8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): January 26, 2004

McDONALD'S CORPORATION

(Exact name of Registrant as specified in Charter)

Delaware	1-5231	36-2361282
(State or other Jurisdiction	(Commission File No.)	(IRS Employer
of Incorporation)		Identification No.)

One McDonald's Plaza

Oak Brook, Illinois 60523

(630) 623-3000

(Address and Phone Number of Principal Executive Offices)

Item 12. Results of Operations and Financial Condition.

On January 26, 2004, McDonald’s Corporation (the “Company”) issued a press release reporting fourth quarter and 2003 year-end results and the retirement of Fred Turner.  The press release is furnished as Exhibit 99.1 and is attached hereto.   Also furnished as Exhibit 99.2 is supplemental information for the quarter and year ended December 31, 2003.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		McDONALD'S CORPORATION
		(Registrant)
Date:	January 26, 2004	By:	/s/ Peter J. Bensen
			Peter J. Bensen
			Corporate Vice President - Assistant Controller

Exhibit Index

Exhibit No.
99.1	News Release of McDonald's Corporation issued January 26, 2004:
	McDonald's Ends Year with Strong Performance First Year of Revitalization Exceeds Plan Senior Chairman Fred Turner Retires
99.2	McDonald's Corporation:  Supplemental Information, Quarter and Year Ended December 31, 2003

EX-99.1

EXHIBIT 99.1

Investor Release

 

FOR IMMEDIATE RELEASE	FOR MORE INFORMATION CONTACT :
01/26/04	Investors :	Mary Healy, 630-623-6429
	Media :	Anna Rozenich, 630-623-7316

McDONALD'S ENDS YEAR WITH STRONG PERFORMANCE

FIRST YEAR OF REVITALIZATION EXCEEDS PLAN

SENIOR CHAIRMAN FRED TURNER RETIRES

OAK BROOK, IL -- McDonald's Corporation today announced strong operating results for the fourth quarter as its revitalization plan continued to deliver above plan performance for the Company.

Chairman and Chief Executive Officer Jim Cantalupo said, "I am energized by the achievements of our System in 2003, particularly by the momentum we built throughout the year. We began 2003 with many challenges to overcome. While much hard work remains, our improving performance clearly indicates that our Plan to Win is delivering, and inspires us to work even harder in 2004 on behalf of our customers.

"From the very beginning, we introduced a new level of discipline and focus to all aspects of the business. In 2003, we eliminated projects not directly impacting our customers’ experience, narrowed our non-McDonald’s brand activities, aligned our System around a single action plan, and re-established McDonald's marketing leadership through the introduction of our first ever global brand direction, 'i’m lovin’ it ^TM '.

"There is solid evidence that our aggressive actions are paying off. We concluded the first year of our revitalization with strong operating results. The U.S. continued its impressive performance with robust sales and margins. Europe’s revenues and sales improved during the fourth quarter, and the region delivered sequential quarterly comparable sales improvements throughout 2003. In our Asia/Pacific region, revenues and sales also improved during the year. Clearly, 2003 was a watershed year for McDonald’s. Our strategic shift from growing by being bigger to growing by being better has reignited the power of our global System and created a more relevant McDonald’s."

McDonald's reported the following fourth quarter highlights:

Revenues increased 17% (9% in constant currencies), Systemwide sales increased 16% (9% in constant currencies), and comparable sales increased 7.4%.

Company-operated restaurant margins increased 170 basis points to 14.8%, and franchised restaurant margins increased 110 basis points to 78.6% – a significant improvement versus prior year trends. U.S. Company-operated margins were 18.6%, a 460 basis point improvement over fourth quarter 2002.

Diluted earnings per share were $0.10 compared with a loss of $0.27 for fourth quarter 2002. Fourth quarter 2003 included net charges of $0.25 per share, while fourth quarter 2002 included charges of $0.52 per share.

McDonald's performance improved throughout the year as successful initiatives took hold. Full year 2003 highlights include:

Revenues increased 11% (6% in constant currencies) to a new record high, and Systemwide sales increased 11% (5% in constant currencies).

Comparable sales increased 2.4%, a significant improvement compared with the 2.1% decline in 2002.

The Company repurchased $439 million of its common stock during the year, and increased the annual dividend 70% to more than $500 million.

Cantalupo added, "Our consolidated financial performance reflects achievement of key priorities that we established for 2003 – growing comparable sales and improving profitability at existing restaurants. In addition, we significantly reduced capital expenditures, and delivered on our commitments to pay down debt and return cash to shareholders through share repurchase and a higher dividend.

"As we enter the second year of our revitalization, we are sharply focused on several business initiatives. In 2004, improving operations at each of our existing restaurants will remain our top priority. As a result, we will spend more on reimaging restaurants, while opening a similar number of units in 2004 as in 2003. Our capital expenditures for the year are targeted at $1.5 billion to $1.6 billion. We plan to further improve our financial position by paying down $400 million to $700 million in debt, and expect to return about $1 billion to shareholders through dividends and share repurchase. Looking ahead to 2005 and beyond, we continue to target annual Systemwide sales and revenue growth of 3% to 5%, annual operating income growth of 6% to 7%, and annual returns on incremental invested capi tal in the high teens."

