Form 10-K

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, 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 (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the 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 Rule 12b-2 of the Act). Yes x No ¨

The aggregate market value of the voting stock of the registrant held by stockholders not including voting stock held by directors and executive officers of the registrant and certain employee plans of the registrant (the exclusion of such shares shall not be deemed an admission by the registrant that any such person is an affiliate of the registrant) at the close of business on June 30, 2003 (the last business day of the registrant’s most recently completed second fiscal quarter) was $4,186,853,343.

On February 23, 2004, the registrant had 68,588,956 shares of common stock outstanding.

Portions of the following documents are incorporated herein by reference into the Part of the Form 10-K indicated:

Whirlpool Corporation, the leading worldwide manufacturer and marketer of major home appliances, was incorporated in 1955 under the laws of Delaware as the successor to a business that traces its origin to 1898. The Company manufactures in 13 countries under nine major brand names and markets products to distributors and retailers in more than 170 countries. As of December 31, 2003, the Company had approximately 68,000 employees. As used herein, and except where the context otherwise requires, the terms “Company” and “Whirlpool” include Whirlpool Corporation and its consolidated subsidiaries.

The Company manufactures and markets a full line of major appliances and related products, primarily for home use. The Company’s principal products are home laundry appliances, home refrigerators and freezers, home cooking appliances, home dishwashers, room air-conditioning equipment, and mixers and other small household appliances. Approximately 10% of the Company’s unit sales volume is purchased from other manufacturers for resale by the Company. The Company also produces hermetic compressors and plastic components, primarily for the home appliance and electronics industries.

The following table sets forth information regarding the total net sales contributed by each class of similar products which accounted for 10% or more of the Company’s consolidated net sales in 2003, 2002, and 2001.

The Company markets and distributes major home appliances in the United States under the Whirlpool, KitchenAid, Roper, and Estate brand names primarily to retailers, buying groups, and builders. KitchenAid portable appliances, such as mixers, are sold directly to retailers. The Company sells products to the builder trade both directly and through distributors. Additionally, the Company sells to Crosley Corporation under the Crosley private label brand, and to Costco Wholesale Corporation under the Kirkland Signature brand. Major home appliances are manufactured and/or distributed in Canada under the Inglis, Admiral, Speed Queen, Whirlpool, Roper, and KitchenAid brand names. In Mexico, major home appliances are manufactured and marketed under the Whirlpool, Acros, KitchenAid, Estate, Roper, and Supermatic brand names. Some products are sold in limited quantities by the Company to other manufacturers and retailers for resale in North America under their respective brand names.

The Company has been the principal supplier of home laundry appliances to Sears, Roebuck and Co. (“Sears”) for over 80 years. The Company is also the principal supplier to Sears of residential trash compactors and a major supplier to Sears of dishwashers, freestanding ranges, home refrigerators and freezers, and microwave-hood combinations. The Company supplies products to Sears for sale under Sears’ Kenmore brand name. Sears has also been a major outlet for the Company’s Whirlpool and KitchenAid brand products since 1989. In 2003, approximately 18% of the Company’s net sales were attributable to sales to Sears.

In Europe, Whirlpool markets and distributes its major home appliances under the Whirlpool, Bauknecht, Ignis, Laden, and Polar brand names and its portable appliances under the KitchenAid brand name. In addition to its extensive operations in Western Europe, the Company has sales subsidiaries in Hungary, Poland, the Czech Republic, Slovakia, Greece, Romania, Bulgaria, Latvia, Estonia, Lithuania, Croatia, and Morocco and representative offices in Russia, Ukraine, Kazakhstan, Yugoslavia, and Slovenia. In certain Eastern European countries, products bearing the Whirlpool, Polar, and Ignis brand names are sold through distributors. The Company manufactures refrigerators and freezers and markets a full line of products under the Whirlpool, KIC, and Ignis brand names in South Africa. Whirlpool’s European operations also sell products carrying the Whirlpool, Bauknecht, and Ignis brand names to distributors and dealers in Africa and the Middle East.

In Latin America, the Company markets and distributes its major home appliances through regional networks under the Whirlpool, Brastemp, Consul, and Eslabon de Lujo brand names. Appliance sales and distribution in Brazil, Argentina, and Chile are managed by the Company’s Brazilian subsidiary, and in Bolivia, Peru, Paraguay, and Uruguay through distributors. Appliance sales and distribution in Central American countries, the Caribbean, Venezuela, Colombia, and Ecuador are managed by Whirlpool’s North America Region and through distributors.

In Asia, the Company has organized the manufacture, marketing, and distribution of its major home appliances into five operating groups: (1) mainland China; (2) South Asia, which includes India, Bangladesh, Sri Lanka, and Nepal; (3) Oceania, which includes Australia, New Zealand, and Pacific Islands; (4) North Asia, which includes Hong Kong, Taiwan, Korea, and Japan; and (5) Southeast Asia, which includes Thailand, Singapore, Malaysia, Indonesia, and the Philippines. The Company markets and sells its products in Asia under the brand names Whirlpool, KitchenAid, Bauknecht, and Ignis by a combination of direct sales to high-volume retailers and chain stores, and through full-service distributors to a large network of electronics stores.

The major home appliance business is highly competitive. In most major markets throughout the world, 2003 was a challenging year in the industry with rising material costs (particularly steel) and intense price competition. In North America, there has been continued polarization in retail distribution channels with most retailers either (1) offering little or no customer service and competing solely on the basis of price, or (2) providing value added services coupled with a brand building strategy. The Company firmly believes that it can best compete in the current environment by providing value added products and services under its strong brand names.

The Company believes that, in terms of units sold, it is the largest North American manufacturer of home laundry appliances and one of the largest North American manufacturers of home refrigerators and freezers, room air conditioning equipment, dishwashers, and cooking products. The Company believes that in North America there are approximately 20 manufacturers or marketers of major home appliances.

The Company believes that in Europe it is, in terms of units sold, one of the largest manufacturers and marketers of major home appliance products, out of approximately 35 European manufacturers, the majority of which manufacture a limited range of products for a specific geographic region. There continues to be significant merger and acquisition activity as manufacturers seek to broaden product lines and expand geographic markets, and the Company believes that some merger and acquisition activity will continue. The Company believes that its Pan European organizational structure and strategy of marketing brand names that are recognized throughout the region are competitive advantages in the European market.

The Company believes that it is well-positioned in the Latin American appliance market due to its ability to offer a broad range of products under well-recognized brand names to meet the specific requirements of consumers in the region. The Company believes that it is about twice the size of its nearest competitor and that there are approximately 25 manufacturers or marketers of major home appliances in the region.

In Asia, the major home appliance market is characterized by low saturation and, as a result, rapid growth (except in Japan and South Korea). The Asian market is served by approximately 50 manufacturers or marketers of varying size and position on a country-by-country basis. The Company believes that it is one of the industry leaders in the Indian market and it continues to establish itself throughout the remainder of the region.

Competition in most of the Company’s markets is based upon a wide variety of factors, including, principally, product features, price, product quality and performance, service, warranty, advertising, and promotion. As a result of its global position, the Company believes it has a competitive advantage by reason of its ability to leverage engineering capabilities across regions, transfer best practices, purchase raw materials and component parts in large volumes, and economically produce a finished product.

The Company’s interests outside the United States are subject to risks which may be greater than or in addition to those risks which are currently present in the United States. Such risks may include currency exchange rate fluctuations; high inflation; the need for governmental approval of and restrictions on certain financial and other corporate transactions and new or continued business operations; the convertibility of local currencies; government price controls; restrictions on the remittance of dividends, interest, royalties, and other payments; restrictions on imports and exports; duties; political and economic developments and instability; the possibility of expropriation; uncertainty as to the enforceability of commercial rights and trademarks; and various types of local participation in ownership.

The Company is generally not dependent upon any one source for raw materials or purchased components essential to its business. In those areas where a single supplier is used, alternative sources are generally available and can be developed within the normal manufacturing environment, although some unanticipated costs may be incurred in transitioning to a new supplier where a prior single supplier is abruptly terminated. While there are pricing pressures on some materials and significant demand for certain components, the Company believes such raw materials and components will be available in adequate quantities to meet anticipated production schedules.

Patents presently owned by the Company are considered, in the aggregate, to be important to the conduct of the Company’s business. The Company is licensed under a number of patents, none of which individually is considered material to its business. The Company is the owner of a number of trademarks and registrations therefor in the U.S. and foreign countries. The most important for its North American operations are the trademarks Whirlpool, KitchenAid, Estate, Roper, and Acros. The most important trademarks owned by the Company in Europe are Whirlpool, Bauknecht, and Ignis. In Latin America, the most important trademarks owned by the Company are Whirlpool, Brastemp, and Consul. The most important trademark owned by the Company in Asia is Whirlpool.

