McDonald's (MCD) 10-Q 2003 Q3 Quarterly report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2003
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________
Commission File Number 1-5231

McDONALD'S CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Delaware	36-2361282
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
McDonald's Plaza Oak Brook, Illinois	60523
(Address of Principal Executive Offices)	(Zip Code)

Registrant's Telephone Number, including Area Code:(630) 623-3000Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.

        Indicate by check  ü  whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  ý    No  o

Indicate by check  ü  whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes  ý    No  o

1,269,163,900(Number of shares of common stock
outstanding as of September 30, 2003)

McDONALD'S CORPORATION

INDEX

			Page Reference
Part I.	Financial Information
	Item 1 — Financial Statements
	Condensed consolidated balance sheet,     September 30, 2003 (unaudited) and December 31, 2002		3
	Condensed consolidated statement of income (unaudited), quarters and nine months ended     September 30, 2003 and 2002		4
	Condensed consolidated statement of cash flows (unaudited), quarters and nine months ended     September 30, 2003 and 2002		5
	Notes to condensed consolidated financial statements (unaudited)		6
	Item 2 — Management's Discussion and Analysis of Financial Condition and Results of                 Operations		9
	Supplemental Information		16
	Item 3 — Quantitative and Qualitative Disclosures About Market Risk		20
	Item 4 — Controls and Procedures		20
Part II.	Other Information
	Item 6 — Exhibits and Reports on Form 8-K		20
	(a)	Exhibits The exhibits listed in the accompanying Exhibit Index are filed as part of this report	20
	(b)	Reports on Form 8-K	22
Signature			24

2

PART I—FINANCIAL INFORMATION

Item 1.    Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEET

In millions, except per share data		(unaudited) September 30, 2003			December 31, 2002
Assets
Current assets
Cash and equivalents		$	647.4		$	330.4
Accounts and notes receivable			703.0			855.3
Inventories, at cost, not in excess of market			116.2			111.7
Prepaid expenses and other current assets			471.9			418.0
	Total current assets		1,938.5			1,715.4
Other assets
Investments in and advances to affiliates			1,092.2			1,037.7
Goodwill, net			1,763.6			1,559.8
Miscellaneous			1,041.2			1,074.2
	Total other assets		3,897.0			3,671.7
Property and equipment
Property and equipment, at cost			27,884.2			26,218.6
Accumulated depreciation and amortization			(8,485.6	)		(7,635.2	)
	Net property and equipment		19,398.6			18,583.4
Total assets		$	25,234.1		$	23,970.5
Liabilities and shareholders' equity
Current liabilities
Accounts payable		$	507.0		$	635.8
Dividends payable			508.0
Income taxes			125.1			16.3
Other taxes			209.0			191.8
Accrued interest			172.4			199.4
Accrued restructuring and restaurant closing costs			152.5			328.5
Accrued payroll and other liabilities			843.6			774.7
Current maturities of long-term debt			115.8			275.8
	Total current liabilities		2,633.4			2,422.3
Long-term debt			9,291.7			9,703.6
Other long-term liabilities and minority interests			668.0			560.0
Deferred income taxes			992.4			1,003.7
Shareholders' equity
Preferred stock, no par value; authorized — 165.0 million shares;     issued — none
Common stock, $.01 par value; authorized — 3.5 billion shares;     issued — 1,660.6 million			16.6			16.6
Additional paid-in capital			1,808.4			1,747.3
Unearned ESOP compensation			(97.9	)		(98.4	)
Retained earnings			20,043.3			19,204.4
Accumulated other comprehensive income (loss)			(1,018.7	)		(1,601.3	)
Common stock in treasury, at cost; 391.5 and 392.4 million shares			(9,103.1	)		(8,987.7	)
	Total shareholders' equity		11,648.6			10,280.9
Total liabilities and shareholders' equity		$	25,234.1		$	23,970.5

See notes to condensed consolidated financial statements.

3

CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)

		Quarters ended September 30					Nine months ended September 30
In millions, except per common share data
		2003		2002			2003			2002
Revenues
Sales by Company-operated restaurants		$	3,351.2	$	3,019.3		$	9,397.0		$	8,566.8
Revenues from franchised and affiliated restaurants			1,153.4		1,027.7			3,188.1			2,939.7
	Total revenues		4,504.6		4,047.0			12,585.1			11,506.5
Operating costs and expenses
Company-operated restaurant expenses			2,840.6		2,584.8			8,094.0			7,348.3
Franchised restaurants — occupancy expenses			236.0		214.2			690.3			622.9
Selling, general, and administrative expenses			456.3		438.2			1,319.1			1,226.0
Other operating (income) expense, net			7.8		(20.0	)		17.0			(7.0	)
	Total operating costs and expenses		3,540.7		3,217.2			10,120.4			9,190.2
Operating income			963.9		829.8			2,464.7			2,316.3
Interest expense			93.8		93.8			297.3			279.5
Nonoperating expense, net			47.0		20.7			88.5			53.1
Income before provision for income taxes and cumulative effect of accounting changes			823.1		715.3			2,078.9			1,983.7
Provision for income taxes			275.7		228.6			696.4			647.8
Income before cumulative effect of accounting changes			547.4		486.7			1,382.5			1,335.9
Cumulative effect of accounting changes, net of tax benefits of $9.4 and $17.6								(36.8	)		(98.6	)
Net income		$	547.4	$	486.7		$	1,345.7		$	1,237.3
Per common share:
Income before cumulative effect of accounting changes		$	0.43	$	0.38		$	1.09		$	1.05
Cumulative effect of accounting changes								(0.03	)		(0.08	)
Net income		$	0.43	$	0.38		$	1.06		$	0.97
Per common share — diluted:
Income before cumulative effect of accounting changes		$	0.43	$	0.38		$	1.08		$	1.04
Cumulative effect of accounting changes								(0.03	)		(0.08	)
Net income		$	0.43	$	0.38		$	1.05		$	0.96
Dividends declared per common share		$	0.40		—		$	0.40			—
Weighted average shares			1,271.5		1,273.1			1,271.2			1,274.5
Weighted average shares — diluted			1,281.0		1,280.5			1,276.2			1,286.8

See notes to condensed consolidated financial statements.

