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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission file number 1-655

MAYTAG CORPORATION

403 West Fourth Street North, Newton, Iowa 50208

Registrant’s telephone number, including area code: 641-792-7000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark 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  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act  Rule 12b-2).    Yes  x    No  ¨

The aggregate market value of the voting stock (common stock) held by non-affiliates of the registrant as of the close of business on March 10, 2003 was $1,756,537,428. The number of shares outstanding of the registrant’s common stock (par value $1.25) as of the close of business on March 10, 2003 was 78,277,069.

DOCUMENTS INCORPORATED BY REFERENCE

As noted in Part III of this Form 10-K, portions of the registrant’s proxy statement for its annual meeting of shareholders to be held May 8, 2003 have been incorporated by reference.

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MAYTAG CORPORATION

2002 ANNUAL REPORT ON FORM 10-K CONTENTS

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PART I

Item 1.     Business.

Maytag is a leading producer of home and commercial appliances. Its products are sold to customers throughout North America and in international markets. Maytag was organized as a Delaware corporation in 1925.

Maytag is among the top three major appliance companies in the North American market, offering consumers a full line of washers, dryers, dishwashers, refrigerators and ranges distributed through large and small retailers across the U.S. and Canada. Maytag also has a significant presence in the commercial laundry market. Maytag’s Hoover brand is the market leader in North America floor care products.

Maytag owns Dixie-Narco, one of the original brand names in the vending machine industry and today the leading manufacturer of soft drink can and bottle vending machines in the United States. Dixie-Narco venders are sold primarily to major soft drink bottlers such as Coca-Cola and Pepsico.

In commercial cooking appliances, Maytag owns Jade Range, a leading manufacturer of premium-priced commercial ranges under the Jade brand and commercial-style ranges for the residential market under the Dynasty brand.

Maytag makes significant annual capital investments that have led directly to demonstrable and superior product innovations in its strongest brands. Superior product performance reinforces brand positioning; product and brand positioning drive average pricing and distribution.

The Company operates in two business segments: home appliances and commercial appliances. Sales to Sears, Roebuck and Co. represented 13%, 12% and 12% of consolidated net sales in 2002, 2001 and 2000, respectively. Financial and other information relating to these reportable business segments is included in Part II, Items 7 and 8.

Home Appliances

The home appliances segment represented 94.8 percent of consolidated net sales in 2002.

The operations of the Company’s home appliances segment manufacture laundry products, dishwashers, refrigerators, cooking appliances and floor care products. These products are primarily sold to major national retailers and independent retail dealers in North America and targeted international markets. These products are sold primarily under the Maytag, Amana, Hoover, Jenn-Air and Magic Chef brand names. Included in this segment is Maytag International, Inc., the Company’s international marketing subsidiary that administers the sale of home appliances and licensing of certain home appliance brands in markets outside the United States.

A portion of the Company’s operations and sales is outside the United States. The risks involved in foreign operations vary from country to country and include tariffs, trade restrictions, changes in currency values, economic conditions and international relations.

The Company uses basic raw materials such as steel, copper, aluminum, rubber and plastic in its manufacturing processes in addition to purchased motors, compressors, timers, valves and other components. These materials are supplied by established sources and the Company anticipates that such sources will, in general, be able to meet its future requirements.

The Company holds a number of patents that are important in the manufacture of its products. The Company also holds a number of trademark registrations of which the most important are ADMIRAL, AMANA, HOOVER, JENN-AIR, MAGIC CHEF, MAYTAG, and the associated corporate symbols.

The Company’s home appliance business is generally not considered seasonal.

A portion of the Company’s accounts receivable is concentrated among major retailers. A significant loss of business with any of these national retailers could have an adverse impact on the Company’s ongoing operations.

The dollar amount of backlog orders of the Company is not considered significant for home appliances in relation to the total annual dollar volume of sales. Because it is the Company’s practice to maintain a level of inventory sufficient to cover anticipated shipments and since orders are generally shipped upon receipt, a large backlog would be unusual.

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The home appliances market is highly competitive with the two principal major appliances competitors being larger than the Company. The Company is focused on growth through product innovation that supports superior product performance in the Company’s premium brands. The Company uses brand image, product quality, customer service, advertising and warranty as competitive tools.

Expenditures for company-sponsored research and development activities relating to the development of new products and the improvement of existing products are included in Part II, Item 8. Most of the research and development expenditures relate to the home appliances segment.

Although the Company has manufacturing sites with environmental concerns, compliance with laws and regulations regarding the discharge of materials into the environment or relating to the protection of the environment have not had a significant effect on capital expenditures, earnings or the Company’s competitive position.

The Company has been identified as one of a group of potentially responsible parties by state and federal environmental protection agencies in remedial activities related to various “superfund” sites in the United States. The Company presently does not anticipate any significant adverse effect upon its earnings or financial condition arising from resolution of these matters. Additional information regarding environmental remediation is included in Part II, Item 8.

The Company is subject to changes in government mandated energy and environmental standards regarding appliances that may become effective over the next several years. The Company is in compliance with existing standards where it does business. As any new standards that effect the entire appliance industry become effective, the Company intends to be in compliance with the new standards where it does business.

The number of employees of the Company in the home appliances segment as of December 31, 2002 and 2001 were 19,378 and 20,288, respectively. Approximately 44 percent and 43 percent of these employees were covered by collective bargaining agreements as of December 31, 2002 and 2001, respectively.

Commercial Appliances

The commercial appliances segment represented 5.2 percent of consolidated net sales in 2002.

The operations of the Company’s commercial appliances segment manufacture commercial cooking under the Jade and Dynasty brand names and vending equipment under the Dixie Narco Brand name. These products are primarily sold to distributors, soft drink bottlers, restaurant chains and dealers in North America and targeted international markets.

The Company uses steel as a basic raw material in its manufacturing processes in addition to purchased motors, compressors and other components. These materials are supplied by established sources and the Company anticipates that such sources will, in general, be able to meet its future requirements.

The Company holds a number of patents that are important in the manufacture of its products. The Company also holds a numbers of trademark registrations of which the most important are DIXIE-NARCO and JADE and the associated corporate symbols.

Commercial appliance sales are considered seasonal to the extent that the Company normally experiences lower sales in the fourth quarter compared to other quarters.

Within the commercial appliances segment, the Company’s vending equipment sales are dependent upon a few major soft drink suppliers. Therefore, the loss of one or more of these customers could have a significant adverse effect on the commercial appliances segment.

The dollar amount of backlog orders of the Company is not considered significant for commercial appliances in relation to the total annual dollar volume of sales. Because it is the Company’s practice to maintain a level of inventory sufficient to cover shipments and since orders are generally shipped upon receipt, a large backlog would be unusual.