Expenditures for Company-sponsored research and engineering activities relating to the development of new products and the improvement of existing products are included in Note 1 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

The Company’s manufacturing facilities are subject to numerous laws and regulations designed to protect or enhance the environment, many of which require federal, state, or other governmental licenses and permits with regard to wastewater discharges, air emissions, and hazardous waste management. The Company’s policy is to comply with all such laws and regulations. Where laws and regulations are less restrictive, the Company has established and is following its own standards consistent with its commitment to environmental responsibility.

The Company believes that it is in compliance in all material respects with all presently applicable federal, state, local, and other governmental provisions relating to environmental protection in the countries in which it has manufacturing operations. Capital expenditures and expenses for manufacturing operations directly

attributable to compliance with such provisions worldwide amounted to approximately $26 million in 2003, $32.5 million in 2002, and $23 million in 2001. It is estimated that in 2004 environmental capital expenditures and expenses for manufacturing operations will be approximately $25 million. Capital expenditures and expenses for product related environmental activities were not material in any of the past three years and are not expected to be material in 2004.

Globally, the entire major home appliance industry, including the Company, must contend with the adoption of stricter governmental energy and environmental standards to be phased in over the next several years. These include the general phase-out of ozone depleting chemicals used in refrigeration and energy standards rulemakings for other selected major appliances produced by the Company. Compliance with these various standards as they become effective will require some product redesign. However, the Company believes, based on its understanding of the current state of proposed regulations, that it should be able to develop, manufacture, and market products that comply with these regulations.

The Company has been notified by state and federal environmental protection agencies of its possible involvement in a number of “Superfund” sites in the United States. However, based upon evaluation of the facts and circumstances relating to these sites by the Company and its technical consultants, the Company does not presently anticipate any material adverse effect upon the Company’s earnings, financial condition, or competitive position arising out of the resolution of these matters or the resolution of any other known governmental proceeding regarding environmental protection matters.

For information on product recalls, see Note 14 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

For an update of the global restructuring plan announced by the Company in December 2000, see Note 13 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

For information on the Company’s acquisitions in Poland, Mexico, and China, see Note 4 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

For certain other financial information concerning the Company’s business segments and foreign and domestic operations, see Notes 1 and 17 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

The following table sets forth the names of the Company’s executive officers at December 31, 2003, the positions and offices with the Company held by them at such date, the year they first became executive officers, and their ages at December 31, 2003:

Each of the executive officers named above was elected to serve in the office indicated until the first meeting of the Board of Directors following the annual meeting of stockholders in 2004 and until his successor is chosen and qualified or until his earlier resignation or removal. Each of the executive officers of the Company has held the position set forth in the table above or has served the Company in various executive or administrative capacities for at least the past five years, except for (a) Mr. Swift who, prior to joining the Company in October 2001, for the previous 20 years held various executive or administrative positions with the Eastman Kodak Company, the most recent being President, Kodak Professional Group, and (b) Mr. Barrett who, prior to joining the Company in September 2002, for the previous 24 years held various financial and executive positions with Procter & Gamble Co., the most recent being Vice President, Finance for P&G’s European-based global Fabric and Home Care business.

Financial results and investor information can be accessed through Whirlpool’s website at www.whirlpoolcorp.com; click on the “Investors” tab, and then “SEC Filings.” Copies of Whirlpool’s Form 10-K, 10-Q, and 8-K reports, as well as amendments to them, are available free of charge through Whirlpool’s website on the same day they are filed with the Securities and Exchange Commission.

The principal executive offices of Whirlpool Corporation are located in Benton Harbor, Michigan. At December 31, 2003, the principal manufacturing operations of the Company were carried on at 41 locations worldwide, 31 of which are located in 12 countries outside the United States. The Company occupied a total of approximately 48.7 million square feet devoted to manufacturing, service, administrative offices, warehouse, distribution, and sales space. Over 14.3 million square feet of such space is occupied under lease. In general, all facilities are well maintained, suitably equipped, and in good operating condition.

Information with respect to legal proceedings can be found under the heading “Contingencies” in Note 9 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

There were no matters submitted to a vote of security holders in the fourth quarter of 2003.

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

The Company’s common stock is traded on the New York Stock Exchange and the Chicago Stock Exchange. As of February 23, 2004, the number of holders of record of the Company’s common stock was approximately 8,078.

High and low sales prices (as reported on the New York Stock Exchange composite tape) for the Company’s common stock for each quarter during the years 2003 and 2002 are set forth below:

Cash dividends declared on the Company’s common stock for each quarter during the years 2003 and 2002 are set forth in Note 18 to the Consolidated Financial Statements contained in the Financial Supplement to this report.

The selected financial data for the five years ended December 31, 2003 with respect to the following line items are shown under the “Eleven Year Consolidated Statistical Review” contained in the Financial Supplement to this report: Total net sales, earnings from continuing operations, earnings from continuing operations per share of common stock, dividends declared per share of common stock, total assets, and long-term debt. See the material incorporated herein by reference in response to Item 7 of this report for a discussion of the effects on such data of business combinations and other acquisitions, disposition and restructuring activity, restructuring costs, accounting changes, earnings of foreign affiliates, and other significant activity impacting or affecting the comparability of reported amounts.

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

See “Management’s Discussion and Analysis” contained in the Financial Supplement to this report.

Information with respect to market risk can be found under the caption “Market Risk” in “Management’s Discussion and Analysis” contained in the Financial Supplement to this report.

The Consolidated Financial Statements of the Company are contained in the Financial Supplement to this report. Supplementary financial information regarding quarterly results of operations (unaudited) for the years ended December 31, 2003 and 2002 is set forth in Note 18 to the Consolidated Financial Statements. For a list of financial statements and schedules filed as part of this report, see the Table of Contents to the Financial Supplement to this report on page F-1.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Evaluation of disclosure controls and procedures. The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of December 31, 2003, have concluded that the Company’s disclosure controls and procedures were adequate and designed to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

Changes in internal controls over financial reporting. There were no changes in the Company’s internal controls over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Information regarding the Company’s executive officers is included in Item 1 of Part I of this report.

Information regarding the background of the directors, matters related to the Audit Committee, and Section 16(a) compliance appears under the captions “Directors and Nominees for Re-Election as Directors,” “Board of Directors and Corporate Governance—Audit Committee,” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement which is incorporated herein by reference.

The Company has adopted a code of ethics that applies to all of its employees, officers, and directors, including its principal executive officer, principal financial officer, and principal accounting officer (controller). The text of the Company’s code of ethics is posted on its website at www.whirlpoolcorp.com; click on the “Governance” tab, and then “Code of Ethics.” The Company intends to disclose future amendments to, or waivers from, certain provisions of the code of ethics for executive officers and directors on the Company’s website within five business days following the date of such amendment or waiver. Stockholders may request a free copy of the code of ethics from:

Whirlpool has also adopted written charters for its Audit, Finance, Human Resources, and Corporate Governance and Nominating Committees, and Corporate Governance Guidelines, all of which are posted on the Company’s website at www.whirlpoolcorp.com; click on the “Governance” tab, and then “Board of Directors.” Stockholders may request a free copy of the charters and guidelines from the address or telephone number set forth above.

Information with respect to compensation of executive officers and directors of the Company can be found under the captions “Executive Compensation,” “Stock Option Grants and Related Information,” “Stock Option Exercises and Holdings,” “Long-Term Incentive Awards,” “Agreements with Executive Officers,” “Retirement Benefits,” “Human Resources Committee Interlocks and Insider Participation,” and “Compensation of Directors” in the Proxy Statement which is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information with respect to security ownership by any person(s) known to the Company to beneficially own more than 5% of the Company’s stock and by each director of the Company, each named executive officer of the Company, and all directors and executive officers of the Company as a group can be found under the captions “Security Ownership” and “Beneficial Ownership” in the Proxy Statement which is incorporated herein by reference.

Information relating to securities authorized under equity compensation plans can be found under the caption “Equity Compensation Plan Information” in the Proxy Statement which is incorporated herein by reference.

Information relating to the Company’s auditors and the Audit Committee’s pre-approval policies can be found under the caption “Matters Relating to Auditors” in the Proxy Statement which is incorporated herein by reference. The “Audit Committee Report” is not incorporated herein by reference.

ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

1. The financial statements and related notes, and reports of independent auditors and management, listed in the Table of Contents to the Financial Supplement to this report. Individual financial statements of the registrant’s affiliated foreign companies, accounted for by the equity method, have been omitted since no such company individually constitutes a significant subsidiary.

