##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13

OF THE SECURITIES EXCHANGE ACT OF
1934


For the Fiscal Year Ended December 31,
2002

Commission File Number 1-11793



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The Dial Corporation

(Exact Name of Registrant as Specified in its
Charter)


|                                                                                               |  |                                         
|---------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                       |  | 51-0374887                              
|(State or Other Jurisdiction of
    Incorporation or Organization)                             |  | (I.R.S. Employer
    Identification No.)
|                                                                                              
|15501 North Dial Boulevard
    Scottsdale, Arizona(Address of Principal Executive
    Offices) |  | 85260-1619(Zip Code)                    

Registrants Telephone Number, Including
Area Code:

(480) 754-3425


Securities Registered Pursuant to
Section 12(b) of the Act:

|                                |  |                                          
|------------------------------- |  | -----------------------------------------
|Title of Each Class             |  | Name of Each Exchange On Which Registered
|                                |  |                                          
|Common Stock, $.01 par value    |  | New York Stock Exchange                  
|Preferred Share Purchase Rights |  | New York Stock Exchange                  

Securities Registered Pursuant to
Section 12(g) of the Act:

None


Indicate by check mark whether the registrant
(1) has filed all Exchange Act 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 þ          No o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be
contained, to the best of 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.     o

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

As of February 28, 2003,
95,442,092 shares of Dials common stock were
outstanding and the aggregate market value of the common stock
(based on its closing price on such date) held by nonaffiliates
was approximately $1.7 billion.

Documents Incorporated by Reference


Portions of Dials proxy statement relating
to the 2003 annual meeting of stockholders to be held on
June 5, 2003, have been incorporated by reference into
Part III, Items 10, 11 and 12 of this Form 10-K.



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TABLE OF CONTENTS



|           |                                                                                                         |  |  |  |  |  |  | 
|---------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I    
|           | Item 1. Business                                                                                       
|           | Item 2. Properties                                                                                     
|           | Item 3. Legal Proceedings                                                                              
|           | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II   
|           | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|           | Item 6. Selected Financial and Other Data                                                              
|           | Item 7. Managements Discussion and Analysis of Results of Operations and Financial Condition          
|           | Item 7A. Quantitative and Qualitative Disclosure About Market Risk                                     
|           | Item 8. Financial Statements and Supplementary Data                                                    
|PART III  
|           | Item 10. Directors and Executive Officers of the Registrant                                            
|           | Item 11. Executive Compensation                                                                        
|           | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|           | Item 13. Certain Relationships and Related Transactions                                                
|           | Item 14. Controls and Procedures                                                                       
|           | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                               
|SIGNATURES
|EX-10.E   
|EX-10.J   
|EX-10.O   
|EX-21     
|EX-23     
|EX-99.A   
|EX-99.B   
|EX-99.C   
|EX-99.D   



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TABLE OF CONTENTS

|         |  |                                                                                                    |  |      |    | 
|-------- |  | -------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                                    |  | Page
|         |  |                                                                                                    |  |     
|PART I  
|Item 1   |  | Business                                                                                           |  |      | 2  | 
|Item 2   |  | Properties                                                                                         |  |      | 11 | 
|Item 3   |  | Legal Proceedings                                                                                  |  |      | 11 | 
|Item 4   |  | Submission of Matters to a Vote of Security
    Holders                                            |  |      | 12 | 
|PART II 
|Item 5   |  | Market for Registrants Common Equity and
    Related Stockholder Matters                          |  |      | 13 | 
|Item 6   |  | Selected Financial and Other Data                                                                  |  |      | 14 | 
|Item 7   |  | Managements Discussion and Analysis of
    Results of Operations and Financial Condition          |  |      | 16 | 
|Item 7A  |  | Quantitative and Qualitative Disclosure About
    Market Risk                                      |  |      | 33 | 
|Item 8   |  | Financial Statements and Supplementary Data                                                        |  |      | 35 | 
|Item 9   |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures          |  |      | 67 | 
|PART III
|Item 10  |  | Directors and Executive Officers of the Registrant                                                 |  |      | 68 | 
|Item 11  |  | Executive Compensation                                                                             |  |      | 71 | 
|Item 12  |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |  |      | 71 | 
|Item 13  |  | Certain Relationships and Related Transactions                                                     |  |      | 72 | 
|Item 14  |  | Controls and Procedures                                                                            |  |      | 72 | 
|Item 15  |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |  |      | 73 | 

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PART I

Unless otherwise indicated, the industry data
contained herein are derived from confidential reports published
by AC Nielsen. AC Nielsen captures consumer purchases
in US Food and Drug stores plus Kmart and Target via
scanners while consumer purchases from Wal-Mart are recorded by
Homescan panelists. A substantial portion of our sales are to
club and dollar stores. However, consumer purchases in these
stores are not included in market share resources such as those
provided by AC Nielsen. Unless otherwise noted, all market
share data are as of the 52 weeks ended December 31
and are based upon volume in the U.S. market. Soap and
detergent products are measured by ounces sold. Air fresheners
and canned meats are measured by units sold. Due to a change in
market share providers, we do not have market share data
available in a comparable format for the year ended
December 31, 2000. Consequently, we have not included
market share data for this period.

This Annual Report on Form 10-K contains
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. When used in this Form 10-K, the words
anticipates, intends, plans,
believes, estimates and similar
expressions are intended to identify forward-looking statements.
Such forward-looking statements included in this Form 10-K
include our belief that we have ample resources for raw
materials; the adequacy of our reserves for environmental
matters; our anticipated costs to comply with environmental
laws; our belief that our facilities are adequate and suitable
for their purposes and that manufacturing capacity is sufficient
for current needs; our belief that our relations with our
employees are satisfactory; our belief that the EEOC litigation
could have a material adverse effect on our operating results in
the period in which the case is resolved; our belief that the
number of claimants who ultimately will be eligible to recover
damages in the EEOC case is much fewer than 89; our belief that
liabilities from other legal claims, after taking into account
amounts already accrued and exclusive of any potential insurance
recovery, should not have a material adverse effect on our
financial position, cash flows or operating results and our
belief that we should explore opportunities for us to become
part of a larger company. These statements are based upon
managements beliefs, as well as on assumptions made by and
information currently available to management, and involve
various risks and uncertainties, which are beyond our control.
Our actual results could differ materially from those expressed
in any forward-looking statements made by, or on behalf of, us.
Factors that could cause actual results to differ include those
factors identified in
Item 7.     Managements
Discussion and Analysis of Results of Operations and Financial
Condition  Factors That May Affect Future Results and
Financial Condition in this Form 10-K.

In the fourth quarter of 2002, we entered into
a contract to sell our business in Argentina. In addition, we
sold our Specialty Personal Care business in the third quarter
of 2001. Accordingly, historical amounts and percentages
disclosed in this Form 10-K have been restated to reflect
our reporting of the Dial Argentina and Specialty Personal Care
businesses as discontinued operations in the accompanying
consolidated financial statements. See
Business  Pending Sale of Dial Argentina
Business and Business  Sale of Specialty
Personal Care Segment of this Form 10-K.






|        |         
|------- | --------
|Item 1. | Business

General

We manufacture and sell consumer products. We
market our products primarily under such well-known household
brand names as Dial® soaps,
Purex® detergents,
Renuzit® air fresheners and
Armour® canned meats. We believe that our
brand names have contributed to our products achieving leading
market positions.

We are organized into two business segments:
Domestic Branded and International and Other. Information
concerning the net sales, operating income and assets of each of
our business segments is set forth

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in Note 18 to the consolidated financial
statements included in this Form 10-K. The following table
sets forth the percentage of our net sales represented by each
of our segments:


|                        |       |      |    |      |   |      |    |     |   |  |    |     |  
|----------------------- | ----- | ---- | -- | ---- | - | ---- | -- | --- | - |  | -- | --- | -
|                        |       | 2002 |    | 2001 |   | 2000
|                        |       |      |    |      |   |     
|Domestic Branded        |       |      | 92 | %    |   |      | 92 | %   |   |  | 91 | %  
|International and Other |       |      | 8  |      |   |      | 8  |     |   |  | 9  |    
|                        |       |      |    |      |   |      |    |     |   |  |    |    
|                        | Total |      |    | 100  | % |      |    | 100 | % |  |    | 100 | %
|                        |       |      |    |      |   |      |    |     |   |  |    |    



| |                 
| | ----------------
| | Domestic Branded

Our Domestic Branded business segment consists of
four franchises:



| |   |                   
| | - | ------------------
| |  | Laundry Care      
| |  | Personal Cleansing
| |  | Food Products     
| |  | Air Fresheners    

Within our Domestic Branded business segment, we
have chosen to focus our marketing and product development
efforts on the Dial, Purex, Renuzitand Armourbrands. The following table sets forth the percentage of net
sales represented by each franchise within our Domestic Branded
segment:

|                   |       |      |    |      |   |      |    |     |   |  |    |     |  
|------------------ | ----- | ---- | -- | ---- | - | ---- | -- | --- | - |  | -- | --- | -
|                   |       | 2002 |    | 2001 |   | 2000
|                   |       |      |    |      |   |     
|Laundry Care       |       |      | 39 | %    |   |      | 37 | %   |   |  | 34 | %  
|Personal Cleansing |       |      | 31 |      |   |      | 32 |     |   |  | 33 |    
|Food Products      |       |      | 16 |      |   |      | 16 |     |   |  | 17 |    
|Air Fresheners     |       |      | 14 |      |   |      | 15 |     |   |  | 16 |    
|                   |       |      |    |      |   |      |    |     |   |  |    |    
|                   | Total |      |    | 100  | % |      |    | 100 | % |  |    | 100 | %
|                   |       |      |    |      |   |      |    |     |   |  |    |    



| |             
| | ------------
| | Laundry Care

Our Laundry Care business includes Purexdetergents, bleach and fabric softeners,
Zout® stain remover,
Trend® detergent,
Borateem® bleach, Sta-Flo®
starches, Boraxo® soap and 20 Mule
Team® borax and Fels Naptha®
laundry soap.

In 2002, retail sales in the U.S. detergent
category were $4.9 billion. Although retail sales in the
category declined 0.7%, retail volume increased 2.6% over 2001.
Category volume growth was driven by increased sales of liquid
detergent products. Dry detergent products continue to decline
due to a consumer preference for liquid detergent products.

Our Laundry Care business had volume market share
of the U.S. detergent category of 13.7% and 11.8% for 2002
and 2001, respectively. Our Laundry Care business had dollar
market share of the U.S. detergent category of 8.6% and
7.6% for 2002 and 2001, respectively. Based on ounces sold,
Purexis the second largest brand of detergents in the
U.S. and was the fastest growing, primarily due to continued
momentum in Purex liquid detergents.

The U.S. stain remover category accounted
for $190 million of sales at retail in 2002, a decline of
2.3% from 2001. Zoutis the number three brand in the
stain remover category.



| |                   
| | ------------------
| | Personal Cleansing

Our Personal Cleansing business includes
Dial, Coast® and
Tone® soaps and body washes, and
Pure & Natural® soaps. In 2002,
retail sales in the U.S. soap category were
$2.2 billion.

Our Personal Cleansing business had volume market
share of the U.S. soap category of 20.0% and 19.3% for 2002
and 2001, respectively. Our Personal Cleansing business had
dollar market share of the U.S. soap category of 17.6% and
17.0% for 2002 and 2001, respectively.

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Dialis
Americas leading deodorant bar soap brand. Category bar
soap sales continue to decline due to a consumer preference for
body wash products.

Body wash was the fastest growing segment in the
U.S. soap category in 2002. We are the third largest
marketer of body washes including Dial, Toneand
Coast brands.

Dialis the second
largest liquid hand soap brand.

Sales of our subsidiary, ISC International, Ltd.,
a manufacturer of translucent soaps, and sales of soap pellets
and chemicals, principally glycerin and fatty acids, which are
by-products of the soap making process, also are included in our
Personal Cleansing business.

Food
Products

Our Food Products business includes Armourand Armour Star® canned meats, chili,
hash and meat spreads and Cream® cornstarch.
We also manufacture and sell shelf stable food products for
third parties. Private label and copack sales represented 28%,
27%, and 26% of the volume of our Food Products business in
2002, 2001 and 2000, respectively.

The U.S. canned meat category totals
$1.3 billion and unit volume grew 2% in 2002. Our Armour
branded products within our Food Products business had unit
market share of the U.S. canned meat category of 20.2% and 19.2%
for 2002 and 2001, respectively. Our Armour branded products
within our Food Products business had dollar market share of the
U.S. canned meat category of 10.6% and 10.2% for 2002 and 2001,
respectively. Market share data for the private label portion of
our Food Products business is not available.

In 2002, Armourwas the largest brand,
measured by unit sales, in the canned meat category. Armouris the leading brand in the Vienna sausage and potted meat
segments. In the Chili segment, Armouris the fourth
largest brand in unit sales. Armour Treetis the second
largest brand in the spiced meat segment.

Air
Fresheners

Our Air Fresheners business includes a wide
variety of air freshener forms and fragrances, all of which are
marketed and sold under the Renuzit® brand.
Sales in the U.S. air freshener category were $1.3 billion
in 2002, a 3.5% increase over 2001. Category dollar growth in
2002 was driven by the electrics segment. Our Air Fresheners
business had unit market share of the U.S. air freshener
category of 22.4% and 22.5% for 2002 and 2001, respectively. Our
Air Fresheners business had dollar market share of the U.S. air
freshener category of 15.1% and 17.0% for 2002 and 2001,
respectively.

At December 31, 2002, Renuzitwas the
second largest brand of air fresheners in the U.S. based on
units sold. Renuzits LongLast Adjustablesolid air
fresheners are the largest selling item in the U.S. air
freshener category. Renuzitis the third largest brand in
the instant action segment. In the instant action segment, we
sell Renuzitaerosols and Renuzit Super Odor
Neutralizersprays. Renuzit Super Odor Neutralizer Spraywas introduced in the fourth quarter of 2002. Renuzithas discontinued its One Touchelectric scented oil
air freshener and, as a result, does not have a substantial
presence in the electrics segment.

Renuzitcandles are
the third largest brand in the scented candles segment. The
candle segment has continued to decline and we expect this trend
to continue. In the carpet air fresheners segment, Renuzitis the fourth largest brand and was the only brand to
increase sales in 2002.



| |                        
| | -----------------------
| | International and Other

Our International and Other segment includes our
international businesses and commercial markets.

International

Our international operations are focused in
Canada, Puerto Rico and exports to Asia and Latin America.
During 2002, 2001 and 2000, approximately 82%, 72% and 62%,
respectively, of our international sales came

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from these markets. In total, international sales
represent 4.4%, 4.6% and 5.1% of sales in 2002, 2001 and 2000,
respectively.


In Canada, Purexis leading the growth of
the liquid detergent category with Purexliquid detergent
volume sales at retail up 46%. Purexis the number two
brand of liquid laundry detergent. We are leading the growth of
the body wash category, with Dialbody wash sales at
retail up 45%. Export sales increased behind new distribution of
Dialbody wash items and Purexliquid detergents.

In Mexico, we moved to a licensing arrangement in
2002 with a third party who previously served as our distributor
in Mexico. Under this licensing arrangement, we have licensed
our Dial, Breckand Renuzittrademarks to a third
party in exchange for a royalty based upon net sales. As a
result, we did not record sales in Mexico in 2002. We recorded
sales in Mexico of $6.0 million and $10.9 million in
2001 and 2000, respectively.

Commercial
Markets

We sell a broad range of branded products through
various commercial channels, including amenity products to
lodging customers and soap and cleaning products to healthcare
and janitorial customers. Based on the Kline & Company,
Inc. 2002 Janitorial and Housekeeping Cleaning Products report,
total consumption of liquid, bar, waterless and powder hand
soaps and cleaners was estimated at $638.5 million during
2002. Based on this study, Dial is estimated to be the sixth
largest supplier of hand soaps and cleaners in the janitorial
and housekeeping commercial sectors. The commercial markets
business also sells products to governmental agencies, including
correctional facilities, schools and the military. Key
competitors include Marietta Corporation and Guest Supply, Inc.
in lodging, Ecolab, Inc. and STERIS Corporation in healthcare
and GOJO Industries and Kimberly-Clark Corporation in janitorial.

Pending Sale of Dial Argentina
Business

In December 2002, we announced that we had
reached an agreement to sell our Argentina business to an entity
designated by Southern Cross Group, a private equity investor in
Argentina. The transaction is structured as the sale of assets
of Dial Argentina, S.A., which includes the stock of its two
subsidiaries, Sulfargen, S.A. and The Dial Corporation San Juan,
S.A. As a result of this transaction, we recorded an after-tax
loss of $62.4 million on the pending disposal and
classified our Argentina business as a discontinued operation in
the fourth quarter of 2002. The sale is subject to satisfaction
of negotiated closing conditions and receipt of approvals under
Argentinas antitrust and bulk transfer laws. The sale
currently is expected to close late in the second quarter of
2003.