4

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

			Quarters ended September 30						Nine months ended September 30
In millions
			2003			2002			2003			2002
Operating activities
Net income			$	547.4		$	486.7		$	1,345.7		$	1,237.3
Adjustments to reconcile to cash provided by operations
	Cumulative effect of accounting changes									36.8			98.6
	Depreciation and amortization			274.9			281.0			832.6			787.7
	Changes in working capital items			49.7			196.1			(215.1	)		32.5
	Deferred income taxes			131.8			(8.1	)		219.1			47.6
	Other			26.4			44.8			49.1			—
		Cash provided by operations	$	1,030.2		$	1,000.5		$	2,268.2		$	2,203.7
Investing activities
Property and equipment expenditures				(257.5	)		(510.9	)		(878.0	)		(1,286.4	)
Purchases and sales of restaurant businesses and sales     of property				9.9			(43.7	)		18.9			(124.3	)
Other				(16.9	)		(82.4	)		(46.0	)		(199.3	)
		Cash used for investing activities	$	(264.5	)	$	(637.0	)	$	(905.1	)	$	(1,610.0	)
Financing activities
Notes payable and long-term financing issuances     and repayments				(530.8	)		(246.4	)		(921.7	)		(109.6	)
Treasury stock purchases				(139.5	)		(149.1	)		(165.5	)		(605.9	)
Other				31.6			(20.5	)		41.1			127.1
		Cash used for financing activities	$	(638.7	)	$	(416.0	)	$	(1,046.1	)	$	(588.4	)
Cash and equivalents increase (decrease)				127.0			(52.5	)		317.0			5.3
Cash and equivalents at beginning of period				520.4			475.9			330.4			418.1
Cash and equivalents at end of period			$	647.4		$	423.4		$	647.4		$	423.4

See notes to condensed consolidated financial statements.

5

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Basis of Presentation

        The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements contained in the Company's December 31, 2002 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. The results for the quarter and nine months ended September 30, 2003 do not necessarily indicate the results that may be expected for the full year.

        The results of operations of restaurant businesses purchased and sold were not material to the condensed consolidated financial statements for periods prior to purchase and sale.

Comprehensive Income

        The following table presents the components of comprehensive income for the quarters and nine months ended September 30, 2003 and 2002:

		Quarters ended September 30					Nine months ended September 30
In millions
		2003		2002			2003		2002
Net income		$	547.4	$	486.7		$	1,345.7	$	1,237.3
Other comprehensive income (loss):
	Foreign currency translation adjustments		40.9		(177.1	)		575.5		(149.5	)
	Deferred hedging adjustments		7.7		10.6			7.1		3.0
Total other comprehensive income (loss)			48.6		(166.5	)		582.6		(146.5	)
	Total comprehensive income	$	596.0	$	320.2		$	1,928.3	$	1,090.8

Restructuring and Restaurant Closing Costs

        In second quarter 2003, the Company recorded a $14.0 million pretax charge in selling, general and administrative expenses for severance and other employee-related costs, in connection with streamlining restaurant development functions.

        In first quarter 2002, the Company recorded $43.0 million (pre and after tax) of asset impairment charges in other operating expense, primarily related to the impairment of assets in certain existing restaurants in Chile and other Latin American markets and the closing of 32 underperforming restaurants in Turkey, as a result of continued economic weakness.

        In fourth quarter 2002, the Company recorded $810.2 million of pretax charges ($656.9 million after tax) primarily related to: restructuring certain markets in the Middle East and Latin America; eliminating approximately 600 positions; reallocating resources and consolidating certain home office facilities; management's decision to close 719 underperforming restaurants primarily in the U.S. and Japan; and the write-off of software development costs.

        The following table presents the activity included in accrued restructuring and restaurant closing costs in the condensed consolidated balance sheet.

				2003 Activity
		Liability at December 31, 2002							Liability at September 30, 2003
In millions				Provision		Cash Payments
Employee-related costs		$	72.3	$	14.0	$	(38.2	)	$	48.1
Lease termination and other			256.2				(151.8	)		104.4
	Total accrued restructuring and restaurant closing costs	$	328.5	$	14.0	$	(190.0	)	$	152.5

Per Common Share Information

        Diluted net income per common share is calculated using net income divided by diluted weighted-average shares. Diluted weighted-average shares include weighted-average shares outstanding plus the dilutive effect of stock options, calculated using the treasury stock

6

method, of 9.5 million shares and 7.4 million shares for the third quarter 2003 and 2002, respectively, and 5.0 million shares and 12.3 million shares for the nine months ended September 30, 2003 and 2002, respectively. Stock options that were not included in diluted weighted-average shares because they would have been antidilutive were 159.1 million shares and 168.8 million shares for the third quarter 2003 and 2002, respectively, and 167.1 million shares and 104.0 million shares for the nine months ended September 30, 2003 and 2002, respectively.

Stock-Based Compensation

        The Company accounts for stock options as prescribed by Accounting Principles Board Opinion No. 25 and includes pro forma information, as provided by Statement of Financial Accounting Standards (SFAS) No. 123, as amended by SFAS No. 148,Accounting for Stock-Based Compensation.

        Pro forma net income and net income per common share were determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value of these options was estimated at the date of grant using an option pricing model. The model was designed to estimate the fair value of exchange-traded options that, unlike employee stock options, can be traded at any time and are fully transferable. In addition, such models require the input of highly subjective assumptions including the expected volatility of the stock price. For pro forma disclosures, the options' estimated fair value was amortized over their vesting period.

		Quarters ended September 30						Nine months ended September 30
Pro forma disclosuresIn millions, except per share data
		2003			2002			2003			2002
Net income, as reported		$	547.4		$	486.7		$	1,345.7		$	1,237.3
Deduct: Total stock option compensation expense under fair value method, net of related tax effects			(49.5	)		(64.2	)		(168.9	)		(187.4	)
Pro forma-net income		$	497.9		$	422.5		$	1,176.8		$	1,049.9
Net income per share:
	As reported-basic	$	0.43		$	0.38		$	1.06		$	0.97
	Pro forma-basic	$	0.39		$	0.33		$	0.93		$	0.82
	As reported-diluted	$	0.43		$	0.38		$	1.05		$	0.96
	Pro forma-diluted	$	0.39		$	0.33		$	0.92		$	0.82

Changes in Accounting Standards

Asset retirement obligations — 2003

        Effective January 1, 2003, the Company adopted SFAS No. 143,Accounting for Asset Retirement Obligations. The Statement requires legal obligations associated with the retirement of long-lived assets to be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, the cost is capitalized as part of the related long-lived asset and allocated to expense over the useful life of the asset. In first quarter 2003, the Company recorded a charge of $36.8 million after tax ($0.03 per diluted share) related to lease obligations in certain international markets to reflect the cumulative effect of this accounting change. The adoption of the new rule will not have a material effect on the Company's ongoing results of operations or financial position.