2. “Schedule II—Valuation and Qualifying Accounts” contained in the Financial Supplement to this report. Certain schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

1. A Current Report on Form 8-K for October 14, 2003 pursuant to Item 5—“Other Events” announced the mailing of a summary of the 2002 annual report for the Whirlpool 401(k) Plan to members of the Plan.

2. A Current Report on Form 8-K for October 21, 2003 pursuant to Item 5—“Other Events” announced the appointment of Michael F. Johnston to Whirlpool’s Board of Directors. This 8-K also announced, pursuant to Item 12—“Results of Operations and Financial Condition,” the Company’s third quarter 2003 earnings.

3. A Current Report on Form 8-K for December 16, 2003 pursuant to Item 5—“Other Events” announced an increase in the Company’s first quarter 2004 dividend. This 8-K also reaffirmed the Company’s previously announced 2003 full-year earnings guidance.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


WHIRLPOOL CORPORATION
(Registrant)

By:		/s/ R. STEPHEN BARRETT, JR.
		R. Stephen Barrett, Jr.
		(Principal Financial Officer)
		Executive Vice President and Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Whirlpool Corporation is the largest global manufacturer of major appliances worldwide with 2003 revenues of $12.2 billion and net earnings of $414 million. The Company’s four reportable segments are based on geography and consist of North America (64% of revenue), Europe (22% of revenue), Latin America (11% of revenue), and Asia (3% of revenue). The Company is the market share leader in North America and Latin America and has significant market presence in Europe, India and China. Whirlpool’s brands and operations worldwide have received well-deserved recognition for accomplishments in a variety of business and social efforts, including energy efficiency leadership, community involvement, support of women’s issues, and excellence in design, to name a few.

The Company’s growth strategy over the past several years has been to introduce innovative new products, continue to expand its global footprint, add or enhance distribution channels and evaluate potential acquisitions which enhance the Company’s innovative global product offering.

The Company monitors country economic factors such as gross domestic product, consumer interest rates, consumer confidence, housing starts, existing home sales and mortgage refinancing as key indicators of industry demand. Management also focuses on country, brand, product and channel market share, average sales values, and profitability when assessing and forecasting financial results. The Company also focuses on total cost productivity, which includes material and conversion costs, as it continues to reduce its total global costs to operate the business and fund future growth.

The Company has, and will continue to evaluate its global operating platform to strengthen Whirlpool’s brand leadership position in the global appliance industry. The Company plans to continue its comprehensive worldwide effort to optimize its regional manufacturing facilities, supply base, product platforms and technology resources to better support its global brands and customers.

Management’s Discussion and Analysis discusses the results of operations, cash flow, financial condition and liquidity, contractual obligations and cash requirements, other matters, critical accounting policies and estimates, new accounting pronouncements, market risk and forward-looking statements.

Included within the results of operations and financial condition and liquidity section is management’s forward-looking perspective. In addition, the Company has included comments regarding regional business unit performance, where appropriate.

The consolidated statements of operations summarize operating results for the last three years. This section of Management’s Discussion and Analysis highlights the main factors affecting changes in the Company’s financial condition and results of operations and should be read along with the Consolidated Financial Statements.

The total number of units sold in 2003 increased 5.6% over 2002. Consolidated net sales increased 10.5% over 2002, which includes a positive impact from currency fluctuations. Excluding currency impact, net sales increased approximately 7%. Excluding currency fluctuations and the acquisitions of Vitromatic (Whirlpool Mexico) and Polar, as described in Note 4 to the Consolidated Financial Statements, the total number of units and dollars sold increased approximately 4% and 5%,

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

respectively. Consolidated net sales in 2002 were up approximately 7% over 2001 after excluding the negative currency impact. The tables below provide the breakdown of units and sales by region.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

The consolidated gross margin percentage in 2003 decreased 60 basis points versus 2002 due primarily to higher U.S. pension and medical expenses coupled with reduced Befiex credits, an increase in expense due to the decline of the U.S. dollar and higher material costs in Latin America. The higher expense was partially offset by productivity improvements in North America and Europe and lower restructuring and related expense. The consolidated gross margin percentage declined slightly in 2002 versus 2001 with continued global pricing pressures and lower pension and Befiex credits offsetting productivity improvements. The table below outlines the gross margin percentages by region, excluding the impact of the 2003, 2002 and 2001 restructuring related charges of $7 million, $43 million and $53 million, respectively, from the regional percentages. The Company believes this comparison of gross margin percentages excluding restructuring related charges provides management and shareholders a better understanding of the ongoing performance of the regions. The Company evaluates segment performance based upon each segment’s operating income, which exclude, among others, one-time charges (See Note 17). The restructuring related charges are included in the consolidated percentages in each of the three years presented.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

Consolidated selling, general and administrative expenses in 2003, as a percent of consolidated net sales, remained relatively unchanged versus 2002 and 2001. Higher pension and freight costs in North America were partially offset by cost controls on discretionary spending. The European increase in 2003 was a result of expense reclassification into selling, general and administrative expenses, while Latin America’s improvement was primarily driven by lower bad debt expense in 2003. Asia’s higher selling, general and administrative expenses, as a percent of sales, were due to increased operating reserves. The table below outlines the selling, general and administrative expenses as a percentage of sales by region, excluding the impact of 2003, 2002 and 2001 restructuring related charges of $4 million, $17 million and $9 million, respectively, from the regional amounts. The Company believes this comparison of selling, general and administrative expenses excluding restructuring related charges provides management and shareholders a better understanding of the ongoing performance of the regions. The Company evaluates segment performance based upon each segment’s operating income, which exclude, among others, one-time charges (See Note 17). The restructuring related charges are included in the “Corporate/Other” line.

During 2001, the Company recognized a total of $295 million of pre-tax charges ($181 million after-tax) related to two separate product recalls. These charges were recorded as a separate component of operating profit. During 2002, Whirlpool recognized additional recall related pre-tax charges of approximately $9 million for one of these recalls. Additionally, in 2003, the Company recognized pre-tax charges of $16 million primarily for final expenses related to the 2001 recall of microwave oven hood units. Beyond this, the Company expects that no further liability will be incurred related to these two product recalls. See Note 14 to the Consolidated Financial Statements for a more detailed description of these charges.

Restructuring initiatives resulted in pre-tax restructuring charges of $3 million, $101 million and $150 million in 2003, 2002 and 2001, respectively. These amounts have been identified as a separate

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

component of operating profit. As a result of the Company’s restructuring activity, it also recognized $11 million, $60 million and $62 million, respectively, in pre-tax restructuring related charges during 2003, 2002 and 2001, respectively, which were recorded primarily within cost of products sold. See Note 13 to the Consolidated Financial Statements for a more detailed description of these charges and the Company’s restructuring program.

During the fourth quarter of 2002, the Company recognized the vast majority of remaining charges for the global restructuring plan that was originally announced in December of 2000. The plan, which had a total restructuring and related pre-tax cost of $387 million, is expected to result in more than $200 million in annualized savings once fully implemented. At December 31, 2003, a liability of $45 million remains for actions yet to be completed under the plan. Actions under the plan include the elimination of over 7,500 positions worldwide, of which approximately 6,900 had been eliminated as of December 31, 2003.

Interest income and sundry expense, which includes foreign currency gains and losses, improved approximately 24% as compared to 2002. The improvement is largely attributable to lower foreign currency losses as well as lower losses in asset dispositions and a 2002 fire loss within a Mexican facility. Interest income and sundry expense increased slightly in 2002 when compared to 2001, due primarily to lower interest income.

Interest expense decreased $6 million versus 2002, which was $19 million lower than 2001. The decrease was attributable to a lower overall interest rate environment and a decrease in overall borrowings.

The effective income tax rate from continuing operations was 35% in 2003, 39% in 2002, and 46% in 2001. The impact of restructuring and related charges, the write-off of the equity interest and advances to Wellmann, the goodwill impairment and the product recall related charges impacted the effective tax rates in 2002 and 2001. See the income tax rate reconciliation included in Note 15 to the Consolidated Financial Statements for a description of the significant items impacting the consolidated effective income tax rate.

The 2003 results improved $30 million versus 2002. The 2002 results were reduced by a $22 million after-tax impairment charge related to the Company’s minority investments in and advances to Wellmann, a German kitchen cabinet manufacturer. During 2003, the Company’s investment in the equity of Wellmann was sold to Alno, a prominent German kitchen cabinet manufacturer. The sale did not have a material impact to the Company’s financial position or results of operations. The 2002 results were also impacted by a $4 million charge incurred related to a minority interest in an Asian entity.