For additional information concerning this
transaction, see Item 7. Managements
Discussion and Analysis of Results of Operations and Financial
Condition  Pending Sale of Dial Argentina
Business.

Sale of Specialty Personal Care
Segment

On August 28, 2001, we completed the sale of
our Specialty Personal Care (SPC) business. Businesses included
in this segment consisted of a variety of skin, hair, bath, body
and foot care products sold under the Freeman and Sarah Michaels
brand names. The sale of SPC was in line with our strategy to
fix or jettison under-performing businesses. As a result of the
sale, we recorded an after-tax loss of $198.4 million
related to the write-off of SPC assets and to record an accrual
for estimated exit costs. Proceeds from the sale were primarily
used to repay debt. We sold the stock of our wholly-owned
subsidiary, Sarah Michaels, Inc., and the inventories, fixed
assets and intangibles of the SPC business, but retained the
related receivables and liabilities arising on or prior to
closing.

For additional information concerning this
transaction, see Item 7. Managements
Discussion and Analysis of Results of Operations and Financial
Condition  Sale of Specialty Personal Care
Segment.

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Discontinuation of Dial/ Henkel Joint
Ventures

In April 1999, we formed Dial/ Henkel LLC, a
joint venture with Henkel KGaA of Düsseldorf, Germany. Dial
and Henkel each owned 50% of this joint venture. This joint
venture was formed to develop and market a range of enhanced
laundry products in North America. In 1999, this joint venture
acquired the Custom Cleanerhome dry cleaning business
and launched Purex Advancedlaundry detergent.

In March 2000, we formed another joint venture
with Henkel named Dial/ Henkel Mexico S.A. de C.V. Henkel owned
51% and Dial owned 49% of this joint venture. This joint venture
was formed primarily to develop and market consumer detergent
and household cleaning products in Mexico. In May 2000, this
joint venture acquired 80% of Fabrica de Jabon Mariano Salgado,
S.A. de C.V., a manufacturer and marketer of consumer detergents
and household cleaning products in Mexico.

During the third quarter of 2000, the Dial/
Henkel LLC joint venture discontinued operations of Purex
Advanced laundry detergents. Our portion of the loss on
disposal of Purex Advanced was $12.6 million. This
charge consisted of recording inventory at net realizable value
and recording reserves for expected returns and deductions by
joint venture customers. In addition, we recorded a charge of
$5.4 million to write down to net realizable value the
fixed assets used to manufacture Purex Advanced.

During the fourth quarter of 2000, the Dial/
Henkel LLC joint venture recorded a $15 million special
charge relating to the Custom Cleaner home dry cleaning
business. This charge consisted of recording inventory at net
realizable value and writing down impaired goodwill and deferred
tax assets. Our share of this charge was $7.5 million.

In December 2000, we sold our interest in the
Dial/ Henkel Mexico joint venture to Henkel for
$18.9 million and recorded a $5.0 million loss on the
sale.

In the third quarter of 2001, Dial/ Henkel LLC
discontinued the Custom Cleaner home dry cleaning
business.

In the second quarter of 2002, Henkel received
certain intellectual property rights related to the former
Custom Cleaner business in exchange for its interest in
Dial/ Henkel LLC, which did not operate during 2002. We
accounted for our investments in these joint ventures under the
equity method of accounting. During 2002, we recorded a
$2.1 million gain related to lower than expected costs of
the joint venture associated with exiting the discontinued
Custom Cleaner business. During 2001, we recorded a
$3.0 million gain from lower than expected marketing costs
of the Custom Cleanerand Purex Advanced
businesses and lower than expected costs of exiting the joint
venture. During 2000, the two Dial/ Henkel joint ventures
resulted in net losses to us of $37.6 million, which
included $30.5 million in special charges related to exit
activities.

Customers

Our products are sold throughout the United
States primarily through supermarkets, mass merchandisers, drug
stores, membership club stores and other outlets. Generally, our
payment terms to customers are 30 days, with discounts
offered for early payment. The table below sets forth our net
sales by major customer. Other than Wal-Mart, no customer
accounted for more than 10% of net sales in 2002, 2001 or 2000.

|                                                               |  |      |    |      |  |      |    |   |  |  |    |  
|-------------------------------------------------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                                               |  | 2002 |    | 2001 |  | 2000
|                                                               |  |      |    |      |  |     
|Wal-Mart                                                       |  |      | 28 | %    |  |      | 25 | % |  |  | 22 | %
|Remaining top ten customers                                    |  |      | 29 |      |  |      | 29 |   |  |  | 29 |  
|                                                               |  |      |    |      |  |      |    |   |  |  |    |  
|Sales to top ten customers as a percent of total
    net sales |  |      | 57 | %    |  |      | 54 | % |  |  | 51 | %
|                                                               |  |      |    |      |  |      |    |   |  |  |    |  

Our products are also sold internationally
through the same channels, principally in Canada, Puerto Rico
and the Caribbean. Payment terms for international customers are
generally 30 days.

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Sales

Sales within the United States were 96%, 95% and
95% of our total sales during 2002, 2001, and 2000,
respectively. Our customers are served by a national sales
organization of approximately 160 employees. The sales
organization is divided into regional divisions and account
teams for grocery sales and specialized sales operations that
sell to large mass merchandisers, membership club stores, chain
drug stores, vending and military customers. In addition, some
customers and regions are served by a national sales and
marketing agency.

The following table sets forth our U.S. net sales
by channel:

|                             |                      |      |      |       |   |      |      |       |   |  |      |       |  
|---------------------------- | -------------------- | ---- | ---- | ----- | - | ---- | ---- | ----- | - |  | ---- | ----- | -
|                             |                      | 2002 |      | 2001  |   | 2000
|                             |                      |      |      |       |   |     
|Food(1)                      |                      |      | 42.1 | %     |   |      | 42.1 | %     |   |  | 44.3 | %    
|Mass                         |                      |      | 36.6 |       |   |      | 36.9 |       |   |  | 34.6 |      
|Dollar, club and drug        |                      |      | 15.1 |       |   |      | 14.5 |       |   |  | 13.7 |      
|Commercial markets and other |                      |      | 6.2  |       |   |      | 6.5  |       |   |  | 7.4  |      
|                             |                      |      |      |       |   |      |      |       |   |  |      |      
|                             | Total U.S. net sales |      |      | 100.0 | % |      |      | 100.0 | % |  |      | 100.0 | %
|                             |                      |      |      |       |   |      |      |       |   |  |      |      



---



|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | Includes all private label and copack food
    products that are sold through the Food channel.

Our international customers are served by
salespeople at three foreign sales offices, consisting of 16
employees. In addition, independent distributors also service
some regions.

Distribution

We ship products from four domestic distribution
centers. The distribution centers are operated by third parties,
except for one distribution center that we operate. Outside
carriers are used to transport our products.

We also shipped full truckload quantities
directly to customers from our manufacturing facilities. Direct
shipment to customers is limited to certain high volume
products, such as Purexliquid laundry detergent. The
percent of tonnage shipped direct from our plants to our
customers was approximately 25%, 23% and 23% in 2002, 2001, and
2000, respectively.

Suppliers

We rely on a number of third parties for
manufacturing, packaging and research and development. Some of
our arrangements related to new products contain limited mutual
exclusivity provisions. This is designed to permit the supplier
and us to profit from the product enhancement or innovation
before we use an alternative supplier or the supplier sells to
one of our competitors. Most of our supplier arrangements can be
terminated without material penalties.

Currently, we rely on a single company-owned
plant to manufacture our Dialbar soap, a single contract
manufacturer for our Renuzit Adjustableproducts and a
single supplier for Purexliquid laundry detergent
bottles. If any of these plants or suppliers were unable to
produce these products for us for an extended period of time, it
could have a material adverse effect on our financial condition
and operating results.

Raw Materials

We believe that ample sources of raw materials
are available with respect to all of our major products. Paper,
fats and oils, detergent chemicals, resins used in manufacturing
bottles and meat have the most significant impact on our costs.
Generally, we purchase these raw materials from a variety of
suppliers in the United States. Increases in the prices of
certain raw materials could materially impact our profit margins
and financial results. For example, tallow (a key ingredient in
Dial bar soaps) has experienced price fluctuations within the
range of $0.09 to $0.25 per pound from January 1, 1997, to
December 31, 2002. Recently, the price of tallow has been
trading at the middle of this historical range. If prices were
to increase, we may not be able to increase the prices of our
Dial bar soaps to offset these increases. In addition, because
our competitors use

7



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less tallow in their bar soap products, increases
in tallow prices would adversely impact us more than our
competitors. For the first quarter of 2003, we have entered into
an agreement with our supplier that fixes the price we pay for
tallow.


We attempt to reduce our risk by entering into
contracts to provide six to twelve month supplies of tallow,
other raw materials and packaging materials. In the past, we
have used financial derivatives to mitigate price fluctuations
on the raw material component of the cardboard boxes and
packaging used in our business. Other long-term hedging
opportunities against price increases for these raw materials
are generally not available.

Competition

We compete primarily on the basis of brand
equity, brand advertising, customer service, product performance
and product quality at competitive retail price points. We
compete with numerous, well-established local, regional,
national and international companies. Some of these companies
have greater financial resources than we do and may be willing
to commit significant resources to protect their own market
shares or to capture market share from us. Our principal
competitors are as follows:

|                                                               |  |                     
|-------------------------------------------------------------- |  | --------------------
|Personal Cleansing                                             |  | Food Products       
|                                                               |  |                     
| The Procter & Gamble Company
    (P&G)                     |  |  Hormel Foods Corp.
| Lever Brothers Co., a division of
    Unilever PLC (Lever) |  |  ConAgra           
| Colgate-Palmolive Company
    (Colgate)                    |  |                     

|                            |  |                            
|--------------------------- |  | ---------------------------
|Laundry Care                |  | Air Fresheners             
|                            |  |                            
| P&G                       |  |  S.C. Johnson & Son, Inc. 
| Lever                     |  |  Reckitt & Benckiser, Inc.
| Colgate                   |  |  Church & Dwight, Inc.    
| Church & Dwight, Inc.     |  |  Global Household Brands  
| S.C. Johnson & Son, Inc.  |  |                            
| Reckitt & Benckiser, Inc. |  |                            

Research and Development

We conduct research and development at our
facility in Scottsdale, Arizona. Our internal research and
development efforts are primarily directed at providing
technical assistance, supporting our manufacturing activities
and generating innovation for new and existing products. To
increase our innovative capacity, we also contract general
research and development activities in areas beyond our core
areas of expertise. Our total research and development
expenditures were approximately $16.2 million,
$14.3 million and $12.1 million in 2002, 2001 and
2000, respectively.

Marketing Research

We rely on industry data, syndicated market share
data and various attitude and usage studies prepared by
independent marketing firms. We also obtain direct sales
information from our largest customers to identify consumer
needs and anticipate shifts in consumer preferences. This allows
us to develop line extensions and new products to meet changing
demands.

Patents and Trademarks

Our trademarks include Dial, Purex, Renuzit,
Coast, Zout, Armour, Armour Star, Tone, Pure & Natural,
Trend, Treet, 20 Mule Teamand Boraxoin
addition to related trade names. In the U.S., we license the
Armourand Armour Star trademarks from ConAgra,
Inc., which also sells food products under the Armour
trademark. We license the 20 Mule Teamtrademark
from U.S. Borax, Inc.

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In 2001, we licensed our Brecktrademarks
in the U.S., Canada, Puerto Rico, Europe and Asia to a third
party in exchange for a royalty based upon gross sales. In 2002,
we licensed our Brecktrademark in Mexico to a different
third party in exchange for a royalty based upon net sales. For
further discussion of our licensing arrangement in Mexico, see
Item 1. Business  International.

United States trademark registrations are for a
term of 10 years, renewable every 10 years as long as
the trademarks are used in the regular course of trade. We
maintain a portfolio of trademarks representing substantial
goodwill in the businesses using these trademarks. We also have
a significant number of registered foreign trademarks.

United States patents are currently granted for a
term of 20 years from the date a patent application is
filed. We own a number of patents and believe that some of them
may provide competitive advantages in the marketplace.

Government Regulation

Substantially all of our operations are, or may
become, subject to various federal laws and agency regulations.
These include the Food, Drug and Cosmetic Act, which is
administered by the Food and Drug Administration (the
FDA). The FDA regulates the manufacturing, labeling
and sale of our over-the-counter drug and cosmetic products. The
Insecticide, Fungicide and Rodenticide Act and the Toxic
Substances Control Act are administered by the Environmental
Protection Agency and regulate our disinfectant products and
certain substances used in the manufacturing of our products.
The Meat Inspection Act is administered by the Department of
Agriculture and regulates our meat products. The Hazardous
Substances Act is administered by the Consumer Product Safety
Commission and regulates the labeling of our household products.
The Fair Packaging and Labeling Act is administered by the
Federal Trade Commission (the FTC) and regulates the
packaging and labeling of all of our products. Our products also
are subject to regulation by various state laws and various
state regulatory agencies. In addition, we are subject to
similar laws and regulations imposed by foreign jurisdictions.

Since the 1970s, the FDA has regulated
antibacterial soaps and hand washes under a proposed regulation.
Although the proposed regulation has not been finalized, the FDA
ultimately could set standards that result in limiting or even
precluding soap manufacturers from using some current
antibacterial ingredients or making antibacterial claims for
some product forms, such as bar soap. Dial, which uses
the antibacterial ingredient Triclosan in Liquid Dial and
Triclocarban in Dialbar soap, emphasizes the
antibacterial properties of its soap products in its marketing
campaigns and product labeling. Any final FDA regulation that
limits or precludes this type of advertising could require us to
develop new marketing campaigns, develop new products or utilize
different antibacterial ingredients in its products, all of
which could have a material adverse effect on our business,
operating results and financial condition.

Environmental Matters

We are subject to a variety of environmental and
health and safety laws in each jurisdiction in which we operate.
These laws and regulations pertain to our present and past
operations. Although we do not anticipate that the costs to
comply with environmental laws and regulations will have a
material adverse effect on our capital expenditures, earnings or
competitive position, the emergence of unforeseen claims and
liabilities or the imposition of increasingly stringent laws,
regulations and enforcement policies could result in material,
unreserved costs in the future. Since 1980, we have received
notices or requests for information with respect to
Superfund sites under the federal Comprehensive
Environmental Response, Compensation and Liability Act, three of
which are currently active. In addition, in 1999 and in prior
years we used nonlyphenol ethoxylate as an ingredient in our
liquid and powder detergents and we continue to use it as an
ingredient in our Zout stain remover products. Certain
environmental and regulatory groups have raised concerns
regarding toxicity of compounds produced from nonlyphenol
ethoxylate.

We do not currently anticipate that we will incur
significant capital expenditures in connection with matters
relating to environmental control or compliance in 2003. We do
not anticipate that the costs to comply with environmental laws
and regulations or the costs related to Superfund sites and the
clean up of closed

9



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plant sites will have a material adverse effect
on our financial results or condition. We believe our reserves
are adequate, but these costs are difficult to predict with
certainty. There can be no assurance that other developments,
such as the emergence of unforeseen claims or liabilities or the
imposition of increasingly stringent laws, regulations and
enforcement policies, will not result in material costs in the
future.


Federal, state, local and foreign environmental
compliance may from time to time require changes in product
formulation or packaging. These changes have not had, and are
not expected to have, a material adverse effect on our financial
results or condition.

Employees

We employed approximately 2,900 individuals, of
whom approximately 1,020 were covered by collective bargaining
agreements, as of December 31, 2002.

Three of our five plants in the United States are
unionized. In 2002, we finalized negotiations of two labor
contracts. The first was with the International Brotherhood of
Teamsters for the St. Louis, Missouri Plant and Madison
County, Illinois Distribution Center, covering approximately 360
employees, which now expires in June 2005. The second was
with the United Food and Commercial Workers union, covering
approximately 280 employees at the Aurora, Illinois Plant, which
now expires in September 2006. The labor contract with the
United Food and Commercial Workers union, covering approximately
380 employees at our Fort Madison, Iowa Plant, expires in
September 2003. Although we believe that our relations with
our employees are satisfactory, there can be no assurance that
we will not face labor disputes in the future or that such
disputes will not be material to us.

Available Information

Copies of our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to those reports filed or
furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge
through our website (www.dialcorp.com) as soon as reasonably
practicable after we electronically file the material with, or
furnish it to, the Securities and Exchange Commission.

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##### Table of Contents






Item 2.     Properties

Our corporate headquarters is located in a leased
130,000-square-foot, single-tenant building in Scottsdale,
Arizona, that is adjacent to the 200,000-square-foot Dial Center
for Innovation (DCI), which we sold in
June 2000 but still occupy under a multi-year lease. See
Managements Discussion and Analysis of Results of
Operations and Financial Condition  Financial
Condition and Liquidity.

