Kathy Martin - James A. Skinner - Vice Chairman, Chief Executive Officer and Chairman of Executive Committee Donald Thompson - President, Chief Operating Officer and Director Peter J. Bensen - Chief Financial Officer and Executive Vice President

David Palmer - UBS Investment Bank, Research Division David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division Jason West - Deutsche Bank AG, Research Division Andrew M. Barish - Jefferies & Company, Inc., Research Division Jeffrey Andrew Bernstein - Barclays Capital, Research Division John S. Glass - Morgan Stanley, Research Division Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division Joseph T. Buckley - BofA Merrill Lynch, Research Division Sara H. Senatore - Sanford C. Bernstein & Co., LLC., Research Division John W. Ivankoe - JP Morgan Chase & Co, Research Division Keith Siegner - Crédit Suisse AG, Research Division Steve Marrs - Citizens Business Bank Howard W. Penney - Hedgeye Risk Management LLC

Hello, and welcome to McDonald's April 20, 2012, Investor Conference Call. At the request of McDonald's Corporation, this conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Ms. Kathy Martin, Vice President of Investor Relations for McDonald's Corporation. Ms. Martin, you may begin.

Thank you, and good morning, everyone. With me on the call are Chief Executive Officer Jim Skinner; Chief Operating Officer Don Thompson; and Chief Financial Officer Pete Bensen. Today's conference call is being webcast live and recorded for replay via phone, webcast and podcast. And before I turn it over to Jim, I want to remind everyone that, as always, the forward-looking statements in our earnings release and 8-K filing also apply to our comments. Both documents are available on our website, www.investor.mcdonalds.com, as are any reconciliations of non-GAAP financial measures mentioned on today's call with their corresponding GAAP measures. So now I'd like to turn it over to Jim. Jim? James A. Skinner: Thank you, Kathy, and good morning, everyone. As you know, I recently announced my retirement after 41 years with McDonald's and almost 8 years as CEO. The time was right for me to make this decision as our business continues to be very strong. For the quarter, comparable sales were up 7.3%; operating income increased 9% in constant currencies; and EPS reached $1.23, an 8% increase in constant currencies. Our system is aligned and focused and we have an outstanding leader in Don to step in and continue our momentum. I'm extremely confident in Don and his leadership team, and I know the business is in very capable hands. I also know that our system of outstanding operators, suppliers and employees will continue working together to drive our results. And let me say it's been a pleasure working with all of you in the investment community over these years. I appreciate your continued engagement and your interest our business, as well as your thoughtfulness when you put together your viewpoints and your assessment of McDonald's. I wish you all well. And with that, I'll turn it over to Don to discuss the quarter's results around the world.

