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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the Fiscal Year Ended January 3, 2004

For the transition period from              to             

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 June 28, 2003 was $1,920,660,190. The number of shares outstanding of the registrant’s common stock (par value $1.25) as of the close of business on June 28, 2003 was 78,554,609.

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 13, 2004 have been incorporated by reference.

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MAYTAG CORPORATION

2003 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 American floor care products.

Maytag owns Dixie-Narco, one of the original brand names in the vending machine industry and currently the leading manufacturer of soft drink can and bottle vending machines in the U.S. 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 and commercial-style ranges for the residential market.

Maytag makes significant annual capital investments so that it has 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 15%, 13% and 12% of consolidated net sales in 2003, 2002 and 2001, respectively. Financial and other information relating to these reportable business segments is included in Part II, Items 7 and 8.

HOME APPLIANCES

The home appliance segment represented 94.7 percent of consolidated net sales in 2003.

The operations of the Company’s home appliance 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. The Company also has increased emphasis on its in-home service business, Maytag Services, which repairs not only Maytag brand appliances but other brands as well.

A portion of the Company’s operations and sales is outside the United States. The Company also outsources certain components and products from 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.

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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.

The home appliance market is highly competitive with the two principal major domestic appliance 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 appliance 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.

With regard to appliances, the Company is subject to changes in government mandated energy and environmental standards 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 affect the entire appliance industry become effective, the Company intends to be in compliance with those new standards.

The number of employees of the Company in the home appliance segment was approximately 19,400 as of both January 3, 2004 and December 28, 2002. Approximately 40 percent and 44 percent of these employees were covered by collective bargaining agreements as of January 3, 2004, and December 28, 2002, respectively. Collective bargaining agreements covering two of Maytag’s manufacturing sites are scheduled for negotiations in 2004.

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COMMERCIAL APPLIANCES

The commercial appliance segment represented 5.3 percent of consolidated net sales in 2003.

The operations of the Company’s commercial appliance segment manufacture commercial cooking equipment under the Jade brand name 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. Over the last several years, the Company has increased its emphasis in the vender refurbishment and coin changer businesses.

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 number 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 appliance 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 appliance 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.

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 appliance segment as of January 3, 2004 and December 28, 2002 was approximately 1,240 and 1,265, 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.

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Item 2. Properties.

The Company’s corporate headquarters is located in Newton, Iowa. Major offices and manufacturing facilities in the United States related to the home appliance 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. The Company also leases office space in Chicago, Illinois.

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

The facilities for the home appliance and commercial appliances segments are well maintained, suitably equipped and in good operating condition. The facilities had sufficient capacity to meet production needs in 2003, and the Company expects that such capacity will be adequate for planned production in 2004. The Company’s major capital projects and planned capital expenditures for 2004 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 impact 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 2003 through a solicitation of proxies or otherwise.

EXECUTIVE OFFICERS OF THE REGISTRANT

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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 February 2, 2004, the Company had 19,562 shareowners of record.

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Item 6. Selected Financial Data

Note: The twelve months ended January 3, 2004 consisted of 53 weeks; all other years in this table consisted of 52 weeks.

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

Company Profile

Maytag manufactures and sells home and commercial appliances throughout North America and in international markets. Financial results are reported for two segments: home appliances and commercial appliances. The home appliance segment includes sales of major appliances, floor care products, international export sales and in-home appliance service operations. The commercial appliance segment includes sales of vending equipment and commercial cooking products.

Executive Summary

U.S. industry unit shipments of major appliances reached a record level in 2003 as the industry was up 5 percent versus 2002. Floor care industry unit shipments in the U.S. increased by 3 percent in 2003 although there was a dramatic shift in consumer demand to lower priced products. This shift in demand had a significant impact on Maytag’s results as Maytag historically sells at higher price points. In commercial appliances, based on internal estimates, unit sales in the cold beverage vending industry were down by approximately 15 percent in 2003.

In 2003, Maytag maintained its market share in U.S. major appliances with improvements in the cooking and dishwasher categories offset by decreases in laundry and refrigeration. The Company increased unit sales due to the strong industry shipments as well as new product introductions by Maytag. The unit increases in major appliances, however, were partially offset by a decline in market share and lower pricing in the floor care product category (sold under the Hoover brand). In the commercial segment, Maytag offset the impact of declining industry volume with sales of refurbished products and higher priced glass front venders.

Consolidated net sales increased to $4.8 billion in 2003, a 3 percent increase over 2002. This increase was driven primarily by growth in major appliances partially offset by the impact of lower volume and pricing in certain product categories, particularly in floor care. Maytag ended the year with sales momentum generated by new product introductions in the cooking, laundry, and floor care product lines. For major appliances, this momentum resulted in a higher market share in the second half of 2003 as compared to the first half of 2003 and also as compared to the same period in the prior year.