Our principal facilities include the following:

|                            |          |             |         |           |  |                                                          | 
|--------------------------- | -------- | ----------- | ------- | --------- |  | -------------------------------------------------------- | 
|                            |          | Approximate |         |          
|Location                    |          | Sq. Feet    |         | Purpose  
|                            |          |             |         |          
|Manufacturing Facilities    |          |             |         |           |  |                                                         
|Aurora, Illinois            |          |             | 451,000 |           |  | Bar soaps                                               
|Fort Madison, Iowa          |          |             | 447,000 |           |  | Canned meats                                            
|St. Louis, Missouri         |          |             | 272,400 |           |  | Dry and liquid laundry detergents                       
|West Hazleton, Pennsylvania |          |             | 214,500 |           |  | Liquid detergents, liquid soaps and fabric
    softeners
|Los Angeles, California     |          |             | 47,600  |           |  | Liquid detergents and powdered soap                     
|Guatemala City, Guatemala   |          |             | 100,000 |           |  | Bar soaps                                               
|                            |          |             |         |           |  |                                                         
|                            | Subtotal |             |         | 1,532,500 |  |                                                          | 
|                           
|Distribution Centers        |          |             |         |           |  |                                                         
|Allentown, Pennsylvania(1)  |          |             | 800,000 |           |  | Warehousing and distribution of finished goods          
|Ontario, California(1)      |          |             | 340,000 |           |  | Warehousing and distribution of finished goods          
|Edwardsville, Illinois(1)   |          |             | 812,000 |           |  | Warehousing and distribution of finished goods          
|Atlanta, Georgia(2)         |          |             | 253,700 |           |  | Warehousing and distribution of finished goods          
|                            |          |             |         |           |  |                                                         
|                            | Subtotal |             |         | 2,205,700 |  |                                                          | 
|                            |          |             |         |           |  |                                                         
|                            | Total    |             |         | 3,738,200 |  |                                                          | 
|                            |          |             |         |           |  |                                                         



---



|    |                  
|--- | -----------------
|(1) | Leased facility. 
|   
|(2) | Public warehouse.

We believe that our facilities in the aggregate
are adequate and suitable for their purposes and that
manufacturing capacity is sufficient for current needs. We
continue to seek ways to cut costs and may close facilities as
warranted.




Item 3.     Legal
Proceedings

As we have previously disclosed, we are defending
a lawsuit filed by the U.S. Equal Employment Opportunity
Commission (EEOC). This lawsuit is pending in the
U.S. District Court for the Northern District of Illinois,
Eastern Division, and is entitled Equal Employment Opportunity
Commission v. The Dial Corporation, Civil Action
No. 99 C 3356. The EEOC alleges that we engaged
in a pattern and practice of discrimination against a class of
female employees at our Aurora, Illinois manufacturing facility
by subjecting them to sexual harassment and failing to take
prompt remedial action after these employees complained about
the alleged harassment. Most of the potential claimants
allegations relate to incidences that allegedly occurred prior
to 1996. The EEOC is seeking injunctive relief and unspecified
compensatory and punitive damages. We have denied the
EEOCs allegations.

There are currently 89 potential claimants.
Compensatory and punitive damages are limited to a maximum of
$300,000 for each potential claimant. However, we currently
believe that the number of claimants who ultimately will be
eligible to recover damages in this case is much fewer than 89
based upon the potential claimants individualized
allegations and our defenses. Nevertheless, no assurances can be
given regarding the number of potential claimants who will
ultimately be eligible to recover monetary damages.

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The trial is scheduled to begin in late
April 2003. During initial settlement discussions, the EEOC
indicated that it is seeking $15 million to resolve this
case. Based upon our investigation, we do not believe the facts
warrant such a large settlement. Accordingly, we are preparing
for trial.

Depending on the outcome, this case could have a
material adverse effect on our operating results in the period
in which the case is resolved. In addition, negative publicity
resulting from this lawsuit could adversely affect our sales and
operating results.

As is the case with many companies, we also face
exposure to actual or potential claims and lawsuits involving
our business and assets. We are currently party to a number of
lawsuits consisting of ordinary, routine litigation incidental
to our business, including general and product liability and
workers compensation claims. We believe that any
liabilities resulting from these claims, after taking into
account amounts already accrued and including any potential
insurance recovery, should not have a material adverse effect on
our financial position, cash flows or operating results.




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

We did not submit any matter to a vote of our
stockholders during the fourth quarter of 2002.

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PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Our common stock is traded on the New York Stock
Exchange under the symbol DL. The following table sets forth the
high and low sale prices as reported on the NYSE for the periods
indicated as well as the dividend paid with respect to these
periods. The sale price of the common stock on February 28,
2003, was $18.19 per share.

|            |                |             |  |       |  |           |  |       |  |  |  |      | 
|----------- | -------------- | ----------- |  | ----- |  | --------- |  | ----- |  |  |  | ---- | 
|            |                |             |  |      
|            |                | Price Range |  |      
|            |                |             |  |      
|            |                | High        |  | Low   |  | Dividends
|            |                |             |  |       |  |          
|Fiscal 2002 |                |             |  |       |  |           |  |       |  |  |  |     
|            | Fourth Quarter |             |  | 22.15 |  |           |  | 20.37 |  |  |  | 0.04 | 
|            | Third Quarter  |             |  | 21.67 |  |           |  | 17.98 |  |  |  | 0.04 | 
|            | Second Quarter |             |  | 21.99 |  |           |  | 17.99 |  |  |  | 0.04 | 
|            | First Quarter  |             |  | 18.02 |  |           |  | 15.74 |  |  |  | 0.04 | 
|Fiscal 2001 |                |             |  |       |  |           |  |       |  |  |  |     
|            | Fourth Quarter |             |  | 18.78 |  |           |  | 15.80 |  |  |  | 0.04 | 
|            | Third Quarter  |             |  | 18.00 |  |           |  | 12.80 |  |  |  | 0.04 | 
|            | Second Quarter |             |  | 15.10 |  |           |  | 11.95 |  |  |  | 0.04 | 
|            | First Quarter  |             |  | 15.75 |  |           |  | 11.19 |  |  |  | 0.04 | 

The declaration and payment of dividends is
subject to the discretion of our Board of Directors. Any future
determination to pay dividends will depend on our results of
operations, financial condition, capital requirements,
contractual restrictions and other factors deemed relevant at
the time by the Board. As of February 28, 2003, there were
95,442,092 shares of common stock outstanding, which were
held by 28,761 stockholders of record.

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|        |                                      
|------- | -------------------------------------
|Item 6. | Selected Financial and Other
    Data

The following table presents selected financial
information derived from our consolidated financial statements
and includes the reclassification of the Argentina and SPC
businesses as discontinued operations.

The following data should be read in conjunction
with our consolidated financial statements and notes thereto,
Item 7. Managements Discussion and Analysis
of Results of Operations and Financial Conditionand
the other financial information included elsewhere or
incorporated by reference in this Form 10-K.

SELECTED FINANCIAL AND OTHER DATA

|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | --------- | ------- |  | ------- | --------- | ------- |  | ------- | --------- | - |  | - | --------- | - |  | - | --------- | -
|                                                                                                                |  |                                      
|                                                                                                                |  | Year Ended                           
|                                                                                                                |  |                                      
|                                                                                                                |  | Dec. 31                               |           | Dec. 31 |  | Dec. 31 |           | Dec. 31 |  | Dec. 31
|                                                                                                                |  | 2002(1)                               |           | 2001(2) |  | 2000(3) |           | 1999    |  | 1998   
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |        
|                                                                                                                |  |                                      
|                                                                                                                |  | (In thousands, except per share data)
|Operations                                                                                                      |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Net sales                                                                                                       |  | $                                     | 1,282,231 |         |  | $       | 1,189,332 |         |  | $       | 1,077,646 |   |  | $ | 1,151,585 |   |  | $ | 1,077,178 |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Cost of products sold                                                                                           |  |                                       | 803,696   |         |  |         | 772,810   |         |  |         | 723,786   |   |  |   | 732,642   |   |  |   | 695,727   |  
|Special charges/(income) from asset write-downs,
    discontinued product inventories and other exit activities |  |                                       | (1,707    | )       |  |         | 8,424     |         |  |         | 10,519    |   |  |   |           |   |  |   |           |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Total cost of products sold                                                                                     |  |                                       | 801,989   |         |  |         | 781,234   |         |  |         | 734,305   |   |  |   | 732,642   |   |  |   | 695,727   |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Selling, general and administrative expenses                                                                    |  |                                       | 259,900   |         |  |         | 244,695   |         |  |         | 207,447   |   |  |   | 205,646   |   |  |   | 203,934   |  
|Special charges and other asset write-downs                                                                     |  |                                       |           |         |  |         | 330       |         |  |         | 6,734     |   |  |   |           |   |  |   |           |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|                                                                                                                |  |                                       | 1,061,889 |         |  |         | 1,026,259 |         |  |         | 948,486   |   |  |   | 938,288   |   |  |   | 899,661   |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Operating income                                                                                                |  |                                       | 220,342   |         |  |         | 163,073   |         |  |         | 129,160   |   |  |   | 213,297   |   |  |   | 177,517   |  
|Interest and other expenses, net                                                                                |  |                                       | (40,255   | )       |  |         | (47,990   | )       |  |         | (50,306   | ) |  |   | (32,712   | ) |  |   | (23,357   | )
|Income/(loss) from Dial/ Henkel joint ventures                                                                  |  |                                       | 2,086     |         |  |         | 2,990     |         |  |         | (37,615   | ) |  |   | (1,347    | ) |  |   |           |  
|Other income  gain on special items                                                                            |  |                                       |           |         |  |         |           |         |  |         | 9,243     |   |  |   |           |   |  |   |           |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Income from continuing operations before income
    taxes                                                       |  |                                       | 182,173   |         |  |         | 118,073   |         |  |         | 50,482    |   |  |   | 179,238   |   |  |   | 154,160   |  
|Income taxes                                                                                                    |  |                                       | (66,939   | )       |  |         | (43,765   | )       |  |         | (17,066   | ) |  |   | (62,441   | ) |  |   | (54,610   | )
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Income from continuing operations                                                                               |  |                                       | 115,234   |         |  |         | 74,308    |         |  |         | 33,416    |   |  |   | 116,797   |   |  |   | 99,550    |  
|Discontinued operations:                                                                                        |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Income/(loss) from operations of discontinued
    businesses, net of tax                                        |  |                                       | 3,783     |         |  |         | (8,156    | )       |  |         | (44,424   | ) |  |   | (31       | ) |  |   | 3,066     |  
|Loss on disposal of discontinued businesses, net
    of tax                                                     |  |                                       | (58,817   | )       |  |         | (198,403  | )       |  |         |           |   |  |   |           |   |  |   |           |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|(Loss)/ Income from discontinued operations                                                                     |  |                                       | (55,034   | )       |  |         | (206,559  | )       |  |         | (44,424   | ) |  |   | (31       | ) |  |   | 3,066     |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Cumulative effect of change in accounting
    principle, net of tax                                             |  |                                       | (43,308   | )       |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  
|Net income (loss)                                                                                               |  | $                                     | 16,892    |         |  | $       | (132,251  | )       |  | $       | (11,008   | ) |  | $ | 116,766   |   |  | $ | 102,616   |  
|                                                                                                                |  |                                       |           |         |  |         |           |         |  |         |           |   |  |   |           |   |  |   |           |  

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|                                     |                                                         |                                       |        |         |   |         |        |         |   |         |        |       |   |   |         |       |  |   |         |       | 
|------------------------------------ | ------------------------------------------------------- | ------------------------------------- | ------ | ------- | - | ------- | ------ | ------- | - | ------- | ------ | ----- | - | - | ------- | ----- |  | - | ------- | ----- | 
|                                     |                                                         |                                      
|                                     |                                                         | Year Ended                           
|                                     |                                                         |                                      
|                                     |                                                         | Dec. 31                               |        | Dec. 31 |   | Dec. 31 |        | Dec. 31 |   | Dec. 31
|                                     |                                                         | 2002(1)                               |        | 2001(2) |   | 2000(3) |        | 1999    |   | 1998   
|                                     |                                                         |                                       |        |         |   |         |        |         |   |        
|                                     |                                                         |                                      
|                                     |                                                         | (In thousands, except per share data)
|Diluted net income/(loss) per share: |                                                         |                                       |        |         |   |         |        |         |   |         |        |       |   |   |         |       |  |   |         |      
|                                     | Income from continuing operations                       |                                       | $      | 1.22    |   |         | $      | 0.81    |   |         | $      | 0.36  |   |   | $       | 1.17  |  |   | $       | 0.99  | 
|                                     | (Loss)/ Income from discontinued operations             |                                       |        | (0.58   | ) |         |        | (2.24   | ) |         |        | (0.48 | ) |   |         |      |  |   |         | 0.03  | 
|                                     | Cumulative effect of change in accounting
    principle |                                       |        | (0.46   | ) |         |        |        |   |         |        |      |   |   |         |      |  |   |         |      | 
|                                     |                                                         |                                       |        |         |   |         |        |         |   |         |        |       |   |   |         |       |  |   |         |      
|Net income/(loss) per diluted share  |                                                         | $                                     | 0.18   |         |   | $       | (1.43  | )       |   | $       | (0.12  | )     |   | $ | 1.17    |       |  | $ | 1.02    |      
|                                     |                                                         |                                       |        |         |   |         |        |         |   |         |        |       |   |   |         |       |  |   |         |      
|Basic shares outstanding             |                                                         |                                       | 92,359 |         |   |         | 91,451 |         |   |         | 92,237 |       |   |   | 98,255  |       |  |   | 98,294  |      
|                                     | Equivalent shares                                       |                                       |        | 2,072   |   |         |        | 787     |   |         |        | 279   |   |   |         | 1,810 |  |   |         | 2,185 | 
|                                     |                                                         |                                       |        |         |   |         |        |         |   |         |        |       |   |   |         |       |  |   |         |      
|Diluted shares                       |                                                         |                                       | 94,431 |         |   |         | 92,238 |         |   |         | 92,516 |       |   |   | 100,065 |       |  |   | 100,479 |      
|                                     |                                                         |                                       |        |         |   |         |        |         |   |         |        |       |   |   |         |       |  |   |         |      

|                                         |  |            |           |         |  |         |           |         |  |         |           |   |  |   |           |  |  |   |           | 
|---------------------------------------- |  | ---------- | --------- | ------- |  | ------- | --------- | ------- |  | ------- | --------- | - |  | - | --------- |  |  | - | --------- | 
|                                         |  |           
|                                         |  | Year ended
|                                         |  |           
|                                         |  | Dec. 31    |           | Dec. 31 |  | Dec. 31 |           | Dec. 31 |  | Dec. 31
|                                         |  | 2002(1)    |           | 2001(2) |  | 2000(3) |           | 1999    |  | 1998   
|                                         |  |            |           |         |  |         |           |         |  |        
|Balance Sheet Data                       |  |            |           |         |  |         |           |         |  |         |           |   |  |   |           |  |  |   |           | 
|Total assets                             |  | $          | 1,149,739 |         |  | $       | 1,024,116 |         |  | $       | 1,392,717 |   |  | $ | 1,286,568 |  |  | $ | 1,176,672 | 
|Working capital (deficit) excluding cash |  |            | 8,366     |         |  |         | 20,159    |         |  |         | (23,505   | ) |  |   | 8,579     |  |  |   | 22,219    | 
|Cash                                     |  |            | 219,554   |         |  |         | 28,310    |         |  |         | 6,392     |   |  |   | 5,911     |  |  |   | 10,666    | 
|Total debt                               |  |            | 458,393   |         |  |         | 445,341   |         |  |         | 581,038   |   |  |   | 344,803   |  |  |   | 280,204   | 
|Net debt (total debt less cash)          |  |            | 238,839   |         |  |         | 417,031   |         |  |         | 574,646   |   |  |   | 338,892   |  |  |   | 269,538   | 
|Stockholders equity(4)                  |  |            | 148,998   |         |  |         | 81,878    |         |  |         | 293,907   |   |  |   | 411,271   |  |  |   | 390,225   | 
|Other Data                               |  |            |           |         |  |         |           |         |  |         |           |   |  |   |           |  |  |   |           | 
|Depreciation and amortization            |  |            | 35,964    |         |  |         | 43,806    |         |  |         | 43,855    |   |  |   | 35,672    |  |  |   | 33,528    | 
|Capital expenditures                     |  |            | 34,490    |         |  |         | 28,644    |         |  |         | 37,337    |   |  |   | 56,252    |  |  |   | 50,330    | 
|Dividends paid on common stock           |  |            | 14,793    |         |  |         | 14,613    |         |  |         | 25,762    |   |  |   | 31,407    |  |  |   | 31,497    | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes special net gain of $1.7 million
    ($0.9 million after-tax or $0.01 per diluted share) from
    manufacturing asset sales and writedowns and reversal of
    restructure reserves. Also includes $2.1 million
    ($2.0 million after-tax or $0.02 per diluted share) of
    income from the liquidation of the Dial/ Henkel LLC joint
    venture. See Notes 3 and 6 of the consolidated financial
    statements included in this Form 10-K.                                                                                                                                                                                                                                                   
|   
|(2) | Includes special charges of $8.8 million
    ($7.6 million after-tax or $0.08 per diluted share) from
    asset writedowns, discontinuing product inventories, and other
    exit costs. See Note 3 of the consolidated financial
    statements included in this Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(3) | Includes special charges of $17.3 million
    ($11.3 million after-tax or $0.12 per diluted share) from
    asset writedowns, discontinuing product inventories, and other
    exit costs. Also includes $30.5 million ($22.3 million
    after-tax or $0.24 per diluted share) resulting from exit
    activities undertaken by the Dial/ Henkel joint ventures during
    2000. These charges are partially offset by $9.2 million
    ($7.2 million after-tax or $0.08 per diluted share) from
    the sale of land and a curtailment gain resulting from changes
    to retiree medical plan benefits. See Notes 3, 6 and 7 of
    the consolidated financial statements included in this
    Form 10-K.
|   
|(4) | In 2002, stockholders equity was reduced by
    a charge of $17.7 million for additional minimum pension
    liability. In 2001, stockholders equity was reduced
    $62.2 million for unrealized foreign currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

15



---



##### Table of Contents



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | translation charges related to the currency
    devaluation in Argentina and $11.9 million for additional
    minimum pension liability.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Results of Operations and Financial Condition

Potential Sale of Dial And Future Capital
Allocation Strategy

We believe that our long-term interests and those
of our shareholders would be best served if we were part of a
larger enterprise. We will continue to explore opportunities to
become part of a larger company, which could include
transactions with multiple parties. We have been working with
Goldman Sachs & Co. and may continue to do so as we evaluate
any opportunities for us to be part of a larger company.