The Company uses brand image, product quality, product innovation, customer service, warranty and price as competitive tools.

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Expenditures for company-sponsored research and development activities relating to the development of new products and the improvement of existing products are included in Part II, Item 8.

Although the Company has manufacturing sites with environmental concerns, compliance with laws and regulations regarding the discharge of materials into the environment or relating to the protection of the environment have not had a significant effect on capital expenditures, earnings or the Company’s competitive position.

The number of employees of the Company in the commercial appliances segment as of December 31, 2002 and 2001 were 1,265 and 1,293, respectively.

Available Information

The Company maintains an Internet website at www.maytagcorp.com where its Annual Report on Form 10K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports are available, without charge, as reasonably practicable following the time they are filed with or furnished to the SEC.

Item 2.     Properties.

The Company’s corporate headquarters are located in Newton, Iowa. Major offices and manufacturing facilities in the United States related to the home appliances segment are located in: Newton, Iowa; Galesburg, Illinois; Cleveland, Tennessee; Jackson, Tennessee; Milan, Tennessee; Herrin, Illinois; Amana, Iowa; Florence, South Carolina; Searcy, Arkansas; North Canton, Ohio; and El Paso, Texas. The Company also has facilities that are located in Reynosa, Mexico and Juarez, Mexico. The Company has announced its plan to close the facility located in Galesburg, Illinois by the end of 2004.

Major offices and manufacturing facilities in the United States related to the commercial appliances segment are located in Williston, South Carolina and Commerce, California.

The facilities for the home appliances and commerical appliances segments are well maintained, suitably equipped and in good operating condition. The facilities had sufficient capacity to meet production needs in 2002, and the Company expects that such capacity will be adequate for planned production in 2003. The Company’s major capital projects and planned capital expenditures for 2003 are described in Part II, Item 7.

The Company also owns or leases sales offices and warehouses in many large metropolitan areas throughout the United States and Canada. Lease commitments are included in Part II, Item 8.

Item 3.     Legal Proceedings.

The Company is involved in contractual disputes, environmental, administrative and legal proceedings and investigations of various types. Although any litigation, proceeding or investigation has an element of uncertainty, the Company believes that the outcome of any proceeding, lawsuit or claim which is pending or threatened, or all of them combined, will not have a significant adverse effect on its consolidated financial position. The Company’s contingent liabilities are discussed in Part II, Item 8.

Item 4.     Submission of Matters to a Vote of Security Holders.

The Company did not submit any matters to a vote of security holders during the fourth quarter of 2002 through a solicitation of proxies or otherwise.

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EXECUTIVE OFFICERS OF THE REGISTRANT

Each of the executive officers has served the Company in various executive or administrative positions for at least the last five years except for:

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PART II

Item 5.     Market for Registrant’s Common Equity and Related Stockholder Matters.

The principal U.S. market the Company’s common stock is traded on is the New York Stock Exchange under the symbol MYG. As of March 10, 2003, the Company had 25,605 shareowners of record.

Item 6.     Selected Financial Data

Note: Net sales and gross profit for the years 1998 through 2001 have been restated to reflect the adoption of Emerging Issues Task Force 01-9 which requires companies to classify certain sales incentive costs as a reduction of sales. These costs were previously classified in selling, general and administrative expense. There was no impact on Maytag’s operating income or net income as a result of the new accounting policy.

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Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Critical Accounting Policies

The following accounting policies and practices are those that management believes are most important to the portrayal of Maytag’s financial condition and results and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Allowance for Doubtful Accounts: Maytag determines its allowance for doubtful accounts by utilizing various methodologies. Bad debt reserves are established based on an aging of accounts receivables ranging from 0.05 percent of the face amount of the account receivable for current amounts up to 90 percent for accounts in bankruptcy. These percentages are based on historical experience. Where Maytag is aware of a customer’s inability to meet its financial obligations, it specifically reserves for the potential bad debt to reduce the receivable to the amount it reasonably believes will be collected. If circumstances change (i.e., higher than expected defaults or an unexpected material adverse change in a customer’s ability to meet its financial obligations), estimates of the recoverability of amounts due could be revised by a material amount.

Pensions: Maytag provides noncontributory defined benefit pensions for most of its employees. Plans covering salaried, management and some nonunion hourly employees generally provide pension benefits that are based on employee’s earnings and credited service. Plans covering union hourly and other nonunion hourly employees generally provide benefits of stated amounts for each year of service. Maytag’s funding policy for the plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974 (ERISA), plus any additional amounts that Maytag may determine to be appropriate. Maytag accounts for its defined benefit pension plans in accordance with Financial Accounting Standards Board (FASB) Statement No. 87, “Employers’ Accounting for Pensions,” which requires that amounts recognized in financial statements be determined on an actuarial basis. A minimum liability is required to be established on the Consolidated Balance Sheets representing the amount of unfunded accrued pension cost. The unfunded accrued pension cost is the difference between the accumulated benefit obligation and the fair value of the plan assets. As allowed by FASB Statement No. 87, the Company uses September 30 as a measurement date to compute the minimum pension liability.

To account for its defined benefit plans in accordance with FASB Statement No. 87, Maytag must make three principal assumptions as of the measurement date: First, it must determine the discount rate to be used to compute the present value of the accumulated benefit obligation and projected benefit obligation for the end of the current year and to determine net periodic pension cost for the subsequent year. For guidance in determining the discount rate, Maytag looks at rates of return on high-quality fixed-income investments. At December 31, 2002, the rate utilized was 7 percent compared to 7.5 percent and 7.75 percent used for 2001 and 2000.

Second, Maytag must determine rates of increase in compensation levels to be used in the calculation of the projected benefit obligation for the end of the current year and to determine net periodic pension cost for the subsequent year. At December 31, 2002, this rate for salaried employees was 4.25 percent compared to 4.75 percent and 5.25 percent for 2001 and 2000. At December 31, 2002, the rate for non-union hourly employees was 3 percent compared to 3.25 percent and 3.75 percent for 2001 and 2000. Any changes in assumptions that affect the projected benefit obligation are deferred to unrecognized actuarial gains and losses. The amortization of unrecognized actuarial gains and losses is recognized when the cumulative total is outside of a corridor that is defined by FASB Statement No. 87 as the greater of 10 percent of the projected benefit obligation or 10 percent of the market value of plan assets.

Third, as another component of net periodic pension cost, Maytag must determine the expected return on plan assets. In order to reduce volatility in the calculation of pension cost, FASB Statement No. 87 requires the utilization of an expected rate of return on plan assets. The difference between the actual return on plan assets and the expected return is included with other unrecognized actuarial gains and losses. At December 31, 2002, Maytag has reduced

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the assumption for the expected rate of return to 8.75 percent for determining 2003 net periodic pension cost as compared to 9 percent and 9.5 percent for 2001 and 2000, respectively. The expected rate of return is based on historical rates of return over the long term.