Consolidated earnings per share decreased to $1.53 in 2003 from $2.40 in 2002. Excluding items such as restructuring charges that affected comparability, earnings per share decreased to $2.20 in 2003 from $2.93 per share in 2002. Comparable earnings were primarily impacted by the deterioration in volume, pricing and product mix in the floor care product line. In addition, earnings were negatively impacted by a significant increase in pension and postretirement medical costs. These higher costs were partially offset by higher sales revenue, the effect of favorable foreign currency exchange rates, primarily for the Canadian dollar, and lower interest costs as Maytag reduced debt in 2003. For a complete listing of items affecting comparability, see “GAAP to Non-GAAP Reconciliation” in this Management’s Discussion and Analysis.

As part of an effort to improve profitability, Maytag reduced salaried headcount by approximately 8 percent in the second quarter of 2003. The salaried headcount reduction is expected to reduce annualized costs by $40 million. Maytag recorded a restructuring charge of $16.5 million associated with this action in the second quarter 2003. Maytag also recorded restructuring charges in both 2003 and 2002 for the anticipated closing of the Galesburg refrigeration plant in 2004. Maytag expects to generate $35 million in annual cost savings from the refrigeration restructuring when fully implemented in 2005. In total, restructuring costs were comparable for both years.

In the fourth quarter of 2003, Maytag negotiated a new union contract with the employees at its North Canton, Ohio facility, a primary location for floor care production. The new contract provides for more flexibility in floor care manufacturing operations and a substantial reduction of annual benefit costs starting in 2004. As a result of these actions, Maytag recorded an $11.2 million non-cash impairment charge in the fourth quarter for the assets employed in a product line that will be exited in the first quarter of 2004.

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Collective bargaining agreements covering two of Maytag’s manufacturing sites are scheduled for negotiations in 2004. If agreement is not reached in a timely manner, any resulting work stoppage could have an adverse impact on Maytag’s results of operations.

Maytag had strong cash flows from operating activities in 2003. Cash flow from operations in 2003 was $354 million, net of $265 million of voluntary contributions to the pension plan. In 2002, cash flow from operations was $365 million, net of $190 million of voluntary pension contributions. A significant contributor to cash flow from operations in 2003 was a $103 million increase in accounts payable as the Company made a concerted effort to extend payment terms. In addition to increased funding of the pension plan in 2003, the Company utilized cash flow from operations to fund $199 million in capital expenditures, reduce debt by $128 million, and pay $56.5 million in dividends to shareholders.

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Business Results

The twelve months ended January 3, 2004 consisted of 53 weeks; all other years in this table consisted of 52 weeks.

The segment included $67.1 million and $7.9 million of restructuring charges in 2002 and 2001, respectively.

Comparison of 2003 with 2002

Net Sales: For 2003, consolidated net sales were $4.792 billion, which was up 3 percent from $4.666 billion for 2002.

Home appliance net sales were 3 percent higher in 2003 compared to 2002. The increase in sales of major appliances was partially offset by lower sales of floor care products. Sales of major appliances in 2003 increased due to industry strength and product introductions by Maytag. Maytag’s major appliance unit market share was flat in 2003 compared to 2002 with improvements in cooking and dishwasher categories offset by a decrease in laundry and refrigeration. The decline in floor care sales was due to a decrease in unit market share, pricing decreases, and a product mix shift within the industry towards products in lower price categories. New floor care products were introduced in the fourth quarter of 2003 and are planned throughout 2004 that are intended to compete at a wider range of price points.

U.S. industry unit shipments of major appliances were up 5 percent in 2003 compared to 2002. For the full year of 2004, the Company expects the major appliances industry to be up 2 percent compared to 2003. Floor care industry unit shipments were up 3 percent in 2003 compared to 2002. Maytag expects floor care industry unit shipments for the full year 2004 to be up 3 to 4 percent.

Commercial appliance net sales were up 4 percent in 2003 compared to 2002. A decrease in sales of traditional venders was offset by increased sales of glass-front venders, refurbished venders and coin changer products. Based on its internal estimates, Maytag estimates that the cold beverage vending equipment industry was down approximately 15 percent in 2003 compared to 2002. However, the Company’s increased average selling prices related to glass front venders and its expanded business initiatives offset the industry weakness. Maytag estimates the cold beverage vending equipment industry to show flat to declining growth in 2004 compared to 2003.