No time constraints have been set for any
transaction, and any decision regarding any potential
transactions will be based upon the best interests of our
shareholders. Accordingly, there is no assurance that any sale,
merger or other transactions involving us or any of our
businesses will occur in the near future or at all. In addition,
decisions made in the course of continuing to improve our
operating results could require additional special or
restructuring charges or additional asset writedowns.

We will continue to focus on growing our core
businesses and will evaluate capital allocation options in light
of the amount of cash we are accumulating. The capital
allocation alternatives we are reviewing include:



| |   |                                
| | - | -------------------------------
| |  | Acquisitions                   
|
| |  | Share repurchases              
|
| |  | Dividend increases             
|
| |  | Debt reduction                 
|
| |  | Investment in our base business

If suitable acquisition options do not emerge,
then we currently expect to use cash to repurchase shares. We
also may consider increasing our dividend or reducing our debt.

Critical Accounting Policies and
Estimates

Managements discussion and analysis of
results of operations and financial condition are based upon our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of our financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses.
We routinely evaluate our estimates, including those related to
customer programs and incentives, product returns, bad debts,
income taxes, pension and other post retirement benefits,
long-lived assets, inventories, restructurings, self insurance
(primarily workers compensation), environmental matters,
exit cost reserves related to discontinued operations and
contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these
estimates under different assumptions and conditions.

Accounting policies are considered critical when
they are both significant to the portrayal of our financial
condition and results, and they require difficult, subjective,
or complex judgments or estimates. We consider our critical
accounting policies to include our calculation and treatment of
the following expenses:



| |   |                                     
| | - | ------------------------------------
| |  | sales incentives                    
|
| |  | income taxes                        
|
| |  | pension and post retirement benefits

Management has discussed these critical
accounting estimates with the Audit Committee of our Board of
Directors.

16



---



##### Table of Contents





| |                 
| | ----------------
| | Sales Incentives

Customer sales are recorded net of allowances for
cash discounts, estimated sales returns, trade promotions and
other sales incentives.

We routinely commit to both one-time and on-going
trade promotion programs with customers that require us to
estimate and accrue the ultimate costs of such programs. We
record an accrual for the earned, but unpaid costs related to
our trade promotion programs. Trade promotion and cash discount
costs are recorded as a deduction from sales. Estimating the
costs associated with on-going and routine trade promotion
programs and cash discount expense for core brands is based on
our experience and available historical information.

In determining liabilities for trade promotional
spending, we must rely on judgment and estimates which include,
but are not limited to, our understanding of trade promotional
spending patterns, knowledge of the status of trade promotional
activities, and the interpretation of historical spending trends
by customer and category. If our estimates were to differ by
10%, the impact to promotional spending accruals would be
approximately $2.0 million.



| |             
| | ------------
| | Income Taxes

Under Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income
Taxes, income taxes are recorded based on current year
amounts payable or refundable, as well as the consequences of
events that give rise to deferred tax assets and liabilities. We
base our estimate of current and deferred taxes on the tax laws
and rates that are currently in effect in the appropriate
jurisdiction. Changes in tax laws or rates may affect the
current amounts payable or refundable as well as the amount of
deferred tax assets or liabilities.

We currently have $80.3 million of net
deferred tax assets resulting primarily from differences between
book and tax treatment for certain items. We believe that these
net deferred tax assets will be realized based primarily on our
projected future earnings and scheduling of our deferred tax
liabilities. However, the amount of the deferred tax assets
actually realized could differ if we have little or no future
earnings.

At December 31, 2001, we established a full
valuation allowance of $19.4 million for deferred tax
assets related to a $52.3 million capital loss from the
sale of the Specialty Personal Care business. The
$52.3 million capital loss can only be utilized to offset
net capital gains, and will expire on December 31, 2006.
SFAS No. 109 requires that a valuation allowance be
established when it is more likely than not that all or a
portion of a deferred tax asset will not be realized. Changes in
valuation allowances from period to period are included in our
tax provision in the period of change. In determining whether a
valuation allowance is required, we take into account all
evidence with regard to the utilization of a deferred tax asset
including our past earnings history, expected future earnings,
the character and jurisdiction of such earnings, unsettled
circumstances that, if unfavorably resolved, would adversely
affect utilization of a deferred tax asset, carryback and
carryforward periods, and tax strategies that could potentially
enhance the likelihood of realization of a deferred tax asset.
We will maintain a full valuation allowance for that capital
loss until it is more likely than not to be utilized.

U.S. income tax is not provided when foreign
earnings are indefinitely reinvested in accordance with
Accounting Principles Board Opinion No. 23,
Accounting for Income Taxes, Special Areas. We
determine whether our foreign subsidiaries have invested or will
invest a significant portion of their undistributed earnings
indefinitely. We reassess our determination on a periodic basis.
Changes to our determination may be warranted based on the
experience as well as plans regarding future international
operations and expected tax payments. Changes in the
determination from period to period are included in our tax
provision in the period of change. As of December 31, 2002,
we had not provided for any U.S. taxes on approximately
$14 million of undistributed earnings from our non-U.S.
subsidiaries since these earnings are indefinitely reinvested.



| |                                         
| | ----------------------------------------
| | Pension and Post-Retirement
    Benefits

Our employee pension and other post-retirement
benefits (i.e., health care and life insurance) costs and
obligations are accounted for under the provisions of SFAS
No. 87, Employers Accounting for Pensions

17



---



##### Table of Contents



and SFAS No. 106, Employers
Accounting for Postretirement Benefits Other Than
Pensions. The calculation and measurement of these
expenses and liabilities are based on a variety of assumptions,
including discount rates, medical trend rates, expected
long-term rate of return on plan assets, salary growth rates,
employee turnover, retirement and mortality rates. The
assumptions are based on our historical experience as well as
current facts and known economic and market conditions. We use
third-party actuaries to assist in properly measuring the
expense and obligations related to these employee benefits.
While we believe that the assumptions used are appropriate, the
use of different estimates could result in variances in the
amount of expense recognized. The table below illustrates the
approximate impact to 2002 expense if we were to change the
following key assumptions by 10%:


|                           |  |      |      |               |  |       |     | 
|-------------------------- |  | ---- | ---- | ------------- |  | ----- | --- | 
|                           |  | Rate |      | Impact of 10%
|Key Assumptions:           |  | Used |      | Rate Change  
|                           |  |      |      |              
|                           |  |      |      | (in millions)
|Rate of return on assets   |  |      | 9.00 | %             |  | +/- $ | 1.7 | 
|Discount rate              |  |      | 7.25 | %             |  | +/- $ | 1.5 | 
|Salary growth rate         |  |      | 4.00 | %             |  | +/- $ | 0.3 | 
|Initial medical trend rate |  |      | 6.50 | %             |  | +/- $ | 2.0 | 

The key rates were used to measure the pension
and post-retirement benefit expense in 2002. The related
accounting requirements allow for the amortization of gains and
losses over future periods, which result from differences
between our assumptions and actual results. Therefore, such
gains and losses impact our recognized expense and related
obligations in future periods. In accordance with SFAS
No. 87, we use a five-year amortization of pension asset
gains and losses (i.e.; calculated value) when calculating the
expected return on assets component of net periodic pension
cost. Variances that may result from using this calculated value
as opposed to the straight fair market value of assets are
expected to net to zero over time.

The significant declines in the financial markets
over the past two years coupled with the decline in interest
rates have caused our accumulated pension obligation to exceed
the fair value of the related plan assets. As a result, in 2002
we recorded an increase to our accrued pension liability of
approximately $29.3 million and a non-cash charge to equity
of approximately $17.7 million after-tax. This charge may
be reversed in future periods if market conditions improve or
interest rates rise.

See Note 14 to the consolidated financial
statements included in the Form 10-K for more information
regarding the costs and obligations for pensions and
post-retirement benefits.

Pending Sale of Dial Argentina
Business

In December 2002, we announced that we had
reached an agreement to sell our Argentina business to an entity
designated by Southern Cross Group, a private equity investor in
Argentina. The transaction is structured as the sale of assets
of Dial Argentina, S.A., which includes the stock of its two
subsidiaries, Sulfargen, S.A. and The Dial Corporation San Juan,
S.A. The sale is subject to satisfaction of negotiated closing
conditions and receipt of approvals under Argentinas
antitrust and bulk transfer laws. The sale currently is expected
to close late in the second quarter of 2003. The sales price is
$6.0 million resulting in tax benefits of approximately
$61 million. As a result, we recorded an after-tax loss of
$62.4 million on the pending disposal and reclassified our
Argentina business as a discontinued operation. This non-cash
loss includes the reversal of the $92.8 million currency
translation adjustment that had previously been recorded as a
reduction of equity and an accrual for estimated exit and
closing costs. In the first quarter of 2002, we recorded an
after-tax impairment charge of $43.3 million for the
Argentina business as a result of adopting the Financial
Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets.

18



---



##### Table of Contents



As of December 31, 2002, our consolidated
balance sheet included $18.5 million in current assets,
$2.2 million in non-current assets and $13.5 million
in current liabilities related to our discontinued Argentina
business. The results of operations of the Argentina business,
which have been reclassified as a discontinued operation, are as
follows for 2002, 2001 and 2000:

|                                                                         |  |               |       |      |  |      |      |   |  |   |      | 
|------------------------------------------------------------------------ |  | ------------- | ----- | ---- |  | ---- | ---- | - |  | - | ---- | 
|                                                                         |  | 2002          |       | 2001 |  | 2000
|                                                                         |  |               |       |      |  |     
|                                                                         |  |              
|                                                                         |  | (In millions)
|Net sales                                                                |  | $             | 52.3  |      |  | $    | 80.8 |   |  | $ | 73.7 | 
|Operating gain (loss)(1)                                                 |  |               | 6.8   |      |  |      | (4.5 | ) |  |   | 0.5  | 
|Tax (expense) benefit on operations                                      |  |               | (3.2  | )    |  |      | 0.1  |   |  |   | 0.4  | 
|Income (loss) from operations, net of tax                                |  |               | 3.6   |      |  |      | (4.5 | ) |  |   | 0.9  | 
|Net gain (loss) from disposal of Argentina,
    net of $61.0 tax benefit |  | $             | (62.4 | )    |  |      |     |   |  |   |     | 



---



|    |                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in this balance are special charges for
    asset write-downs and severance that have been reclassified to
    discontinued operations. These charges were $2.0 million
    and $0.7 million, in 2001 and 2000, respectively.

The consolidated financial statements included in
this Form 10-K have been prepared to reflect our historical
financial position and results of operations and cash flows as
adjusted for the reclassification of the Argentina business as a
discontinued operation. The historical results of operations of
the Argentina business up to its measurement date and the
estimated loss on the disposal of Argentina are reported as a
discontinued operation in the consolidated financial statements.

Sale of Specialty Personal Care
Segment

On August 28, 2001, we completed the sale of
our Specialty Personal Care (SPC) business. Businesses included
in the sale consisted of a variety of skin, hair, bath, body and
foot care products sold under the Freeman and Sarah Michaels
brand names. The sale of SPC was in line with our strategy to
fix or jettison under-performing businesses. As a result of the
sale, we recorded an after-tax loss of $198.4 million
related to the write-off of SPC assets and to record an accrual
for estimated exit costs. Proceeds from the sale were primarily
used to repay debt. As a result of this transaction, we sold the
stock of our wholly-owned subsidiary, Sarah Michaels, Inc., and
the inventories, fixed assets and intangibles of the SPC
business, but retained the related receivables and liabilities
arising on or prior to closing.

As consideration for the sale, we received
aggregate purchase price consideration of $12.0 million,
which consisted of $8.0 million in cash and two
subordinated promissory notes in the amount of $2.0 million
each. On December 31, 2001, the $4.0 million in
promissory notes had not been recorded by us because of
uncertainties regarding the realizability of such amounts. In
the first quarter of 2002, we entered into an agreement with the
buyer of this business to resolve disputes that arose in
connection with the sale. Under the terms of that agreement, we
received full payment on one of these notes, forgave the other
note and agreed to bear the cost of some disputed expenses. In
the first quarter of 2002, we recorded the $2.0 million
($1.3 million after-tax) received as a reduction of the
loss recognized on the sale of the SPC business. In the fourth
quarter of 2002, we further reduced the loss previously recorded
on the disposal of the SPC business by $4.0 million
($2.5 million after-tax) as a result of reversing certain
exit cost accruals because of lower than expected costs
associated with exiting the SPC discontinued operation.

Our loss on the sale includes a current tax
benefit of approximately $40.0 million. This tax benefit
resulted in cash savings in the third and fourth quarters of
2001 and the first nine months of 2002. The loss on the sale of
SPC is primarily comprised of the write-off of goodwill and
inventories. In addition, the sale resulted in approximately
$52.3 million in capital losses for which no tax benefits
were provided. We will realize benefits on the capital loss only
to the extent that we generate capital gains within five years
of the SPC sale. See Item 7. Managements
Discussion and Analysis of Results of Operations and Financial
Condition  Critical Accounting Policies and
Estimates  Income Taxes.

19



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##### Table of Contents



The following table summarizes the net sales,
operating loss and net loss of the discontinued SPC business for
2002, 2001 and 2000:

|                                                                                                                                 |  |               |     |      |  |      |        |   |  |   |       |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --- | ---- |  | ---- | ------ | - |  | - | ----- | -
|                                                                                                                                 |  | 2002          |     | 2001 |  | 2000
|                                                                                                                                 |  |               |     |      |  |     
|                                                                                                                                 |  |              
|                                                                                                                                 |  | (In millions)
|Net sales                                                                                                                        |  | $             |    |      |  | $    | 26.2   |   |  | $ | 99.1  |  
|Operating loss(1)                                                                                                                |  |               |    |      |  |      | (4.8   | ) |  |   | (70.3 | )
|Tax benefit on operations                                                                                                        |  |               |    |      |  |      | 1.1    |   |  |   | 25.0  |  
|Loss on operations, net of tax                                                                                                   |  |               |    |      |  |      | (3.7   | ) |  |   | (45.3 | )
|Net adjustment (loss) from disposal of SPC,
    net of ($2.2) and $40.0 tax benefit (expense) in 2002 and 2001,
    respectively |  | $             | 3.8 |      |  | $    | (198.4 | ) |  |   |      |  



---



|    |                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Included in this balance are special charges for
    discontinued product inventories, severance and other exit costs
    that have been reclassified to discontinued operations. These
    charges were $49.6 million in 2000.

Special Items

2002 Special
Items  Pre-Tax Gain of
$3.8 million

We recorded a net gain of $1.7 million
($0.9 million after-tax) associated with the sale of our
Mexico manufacturing facility and the reversal of special item
reserves established in 2001 and 2000, which were deemed no
longer necessary. This was offset in part by a writedown of the
carrying value of our Guatemala manufacturing facility. In
addition, we recorded a $2.1 million gain associated with
the previously dissolved Dial/ Henkel joint ventures for the
reversal of reserves that were no longer required.