SENIOR CHAIRMAN FRED TURNER RETIRES

"McDonald’s is succeeding because we have returned to the type of disciplined leadership that historically made our System great," said Jim Cantalupo. "That leadership is personified in Fred Turner, and it is with very mixed emotions that I announce his retirement as Senior Chairman of the Board of Directors after 48 legendary years with McDonald’s. Fred is our pioneer, our mentor, our heart and soul, and, without doubt, one of the finest men I have ever met. Fred’s history is literally McDonald's history, so there is no way that we can ever repay or replace his leadership. All we can do is continue his legacy – every day, in every restaurant – by relentlessly pursuing operational excellence. Every time we please a customer, we honor Fred Turner."

Senior Chairman Turner announced his retirement in a letter sent today to the McDonald’s System, which included the following comments . . .

"Under Jim Cantalupo’s able direction, our beloved McDonald’s System is making good progress . . . with much ahead . . . and we’re off to a great start on getting our McHouse where it needs to be. Jim’s been CEO for a year, and at this time I’ve decided to hang up my spatula. I feel the time is right . . . I’m a very lucky man to have joined Ray Kroc when our System was a teen number of stores . . . I believe I helped make a difference. . . let’s remember we’re all lucky to be under the Arches. Your job is to help make a difference."

KEY HIGHLIGHTS - CONSOLIDATED

Dollars in millions, except per common share data

Quarters ended December 31,		2003		2002		% Inc (Dec	)		Currency Trans- lation Benefit	%Inc Excl Currency Translation Benefit
Revenues	$	4,555.4	$	3,899.2		17		$	295.6	9
Operating income (loss)*		367.5		(203.4	)	n/m			24.7	n/m
Net income (loss)*		125.7		(343.8	)	n/m			6.0	n/m
Net income (loss)   per common share -   diluted*		0.10		(0.27	)	n/m			0.01	n/m
Years ended December 31,
Revenues	$	17,140.5	$	15,405.7		11		$	885.8	6
Operating income**		2,832.2		2,112.9		34			189.0	25
Income before   cumulative effect   of accounting   changes**		1,508.2		992.1		52			89.3	43
Net income**		1,471.4		893.5		65			89.3	55
Per common share -  diluted:  Income before    cumulative effect  of accounting    changes**		1.18		0.77		53			0.07	44
Net income**		1.15		0.70		64			0.07	54

*	In 2003, includes net pretax charges (substantially all non-cash) of $407.6 million ($323.2 million after tax or $0.25 per share, $0.01 per share less in constant currencies) related to the sale of Donatos Pizzeria; the closing of Donatos and Boston Market restaurants outside the U.S.; the exit of a domestic joint venture with Fazoli’s; goodwill and asset impairment charges, primarily in Latin America; McDonald’s Japan’s revitalization plan actions; restaurant closings associated with strategic actions in Latin America; and a favorable adjustment to the 2002 charge for restaurant closings, due to about 85 fewer closings than originally anticipated. In 2002, includes pretax charges of $810.2 million ($656.9 million after tax or $0.52 per share) primarily related to restructuring several international markets, restaurant closings/asset impairment and the write-off of technology costs.
**	In 2003, includes net pretax charges of $407.6 million ($323.2 million after tax or $0.25 per share, $0.01 per share less in constant currencies) related to the items noted above. In 2002, includes pretax charges of $853.2 ($699.9 after tax or $0.55 per share) related to the items noted above.
n/m	Not meaningful

THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED THROUGHOUT THIS RELEASE

Constant currency results are calculated by translating current year results at prior year average exchange rates.

Systemwide Sales include sales by all restaurants, whether operated by the Company, by franchisees or by affiliates operating under joint-venture agreements.

Comparable Sales represent the constant currency change in sales from the same period for Systemwide restaurants in operation at least thirteen months.

Return on incremental invested capital is the change in operating income plus depreciation divided by the change in gross assets, and excludes the impact of changes in foreign currency exchange rates .

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements which reflect management's expectations regarding future events and operating performance and speak only as of January 26, 2004. These forward-looking statements involve a number of risks and uncertainties. A list of the factors that could cause actual results to differ materially from those expressed in, or underlying our forward-looking statements are detailed in the Company's filings with the Securities and Exchange Commission, such as its annual and quarterly reports.

RELATED COMMUNICATIONS

McDonald's Corporation will broadcast its investor conference call live over the Internet at 9:00 a.m. Central Time on January 27, 2004. For access, go to www.investor.mcdonalds.com . An archived replay of this webcast will be available for a limited time.

See Exhibit 99.2 in the Company's Form 8-K filing for additional, supplemental information related to the Company’s results for the quarter and year ended December 31, 2003.