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Gross Profit: Consolidated gross profit as a percent of sales declined to 17.9 percent in 2003 from 21.5 percent in 2002. The decline in gross margin as a percentage of sales for 2003 is primarily attributable to lower priced and lower margin floor care products in the home appliance segment. At the beginning of 2003, in response to competitive pressures, the Company reduced prices for several floor care products. As these prices did not result in increased volume, the impact on gross profit as a percent of sales was significant. Also, in 2002, Maytag recognized a gain on the sale of a distribution center of $8.3 million that was recorded as a reduction in cost of goods sold.

The Company also incurred significant increases in pension and postretirement medical expenses in 2003, primarily due to assumption changes. The assumption changes included a lower discount rate, a lower expected rate of return on pension assets, and a higher trend rate for health care costs as compared to the assumptions used for 2002. See “Pension Benefits” section in the Notes to Consolidated Financial Statements of the 2003 Annual Report on Form10-K (“2003 Form 10-K”) for a summary of pension assumptions. For 2004, the Company expects pension and postretirement expenses to be equal to 2003 as a result of increased pension contributions at the end of 2003 as well as the Company having negotiated a revised union contract covering certain production employees. In December 2003, Congress enacted the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“Medicare Act”), which includes subsidies for companies providing prescription-drug benefits to retirees. Maytag’s SFAS 106 Postretirement Benefit measurement date of September 30 was before the enactment of this law and, therefore, the potential benefit of any changes in Maytag’s postretirement liability or expense is not reflected in the financial statements or accompanying notes included in the 2003 Form 10-K. While Maytag believes the impact of the law should significantly lower its postretirement liability and expense, the Company is still evaluating its prospective impact.

During the first six months of 2003, material cost increases, primarily for steel, also negatively impacted gross profit as a percent of sales. However, the Company negotiated reductions in steel prices and other commodities to mitigate the effect of material cost increases in the second half of 2003. For the full year of 2004, Maytag expects increases in steel costs to again negatively impact gross profit as a percent of sales.

Selling, General and Administrative Expenses: Consolidated selling, general and administrative expenses were 11.6 percent of sales in 2003 compared to 12.4 percent of sales in 2002. The primary reason for the decline was a reduction in discretionary spending, a salaried work force reduction, decreased bad debt expense and leverage from increased net sales.

Restructuring Charges: In the fourth quarter of 2002, the Company announced it would close its refrigeration manufacturing facility in Galesburg, Illinois, by the end of 2004. In 2003 and 2002, the Company recorded $48.4 million and $67.1 million, respectively, of charges related to the refrigeration restructuring. The total pre-tax restructuring charges are anticipated to be in the range of $160 to $170 million. The majority of the remaining expenses are expected to be incurred in 2004. An estimated $44 million of the total restructuring charge is expected to be paid in cash, primarily involving severance and costs to move equipment. Cash expenditures for the twelve months ended January 3, 2004 related to the facility closing were $8.0 million. It is anticipated that the closure of the facility will result in a workforce reduction of approximately 1,600 positions by the end of 2004, with the majority of those positions held by hourly production workers. Approximately 400 positions have been eliminated through January 3, 2004. The Company expects to generate $35 million of cost savings on an annualized basis after the facility closure. Refrigeration production is currently being moved to an existing facility in Amana, Iowa, and a new factory in Reynosa, Mexico. The manufacturing of certain other refrigeration products has already been sourced to a third party. All of these charges were recorded within the home appliance segment.

In the second quarter of 2003, Maytag implemented an additional restructuring program primarily consisting of a salaried workforce reduction and recorded $16.5 million of restructuring charges. The workforce reduction resulted in cost savings estimated at $20 million in the second half of 2003 and is expected to result in cost savings of approximately $40 million on an annualized basis.

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See “Restructuring Charges” section in the Notes to Consolidated Financial Statements included in the 2003 Form 10-K for further discussion and analysis of reserve activity for 2003.

Asset Impairment: In the fourth quarter of 2003, Maytag negotiated a new union contract with the employees at its North Canton, Ohio, facility, a primary location for floor care production. The new contract provides Maytag with more flexibility in its manufacturing operations and a substantial reduction of annual benefit costs starting in 2004. As a result of these actions, Maytag recorded within the home appliance segment an $11.2 million non-cash impairment charge in the fourth quarter for the assets employed in a product line that will be exited in the first quarter of 2004. These assets were written down to fair value based on prices for similar assets.

Operating Income: Consolidated operating income as a percent of sales for 2003 was 4.8 percent, compared to 7.7 percent in 2002. The 2003 and 2002 results included restructuring charges for the planned closing of the refrigeration manufacturing facility in Galesburg, Illinois. The 2003 results also include the salaried workforce reduction charge as well as the asset impairment charge. The 2002 results include the gain on sale of the distribution center of $8.3 million. The decrease in operating income as a percent of sales was due to the declines in gross profit as a percent of sales partially offset by lower selling, general and administrative expenses as a percent of sales, as discussed above.