Goodwill — 2002

        Effective January 1, 2002, the Company adopted SFAS No. 142,Goodwill and Other Intangible Assets, which eliminates the amortization of goodwill (and intangible assets deemed to have indefinite lives) and instead subjects it to annual impairment tests. The Company performed the initial required goodwill impairment test as of January 1, 2002, and recorded a charge of $98.6 million after tax ($0.08 per diluted share) in first quarter 2002 for the cumulative effect of this accounting change. The impaired goodwill was primarily in Argentina, Uruguay and other markets in Latin America and the Middle East, where economies had weakened significantly.

Segment Information

        The Company operates in the food service industry and primarily operates and franchises quick-service restaurant businesses under the McDonald's brand (McDonald's restaurants). The Company also operates other restaurant concepts under its Partner Brands: Boston Market, Chipotle Mexican Grill and Donatos Pizzeria.

7

        The following table presents the Company's revenues and operating income by geographic segment. APMEA represents McDonald's restaurant operations in Asia/Pacific, the Middle East and Africa.

			Quarters ended September 30						Nine months ended September 30
In millions
			2003			2002			2003			2002
Revenues
	U.S.		$	1,593.5		$	1,408.1		$	4,460.6		$	4,076.3
	Europe			1,525.4			1,380.7			4,291.2			3,789.1
	APMEA			659.3			623.7			1,811.8			1,788.0
	Latin America			221.3			201.2			620.4			619.4
	Canada			213.8			172.9			561.6			473.7
	Partner Brands			291.3			260.4			839.5			760.0
		Total revenues	$	4,504.6		$	4,047.0		$	12,585.1		$	11,506.5
Operating income (loss)
	U.S.		$	571.0		$	479.9		$	1,480.0		$	1,400.0
	Europe			382.6			336.3			980.8			877.7
	APMEA			91.4			84.2			208.7			229.6
	Latin America			(20.2	)		6.7			(15.2	)		(2.7	)
	Canada			47.3			39.3			114.4			104.8
	Partner Brands			(0.2	)		(10.1	)		(23.4	)		(28.7	)
	Corporate			(108.0	)		(106.5	)		(280.6	)		(264.4	)
		Total operating income	$	963.9		$	829.8		$	2,464.7		$	2,316.3

8

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

OPERATING RESULTS

		Quarter ended September 30, 2003			Nine months ended September 30, 2003
Dollars in millions, except per common share data		Amount		% Increase/ (Decrease)	Amount			% Increase/ (Decrease)
Revenues
Sales by Company-operated restaurants		$	3,351.2	11	$	9,397.0		10
Revenues from franchised and affiliated restaurants			1,153.4	12		3,188.1		8
	Total revenues		4,504.6	11		12,585.1		9
Operating costs and expenses
Company-operated restaurant expenses			2,840.6	10		8,094.0		10
Franchised restaurants — occupancy expenses			236.0	10		690.3		11
Selling, general, and administrative expenses			456.3	4		1,319.1		8
Other operating expense, net			7.8	n/m		17.0		n/m
	Total operating costs and expenses		3,540.7	10		10,120.4		10
Operating income			963.9	16		2,464.7		6
Interest expense			93.8	—		297.3		6
Nonoperating expense, net			47.0	n/m		88.5		n/m
Income before provision for income taxes and cumulative effect of accounting changes			823.1	15		2,078.9		5
Provision for income taxes			275.7	21		696.4		8
Income before cumulative effect of accounting changes			547.4	12		1,382.5		3
Cumulative effect of accounting changes, net of tax benefit of $9.4			—	n/m		(36.8	)	n/m
Net income		$	547.4	12	$	1,345.7		9
Per common share:
Income before cumulative effect of accounting changes		$	0.43	13	$	1.09		4
Cumulative effect of accounting changes			—	—		(0.03	)	n/m
Net income		$	0.43	13	$	1.06		9
Per common share — diluted:
Income before cumulative effect of accounting changes		$	0.43	13	$	1.08		4
Cumulative effect of accounting changes			—	—		(0.03	)	n/m
Net income		$	0.43	13	$	1.05		9

n/m

Not meaningful

9

CONSOLIDATED OPERATING RESULTS

The Company operates in the food service industry and primarily operates and franchises quick-service restaurant businesses under the McDonald's brand (McDonald's restaurants). The Company also operates other restaurant concepts under its Partner Brands.

Impact of Foreign Currencies on Reported Results

        While changing foreign currencies affect reported results, McDonald's lessens exposures, where practical, by financing in local currencies, hedging certain foreign-denominated cash flows and by purchasing goods and services in local currencies. Foreign currency translation had a positive impact on the growth rates of consolidated revenue, operating income and earnings per share for the quarter and nine months, primarily due to the stronger Euro.

        Information in constant currencies excludes the effect of foreign currency translation on reported results. Constant currency results are calculated by translating current year results at prior year average exchange rates. Management reviews and analyzes business results in constant currencies and bases certain compensation plans on these results because it believes these results better represent the Company's underlying business trends.

Net Income and Diluted Net Income Per Common Share

        For the quarter, net income increased $60.7 million or 12%, and diluted net income per common share increased $0.05 or 13%. These results included a benefit from foreign currency translation of $23.4 million in net income and $0.02 in diluted net income per common share.

        For the nine months, income before the cumulative effect of accounting changes increased $46.6 million or 3%, and diluted income per common share before the cumulative effect of accounting changes increased $0.04 or 4%. Net income, including the cumulative effect of the accounting changes, increased $108.4 million or 9% and diluted net income per common share increased $0.09 or 9%. These results included a benefit from foreign currency translation of $83.3 million in net income and $0.06 in diluted net income per common share.

        Diluted weighted average shares outstanding were lower for the nine months compared with the prior year due to a less dilutive effect from outstanding stock options and shares repurchased.

        The Company repurchased $139 million of its common stock during the third quarter.