At December 31, 2002, Maytag’s accrued pension cost was $489 million, an increase from $353 million at the end of 2001. The increased accrued pension cost was due to an increase in the minimum liability requirement. The minimum liability requirement increased due to a higher accumulated benefit obligation and the lower value of plan assets at September 30, 2002 as compared to September 30, 2001. The accumulated benefit obligation increased based on one year of additional pension benefit accrual and the assumption of a lower discount rate used to calculate the liability. The fair value of plan assets decreased by $27 million as losses on plans assets and benefit payments exceeded employer contributions. An additional contribution of $55 million, subsequent to the September 30, 2002 measurement date, reduced the accrued pension cost on the December 31, 2002 Consolidated Balance Sheet from the $544 million amount required by the minimum liability calculation as of the September 30, 2002 measurement date.

Net periodic pension cost increased to $79 million in 2002 from $42 million in 2001. The primary reason for this increase is attributable to a $26 million curtailment charge associated with the announced 2004 closing of a manufacturing plant (for further discussion see “Restructuring Charges” in this Management’s Discussion and Analysis). Net periodic pension cost also increased due to increases in service and interest cost as well as higher amortization of unrecognized actuarial losses. Maytag expects net periodic pension cost, excluding the $26 million curtailment charge in 2002, to increase $13 million in 2003 to $66 million due to a lower expected return on plan assets and a lower discount rate used to value the projected benefit obligation, partially offset by the decrease in expected rates of increase in compensation levels, as described above.

Lowering the expected rate of return on plan assets by 0.25 percent would have increased net periodic pension cost for 2002 by approximately $3 million. Lowering the discount rate by 0.25 percent would have increased net periodic pension cost for 2002 by approximately $4 million. Increasing the rate of increase in compensation levels by 0.25 percent would have increased net periodic pension cost for 2002 by approximately $1 million.

Pension contributions increased to $193 million in 2002 from $68 million in 2001. Maytag has no minimum funding requirements in 2003, based on ERISA requirements. However, the Company intends to contribute $135 million in 2003.

Postretirement Benefits: Maytag provides postretirement health care and life insurance benefits for certain employee groups in the United States. Most of the postretirement plans are contributory and contain certain other cost sharing features such as deductibles and coinsurance. The plans are unfunded. Employees do not vest and these benefits are subject to change. Death benefits for certain retired employees are funded as part of, and paid out of, pension plans.

Maytag accounts for its postretirement benefits in accordance with FASB Statement No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” which requires that the postretirement liability be reflected in the Consolidated Balance Sheets and the postretirement cost be recognized in the Consolidated Statements of Income as determined on an actuarial basis. The Company uses a September 30 measurement date to compute the postretirement liability.

To account for postretirement benefits in accordance with FASB Statement No. 106, Maytag must make two main assumptions at the measurement date: First, it must determine the discount rate used to compute the present value of the accumulated postretirement benefit obligation for the end of the current year and the net periodic postretirement cost for the subsequent year. For guidance in determining the discount rate, Maytag looks at rates of return on high-quality fixed income investments. At December 31, 2002, Maytag determined this rate to be 7 percent compared to 7.5 percent and 7.75 percent used for 2001 and 2000, respectively.

Second, Maytag must determine the expected health care cost trend rate used in the calculation of the accumulated postretirement benefit obligation for

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the end of the current year and net periodic postretirement cost for the subsequent year. At December 31, 2002, due to increasing medical costs, Maytag increased this initial health care cost trend rate from 7 percent to 12 percent. The expected health care cost trend rate decreases gradually to 5 percent in 2007 and thereafter.

At December 31, 2002, Maytag’s postretirement benefit liability was $518 million, an increase from $497 million at the end of 2001. For the year ended December 31, 2002, Maytag incurred a net periodic postretirement cost of $61 million, an increase from $46 million in 2001. The increase was due in part to an $8 million curtailment charge associated with the announced closing of a manufacturing plant (for further discussion see “Restructuring Charges” in this Management’s Discussion and Analysis). Maytag currently expects that net periodic postretirement cost for 2003, excluding the $8 million curtailment charge in 2002, will increase $19 million to approximately $71 million due to the lower discount rate used to estimate the accumulated postretirement benefit obligation and an increase in the assumed health care cost trend rate, as described above.

Increasing the expected health care cost trend rate one percent would have increased net periodic postretirement cost for 2002 by approximately $7 million. Lowering the discount rate by 0.25 percent would have increased net periodic postretirement cost for 2002 by approximately $2 million.

Litigation and Tax Contingencies: Maytag is a defendant in a number of legal proceedings associated with employment and product liability matters. Maytag’s law department estimates the costs to settle pending litigation, including legal expenses, based on its experience involving similar cases, specific facts known, and if applicable, the judgments of outside counsel. Maytag does not believe it is a party to any legal proceedings that will likely have a material adverse effect on its consolidated financial position. It is possible, however, that future results of operations, for any particular quarterly or annual period, could be materially affected by changes in Maytag’s assumptions related to these proceedings.

Maytag’s tax returns are subject to audit by various domestic and foreign tax authorities. During the course of these audits, the authorities may question the positions taken in the return, including the timing and amount of deductions and the allocation of income between various tax jurisdictions, which can affect the amount of taxes ultimately due. In evaluating the exposure associated with its various filing positions, Maytag records reserves for probable exposures. To the extent Maytag prevails in matters where accruals have been established or is required to pay amounts in excess of the accrual, Maytag’s effective tax rate and net income in a given financial period may be impacted.

Accounting for Goodwill and Other Intangible Assets: In 2001, the Financial Accounting Standards Board issued Statement No. 142, “Goodwill and Other Intangible Assets,” effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with the statement.

The statement requires a two-step process for impairment testing. The first step, used to identify potential impairment only, compares the fair value of a reporting unit with its net carrying amount on the financial statements. Fair value is determined as the amount at which the reporting unit as a whole could be bought or sold in a current transaction between willing parties. Several estimates are required if a current market price is not available. Quoted market prices are best evidence of fair value and are used as the basis for the measurement where available. Where these are not available, fair value of the reporting unit can be estimated based on the present value of estimated future cash flows of the reporting unit. These cash flow estimates must be based on reasonable and supportable assumptions, and consider all available evidence. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered impaired; thus the second step of the process in not necessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any. If the carrying value of goodwill on the financial statements exceeds the implied fair value of goodwill, the difference must be recognized as an impairment loss. Implied fair value of goodwill shall be determined in the same manner as the amount of goodwill recognized in a business combination is determined.