Home appliance operating income as a percent of sales for 2003 was 5.9 percent, compared to 9 percent in 2002. The 2003 results include $48.4 million of restructuring charges for the closing of the refrigeration manufacturing facility, $15.2 million of charges for the salaried workforce reduction and the asset impairment charge of $11.2 million. The 2002 results include $67.1 million of restructuring charges related to the closing of the refrigeration manufacturing facility and the gain on sale of the distribution center. The 2003 operating income as a percent of sales was significantly impacted by lower floor care pricing and a shift in floor care product mix and increased pension and postretirement medical costs.

Commercial appliance operating income as a percent of sales for 2003 was 4.6 percent, compared to 5.3 percent in 2002. Improved gross profit and lower selling, general and administrative expenses in vending equipment did not offset higher costs from short-term inefficiencies within commercial cooking as a result of a factory move and system installations.

General corporate operating expenses were higher in 2003 compared to 2002 as lower incentive compensation expense accruals were offset by higher information technology costs, professional service fees and severance and recruiting costs.

For a listing of items affecting operating income comparability between periods, such as restructuring charges, see “GAAP to Non-GAAP Reconciliation” in this Management’s Discussion and Analysis.

Interest Expense: Interest expense for 2003 was 15 percent lower than 2002 due to both reduced debt levels and lower average interest rates.

Loss on Investment: In the fourth quarter of 2003, Maytag ceased funding the operations of a company with robotic technology for the floor care industry in which it had a remaining investment of $7.2 million accounted for under the equity method. An analysis of the prospects for this investment projected negative cash flows and would have required continued allocation of resources. Therefore, Maytag determined that the impairment of the investment was other than temporary and recorded the $7.2 million charge as a loss on investment on the Consolidated Statements of Income.

Other Income (Loss): During 2003, other income (loss) reflected income of $4.4 million compared to a loss of $1.4 million in 2002. The change in other income (loss) was primarily due to interest income recorded in 2003. The source of interest income included $4.1 million received throughout the year related to the notes receivable arising from the sale of Blodgett, $3.5 million for interest on a

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federal tax refund, and $1.6 million arising from the settlement of a purchase contract dispute involving the 2001 acquisition of Amana. Losses on foreign currency exchange rates of $5.9 million in 2003 and $1.9 million were also recorded in Other Net. See “Financial Instruments” section in the Notes to Consolidated Financial Statements included in the 2003 Form 10-K for more details on foreign currency exchange rates.

Income Taxes: The effective tax rates for 2003 and 2002 were 33.8 and 34 percent, respectively. The decrease was due to lower 2003 earnings that caused fixed dollar tax credits to be a more significant component of the tax provision calculation, thereby reducing the effective tax rate. The rate decrease was partially offset by the loss on an investment for which no tax benefit was recorded as the realization of future tax benefit is uncertain.

Discontinued Operations: During the fourth quarter of 2001, Maytag committed to a plan to dispose of its interest in Rongshida-Maytag, a joint venture located in China. The business was classified as a discontinued operation during that quarter. On June 30, 2003, the Company announced a tentative agreement to sell its holdings in Rongshida-Maytag subject to regulatory approvals and negotiation of final contract terms. Based on the status of the negotiations, the Company recorded an after-tax loss of $3.3 million in the third quarter of 2003 to write down its investment in Rongshida-Maytag to its fair value less costs to dispose. The Company has been unsuccessful in reaching a final agreement with the buyer and as a result, is considering all options for the disposal of its interests. Based on discussions with other interested buyers, the Company believes the Rongshida-Maytag net assets are recorded at fair value less costs to dispose as of January 3, 2004.

In connection with the 2001 sale of Blodgett, a manufacturer of cooking products, Maytag received $18.2 million of notes receivable but recorded a valuation reserve of $9.7 million against the note due to the credit status of the buyer ($8.5 million, net). In 2003, Maytag received payments of $16.2 million in principal and $3.3 million of accrued interest against these notes receivable. Based on the cash payments received and the improved financial position of the buyer, the Company reversed the $9.7 million reserve and recognized a gain in discontinued operations.

See “Discontinued Operations” section in the Notes to Consolidated Financial Statements included in the 2003 Form 10-K for further information.

Net Income: The decrease in net income in 2003 compared to 2002 was due primarily to the decrease in operating income. The decrease in diluted earnings per share in 2003 compared to 2002 was also due primarily to the decrease in operating income as average diluted shares outstanding were comparable.

For a listing of items affecting net income comparability between periods, such as restructuring charges, see “GAAP to Non-GAAP Reconciliation” in this Management’s Discussion and Analysis.