Earnings from continuing operations were $414 million in 2003 versus $262 million and $34 million in 2002 and 2001, respectively. The significant increase in 2003 relates primarily to approximately $147 million of higher restructuring and related charges in 2002, the full year impact of acquisitions,

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

strong volume growth, productivity improvements and an equity investment write-off, partially offset by an increase in expense due to the decline of the U.S. dollar. The significant increase in 2002 versus 2001 is due primarily to the product recall and restructuring expenses recognized in 2001.

As a result of the United Airlines bankruptcy filing in December 2002, the Company wrote off its related investment in leveraged aircraft leases during the fourth quarter of 2002. The write-off resulted in a non-cash charge to discontinued operations of approximately $68 million, or $43 million after-tax. These leveraged lease assets were part of the Company’s previously discontinued finance company, Whirlpool Financial Corporation.

During the second quarter of 2001, the Company wrote off an investment in a securitized aircraft portfolio that was also owned by Whirlpool Financial Corporation. The write-off, due primarily to the softening aircraft leasing industry, resulted in a loss from discontinued operations of $35 million, or $21 million after-tax.

Although most of its assets have been divested, Whirlpool Financial Corporation remains a legal entity with assets consisting primarily of a leveraged lease portfolio. The portfolio includes an investment in aircraft leveraged leases and is affected by the economic conditions of the aviation industry. As of December 31, 2003 and 2002, the portfolio totaled $42 million and $43 million, respectively, net of related reserves. See Note 5 to the Consolidated Financial Statements. The Company continues to monitor its arrangements with the lessees and the value of the underlying assets.

The Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” on January 1, 2002. As a result of this adoption, the Company recorded a non-cash after-tax charge of $613 million in 2002.

The Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, on January 1, 2001. The adoption of Statement No. 133 resulted in $8 million of income, net of tax, in the Company’s statement of operations and a $11 million decrease, net of tax, in stockholders’ equity in 2001.

See Notes 1 and 3 to the Consolidated Financial Statements for a more detailed description of these changes in accounting principles.

Whirlpool enters 2004 with positive industry and economic momentum in North America and Europe, the Company’s two largest segments. The Company expects gradually improving economic conditions in these regions throughout the year. The Company anticipates that the North America and Europe regions will drive the majority of Whirlpool’s net earnings increase during 2004. Despite projected

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

increases in steel prices and raw materials, the Company’s efforts to improve total cost productivity are expected to offset the negative swings in the total manufacturing cost of its products. The Company is forecasting a 2% increase in industry demand in North America during 2004 and 3% in Europe.

Weak economic conditions in Latin America, higher material costs and unfavorable currency resulted in lower overall operating profit for its third largest segment during 2003. The Company expects gradual improvement in the economic environment during 2004 and is forecasting a 5% to 10% increase in overall demand. Higher material costs are expected to continue and will not be completely offset by productivity improvements. As a result, the Company will continue to raise prices on selected products. Finally, Whirlpool expects a gradual devaluation of the Brazilian real during the course of the year.

The Company expects to drive both growth and operating profit margin expansion in Asia, its smallest segment, during 2004. First, the Company will continue to expand its China procurement and technology base. This is a growing and important part of Whirlpool’s global operating platform. The Company will continue to expand its China domestic sales and increase finished goods exported to its global sales networks. The Company is revising its trade management strategy in India, a key market within the Asia region, which will allow the Company to improve the speed, flexibility and overall efficiency within its sales and distribution processes. This change in strategy will enable the Company to launch new product introductions more frequently and faster to the market as trade terms are reduced from 60 to 90 days, to 20 to 30 days. This initiative will be launched in the first quarter of 2004 and will be completed sometime in the second quarter of 2004. The Company expects this initiative will result in reduced volumes over the first half of 2004. The ongoing benefits of this program, including improved gross margins and cash flow, are expected to be realized starting in the latter part of the second quarter.

In December 1996, Multibras and Empresa Brasileira de Compressores S.A. (Embraco), Brazilian subsidiaries, were granted additional export incentives in connection with the Brazilian government’s export incentive program (Befiex). These incentives allowed the use of credits as an offset against current Brazilian federal excise tax on domestic sales. The Company recognized credits of $5 million in 2003, $42 million in 2002 and $53 million in 2001 as a reduction of current excise taxes payable and therefore, an increase in net sales. The Company’s remaining credits are approximately $200 million at December 31, 2003. However, we do not expect to recognize additional Befiex credits until the calculation of the credit, which is currently under review, is confirmed by the Brazilian courts.

The statements of cash flows reflect the changes in cash and equivalents for the last three years by classifying transactions into three major categories: operating, investing and financing activities.

Whirlpool’s main source of cash flow is from operating activities consisting of net earnings adjusted for changes in operating assets and liabilities such as receivables, inventories and payables and for non-cash operating items, such as depreciation.

The Company’s 2003 cash provided by operating activities benefited from higher earnings, primarily within our European and North American business segments as well as continued improvement in working capital management. Cash flow was negatively impacted by a voluntary after-tax pension contribution of $97 million to the Company’s U.S. pension plans. In comparison, after-tax U.S. pension contributions made during 2002 and 2001 were $5 million and $7 million, respectively. The 2003

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

results were also negatively impacted by restructuring spending, primarily related to 2002 projects, as well as the timing of promotional payments. Combined, these negative 2003 cash outflows were essentially offset by the absence of $239 million in product recall spending which occurred during 2002. Cash provided by operating activities was also negatively impacted in 2002 by a one-time tax payment of $86 million on a cross-currency interest rate swap gain, which occurred during 2001. The decrease in 2002 versus 2001 relates primarily to the $239 million in product recall payments made during the year and to changes in deferred and current taxes.

The principal recurring investing activities are capital expenditures, which were $423 million, $430 million and $378 million in 2003, 2002 and 2001, respectively. Capital expenditures are incurred to support distinctive and innovative solutions for consumers which lead to new revenue growth. Expenditures are also made to support the Company’s global operating platform footprint moves to lower cost locations as well as replacement, regulatory and infrastructure changes.

During 2003, Whirlpool entered into separate sale-leaseback transactions whereby the Company sold and leased back four of its owned properties. Proceeds related to the sale-leaseback transactions, net of related fees, were approximately $65 million.

On November 18, 2002, the Company acquired the remaining 20% interest in Whirlpool Narcissus Shanghai Company Limited (“Narcissus”) for $9 million. Subsequent to the purchase, Narcissus was renamed Whirlpool Home Appliance (Shanghai) Co. Ltd. In accordance with the purchase agreement, 40% of the purchase price was paid during 2002, 40% was paid during 2003 and the remaining 20% will be paid in 2004.

On July 3, 2002, Whirlpool acquired the remaining 51% ownership in Vitromatic S.A. de C.V. (Whirlpool Mexico), an appliance manufacturer and distributor in Mexico. The aggregate purchase price was $151 million in cash plus assumption of outstanding debt at the time of acquisition, which totaled $143 million.

On June 5, 2002, the Company acquired 95% of the shares of Polar S.A. (Polar), a leading major home appliance manufacturer in Poland. The aggregate purchase price was $27 million in cash plus outstanding debt at the time of acquisition, which totaled $19 million. During 2003, Whirlpool acquired the remaining 5% of the shares of Polar.

On October 5, 2001, the Company closed its position in a portfolio of cross currency interest rate swaps resulting in the receipt of $209 million.

Total repayments of short-term and long-term debt, net of new borrowings, were $208 million, $236 million and $579 million in 2003, 2002 and 2001, respectively.

During March 2003, the Company redeemed its $200 million 9% Debentures using short-term notes payable.

In July 2001, Whirlpool issued 300 million Euro denominated 5.875% Notes, due 2006. The proceeds were used for general corporate purposes.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

Dividends paid to stockholders totaled $94 million, $91 million and $113 million in 2003, 2002 and 2001. The large payment in 2001 was affected by the timing of funding for the fourth quarter 2000 dividend, which was paid on January 2, 2001.

Under its stock repurchase program, Whirlpool purchased approximately 1 million shares ($65 million) in 2003, 0.7 million shares ($46 million) in 2002 and 0.7 million shares ($43 million) in 2001. See Other Matters for stock repurchases subsequent to December 31, 2003 and Note 11 to the Consolidated Financial Statements for additional detail on the Company’s stock repurchase program.

The Company also redeemed $33 million and $25 million in 2003 and 2002, respectively, in preferred stock of its discontinued finance company, Whirlpool Financial Corporation. See Note 8 to the Consolidated Financial Statements for additional detail on the Whirlpool Financial Corporation preferred stock.

Whirlpool received proceeds of $65 million in 2003, $80 million in 2002 and $81 million in 2001 related to the exercise of Company stock options. The Company’s stock option program is discussed in Notes 1 and 12 to the Consolidated Financial Statements.