Cumulative Effect of Accounting Changes

        First quarter 2003 included a charge of $36.8 million after tax ($0.03 per diluted share) for the cumulative effect of an accounting change that impacted lease obligations in certain international markets.

        First quarter 2002 included a charge of $98.6 million after tax ($0.08 per diluted share) to reflect the cumulative effect of an accounting change that impacted goodwill.

        See changes in accounting standards on page 7 for further discussion of these charges.

Revenues and Comparable 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. For the quarter and nine months ended September 30, 2003, Company-operated restaurants generated about 75% of revenues. See pages 16-17 for additional details regarding revenues.

10

Revenues Dollars in millions		2003							2002		Percent Increase/(Decrease)
Quarters ended September 30		As reported		Currency translation impact			Constant currency*		As reported		As reported	Constant currency*
U.S.		$	1,593.5		n/a		$	1,593.5	$	1,408.1	13	n/a
Europe			1,525.4	$	(134.5	)		1,390.9		1,380.7	10	1
APMEA			659.3		(31.0	)		628.3		623.7	6	1
Latin America			221.3		0.1			221.4		201.2	10	10
Canada			213.8		(24.9	)		188.9		172.9	24	9
Partner Brands			291.3		(0.6	)		290.7		260.4	12	12
	Total revenues	$	4,504.6	$	(190.9	)	$	4,313.7	$	4,047.0	11	7
Nine months ended September 30
U.S.		$	4,460.6		n/a		$	4,460.6	$	4,076.3	9	n/a
Europe			4,291.2	$	(535.8	)		3,755.4		3,789.1	13	(1	)
APMEA			1,811.8		(87.1	)		1,724.7		1,788.0	1	(4	)
Latin America			620.4		86.9			707.3		619.4	—	14
Canada			561.6		(53.1	)		508.5		473.7	19	7
Partner Brands			839.5		(1.1	)		838.4		760.0	10	10
	Total revenues	$	12,585.1	$	(590.2	)	$	11,994.9	$	11,506.5	9	4

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

n/a

Not applicable

        Comparable sales represent the percent change in constant currency Systemwide sales from the same period in the prior year for all Systemwide restaurants in operation at least thirteen months. Systemwide sales include sales by all restaurants, whether operated by the Company, by franchisees or by affiliates operating under joint-venture agreements. Management believes that Systemwide sales information is useful in analyzing the Company's revenues because fees received from franchisees and affiliates, based on sales from their restaurants, along with sales from Company-operated restaurants are reported as revenues.

		Percent Increase/(Decrease)
		Quarters ended September 30				Nine months ended September 30
Comparable Sales — McDonald's Restaurant Business
		2003		2002		2003		2002
U.S.		9.5		(2.8	)	4.3		(1.6	)
Europe		(0.1	)	(1.3	)	(2.0	)	2.0
APMEA		(3.9	)	(8.1	)	(6.2	)	(9.2	)
Latin America		(1.8	)	3.6		2.5		(2.1	)
Canada		0.7		(0.9	)	(1.8	)	(2.0	)
	Brand McDonald's	3.9		(3.0	)	0.7		(2.1	)

        In the U.S., continued strong customer response to the new Premium Salads and McGriddles breakfast sandwiches, popular Happy Meals, extended hours, continued everyday value and focus on improved food taste and service, all contributed to the revenue increases for the quarter and nine months.

        In Europe, expansion in France and a strong performance in Russia were offset by continued negative trends in the U.K. and Germany for the quarter and nine months.

        In APMEA, revenues for the quarter and nine months were impacted by positive comparable sales in Australia, expansion in China and weak results in South Korea and Taiwan. For the nine months, revenues were also affected by concerns about SARS (Severe Acute Respiratory Syndrome).

        In Latin America, revenues increased for both periods in constant currencies primarily due to a higher percentage of Company-operated restaurants in 2003.

11

Operating Margins

Company-operated and Franchised Restaurant Margins — McDonald's Restaurant Business*
		Percent		Amount
Dollars in millionsQuarters ended September 30								Percent Increase/ (Decrease)
		2003	2002	2003		2002
Company-operated
U.S.		18.6	15.5	$	175.5	$	128.5	37
Europe		17.0	17.1		197.5		182.0	9
APMEA		12.2	12.2		71.4		68.0	5
Latin America		5.7	10.1		11.4		17.4	(34	)
Canada		17.1	15.1		29.7		20.7	43
	Total	15.9	15.1	$	485.5	$	416.6	17
Franchised
U.S.		80.4	79.6	$	524.3	$	462.5	13
Europe		77.4	77.6		281.6		244.5	15
APMEA		86.7	86.1		65.0		56.7	15
Latin America		64.7	69.3		14.1		20.3	(31	)
Canada		79.3	80.6		31.8		28.9	10
	Total	79.5	79.2	$	916.8	$	812.9	13
Nine months ended September 30
Company-operated
U.S.		17.3	16.7	$	461.6	$	394.9	17
Europe		15.5	16.0		509.7		468.8	9
APMEA		9.9	12.3		159.4		196.3	(19	)
Latin America		7.1	9.2		39.6		48.4	(18	)
Canada		14.5	14.6		66.0		55.2	20
	Total	14.4	14.9	$	1,236.3	$	1,163.6	6
Franchised
U.S.		79.5	79.5	$	1,429.6	$	1,357.6	5
Europe		75.8	76.9		766.9		653.7	17
APMEA		85.0	86.1		175.1		162.9	7
Latin America		64.9	68.1		41.7		64.4	(35	)
Canada		78.3	79.4		83.0		76.8	8
	Total	78.3	78.8	$	2,496.3	$	2,315.4	8

*

Operating margin information relates to McDonald's restaurant business and excludes Partner Brands.

        Combined operating margin dollars increased $172.8 million or 14% for the quarter and $253.6 million or 7% for the nine months. Foreign currency translation benefited combined operating margin dollars by $63.0 million for the quarter and $207.2 million for the nine months. The U.S. and Europe segments accounted for more than 80% of the combined margin dollars in both periods of 2003 and 2002.

        In the U.S., the 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 increased commodity costs.

        In Europe, the Company-operated margin percent declined for both periods due to weak performance in the U.K., partly offset by improved margin performance in Germany and France.

        In APMEA, the Company-operated margin percent benefited from SARS-related sales tax relief received from the Chinese government.