Comparison of 2002 with 2001

The results for both periods 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 appliance net 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 6 percent in 2002. Maytag’s unit shipments of major appliances increased 9 percent due primarily to the inclusion of Amana sales for a full year in 2002 compared to five months in 2001. Floor care industry shipments of uprights, the primary product type in this industry, were up 2 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 sales of the new hard surface floor cleaner category, allowing total Maytag floor care shipments to increase in 2002.

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Commercial appliance net sales, which include vending equipment and commercial cooking products, increased 6 percent in 2002 compared to 2001. The increase was due to improved product mix of vending equipment. Increases in sales of glass-front venders helped to offset decreases in traditional vender sales.

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.

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.

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 for which it recognized restructuring charges of $67.1 million in 2002. During the fourth quarter of 2001, Maytag recognized restructuring charges of $9.8 million associated with a salaried workforce reduction and asset write-downs. See “Restructuring Charges” section in the Notes to Consolidated Financial Statements included in the 2003 Form10-K for further discussion.

Operating Income: Consolidated operating income as a percent of sales for 2002 was 7.7 percent, compared to 6.9 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, the decrease in selling, general and administrative costs as a percent of sales, as discussed above, and the $8.3 million gain on sale of distribution center. These positive effects were partially offset by $67.1 million in restructuring charges. Operating income in 2002 increased 24 percent compared to 2001 as a result of increased sales and improved operating income as a percent of sales.

Home appliance operating income as a percent of sales for 2002 was 9 percent, compared to 8.2 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. These positive effects were partially offset by $67.1 million in restructuring charges. Home appliance operating income in 2002 increased 22 percent compared to 2001 as a result of increased sales and improved operating income as a percent of sales.

Commercial appliance operating income as a percent of sales for 2002 was 5.3 percent, compared to 2.5 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 appliance operating income increased 127 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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General 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 expense resulting from increased earnings, higher charitable contribution expense and business development costs.

For a listing of items affecting operating income comparability between periods, such as restructuring charges, see “GAAP to Non-GAAP Reconciliation” in this Management’s Discussion and Analysis.

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

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 included in the 2003 Form 10-K for further discussion on the Maytag Trusts).

Loss on Investment: During 2001, Maytag recognized a loss on investment of $7.2 million resulting from the write-off of the remaining investment in an Internet-related company (see “Loss on Investment” section in the Notes to Consolidated Financial Statements included in the 2003 Form 10-K for further discussion).

Other Income (Loss): During 2002, other income (loss) reflected a loss of $1.4 million compared to a loss of $5 million in 2001. The change in other income (loss) was primarily due to 2001 including losses on certain equity investments.

Income Taxes: The effective tax rates for 2002 and 2001 were 34 percent and 13.3 percent, respectively. The 2001 effective tax rate reflected a one-time tax benefit of $42 million. The one-time tax benefit was associated with the settlement of an Internal Revenue Service audit. Partially offsetting this was the absence of any tax benefit from the $7.2 loss on investment due to the uncertainty of utilization of capital loss carryforwards.

Minority Interest: Minority interest decreased by $10.7 million in 2002 compared to 2001. The decrease was due to Maytag’s purchase from an outside investor in 2002 of a noncontrolling minority interest as well as the fact that the 2001 results included another minority interest that was retired in the third quarter of 2001 (see “Minority Interests” section in the Notes to Consolidated Financial Statements of the 2003 10-K for further discussion ). Both of 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 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 established 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.

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 certain put obligations and purchase contracts on the balance sheet (see “Cumulative Effect of Accounting Change” section in the Notes to the Consolidated Financial Statements included in the 2003 Form 10-K for further discussion).

Net Income (Loss): The increase in net income in 2002 compared to 2001 was due primarily to the increase in operating income as well as the 2001 loss from discontinued operations. The increase in diluted earnings per share in 2002 compared to 2001 was also due primarily to the increase in operating income and the loss from discontinued operations in the prior year.

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For a listing of items affecting net income (loss) comparability between periods, such as restructuring charges, see “GAAP to Non-GAAP Reconciliation” in this Management’s Discussion and Analysis.

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. A summary of that statement is provided below.

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 medical benefits. Non-cash items include depreciation and amortization and deferred income taxes. Working capital items consist primarily of accounts receivable, accounts payable, inventories, other current assets and other current liabilities.

Net cash provided by continuing operations for 2003 was $354.4 million, a decrease of $10 million from the prior year. Based on strong cash flow from operating activities in 2003, Maytag made $265 million in voluntary pension contributions during 2003 as compared to $190 million in 2002. Maytag plans to make pension contributions of at least $90 million in 2004. Other current assets decreased compared to December 28, 2002 due primarily to a tax refund received in 2003. Working capital decreased as of January 3, 2004 because of increased accounts payable due to concerted efforts to extend payment terms.