McDONALD'S CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

Dollars and shares in millions, except per common share data
Quarters ended						Inc/(Dec)
December 31,	2003		2002			$			%
Revenues
Sales by Company-operated restaurants	$	3,398.4	$	2,932.8			465.6			16
Revenues from franchised and affiliated restaurants		1,157.0		966.4			190.6			20
TOTAL REVENUES		4,555.4		3,899.2			656.2			17
Operating costs and expenses
Company-operated restaurant expenses		2,912.0		2,558.3			353.7			14
Franchised restaurants -- occupancy expenses		247.4		217.2			30.2			14
Selling, general & administrative expenses		513.9		486.8			27.1			6
Other operating expense, net		514.6		840.3			(325.7	)		(39	)
Total operating costs and expenses		4,187.9		4,102.6			85.3			2
OPERATING INCOME (LOSS)		367.5		(203.4	)		570.9			n/m
Interest expense		90.7		94.6			(3.9	)		(4	)
Non-operating expense, net		9.3		23.6			(14.3	)		n/m
Income (loss) before provision for income taxes		267.5		(321.6	)		589.1			n/m
Provision for income taxes		141.8		22.2			119.6			n/m
NET INCOME (LOSS)	$	125.7	$	(343.8	)		469.5			n/m
NET INCOME (LOSS) PER COMMON SHARE-DILUTED	$	0.10	$	(0.27	)		0.37			n/m
Weighted average common shares outstanding - diluted		1,277.9		1,271.4

  n/m    Not meaningful

McDONALD'S CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF INCOME

Dollars and shares in millions, except per common share data
Years ended							Inc/(Dec)
December 31,	2003			2002			$			%
Revenues
Sales by Company-operated restaurants	$	12,795.4		$	11,499.6			1,295.8			11
Revenues from franchised and affiliated restaurants		4,345.1			3,906.1			439.0			11
TOTAL REVENUES		17,140.5			15,405.7			1,734.8			11
Operating costs and expenses
Company-operated restaurant expenses		11,006.0			9,906.6			1,099.4			11
Franchised restaurants -- occupancy expenses		937.7			840.1			97.6			12
Selling, general & administrative expenses		1,833.0			1,712.8			120.2			7
Other operating expense, net		531.6			833.3			(301.7	)		(36	)
Total operating costs and expenses		14,308.3			13,292.8			1,015.5			8
OPERATING INCOME		2,832.2			2,112.9			719.3			34
Interest expense		388.0			374.1			13.9			4
Non-operating expense, net		97.8			76.7			21.1			n/m
Income before provision for income taxes		2,346.4			1,662.1			684.3			41
Provision for income taxes		838.2			670.0			168.2			25
Income before cumulative effect of accounting changes		1,508.2			992.1			516.1			52
Cumulative effect of accounting changes, net of tax*		(36.8	)		(98.6	)		n/m			n/m
NET INCOME	$	1,471.4		$	893.5			577.9			65
PER COMMON SHARE-DILUTED:                                                Income before cumulative effect of accounting changes	$	1.18		$	0.77			0.41			53
Cumulative effect of accounting changes*	$	(0.03	)	$	(0.07	)		n/m			n/m
Net income	$	1.15		$	0.70			0.45			64
Weighted average common shares outstanding - diluted		1,276.5			1,281.5

n/m	Not meaningful
*	Relates to changes in accounting for asset retirement obligations in 2003 and goodwill in 2002.

EX-99.2

EXHIBIT 99.2

McDONALD'S CORPORATION

SUPPLEMENTAL INFORMATION

QUARTER AND YEAR ENDED DECEMBER 31, 2003

Impact of Foreign Currencies on Reported Results	1
Revenues and Systemwide Sales	1
Operating Margins	8
Selling, General and Administrative Expenses	10
Other Operating (Income) Expense, Net	10
Operating Income	12
Interest, Nonoperating Expense and Income Taxes	13
Outlook	14
Balance Sheet	16
Restaurant Information	17

SUPPLEMENTAL INFORMATION

         The purpose of this exhibit is to provide additional information related to McDonald’s Corporation’s results for the fourth quarter and year ended December 31, 2003. This exhibit should be read in conjunction with Exhibit 99.1.

Impact of Foreign Currencies on Reported Results

 Management reviews and analyzes business results excluding the effect of foreign currency translation and bases certain compensation plans on these results, because it believes they better represent the Company's underlying business trends. Results excluding the effect of foreign currency translation (also referred to as constant currency) are calculated by translating current year results at prior year average exchange rates.

• Foreign currency translation had a positive impact on the growth rates of consolidated revenues, operating income and earnings per share for the quarter and year, due to the strengthening of several major currencies, primarily the Euro.

Revenues and Systemwide Sales

 Revenues include sales by Company-operated restaurants and fees from restaurants operated by franchisees or affiliates under joint-venture agreements. These fees include rent, service fees and/or royalties that are based on a percent of sales with specified minimum payments, along with initial fees.

1

REVENUES Dollars in millions
Quarters ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
Company-operated sales:
U.S.	$ 932.1	$ 803.5	16	n/a	n/a
Europe	1,218.4	1,042.7	17	$138.2	4
APMEA	552.3	515.4	7	38.5	-
Latin America	217.6	171.5	27	16.4	17
Canada	176.3	128.4	37	28.7	15
Other*	301.7	271.3	11	0.5	11
Total	$3,398.4	$2,932.8	16	$222.3	8
Franchised and affiliated revenues:
U.S.	$ 646.6	$ 542.9	19	n/a	n/a
Europe	365.3	304.2	20	$ 53.6	2
APMEA	83.5	64.3	30	13.8	8
Latin America	20.8	23.0	(10)	(0.6)	(7)
Canada	40.0	31.5	27	6.5	6
Other*	0.8	0.5	60	-	60
Total	$1,157.0	$ 966.4	20	$ 73.3	12
Total revenues:
U.S.	$1,578.7	$1,346.4	17	n/a	n/a
Europe	1,583.7	1,346.9	18	$191.8	3
APMEA	635.8	579.7	10	52.3	1
Latin America	238.4	194.5	23	15.8	14
Canada	216.3	159.9	35	35.2	13
Other*	302.5	271.8	11	0.5	11
Total	$4,555.4	$3,899.2	17	$295.6	9