2001 Special
Items  Pre-Tax Charge of
$8.8 million

On August 30, 2001, we announced a special
charge to consolidate manufacturing facilities in the United
States and Argentina. In addition, in the third quarter of 2001
we incurred a special charge in connection with the closure of
our Mexico manufacturing facility. Excluding the Argentina
portion of the charge, which has been reclassified to
discontinued operations, we recorded charges of
$9.8 million ($8.3 million after-tax) during 2001.
During 2001, we also recorded a $1.0 million pre-tax gain
($0.5 million after-tax) for the reversal of special item
reserves established in 2000, which were deemed no longer
necessary.

We recorded employee separation charges related
to severance packages for 64 manufacturing employees in the
United States and 69 manufacturing and 33 general,
selling and administrative employees in Mexico. The
predominately involuntary packages were based on salary levels
and past service and were recorded upon acceptance of the
package.

We wrote down the carrying value of the Compton,
California and Mexico manufacturing plants by approximately
$1.9 million. As a result of the closure of our Mexico
manufacturing facility, some inventory, primarily raw material,
became unusable. Accordingly, a charge was recorded for the
difference between cost and net realizable value.

We expensed the $2.8 million cumulative
currency translation adjustment previously recorded to other
comprehensive income in stockholders equity that related
to our Mexico operations.

2000 Special
Items  Pre-Tax Charge of
$47.8 million

On June 28, 2000 and on October 18,
2000, we announced special charges related to the Specialty
Personal Care business, the Dial/ Henkel joint ventures,
severance costs for prior management and other actions to
improve operational efficiencies. The special charges related to
the Dial/ Henkel joint ventures totaling $30.5 million
pre-tax are discussed in Note 6 to the consolidated
financial statements in this Form 10-K. Excluding the joint
venture and the Specialty Personal Care and Argentina portions
of the charge, which have been reclassified to discontinued
operations, we recorded charges of $17.3 million
($11.3 million after-tax) during 2000.

20



---



##### Table of Contents



We recorded employee separation charges related
to severance packages for three former executive officers,
80 manufacturing employees located in the United States and
103 primarily general, selling and administrative employees
located in the United States and Mexico. The executive severance
charges were recorded based either on contractual agreements or
in accordance with our policies. The remaining severance charges
were predominately involuntary packages and are based on salary
levels and past service that were recorded upon acceptance of
the package.

We recorded accelerated depreciation on the
Bristol, Pennsylvania plant during 2000 for assets that were
taken out of service prior to the end of their normal service
life. Accordingly, we changed the estimated useful lives of such
assets, resulting in accelerated depreciation. We also wrote
down the carrying value of this plant and certain other assets
by approximately $5.4 million.

See additional discussion of these charges in
Note 3 to the consolidated financial statements included in
this Form 10K.

Recent Developments



| |                                        
| | ---------------------------------------
| | Kmart Bankruptcy and Store
    Closings

In January 2002, Kmart Corporation filed for
Chapter 11 bankruptcy protection. Kmart is one of our top
ten customers. We sell certain products to Kmart primarily
through Kmarts distributor, Fleming Companies, Inc., but
we also sell products to Kmart directly. Kmart and Fleming have
recently announced that Fleming will no longer be Kmarts
contracted distributor. As a result, during 2003 we will begin
to sell our products directly to Kmart.

Kmart has already closed approximately 300 stores
and recently announced plans to close approximately 300
additional stores in its effort to emerge from bankruptcy. Our
sales to Kmart have decreased as a result of these store
closings and from a decline in consumers visiting Kmarts
open stores. To date, Kmarts bankruptcy has not had a
material adverse effect on our planned sales or operating
results. However, the additional store closings and potential
change of Kmarts distribution system could have an adverse
impact on our sales and operating results in 2003.



| |                                          
| | -----------------------------------------
| | Fiscal 2002 Compared With Fiscal
    2001

Net sales increased 7.8% to $1,282.2 million
in 2002 from $1,189.3 million in 2001. Our Domestic Branded
segment increased 8.0% and our International and Other segment
increased 6.2%. Net sales information for the businesses is set
forth below:

|                                      |  |                    |         |          |  |        |         |            |  |   |      |  |  |  |      |  
|------------------------------------- |  | ------------------ | ------- | -------- |  | ------ | ------- | ---------- |  | - | ---- |  |  |  | ---- | -
|                                      |  |                    |         |          |  |       
|                                      |  | For the Year Ended |         |         
|                                      |  | December 31        |         | Increase
|                                      |  |                    |         |         
|                                      |  | 2002               |         | 2001     |  | Amount |         | Percentage
|                                      |  |                    |         |          |  |        |         |           
|                                      |  |                   
|                                      |  | (In millions)     
|Laundry Care                          |  | $                  | 466.6   |          |  | $      | 402.9   |            |  | $ | 63.7 |  |  |  | 15.8 | %
|Personal Cleansing                    |  |                    | 367.8   |          |  |        | 352.9   |            |  |   | 14.9 |  |  |  | 4.2  | %
|Food Products                         |  |                    | 185.3   |          |  |        | 179.5   |            |  |   | 5.8  |  |  |  | 3.2  | %
|Air Fresheners                        |  |                    | 162.5   |          |  |        | 159.8   |            |  |   | 2.7  |  |  |  | 1.7  | %
|                                      |  |                    |         |          |  |        |         |            |  |   |      |  |  |  |      |  
|Total Domestic Branded Segment        |  |                    | 1,182.2 |          |  |        | 1,095.1 |            |  |   | 87.1 |  |  |  | 8.0  | %
|Total International and Other Segment |  |                    | 100.0   |          |  |        | 94.2    |            |  |   | 5.8  |  |  |  | 6.2  | %
|                                      |  |                    |         |          |  |        |         |            |  |   |      |  |  |  |      |  
|Total Company Net Sales               |  | $                  | 1,282.2 |          |  | $      | 1,189.3 |            |  | $ | 92.9 |  |  |  | 7.8  | %
|                                      |  |                    |         |          |  |        |         |            |  |   |      |  |  |  |      |  

The increase in Laundry Care sales is primarily
due to an increase in Purex liquid detergent, resulting
from higher market share and a consumer preference for liquid
detergent products versus powder detergent products. We
currently expect that this consumer trend will continue.
Personal Cleansing sales increased primarily due to the growth
in body wash products offset in part by higher promotional
spending on bar soap to defend against a new competitive entry.
Category bar soap sales continue to be hurt by a consumer
preference

21



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##### Table of Contents



for body wash products over bar soap products. We
expect that this consumer trend will continue. Sales in Food
Products increased due to growth of Armour branded products,
primarily Vienna sausage and chili, and private label products.
Air Fresheners sales increased due to the growth of Adjustables.
This was offset in part by overall weakness in candle products,
other air freshener products and the discontinuation of our
One Touchelectric scented oil products and Fresh Gelsproducts.


Net sales of our International & Other
segment increased 6.2% to $100.0 million from
$94.2 million in 2001 primarily as a result of increased
sales of our branded commercial markets business and higher
sales in Canada.

Our gross margin improved 320 basis points to
37.5% from 34.3% in 2001. This improvement resulted from higher
production volumes, manufacturing efficiencies, lower raw
material costs and gains on special items in 2002 versus losses
on special items in 2001. This was offset in part by higher
promotional expenses.

Selling, general and administrative expenses
increased 6.1% to $259.9 million from $245.0 million
in 2001. This increase resulted from higher employee
performance-based compensation and other employee benefits. This
increase was offset in part by lower intangible amortization due
to the implementation of SFAS No. 142 and the closure of
our Mexico manufacturing facility.

Interest expense decreased 18.7% to
$29.9 million from $36.8 million in 2001. The decrease
was due to lower interest rates, as a result of our
$250 million interest rate swaps, as well as lower average
debt levels. Our interest rate swaps effectively reduced our
interest rate on that portion of our notes to 5.4% from 7.0% in
2001.

Net other expenses increased 7.7% to
$10.3 million from $11.2 million in 2001. The increase
is primarily due to higher post-retirement benefits expenses.

Income related to the wind-down and liquidation
of the Dial/ Henkel LLC joint venture decreased to
$2.1 million from $3.0 million in 2001. All joint
venture operations ceased during the third quarter of 2001.

Our effective income tax rate on continuing
operations in 2002 decreased to 36.7% from 37.1% in 2001. This
decrease is primarily attributable to a foreign restructure
charge that was subject to a full valuation allowance in 2001,
the cessation of amortization of nondeductible goodwill as a
result of implementing SFAS 142 in 2002, and nontaxable
joint venture income in 2002. These decreases were offset in
part by higher state taxes, less income in foreign jurisdictions
that have lower tax rates, lower benefits relating to foreign
sales, and nontaxable income in 2001.

Income from continuing operations was
$115.2 million or $1.22 per diluted share, versus
$74.3 million or $0.81 per diluted share in 2001. As
discussed above, this increase is primarily attributable to
higher sales, improved gross margin and lower special charges,
offset in part by higher selling, general and administrative
expenses. The following table reconciles diluted earning per
share from income from continuing operations to net income:

|                                                            |  |      |       |      |  |   |       |  
|----------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|                                                            |  | 2002 |       | 2001
|                                                            |  |      |       |     
|Diluted net income per share from continuing
    operations |  | $    | 1.22  |      |  | $ | 0.81  |  
|Discontinued operation, Specialty Personal Care             |  |      | 0.04  |      |  |   | (2.19 | )
|Discontinued operation, Dial Argentina                      |  |      | (0.62 | )    |  |   | (0.05 | )
|Cumulative effect of change in accounting
    principle     |  |      | (0.46 | )    |  |   |      |  
|                                                            |  |      |       |      |  |   |       |  
|Net income (loss) per diluted share                         |  | $    | 0.18  |      |  | $ | (1.43 | )
|                                                            |  |      |       |      |  |   |       |  



| |                                          
| | -----------------------------------------
| | Fiscal 2001 Compared With Fiscal
    2000

Net sales increased 10.4% to
$1,189.3 million in 2001 from $1,077.6 million in
2000. Our Domestic Branded segment increased 11.1% and our
International and Other segment increased 2.2%. Net sales in 2001

22



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included sales of $20.8 million from
acquisitions of the Coast and Zoutbusinesses
acquired in the second quarter of 2000. Net sales information
for the businesses is set forth below:


|                                      |  |                    |         |          |  |        |         |            |  |   |       |  |  |  |      |  
|------------------------------------- |  | ------------------ | ------- | -------- |  | ------ | ------- | ---------- |  | - | ----- |  |  |  | ---- | -
|                                      |  |                    |         |          |  |       
|                                      |  | For the Year Ended |         |         
|                                      |  | December 31        |         | Increase
|                                      |  |                    |         |         
|                                      |  | 2001               |         | 2000     |  | Amount |         | Percentage
|                                      |  |                    |         |          |  |        |         |           
|                                      |  |                   
|                                      |  | (In millions)     
|Laundry Care                          |  | $                  | 402.9   |          |  | $      | 338.7   |            |  | $ | 64.2  |  |  |  | 19.0 | %
|Personal Cleansing                    |  |                    | 352.9   |          |  |        | 320.8   |            |  |   | 32.1  |  |  |  | 10.0 | %
|Food Products                         |  |                    | 179.5   |          |  |        | 167.2   |            |  |   | 12.3  |  |  |  | 7.4  | %
|Air Fresheners                        |  |                    | 159.8   |          |  |        | 158.7   |            |  |   | 1.1   |  |  |  | 0.7  | %
|                                      |  |                    |         |          |  |        |         |            |  |   |       |  |  |  |      |  
|Total Domestic Branded Segment        |  |                    | 1,095.1 |          |  |        | 985.4   |            |  |   | 109.7 |  |  |  | 11.1 | %
|Total International and Other Segment |  |                    | 94.2    |          |  |        | 92.2    |            |  |   | 2.0   |  |  |  | 2.2  | %
|                                      |  |                    |         |          |  |        |         |            |  |   |       |  |  |  |      |  
|Total Company Net Sales               |  | $                  | 1,189.3 |          |  | $      | 1,077.6 |            |  | $ | 111.7 |  |  |  | 10.4 | %
|                                      |  |                    |         |          |  |        |         |            |  |   |       |  |  |  |      |  

The increase in Laundry Care is primarily due to
an increase in Purexliquid detergent, the launch of
Purextabs, and the inclusion of full year results from
the Zoutacquisition that was made in the second quarter
of 2000. Personal Cleansing sales benefited from having a full
year of sales from the acquisition of Coast, which was
acquired in the second quarter of 2000, growth in body wash, the
introduction of Dial Completeand solid performance of
the base business. The increase in Food Products resulted
primarily from increased sales of private label and Armour
branded Vienna sausage. Sales in Air Fresheners increased
primarily due to the introduction of One Touchelectric
scented oils and Fresh Gels, offset by a decline in
candles.

Net sales of our International and Other segment
increased 2.2% to $94.2 million from $92.2 million in
2000 primarily as a result of higher sales in Canada, partially
offset by lower sales in Mexico caused by difficulties of
outsourcing our sales administrative function.

Gross margin improved 240 basis points to 34.3%
from 31.9% in 2000. This improvement is primarily from lower
delivered product costs associated with higher production
volume, a more even distribution of sales within the quarters,
lower raw material costs and a decrease in special charges.

Selling, general and administrative expenses
increased 14.4% to $245.0 million from $214.2 million
in 2000. This increase resulted from higher employee
performance-based compensation and higher marketing spending to
support new products, offset in part by lower special charges in
2001.

Interest expense decreased 13.2% to
$36.8 million from $42.4 million in 2000. The decrease
was primarily due to the declining debt balance during 2001.

Net other expense increased 41.3% to
$11.2 million from $7.9 million in 2000. The increase
is primarily due to increased post-retirement benefit expenses.

Income from the Dial/ Henkel joint venture was
$3.0 million in 2001 resulting from lower than expected
marketing costs of the Custom Cleanerand Purex
Advancedbusinesses and lower than expected costs of exiting
the joint venture. In 2000, we recorded $37.6 million of
losses from the Dial/ Henkel joint ventures, of which
$30.5 million was a result of exit activities undertaken by
the joint ventures during 2000.

In 2000, we recorded $9.2 million of
Other income  gain on special
items, which consists of a gain from the sale of land
and a curtailment gain resulting from changes to retiree medical
plan benefits.

Our effective income tax rate for 2001 on
continuing operations was 37.1%, up from 33.8% in 2000. This
increase is primarily attributable to a foreign restructure
charge which was subject to a full valuation allowance in 2001,
higher state taxes, lower benefits relating to foreign sales,
and less income in foreign jurisdictions that have lower tax
rates. These increases were offset in part by nondeductible
joint venture losses in 2000.

Net income from continuing operations was
$74.3 million or $0.81 per diluted share, versus
$33.4 million or $0.36 per diluted share in 2000. As
discussed above, this increase is primarily attributable to
higher sales, improved gross margin and lower restructuring and
special charges, offset in part by selling, general and

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administrative expenses. The following table
reconciles diluted earning per share from income from continuing
operations to net income:


|                                                            |  |      |       |      |  |   |       |  
|----------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | -
|                                                            |  | 2001 |       | 2000
|                                                            |  |      |       |     
|Diluted net income per share from continuing
    operations |  | $    | 0.81  |      |  | $ | 0.36  |  
|Discontinued operation, Specialty Personal Care             |  |      | (2.19 | )    |  |   | (0.49 | )
|Discontinued operation, Dial Argentina                      |  |      | (0.05 | )    |  |   | 0.01  |  
|                                                            |  |      |       |      |  |   |       |  
|Net loss per diluted share                                  |  | $    | (1.43 | )    |  | $ | (0.12 | )
|                                                            |  |      |       |      |  |   |       |  

Financial Condition and Liquidity

Our needs and access to funds are dependent on
future operating results, as well as external economic and
market conditions. Cash and cash equivalents, cash flow from
operations and proceeds from divestitures are expected to be
sufficient to meet our anticipated operating, capital
expenditure, and debt service requirements during the next year.

We will continue to focus on growing our core
businesses and will evaluate capital allocation options in light
of the amount of cash we are accumulating. The capital
allocation alternatives we are reviewing include:



| |   |                                
| | - | -------------------------------
| |  | Acquisitions                   
|
| |  | Share repurchases              
|
| |  | Dividend increases             
|
| |  | Debt reduction                 
|
| |  | Investment in our base business

If suitable acquisition options do not emerge,
then we currently expect to use cash to repurchase shares. We
also may consider increasing our dividend or reducing our debt.
With the possible exception of acquisitions, we believe that we
will have sufficient resources to execute this strategy without
increasing debt.