Thanks, Jim. And thank you for your tremendous leadership and all you've done for McDonald's. You're a terrific partner, a mentor, and you'll definitely be missed. Well, good morning, everyone. I'm pleased to share McDonald's latest quarterly results, which reflect the strength of our business. Our continued momentum remains a system-wide effort with positive trends continuing in every area of the world. In the U.S., comparable sales increased 8.9% for the quarter and operating income rose 10%. Europe's comparable sales were up 5% and operating income grew 8% in constant currencies. And in Asia/Pacific, Middle East and Africa, or what we call APMEA, comp sales grew 5.5% and operating income was up 7% in constant currencies. Our momentum is continuing into April, with global comparable sales growth expected to be about 4%. We are pleased with these results, particularly given the headwinds we've faced on both the top and bottom lines, and the fact that we'll continue to face these headwinds throughout the rest of the year. The economic climate remains challenging, with varying degrees of consumer confidence, economic pressures and inflationary costs. And our success in this volatile environment is a testament to our Plan to Win and our relentless focus on customers' needs. Around the world, we continue to gain market share in an industry with minimal to negative growth. We also remain committed to our proven plan and to executing against our 3 global priorities, which are optimizing our menu, modernizing the customer experience and broadening accessibility to brand McDonald's. In the U.S., our strong sales were the result of a focus on our core and new products, as well as value and convenience. The mild winter weather also benefited sales and traffic, but to a lesser extent. This momentum helped offset some of the headwinds and margin challenges we're facing due to pressures like commodities that we've mentioned before. We continued to meet our customers' desire for a great breakfast during the quarter by advertising our increasingly popular wholesome choices menu, which includes a great selection of items with no more than 300 calories each, like our oatmeal, the Egg McMuffin, and Fruit 'N Yogurt Parfait. We also featured our iconic Big Mac, which lifted sales of both Big Macs and Mac Snack Wraps. In January, the U.S. launched Chicken McBites, a bite-sized chicken offering. McBites contributed to the growth of the overall chicken sales by providing a tasty solution that is shareable and a great snack. We often say that the power of our system lies in our ability to learn from each other, then share, then scale ideas, and McBites is a great example of that. The product originated in Australia, and its positioning as a promotional food event came out of Europe. This approach significantly reduces time-to-market compared with developing a product from scratch. You can expect to see us share even more menu ideas, given the strong global pipeline that we can tap into. The U.S. also continues to strengthen its position as a beverage destination, with total beverage units up 6% over last year. And in the weeks ahead, we'll be enhancing our McCafé blended ice lineup with a new Cherry Berry Chiller. It's a refreshing new drink made with 100% juice. Meanwhile, the U.S. continues to broaden accessibility by evolving its value proposition with the new Extra Value Menu. This menu builds on the iconic Dollar Menu by offering a great selection of products at various value price points, from Snack Wraps under $2 to 20-piece McNuggets at $4.99. We're also focused on maximizing restaurant throughput and capacity. More than 1/3 of all restaurants are leveraging a form of multiple order points, including tandem or side-by-side drive-thrus, along with nearly 1,200 handheld order takers. Now let's turn to Europe, a region that continues to experience unprecedented economic challenges from widespread austerity measures, concerns over the sovereign debt crisis and unemployment levels averaging about 10%. Our business has held strong despite the impact of the environment and what it's having on consumers' purchasing power. We remain focused, however, on upgrading the overall experience and are continuously looking to provide even greater value across our menu. From entry-level to core and premium products, we have to provide value to ensure we remain relevant in this environment. In the area of menu, Europe has led the way with limited-time offers that we call promotional food events. This quarter, France featured 2 premium beef sandwiches, the McFarmer and McTimber, which resonated with customers. In the U.K., strong promotions around the Big Tasty beef sandwich and our 20-piece McNuggets ShareBox exceeded our expectations, as did Germany's re-hit of the 1955 burger. Considering the ongoing pressures on consumers and our focus on maintaining and growing guest counts, we've stepped up our emphasis on branded affordability. Germany's newly evolved value menu contributed to sales during the quarter, which helped offset increased competitive value offers. In the U.K., sales from the Saver Menu grew double-digits versus the prior year. And France is also evaluating options to further strengthen value perceptions at a time when a number of new austerity measures are impacting consumers' confidence and their disposable income. Europe continues to lead the systems reimaging efforts. 80% of our interiors and 50% of our exteriors have been refreshed, elevating perceptions of the McDonald's brand and strengthening appeal with today's consumers. And we continue to broaden our accessibility through the rollout of the new point-of-sale system across Europe and the expansion of McCafés. Approximately 150 more will be added this year. As we said before, our holistic approach to the business and attention to evolving consumer needs serves us well in these times of austerity and economic uncertainty and for the long-term growth of the region. Now over to APMEA, where we're also seeing challenging economic conditions with slow growth in China and ongoing tightening in Australia. We're managing through the environment with a focus on compelling menu offerings, strong value and convenience. Australia is focused on branded affordability, particularly the Value Lunch program, has been key to its solid gains in this quarter. In March, we launched the Loose Change menu. This menu features 7 items ranging from a soft-serve ice cream cone at AUD $0.30 to a Double Cheeseburger at AUD $2. And early results are encouraging. We also had some new food news in the market, with the introduction of our new Spicy Chicken McBites, smoothies and frappés. Australia is the first market in APMEA to launch these blended ice drinks, and as we've seen elsewhere, these products are a hit, selling above our expectations. Japan's results remain uneven, as the recovery from last year's devastating events continues and consumers are eating at home more often. Strong support of our core products, compelling limited-time offers and a focus on breakfast have contributed to hard-sought market share gains in a retracting industry. Our Big Mac promotion helped boost sales and lift average check, and a focus on our Premium Roast Coffee and popular menu items like the Sausage McMuffin and hotcakes during the morning hours have ensured that breakfast remains a strong contributor to Japan's results. We expect short-term volatility will continue but remain optimistic about Japan for the long term. And while China's economy is still expected to grow at about 8% in 2012, this is a slowdown from last year's growth of just over 9%, with much of this attributed to a reduction in exports. McDonald's China delivered first quarter comparable sales of 8.5%. We remain committed to offering great value and local menu favorites to continue to drive our results. Our Value Lunch is a staple in the minds of Chinese consumers, and the addition of the chicken burger has helped keep the momentum going, driving lunchtime comp sales by double-digits. We will also be launching a value dinner program in the coming months. Value is also delivering results at breakfast, and helped grow comparable sales by over 20% for this important daypart. Beyond breakfast, we ran a series of successful menu promotions around Chinese New Year that provided a lift in overall sales and traffic. APMEA remains a region of tremendous growth and opportunity. We remain excited about our future potential in this growing region as we build on our menu and value and extend the convenience of our brand through drive-thru, delivery, kiosks and extended hours, as well as new restaurant development. All in all, we continue to strengthen our business and build on our success in a strategic and a comprehensive way. We're equally committed to maintaining a strong financial foundation and maximizing value for our system and for our shareholders. These are the hallmarks of how we have and will continue to manage our business. Our long-term average annual targets remain intact, with sales growth of 3% to 5%, operating income growth of 6% to 7% and return on incrementally invested capital in the high-teens. Our intent remains to return all of our cash flow, after reinvesting in the business, to investors through a combination of dividends and share repurchases over the long term. In fact, we returned $1.5 billion to shareholders through dividends and share repurchases this quarter. Overall, I'm pleased with our latest quarterly results. However, I also know there's much more work to be done. With a fragile global economy and numerous pressures to contend with, we're staying focused on those things within our control. We remain committed to executing our Plan to Win and delivering an exceptional experience for our nearly 68 million customers per day. Next week, we will be with Owner/Operators from around the world at our biennial convention. This meeting provides a great opportunity to share ideas and also solidify plans for today and for the future. The fundamentals of our business are strong, our system is aligned, and I am confident that together we will deliver continued growth. Thank you, and now I'll turn it over to Pete. Peter J. Bensen: Thanks, Don, and hello, everyone. We start 2012 where we left off in 2011, with strong sales momentum and market share growth around the world. We are guided by the Plan to Win and our 3 global priorities: optimizing the menu, modernizing the experience and broadening accessibility. We continue to approach our business holistically and see many opportunities ahead, even as we manage through a volatile and inflationary environment. Our strong performance and balance sheet enables investments in key system initiatives to help sustain our momentum over the long term. As we outlined at our investor meeting last November, we are willing and able to invest for continued growth and to widen our competitive advantages, recognizing that in the short term, these investments along with other near-term headwinds will impact our 2012 operating income growth. We believe our strategies and focused execution are right for the business and will create significant shareholder value over the coming years. We are pleased with the first quarter results, which were led by a 10% constant currency increase in system-wide sales amidst a challenging economic landscape. Combined operating margin rose 10 basis points to 30% due to strong comparable sales, mostly offset by higher costs. The largest component of operating income is our franchise margin, representing nearly 70% of total restaurant margin dollars. Franchise margin dollars rose $135 million to over $1.7 billion, a 10% constant currency increase, with every area of the world contributing. Consolidated franchise margin percent rose 40 basis points to 82.3%, as positive comparable sales more than offset higher costs. Please note there was a change in classification of certain franchising costs in Australia beginning in first quarter. This negatively affected APMEA's franchise margin percent by about 40 basis points but had no impact on overall margin dollars. This change in classification will have a similar impact on APMEA's franchise margin percent for the balance of the year. Global company operated margin dollars grew $42 million to $778 million for the quarter, while the percent decreased 20 basis points to 17.5%. Rising commodity, labor and occupancy costs, particularly in the U.S., offset strong comparable sales. In the U.S., company operated margins declined 70 basis points to 18.8%, primarily due to higher commodity costs. First quarter commodity costs in the U.S. rose 7%, primarily driven by increases in beef. We expect to experience similar pressure in the second quarter, and then easing a bit in the second half of the year. The full year outlook for the increase in our U.S. grocery basket remains at 4.5% to 5.5%. The cost increases were partly offset by strong guest count growth and a nearly 1% price increase in February. Combined with last year's price increases, the U.S. business is running about a 3% price increase versus a year ago. While we typically keep price increases similar to or slightly below food-away-from-home inflation index, we also keep a close eye on food-at-home inflation, which has been rising faster than food-away-from-home. We remain mindful of balancing future price increases with our desire to maintain growth in guest counts and market share. In addition, in first quarter, we invested in local value promotions to drive sales. We also invested in labor to build capacity, primarily during peak hours. This contributed to a significant improvement in guest count growth for the quarter during the critical noon to 1 p.m. hour. Providing compelling value throughout our menu and increasing peak hour capacity are critical components to our long-term growth. In first quarter, these initiatives impacted our ability to realize greater margin leverage despite strong comp sales. All of these headwinds are expected to continue as we anticipate similar U.S. company operated margin percent declines at least through the second quarter. Turning to Europe. Company operated margins increased 30 basis points to 17.5%, as solid comparable sales more than offset higher commodity, labor and occupancy costs. Very strong comparable sales increases in Russia and the U.K., our 2 largest McOpCo markets in Europe, drove the margin expansion. Europe's grocery bill was up about 5% in the quarter. We expect a little less of an increase in second quarter, with the full year increase still projected at 2.5% to 3.5%. Though Europe is facing less overall commodity inflation compared to the U.S., the impact of austerity measures is weighing on both our top and bottom lines. Across Europe, the average price increase for the trailing 12 months, excluding Russia, is about 2% to 3%. We do not currently have as much pricing power in Europe and in key markets, such as France and Germany, where we are evolving our value offerings and messaging to address growing consumer needs. The combination of all these factors is expected to pressure company operated margins over the next few quarters. In Asia/Pacific, Middle East and Africa, company operated margins declined 60 basis points to 16.9%, as strong comparable sales were offset by higher commodity, labor and occupancy costs. In addition, the new restaurant openings in China contributed to the lower margin percent. While China's new restaurants pressure margins early on, within a few years of opening, most restaurants generate operating margins that approach the market's average. G&A for the quarter increased 6% in constant currencies. We expect the next 2 quarters will experience more significant increases due to our Worldwide Convention in April, the Summer Olympics starting in late July and the ongoing technology enhancements. With the favorable interest rate environment and our strong credit rating, we are taking advantage of our ability to issue debt at low rates, but we are not changing our philosophy toward our balance sheet. The change in our interest expense outlook is being driven by stronger foreign currencies versus 3 months ago, not an increase in anticipated borrowings for the year. The first quarter effective tax rate of 31.4% represented a significant increase versus the prior year rate of 28.8%, which was aided by a nonrecurring deferred tax benefit related to our foreign operations. We continue to project the full year rate to be between 31% and 33%. We are confident that the investments being made today will build customer loyalty, drive returns and enhance shareholder value over the long term. We're operating from a position of strength and seizing the opportunity to modernize our brand while leveraging our size and scale in a way that others simply cannot match. Our franchisees remained aligned with our strategies and have the capacity and willingness to invest. For example, the average traditional restaurant in the U.S. now generates over $2.5 million in annual sales and $340,000 in pre-debt cash flow. Just 5 years ago, our average volume and cash flow per restaurant were about $2.1 million and $290,000, respectively. The strong financial foundation of our operators around the world allows them to invest in key strategic initiatives like reimaging. We are on track to reimage at least 2,400 restaurants this year, including 800 in the U.S., 900 in Europe and 475 in APMEA. Through first quarter, we've completed about 350 reimages globally. In addition, we will complete over 200 rebuilds in the U.S. this year. And opening new units also remains a focus because we see significant opportunity to strategically extend our brand. In 2012, we expect to open more than 1,300 new restaurants, including 450 in Latin America, Japan and other markets, where we invest no capital. Lastly, let me touch on foreign currency translation, which negatively impacted first quarter results by $0.01. At current rates, we expect second and third quarter EPS to each be negatively impacted by $0.05 to $0.07, with the full year negative impact ranging from $0.12 to $0.14. As usual, this is directional guidance only because I know rates will change as we move throughout the year. We remain committed to making the right long-term decisions for the system and our shareholders. Our momentum is strong, and we are pleased with first quarter results, given the environment. We remain focused on widening our competitive advantages over the coming years. Even with the headwinds in 2012, I'm confident that we can meet our financial targets this year and continue to build significant shareholder value. Thank you. Now I'll turn it over to Kathy to begin our Q&A.