The Company’s objective is to finance its business through the appropriate mix of long-term and short-term debt. By diversifying its maturity structure, the Company avoids concentrations of debt, reducing liquidity risk. Whirlpool has varying needs for short-term working capital financing as a result of the nature of its business. The volume and timing of refrigeration and air conditioning production impact the Company’s cash flows and consists of increased production in the first half of the year to meet increased demand in the summer months. The Company finances its working capital fluctuations primarily through the commercial paper markets in the U.S., Europe and Canada, which are supported by committed bank lines. In addition, outside the U.S., short-term funding is also provided by bank borrowings on uncommitted lines. The Company has access to long-term funding in the U.S., European and other public bond markets.

The Company’s financial position remains strong. At December 31, 2003, Whirlpool’s total assets were $7.4 billion versus $6.6 billion at December 31, 2002. Stockholders’ equity increased from $0.7 billion at the end of 2002 to $1.3 billion at the end of 2003. The increase in equity is primarily attributed to net earnings retention, a $118 million increase in equity to reduce the U.S. defined benefit pension plans’ minimum liability and $129 million increase in equity through foreign currency translation adjustments.

The Company’s overall debt levels have declined approximately $110 million. Cash flows from operations have been used to reduce the Company’s indebtedness.

In May 2003, Whirlpool renewed its existing $400 million committed 364 day credit facility for another 364 days. The Company also has a $800 million committed credit facility that was entered into on June 1, 2001 and matures in 2006. These committed facilities support commercial paper programs and other operating needs. There were no borrowings under these facilities during 2003 or 2002. Whirlpool was in full compliance with its bank covenants throughout both 2003 and 2002. None of the Company’s material debt agreements requires accelerated repayment in the event of a decrease in credit ratings.

The Company guarantees the indebtedness of Wellmann, a former European affiliate, and certain trade related obligations of customers of Wellmann and a Brazilian subsidiary as discussed in Note 9

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

to the Consolidated Financial Statements. As of December 31, 2003 and December 31, 2002, the Company had approximately $18 million and $30 million, respectively, of guarantees outstanding for the bills of exchange related to Wellmann, which expired in January and February 2004. The Company will continue to provide guarantees of certain trade related obligations of customers of Wellmann, however, the amounts are expected to be de minimus. Whirlpool does not expect these guarantees to have a material effect on its financial condition or liquidity.

The following table summarizes the Company’s expected cash outflows resulting from financial contracts and commitments.

The goal of the Company’s global operating platform is to strengthen Whirlpool’s brand leadership position in the global appliance industry. The Company plans to continue its comprehensive worldwide effort to optimize its regional manufacturing facilities, supply base, product platforms and technology resources to better support its global brands and customers. The Company intends to make additional investments to strengthen its competitiveness and brand leadership position in fiscal 2004. Capital spending is expected to increase to approximately $500 million in 2004 in support of the Company’s investment in innovative product technologies and its global operating platform initiatives.

In December 2003, Whirlpool Corporation’s Board of Directors announced a first quarter 2004 dividend of 43 cents per share, a 26% increase from the fourth quarter 2003 dividend of 34 cents per share. The dividend is payable on March 15, 2004, to holders of record at the close of business on February 27, 2004. If continued, the dividend will increase the Company’s annual dividend payments by approximately $24 million to $118 million.

The Company believes that its capital resources and liquidity position at December 31, 2003 coupled with its planned cash flow generated from operations in 2004 are adequate to support higher capital spending, a higher dividend payment and meet anticipated business needs to fund future growth opportunities. Currently, the Company has access to capital markets in the U.S. and internationally.

The Company expects to generate approximately $300 million of free cash flow during 2004 (defined as cash provided by operating activities plus proceeds from asset disposals less capital spending and dividends). Management intends to use these funds to reduce debt, repurchase stock and fund additional business opportunities as they become available.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

Pursuant to the Company’s stock repurchase program authorized by the Board of Directors, the Company repurchased a combined total 1 million shares of Whirlpool common stock in the open market subsequent to December 31, 2003, at an aggregate purchase price of $75 million.

While lower discount rates increased Whirlpool’s pension obligations during 2003, improvement in equity market performance during the year significantly increased the value of pension fund assets. Whirlpool also contributed approximately $103 million after-tax to the pension plans during 2003, of which $97 million was voluntary. As a result of these actions, the unfunded obligation declined, and the Company reduced its minimum pension liability equity charge by $118 million, after-tax, to $38 million during 2003. At December 31, 2003, the Company’s defined benefit pension plans still remain underfunded on a combined basis.

The Company recognized consolidated pre-tax pension cost (credits) of $78 million, $(37) million and $(70) million in 2003, 2002 and 2001, respectively. The Company currently expects that U.S. pension cost for 2004 will be approximately $60 million based upon an expected return on assets assumption of 8.75% and a lower discount rate of 6.00%. The $60 million compares to pension cost of $63 million in 2003. Consolidated pension cost in 2004 is anticipated to be approximately $72 million compared to $78 million in 2003.

The discount rate and expected return on asset assumptions used in determining the Company’s U.S. pension benefit obligations and costs are as follows:

The Company’s expected return on assets assumption of 8.75% is based on historical market returns between 1926 and 2003 applied to its target allocation of plan assets. The annualized discount rate approximates Moody’s Aa corporate bond rate at the measurement date. The Company uses a measurement date of December 31.

In addition, the Company sponsors plans to provide postretirement health care benefits for eligible retired U.S. employees. Eligible retirees are those who were full-time employees with 10 years of service who attained age 55 while in service with the Company. The postretirement health care plans are generally contributory with participants’ contributions adjusted annually and include cost-sharing provisions that limit the Company’s exposure for recent and future retirees. The plans are unfunded.

In June 2003, the Company announced a modification to its U.S. retiree health care plans that affects future retirees The new plan is based on a Retiree Healthcare Savings Account (RHSA), where notional accounts will be established for most active U.S. paid employees. The notional account reflects each year of service beginning at age 40 and is designed to provide employees who retire after December 31, 2003 from Whirlpool with notional funds to apply towards health care premiums. In

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

June 2003, the Company recorded a one-time curtailment gain of $13.5 million, net of tax, related to the modification of its retiree health care plan. The Company provides no significant postretirement medical benefits to non-U.S. employees.

On December 8, 2003, President Bush signed the Medicare Prescription Drug, Improvement and Modernization Act (the Act) into law. This law introduced a prescription drug benefit program under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. In general, accounting rules require that the changes in relevant laws and government benefit programs be considered in measuring postretirement benefit costs and the Accumulated Postretirement Benefit Obligation (APBO). However, certain accounting issues raised by the Act—in particular, how to account for the federal subsidy—are not explicitly addressed by FASB Statement 106. In addition, significant uncertainties exist for a plan sponsor both as to the direct effects of the Act and its ancillary effects on plan participants’ behavior and health care costs. The FASB issued FASB Staff Position (FSP) No. 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003”, (FSP 106-1) that allows sponsors to elect to defer recognition of the effects of the Act until guidance is issued by the FASB. In accordance with FSP 106-1, the Company has elected to defer recognition of the effects of the Act. Accordingly, any measures of the APBO or net periodic postretirement benefit cost in the financial statements or the accompanying footnotes do not reflect the effects of the Act on the plan. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require the Company to change previously reported information.

In September 2003, the Company completed the sale of Wellmann to Alno, a prominent German kitchen cabinet manufacturer. Previously, the Company held a 49.5% ownership interest in Wellmann, and in connection with the sale, the Company obtained a 10% interest in Alno. The sale did not have a material impact to the Company’s financial position or results of operations. The Company analyzed the provisions of FIN 46, “Consolidation of Variable Interest Entities”, with respect to its 10% interest in Alno and determined that Alno did not meet the definition of a variable interest entity under FIN 46.

In 1989, a Brazilian affiliate (now a subsidiary) of the Company brought an action against a financial institution in Brazil seeking a “Declaration of Non-Enforceability of Obligations” relating to loan documentation entered into without authority by a senior officer of the affiliate. The original amount in dispute was approximately $25 million. In September 2000, a decision in the declaratory action adverse to the Company became final. In 2001, the financial institution began a collection action, and the Company responded with a counterclaim. The lower court has dismissed the counterclaim and a discretionary appeal of this dismissal has been requested. A final decision in the collection action is not expected for several years. The Company plans to continue to aggressively defend this matter, and at this point cannot reasonably estimate a possible range of loss.