A substantial portion of accounts receivable is concentrated among major national retailers. A significant loss of business with or failure of any of these retailers could have an adverse impact on ongoing operations.

Certain accounts receivable are sold to an unconsolidated finance company in which Maytag has a 50 percent ownership interest and shares equally in profits or losses. These accounts receivable are 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 $21.7 million of receivables and $8.5 million of debt were recorded at January 3, 2004 on the unconsolidated finance company’s balance sheet. The investment in the finance company is accounted for using the equity method and a total investment of $1.3 million was recorded on the Consolidated Balance Sheet as of January 3, 2004.

Net Cash Utilized by Investing Activities: Maytag’s capital expenditures represent continued investments in its businesses for such items as new product designs, cost reduction programs, replacement of equipment, targeted capacity expansion and government mandated product requirements. Capital expenditures for 2003 were $199 million compared to $230 million in 2002. The Company plans to expend between $175 and $185 million on capital expenditures in 2004.

In 2003, Maytag received $16.2 million in principal and $3.3 million in interest payments related to its 2001 sale of Blodgett. See “Discontinued Operations” in this Management’s Discussion and Analysis for further discussion.

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In 2001, the Company acquired the major appliances and commercial microwave oven businesses of Amana. The purchase contract contained a price adjustment mechanism that was ultimately settled for $13.5 million in Maytag’s favor, in the fourth quarter of 2003. The settlement included $1.6 million of interest that was recognized as income in the Other-net component of the Consolidated Statements of Income. The remaining $11.9 million of the settlement was recorded as a reduction to the originally recorded $20.5 million of goodwill. (See “Business Acquisitions” section in the Notes to Consolidated Financial Statements of the 2003 Form 10-K for further discussion of the acquisition.)

Net Cash Utilized by Financing Activities:

In 2003, Maytag’s debt obligations decreased by $142 million, reflecting net cash payments of $128 million and a decrease in long-term debt related to a change in the fair value of interest rate swaps of $14 million. The current portion of long-term debt decreased $171 million due primarily to a $150 million principal payment on a medium term note. Long-term debt increased $136 million due primarily to the issuance of $200 million of medium-term notes, the proceeds of which were used principally to pay down commercial paper.

Any funding requirements for future investing and financing activities in excess of cash on hand and generated from operations will be supplemented by borrowings. A 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 April 29, 2004 and May 3, 2004. The Company expects to enter into new credit agreements similar in amount, terms and conditions to those set to expire in 2004. The Consolidated Balance Sheet includes $71 million of commercial paper outstanding as of January 3, 2004 that is classified as notes payable. The credit agreements include financial covenants with respect to interest coverage and debt to earnings before interest, taxes, depreciation and amortization. The Company was in compliance with these covenants as of January 3, 2004 and expects to be in compliance with these financial covenants through the end of 2004. 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 the Company’s ability to borrow through the sale of commercial paper. If additional funds are required, the Company has a shelf registration statement on file with the Securities and Exchange Commission providing the ability to issue publicly an aggregate of $100 million of debt securities as of January 3, 2004.

Dividend payments on common stock were $56.5 million in 2003 and $56 million in 2002, in each case representing $0.72 per share.

Shareowners’ Equity: Shareowner’s equity remains at a low level 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 January 3, 2004. 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 2003, 2002 and 2001. Management does not expect the low level of equity to pose a risk to liquidity because cash flow is strong and there are no covenants in any debt instruments that include equity or debt-to-equity ratios.

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Future Obligations and Commitments

The following table summarizes our future estimated cash payments under existing contractual obligations, including payments due by period. The majority of the purchase obligations represent commitments for projected production needs to be utilized in the normal course of business operations. For additional disclosures regarding long-term commitments, see “Commitments and Contingencies” section in the Notes to Consolidated Financial Statements included in the 2003 Form 10-K.

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. Maytag hedges a portion of its anticipated foreign currency denominated export sales transactions, which are denominated primarily in Canadian dollars. At January 3, 2004, 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 $25 million for the year ending January 1, 2005. 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 January 3, 2004, a uniform 10 percent increase in the price of commodities covered by commodity swap agreements would result in an increase of $212 thousand in fair market value of the commodity swap agreements. For all commodities, a uniform 10 percent increase in the price of future purchases of commodities would have a material impact on operational results.

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 January 3, 2004, an increase in interest rates of 1 percent would result in a decrease in net income of approximately $3 million for the year ending January 1, 2005.

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Contingencies

Maytag has contingent liabilities arising in the normal course of business, including pending litigation, environmental remediation, taxes and other claims. The Company’s legal 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. The Company believes the outcome of these matters will not have a materially 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.