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As of January 1, 2002 (the initial impairment test) and during the fourth quarter of 2002, Maytag performed step one of the impairment test of goodwill and determined that the fair value of the reporting units that have goodwill exceeded the carrying value of the net assets specifically related to these reporting units. Goodwill included in the home appliances segment totaled $265.8 million as of December 31, 2002 most of which related to the floor care product line. The fair value of the reporting units within this segment that have goodwill was determined using expected future discounted cash flows based on historical results. Goodwill included in the commercial appliances segment totaled $15.2 million as of December 31, 2002 most of which related to the commercial cooking product line. The fair value of the reporting units within this segment that have goodwill was determined using expected future discounted cash flows based on prospective assumptions as the Company is undertaking additional business initiatives within this segment that are not currently reflected in the historical results. Maytag currently has no intangible assets with indefinite lives other than goodwill.

Income Statement Reclassification

Maytag adopted a new accounting standard in the first quarter of 2002 that requires certain sales incentives previously recognized in selling, general and administrative expenses to be classified as a reduction of sales. The Financial Accounting Standards Board’s Emerging Issues Task Force (EITF) issued EITF 01-9 that states any cash consideration provided to customers that has no identifiable benefit other than to increase sales is required to be classified as a reduction of sales. This reclassification does not change previously reported operating income or net income from continuing operations; however, the reduction does impact the gross profit and operating income margins. The amount considered as an additional reduction of sales in accordance with this accounting standard was $180.1 million, $138.7 million and $103.4 million in 2002, 2001 and 2000, respectively. Prior periods have been restated to reflect this change.

Comparison of 2002 with 2001

Maytag has two reportable segments: home appliances and commercial appliances (see discussion and financial information about Maytag’s reportable segments in “Segment Reporting” section of the Notes to Consolidated Financial Statements). The 2001 results include the major appliances business of Amana Appliances (“Amana”) that was acquired by Maytag effective August 1, 2001.

Net Sales: Consolidated net sales for 2002 were $4.666 billion, an increase of 11 percent from 2001. This increase was due primarily to the impact of the Amana acquisition coupled with the strength of the U.S. major appliances industry. 2002 results reflect 12 months of Amana sales compared to only five months of sales in 2001.

Home appliances net sales, which include major appliances, floor care products and international export sales, increased 12 percent compared to 2001. This increase was due to the impact of the Amana acquisition, U.S. major appliances industry strength and improved product mix. The introduction of a hard surface floor cleaner, a new product category in this segment, also contributed to the sales growth.

U.S. industry unit shipments of major appliances were up six percent in 2002. Maytag’s unit shipments of major appliances increased nine percent due primarily to the inclusion of Amana product sales for a full year in 2002 compared to five months in 2001. For 2003, Maytag expects the major appliance industry to be up two to three percent compared to 2002. Floor care industry shipments of uprights, the primary product type in this industry, were up two percent in 2002. Maytag’s unit shipments of uprights for 2002 decreased compared to 2001 as its market share declined with some of its lower priced products. This volume loss was more than offset by volume in the new hard surface floor cleaner category, allowing total Maytag floor care shipments to increase in 2002. Maytag expects the floor care industry shipments of uprights to grow three percent in 2003 compared to 2002.

Commercial appliances net sales, which include vending equipment and commercial cooking products sales, increased six percent in 2002 compared to 2001. The increase in sales was due to improved product mix of vending equipment sales. Increases in sales of glass-front venders helped to offset decreases in traditional vender sales. Maytag expects the vending equipment industry to be down five to six percent in 2003 compared to 2002. Maytag expects increased average selling price in 2003, through continued product mix improvement, to offset much of the expected industry weakness.

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Gross Profit: Consolidated gross profit as a percent of sales increased to 21.5 percent in 2002 from 20.7 percent in 2001. The increase was due to volume leverage, improved product mix, lower material costs, gain on sale of a distribution center and favorable warranty performance. These positive effects were partially offset by increased expenditures on research and development. Increases in the market price of steel attributable to tariffs imposed on steel imports did not affect Maytag’s gross profit in 2002 because of an existing domestic steel supply contract. This contract expired at the end of 2002 and Maytag expects approximately $33 million in increased steel costs in 2003. The Company expects to offset the increased steel costs with savings in other areas of sourced raw materials and components. Maytag also expects net periodic pension and postretirement costs to increase by approximately $32 million in 2003 compared to 2002 (excluding pension and postretirement curtailment costs related to 2002 restructuring charges) as previously discussed in “Critical Accounting Policies” in this Management’s Discussion and Analysis.

Selling, General and Administrative Expenses: Consolidated selling, general and administrative expenses were 12.4 percent of sales in 2002 compared to 13.5 percent of sales in 2001. The decrease as a percent of sales was due to increased sales, synergies resulting from the Amana acquisition, cost reduction initiatives and a change in accounting standards effective January 1, 2002. The accounting change eliminated the amortization of goodwill and intangible assets deemed to have indefinite lives. While these assets are subject to impairment tests to assess their valuation, there were no charges related to impairment during 2002. Amortization of goodwill included in 2001 was $10 million. The reduction in selling, general and administrative expenses as a percent of sales was achieved despite a nine percent increase in advertising costs in 2002 compared to 2001.

Special Charges: During the fourth quarter of 2002, Maytag announced its intention to close a refrigeration manufacturing facility located in Galesburg, Illinois by the end of 2004. The Company recognized a pre-tax restructuring charge of $67.1 million ($44.3 million after-tax) in connection with the planned closing. For further discussion, see “Restructuring Charges” in this Management’s Discussion and Analysis.

During the fourth quarter of 2001, Maytag recognized in operating income special charges of $9.8 million, ($6.2 million after-tax) associated with a salaried workforce reduction and asset write-downs. Of the $9.8 million, $7.9 million, $0.7 million and $1.2 million were recorded in the home appliances segment, commercial appliances segment and corporate, respectively.

Operating Income: The following tables summarize the impact of the gain on sale of the distribution center and special charges on reported consolidated operating income and reported consolidated operating income as a percent of sales:

Consolidated operating income as a percent of sales for 2002 was 7.7 percent, compared to 6.9 percent in 2001. Excluding the special charges of $67.1 million and the $8.3 million gain on sale of a distribution center, consolidated operating income as a percent of sales for 2002 was 9.0 percent. Excluding the special charges of $9.8 million, consolidated operating income as a percent of sales

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for 2001 was 7.1 percent. The increase in operating income as a percent of sales was due to the increase in gross profit as a percent of sales and the decrease in selling, general and administrative costs as a percent of sales, as discussed above. Operating income in 2002, excluding special charges and the gain on sale, increased 40 percent compared to 2001 as a result of increased sales and improved operating income as a percent of sales.