        The increase in the consolidated franchised margin percent for the quarter reflects positive comparable sales partly offset by higher occupancy costs, due in part to an increased proportion of leased sites. Positive comparable sales were more than offset by these higher occupancy costs for the nine months.

12

Selling, General & Administrative Expenses

        Selling, general & administrative expenses increased 4% for the quarter and 8% for the nine months partly due to higher marketing costs related to the introduction of the new 'i'm lovin' it' campaign, and higher performance-based incentive compensation. The nine months also included approximately $14 million in severance costs, primarily associated with streamlining restaurant development functions, and $11 million of incremental marketing in the second quarter, principally in the U.S. In addition, stronger foreign currencies increased selling, general & administrative expenses by $14.6 million for the quarter and $44.2 million for the nine months, contributing to the increases.

Other Operating (Income) Expense, Net

Other Operating (Income) Expense, Net		Quarters ended September 30						Nine months ended September 30
Dollars in millions		2003			2002			2003			2002
Gains on sales of restaurant businesses		$	(11.5	)	$	(38.1	)	$	(42.3	)	$	(78.5	)
Equity in earnings of unconsolidated affiliates			(20.7	)		(14.1	)		(24.2	)		(29.5	)
Front counter service system payments — U.S.			—			—			—			21.6
Asset impairment — Latin America and Turkey			—			—			—			43.0
Other expense			40.0			32.2			83.5			36.4
	Total	$	7.8		$	(20.0	)	$	17.0		$	(7.0	)

        Equity in earnings of unconsolidated affiliates for the quarter and nine months reflected weaker results from our Japanese affiliate in 2003 and stronger performance in the U.S.

        Other expense for both periods reflected higher provisions for uncollectible receivables in 2003 compared with 2002. In addition, the nine months 2003 included about $25 million of costs in the U.S. as a result of management's decision to significantly reduce capital expenditures.

Operating Income

Operating Income Dollars in millions		2003									2002			Percent Increase/(Decrease)
Quarters ended September 30		As reported			Currency translation impact			Constant currency*			As reported			As reported		Constant currency*
U.S.		$	571.0			n/a		$	571.0		$	479.9		19		n/a
Europe			382.6		$	(38.5	)		344.1			336.3		14		2
APMEA			91.4			(7.8	)		83.6			84.2		9		(1	)
Latin America			(20.2	)		3.4			(16.8	)		6.7		n/m		n/m
Canada			47.3			(5.6	)		41.7			39.3		20		6
Partner Brands			(0.2	)		0.3			0.1			(10.1	)	98		n/m
Corporate			(108.0	)		n/a			(108.0	)		(106.5	)	(1	)	n/a
	Total operating income	$	963.9		$	(48.2	)	$	915.7		$	829.8		16		10
Nine months ended September 30
U.S.		$	1,480.0			n/a		$	1,480.0		$	1,400.0		6		n/a
Europe			980.8		$	(134.0	)		846.8			877.7		12		(4	)
APMEA			208.7			(19.8	)		188.9			229.6		(9	)	(18	)
Latin America			(15.2	)		(0.3	)		(15.5	)		(2.7	)	n/m		n/m
Canada			114.4			(11.3	)		103.1			104.8		9		(2	)
Partner Brands			(23.4	)		1.1			(22.3	)		(28.7	)	18		22
Corporate			(280.6	)		n/a			(280.6	)		(264.4	)	(6	)	n/a
	Total operating income	$	2,464.7		$	(164.3	)	$	2,300.4		$	2,316.3		6		(1	)

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

n/a

Not applicable

n/m

Not meaningful

13

        In the U.S., higher combined operating margin dollars were partly offset by lower other operating income for both periods and higher selling, general & administrative expenses for the nine months. Selling, general & administrative expenses were relatively flat for the quarter.

        In Europe, operating income for both periods reflected positive results in France and weak results in Germany and the U.K.

        In APMEA, operating income for the quarter reflected positive results in Australia and the sales tax relief benefit in China, offset by weak results in other markets. For the nine months, operating income decreased due to negative comparable sales, compounded by concerns about SARS. Results for the nine months 2002 included $15.9 million of asset impairment charges in Turkey.

        In Latin America, the declines in operating income for both periods reflected weak results in Brazil and Argentina, and higher provisions for uncollectible receivables. In addition, Latin America's results for the nine months were negatively impacted by the national strike in Venezuela. Results for the nine months 2002 included $27.1 million of asset impairment charges.

INTEREST, NONOPERATING EXPENSE AND INCOME TAXES

        Interest expense was flat for the quarter but increased for the nine months due to stronger foreign currencies.

        Nonoperating expense for both periods reflected an $11 million loss on the early extinguishment of $200 million of debt in July 2003. In addition, the nine months reflected higher foreign currency translation losses in 2003 compared with 2002.

        The effective income tax rate for both periods in 2003 was 33.5% compared with 32.0% for third quarter 2002 and 32.7% for the nine months 2002.

CASH FLOWS AND FINANCIAL POSITION

        For the nine months 2003, cash provided by operations totaled $2,268.2 million and exceeded capital expenditures by $1,390.2 million. Cash provided by operations was higher than in 2002, and capital expenditures decreased by more than $400 million or about 30% for the nine months primarily due to lower restaurant openings in 2003, partly offset by stronger foreign currencies. See the followingOUTLOOK section for the Company's expectations regarding capital expenditures and other uses of cash from operations in 2003.

        Debt obligations at September 30, 2003 totaled $9,407.5 million compared with $9,979.4 million at December 31, 2002. The decrease in 2003 is due to net payments of $921.7 million and SFAS No. 133 noncash fair value adjustments of $2.0 million, partly offset by the impact of changes in exchange rates on foreign currency- denominated debt ($351.8 million).

OUTLOOK

        The information provided below is as of the date of this report.

•

McDonald's expects sales from new restaurants to add two to three percentage points to Systemwide sales growth in 2003 (in constant currencies). Most of this anticipated growth will result from restaurants opened in 2002. McDonald's expects new restaurants to add approximately one percentage point to sales growth in 2004 (in constant currencies). In 2003 net worldwide restaurant additions are expected to total 360, with 260 net traditional and 100 net satellite restaurants.



