. 142, ``Goodwill and Other Intangible Assets.'' To reflect the cumulative effect of this accounting change, the Company recorded a non-cash charge of $99 million after tax ($.07 per share) related to impaired goodwill in the first quarter. The impaired goodwill was primarily in Latin America, where economies have weakened significantly over the last several years.
Greenberg also noted, ``Europe's performance was strong. In constant currencies, Europe's sales increased 10% and operating income increased 13% for the quarter. Comparable sales increased in France, Germany and the U.K. We are encouraged by these results and look forward to continued strong performance throughout the year.
``In the U.S., sales increased 2% for the quarter. U.S. operating income declined 2% for the quarter, due to payments to owner/operators to facilitate a new front counter team service system. Excluding these payments, U.S. operating income increased 4% for the first quarter reflecting higher combined operating margin dollars and lower selling, general and administrative expenses. We expect our restaurant operations improvement process, along with menu and value initiatives, to boost top line sales and help us achieve improved results as the year progresses.
``In our Asia/Pacific/Middle East/Africa segment, Australia posted strong results, continuing the momentum begun last fall as a result of its New Tastes Menu introduction. However, the segment continues to be hurt by weak economic conditions and consumer concerns about food safety in Japan, our largest market in the region. McDonald's Japan continues to communicate our safety and quality standards. Sales in this segment declined 2% in constant currencies for the quarter.
``We expect 2002 annual earnings per share to improve significantly over 2001 results. Consistent with our previous guidance, this equates to 2002 earnings per share of $1.47-$1.50, excluding the impact of foreign currency translation and the $142 million of charges described above.''
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