The following tables summarize the impact of the gain on sale of the distribution center and special charges on reported consolidated operating income and reported consolidated operating income as a percent of sales by reportable segment:

Home appliances operating income as a percent of sales for 2002 was 9 percent, compared to 8.2 percent in 2001. Home appliances operating income as a percent of sales for 2002, excluding special charges of $67.1 million and the gain on sale of a distribution center, was 10.3 percent. Home appliances operating income as a percent of sales for 2001, excluding special charges of $7.9 million, was 8.4 percent in 2001. The increase in operating income as a percent of sales was due to the increase in gross profit as a percent of sales and the decrease in selling, general and administrative costs as a percent of sales. Home appliances operating income in 2002, excluding special charges and the gain on sale, increased 37 percent compared to 2001 as a result of increased sales and improved operating income as a percent of sales.

Commercial appliances operating income as a percent of sales for 2002 was 5.3 percent, compared to 2.5 percent in 2001. Commercial appliances operating income as a percent of sales for 2001, excluding special charges of $0.7 million, was 2.8 percent in 2001. Operating income as a percent of sales increased due to improved gross profit as a percent of sales and reduced selling, general and administrative costs as a percent of sales. Commercial appliances operating income increased 103 percent in 2002 compared to 2001 as a result of increased sales and improved operating income as a percent of sales.

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Corporate operating expenses for 2002 compared to 2001, excluding special charges of $1.2 million in 2001, increased 23 percent. The increase in expenses was due to higher incentive compensation resulting from increased earnings, higher charitable contribution expense and business development costs.

Interest Expense: Interest expense for 2002 was lower than 2001 due primarily to lower average interest rates.

Loss on Securities: During 2001, Maytag recognized a loss on securities of $7.2 million resulting from the write-off of the remaining investment in an Internet-related company (see “Loss on Securities” section in the Notes to Consolidated Financial Statements for further discussion).

Income Taxes: The effective tax rates for 2002 and 2001 were 34 percent and 14.2 percent, respectively. The 2001 effective tax rate, excluding a one-time tax benefit of $42 million and the $7.2 million loss on securities, was 32.9 percent. The $42 million one-time tax benefit was associated with the settlement of an Internal Revenue Service audit. Offsetting this was the absence of any tax benefit from the loss on securities due to the uncertainty of utilization of capital loss carryforwards. The effective tax rate for 2002 increased compared to 2001 due to the retirement of the Maytag Capital Trusts (“Maytag Trusts”) in 2001 and the 2002 purchase of the noncontrolling interest in Anvil Technologies LLC (“Anvil”) from an outside investor (see “Minority Interests” section in the Notes to Consolidated Financial Statements for further discussion on the Maytag Trusts and Anvil). The financing costs associated with the Maytag Trusts and Anvil were recognized as minority interests with the tax benefit included as a component of tax expense. These minority interests have been retired and refinanced with borrowings for which interest expense has reduced income before tax and minority interest. Because tax expense was unaffected by the retirement of these instruments, the effective tax rate increased. The increased rate was also due to increased income in 2002 that caused tax credits to have less of an impact on lowering the effective tax rate. The effect of these items on the effective tax rate was partially offset by the elimination of goodwill amortization in 2002 that is nondeductible for income tax purposes. Potential federal and state legislative tax changes, coupled with the 2002 retirement of the minority interest in Anvil, could result in an increase of Maytag’s effective tax rate for 2003.

Minority Interest: Minority interest decreased by $10.7 million in 2002 compared to 2001. The decrease was due to Maytag’s purchase of the noncontrolling interest in Anvil from an outside investor in 2002 as well as the fact that the 2001 results included the Maytag Trusts which were not retired until the third quarter of 2001 (see “Minority Interests” section in the Notes to Consolidated Financial Statements for further discussion of Anvil and the Maytag Trusts). Both these minority interests were refinanced with debt.

Discontinued Operations: During 2001, the Company committed to a plan to dispose of its interest in Rongshida-Maytag, a majority-owned joint venture in China. A charge was recognized in 2001 of approximately $42.3 million to write down the Company’s interest in the net assets of Rongshida-Maytag to its fair value less cost to dispose. Based on current market conditions and negotiations with potential buyers, the fair value of the Company’s interest in Rongshida-Maytag has been re-evaluated, and the estimate of the value has not changed materially since the end of 2001.

During 2001, a $59.5 million net loss was recognized on the sale of the Blodgett foodservice operations. No tax benefit was recognized on the $59.5 million capital loss because the future tax benefit from utilization of this loss is uncertain. The sale of Blodgett generated notes receivable of $21 million and net cash proceeds of $70.6 million after transaction costs of $3.4 million.

Extraordinary Item-Loss on Early Retirement of Debt: In 2001, Maytag recognized an after-tax loss of $5.2 million on early retirement of debt related to the cost of refinancing the Maytag Trusts (see “Minority Interests” section in the Notes to Consolidated Financial Statements for further discussion on the Maytag Trusts).

Cumulative Effect of Accounting Change: A cumulative effect of accounting change of $3.7 million was recognized in 2001 as a result of the implementation of accounting rules that required

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Maytag to establish the fair market value of the put obligations and purchase contracts associated with the Maytag Trusts on the balance sheet (see “Cumulative Effect of Accounting Change” section in the Notes to the Consolidated Financial Statements for further discussion.

Net Income (Loss): The following table summarizes the impact of the gain on sale of distribution center, special charges, loss on securities, one-time tax benefit, discontinued operations, extraordinary item and cumulative effect of accounting change on reported net income and diluted earnings per share. The increase in net income in 2002 compared to 2001, excluding the items listed above, was due primarily to the increase in operating income. The increase in diluted earnings per share in 2002 compared to 2001, excluding the items listed above, was also due primarily to the increase in operating income as average diluted shares outstanding were comparable.

The $3.7 million cumulative effect of accounting change in 2001 was accretive to diluted earnings per share by $0.76 due to the specific calculation requirements of dilutive earnings per share according to FASB Statement No. 128, “Earnings Per Share” (see “Earnings Per Share” section in the Notes to the Consolidated Financial Statements for further discussion).

Comparison of 2001 with 2000

Net Sales: Consolidated net sales for 2001 were $4.185 billion, an increase of eight percent from 2000. Excluding the impact of the Amana acquisition, 2001 net sales were flat compared to 2000.

Home appliances net sales, which includes major appliances, floor care products and international export sales, increased 10 percent compared to 2000 due primarily to the impact of the Amana acquisition. Excluding Amana, home appliances sales were up one percent with increases in major appliances partially offset by decreases in floor care products and export sales. The increase in major appliances sales was achieved despite a decline in industry unit shipments for 2001. The decrease in sales of floor care products was due to the industry being down, the retail focus on lower priced products in contrast to Maytag’s strategy of premium priced products, and higher sales beginning in the third quarter of 2000 associated with the introduction of Maytag’s new bagless floor care products.