Net cash provided by operations in 2002 was
$215.3 million versus $156.9 million in 2001 and
$131.5 million in 2000. The increase in net cash provided
by operations in 2002 was primarily due to an increase in net
income and favorable tax benefits from the sale of our Specialty
Personal Care business in 2001 and the pending sale of our
Argentina business in 2002. Partially offsetting these benefits
were higher receivables and inventory levels in support of
higher sales. The increase in cash provided by operating
activities in 2001 was primarily due to better working capital
management, favorable tax benefits from losses incurred in 2001
and 2000, and an increase in net income from continuing
operations.

Net cash used in investing activities was
$37.3 million in 2002 versus a source of cash of
$12.2 million in 2001 and a use of cash of
$186.0 million in 2000.

Capital expenditures were $34.5 million in
2002 versus $28.6 million in 2001 and $37.3 million in
2000. We expect capital expenditures in 2003 to be approximately
$45 million. These expenditures will be concentrated
primarily on equipment and information systems that provide
opportunities to reduce manufacturing, logistic, and
administrative costs or are required to maintain our existing
facilities. There can be no assurance as to the quantity and the
type of capital spending we may incur.

In 2000, we acquired two businesses for
$72.2 million in cash. The acquisitions included the Coast
bar soap and the Zout stain remover businesses in the United
States. In 2002 and 2001, we made additional earnout payments of
$1.1 million and $0.9 million, respectively, for the
Zout business due to the achievement of specified level of gross
sales. We currently expect to pay a final earnout in 2003 of
approximately $1.1 million based upon the planned level of
gross sales. In 2000, we used net cash of $13.5 million for
the Dial/ Henkel joint venture. This includes $18.9 million
received for the sale of our interest in the Dial/ Henkel Mexico
joint venture.

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Proceeds from the disposition of discontinued
operations were $2.0 million in 2002 versus
$8.0 million in 2001. There were no proceeds from
disposition of discontinued operations in 2000. Net cash used in
investing activities from discontinued operations was
$6.7 million in 2002 versus a source of net cash of
$31.4 million in 2001 and a use of net cash of
$74.2 million in 2000. In 2000, we spent $47.9 million
in cash and assumed $1.3 million of liabilities to acquire
the Plusbelle hair care business in Argentina. This business has
been reclassified as a discontinued operation effective with the
pending sale of the Dial Argentina business. Also, included in
discontinued operations is the Specialty Personal Care business.

Proceeds from the sale of assets were
$3.0 million in 2002 versus $2.3 million in 2001 and
$11.2 million in 2000. In 2002, we sold our Mexico City
facility for $2.7 million as part of the 2001 restructuring
program. In 2001, we sold our Bristol, Pennsylvania facility for
$2.3 million as part of the 2000 restructuring program. In
the second quarter of 2000, we sold the Dial Center for
Innovation (DCI) and accompanying 23-acre parcel in
Scottsdale, Arizona for $15.3 million. At that time, we
entered into an operating lease with the buyer for the existing
building pending construction of a new building. In the fourth
quarter of 2000, we paid the buyer $4.2 million and, in
return, our obligation to construct a new building was replaced
with an exclusive option to construct a new DCI building. This
option expires in the second quarter of 2003.

Net cash provided by financing activities was
$15.3 million in 2002 versus net cash used of
$146.9 million in 2001 and net cash provided of
$55.0 million in 2000. Dividends paid were
$14.8 million in 2002 versus $14.6 million in 2001 and
$25.8 million in 2000. The quarterly dividend rate was
$0.04 per share for each of the four quarters of 2002 and 2001.
In 2000, the quarterly dividend was $0.08 per share in the
first, second and third quarters and $0.04 per share in the
fourth quarter. Outstanding shares were reduced by
5.8 million shares for $83.1 million in 2000. There
were no shares repurchased during 2002 and 2001.

At December 31, 2002, we had
$215.6 million invested in short-term investment vehicles
with low principal risk. The carrying values of cash and cash
equivalents, receivables, accounts payable and short-term bank
borrowings approximate fair values due to the short-term
maturities of these instruments. The fair value of our senior
notes is estimated based upon quoted market prices. The fair
value of our senior notes was $477.7 million at
December 31, 2002.

Capital Structure and Resources

Total debt was $458.4 million at
December 31, 2002 and $445.3 million at
December 31, 2001. The increase in total debt is due to the
fair market gain, in accordance with SFAS No. 133
Accounting for Derivative Instruments and Hedging
Activities, associated with the termination of interest
rate swaps entered into in 2001. Cash and cash equivalents were
$219.6 million at December 31, 2002 and $28.3 million
at December 31, 2001. Our outstanding debt has interest
rates ranging from 6.5% to 7.0% and matures in 2006 and 2008.

We have outstanding $250 million of 7.0%
Senior Notes due 2006, which were issued in 2001. The Indenture
governing these Senior Notes imposes restrictions with respect
to, among other things, our ability to place liens on certain
properties and enter into certain sale and leaseback
transactions. In addition, the Indenture governing these Senior
Notes requires us to purchase from the holders of the Senior
Notes, upon the exercise of such purchase right by each holder,
all or any part of their Senior Notes at a purchase price equal
to 101% of the principal amount of the Senior Notes plus
interest, upon the occurrence of either (i) a change of
control of Dial that is followed by a rating decline or
(ii) a significant asset sale yielding gross proceeds to us
of $500 million or more in the aggregate that is followed
by a rating decline. A rating decline is deemed to
have occurred if, no later than 90 days after the public
notice of either the occurrence or intention to effect a change
of control or significant asset sale, either of the rating
agencies assigns a rating to the Senior Notes that is lower than
Baa3, in the case of a rating by Moodys, or BBB-, in the
case of a rating by Standard & Poors.

We also have outstanding $200 million of
6.5% Senior Notes due 2008, which were issued in 1998. The
Indenture governing these Senior Notes also imposes restrictions
with respect to, among other things, our ability to place liens
on certain properties and enter into certain sale and leaseback
transactions.

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In 2001, we entered into two interest rate swap
contracts which effectively converted our $250 million 7%
Senior Notes due in 2006 to floating rate debt. We designed the
swaps as fair value hedges. Accordingly, the fair value of the
swaps were recorded as an asset and the carrying value of the
underlying debt was increased by an equal amount in accordance
with SFAS No. 133. In 2002, the swaps were terminated
resulting in a net gain of $13.4 million. The gain is
recorded with total reported debt and will be amortized as a
reduction of interest expense over the remaining term of the
$250 million 7% Senior Notes due in 2006. The amortization
of the gain effectively reduces the interest rate on these notes
to 5.4% annually.

In January 2003, we entered into two interest
rate swap contracts that effectively changes the interest rate
on a portion of our Senior Notes from fixed to variable. The
total notional value of the interest rate swaps that expire in
September 2008 is $200 million, effectively converting 45%
of our total debt to variable interest rates. Under the interest
rate swaps, we pay a variable rate of interest based on 6-month
LIBOR plus 278 basis points and receive a fixed interest rate of
6.5%. Variable interest rates are paid and reset semi-annually.
The swaps expose us to the risk of changes in the LIBOR based
interest rates. Each 50 basis point change in the swaps
floating rate would change pre-tax interest expense by
$1 million.

Credit ratings for our Senior Notes were assigned
by Standard and Poors at BBB-, by Fitchs at BBB and
by Moodys at Baa3.

The events of default under the Indentures
governing both of our Senior Notes include the following:



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to pay principal or interest when due                                                                                                                                                                                                         
|
| |  | failure to comply with convenants                                                                                                                                                                                                                     
|
| |  | commencing any proceeding for bankruptcy,
    insolvency or reorganization                                                                                                                                                                            
|
| |  | default under any other indebtedness for borrowed
    money having an aggregate principal amount outstanding of at
    least $50 million, which default results in such
    indebtedness being declared due and payable prior to its
    maturity date

In the first quarter of 2002, we terminated our
existing credit facility and replaced it with a
$200 million revolving credit facility. The new facility is
comprised of two commitments: $100 million available until
March 2005 and $100 million available until March 2003. The
credit facility requires us to pay commitment fees to the
lenders. Borrowings under the facility bear interest at our
option, at the banks prime rate or LIBOR plus a credit
spread that ranges from 0.475% to 1.125% depending on our
current credit rating. The commitment fees paid for the facility
also vary depending on our debt ratings. As of December 31,
2002, there were no amounts outstanding under our credit
facility. In the first quarter of 2003, we expect to renew the
$100.0 million of commitments that expire in March 2003
under the same terms and conditions.

Under our credit facility, we are required to
maintain minimum net worth of $100 million plus 50% of net
income (if positive) earned from the date of the facility. For
purposes of calculating our minimum net worth, we exclude
foreign currency translation gains or losses, gains or losses
relating to any sale or other disposition of our Argentina
business and the Armour food business and the $43.3 million
after-tax impairment charge taken in the first quarter of 2002
for Argentina. We also are limited to a maximum ratio of funded
debt to earnings before interest, taxes, depreciation and
amortization (EBITDA) of 3.0 to 1.0. Our credit facility also
limits our ability to incur additional unsecured indebtedness,
sell, lease or transfer assets, enter into sale and leaseback
transactions, place liens on properties and complete certain
acquisitions without our lenders consent.

The events of default under this
$200 million credit facility include the following:



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to pay principal or interest when due                                                                                                                     
|
| |  | failure to comply with covenants, representations
    and warranties under the credit agreement                                                                   
|
| |  | default in the payment of, or failure to comply
    with covenants relating to, other indebtedness with a principal
    amount outstanding of at least $15 million
|
| |  | default under any material contract which results
    in liabilities or damages in excess of $25 million                                                          

26



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##### Table of Contents





| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | commencing any proceeding for bankruptcy,
    insolvency or reorganization
|
| |  | entry of a final, non-appealable judgment in
    excess of $25 million    
|
| |  | a change in control of Dial                                               

At December 31, 2002, we were in compliance
with all covenants under our credit facility, our
$250 million of 7.0% Senior Notes due 2006 and our
$200 million of 6.5% Senior Notes due 2008.

At December 31, 2002, and December 31,
2001, a total of 10,910,433 and 10,847,386 common shares,
respectively, were held in treasury.

Commitments and Contingencies

The following table outlines our future
contractual financial obligations, in millions, as of
December 31, 2002, due by period:

|                                            |  |       |       |           |  |       |      |       |  |         |      |  |  |   |       |  |  |   |       | 
|------------------------------------------- |  | ----- | ----- | --------- |  | ----- | ---- | ----- |  | ------- | ---- |  |  | - | ----- |  |  | - | ----- | 
|                                            |  |       |       | Less Than |  | 1-3   |      | 4-5   |  | After 5
|                                            |  | Total |       | 1 Year    |  | Years |      | Years |  | Years  
|                                            |  |       |       |           |  |       |      |       |  |        
|Long-term debt(1)                           |  | $     | 446.2 |           |  | $     |     |       |  | $       |     |  |  | $ | 247.4 |  |  | $ | 198.8 | 
|Operating leases, net of sublease income(2) |  |       | 65.2  |           |  |       | 11.7 |       |  |         | 22.7 |  |  |   | 20.4  |  |  |   | 10.4  | 
|Unconditional purchase obligations(3)       |  |       | 12.4  |           |  |       | 12.2 |       |  |         | 0.2  |  |  |   |      |  |  |   |      | 
|                                            |  |       |       |           |  |       |      |       |  |         |      |  |  |   |       |  |  |   |       | 
|Total contractual cash obligations          |  | $     | 523.8 |           |  | $     | 23.9 |       |  | $       | 22.9 |  |  | $ | 267.8 |  |  | $ | 209.2 | 
|                                            |  |       |       |           |  |       |      |       |  |         |      |  |  |   |       |  |  |   |       | 



---



|    |                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes the gain on the termination of interest
    rate swaps that is recorded in long-term debt. See Note 12
    to the consolidated financial statements included in this
    Form 10-K for additional information.
|   
|(2) | See Note 16 to the consolidated financial
    statements included in this Form 10-K for additional
    information concerning our operating leases.                                                                    
|   
|(3) | Consists of obligations to purchase certain raw
    materials, which are expected to be used in the ordinary course
    of business.                                                                                   

The following table outlines our other future
commercial commitments, in millions, as of December 31,
2002, by the amount of commitment that expires per period:

|                             |  |       |     |           |  |       |     |       |  |         |   |  |  |   |   |  |  |   |   | 
|---------------------------- |  | ----- | --- | --------- |  | ----- | --- | ----- |  | ------- | - |  |  | - | - |  |  | - | - | 
|                             |  |       |     | Less Than |  | 1-3   |     | 4-5   |  | After 5
|                             |  | Total |     | 1 Year    |  | Years |     | Years |  | Years  
|                             |  |       |     |           |  |       |     |       |  |        
|Standby letters of credit    |  | $     | 4.4 |           |  | $     | 4.4 |       |  | $       |  |  |  | $ |  |  |  | $ |  | 
|Other commercial commitments |  |       | 0.3 |           |  |       | 0.3 |       |  |         |  |  |  |   |  |  |  |   |  | 
|                             |  |       |     |           |  |       |     |       |  |         |   |  |  |   |   |  |  |   |   | 
|Total commercial commitments |  | $     | 4.7 |           |  | $     | 4.7 |       |  | $       |  |  |  | $ |  |  |  | $ |  | 
|                             |  |       |     |           |  |       |     |       |  |         |   |  |  |   |   |  |  |   |   | 

We made contributions for pension and other
post-retirement employee benefits of $35.1 million in 2002,
$23.8 million in 2001 and $23.1 million in 2000.
Projected pension and other post-retirement obligations
increased $80.0 million to $497.3 million at
December 31, 2002 as compared to $417.3 million at
December 31, 2001. Increased payments and payables are a
result of the continued declines in the value of our pension
investments and a lower discount rate. If pension-funding
assumptions remain constant, we expect our total projected
contributions to be $97 million over the next five years.

New Accounting Pronouncements

In December 2002, the Financial Accounting
Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure. This Statement amends SFAS
No. 123 to provide alternative methods of transition for a
voluntary change to the fair value method of accounting for
stock-based employee compensation. Specifically, SFAS
No. 148 prohibits companies from utilizing the prospective
method of transition, the only method offered under the original
SFAS No. 123, in fiscal years beginning after
December 15, 2003. However, the

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statement permits two additional transition
methods for companies that adopt the fair value method of
accounting for stock-based compensation, which include the
modified prospective and retroactive restatement methods. Under
the prospective method, expense is recognized for all employee
awards granted, modified, or settled after the beginning of the
fiscal year in which the recognition provisions are first
applied. The modified prospective method recognizes stock-based
employee compensation cost from the beginning of the fiscal year
in which the provisions are first applied, as if the fair value
method had been used to account for all employee awards granted,
modified, or settled in fiscal years beginning after
December 15, 1994. Under the retroactive restatement
method, all periods presented are restated to reflect
stock-based employee compensation cost under the fair value
method for all employee awards granted, modified, or settled in
fiscal years beginning after December 15, 1994. In
addition, this Statement amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results using a prescribed
specific tabular format and requiring disclosure in the
Summary of Significant Accounting Policies or its
equivalent. We have adopted the new disclosure requirements for
2002, and are currently evaluating the impact if we were to
adopt the fair value method of accounting for stock-based
employee compensation under all three methods.


In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This Interpretation clarifies that a guarantor is
required to recognize a liability for the fair value of the
obligation undertaken in issuing a guarantee and requires
certain related disclosures. Currently, under such guarantees,
we could be liable for lease payments extending through 2006
with minimum lease payments totaling approximately
$7.6 million. We are currently analyzing the impact of FIN
No. 45 on our business.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 supersedes guidance
established in the FASBs Emerging Issues Task Force
(EITF) Issue No. 94-3 regarding certain exit
and disposal costs. The provisions of this Statement are
effective for exit or disposal activities that are initiated
after December 31, 2002. We do not anticipate a financial impact
as a result of this Statement.

In April 2002, the FASB issued SFAS No. 145,
Rescission of Statements 4, 44, and 64, Amendment of
SFAS No. 13 and Technical Corrections. This statement
rescinds SFAS No. 4 that required all gains and losses from
the extinguishment of debt to be aggregated and, if material,
classified as an extraordinary item. Gains and losses from the
extinguishment of debt will no longer be considered
extraordinary. SFAS No. 145 is effective for fiscal years
beginning after May 15, 2002. As part of our capital allocation
strategy, we are currently considering repurchasing debt. We are
currently evaluating the financial impact of this Statement on a
debt-repurchasing plan.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This Statement supersedes SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and
the accounting and reporting provisions of the Accounting
Principles Board (APB) Opinion No. 30,
Reporting the Results of Operations-Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business
(as previously defined in the Opinion). There was no effect from
adopting SFAS No. 144 effective January 1, 2002, as
required.