Thanks, Pete. We're ready to open the call for analyst and investor questions. [Operator Instructions] So we are ready to begin our Q&A.

And we'll start with David Palmer from UBS. David Palmer - UBS Investment Bank, Research Division: And just in case Jim Skinner is not going to be on the second quarter call, just wanted to say thank you and congratulations for a great career. Taco Bell, Burger King, those are a couple of big competitors in the U.S. that are making a big sales go-at-it here heading into the second quarter. I don't normally think about the smaller competitors having a much of an impact on McDonald's, but do you think that, that could be something of a competitive encroachment in the second quarter that we should be thinking about? And secondly, just out of Europe, can you give us a sense of the type of marketing changes you may be already making in places like France and Germany, that more value-oriented marketing that you discussed? James A. Skinner: David, thanks for your comments. And the question regarding the United States, I'll take, and Don can add some texture if he likes and he can talk about the marketing in Europe, which we are managing effectively, as Pete mentioned in his comments and Don also mentioned. But United States, of course, Burger King and Taco Bell and all of our other competitors, we keep a close eye on in terms of what their activities are like. But it's not our first rodeo regarding this. And they have spurts of enthusiasm and excitement for their brand typically when there's a change in ownership. And so they are doing some things that are meaningful for their brand, they believe. And yet we think that it's business-as-usual for McDonald's relative to what we're focused on, and our strategies have served us very, very well. When you look at optimizing the menu, improving customer relevance as we've done, and accessibility and to our Plan to Win, we expect to be able to maintain our competitive differentiation there, regarding those competitors. And Don, you want to talk a little bit about the marketing in Europe?

Yes. Relative to Europe, David, we have had -- we have ongoing conversations with all the markets, not just those in Europe, but relative to what's happening in a broader business environment and how we are faring. One of the things that we've seen thus far is we continue to gain market share across Europe. And so we know that despite some of the IEO growth or lack thereof, we continue to appeal to consumers and customers across-the-board. Now what we've done, particularly in France and Germany, is we have had some, as you would imagine, more aggressive conversations around how we position our value menus and value offerings. In Germany, they've done some things with their basic value menu, which we call SMS. They made some changes there, as well as they, the franchisees, are considering other things that they might want to do to continue the momentum that we've had relative to market share gains. However, I will say consumer confidence is still one of the things we monitor across Europe, inclusive of Germany and France. In France, we have a great opportunity to better leverage our P'tits Plaisirs platform. So you can probably imagine that we will continue to do that, as well as look for other opportunities to continue to move forward the menu and provide good price value. So those are some of the things we're doing there. Just one touch point, and Jim mentioned several things and he's kept us very focused, as you all can imagine, on consistency in terms of how we run the business. So when you mentioned some of the competitors in the U.S. also, we continue to watch our gain there as well. In the U.S., we're up 60 basis points in terms of market share, which is really, really strong growth. And Jan Fields and her team are doing a great job there, as well we continue to have a positive sales comp gap. And so those things are things we also measure to ensure that we're doing the right thing for our customers.

Next question is from David Tarantino from R.W. Baird. David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division: Jim, congratulations on your retirement and, Don, congratulations on your new role. My question really is a follow-up related to the Europe business. You saw a nice recovery in the comp trend in March. And I just wanted to understand the underlying dynamics there in the various markets, and if you think that maybe February was more of an anomaly related to weather and that the underlying trend is actually more consistent with what you saw in January and March. And then I guess, secondly, have you already implemented some of these initiatives that you've talked about that may be helping the trend in March? Or are those something that you're planning going forward in anticipation of a tough economy?

David, thanks much. And thanks for the recognition, both of Jim and myself. I'll tell you a couple of different things. One is we have already begun some of the planning. Some of these things were implemented before, and we just have to change some of our marketing emphasis, i.e. in Germany, relative to the value platform. France already had P'tits Plaisirs. However, it does end up being a marketing GRP visibility and awareness play more so than anything else, because we've got the tools and the arsenal already, which is good. We can just lever them up. Now here's the other thing I would say relative to Europe, and you asked about do we think it will continue. Europe, the first quarter had a lot of different pieces in it. Clearly, we had the 200-year weather cycle, which was a negative impact. We have the positive impact of things like bank holidays. We have a lot of moving parts. However, we know that the underlying thing that we have to do is have good price value across-the-board while consumers are facing some confidence issues due to austerity measures, and then some of the other things such as pension issues in the U.K. and taxes and VAT increases across-the-board. So we do have many plans already in place. There are some new things we will put in place, but the biggest part is just how we shift our marketing to enhance the value messaging and awareness.