* Other represents non-McDonald’s brands.

n/a Not applicable

2

REVENUES Dollars in millions
Years ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
Company-operated sales:
U.S.	$ 3,594.4	$ 3,172.0	13	n/a	n/a
Europe	4,498.2	3,982.2	13	$519.3	-
APMEA	2,158.2	2,114.2	2	103.6	(3)
Latin America	773.7	696.2	11	(61.6)	20
Canada	631.7	505.3	25	71.8	11
Other*	1,139.2	1,029.7	11	1.6	10
Total	$12,795.4	$11,499.6	11	$634.7	6
Franchised and affiliated revenues:
U.S.	$ 2,444.9	$ 2,250.7	9	n/a	n/a
Europe	1,376.7	1,153.8	19	$208.3	1
APMEA	289.4	253.5	14	35.8	-
Latin America	85.1	117.7	(28)	(9.5)	(20)
Canada	146.2	128.3	14	16.5	1
Other*	2.8	2.1	33	-	33
Total	$ 4,345.1	$ 3,906.1	11	$251.1	5
Total revenues:
U.S.	$ 6,039.3	$ 5,422.7	11	n/a	n/a
Europe	5,874.9	5,136.0	14	$727.6	-
APMEA	2,447.6	2,367.7	3	139.4	(3)
Latin America	858.8	813.9	6	(71.1)	14
Canada	777.9	633.6	23	88.3	9
Other*	1,142.0	1,031.8	11	1.6	11
Total	$17,140.5	$15,405.7	11	$885.8	6

* Other represents non-McDonald’s brands.

n/a Not applicable

3

 Comparable sales represent the percent change in constant currency sales from the same period in the prior year for all Systemwide restaurants in operation at least thirteen months. Comparable sales are a key performance indicator used within the retail industry, and are reviewed by management to assess business trends for McDonald’s restaurants.

COMPARABLE SALES – McDONALD’s RESTAURANTS
	Percent Increase / (Decrease)
	Quarters Ended December 31,		Years Ended December 31,
	2003	2002	2003	2002
U.S.	12.5	(1.4)	6.4	(1.5)
Europe	2.1	(1.9)	(0.9)	1.0
APMEA	1.9	(6.1)	(4.2)	(8.5)
Latin America	1.5	11.2	2.3	1.0
Canada	5.6	(4.1)	-	(2.5)
McDonald’s Restaurants	7.4	(1.9)	2.4	(2.1)

• U.S.: In 2003, the U.S. achieved its highest annual comparable sales increase since 1987. Ongoing service, value and menu initiatives drove the revenue increases for the fourth quarter and year. These initiatives included Premium Salads, McGriddles breakfast sandwiches, Chicken McNuggets made with white meat, the Dollar Menu, popular Happy Meals, extended hours, and a new marketing direction.
• Europe: For the quarter and year, strong performance in Russia driven by expansion and strong comparable sales, along with expansion in France were partly offset by negative comparable sales in the UK. Revenues for the year were also affected by weak results in Germany, although Germany’s performance improved in the second half of the year.
• APMEA: Positive comparable sales in Australia, expansion in China and negative comparable sales in Taiwan, Hong Kong, and South Korea impacted revenues for the quarter and year. One of the factors negatively affecting comparable sales in certain markets for the year was SARS (Severe Acute Respiratory Syndrome).
• Latin America: Revenues increased for both periods in constant currencies primarily due to a higher percentage of Company-operated restaurants in 2003. In addition, revenues for the quarter increased as a result of the temporary closure of restaurants in Venezuela due to the national strike that began in December 2002.

4

 The following tables present Systemwide sales growth rates along with franchised and affiliated sales for the quarter and year. Systemwide sales include sales by all restaurants, whether operated by the Company, by franchisees or by affiliates operating under joint-venture agreements. While these amounts are not recorded as revenues by the Company, management believes that the following information is important in understanding the Company’s financial performance because they are the basis for which the Company calculates and records franchised and affiliated revenue (rent, service fees and/or royalties).

McDONALD’S CORPORATION SYSTEMWIDE SALES PERCENT INCREASE /(DECREASE)
	Quarters Ended December 31, 2003		Years Ended December 31, 2003
	As Reported % Inc (Dec)	% Inc (Dec) Excl Currency Translation Benefit (Loss)	As Reported % Inc (Dec)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
U.S.	15	n/a	9	n/a
Europe	20	4	18	2
APMEA	15	2	6	(2)
Latin America	14	7	(4)	4
Canada	30	9	17	4
Other*	11	11	10	10
Total sales	16	9	11	5