•

Through September 2003, comparable sales have increased 0.7% worldwide and 4.3% in the U.S., while Europe's comparable sales decreased 2.0% for this period. As a guideline, assuming no change in profit margins, one percentage point of comparable sales in the U.S. impacts annual earnings per share by 1.5 cents, and one percentage point of comparable sales in Europe impacts annual earnings per share by about one cent.



•

McDonald's expects 2003 selling, general & administrative expenses to increase 5% to 6% (2% in constant currencies) compared with 2002.



•

A significant part of McDonald's operating income is from outside the U.S., and more than 60% 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 2002 average rates), McDonald's annual reported earnings per share would change by about 4 to 5 cents. Through September 2003, foreign currency translation benefited diluted earnings per share by 6 cents.

14

•

For the year 2003, the Company previously indicated its net debt payments would be in the $300 million to $700 million range. The Company now expects net debt payments to be at the higher end of this range, and expects interest expense to increase about 4% for the year.



•

McDonald's expects the effective income tax rate for the year 2003 to be about 33.5% to 34.0%.



•

McDonald's expects capital expenditures for 2003 to be approximately $1.2 billion in constant currencies. However, as a result of foreign currency translation, reported capital expenditures are expected to be closer to $1.3 billion.



•

McDonald's will return approximately $500 million to shareholders through dividends and about $300 million through share repurchases in 2003.



•

The Company expects to make decisions related to its Partner Brands and perform its annual impairment testing in the fourth quarter. In addition, the Company's Japanese affiliate recently announced plans for revitalizing McDonald's business in Japan. These actions will result in the Company recording charges in the fourth quarter 2003.



•

The Company's goals beginning in 2005 include achieving sustainable annual constant currency Systemwide sales and revenue growth of 3% to 5%, operating income growth of 6% to 7%, and return on incremental⁽¹⁾ invested capital in the high teens.

⁽¹⁾

Return on incremental invested capital is defined as the change in operating income plus depreciation divided by the change in gross assets.

FORWARD-LOOKING STATEMENTS

        Certain forward-looking statements are included in this report. 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 report. 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 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; changes 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.

15

SUPPLEMENTAL INFORMATION

        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. See page 18 for these franchised and affiliated sales amounts.

TOTAL REVENUES

Total Revenues Dollars in millions		2003							2002
Quarters ended September 30		As reported		Currency translation impact			Constant currency*		As reported
U.S.
Company-operated sales		$	941.7		n/a		$	941.7	$	827.2
Franchised and affiliated revenues			651.8		n/a			651.8		580.9
	Total	$	1,593.5		n/a		$	1,593.5	$	1,408.1
Europe
Company-operated sales			1,161.4	$	(93.2	)		1,068.2		1,065.6
Franchised and affiliated revenues			364.0		(41.3	)		322.7		315.1
	Total		1,525.4	$	(134.5	)		1,390.9		1,380.7
APMEA
Company-operated sales			584.3		(22.9	)		561.4		557.9
Franchised and affiliated revenues			75.0		(8.1	)		66.9		65.8
	Total		659.3		(31.0	)		628.3		623.7
Latin America
Company-operated sales			199.6		(0.9	)		198.7		171.9
Franchised and affiliated revenues			21.7		1.0			22.7		29.3
	Total		221.3		0.1			221.4		201.2
Canada
Company-operated sales			173.7		(20.3	)		153.4		137.0
Franchised and affiliated revenues			40.1		(4.6	)		35.5		35.9
	Total		213.8		(24.9	)		188.9		172.9
Partner Brands
Company-operated sales			290.5		(0.6	)		289.9		259.7
Franchised and affiliated revenues			0.8		n/a			0.8		0.7
	Total		291.3		(0.6	)		290.7		260.4
Consolidated
Company-operated sales		$	3,351.2	$	(137.9	)	$	3,213.3	$	3,019.3
Franchised and affiliated revenues			1,153.4		(53.0	)		1,100.4		1,027.7
	Total	$	4,504.6	$	(190.9	)	$	4,313.7	$	4,047.0

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

n/a

Not applicable

16

Total Revenues Dollars in millions		2003							2002
Nine months ended September 30		As reported		Currency translation impact			Constant currency*		As reported
U.S.
Company-operated sales		$	2,662.3		n/a		$	2,662.3	$	2,368.5
Franchised and affiliated revenues			1,798.3		n/a			1,798.3		1,707.8
	Total	$	4,460.6		n/a		$	4,460.6	$	4,076.3
Europe
Company-operated sales			3,279.8	$	(381.1	)		2,898.7		2,939.5
Franchised and affiliated revenues			1,011.4		(154.7	)		856.7		849.6
	Total		4,291.2	$	(535.8	)		3,755.4		3,789.1
APMEA
Company-operated sales			1,605.9		(65.1	)		1,540.8		1,598.8
Franchised and affiliated revenues			205.9		(22.0	)		183.9		189.2
	Total		1,811.8		(87.1	)		1,724.7		1,788.0
Latin America
Company-operated sales			556.1		78.0			634.1		524.7
Franchised and affiliated revenues			64.3		8.9		��	73.2		94.7
	Total		620.4		86.9			707.3		619.4
Canada
Company-operated sales			455.4		(43.1	)		412.3		376.9
Franchised and affiliated revenues			106.2		(10.0	)		96.2		96.8
	Total		561.6		(53.1	)		508.5		473.7
Partner Brands
Company-operated sales			837.5		(1.1	)		836.4		758.4
Franchised and affiliated revenues			2.0		n/a			2.0		1.6
	Total		839.5		(1.1	)		838.4		760.0
Consolidated
Company-operated sales		$	9,397.0	$	(412.4	)	$	8,984.6	$	8,566.8
Franchised and affiliated revenues			3,188.1		(177.8	)		3,010.3		2,939.7
	Total	$	12,585.1	$	(590.2	)	$	11,994.9	$	11,506.5

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

n/a

Not applicable

17

FRANCHISED AND AFFILIATED SALES

        The following tables present franchised and affiliated sales for the quarter and nine months. While these amounts are not recorded as sales by the Company, these amounts are the basis for which the Company calculates and records franchised and affiliated revenue (rent, service fees and/or royalties).