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Commercial appliances net sales, which include vending and commercial cooking, decreased 18 percent in 2001 compared to 2000. The net sales decrease was due primarily to the weak vending equipment industry.

Gross Profit: Consolidated gross profit as a percent of sales decreased to 20.7 percent in 2001 from 25.3 percent of sales in 2000. The decrease was due primarily to lower product pricing, unfavorable product mix and higher distribution and warranty costs partially offset by lower raw material costs.

Selling, General and Administrative Expenses: Consolidated selling, general and administrative expenses were 13.5 percent of sales in 2001 compared to 13.0 percent of sales in 2000. The increase was due primarily to higher national advertising expenses as well as other general and administrative expenses.

Special Charges: During 2001, Maytag recognized special charges of $9.8 million ($6.2 million after-tax) associated with a salaried workforce reduction and asset write-downs. Of the $9.8 million, $7.9 million, $0.7 million and $1.2 million were recorded in the home appliances segment, commercial appliances segment and corporate, respectively.

During 2000, Maytag recognized in operating income, special charges of $39.9 million ($25.3 million after-tax) associated with terminated product initiatives, asset write-downs and executive severance costs. Of the $39.9 million, $19.7 million and $20.2 million were recorded in the home appliances segment and corporate, respectively.

Operating Income: The following tables summarize the impact of special charges on reported consolidated operating income and reported consolidated operating income as a percent of sales:

Consolidated operating income for 2001 was 6.9 percent of sales, compared to 11.3 percent of sales, in 2000. Excluding the special charges of $9.8 million, consolidated operating income as a percent of sales for 2001 was 7.1 percent. Excluding the special charges of $39.9 million, consolidated operating income as a percent of sales for 2000 was 12.3 percent. The decrease in operating income as a percent of sales was due primarily to the decrease in gross profit as a percent of sales. Operating income in 2001, excluding special charges, decreased 38 percent compared to 2000 due primarily to a decrease in gross profit.

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The following tables summarize the impact of the special charges on reported consolidated operating income and reported consolidated operating income as a percent of sales by reportable segment:

Home appliances operating income as a percent of sales for 2001 was 8.2 percent, compared to 13.2 percent in 2000. Home appliances operating income as a percent of sales for 2001, excluding special charges of $7.9 million, was 8.4 percent. Operating income as a percent of sales in 2000, excluding special charges of $19.7 million, was 13.8 percent of sales in 2000. The decrease in operating income as a percent of sales was due primarily to the decrease in gross profit as a percent of sales discussed above. Operating income in 2001, excluding special charges, decreased 33 percent compared to 2000 due primarily to a decrease in gross profit.

Commercial appliances operating income as a percent of sales for 2001 was 2.5 percent compared to 10.5 percent in 2000. Commercial appliances operating income as a percent of sales for 2001, excluding special charges of $0.7 million, was 2.8 percent. Operating income, excluding restructuring charges, decreased 78 percent. The decrease in both operating income as a percent of sales and operating income for 2001 compared to 2000 was due primarily to the decrease in sales.

Corporate operating expenses for 2001 compared to 2000, excluding special charges of $1.2 million and $20.2 million in 2001 and 2000, respectively, decreased 16 percent. The decrease in expense was due primarily to higher business development costs in 2000.

Interest Expense: Interest expense for 2001 was seven percent higher than 2000. The increase resulted from additional debt issued for the acquisition of Amana and the classification of the financing costs related to the Maytag Trusts as interest expense instead of minority interest during the third quarter of 2001 (see “Minority Interests” section in the Notes to Consolidated Financial Statements for further discussion on the Maytag Trusts). These increases were partially offset by lower average borrowing rates.

Loss on Securities: During 2001, Maytag recognized a loss on securities of $7.2 million resulting from the write-off of a remaining investment in an Internet-related company. During 2000, Maytag recognized losses on securities of $17.6 million ($11.2 million after-tax) resulting from a lower market valuation of securities held in TurboChef Technologies, Inc. and investments in privately held Internet-related companies (see “Loss on Securities” section in the Notes to Consolidated Financial Statements for further discussion).

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Income Taxes: The effective tax rates for 2001 and 2000 were 14.2 percent and 33.6 percent, respectively. The 2001 effective tax rate, excluding a one-time tax benefit of $42 million and the $7.2 million loss on securities was 32.9 percent. The $42 million one-time tax benefit was associated with an Internal Revenue Service audit settlement related to recognition of capital gains in prior year tax returns that were offset by available capital loss carryforwards. Offsetting this was the absence of any tax benefit from the loss on securities due to the uncertainty of utilization of capital loss carryforwards.

Minority Interest: Minority interest decreased by $6.1 million in 2001 compared to 2000 due primarily to the early retirement of the $200 million Maytag Trust obligations as discussed under “Extraordinary Item-Loss on Early Retirement of Debt” of this Management’s Discussion and Analysis and the classification of the financing costs related to the Maytag Trusts as interest expense instead of minority interest in the third quarter of 2001 (see “Minority Interests” section in the Notes to Consolidated Financial Statements for further discussion ).

Discontinued Operations: During 2001, the Company committed to a plan to dispose of its interest in Rongshida-Maytag, a majority-owned joint venture in China. A charge was recognized in 2001 of approximately $42.3 million to write down Maytag’s interest in the net assets of Rongshida-Maytag to its fair value less cost to dispose. The estimated fair value was calculated using expected future cash flows discounted at a ten percent rate as there was no observable market price. No tax benefit was recognized on the $42.3 million capital loss as the future tax benefit from such loss was uncertain.

During 2001, a $59.5 million net loss was recognized on the sale of Blodgett. No tax benefit was recognized on the $59.5 million capital loss because the future tax benefit from utilization of this loss was uncertain. The sale of Blodgett generated notes receivable of $21 million and net cash proceeds of $70.6 million after transaction costs of $3.4 million.

Extraordinary Item-Loss on Early Retirement of Debt: In 2001, Maytag recognized an after-tax loss on early retirement of debt of $5.2 million related to the cost of refinancing the Maytag Trusts (see “Minority Interests” section in the Notes to Consolidated Financial Statements for further discussion on the Maytag Trusts).

Cumulative Effect of Accounting Change: A cumulative effect of accounting change of $3.7 million was recognized in 2001 as a result of the implementation of accounting rules that required Maytag to establish the fair market value of the put obligations and purchase contracts associated with the Maytag Trusts on the balance sheet (see “Cumulative Effect of Accounting Change” section in the Notes to the Consolidated Financial Statements for further discussion of the Maytag Trusts).

