Updated from 9:09 a.m. EDT
reported an expected second-quarter loss Tuesday as plans to license restaurants in Latin America and the Caribbean to a franchisee dented the company's bottom line.
Excluding a $1.6 billion charge tied to the sale of 1,600 restaurants, earnings were in line with the company's recently announced projection amid strong sales worldwide.
The world's largest fast-food chain recorded a second-quarter loss of $711.7 million, or 60 cents a share, which included a charge of $1.31 a share due to the previously disclosed licensing agreement. A year earlier, the Oak Brook, Ill., company recorded a profit of $834.1 million, or 67 cents a share.
McDonald's has been identifying restaurants in certain markets that it wants to transition to a developmental license, through which a local licensee owns the business, including the real estate. The arrangement allows McDonald's to collect royalties based on a percentage of sales without having to invest any capital.
The licensing agreements in Latin America and the Caribbean will result in $700 million in cash for McDonald's, which will use the proceeds to buy back shares and pay dividends. The company repurchased 13.3 million shares of stock for $664 million in the second quarter, the total amount of repurchases so far to $1.7 billion.
Chief Executive Jim Skinner said McDonald's is well on its way to returning $5.7 billion to shareholders through 2008 via buybacks and dividends.
Earnings per share from continuing operations, which exclude charges, rose to 71 cents in the second quarter from 56 cents on a comparable basis last year. That matched McDonald's forecast given last week, and also met Thomson First Call's average analyst estimate.
McDonald's second-quarter revenue rose 12% to $6.01 billion from $5.37 billion a year earlier, topping Wall Street's forecast of $5.9 billion. Excluding the effect of currency exchange, revenue rose 8%.
Same-store sales rose 7.4%, as the company announced last week.
Skinner credited strong second-quarter sales growth in the U.S. to McDonald's breakfast business, as well as its premium roast coffee. The company also had a 3% hike in menu prices.
In Europe, sales were particularly strong in France and Russia, but were partially offset by the sale and closure of company-operated restaurants in the U.K. Sales in Asia continued to grow, with China leading the market.
Also Tuesday, McDonald's Chief Financial Officer Matthew Paull announced his plans to retire by the end of the year to become a professor.
"This is not about me wanting a bigger job at McDonald's -- this is not about me going to work for another company," Paull said during a conference call. "I've always dreamed of going back to a college campus to teach."
Paull, who had served as the company's financial chief since 2001, said he intends to stay on until his replacement is named. Skinner said the company will consider both internal and external candidates.
Shares were slipping 40 cents, or 0.8%, to $52.10 in afternoon trading.