In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. Under the
provisions of SFAS No. 142, goodwill and intangible assets
with indefinite lives are no longer amortized but are subject to
annual impairment tests. SFAS No. 142 also established a
new method of testing goodwill for impairment. We adopted SFAS
No. 142 effective January 1, 2002 and ceased the
amortization of goodwill and intangibles with indefinite lives.
Amortization expense of these items was $7.3 million
pre-tax ($0.05 per diluted share) and $6.6 million pre-tax
($0.05 per diluted share) respectively in 2001 and 2000,
respectively. In addition, we recorded an impairment charge on
our Argentina intangible assets from the change in accounting
principle in the first quarter of 2002. The amount of this
charge was $43.3 million after tax

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($44.0 million pre-tax) and is included
within the Cumulative effect of the change in accounting
principleline on the consolidated statement of operations
and comprehensive income.


In August 2001, the FASB issued EITF release
Issue No. 01-09, Accounting for Consideration Given
by a Vendor to a Customer or a Reseller of the Vendors
Products. EITF 01-09 consolidates Issue
No. 00-14 Accounting for Certain Sales
Incentives and Issue No. 00-25 Vendor Income
Statement Characterization of Consideration Paid to a Reseller
of the Vendors Products. EITF 01-09 does not
change the accounting treatment set forth by EITF 00-14 and
EITF 00-25. We adopted EITF 01-09 effective
January 1, 2002.

The implementation of EITF 01-09 required us
to change the way we classified certain sales incentives that
were previously recorded as selling, general and administrative
expenses. We have restated our historical net sales, cost of
sales, and selling, general and administrative expense as a
result of the implementation of the consensus of
Issue 01-09.

The following table illustrates the effect of the
changes from adopting EITF 01-09.

|                    |  |               |       |              |  |                   |       |                      |  |                                |  |                                             |  | 
|------------------- |  | ------------- | ----- | ------------ |  | ----------------- | ----- | -------------------- |  | ------------------------------ |  | ------------------------------------------- |  | 
|                    |  | Year Ended    |       | Year Ended   |  |                   |       | Treatment in        
|                    |  | December 31,  |       | December 31, |  |                   |       | Reports Issued Prior
|                    |  | 2001          |       | 2000         |  | Current Treatment |       | to January 1, 2002  
|                    |  |               |       |              |  |                   |       |                     
|                    |  |               |       |              |  |                  
|                    |  | (In millions) |       |              |  |                  
|Trade promotions    |  | $             | 322.8 |              |  | $                 | 318.1 |                      |  | Reduction of net sales         |  | Selling, general and administrative expense
|Coupons and rebates |  | $             | 10.9  |              |  | $                 | 7.0   |                      |  | Reduction of net sales         |  | Selling, general and administrative expense
|Free product        |  | $             | 10.2  |              |  | $                 | 9.3   |                      |  | Increase to cost of goods sold |  | Selling, general and administrative expense

Factors That May Affect Future Results and
Financial Condition

Our future results and financial condition are
dependent upon our ability to successfully develop, manufacture
and market consumer products. Inherent in this process are a
number of factors that we must successfully manage to achieve
favorable future operating results and financial condition.
Potential risks and uncertainties that could affect our future
operating results and financial condition include, but are not
limited to, the factors discussed below.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are considering selling substantial assets or
    the entire company. There can be no assurance that we will sell
    substantial assets or the entire company in the near future or
    at all. The uncertainty caused by our consideration of these
    alternatives could harm employee recruiting and retention and
    impair our relationships with our customers, suppliers and
    lenders.

We are considering selling substantial assets or
the entire company. In this regard, we believe that we may be
best served by becoming a part of a larger enterprise. We cannot
assure that any transactions will occur or, if transactions do
occur, that they will improve our operating results or financial
condition or be on terms favorable to us. Moreover, the
uncertainty created by this environment may adversely impact our
ability to retain employees and our relationships with
customers, suppliers and lenders.



| |   |                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We have developed and commenced sales of a number
    of new products, which, if they do not gain widespread customer
    acceptance or if they cannibalize sales of existing products,
    could harm our efforts to improve our financial performance.

We have introduced a number of new products in
the soap, detergent and air freshener categories. In addition,
we have committed to increase development efforts in our core
brands. The development and introduction of new products involve
substantial research, development and marketing expenditures,
which we may be unable to recoup if our new products do not gain
widespread market acceptance or we do not execute product roll
outs effectively. In addition, if our new products merely
cannibalize sales of our existing products, our financial
performance would be harmed.

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| |   |                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------
| |  | We may discontinue products or product lines,
    which could result in returns, asset write-offs and shut down
    costs.

In the past, we have discontinued certain
products and product lines, which resulted in returns from
customers, asset write-offs, and shut down costs. We may suffer
similar results in the future to the extent we discontinue
products that do not meet expectations or no longer satisfy
consumer demand. Product returns, write-offs or shut down costs
would reduce our cash flow and earnings.



| |   |                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We face intense competition in a mature industry
    that may require us to increase expenditures and lower profit
    margins to preserve or maintain our market share. Unless the
    markets in which we compete grow substantially, a loss of market
    share will result in reduced sales levels and less favorable
    operating results.

Currently, 96% of our sales are generated in U.S.
markets. U.S. markets for consumer products are mature and
characterized by high household penetration, particularly with
respect to our most significant product categories, including
detergents and bar soaps. We may not be able to succeed in
implementing our strategies to increase domestic revenues. Our
unit sales growth in domestic markets will depend on increasing
usage by consumers, product innovation and capturing market
share from competitors.

The consumer products industry is intensely
competitive. To protect our existing market share or to capture
increased market share, we may need to increase expenditures for
promotions and advertising and to introduce and establish new
products. Increased expenditures may not prove successful in
maintaining or enhancing our market share and could result in
lower sales and profits.

Many of our competitors are large companies,
including The Procter & Gamble Company, Lever Brothers
Co., Colgate-Palmolive Company, and S.C. Johnson &
Son, Inc., which have greater financial resources than we do.
They have the capacity to outspend us in an attempt to take
market share from us.



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | Price-cutting measures in response to competitive
    pressures could result in decreased profit margins.

Consumer products, particularly those that are
value-priced, are subject to significant price competition. From
time to time, we may need to reduce the prices for some of our
products to respond to competitive and customer pressures and to
maintain market share. Any reduction in our prices to respond to
these pressures would harm our profit margins. In addition, if
our sales volumes fail to grow sufficiently to offset any
reduction in margins, our results of operations would suffer.



| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Providing price concessions or trade terms that
    are acceptable to our trade customers, or our failure to do so,
    could adversely affect our sales and profitability. In addition,
    reductions in inventory by our trade customers, including as a
    result of consolidations in the retail industry, could adversely
    affect our sales.

Because of the competitive environment facing
retailers, we face pricing pressure from these customers. Many
of our trade customers, particularly our high-volume retail
store customers, have increasingly sought to obtain pricing
concessions or better trade terms. These concessions or terms
could reduce our margins. Further, if we are unable to maintain
price or trade terms that are acceptable to our trade customers,
they could increase product purchases from our competitors,
which would harm our sales and profitability. In addition, from
time to time our retail customers have reduced inventory levels
in managing their working capital requirements. Any reduction in
inventory levels by our retail customers would harm our
operating results. In particular, consolidation within the
retail industry could potentially reduce inventory levels
maintained by our retail customers, which could adversely impact
our results of operations. Our performance is also dependent
upon the general health of the economy and of the retail
environment in particular and could be significantly harmed by
changes affecting retailing and by the financial difficulties of
retailers, including the ongoing bankruptcy proceedings
involving Kmart.



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | Loss of our principal customers could
    significantly decrease our sales and profitability.

Our top ten customers accounted for 57%, 54% and
51% of net sales in 2002, 2001 and 2000, respectively. Wal-Mart,
including its affiliate Sams Club, was our largest
customer, accounting for 28% of net sales in 2002, 25% of net
sales in 2001, and 22% of net sales in 2000. The loss of or a
substantial decrease in the

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volume of purchases by Wal-Mart or any of our
other top customers (including Kmart, which has filed for
bankruptcy protection) could harm our sales and profitability.




| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | Price increases in certain raw materials or
    energy costs could erode our profit margins, which would harm
    our operating results.

Increases in the prices of certain raw materials
or increases in energy costs could significantly impact our
profit margins. Paper, fats and oils, detergent chemicals, resin
and meat have the most significant impact on our costs. Tallow
(a key ingredient in Dialbar soaps) has experienced
price fluctuations within the range of $0.09 and $0.25 per pound
from January 1, 1997, to December 31, 2002. Recently,
the price of tallow has been trading around the mid-point of
this historical range. If prices were to increase, we may not be
able to increase the prices of our Dialbar soaps to
offset these increases. Moreover, in light of recent world
events, energy costs are increasing and these increases could
adversely impact our profit margins and operating results in
2003.



| |   |                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We rely on single sources for some of our
    products and if our suppliers were unable to produce products
    for us for an extended period of time it could have a material
    adverse effect on our financial condition and operating results.

We rely on single sources for some of our
products. For example, we currently rely on a single
company-owned plant to manufacture our Dialbar soap, a
single contract manufacturer for our Renuzit Adjustablesproducts and a single supplier for Purexliquid
laundry detergent bottles. If any of our single sources were
unable to produce products for us for an extended period of
time, it could have a material adverse effect on our financial
condition and operating results.



| |   |                                                                                        
| | - | ---------------------------------------------------------------------------------------
| |  | We may make acquisitions that prove unsuccessful
    or strain or divert our resources.

We have stated that acquisitions are our first
priority within the next year with respect to our capital
allocation options. Any future acquisitions or investments would
entail various risks, including the difficulty of assimilating
the operations and personnel of the acquired businesses or
products, the potential disruption of our ongoing business and,
generally, our potential inability to obtain the desired
financial and strategic benefits from the acquisition or
investment. These factors could harm our financial results. Any
future acquisitions or investments could result in substantial
cash expenditures and the incurrence of additional debt and
contingent liabilities. In addition, any potential acquisitions
or investments, whether or not they are ultimately completed,
could divert the attention of our management and our other
resources from other issues that are critical to our operations.



| |   |                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The FDA could impose standards that negatively
    impact our ability to market some of our products as
    antibacterial, which could result in compliance costs and could
    make our products less attractive to our customers.

Since the 1970s, the Food and Drug Administration
has regulated antibacterial soaps and hand washes under a
proposed regulation. Although the proposed regulation has not
been finalized, the FDA ultimately could set standards that
result in limiting or even precluding soap manufacturers from
using some current antibacterial ingredients or making
antibacterial claims for some product forms, such as bar soap.
We use the antibacterial ingredient Triclosan in Liquid Dialand Triclocarban in Dialbar soap, and emphasize the
antibacterial properties of our soap products in our marketing
campaigns and product labeling. Any final FDA regulation that
limits or precludes this type of advertising could require us to
develop new marketing campaigns, develop new products or utilize
different antibacterial ingredients in our products, all of
which could make our products less attractive to customers and
could seriously harm our business.



| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | We could become the subject of adverse publicity
    or product recalls that negatively impact our operations.

Adverse publicity regarding our products could
impact the sales of our products. Some news broadcasts by major
U.S. television and radio networks have focused on the use of
antibacterial agents to kill germs on various surfaces.
Triclosan, the active ingredient in Liquid Dial, also has
been a focus of these broadcasts. Although the broadcasts do not
dispute that Triclosan kills germs on the skin, some third party
experts

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question whether it provides any additional
protection beyond that provided by non-antibacterial soap
products. Although we have test results that we believe prove
that Triclosan provides consumers with additional protection in
limiting exposure to bacteria-related diseases, we cannot assure
you that our Triclosan products or other products will not be
the subject of adverse publicity in the future.


From time to time, consumer product companies,
including Dial, have had to recall products for various reasons.
The costs of recall or other related liabilities could
materially lower our profit margins. Adverse publicity regarding
any product recalls also could depress our sales.

In addition, we share the use of the Armour
trademark for food products with ConAgra Inc., the manufacturer
of Armour-branded non-canned meat products. Accordingly, we face
the added risk that consumer preferences and perceptions with
respect to any of our Armour products may be influenced by
adverse publicity affecting any of the Armour-branded products
of ConAgra, Inc.



| |   |                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are defending a lawsuit brought by the U.S.
    Equal Employment Opportunity Commission (EEOC) and a
    settlement or adverse verdict could harm our operating results
    in the period in which the case is resolved. Negative publicity
    concerning this case also could harm our sales and operating
    results.

As previously disclosed, we are defending a
lawsuit filed by the EEOC, which is pending in the U.S. District
Court for the Northern District of Illinois, Eastern Division
(Civil Action No. 99 C 3356). The EEOC alleges
that we engaged in a pattern and practice of discrimination
against a class of female employees at our Aurora, Illinois
manufacturing facility by subjecting them to sexual harassment
and failing to take prompt remedial action after these employees
communicated the alleged harassment. Most of the potential
claimants allegations relate to incidences that allegedly
occurred prior to 1996. The EEOC is seeking injunctive relief
and unspecified compensatory and punitive damages. We have
denied the EEOCs allegations.

There are currently 89 potential claimants.
Compensatory and punitive damages are limited to a maximum of
$300,000 for each potential claimant. However, we currently
believe that the number of claimants who ultimately will be
eligible to recover damages in this case is much fewer than 89
based upon the potential claimants individualized
allegations and our defenses. Nevertheless, no assurances can be
given regarding the number of potential claimants who will
ultimately be eligible to recover monetary damages.

During initial settlement discussions, the EEOC
indicated that it is seeking $15 million to resolve this
case. Based upon our investigation, we do not believe the facts
warrant such a large settlement. Accordingly, we are preparing
for trial. The trial is scheduled to begin in late April 2003.
Depending on the outcome, this case could have a material
adverse effect on our operating results in the quarter in which
the case is resolved. In addition, negative publicity resulting
from this lawsuit could harm our sales and operating results.



| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We have announced the pending sale of our
    Argentina business, but if this transaction does not close, we
    will continue to be exposed to risks associated with operating
    in Argentina.

As previously disclosed, we have reached an
agreement to sell our Argentina business to an entity designated
by Southern Cross Group, a private equity investor in Argentina.
The sale is subject to satisfaction of negotiated closing
conditions and receipt of approvals under Argentinas
antitrust and bulk transfer laws. The sale currently is expected
to close late in the second quarter of 2003. If the transaction
does not close, we will continue to be exposed to the risks of
operating in Argentina, including poor economic conditions,
currency fluctuations and unstable governments and legal
systems. The additional risks and expenses inherent in operating
in Argentina could harm our profit, cash flows and
stockholders equity.



| |   |                                                                                     
| | - | ------------------------------------------------------------------------------------
| |  | We may incur unexpected expenses due to
    environmental, health or safety matters.

We are subject to a variety of environmental and
health and safety laws in each jurisdiction in which we operate.
These laws and regulations pertain to our present and past
operations. Although we currently do not anticipate that the
costs to comply with environmental laws and regulations will
have a material adverse effect on our capital expenditures,
earnings or competitive position, the emergence of unforeseen
claims or liabilities or the imposition of increasingly
stringent laws, regulations and enforcement policies could
result in material,

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unreserved costs in the future. Since 1980, we
have received notices or requests for information with respect
to Superfund sites under the federal Comprehensive
Environmental Response, Compensation and Liability Act, three of
which are currently active. In addition, in 1999 and in prior
years we used nonlyphenol ethoxylate as an ingredient in our
liquid and powder detergent products and we continue to use it
as an ingredient in our Zout stain remover products.
Certain environmental and regulatory groups have raised concerns
regarding the toxicity of compounds produced from nonlyphenol
ethoxylate. We believe our reserves are adequate, but these
costs are difficult to predict with certainty.




| |   |                                                                             
| | - | ----------------------------------------------------------------------------
| |  | Loss of key managerial personnel could negatively
    impact our operations.

Our operation requires managerial expertise. Of
our current key personnel, only our chief executive officer has
an employment contract with us. We cannot assure you that any of
our key employees will remain employed by us. If we lose any of
our key personnel, our business could suffer.






|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure
    About Market Risk

The following discussion of our exposure to
various market risks contains forward looking
statements that involve risks and uncertainties. These
projected results have been prepared utilizing assumptions
considered reasonable in light of information currently
available to us. Nevertheless, because of the unpredictability
of interest rates, foreign currency rates, commodity prices and
other factors, actual results could differ materially from those
projected in this forward looking information.

Our use of financial instruments is limited to
purposes other than trading and primarily includes management of
interest rate and commodity expense. We may use financial
instruments for the management of interest rates, foreign
currency or other risks in the future.

Interest Rate Risk

At December 31, 2002, we had
$446.3 million in long-term debt outstanding, comprised of
$200 million ($198.8 million net of issue discount) of
6.5% Senior Notes due 2008, and $250 million
($247.5 million net of issue discount) of 7.0% bonds due
2006. Our Senior Notes have fixed interest rates to maturity.