Management has evaluated the accounting policies used in the preparation of the accompanying Consolidated Financial Statements and related notes and believes those policies to be reasonable and appropriate. The Company’s accounting policies are described in Note 1 to the Consolidated Financial Statements. Certain of these accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. The Company’s critical accounting policies include the following:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

Accounting for pensions and other postretirement benefits involves estimating the costs of future benefits and attributing the cost over the employee’s expected period of employment with the Company. The determination of the Company’s obligation and expense for these costs requires the use of certain assumptions. Those assumptions are included in Note 16 to the Consolidated Financial Statements and include, among others, the discount rate, expected long-term rate of return on plan assets and health care cost trend rates. These assumptions are subject to change based on stock and bond market returns, interest rates on high quality bonds and medical cost inflation, respectively. As permitted by generally accepted accounting principles, actual results that differ from the Company’s assumptions are accumulated and amortized over future periods and therefore, generally affect its recognized expense and accrued liability in such future periods. While the Company believes that its assumptions are appropriate given current economic conditions and its actual experience, significant differences in results or significant changes in the Company’s assumptions may materially affect its pension and other postretirement obligations and related future expense. As required by FAS 87, FAS 132 and FAS 106, Whirlpool’s pension and other postretirement benefit obligations as of December 31, 2003 and preliminary retirement benefit costs for the 2004 fiscal year were prepared using the assumptions that are determined as of December 31, 2003. The following table highlights the sensitivity of Whirlpool’s December 31, 2003 retirement obligations and 2004 retirement benefit costs of its U.S. plans to changes in the key assumptions used to determine those results:

The analysis is an estimate only. These sensitivities may not be appropriate to use for other years’ financial results. Furthermore, the impact of assumption changes outside of the ranges shown above may not be approximated by using the above results.

As part of the process of preparing its Consolidated Financial Statements, the Company estimates its income taxes in each of the taxing jurisdictions in which its operates. This process involves estimating actual current tax expense together with assessing any temporary differences resulting from the different treatment of certain items, such as the timing for recognizing expenses, for tax and accounting purposes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” These differences may result in deferred tax assets and liabilities, which are included

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

in the Company’s consolidated balance sheets. The Company is required to assess the likelihood that its deferred tax assets, which include net operating loss carryforwards and temporary differences that are expected to be deductible in future years, will be recoverable. If recovery is not likely, the Company provides a valuation allowance based on its estimates of future taxable income in the various taxing jurisdictions, and the amount of deferred taxes that are ultimately realizable. If future taxable income was lower than expected or if tax-planning strategies were not available as anticipated, the Company may record additional valuation allowances through income tax expense in the period such determination is made. Likewise, if the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amounts, an adjustment to the deferred tax asset would increase income in the period such determination is made. As of December 31, 2003, the Company had total deferred tax assets of $703 million, net of valuation allowances of $51 million (see Note 15 to the Consolidated Financial Statements). The Company’s effective tax rate has ranged from 35% to 46% over the past five years and has been influenced by restructuring and recall activity, tax planning strategies, and enacted legislation. A 1% increase in the Company’s effective tax rate would decrease earnings by approximately $6.5 million based on 2003 earnings. Future change in the effective tax rate is subject to several factors including enacted laws, tax planning strategies, and business profitability.

In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. In the opinion of management, adequate provisions for income taxes have been made for all years.

The establishment of a liability for product recall expenses is occasionally required and is impacted by several factors such as customer response rate, consumer options, field repair costs, inventory repair costs, extended warranty costs, communication structure and other miscellaneous costs such as legal, logistics and consulting. The customer response rate, which represents an estimate of the total number of units to be serviced as a percentage of the total number of units impacted by the recall, is the most significant factor in estimating the total cost of each recall. This rate is impacted by several factors, including the type of product, the year manufactured, age of the product sold and current and past experience factors. Significant differences between the Company’s assumptions and its actual experience or significant changes in its assumptions could have a material impact on the Company’s product recall reserves.

As discussed above, the Company’s Brazilian subsidiaries have been recognizing benefits under the Brazilian government’s export incentive program (Befiex) as an offset against current Brazilian federal excise tax on domestic sales. Since the initial granting of these credits in 1996, it has been the Company’s policy to recognize these credits as they have been monetized. There have, however, been ongoing legal proceedings relating to this program and it is presently under review within the Brazilian court system. The Company has chosen not to recognize any of the remaining credits of $200 million under the program until the Brazilian courts have confirmed the method used to calculate those remaining credits.

The estimation of warranty obligations is determined in the same period that revenue from the sale of the related products is recognized. The warranty obligation is based on historical experience and reflect management’s best estimate of expected costs at the time products are sold. Warranty accruals are adjusted for known or anticipated warranty claims as new information becomes available. Future

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

events and circumstances could materially change the Company’s estimates and require adjustments to the warranty obligation. New product launches require a greater use of judgment in developing estimates until historical experience becomes available. See Note 9 to the Consolidated Financial Statements for a summary of the activity in the Company’s product warranty accounts for 2003 and 2002.

In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51” (Interpretation or FIN 46) as amended, December 2003. The Interpretation requires consolidation, beginning December 31, 2003, of entities in which the Company absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are consolidated when the Company has a controlling financial interest, typically through ownership of a majority voting interest in an entity. The adoption of FIN 46 did not materially impact the Company’s financial position or results of operations.

In December 2003, the FASB issued revised Statement No. 132 (SFAS 132), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised SFAS 132 requires additional disclosures about the types of plan assets, investment strategy, measurement date(s), plan obligations, cash flows, and components of net periodic benefit cost recognized during interim periods (see Note 16 to the Consolidated Financial Statements). This Statement is effective for financial statements with fiscal years ending after December 15, 2003. The adoption of the revised SFAS 132 did not impact the Company’s financial position or results of operations.

The Company is exposed to market risk from changes in foreign currency exchange rates, domestic and foreign interest rates, and commodity prices, which can affect the Company’s operating results and overall financial condition. Whirlpool manages its exposure to these market risks through its operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and are not used for speculation or for trading purposes. Derivative financial instruments are entered into with a diversified group of investment grade counterparties to reduce its exposure to nonperformance on such instruments. The Company’s sensitivity analysis reflects the effects of changes in market risk but does not factor in potential business risks of the counterparties or appropriate use of instruments.

Whirlpool uses foreign currency forward contracts and currency swaps to hedge the price risk associated with firmly committed and forecasted cross-border payments and receipts related to its ongoing business and operational financing activities. Foreign currency contracts are sensitive to changes in foreign currency exchange rates. At December 31, 2003, a 10% unfavorable exchange rate movement in each currency in the Company’s portfolio of foreign currency forward contracts would have resulted in an incremental unrealized loss of approximately $121 million, while a 10% favorable shift would have resulted in an incremental unrealized gain of approximately $111 million. Consistent with the use of these contracts to neutralize the effect of exchange rate fluctuations, such unrealized losses or gains would be offset by corresponding gains or losses, respectively, in the remeasurement of the underlying exposures.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS—(Continued)

The Company enters into commodity swap contracts to hedge the price risk associated with firmly committed and forecasted commodities purchases that are not fixed directly through supply contracts. As of December 31, 2003, a 10% unfavorable shift in commodity prices would have resulted in an incremental loss of approximately $4 million, while a 10% favorable shift would have resulted in an incremental gain of approximately $4 million.

Whirlpool utilizes interest rate swaps to hedge the Company’s interest rate risk. As of December 31, 2003, 10% shift in interest rates would have resulted in approximately an incremental $0.5 million gain or loss related to these contracts.

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by or on behalf of the Company. Management’s Discussion and Analysis and other sections of this report may contain forward-looking statements that reflect the Company’s current views with respect to future events and financial performance.

Certain statements contained in this Financial Supplement, including those within the forward-looking perspective section within this Management’s Discussion and Analysis, and other written and oral statements made from time to time by the Company do not relate strictly to historical or current facts. As such, they are considered “forward-looking statements” which provide current expectations or forecasts of future events. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “possible,” “plan,” “project,” “will,” “forecast,” and similar words or expressions. The Company’s forward-looking statements generally relate to its growth strategies, financial results, product development, and sales efforts. These forward-looking statements should be considered with the understanding that such statements involve a variety of risks and uncertainties, known and unknown, and may be affected by inaccurate assumptions. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.