* Other represents non-McDonald’s brands

n/a Not applicable

5

FRANCHISED AND AFFILIATED SALES Dollars in millions
Quarters ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
U.S.
Franchised sales	$4,570.0	$3,992.6	14	n/a	n/a
Affiliated sales	295.0	260.6	13	n/a	n/a
Total	$4,865.0	$4,253.2	14	n/a	n/a
Europe
Franchised sales	1,934.7	1,571.6	23	$281.1	5
Affiliated sales	173.5	154.4	12	25.9	(4)
Total	2,108.2	1,726.0	22	$307.0	4
APMEA
Franchised sales	692.1	530.9	30	99.9	12
Affiliated sales	692.7	644.7	7	70.9	(4)
Total	1,384.8	1,175.6	18	170.8	3
Latin America
Franchised sales	154.0	153.0	1	5.1	(3)
Affiliated sales	9.6	11.2	(14)	(0.5)	(10)
Total	163.6	164.2	-	4.6	(3)
Canada
Franchised sales	258.9	213.4	21	42.1	2
Affiliated sales	30.2	15.7	92	4.9	61
Total	289.1	229.1	26	47.0	6
Other*
Franchised sales	10.2	8.6	19	-	19
Total
Franchised sales	$7,619.9	$6,470.1	18	$428.2	11
Affiliated sales	1,201.0	1,086.6	11	101.2	1
Total	$8,820.9	$7,556.7	17	$529.4	10

* Other represents non-McDonald’s brands.

n/a Not applicable

6

FRANCHISED AND AFFILIATED SALES Dollars in millions
Years ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
U.S.
Franchised Sales	$17,369.7	$16,065.4	8	n/a	n/a
Affiliated Sales	1,157.7	1,068.3	8	n/a	n/a
Total	$18,527.4	$17,133.7	8	n/a	n/a
Europe
Franchised Sales	7,202.7	5,934.0	21	$1,080.8	3
Affiliated Sales	670.4	560.0	20	103.7	1
Total	7,873.1	6,494.0	21	$1,184.5	3
APMEA
Franchised Sales	2,437.5	2,053.6	19	258.0	6
Affiliated Sales	2,567.7	2,608.5	(2)	173.6	(8)
Total	5,005.2	4,662.1	7	431.6	(2)
Latin America
Franchised Sales	576.4	707.2	(18)	(53.5)	(11)
Affiliated Sales	36.9	40.0	(8)	(1.9)	(3)
Total	613.3	747.2	(18)	(55.4)	(11)
Canada
Franchised Sales	975.5	893.0	9	109.7	(3)
Affiliated Sales	101.8	57.7	76	11.9	56
Total	1,077.3	950.7	13	121.6	1
Other*
Franchised Sales	41.1	38.7	6	-	6
Total
Franchised Sales	$28,602.9	$25,691.9	11	$1,395.0	6
Affiliated Sales	4,534.5	4,334.5	5	287.3	(2)
Total	$33,137.4	$30,026.4	10	$1,682.3	5

* Other represents non-McDonald’s brands.

n/a Not applicable

7

Operating Margins

COMPANY-OPERATED AND FRANCHISED RESTAURANT MARGINS – McDONALD’S RESTAURANTS* Dollars in millions
		Percent		Amount
Quarters ended December 31,	2003	2002	2003	2002	% Inc/ (Dec)
Company-operated
U.S.	18.6	14.0	$ 173.2	$ 112.4	54
Europe	16.3	15.6	198.3	162.6	22
APMEA	9.7	8.3	53.3	43.0	24
Latin America	3.5	9.9	7.6	17.0	(55)
Canada	14.9	11.1	26.2	14.2	85
Total	14.8	13.1	$ 458.6	$ 349.2	31
Franchised
U.S.	79.7	78.0	$ 515.3	$ 423.6	22
Europe	75.8	76.0	276.9	231.3	20
APMEA	87.1	85.1	72.7	54.7	33
Latin America	62.2	62.6	13.0	14.4	(10)
Canada	78.0	78.7	31.2	24.8	26
Total	78.6	77.5	$ 909.1	$ 748.8	21
		Percent		Amount
Years ended December 31,	2003	2002	2003	2002	% Inc/ (Dec)
Company-operated
U.S.	17.7	16.0	$ 634.8	$ 507.3	25
Europe	15.7	15.9	708.0	631.4	12
APMEA	9.9	11.3	212.7	239.3	(11)
Latin America	6.1	9.4	47.2	65.4	(28)
Canada	14.6	13.7	92.2	69.4	33
Total	14.5	14.4	$1,694.9	$1,512.8	12
Franchised
U.S.	79.5	79.1	$1,944.9	$1,781.2	9
Europe	75.8	76.7	1,043.8	885.0	18
APMEA	85.6	85.8	247.8	217.6	14
Latin America	64.3	66.9	54.7	78.8	(31)
Canada	78.2	79.2	114.2	101.6	12
Total	78.4	78.5	$3,405.4	$3,064.2	11

* Operating margin information relates to McDonald's restaurants

and excludes non-McDonald’s brands.

• Combined: Operating margin dollars increased $269.7 million or 25% for the quarter and $523.3 million or 11% for the year. Foreign currency translation benefited the combined margin dollars by $88.6 million for the quarter and $295.8 million for the year. The U.S. and Europe segments accounted for more than 80% of the combined margin dollars in both periods of 2003 and 2002.

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• U.S.:  Company-operated margin percent increased for both periods primarily due to positive comparable sales and lower payroll as a percent of sales due to improved productivity, partly offset by higher commodity costs.
• Europe:  For both periods, the Company-operated margin percent reflected improved margin performance in Germany and France and weak performance in the U.K.
• APMEA:   For the quarter, strong comparable sales performance in Australia drove the Company-operated margin percent improvement. The margin percent declined for the year due to weak results in South Korea, Hong Kong and Taiwan.
• Franchised:  For the quarter, the consolidated Franchised margin percent reflects positive comparable sales partly offset by higher occupancy costs, due in part to an increased proportion of leased sites. Positive comparable sales were offset by these higher occupancy costs for the year.