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 Maytag’s acquisition of the Amana business. The punitive damage award was reduced to $10 million by the trial court after post-trial motions. The Company is appealing the entire verdict and believes that the ultimate resolution of the case will not have a material impact on its financial position.

As of January 3, 2004, approximately $44 million in undrawn stand-by letters of credit were available that are primarily utilized to back workers compensation claims, environmental costs and other business items in the event Maytag fails to fund these obligations.

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GAAP to Non-GAAP Reconciliation

Items that affected comparability of reported operating income, net income and earnings per share are included in the tables below:

The Company has provided these non-GAAP measurements as a way to help investors better understand its earnings and enhance comparisons of the company’s earnings from period to period. Among other things, the Company’s management uses the earnings results, excluding items affecting comparability, to evaluate the performance of its businesses. There are inherent limitations in the use of earnings, excluding items affecting comparability, because the Company’s actual results do include the impact of these items. The non-GAAP measures are intended only as a supplement to the comparable GAAP measures and the Company compensates for the limitations inherent in the use of non-GAAP measures by using GAAP measures in conjunction with the non-GAAP measures. As a result, investors should consider these non-GAAP measures in addition to, and not in substitution for, or as superior to, measures of financial performance prepared in accordance with GAAP.

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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 and applying percentages based on historical experience to age categories. In addition, 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. In 2003, certain Maytag employees were given a one-time opportunity to transfer their pension to a cash balance pension plan. Approximately 33% of all the Company’s employees became participants in the cash balance plan.

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 January 3, 2004, the rate utilized to determine the accumulated benefit obligation and projected benefit obligation was 6.5 percent compared to 7 percent and 7.5 percent used for 2002 and 2001, respectively.

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 January 3, 2004, this rate for salaried employees was 4 percent compared to 4.25 percent and 4.75 percent for 2002 and 2001. At January 3, 2004 and December 28, 2002 the rate for non-union hourly employees was 3 percent compared to 3.25 percent at December 29, 2001. 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.

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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. The expected rate of return is based on the asset allocation within the plan assets as well as the historical and future expected returns for each of the asset classes within the portfolio. The future expected returns on the asset classes are based on current market factors such as interest rates and expected market returns. Maytag determines the asset return component of net periodic pension cost on a market-related valuation of assets that smoothes actual returns and reduces year-to-year net periodic pension cost volatility. As of January 3, 2004, Maytag had cumulative asset losses of approximately $183 million, which remain to be recognized in the calculation of the market-related value of assets. At January 3, 2004 and December 28, 2002, the assumption for the expected rate of return was 8.75 percent for determining net periodic pension cost as compared to 9 percent at December 29, 2001.

Maytag employs a total investment return approach whereby a mix of equity and debt securities are used to maximize the long-term return of plan assets for a prudent level of risk. The investment portfolio contains a diversified blend of equity and debt securities. Furthermore, equity investments are diversified across domestic and international stocks as well as large and small capitalizations. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements and periodic asset/liability studies. The target allocation of equity securities is 68 percent of the plan assets. The target allocation of debt securities is 32 percent of the plan assets. The target allocations remained consistent for the 2003 and 2002 measurement dates.

At January 3, 2004, Maytag’s accrued pension cost was $398 million, a decrease from $489 million at the end of 2002. The decreased accrued pension cost was primarily due to a $130 million contribution made in the fourth quarter of 2003. A minimum liability adjustment was recorded at January 3, 2004 due to a higher accumulated benefit obligation that was partially offset by a higher value of plan assets. 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 increased by $191 million as gains on plan assets and employer contributions exceeded benefit payments. The additional contribution of $130 million, which was subsequent to the September 30, 2003, measurement date, reduced the accrued pension cost on the January 3, 2004, Consolidated Balance Sheet from the $528 million amount required by the minimum liability calculation.

Net periodic pension cost decreased to $70 million in 2003 from $79 million in 2002. Pension costs for 2003 included a curtailment charge of $5.2 million for pension enhancements related to a salaried workforce reduction. Pension costs in 2002 included 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). Excluding the curtailment charges, pension cost increased due to higher amortization of unrecognized actuarial losses partially offset by lower service costs and amortization of prior service cost. For 2004, the Company expects pension expenses to be equal to 2003 benefiting from increased pension contributions at the end of 2003.

Lowering the expected rate of return on plan assets by 0.25 percent would have increased net periodic pension cost for 2003 by approximately $4.5 million. Lowering the discount rate by 0.25 percent would have increased net periodic pension cost for 2003 by approximately $4.5 million. Increasing the rate of increase in compensation levels by 0.25 percent would have increased net periodic pension cost for 2003 by approximately $1.4 million.

Pension contributions increased to $268 million in 2003 from $193 million in 2002. Maytag has no minimum funding requirements in 2004, based on ERISA requirements. However, the Company intends to contribute a minimum of $90 million in 2004.