Many factors could cause actual results to differ materially from the Company’s forward-looking statements. Among these factors are: (1) competitive pressure to reduce prices; (2) the ability to gain or maintain market share in intensely competitive global markets; (3) the success of the Company’s global strategy to develop brand differentiation and brand loyalty; (4) the ability to control operating and selling costs and to maintain profit margins during industry downturns; (5) the success of the Latin American business operating in challenging and volatile environments; (6) continuation of the Company’s strong relationship with Sears, Roebuck and Co. in North America, which accounted for approximately 18% of consolidated net sales of $12 billion in 2003; (7) currency exchange rate fluctuations; (8) social, economic, and political volatility in developing markets; (9) continuing uncertainty in the North American, Latin American, Asian and European economies; (10) changes in North America’s consumer preferences regarding how appliances are purchased; (11) the effectiveness of the series of restructuring actions the Company has announced and/or completed through 2003; (12) the threat of terrorist activities or the impact of war; (13) U.S. interest rates; (14) new Asian competitors; and (15) changes to the obligations as presented in the contractual obligations table.

The Company undertakes no obligation to update every forward-looking statement, and investors are advised to review disclosures in the Company’s filings with the Securities and Exchange Commission. It is not possible to foresee or identify all factors that could cause actual results to differ from expected or historic results. Therefore, investors should not consider the foregoing factors to be an exhaustive statement of all risks, uncertainties, or factors that could potentially cause actual results to differ.

Whirlpool Corporation is the world’s leading manufacturer and marketer of major home appliances. The Company manufactures in 13 countries under 9 major brand names and markets products to distributors and retailers in more than 170 countries.

The Consolidated Financial Statements include all majority-owned subsidiaries. An investment consisting of a direct voting interest of 40% in an affiliated Company, principally engaged in the sale of major home appliances, is accounted for by the equity method. All intercompany transactions have been eliminated upon consolidation.

Management is required to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Sales are recorded when title passes to the customer. The point at which title passes is determined by the shipping terms, which generally designate a transfer of title to the customer as soon as the product is shipped. Allowances for estimated returns are made on sales of certain products based on historical return rates for the products involved.

The Company carries its accounts receivable at their face amounts less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions and based on a history of write-offs and collections. The Company’s policy is generally to not charge interest on trade receivables after the invoice becomes past due. A receivable is considered past due if payments have not been received within agreed upon invoice terms.

Freight-out and warehousing costs included in selling, general and administrative expenses in the statements of operations were $576 million, $520 million and $497 million in 2003, 2002 and 2001, respectively.

All highly liquid debt instruments purchased with an initial maturity of three months or less are considered cash equivalents.

Inventories are stated at first-in, first-out (FIFO) cost, except U.S. production inventories, which are stated at last-in, first-out (LIFO) cost and Brazilian inventories, which are stated at average cost. Costs do not exceed realizable values.

Property, plant and equipment are stated at cost. Depreciation of plant and equipment is computed using the straight-line method based on the estimated useful lives of the assets. Useful lives for buildings range from 25 to 40 years and machinery and equipment range from 3 to 10 years. Assets recorded under capital leases are included in property, plant and equipment.

Research and development costs are charged to expense as incurred. Such costs were $325 million, $282 million and $231 million in 2003, 2002 and 2001, respectively.

Advertising costs are charged to expense as incurred. Such costs were $170 million, $176 million and $177 million in 2003, 2002 and 2001, respectively.

The functional currency for the Company’s international subsidiaries and affiliates is typically the local currency. Certain international subsidiaries utilize the U.S. dollar as the functional currency.

The Company recognizes all of its derivative instruments in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. Changes in the fair value of hedge assets or liabilities (i.e., gains or losses) are recognized depending upon the type of hedging relationship and whether a hedge has been designated. For those derivative instruments that are designated and qualify as hedging instruments, the Company must further designate the hedging instrument, based upon the exposure being hedged, as a cash flow hedge, fair value hedge, or a hedge of a net investment in a foreign operation.

Cash flow hedges are hedges that use derivatives to offset the variability of expected future cash flows. The effective portion of the unrealized gain or loss on a derivative instrument designated as a cash flow hedge is reported as a component of accumulated other comprehensive income and reclassified into earnings in the same line item associated with the hedged transaction in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the unrealized gain or loss on the derivative instrument, if any, is recognized in other income (expense) in current earnings during the period of change.

Fair value hedges are hedges that eliminate the risk of changes in the fair values of assets, liabilities and certain types of firm commitments. The gain or loss on a derivative instrument designated as a fair value hedge and the offsetting loss or gain on the hedged item are recognized in the same line item associated with the hedged item in current earnings during the period of the change in fair values.

Net investment hedge designation refers to the use of derivative contracts or cash instruments to hedge the foreign currency exposure of a net investment in a foreign operation. For those derivatives that qualify as net investment hedges, the effective portion of any unrealized gain or loss is reported in accumulated other comprehensive income as part of the cumulative translation adjustment. Any ineffective portion of net investment hedges is recognized in other income (expense) in current earnings during the period of change.

For derivative instruments not designated as hedging instruments, the unrealized gain or loss is recognized in other income (expense) in current earnings during the period of change.

Stock option and incentive plans are accounted for under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. The Company has adopted the disclosure provisions of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure” but has not adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” as amended. Had the Company elected to adopt the recognition provisions of SFAS No. 123, pro-forma net earnings (loss) and diluted net earnings (loss) per share would be as follows:


Delaware		38-1490038
(State of Incorporation)		(I.R.S. Employer Identification No.)

2000 North M-63, Benton Harbor, Michigan		49022-2692
(Address of principal executive offices)		(Zip Code)


Title of each class		Name of each exchange on which registered
Common stock, par value $1.00 per share		Chicago Stock Exchange and New York Stock Exchange
Preferred Stock Purchase Rights		Chicago Stock Exchange and New York Stock Exchange
7³/4% Debentures due 2016		New York Stock Exchange


	Percent in 2003		Year ended December 31 (millions of dollars)
Class of Similar Products	Percent in 2003		2003		2002		2001
Home Laundry Appliances	32	%	$	3,856	$	3,381	$	3,096
Home Refrigerators and Freezers	29	%	$	3,465	$	3,272	$	3,106
Home Cooking Appliances	16	%	$	1,903	$	1,672	$	1,603
Other	23	%	$	2,952	$	2,691	$	2,538

Net Sales	100	%	$	12,176	$	11,016	$	10,343


Name	Office	First Became an Executive Officer	Age

David R. Whitwam	Director, Chairman of the Board and Chief Executive Officer	1985	61

Jeff M. Fettig	Director, President and Chief Operating Officer	1994	46

R. Stephen Barrett, Jr.	Executive Vice President and Chief Financial Officer	2002	50

Paulo F. M. Periquito	Executive Vice President and President, Latin America	1997	57

David L. Swift	Executive Vice President, North American Region	2001	45

Michael D. Thieneman	Executive Vice President and Chief Technology Officer	1997	55

Michael A. Todman	Executive Vice President and President, Whirlpool Europe	2001	46


Market Price	High		Low		Close
4Q 2003	$	73.35	$	65.52	$	72.65
3Q 2003	$	71.95	$	62.25	$	67.77
2Q 2003	$	65.66	$	48.41	$	63.70
1Q 2003	$	57.92	$	42.80	$	49.03

4Q 2002	$	55.99	$	39.23	$	52.22
3Q 2002	$	66.36	$	44.79	$	45.86
2Q 2002	$	78.20	$	63.45	$	65.36
1Q 2002	$	79.80	$	61.85	$	75.55


Signature		Title		Date
DAVID R. WHITWAM* David R. Whitwam		Director, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	ý ï ï ï ï ï ï ï ï ï ï ï ï ï ï ï ï ï ï ï þ ï ï ï ï ï ï ï ï ï ï ï þ
JEFF M. FETTIG* Jeff M. Fettig		Director, President and Chief Operating Officer (Principal Operating Officer)
R. STEPHEN BARRETT, JR.* R. Stephen Barrett, Jr.		Executive Vice President and Chief Financial Officer (Principal Financial Officer)
ROY W. TEMPLIN* Roy W. Templin		Vice President and Controller (Principal Accounting Officer)
GARY T. DICAMILLO* Gary T. DiCamillo		Director
ALLAN D. GILMOUR* Allan D. Gilmour		Director
KATHLEEN J. HEMPEL* Kathleen J. Hempel		Director		March 12, 2004
MICHAEL F. JOHNSTON* Michael F. Johnston		Director
JAMES M. KILTS* James M. Kilts		Director
ARNOLD G. LANGBO* Arnold G. Langbo		Director
PAUL G. STERN* Paul G. Stern		Director
JANICE D. STONEY* Janice D. Stoney		Director
*By:	/s/ DANIEL F. HOPP Daniel F. Hopp	Attorney-in-Fact



Management’s Discussion and Analysis of Financial Condition and Results of Operations		F-2