Franchised and Affiliated Sales Dollars in millions		2003							2002
Quarters ended September 30		As reported		Currency translation impact			Constant currency*		As reported
U.S.
Franchised sales		$	4,585.2		n/a		$	4,585.2	$	4,105.4
Affiliated sales			312.5		n/a			312.5		270.8
	Total	$	4,897.7		n/a		$	4,897.7	$	4,376.2
Europe
Franchised sales			1,917.9	$	(215.4	)		1,702.5		1,623.1
Affiliated sales			170.0		(19.2	)		150.8		158.0
	Total		2,087.9	$	(234.6	)		1,853.3		1,781.1
APMEA
Franchised sales			639.0		(50.7	)		588.3		555.0
Affiliated sales			642.5		(9.0	)		633.5		717.0
	Total		1,281.5		(59.7	)		1,221.8		1,272.0
Latin America
Franchised sales			148.5		3.1			151.6		173.8
Affiliated sales			10.2		0.4			10.6		12.0
	Total		158.7		3.5			162.2		185.8
Canada
Franchised sales			272.5		(31.7	)		240.8		247.9
Affiliated sales			30.1		(3.5	)		26.6		15.6
	Total		302.6		(35.2	)		267.4		263.5
Partner Brands
Franchised sales			10.3		n/a			10.3		10.2
Affiliated sales			—		n/a			—		—
	Total		10.3		n/a			10.3		10.2
Total
Franchised sales		$	7,573.4	$	(294.7	)	$	7,278.7	$	6,715.4
Affiliated sales			1,165.3		(31.3	)		1,134.0		1,173.4
	Total	$	8,738.7	$	(326.0	)	$	8,412.7	$	7,888.8

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

18

Franchised and Affiliated Sales Dollars in millions		2003							2002
Nine months ended September 30		As reported		Currency translation impact			Constant currency*		As reported
U.S.
Franchised sales		$	12,799.7		n/a		$	12,799.7	$	12,072.8
Affiliated sales			862.7		n/a			862.7		807.7
	Total	$	13,662.4		n/a		$	13,662.4	$	12,880.5
Europe
Franchised sales			5,268.0	$	(799.7	)		4,468.3		4,362.4
Affiliated sales			496.9		(77.8	)		419.1		405.6
	Total		5,764.9	$	(877.5	)		4,887.4		4,768.0
APMEA
Franchised sales			1,745.4		(158.1	)		1,587.3		1,522.7
Affiliated sales			1,875.0		(102.7	)		1,772.3		1,963.8
	Total		3,620.4		(260.8	)		3,359.6		3,486.5
Latin America
Franchised sales			422.4		58.6			481.0		554.2
Affiliated sales			27.3		1.4			28.7		28.8
	Total		449.7		60.0			509.7		583.0
Canada
Franchised sales			716.6		(67.6	)		649.0		679.6
Affiliated sales			71.6		(7.0	)		64.6		42.0
	Total		788.2		(74.6	)		713.6		721.6
Partner Brands
Franchised sales			30.9		n/a			30.9		30.1
Affiliated sales			—		n/a			—		—
	Total		30.9		n/a			30.9		30.1
Total
Franchised sales		$	20,983.0	$	(966.8	)	$	20,016.2	$	19,221.8
Affiliated sales			3,333.5		(186.1	)		3,147.4		3,247.9
	Total	$	24,316.5	$	(1,152.9	)	$	23,163.6	$	22,469.7

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

        The following table presents Systemwide sales growth rates. Systemwide sales include sales by all restaurants, whether operated by the Company, by franchisee or by affiliates operating under joint-venture agreements.

SYSTEMWIDE SALES

		Percent Increase/(Decrease)
		Quarters ended September 30				Nine months ended September 30
Systemwide Sales Percent Increase/(Decrease)
		As reported		Constant currency*		As reported		Constant currency*
U.S.		12	%	n/a		7	%	n/a
Europe		14		3	%	17		1	%
APMEA		2		(3	)	3		(4	)
Latin America		—		1		(9	)	3
Canada		19		5		13		2
Partner Brands		11		11		10		10
	Total sales	11	%	7	%	9	%	4	%

*

Information in constant currencies excludes the effect of foreign currency translation on reported results.

n/a

Not applicable

19

Restaurants			At September 30,	2003	2002
By type
	Operated by franchisees			18,031	17,714
	Operated by the Company			9,211	8,802
	Operated by affiliates			4,053	4,267
		Systemwide restaurants		31,295	30,783

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        There were no material changes to the disclosure made in the Annual Report on Form 10-K for the year ended December 31, 2002 regarding this matter.

Item 4.    Controls and Procedures

        An evaluation was conducted under the supervision and with the participation of the Company's management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of September 30, 2003. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Such officers also confirm that there was no change in the Company's internal control over financial reporting during the quarter ended September 30, 2003 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II — OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K

(a)

Exhibits

Exhibit Number	Description
(3)	(a)	Restated Certificate of Incorporation, effective as of March 24, 1998, incorporated herein by reference from Form 8-K, dated April 17, 1998.
	(b)	By-Laws, effective as of July 11, 2002, incorporated herein by reference from Form 10-Q, for the quarter ended June 30, 2002.
(4)	Instruments defining the rights of security holders, including Indentures: **
	(a)	Senior Debt Securities Indenture, dated as of October 19, 1996, incorporated herein by reference from Exhibit (4)(a) of Form S-3 Registration Statement (File No. 333-14141).
		(i)	63/8% Debentures due January 8, 2028. Supplemental Indenture No. 1, dated as of January 8, 1998, incorporated herein by reference from Exhibit (4)(a) of Form 8-K, dated January 5, 1998.
		(ii)	Medium-Term Notes, Series F, due from 1 Year to 60 Years from the Date of Issue. Supplemental Indenture No. 4, incorporated herein by reference from Exhibit (4)(c) of Form S-3 Registration Statement (File No. 333-59145), dated July 15, 1998.
		(iii)	Medium-Term Notes, Series G, due from 1 Year to 60 Years from Date of Issue. Supplemental Indenture No. 6, incorporated herein by reference from Exhibit (4)(c) of Form S-3 Registration Statement (File No. 333-60170), dated May 3, 2001.
		(iv)	Medium-Term Notes, Series H, due from 1 Year to 60 Years from Date of Issue. Supplemental Indenture No. 7, incorporated herein by reference from Exhibit (4)(c) of Form S-3 Registration Statement (File No. 333-92212), dated July 10, 2002.