Net Income (Loss): The following table summarizes the impact of special charges, loss on securities, one-time tax benefit, discontinued operations, extraordinary item and cumulative effect of accounting change on reported net income and diluted earnings per share. The decrease in net income in 2001 compared to 2000, excluding the items listed above, was due primarily to the decrease in operating income. The decrease in diluted earnings per share in 2001 compared to 2000, excluding the items listed above, was also due primarily to the decrease in operating income partially offset by lower diluted average shares outstanding.

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The $3.7 million cumulative effect of accounting change in 2001 was accretive to diluted earnings per share by $0.76 due to the specific calculation requirements of dilutive earnings per share according to FASB Statement No. 128, “Earnings Per Share” (see “Earnings Per Share” section in the Notes to the Consolidated Financial Statements for further discussion).

Liquidity and Capital Resources

Maytag’s primary sources of liquidity are cash provided by operating activities and borrowings. Detailed information on Maytag’s cash flows is presented in the Consolidated Statements of Cash Flows.

Net Cash Provided by Operating Activities: Cash flow provided by operating activities consists primarily of net income adjusted for certain non-cash items, changes in working capital items, changes in pension assets and liabilities and postretirement benefits. Non-cash items include depreciation and amortization and deferred income taxes. Working capital items consist primarily of accounts receivable, inventories, other current assets and other current liabilities.

Net cash provided by operating activities for 2002 decreased $46 million compared to 2001. The decrease was due primarily to $193 million of pension contributions in 2002 compared with $68 million in contributions in 2001. This increase offset higher net income and favorable working capital performance in 2002 compared to 2001. Although Maytag has no minimum ERISA funding requirements in 2003, pension contributions are expected to be $135 million.

A portion of Maytag’s accounts receivable is concentrated among major national retailers. A significant loss of business with any of these retailers could have an adverse impact on Maytag’s ongoing operations. Maytag continues to sell products to a major retailer that has filed for reorganization under bankruptcy laws. The accounts receivable balance with this retailer was less than two percent of Maytag’s net accounts receivable at December 31, 2002.

Maytag has arrangements with certain finance companies to provide floor plan financing for certain customers. These arrangements provide liquidity for Maytag by financing customer purchases of Maytag products. The accounts receivable are sold without recourse. Maytag also sells accounts receivable to an unconsolidated finance company in which it has a 50 percent ownership interest that was acquired in conjunction with the purchase of Amana. These accounts receivable are also sold without recourse although the Company is required to repurchase repossessed inventory. No such repurchases have been required to date nor are any anticipated. A total of $27 million of receivables and $11 million of debt were outstanding at December 31, 2002 on the unconsolidated finance company’s balance sheet. Maytag’s investment in the finance company is accounted for using the equity method and a total investment of $1.5 million was reflected on Maytag’s Consolidated Balance Sheet as of December 31, 2002.

Total Investing Activities: Maytag’s capital expenditures represent continual investments in its businesses for new product designs, cost reduction programs, replacement of equipment, capacity expansion and government mandated product requirements and similar items.

Capital expenditures in 2002 were $230 million compared to $146 million in 2001. This increase was due to product introductions in 2002 and initial investments for 2003 product introductions. Maytag plans to invest approximately $240 million in capital expenditures in 2003.

Total Financing Activities: Dividend payments on Maytag’s common stock in 2002 and 2001 were $56 million and $55 million, respectively, or $0.72 per share in each year.

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Any funding requirements for future investing and financing activities in excess of cash on hand and generated from operations will be supplemented by borrowings. Maytag’s commercial paper program is supported by two credit agreements with a consortium of lenders that provide revolving credit facilities of $200 million each, totaling $400 million. These agreements expire May 1, 2003 and May 3, 2004. Maytag had $179 million of commercial paper outstanding as of December 31, 2002 that is classified as notes payable on the Consolidated Balance Sheets. The credit agreements include financial covenants with respect to interest coverage and debt to earnings before interest, taxes, depreciation and amortization. Maytag was in compliance with these covenants as of December 31, 2002 and expects to be in compliance with these financial covenants through the end of 2003. The existence of an event of default under the credit agreements or the termination of the credit agreements because of an event of default would adversely impact Maytag’s ability to borrow through the sale of commercial paper. Maytag has a shelf registration statement with the Securities and Exchange Commission providing the ability to issue publicly an aggregate of $300 million of medium-term notes as of December 31, 2002.

In 2002, Maytag purchased the noncontrolling interest in Anvil Technologies LLC (“Anvil”) from an outside investor for $99.9 million. Maytag financed this purchase with commercial paper. Including the purchase of the minority interest in Anvil, Maytag reduced financing obligations by approximately $200 million in 2002. For the full year 2003, Maytag expects to reduce financing obligations by $100 million.

Shareowners’ Equity: Maytag shareowner’s equity has decreased due to a share repurchase program that increased the cost of treasury stock held from $219 thousand at December 31, 1994 to $1.5 billion at December 31, 2002. The Company has also made pension liability adjustments as required by FASB Statement No. 87 due to the underfunded status of its pension plans that reduced equity in 2002 and 2001 (for further discussion, see disclosure about pensions in the “Critical Accounting Policies” above in this Management’s Discussion & Analysis). Management does not believe that the current low level of equity poses a risk to Maytag because its cash flow is strong and there are no covenants in any of its debt instruments that relate to equity or any debt-to-asset ratios.

Restructuring Charges

During the fourth quarter of 2002, Maytag announced its intention to close a refrigeration manufacturing facility located in Galesburg, Illinois by the end of 2004. The refrigeration production activity will be discontinued at Galesburg and new, redesigned models will be produced at an existing facility in Amana, Iowa and a new facility located in Reynosa, Mexico.

In 2002, Maytag recognized a pre-tax restructuring charge of $67.1 million ($44.3 million after-tax) in connection with the planned closing, all included in Special charges on the Consolidated Statements of Income. Of the $67.1 million charge, $32.8 million related to asset impairments, accelerated depreciation and severance and related costs. The remaining $34.4 million related to pension and postretirement medical curtailment charges. The asset impairment and accelerated depreciation charges were determined using estimated future cash flows through the closure date and directly reduced Property, plant and equipment on the Consolidated Balance Sheets. The severance and related costs are reflected in Accrued liabilities on the Consolidated Balance Sheets. The pension and postretirement medical curtailment costs are reflected in the Accrued pension cost and Postretirement benefit liability on the Consolidated Balance Sheets. For additional disclosures regarding the pension and postretirement medical curtailment costs related to restructuring, see the “Pension Benefits” and “Postretirement Benefits” sections in the Notes to Consolidated Financial Statements.