Consolidated Statements of Operations		F-18

Consolidated Balance Sheets		F-19

Consolidated Statements of Cash Flows		F-20

Consolidated Statements of Changes in Stockholders’ Equity		F-21

Notes to Consolidated Financial Statements		F-22

Eleven-Year Consolidated Statistical Review		F-48

Reports of Independent Auditors and Management		F-50

Schedule II—Valuation and Qualifying Accounts		F-52


In thousands	2003			Change		2002			Change		2001
Units Sold:
North America		26,146		7.5	%		24,324		13.6	%		21,404
Europe		11,591		5.1			11,024		2.0			10,803
Latin America		4,269		(2.7	)		4,386		(7.4	)		4,738
Asia		2,346		2.9			2,279		11.2			2,050
Other/eliminations		(37	)	—			(31	)	—			(36	)

Consolidated		44,315		5.6	%		41,982		7.8	%		38,959


Millions of dollars	2003			Change		2002			Change		2001
Net Sales:
North America	$	7,875		7.8	%	$	7,306		11.0	%	$	6,581
Europe		2,691		22.4			2,199		6.9			2,058
Latin America		1,350		6.7			1,266		(14.9	)		1,487
Asia		416		6.6			391		4.8			373
Other/eliminations		(156	)	—			(146	)	—			(156	)

Consolidated	$	12,176		10.5	%	$	11,016		6.5	%	$	10,343


Millions of dollars	2003		As a % of Sales		2002		As a % of Sales		2001		As a % of Sales
Selling, general & administrative expenses
North America	$	970	12.3	%	$	894	12.2	%	$	788	12.0	%
Europe		510	19.0			407	18.5			386	18.8
Latin America		175	13.0			189	15.0			250	16.8
Asia		79	19.0			70	17.8			74	19.9
Corporate/Other		182	—			176	—			141	—

Consolidated	$	1,916	15.7	%	$	1,736	15.8	%	$	1,639	15.8	%


Millions of dollars, except per share data	2003		2002			2001
Earnings from continuing operations	$	414	$	262		$	34
Diluted earnings per share from continuing operations		5.91		3.78			0.50
Net earnings (loss)		414		(394	)		21
Diluted net earnings (loss) per share	$	5.91	$	(5.68	)	$	0.31


	Payments due by period
Millions of dollars	Total		2004		2005 & 2006		2007 & 2008		Thereafter
Debt obligations	$	1,153	$	19	$	386	$	136	$	612
Operating lease obligations		266		68		108		65		25
Purchase obligations		187		34		84		61		8
Long-term liabilities⁽¹⁾		71		71		—		—		—

Total	$	1,677	$	192	$	578	$	262	$	645


	Discount rate		Expected return on assets
Benefit obligation—December 31
2003	6.00	%	N/A
2002	6.75	%	N/A

Pension cost
2004	6.00	%	8.75	%
2003	6.75	%	8.75	%
2002	7.50	%	10.00	%


Change in assumption	Estimated increase (decrease) in 2004 Pension Cost			Estimated increase (decrease) in Projected Benefit Obligation for the year ended December 31, 2003			Estimated increase (decrease) in 2004 Other Postretirement Benefits cost			Estimated increase (decrease) in Accumulated Postretirement Benefit Obligation for the year ended December 31, 2003
Millions of dollars
25 bps increase in discount rate	$	(2.1	)	$	(48.4	)	$	(1.5	)	$	(19.1	)

25 bps decrease in discount rate	$	2.0		$	49.9		$	1.5		$	19.7


25 bps increase in long-term return on assets	$	(4.5	)		N/A			N/A			N/A

25 bps decrease in long-term return on assets	$	4.5			N/A			N/A			N/A


50 bps increase in discount rate	$	(4.7	)	$	(95.5	)	$	(2.9	)	$	(37.7	)

50 bps decrease in discount rate	$	7.4		$	101.1		$	2.9		$	40.0


50 bps increase in long-term return on assets	$	(9.0	)		N/A			N/A			N/A

50 bps decrease in long-term return on assets	$	9.0			N/A			N/A			N/A


	December 31
	2003			2002
ASSETS
Current Assets
Cash and equivalents	$	249		$	192
Trade receivables, less allowances (2003: $113; 2002: $94)		1,913			1,781
Inventories		1,340			1,089
Prepaid expenses		62			64
Deferred income taxes		129			83
Other current assets		172			118

Total Current Assets		3,865			3,327


Other Assets
Investment in affiliated companies		11			7
Goodwill, net		165			161
Other intangibles, net		85			187
Deferred income taxes		268			437
Prepaid pension costs		357			43
Other assets		154			131

		1,040			966
Property, Plant and Equipment
Land		84			87
Buildings		1,004			954
Machinery and equipment		5,391			4,793
Accumulated depreciation		(4,023	)		(3,496	)

		2,456			2,338

Total Assets	$	7,361		$	6,631

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Notes payable	$	260		$	221
Accounts payable		1,944			1,631
Employee compensation		303			273
Deferred income taxes		48			100
Accrued expenses		701			664
Restructuring costs		45			122
Other current liabilities		269			283
Current maturities of long-term debt		19			211

Total Current Liabilities		3,589			3,505


Other Liabilities
Deferred income taxes		236			117
Pension benefits		298			358
Postemployment benefits		489			487
Product warranty		53			57
Other liabilities		198			198
Long-term debt		1,134			1,092

		2,408			2,309


Minority Interests		63			78

Stockholders’ Equity
Common stock, $1 par value:		88			87
Authorized—250 million shares
Issued—89 million shares (2003); 87 million shares (2002)
Outstanding—69 million shares (2003); 68 million shares (2002)
Paid-in capital		659			582
Retained earnings		2,276			1,985
Accumulated other comprehensive income (loss)		(757	)		(999	)
Treasury stock—20 million shares (2003); 19 million shares (2002)		(965	)		(916	)

Total Stockholders’ Equity		1,301			739

Total Liabilities and Stockholders’ Equity	$	7,361		$	6,631


	Common Stock		Treasury Stock/ Paid-in Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balances, December 31, 2000	$	84	$	(444	)	$	(495	)	$	2,539		$	1,684
Comprehensive loss
Net earnings		—		—			—			21			21
Cumulative effect of change in accounting principle, net of tax of $9		—		—			(11	)		—			(11	)
Unrealized loss on derivative instruments		—		—			(6	)		—			(6	)
Minimum pension liability adjustment, net of tax of $4		—		—			(7	)		—			(7	)
Foreign currency items, net of tax of $3		—		—			(178	)		—			(178	)

Comprehensive loss													(181	)

Common stock repurchased		—		(43	)		—			—			(43	)
Common stock issued		2		86			—			—			88
Dividends declared on common stock		—		—			—			(90	)		(90	)

Balances, December 31, 2001	$	86	$	(401	)	$	(697	)	$	2,470		$	1,458

Comprehensive loss
Net loss		—		—			—			(394	)		(394	)
Unrealized loss on derivative instruments		—		—			(3	)		—			(3	)
Minimum pension liability adjustment, net of tax of $100		—		—			(151	)		—			(151	)
Foreign currency items, net of tax of $0		—		—			(148	)		—			(148	)

Comprehensive loss													(696	)

Common stock repurchased, net of reissuances		—		(35	)		—			—			(35	)
Common stock issued		1		102			—			—			103
Dividends declared on common stock		—		—			—			(91	)		(91	)

Balances, December 31, 2002	$	87	$	(334	)	$	(999	)	$	1,985		$	739

Comprehensive income
Net earnings		—		—			—			414			414
Unrealized loss on derivative instruments		—		—			(5	)		—			(5	)
Minimum pension liability adjustment, net of tax of $75		—		—			118			—			118
Foreign currency items, net of tax of $5		—		—			129			—			129

Comprehensive income													656

Common stock repurchased, net of reissuances		—		(49	)		—			—			(49	)
Common stock issued		1		77			—			—			78
Dividends declared on common stock		—		—			—			(123	)		(123	)

Balances, December 31, 2003	$	88	$	(306	)	$	(757	)	$	2,276		$	1,301


	2003		Change			2002		Change			2001
Gross Margin
North America	22.6	%	(1.0	)	pts	23.6	%	0.1		pts	23.5	%
Europe	23.6		1.4			22.2		0.9			21.3
Latin America	19.6		(3.8	)		23.4		(2.6	)		26.0
Asia	20.7		(3.0	)		23.7		(2.5	)		26.2

Consolidated⁽¹⁾	22.6	%	(0.6	)	pts	23.2	%	(0.2	)	pts	23.4	%


Year ended December 31—Millions of dollars, except per share data	2003		2002		2001
Compensation cost included in earnings as reported (net of tax benefits)	$	13	$	12	$	16
Pro-forma total fair value compensation cost (net of tax benefits)	$	25