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	(b)	Subordinated Debt Securities Indenture, dated as of October 18, 1996, incorporated herein by reference from Exhibit (4)(a) of Form 8-K, dated October 18, 1996.
		(i)	7.31% Subordinated Deferrable Interest Debentures due 2027. Supplemental Indenture No. 3, dated September 24, 1997, incorporated herein by reference from Exhibit (4)(b) of Form 8-K, dated September 19, 1997.
	(c)	Debt Securities. Indenture, dated as of March 1, 1987, incorporated herein by reference from Exhibit (4)(a) of Form S-3 Registration Statement (File No. 33-12364).
		(i)	87/8% Debentures, due 2011. Supplemental Indenture No. 17, incorporated herein by reference from Exhibit (4) of Form 8-K, dated April 22, 1991.
		(ii)	Medium-Term Notes, Series D, due from nine months (U.S. Issue)/184 days (Euro Issue) to 60 years from Date of Issue. Supplemental Indenture No. 18, incorporated herein by reference from Exhibit (4)(b) of Form S-3 Registration Statement (File No. 33-42642), dated September 10, 1991.
		(iii)	Medium-Term Notes, Series E, due from nine months (U.S. Issue)/ 184 days (Euro Issue) to 60 years from the Date of Issue. Supplemental Indenture No. 22, incorporated herein by reference from Exhibit (4)(b) of Form S-3 Registration Statement (File No. 33-60939), dated July 13, 1995.
		(iv)	7.05% Debentures, due 2025. Form of Supplemental Indenture No. 24, incorporated herein by reference from Exhibit (4)(a) of Form 8-K, dated November 13, 1995.
	(d)	McDonald's Corporation 2002 QSC Rewards Program, effective as of February 13, 2002, incorporated herein by reference from Exhibit (4) of Form S-3A Registration Statement (File No. 333-82920), dated March 14, 2002.
		(i)	Prospectus dated March 15, 2002, incorporated by reference from Form 424(b)(4) (File No. 333-82920), filed March 20, 2002.
		(ii)	Prospectus Supplement (to Prospectus dated March 15, 2002) dated March 4, 2003, incorporated by reference from Form 424(b)(3) (File No. 333-82920).
		(iii)	Prospectus Supplement (to Prospectus dated March 15, 2002, and to Prospectus Supplement dated March 4, 2003) dated September 25, 2003, incorporated by reference from Form 424(b)(3) (File No. 333-82920).
(10)	Material Contracts
	(a)	Directors' Stock Plan, as amended and restated, incorporated herein by reference from Form 10-Q, for the quarter ended June 30, 2001.*
	(b)	Profit Sharing Program, as amended and restated, incorporated herein by reference from Form 10-K, for the year ended December 31, 1999.*
		(i)	First Amendment to the McDonald's Profit Sharing Program, incorporated herein by reference from Form 10-Q, for the quarter ended September 30, 2000.*
		(ii)	Second Amendment to the McDonald's Profit Sharing Program, incorporated herein by reference from Form 10-Q, for the quarter ended March 31, 2001.*
		(iii)	Third Amendment to the McDonald's Profit Sharing Program, incorporated herein by reference from Form 10-Q, for the quarter ended March 31, 2001.*
		(iv)	Fourth Amendment to the McDonald's Profit Sharing Program, incorporated herein by reference from Form 10-Q, for the quarter ended June 30, 2002. *
	(c)	McDonald's Corporation Supplemental Profit Sharing and Savings Plan, incorporated herein by reference from Form 10-K, for the year ended December 31, 2001.*

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		(i)	First Amendment to McDonald's Corporation Supplemental Profit Sharing and Savings Plan, incorporated herein by reference from Form 10-K, for the year ended December 31, 2002.*
	(d)	1975 Stock Ownership Option Plan, as amended and restated, incorporated herein by reference from Form 10-Q, for the quarter ended September 30, 2001.*
	(e)	1992 Stock Ownership Incentive Plan, as amended and restated, incorporated herein by reference from Form 10-Q, for the quarter ended March 31, 2001.*
	(f)	1999 Non-Employee Director Stock Option Plan, as amended and restated, incorporated herein by reference from Form 10-Q, for the quarter ended September 30, 2000.*
	(g)	Executive Retention Plan, as amended and restated December 18, 2002, incorporated herein by reference from Form 10-K, for the year ended December 31, 2002.*
	(h)	McDonald's Corporation 2001 Omnibus Stock Ownership Plan, incorporated herein by reference from Form 10-Q, for the quarter ended June 30, 2001.*
	(i)	Form of McDonald's Corporation Tier I Change of Control Employment Agreement authorized by the Board of Directors and expected to be entered into between the Company and certain key executives, incorporated herein by reference from Form 10-K, for the year ended December 31, 2001.*
(12)	Computation of ratio of earnings to fixed charges
(31.1)	Rule 13a-14(a) Certification of Chief Executive Officer
(31.2)	Rule 13a-14(a) Certification of Chief Financial Officer
(32.1)	Certification pursuant to 18 U.S.C. Section 1350 by the Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(32.2)	Certification pursuant to 18 U.S.C. Section 1350 by the Chief Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*

Denotes compensatory plan.

**

Other instruments defining the rights of holders of long-term debt of the registrant and all of its subsidiaries for which consolidated financial statements are required to be filed and which are not required to be registered with the Commission, are not included herein as the securities authorized under these instruments, individually, do not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated basis. An agreement to furnish a copy of any such instruments to the Commission upon request has been filed with the Commission.

(b)

Reports on Form 8-K

The following report on Form 8-K was filed during the last quarter covered by this report and subsequently through November 7, 2003.

Date of Report	Item Reported	Financial Statements Required to be Filed
8/7/03	Item 12	No
9/8/03	Item 12	No
9/24/03	Item 5	No
10/7/03	Item 12	No
10/22/03	Item12	No
11/3/03	Item 9	No

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The following report on Form 8-K/A was filed during the last quarter covered by this report and subsequently through November 7, 2003.

Date of Report	Item Reported	Financial Statements Required to be Filed
10/7/03	Item 12	No

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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 thereunto duly authorized.

	McDONALD'S CORPORATION                 (Registrant)
November 7, 2003	By:	/s/ Matthew H. PaullMatthew H. Paull Corporate Executive Vice President and Chief Financial Officer

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INDEX
PART I—FINANCIAL INFORMATION
PART II — OTHER INFORMATION
SIGNATURE