 The following table presents margin components as a percent of sales.

COMPANY-OPERATED COSTS AND MARGINS AS A PERCENT OF SALES – McDONALD’S RESTAURANTS*
	Quarters Ended December 31,		Years Ended December 31,
	2003	2002	2003	2002
Food & paper	33.7	33.9	33.7	34.1
Payroll & employee benefits	26.0	26.9	26.4	26.4
Occupancy & other operating expenses	25.5	26.1	25.4	25.1
Total expenses	85.2	86.9	85.5	85.6
Company-operated margins	14.8	13.1	14.5	14.4

* Operating margin information relates to McDonald's restaurants

and excludes non-McDonald’s brands.

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Selling, General & Administrative Expenses

SELLING, GENERAL & ADMINISTRATIVE EXPENSES Dollars in millions
Years ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
U.S.	$ 566.8	$ 557.7	2	n/a	n/a
Europe	424.3	359.3	18	$57.5	2
APMEA	173.3	157.7	10	11.9	2
Latin America	101.8	101.5	-	(7.5)	8
Canada	53.6	49.2	9	6.0	(3)
Other*	115.1	114.3	1	0.6	-
Corporate	398.1	373.1	7	n/a	n/a
Total	$1,833.0	$1,712.8	7	$68.5	3

* Other represents non-McDonald’s brands

n/a Not applicable

• Selling, general & administrative expenses increased 6% for the quarter and 7% for the year primarily due to higher performance-based incentive compensation, and severance and other costs associated with fewer restaurant openings. These incremental costs were partly offset by lower advertising expenses due to costs incurred to support the launch of the Dollar Menu in the U.S. in fourth quarter 2002. In addition, stronger foreign currencies increased selling, general & administrative expenses by $24.3 million for the quarter and $68.5 million for the year.

Other Operating (Income) Expense, Net

OTHER OPERATING (INCOME) EXPENSE, NET Dollars in millions
	Quarters Ended December 31,		Years Ended December 31,
	2003	2002	2003	2002
Gains on sales of restaurant businesses	$(12.2)	$(35.1)	$(54.5)	$(113.6)
Equity in earnings of unconsolidated affiliates	(12.7)	5.4	(36.9)	(24.1)
Front counter service system payments – U.S.	-	-	-	21.6
Significant charges	407.6	810.2	407.6	853.2
Other expense	131.9	59.8	215.4	96.2
Total	$514.6	$840.3	$531.6	$ 833.3

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• The increase in equity in earnings of unconsolidated affiliates reflected a stronger performance in the U.S. for both periods and improved results from our Japanese affiliate for the quarter.
• Significant charges are defined as charges for actions or transactions related to the implementation of special initiatives of the Company or items that are unusual or infrequent in nature. The Company does not include these items when reviewing business performance trends, because management does not believe these are indicative of ongoing operations. Significant charges for the quarter and full year 2003 included $237.0 million related to the disposition of certain non-McDonald’s brands; $147.7 million primarily related to asset/goodwill impairment mainly in Latin America; $35.1 million related to the revitalization plan actions of our Japanese affiliate; $29.6 million for restaurant closings associated with strategic actions in Latin America; and a favorable adjustment to the 2002 charge for restaurant closings of $41.8 million due to about 8 5 fewer closings. Significant charges in fourth quarter 2002 included $266.9 million primarily related to market restructuring costs; $359.4 million related to restaurant closings/asset impairment for 751 restaurants ($402.4 million for the year); and $183.9 million primarily related to the termination of a technology project.
• Other expense for both periods reflected higher losses on asset dispositions and higher provisions for uncollectible receivables in 2003 compared with 2002. In addition, the full year 2003 included about $25 million of costs in the U.S. as a result of management's decision to significantly reduce capital expenditures.

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Operating Income

OPERATING INCOME (LOSS) Dollars in millions
Quarters ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
U.S.	$ 502.1	$ 273.3	84	n/a	n/a
Europe	358.3	144.1	n/m	$ 47.4	n/m
APMEA	17.6	(165.3)	n/m	9.5	n/m
Latin America	(155.7)	(130.7)	(19)	(29.0)	3
Canada	48.8	20.6	n/m	8.0	98
Other*	(271.7)	(38.1)	n/m	(11.2)	n/m
Corporate	(131.9)	(307.3)	57	n/a	n/a
Total operating income (loss)	$ 367.5	$ (203.4)	n/m	$ 24.7	n/m
Years ended December 31,	2003	2002	% Inc (Dec)	Currency Translation Benefit (Loss)	% Inc (Dec) Excl Currency Translation Benefit (Loss)
U.S.	$1,982.1	$1,673.3	18	n/a	n/a
Europe	1,339.1	1,021.8	31	$181.4	13
APMEA	226.3	64.3	n/m	29.3	n/m
Latin America	(170.9)	(133.4)	(28)	(28.7)	(7)
Canada	163.2	125.4	30	19.3	15
Other*	(295.1)	(66.8)	n/m	(12.3)	n/m
Corporate	(412.5)	(571.7)	28	n/a	n/a
Total operating income	$2,832.2	$2,112.9	34	$189.0	25