Next question is from Jason West, Deutsche Bank. Jason West - Deutsche Bank AG, Research Division: Just wanted to ask on China. You alluded to some modest slowdown there. If you could talk a bit about, is that more regional? I believe during the last recession, you saw more impact in the export-driven markets, if you're seeing sort of a regional impact this time as well. And sort of if you could talk daypart-wise and if there's been any impact from some of the PR issues there recently. Peter J. Bensen: Jason, it's Pete. The China business has continued to perform pretty well for us. You know that March was a little slower than the 2-month trend had been, January and February. But there's no specific region or particular issue to point to. One of the things -- we had a big beef promotion this March relative to a big chicken promotion last March so that had a little bit of a negative impact. We did see a little regionalized slowdown after some of the negative publicity you alluded to, but that wasn't terribly significant. So we remain on track there and are comfortable with where we're going.

The next question is Andy Barish from Jefferies. Andrew M. Barish - Jefferies & Company, Inc., Research Division: Yes, just finishing up maybe the European discussion on the -- your thoughts just as it pertains to the margin impact with a little bit more focus on promotion or value going forward. Europe delivered good margins here in the first quarter with Russia and the U.K., as you mentioned. But any subtle shifts kind of as you focus a little bit more on value going forward? James A. Skinner: I think margins, as you know, Andy, are a top line game, and this is all about generating more traffic through the leveraging of our everyday affordability, which Don had mentioned in terms of getting ourselves in the appropriate position and putting the muscle behind it in marketing, particularly in Germany and France. And we think that, that will be beneficial as the traffic increases and the top line grows into the future. And so we don't really look at that as having a significant impact on margins relative to anything we do on everyday affordability. Peter J. Bensen: Yes. Andy, as you pointed out, it really is kind of a tale of 2 Europes, if you will, with Russia having some high-teen comps and the U.K. around 10%. They really drove some pretty good margin performance here in the first quarter. As we head to second quarter, we obviously, we won't have the leap day benefit. Generally, in the markets that Jim talked about, while we'll enhance our messaging around the local value or the everyday affordability, that tendency is initially you'll see a little dip in the average check. But as the transactions grow, you get that back over time. And in those markets with that environment, we also probably have a little less pricing power as last year's increases roll off and we'll probably be able to take a little bit less this year. Net-net, those are the pressures I alluded to when I mentioned that in my comments.

Next question is Jeff Bernstein from Barclays. Jeffrey Andrew Bernstein - Barclays Capital, Research Division: Just a two-part question. First, just as it relates to -- Pete, you mentioned the food-at-home versus food-away-from-home discussion. And I know the gap has been fairly wide, which gave you guys some comfort or confidence on perhaps being more aggressive on price. But it seems like recently the gap has narrowed. And as commodity inflation is going to ease as we move through the year, I'm just wondering, one, how you think about further price increases beyond the 3% in the U.S. today. And then just as a separate add-on to Pete's comments earlier, I know you said -- when you think about 2012, that you're investing for continued growth and how that's going to pressure the operating income, and you also kind of talked about being somewhat cautious on U.S. and European margins the next couple of quarters. So I was just hoping you could frame up the directional thought for 2012. I think you still sounded fairly confident that you can hit your 6% to 7% operating income. I guess, that's kind of your long-term. So I'm just wondering if you can give some directional color with all those pressures you alluded to and confidence still hitting that target. Peter J. Bensen: Sure. First, on the pricing in the U.S., Jeff. You kind of -- you hit on the head, as over the last several months, there's been a wider gap on the food-at-home being growing greater than the food-away-from-home. That gap is starting to narrow. And in fact, the outlook, food-away-from-home is still projected to grow at 2% to 3% this year. But food-away-from-home is now projected to grow 2.5% to 3.5%. That's down a little bit from the last projection. So that gap is narrowing. And as you think traditionally about our parameters, that 2% to 3% for food-away-from-home, absent any significant gap with the food-at-home, is probably a good way to think about our pricing for the year. So that 2% to 3% is probably the constraints for that one.

Jeff, the other part of this one, too, is we -- and Pete mentioned this. We really look at food-away-from-home as our primary metric relative to how we establish our strategic pricing. We look at food-at-home, it's kind of -- because we can't price the food-at-home because it's too much more -- it's too volatile. It swings up and down so much more aggressively. So we look at food-away-from-home primarily. But what food-at-home tells us is whether or not we may be seeing additional pressures relative to, say, a breakfast daypart. And so that allows us to adjust some of our marketing and our value messaging appropriately. Peter J. Bensen: Regarding the conversation on the longer-term targets, Jeff, very comfortable in the 6% to -- our long-term target, 6% to 7%, obviously the last few years, we've been significantly ahead of that. But as we outlined in November, with some of the actions we're taking to invest and some of these near-term headwinds around commodities, we're probably closer to that 6% to 7% this year than we've been the last few years, and specifically, these next couple of quarters. So in the U.S., I mentioned commodities will be up another close to 7% again in the second quarter, and we won't have the benefit of leap year and the favorable weather. So again, margins look pretty similar in the second quarter for the U.S. I mentioned the G&A. We haven't come off our 6% forecast for the year. But with the timing of some of these events, our internal plans are at double-digit G&A growth for the next couple of quarters. So as we look throughout the year, again, we're very confident in our ability to hit that long-term target. But there's going to be -- the next couple of quarters may look a little down off of that relative to some of these items that I mentioned.