The total pre-tax restructuring charges are estimated to be in the range of $140 to $160 million, with the remaining expense to be recognized in 2003 and 2004. Approximately $30 million of the total restructuring charge (excluding pension and postretirement curtailment charges) will be cash items primarily related to severance costs and costs to move equipment most of which will be paid in 2003 and 2004. Cash expenditures for 2002 related to this charge were $0.1 million.

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Future Obligations and Commitments

Future obligations and commitments consisted of the following:

In the normal course of business operations, Maytag also has long-term purchase commitments related to certain raw materials that are not included in the table above.

Market Risks

Maytag is exposed to foreign currency exchange risk related to its transactions, assets and liabilities denominated in foreign currencies. Foreign currency forward and option contracts are entered into to manage certain foreign exchange exposures. It is Maytag’s policy to hedge a portion of its anticipated foreign currency denominated export sales transactions, which are denominated primarily in Canadian dollars, for periods not exceeding twelve months. At December 31, 2002, a uniform 10 percent strengthening of the U.S. dollar relative to the foreign currencies in which Maytag’s sales are denominated would result in a decrease in net income of approximately $12 million for the year ending December 31, 2003. This sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in potential changes in sales levels or local currency prices.

Maytag also is exposed to commodity price risk related to its purchase of selected commodities used in the manufacturing of its products. Commodity swap agreements are entered into reducing the effect of changing raw material prices for selected commodities. At December 31, 2002, a uniform 10 percent increase in the price of commodities covered by commodity swap agreements would result in a decrease in net income of approximately $4 million for the year ending December 31, 2003.

Maytag also is exposed to interest rate risk in the portfolio of its debt. Maytag uses interest rate swap contracts to adjust the proportion of total debt that is subject to variable and fixed interest rates. The swaps involve the exchange of fixed and variable rate payments without exchanging the notional principal amount. At December 31, 2002, a uniform 10 percent increase in interest rates would result in a decrease in net income of approximately $1 million for the year ending December 31, 2003.

Non-Exchange Traded Contracts Accounted for at Fair Value

The Company has a trading program of interest rate swaps that it marks to market each period. The swap transactions involve the exchange of Canadian variable interest and fixed interest rate instruments. As of December 31, the Company had five swap transactions outstanding that mature on June 10, 2003 with a total notional amount of $53.8 million and $61 million as of December 31, 2002 and December 31, 2001, respectively. The fair value of the swap positions of $4.7 million at December 31, 2002 and $14.9 million at December 31, 2001 is reflected in Other noncurrent liabilities in the Consolidated Balance Sheets. The value of these individual swaps is dependent upon movements in the Canadian and U.S. interest rates. The decrease in fair value was due to settlements during the year. As the portfolio of interest rate swaps outstanding at December 31, 2002 is structured, there would be no measurable impact on the net market value of the swap transactions outstanding with any future changes in interest rates. In 2002, 2001 and 2000 the Company incurred net interest expense of $0.2 million, $1.3 million and

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$1.5 million, respectively in connection with these swap transactions. The payments made or received as well as the mark to market adjustment are recognized in Interest expense.

Contingencies

Maytag has contingent liabilities arising in the normal course of business, including pending litigation, environmental remediation, taxes and other claims. Its law department estimates the costs to settle pending litigation, including legal expenses, based on its experience involving similar cases, specific facts known, and, if applicable, based on judgments of outside counsel. Maytag believes the outcome of these matters will not have a material adverse effect on its consolidated financial position. It is possible, however, that future results of operations, for any particular quarterly or annual period, could be materially affected by changes in Maytag’s estimates.

In February 2003, a jury entered a verdict of $2.1 million in compensatory damages and $17.9 million in punitive damages against Amana Company, L.P, the entity from which Maytag purchased the Amana businesses in 2001. The case involved the termination of a commercial distributorship for Amana products prior to the acquisition of the Amana business. Maytag is appealing the verdict and believes that the ultimate resolution of the case will not have a material impact on the financial position of the Company.

As of December 31, 2002, Maytag had approximately $49 million in stand-by letters of credit primarily associated with the requirement to fund certain unqualified pension plans in the event of a change in control.

Forward-Looking Statements

This Management’s Discussion and Analysis contains statements that are not historical facts and are considered “forward-looking” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by their use of the terms: “expect(s),” “intend(s),” “may impact,” “plan(s),” “should” “believe(s)” or similar terms. Maytag or its representatives may also make similar forward-looking statements from time to time orally or in writing. Maytag cautions the reader that these forward-looking statements are subject to a number of risks, uncertainties, or other factors that may cause (and in some cases have caused) actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: business conditions and growth of industries in which Maytag competes, including changes in economic conditions in the geographic areas where its operations exist or products are sold; timing, start-up and customer acceptance of newly designed products; shortages of manufacturing capacity; competitive factors, such as price competition and new product introductions; significant loss of business or inability to collect accounts receivable from a major national retailer; the cost and availability of raw materials and purchased components, including the impact of tariffs; the timing and progress with which it can continue to achieve further cost reductions and savings from its selling, general and administrative expenses and restructuring initiatives; union labor relationships; progress on capital projects; the impact of business acquisitions or dispositions; the ability of Maytag to integrate the operations from acquisitions into its operations; increasing pension and postretirement health care costs; the costs of complying with governmental regulations; litigation, product warranty claims, energy supply, pricing, or supplier disruptions, currency fluctuations or the material worsening of economic and political situations around the world.

These factors may not constitute all factors that could cause actual results to differ materially from those discussed in any forward-looking statement. Maytag operates in a continually changing business environment and new facts emerge from time to time. It cannot predict such factors nor can it assess the impact, if any, of such factors on its financial position or its results of operations. Accordingly, forward-looking statements should not be relied upon as a predictor of actual results. Maytag disclaims any responsibility to update any forward-looking statement provided in this document.

Item 7A.     Quantitative and Qualitative

Disclosure about Market Risk.

See discussion of quantitative and qualitative disclosures about market risk in “Market Risks” section of this Management’s Discussion and Analysis.

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Item 8.    Financial Statements and Supplementary Data.

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Report of Independent Auditors

Shareowners and Board of Directors

Maytag Corporation

We have audited the accompanying consolidated balance sheets of Maytag Corporation as of December 31, 2002 and 2001, and the related consolidated statements of income, comprehensive income, shareowners’ equity, and cash flows for each of three years in the period ended December 31, 2002. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Maytag Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in the Accounting Policies footnote to the consolidated financial statements, in 2002 the Company changed its method of accounting for goodwill and other intangibles.

ERNST & YOUNG LLP

Chicago, Illinois

January 21, 2003

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CONSOLIDATED STATEMENTS OF INCOME