* Other represents non-McDonald’s brands

n/a Not applicable

n/m Not meaningful

• U.S.:  In 2002, the fourth quarter and full year included significant charges of $99.2 million, primarily related to restaurant closings/asset impairment. Fourth quarter 2003 included a favorable adjustment of $11.4 million related to the 2002 charges. In addition, higher combined operating margin dollars were partly offset by higher other operating expenses for both periods and higher selling, general & administrative expenses for the year. Selling, general & administrative expenses were lower for the quarter.
• Europe:  In 2002, the quarter and year included significant charges of $147.8 million, primarily related to restaurant closings/asset impairment. In 2003, the quarter included a favorable adjustment of $20.0 million ($2.5 million lower in

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constant currencies) related to the 2002 charges. In addition, for the quarter and year, strong performance in Russia and expansion in France were partially offset by weak results in the UK. Operating income for the year was also affected by weak results in Germany, although Germany’s performance improved in the second half of the year.

• APMEA:  Results for both periods in 2003 included significant charges of $54.9 million ($4.6 million lower in constant currencies), primarily related to the revitalization plan actions in Japan, including a buyout of a Management Services Agreement with the founder of our affiliate in Japan, and goodwill impairment in certain markets. In 2002, the results included significant charges of $206.4 million for the quarter and $222.3 million for the year, primarily related to market restructures and restaurant closings/asset impairment. APMEA’s results for the fourth quarter 2003 also included strong comparable sales in Australia and improved performance in Japan. For the year, positive results in Aust ralia were offset by weak results in most markets, compounded by concerns about SARS in certain markets.
• Latin America:  Results for both periods in 2003 included significant charges of $108.9 million ($19.9 million lower in constant currencies) related to goodwill impairment and restaurant closings. In 2002, the results included significant charges of $115.2 million for the quarter and $142.3 million for the year, primarily related to restaurant closings/asset impairment. In addition, both periods in 2003 reflected weak results in Brazil and Argentina, and higher provisions for uncollectible receivables. Latin America's results for the year were negatively impacted by the national strike in Venezuela from December 2002 through mid-February 2003.

INTEREST, NONOPERATING EXPENSE AND INCOME TAXES

• Interest expense for both periods reflected stronger foreign currencies, lower average debt levels, and lower average interest rates.
• Nonoperating expense for the year reflected an $11 million loss on the early extinguishment of $200 million of debt in 2003 and higher foreign currency translation losses in 2003 compared with 2002.
• The effective income tax rate for the fourth quarter 2003 was 53.0% as certain restaurant closing/asset impairment charges were not tax effected. The effective rate for the full year 2003 was 35.7%. The impairment charges increased the rate 19.5 percentage points for the fourth quarter and 2.2 percentage points for the full year 2003.

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Although the Company reported a pretax loss for the fourth quarter 2002, there was a tax provision for the quarter because the loss included certain charges that were not tax effected. The effective rate for the full year 2002 was 40.3%. The significant charges in 2002 increased the rate for the full year by 7.6 percentage points.

OUTLOOK

The information provided below is as of January 2004.

• McDonald's expects net restaurant additions to add approximately one percentage point to sales growth in 2004 (in constant currencies). Most of this anticipated growth will result from restaurants opened in 2003.

In 2003, the Company opened 832 McDonald’s restaurants (513 traditional and 319 satellites). In 2004, the Company expects to open about 850 McDonald’s restaurants (550 traditional and 300 satellite restaurants). McDonald’s restaurant additions, net of closings, totaled 162 (27 traditional and 135 satellites) in 2003, and are expected to total about 450 (250 traditional and 200 satellite restaurants) in 2004.

• Comparable sales represent the constant currency change in sales from the same period in the prior year for Systemwide restaurants in operation at least thirteen months. As a guideline, assuming no change in cost structure, a one percentage point increase in U.S. comparable sales impacts annual earnings per share by about 2 cents, and an increase of one percentage point in Europe’s comparable sales impacts annual earnings per share by about 1.5 cents. In 2003, comparable sales increased 2.4% worldwide and 6.4% in the U.S., while Europe's comparable sales decreased 0.9%.
• McDonald's expects 2004 selling, general & administrative expenses to be relatively flat to up slightly in constant currencies and decline as a percent of Systemwide sales compared with 2003.
• A significant part of McDonald's operating income is from outside the U.S., and more than 70% of total debt is denominated in foreign currencies. The Euro and the British Pound are the most significant currencies impacting our business. If the Euro and the British Pound both move 10% (compared with 2003 average rates), McDonald's annual reported earnings per share would change by about 5 to 6 cents. In 2003, foreign currency translation benefited diluted earnings per share by 7 cents.

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• For 2004, the Company expects its net debt principal repayments to be approximately $400 million – $700 million and expects interest expense to be relatively flat with 2003, reflecting stronger foreign currencies.
• McDonald's expects the effective income tax rate for 2004 to be between 32.5% and 33.5%.
• McDonald's expects capital expenditures for 2004 to be approximately $1.5 billion – $1.6 billion.
• McDonald's expects to return about $1 billion to shareholders through dividends and share repurchases in 2004.