And our next question is from John Glass, Morgan Stanley. John S. Glass - Morgan Stanley, Research Division: I wanted to maybe just go back to the U.S. and talk about the new Extra Value Menu and what your intentions are here. I know you've made some changes to the Dollar Menu as well. So is the intention here to maybe migrate people off the Dollar Menu as a basis for just the meal and try to get more traction with sort of a value but at a higher price point? Maybe you can talk about if this menu has any implications from a margin standpoint. And then, Pete, just I wanted to clarify your comments about the operating income growth, 6% to 7%. That's constant currencies, correct? So as we look at next couple of quarters, with currency pressure magnifying, it's probably on a reported basis probably even less than that. Peter J. Bensen: Correct, John. I'll clarify the operating income comments, and then Don can talk about the Extra Value Menu. But you're right. That long-term guidance is in constant currency. And with the $0.05 to $0.07 each of the next couple quarters of pressure, obviously the reported number will be less than that.

And, John, relative to the new Extra Value Menu, it fits within an overall price value strategy that we continue to move forward. As we look at commodity pressures clearly, we understand that there are certain aspects of the Dollar Menu that are tougher relative to cash flow and margin accretion. So what we've looked to do with the new Extra Value Menu is to have some opportunity to bring some products down to a lower level price, i.e. the 20-piece McNugget, which are really compelling and shareable offer to customers. But at the same time, we also know that this will highlight and emphasize products like the Snack Wraps, which are accretive to building the margin. So it's a combination of both longer-term, we know that we want to keep the Dollar Menu intact. However, you may see some changes within the menu and some of those products may change just a little bit. We'll rotate some new ones in possibly and some may rotate out. But we're going to make sure we continue to have great value for customers across-the-board, but you may see some changes in terms of the overall value menu strategies.

Our next question is from Matt DiFrisco from Lazard. Matthew J. DiFrisco - Lazard Capital Markets LLC, Research Division: Congratulations again, Jim, on a great tenure. Just transitioning, I guess, to go a little bit further into Europe there. I guess, 2 of the countries -- you talked about France actually in this sales -- in this monthly sales release as being one of the stronger regions. And then also looking at France and Portugal, sort of those 2 countries that have seen the VAT increase, I guess, for restaurants as it's been reported this year, would you -- could you give us some color on as far as, what have you seen in trends early on in the year? Has the consumer reverted a little bit home with their food dollar? Or are you sort of having somewhat of a countercyclical benefit? And are people, for lack of a better term, I guess, trading down to better value and coming into your restaurant, that maybe in the past wouldn't have, given the, I guess, it's about a 150 bps jump on the VAT in France?

Matt, I would say, first of all, relative to France, I wouldn't say that France is one of the stronger performing areas today. I think they're going through some serious consumer confidence issues, and we're also seeing a lessened discretionary spending. There's some concerns in the marketplace relative to austerity measures. Having said that, we continue to perform and continue to grow market share. And that's the point. And when the IEO is contracting or slowing down, our focus becomes how we can continue to grow market share and maintain a larger base of customers. And so we're going to continue to do that in France. Portugal is a very interesting area relative to the 10% VAT increase they had there, going from 13 to 23 percentile. We have done a lot of work with our franchisees there to make sure that we maintain a great price value component in the overall strategy. Now what that means in the short term is that in a small market like Portugal, we may have some decreased margins. But in the longer-term, we'll secure the customer base and we'll build the business as we move forward, so -- but things like that are happening, whether it be Portugal. It's happened in Hungary, Romania before. But these are smaller markets.

Our next question is from Mitch Speiser from Buckingham. Okay. We're going to move on then. Joe Buckley from Bank of America Merrill Lynch. Joseph T. Buckley - BofA Merrill Lynch, Research Division: Jim, I want to echo all the positive comments and wish you good luck. Question on the noon to 1 p.m. throughput comments and putting more labor into the stores. Can you talk about if it's simply that or if there are other measures improving that throughput? And probably the same question, talk about some of the technology investments that you referred to. Is some of that directed at labor productivity and throughput? Peter J. Bensen: Yes, it absolutely is, Joe. So there's a couple of things that are impacting that. One is a focus on what we call scheduling, staffing and positioning. So how many people do we have on the floor during those peak hours and where are they positioned is very important to driving more transactions through the restaurant during those peak hours. So do we have all of our kitchen equipment fully utilized? So both sides of our sandwich preparation table, for example. But also, the new register system, the new point-of-sale system, as you point out, is also an enabler because we're able to take orders more quickly and more accurately, so we get the customer through the restaurant. But that new POS also enables things like the handheld order taker and the side-by-side drive-thru, which again gets more orders back into that kitchen during these peak hours, which is another way to expand our capacity. But those -- the new POS had already been in the U.S. last year, and so there was no incremental cost relative to that in this quarter. But certainly, with adding some additional labor under the staffing guidelines, that's where we start to see a little impact on the labor line. Net-net, to grow, I think we grew comp transactions 5% during that lunch hour in the first quarter. And that was a significantly greater growth relative to that hour in the prior year. So those investments are definitely paying off for us.