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.

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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 January 3, 2004, Maytag determined this rate to be 6.5 percent compared to 7 percent and 7.5 percent used for 2002 and 2001, respectively.

Second, Maytag must determine the expected health care cost trend rate used in the calculation of the accumulated postretirement benefit obligation for the end of the current year and net periodic postretirement cost for the subsequent year. At January 3, 2004, Maytag adjusted this initial health care cost trend rate to 10 percent from 12 percent at December 28, 2002. The expected health care cost trend rate decreases gradually to 5 percent in 2007 and thereafter.

At January 3, 2004, Maytag’s postretirement benefit liability was $538 million, an increase from $518 million at the end of 2002. For the year ended January 3, 2004, Maytag incurred a net periodic postretirement cost of $70.9 million, an increase from $61 million in 2002. In 2002, Maytag incurred 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). Net periodic postretirement cost increased in 2003 due to higher amortization of unrecognized actuarial losses and increased interest costs resulting from the higher postretirement benefit liability. Maytag currently expects that net periodic postretirement cost for 2004 will increase slightly from 2003 as the Company negotiated a revised union contract with certain production employees.

In December 2003, Congress enacted the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“Medicare Act”), which includes subsidies for companies providing prescription-drug benefits to retirees. Maytag’s SFAS 106 Postretirement Benefit measurement date of September 30 was before the enactment of this law and, therefore, the potential benefit of any changes in Maytag’s postretirement liability or expense is not reflected in the financial statements or accompanying notes included in the 2003 Form 10-K. While Maytag believes the impact of the law should significantly lower its postretirement liability expense, the Company is still evaluating its prospective impact.

Increasing the expected health care cost trend rate one percent would have increased net periodic postretirement cost for 2003 by approximately $13.2 million. Lowering the discount rate by 0.25 percent would have increased net periodic postretirement cost for 2003 by approximately $1.8 million.

Litigation and Tax Contingencies: Maytag is a defendant in a number of legal proceedings associated with employment, product liability or other 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 materially 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.

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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 the Company prevails in matters where accruals have been established or is required to pay amounts in excess of the accrual, the effective tax rate and net income in a given financial period may be impacted.

Accounting for Goodwill and Other Intangible Assets: Maytag accounts for goodwill and other intangible assets under Statement No. 142, “Goodwill and Other Intangible Assets” whereby goodwill and intangible assets deemed to have indefinite lives are subject to annual impairment tests.

The statement requires a two-step process for impairment testing. The first step, used to identify potential impairment only, compares the fair value of the 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. Quoted market prices are the 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 the reporting unit exceeds its carrying amount, goodwill is not considered impaired; thus the second step of the process is 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.

As of December 30, 2001, (the initial impairment test) and during the fourth quarters of 2002 and 2003, 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 appliance segment totaled $254 million as of January 3, 2004, most of which related to the floor care product line. Goodwill included in the commercial appliance segment totaled $15.1 million as of January 3, 2004, most of which related to the commercial cooking product line. Expected future cash flows for the reporting units tested was based on prospective assumptions as the Company is undertaking additional business initiatives that are not currently reflected in the historical results. Maytag currently has no intangible assets with indefinite lives other than goodwill.

Segment Reporting: Beginning in the first quarter of 2004, Maytag will change its segment reporting structure to three segments from two segments in 2003 as Maytag aligns its internal reporting to reflect new initiatives and accountabilities within the Company. The new reporting segments will reflect internal reporting changes that have occurred as a result of new growth initiatives within the Company.

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Forward-Looking Statements and Business Risks

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)”, “anticipate(s)”, “on track” or similar terms. The Company or its representatives may also make similar forward-looking statements from time to time orally or in writing. The reader is cautioned 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 the Company 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 including but not limited to, the transition of manufacturing operations from the Company’s refrigeration plant in Galesburg, Illinois, to its new plant in Reynosa, Mexico; 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 the Company can continue to achieve further cost reductions and savings from its selling, general and administrative expenses and restructuring initiatives; financial viability of contractors or insurers; union labor relationships including, but not limited to negotiation of union contracts that expire in 2004 at the Company’s Newton, Iowa, and Amana, Iowa, facilities; progress on capital projects; the impact of business acquisitions or dispositions; 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; and 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. The Company 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 January 3, 2004 and December 28, 2002, and the related consolidated statements of income, comprehensive income, shareowners’ equity, and cash flows for each of three fiscal years in the period ended January 3, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15(d). 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 January 3, 2004 and December 28, 2002, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 3, 2004, 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 27, 2004

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Consolidated Statements of Income

See notes to consolidated financial statements.

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Consolidated Balance Sheets