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BALANCE SHEET

McDONALD’S CORPORATION CONSOLIDATED BALANCE SHEET
Dollars in millions
	December 31, 2003	December 31, 2002
ASSETS
Current assets
Cash and equivalents	$ 492.8	$ 330.4
Accounts and notes receivable	734.5	855.3
Inventories	129.4	111.7
Prepaid expenses and other current assets	528.7	418.0
Total current assets	1,885.4	1,715.4
Other assets
Investment in and advances to affiliates	1,089.6	1,037.7
Goodwill, net	1,665.1	1,558.5
Miscellaneous	960.3	1,075.5
Total other assets	3,715.0	3,671.7
Property and equipment
Property and equipment, at cost	28,740.2	26,218.6
Accumulated depreciation and amortization	(8,815.5)	(7,635.2)
Net property and equipment	19,924.7	18,583.4
Total assets	$25,525.1	$23,970.5
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$ 577.4	$ 635.8
Income taxes	71.5	16.3
Other taxes	222.0	191.8
Accrued interest	193.1	199.4
Accrued restructuring and restaurant
closing costs	115.7	328.5
Accrued payroll and other liabilities	918.1	774.7
Current maturities of long-term debt	328.0	275.8
Total current liabilities	2,425.8	2,422.3
Long-term debt	9,402.5	9,703.6
Other long-term liabilities and
minority interests	699.8	560.0
Deferred income taxes	1,015.1	1,003.7
Shareholders’ equity
Common stock	16.6	16.6
Additional paid-in capital	1,837.5	1,747.3
Unearned ESOP compensation	(90.5)	(98.4)
Retained earnings	20,172.3	19,204.4
Accumulated other comprehensive income (loss)	(635.5)	(1,601.3)
Common stock in treasury	(9,318.5)	(8,987.7)
Total shareholders’ equity	11,981.9	10,280.9
Total liabilities and shareholders’ equity	$25,525.1	$23,970.5

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RESTAURANT INFORMATION

SYSTEMWIDE RESTAURANTS
At December 31,	2003	2002	Inc/(Dec)
U.S*	13,609	13,491	118
Europe
Germany*	1,244	1,211	33
United Kingdom	1,235	1,231	4
France	1,008	973	35
Spain	336	333	3
Italy	326	329	(3)
Other	2,037	1,993	44
Total Europe	6,186	6,070	116
APMEA
Japan*	3,773	3,891	(118)
Australia	729	726	3
China	576	546	30
Taiwan	346	350	(4)
South Korea	344	357	(13)
Other	1,707	1,685	22
Total APMEA	7,475	7,555	(80)
Latin America
Brazil	549	584	(35)
Mexico	281	261	20
Other	748	760	(12)
Total Latin America	1,578	1,605	(27)
Canada*	1,339	1,304	35
Other**	942	1,083	(141)
Systemwide restaurants	31,129	31,108	21
Countries	119	119	-

* At December 31, 2003 reflected the following satellites: U.S. 1,307; Germany

90; Japan 1,814; Canada 350. At December 31, 2002: U.S. 1,159; Germany

62; Japan 1,895; Canada 330;.

** Represents non-McDonald’s brands.

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SYSTEMWIDE RESTAURANTS BY TYPE
At December 31,	2003	2002	Inc/(Dec)
U.S.
Operated by franchisees	10,860	10,685	175
Operated by the Company	2,034	2,102	(68)
Operated by affiliates	715	704	11
	13,609	13,491	118
Europe
Operated by franchisees	3,614	3,499	115
Operated by the Company	2,307	2,286	21
Operated by affiliates	265	285	(20)
	6,186	6,070	116
APMEA
Operated by franchisees	2,284	2,182	102
Operated by the Company	2,245	2,218	27
Operated by affiliates	2,946	3,155	(209)
	7,475	7,555	(80)
Latin America
Operated by franchisees	585	658	(73)
Operated by the Company	972	912	60
Operated by affiliates	21	35	(14)
	1,578	1,605	(27)
Canada
Operated by franchisees	776	789	(13)
Operated by the Company	472	450	22
Operated by affiliates	91	65	26
	1,339	1,304	35
Other*
Operated by franchisees	13	51	(38)
Operated by the Company	929	1,032	(103)
	942	1,083	(141)
Systemwide
Operated by franchisees	18,132	17,864	268
Operated by the Company	8,959	9,000	(41)
Operated by affiliates	4,038	4,244	(206)
	31,129	31,108	21

* For 2003, reflected the sale of Donatos Pizzeria and the closing of all Donatos and Boston Market international locations.

FORWARD-LOOKING STATEMENTS

Certain forward-looking statements are included in this exhibit. 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 exhibit. 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

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underlying our forward-looking statements: effectiveness of operating initiatives; success in advertising and promotional efforts; changes in global and local business and economic conditions, including their impact on consumer confidence; fluctuations in currency exchange and interest rates; food, labor and other operating costs; political or economic instability in local markets, including the effects of war and terrorist activities; competition, including pricing and marketing initiatives and new product offerings by the Company's competitors; consumer preferences or perceptions concerning the Company's product offerings; spending patterns and demographic trends; availability of qualified restaurant personnel; severe weather conditions; existence of positive or negative publicity regarding the Company or its industry generally; effects of legal claims; cost and deployment of capital; change s in future effective tax rates; changes in governmental regulations; and changes in applicable accounting policies and practices. The foregoing list of important factors is not all inclusive.

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.

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