All right. Our next question is from Sara Senatore, Sanford Bernstein. Sara H. Senatore - Sanford C. Bernstein & Co., LLC., Research Division: So I did want to ask about Europe, and 2 follow-ups, if I may. One is Europe. And that is, can you kind of parallel what you see in Europe now that maybe what you saw in the U.S. in 2009? Because I feel like, in many ways, we talked about the same -- not a lot of tolerance for rising prices and sort of it took a little while, but eventually, the cumulative effects of what we saw in the U.S. in '08 kind of hit home in '09. So is that sort of what we should anticipate for the year ahead in France and Germany, may play out like we saw in the U.S. in '09? And then on China, can you just talk briefly, you had -- breakfast grew 20% overall comps rate in the half. Can you just tell us how much price you had on there and whether you saw relative softness in either of the other dayparts?

Sarah, this is Don. A couple of things. I think a very astute comment relative to Europe or France today versus the U.S. a couple of years ago. And actually, I'd even go back to the 2008 time frame, 2008, 2009. They are quite similar in that what we did then was we put much more emphasis on our value messaging from a marketing perspective. We made the value offerings more prominent in the restaurant, and that definitely helped us secure what I will call those customers who had decreased discretionary dollars, and they continued to come into McDonald's. And in Europe, across-the-board, we're doing the same thing now. We've been doing it with the Eurosaver Menu in markets like the U.K. We're doing it with SMS in Germany. We're doing it with P'tits Plaisirs in France. I do believe that what we're facing in France now, because we've had -- we haven't had the same strong competitive set in France, we've not had to go there as aggressively, but now we're at a point where from a consumer confident perspective, we are going there a lot stronger relative to that marketing power. So I think it's a very, very good comment. They are somewhat similar. The difference, though, I would say in Europe, Europe, we have a foundation, particularly in markets like France, of having the restaurants reimaged. And so that definitely helps us and allows us also to continue to sell some more premium-based products. Relative to China, in terms of pricing, that's something that normally we don't disclose, but I think this -- in this case is important. China, we did a price increase of 5 percentile. And we know that, that is going to help us relative to moving forward to be able to help us with margin and also help us face some of the commodity-based pressures that we see there. Peter J. Bensen: But with the -- your specific question, Sara, about the breakfast. Breakfast is less than 20 -- is less than 10% of the business there. So while the comps were really strong, and obviously were strong at lunch, where we saw a little lesser momentum was in our dessert kiosks and a little bit more of the discretionary visit potentially, so the snacking kind of visit. But again, the balance of where the business is coming from in China is still pretty good. And it's coming from where we're really focusing a lot of our attention, so that's good. And just to clarify that 5% number that Don gave, that's our trailing 12-month impact of the price increases. We didn't take all of that in this first quarter.

Our next question is from John Ivankoe from JPMorgan. John W. Ivankoe - JP Morgan Chase & Co, Research Division: Maybe just a follow up on the U.S. I mean, you've talked about pricing. But I mean, what do you think about, I guess, a couple of things? Kind of excluding the benefit from remodels or reimages, if it's possible to do that, what kind of an industry traffic growth environment do you think we are in the U.S., in other words, as you kind of slowly improving employment and, I guess, consumer confidence offsetting higher gas prices to where we kind of are in a tailwind environment as opposed to a headwind environment? And secondly, when we think about the overall menu, obviously some changes to value and how you're positioning things and the potential introduction of premium-priced, limited-time-only products, are we kind of in your positive mix environment, perhaps at least in '12 or, I mean, perhaps even in the next couple of years? So just trying to get you to kind of think about price mix and traffic in the U.S. and what kind of environment that we have, helping you or hurting you. James A. Skinner: Yes, John. Jim Skinner. Just make a couple of comments on that. First of all, the employment environment, based on yesterday's number, is actually getting a little worse instead of getting a little bit better in terms of jobless claims. And it's been fairly flat. We're at that 8% unemployment or better -- or worse, I should say, 8.3%, whatever that number is. And the consumer confidence has gone up some, but I think that's just because people are sort of worn-out over the overall economic issues and how it's impacting them personally. And so they're just in a place of normalcy now relative to this entire issue on the economy and savings and eating at home and eating away from home. And that environment, as you know, has continued to operate about the same as it has been. And so our philosophy around pricing and menu and Dollar Menu and all of those things that Don talked about earlier has remained the same. We really haven't changed our strategy around that. We always have to have everyday affordability, the best in the business, at McDonald's. That's been our mantra really since 2002 and the advent of the Dollar Menu. And then obviously, the introduction of new menu items and snack items and what we call that fourth-tier area. So there's really not been a change regarding that. And the traffic has continued to be fairly robust in the U.S. around that for our restaurants. And we continued, as you know, to take share in the U.S. against the competitive set. Peter J. Bensen: The update we got just yesterday, John, from our folks in the U.S. actually shows the -- actually a slight drop in the forecast for the year for the traffic for the industry. It's projected to grow less than 1%. And so that makes our traffic growth even that much more remarkable in that environment. As it's starting to level off or decline a little bit, we continue to see significant traffic gains in the U.S.

Our next question is from Keith Siegner from Crédit Suisse. Keith Siegner - Crédit Suisse AG, Research Division: Just a question for either Pete or Don, just kind of an update on the reimaging program. I mean, we've had some -- I ask because you've got a couple large competitors announce big programs. It's been at least a year now since we had a real good update down in Tampa. And we know you're never complacent. So have you made any changes to the prototype? Is the cost of the remodel looking any different? Are the sales lifts looking any different? Just some general updates on that program, because clearly it's very impactful and an important part of the outlook, would be great.

Keith, first of all, the reimaging efforts are going quite well. And I'll speak specifically about the U.S. I think your question was more focused on the U.S. We have upgraded the course. And I think that, that was something that we did early -- about the middle of the year last year. And we've got tremendous acceleration. In the latter part of the year, we reimaged quite a few, the predominance of our restaurants. We're on track this year to continue to exceed the numbers that we have out there right now. We think we're in that range of around 800 in terms of reimages in the U.S. And we feel very comfortable and confident in that number. What I've seen is that the sales, and the group reported to Pete and I and Jim earlier this week, the sales continue to be in the range, toward the high end of the range relative to what we told you guys about in that 6 percentile range relative to reimages. And the system itself is quite excited about it. I think we're going to continue to see aggressiveness in the reimages, relative to the competitive set. We hear a lot of information from time to time about others that are reimaging. I think the point for us is we have a proven track record of what reimaging can do, how to do it, how to maximize the opportunity and the sales from it, and also how to make sure that we get the cost in the right line. And so we're going to continue to do that, not only in the U.S., but as we complete the interiors in Europe and move further along with the exteriors and also as we move across APMEA and Latin America. Peter J. Bensen: And one encouraging thing to add onto that, Keith, is now that we've got a history of stores that have more than 12 months of operation since reimaging, we're actually seeing higher sales increases as they cross that anniversary. And so they're actually closer to that 7% in our 6% to 7% range in their 13th, 14th, 15th month, which is again very encouraging and supportive of our belief that this is a great long-term investment.

Okay. Our next question is from Steve Marrs, CitizensTrust. Steve Marrs - Citizens Business Bank: In your press release, you talked about APMEA growing first quarter sales by an increase of 5.5%. Also in your remarks, you talked about Japan being soft. Now here is my question. If you x out Japan, what would have APMEA been for the quarter, please? Peter J. Bensen: Steve, we don't have that number at our fingertips. So maybe offline, the Investor Relations folks could give you that. But obviously, we talked about China. We talked about Australia. A lot of the other markets across APMEA are performing extremely well on the top line.

And at over 3,000 restaurants, the number would be much higher. But with us, again, that's not one that we kind of pull out when we factor sales.

Okay. We have time for one last question, Howard Penney from Hedgeye. Howard W. Penney - Hedgeye Risk Management LLC: And I guess it's appropriate to ask Don about, the legacy of Jim Skinner has obviously been well-documented. He took over McDonald's after a difficult year. It was his job to keep the Plan to Win moving along and take McDonald's to the next level with beverages. And I understand you played a big part in that as well. As we look out over the next couple of years, what do you think your legacy will be when we're talking about your retirement? I know that's a little early, but if we could talk about your legacy and where you're seeing McDonald's is and maybe how do you think you'll take McDonald's to the next level, especially when we talk about the competition maybe reorganizing a little bit.

Howard, first of all, I hope that retirement point is quite a few years down the road. Otherwise, that might mean it was induced by something other than me. Here's a point, I think. Jim has always been very strong in telling all of us and continuing to drive the point of what we have to do is focus on the basics. I've been around McDonald's for over 20 years now, and I think what's most important for everyone is to understand that a change in leadership doesn't mean a change in strategy. I was here on the front end when we did the Plan to Win, and I understand what it means to our organization in terms of alignment. We remain focused on those things we've talked about: people, product, place, price, promotion. One of the things that we've done over the last couple of years, and Jim has been great about allowing myself and Pete and the rest of the team to really kind of take the mantle and lead some of the strategies that we have set forth. When we talk about modernizing the customer experience, technology will play a major role in that. But even more so will be the new look of McDonald's and what that allows us to do with our menu set. When we talk about optimizing the menu, we will be more focused, as we have been, on nutritional-based products, but also on focusing on our core and some premium products that we see coming out of areas like Europe. One of the things that we have that's a big potential, we can scale products and learn from the various areas of the world, and we will do that at a more accelerated pace. Lastly, I would say that when we talk about the broadening accessibility, we are much smarter now. We can walk and chew gum at the same time. We can deliver organic growth and we can build new restaurants. We know we can. We're doing it across APMEA and across many of our major markets. So we'll continue to do that. I don't worry about the legacy that will be left, and I'm not trying to chase the tremendous things that Jim has led us to do. I think myself and this team are focused on continuing to drive sustainable growth at McDonald's. And that is the key, Howard. And I think if we can continue to focus on the basics of this business; execution in the restaurants every day; the moment of truth, as Jim has called it, at that front counter; focused on the fact that we do have the power and the financial strength to grow both in development and organically, those are the things that I want to make sure we do. So I'm not really focused on the legacy aspect as much as I am continuing to see all of us move the business and grow as a global company.

Okay. We are done with our Q&A. And so I'm going to turn it over to Don for a few closing comments.

Thanks to all of you. And I want to thank everyone for joining us this morning. In closing, I just want to reiterate our confidence in the continued strength of our business around the world. We're delivering solid results because the entire McDonald's system remains aligned behind executing our Plan to Win, and we're focused on driving toward our mission to become our customers' favorite place and way to eat and drink. We'll continue to focus on being smart and strategic in this current environment while always striving to deliver the best customer experience as we know we can and have in each of our more than 33,000 restaurants around the world. So thanks again, and have a great day.

Thank you.