At the time of the issuance of the
$250 million 7% Senior Notes due 2006, we entered into two
interest rate swaps, which together were designated as fair
market value hedges of that issue. The interest rate swaps had a
total notional amount of $250 million. In August of 2002,
the interest rate swaps were terminated and we received a
payment of $13.4 million. The gain on the termination of
the swaps was deferred and is classified as a part of long-term
debt. The deferred gain will be amortized over the remaining
term of the $250 million 7% Senior Notes as a reduction of
interest expense. The amortization of the gain on the terminated
swaps effectively reduces the fixed rate of the
$250 million 7% Senior Notes to approximately 5.4% annually.

We are currently investing our accumulated cash
balance in a variety of short-term investment vehicles with low
principal risk. The weighted average yield on the invested cash
at December 31, 2002 was 1.43%. Each 50 basis point change
in the yield on the invested cash would result in an approximate
$1.2 million change in our other expense, net.

In January 2003, we entered into two interest
rate swaps contracts that effectively changes the interest rate
on a portion of our Senior Notes from fixed to variable. The
total notional value of the interest rate swaps that expire in
September 2008 is $200 million, effectively converting 45%
of our total debt to variable interest rates. Under the terms of
the swaps, we pay a variable rate of interest based on a 6-month
LIBOR plus 278 basis points and receive a fixed interest of
6.5%. Variable interest rates are paid and reset semi-annually.
The applicable LIBOR rate resets every six months. The six-month
LIBOR rate on January 9, 2003 was 1.39%. The swaps expose
us to the risk of changes in LIBOR based interest rates. Each 50
basis point change in the swaps floating rate would change
our pre-tax interest expense by $1 million.

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| |                 
| | ----------------
| | Foreign Currency

We are exposed to risks from fluctuations in
foreign currency exchange rates, primarily U.S. Dollar/ Canadian
Dollar and U.S. Dollar/ Argentine Peso.

Historically, the Argentine Pesos value was
pegged by the Argentine government as equal to the
U.S. Dollar. However, in late December 2001, the Argentine
government declared strict limitations on bank withdrawals,
effectively blocking all convertibility of Argentine Pesos to
U.S. Dollars at December 31, 2001. On February 12,
2002, the Argentine Government abandoned the dual exchange rate
and allowed the Argentine Peso to float freely against other
currencies. During 2002, the U.S. Dollar/ Argentine Peso
exchange rate fluctuated between 1:1.6 and 1:3.9. If there were
a 10% change in the exchange rates for the U.S. Dollar to the
Argentine Peso from those at December 31, 2002 until the
expected sale date, the gain or loss would be immaterial.

At December 31, 2002, one U.S. Dollar was
worth 1.6 Canadian Dollars. For the year ended December 31,
2002, the U.S. Dollar/ Canadian Dollar exchange rate fluctuated
between 1:1.6 and 1:1.5. If there were a 10% change in the
exchange rates for the U.S. Dollar to the Canadian Dollar from
those at December 31, 2002, the foreign currency gain or
loss would be immaterial.



| |                              
| | -----------------------------
| | Employee Benefit Plan Expense

We offer our directors and management deferred
compensation plans. Under these plans, participants can defer a
portion of their compensation into a combination of Dial stock
units or various cash accounts. For deferrals made into stock
units, deferred compensation due to participants is included on
the balance sheet in stockholders equity under the caption
Employee benefits with no recognition of any
investment gains or losses. The deferred funds are placed in a
Rabbi Trust using shares of Dial common stock. The trust is also
included on the balance sheet in stockholders equity under
the caption Employee benefits.

For deferrals into cash accounts, deferred
compensation due to participants and any accumulated investment
gains or losses is included on the balance sheet as a liability
under the captions Pension and other benefitsand Other Liabilities. We place the
deferred funds in a Rabbi Trust, which purchases life insurance
policies on the participants lives, with Dial as the
beneficiary. The policies have cash surrender value that accrues
tax-free earnings largely based on the performance of the
S&P 500. The cash surrender value asset and any accumulated
investment gains or losses are included on the balance sheet as
an asset under the caption Other assets.

34



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##### Table of Contents






Item 8.     Financial
Statements and Supplementary Data

Our consolidated financial statements as of
December 31, 2002, and for each of the fiscal years in the
three-year period ended December 31, 2002, together with
related notes and the report of Deloitte & Touche LLP are
set forth on the following pages.

MANAGEMENTS REPORT ON RESPONSIBILITY FOR
FINANCIAL REPORTING

The management of The Dial Corporation has the
responsibility for preparing and assuring the integrity and
objectivity of the accompanying financial statements and other
financial information in this report. The financial statements
were prepared using generally accepted accounting principles
consistently applied. The financial statements reflect, where
applicable, managements best estimates and judgments and
include disclosures and explanations that are relevant to an
understanding of our financial affairs.

Our financial statements have been audited by
Deloitte & Touche LLP. Management has made available to
Deloitte & Touche LLP all of our financial records and other
relevant data and has made appropriate and complete written and
oral representations and disclosures in connection with the
audit.

Management has established and maintains a system
of internal control that is designed to provide reasonable
assurance that transactions are authorized and properly
recorded, that assets are protected and that materially
inaccurate financial reporting is prevented and detected. The
appropriate segregation of responsibilities and careful
selection of employees are components of the system of internal
controls. The internal control system is independently monitored
and evaluated by an internal auditing program.

The Board of Directors, acting through its Audit
Committee, oversees the adequacy of our internal control
environment. The Audit Committee meets regularly with management
representatives and, jointly and separately, with
representatives of Deloitte & Touche LLP and internal
auditing management to review accounting, auditing and financial
reporting matters.

|                                                                                |  |                                                                                       
|------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------
|/s/ HERBERT M. BAUMHerbert M. BaumChairman, President & Chief Executive Officer |  | /s/ CONRAD A. CONRADConrad A. ConradExecutive Vice President & Chief Financial Officer

35



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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Stockholders and Board of

Directors of The Dial Corporation:


We have audited the accompanying consolidated
balance sheets of The Dial Corporation and subsidiaries as of
December 31, 2002, and 2001, and the related consolidated
statements of operations and comprehensive income (loss), cash
flows and stockholders equity for each of the three years
in the period ended December 31, 2002. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of The Dial Corporation and subsidiaries as
of December 31, 2002, and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America.

As discussed in Note 2 to the consolidated
financial statements, the Company changed its method of
accounting for goodwill and other intangible assets with
indefinite lives as required by Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets, which was effective January 1,
2002.



| |                          
| | -------------------------
| | /s/ DELOITTE & TOUCHE LLP
| |                          
| | Deloitte & Touche LLP    

Phoenix, Arizona

January 27, 2003


36



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##### Table of Contents



THE DIAL CORPORATION

CONSOLIDATED BALANCE SHEET

|                                                    |                                                                                                                |                            |           |          |           |   |           |          |           | 
|--------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------- | --------- | -------- | --------- | - | --------- | -------- | --------- | 
|                                                    |                                                                                                                |                           
|                                                    |                                                                                                                | As of December 31         
|                                                    |                                                                                                                |                           
|                                                    |                                                                                                                | 2002                       |           | 2001    
|                                                    |                                                                                                                |                            |           |         
|                                                    |                                                                                                                |                           
|                                                    |                                                                                                                | (In thousands,            
|                                                    |                                                                                                                | except share data)        
|ASSETS                                             
|Current Assets:                                     |                                                                                                                |                            |           |          |           |   |           |         
|                                                    | Cash and cash equivalents                                                                                      |                            | $         | 219,554  |           |   | $         | 28,310   |          
|                                                    | Receivables, less allowance of $1,256 and $2,392                                                               |                            |           | 88,466   |           |   |           | 75,690   |          
|                                                    | Inventories                                                                                                    |                            |           | 131,508  |           |   |           | 122,030  |          
|                                                    | Deferred income taxes                                                                                          |                            |           | 23,255   |           |   |           | 21,673   |          
|                                                    | Income tax receivable                                                                                          |                            |           | 7,901    |           |   |           | 12,567   |          
|                                                    | Current assets of discontinued operation                                                                       |                            |           | 18,547   |           |   |           | 30,562   |          
|                                                    | Other current assets                                                                                           |                            |           | 7,605    |           |   |           | 8,219    |          
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|                                                    |                                                                                                                | Total current assets       |           |          | 496,836   |   |           |          | 299,051   | 
|Property and equipment, net                         |                                                                                                                |                            | 220,792   |          |           |   | 228,999   |         
|Deferred income taxes                               |                                                                                                                |                            | 57,012    |          |           |   | 48,464    |         
|Goodwill                                            |                                                                                                                |                            | 312,678   |          |           |   | 310,839   |         
|Other intangibles, net                              |                                                                                                                |                            | 51,070    |          |           |   | 48,305    |         
|Non-current assets of discontinued operation        |                                                                                                                |                            | 2,226     |          |           |   | 76,715    |         
|Other assets                                        |                                                                                                                |                            | 9,125     |          |           |   | 11,743    |         
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|                                                    |                                                                                                                | Total Assets               |           | $        | 1,149,739 |   |           | $        | 1,024,116 | 
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|LIABILITIES AND STOCKHOLDERS
    EQUITY           
|Current Liabilities:                                |                                                                                                                |                            |           |          |           |   |           |         
|                                                    | Trade accounts payable                                                                                         |                            | $         | 94,187   |           |   | $         | 87,795   |          
|                                                    | Income taxes payable                                                                                           |                            |           |         |           |   |           | 521      |          
|                                                    | Current liabilities of discontinued operation                                                                  |                            |           | 13,512   |           |   |           | 8,988    |          
|                                                    | Other current liabilities                                                                                      |                            |           | 161,217  |           |   |           | 153,278  |          
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|                                                    |                                                                                                                | Total current liabilities  |           |          | 268,916   |   |           |          | 250,582   | 
|Long-term debt                                      |                                                                                                                |                            | 458,393   |          |           |   | 445,341   |         
|Post-retirement and other employee benefits         |                                                                                                                |                            | 267,225   |          |           |   | 239,286   |         
|Other liabilities                                   |                                                                                                                |                            | 6,207     |          |           |   | 7,029     |         
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|                                                    |                                                                                                                | Total liabilities          |           |          | 1,000,741 |   |           |          | 942,238   | 
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|Commitments and contingencies (Notes 16 and
    20) |                                                                                                                |                            |          |          |           |   |          |         
|Stockholders Equity:                               |                                                                                                                |                            |           |          |           |   |           |         
|                                                    | Preferred stock, $.01 par value,
    10,000,000 shares authorized; no shares issued and
    outstanding        |                            |           |         |           |   |           |         |          
|                                                    | Common stock, $.01 par value,
    300,000,000 shares authorized; 106,372,531 and
    105,712,924 shares issued |                            |           | 1,064    |           |   |           | 1,057    |          
|                                                    | Additional paid-in capital                                                                                     |                            |           | 436,262  |           |   |           | 420,611  |          
|                                                    | Retained income                                                                                                |                            |           | 8,835    |           |   |           | 6,736    |          
|                                                    | Accumulated other comprehensive loss                                                                           |                            |           | (32,350  | )         |   |           | (75,502  | )        
|                                                    | Unearned employee benefits                                                                                     |                            |           | (48,103  | )         |   |           | (55,542  | )        
|                                                    | Treasury stock, 10,910,433 and 10,847,386 shares
    held                                                      |                            |           | (216,710 | )         |   |           | (215,482 | )        
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|                                                    |                                                                                                                | Total stockholders equity |           |          | 148,998   |   |           |          | 81,878    | 
|                                                    |                                                                                                                |                            |           |          |           |   |           |         
|                                                    |                                                                                                                | $                          | 1,149,739 |          |           | $ | 1,024,116 |         
|                                                    |                                                                                                                |                            |           |          |           |   |           |         

See Notes to Consolidated Financial Statements.

37



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##### Table of Contents



THE DIAL CORPORATION

STATEMENT OF CONSOLIDATED OPERATIONS
AND

COMPREHENSIVE INCOME (LOSS)


|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |         |      |  
|----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | --------- | --------- | ------- | ---- | --------- | --------- | ------- | - | --------- | ------- | ---- | -
|                                                                        |                                                                                                                                            |                                                 
|                                                                        |                                                                                                                                            | Year Ended December 31                          
|                                                                        |                                                                                                                                            |                                                 
|                                                                        |                                                                                                                                            | 2002                                             |           | 2001      |         | 2000
|                                                                        |                                                                                                                                            |                                                  |           |           |         |     
|                                                                        |                                                                                                                                            |                                                 
|                                                                        |                                                                                                                                            | (In thousands, except per share data)           
|Net sales                                                               |                                                                                                                                            | $                                                | 1,282,231 |           |         | $    | 1,189,332 |           |         | $ | 1,077,646 |        
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Costs and expenses:                                                     |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Cost of products sold                                                                                                                      |                                                  |           | 803,696   |         |      |           | 772,810   |         |   |           | 723,786 |     
|                                                                        | Special charges (income) from manufacturing
    asset sales and writedowns, discontinued product inventories and
    other exit activities |                                                  |           | (1,707    | )       |      |           | 8,424     |         |   |           | 10,519  |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Total cost of products sold                                                                                                                |                                                  |           | 801,989   |         |      |           | 781,234   |         |   |           | 734,305 |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Selling, general and administrative expenses                                                                                               |                                                  |           | 259,900   |         |      |           | 244,695   |         |   |           | 207,447 |     
|                                                                        | Special charges from asset writedowns, severance
    and other exit costs                                                                  |                                                  |           |          |         |      |           | 330       |         |   |           | 6,734   |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Total costs and expenses                                                                                                                   |                                                  |           | 1,061,889 |         |      |           | 1,026,259 |         |   |           | 948,486 |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Operating income                                                        |                                                                                                                                            |                                                  | 220,342   |           |         |      | 163,073   |           |         |   | 129,160   |        
|Interest expense                                                        |                                                                                                                                            |                                                  | (29,922   | )         |         |      | (36,797   | )         |         |   | (42,386   | )      
|Other expenses, net                                                     |                                                                                                                                            |                                                  | (10,333   | )         |         |      | (11,193   | )         |         |   | (7,920    | )      
|Income (loss) from Dial/ Henkel joint ventures                          |                                                                                                                                            |                                                  | 2,086     |           |         |      | 2,990     |           |         |   | (37,615   | )      
|Other income  gain on special items                                    |                                                                                                                                            |                                                  |          |           |         |      |          |           |         |   | 9,243     |        
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Income from continuing operations before income
    taxes               |                                                                                                                                            |                                                  | 182,173   |           |         |      | 118,073   |           |         |   | 50,482    |        
|Income taxes                                                            |                                                                                                                                            |                                                  | (66,939   | )         |         |      | (43,765   | )         |         |   | (17,066   | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Income from continuing operations                                       |                                                                                                                                            |                                                  | 115,234   |           |         |      | 74,308    |           |         |   | 33,416    |        
|Discontinued operations:                                                |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Loss from operation of discontinued Specialty
    Personal Care segment, net of income tax                                                 |                                                  |           |          |         |      |           | (3,691    | )       |   |           | (45,298 | )   
|                                                                        | Adjustment to loss (loss) on disposal of
    discontinued Specialty Personal Care segment, net of income tax                               |                                                  |           | 3,783     |         |      |           | (198,403  | )       |   |           |        |     
|                                                                        | Income (loss) from operation of discontinued
    Argentina business, net of income tax                                                     |                                                  |           | 3,582     |         |      |           | (4,465    | )       |   |           | 874     |     
|                                                                        | Loss on disposal of discontinued Argentina
    business, net of income tax                                                                 |                                                  |           | (62,399   | )       |      |           |          |         |   |           |        |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Total loss from discontinued operations                                 |                                                                                                                                            |                                                  | (55,034   | )         |         |      | (206,559  | )         |         |   | (44,424   | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Cumulative effect of the change in accounting
    principle, net of tax |                                                                                                                                            |                                                  | (43,308   | )         |         |      |          |           |         |   |          |        
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|NET INCOME (LOSS)                                                       |                                                                                                                                            | $                                                | 16,892    |           |         | $    | (132,251  | )         |         | $ | (11,008   | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Basic net income (loss) per common share:                               |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Income from continuing operations                                                                                                          |                                                  | $         | 1.25      |         |      | $         | 0.81      |         |   | $         | 0.36    |     
|                                                                        | Loss from discontinued operations                                                                                                          |                                                  |           | (0.60     | )       |      |           | (2.26     | )       |   |           | (0.48   | )   
|                                                                        | Effect of change in accounting principle                                                                                                   |                                                  |           | (0.47     | )       |      |           |          |         |   |           |        |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|NET INCOME (LOSS) PER SHARE 
    BASIC                                 |                                                                                                                                            | $                                                | 0.18      |           |         | $    | (1.45     | )         |         | $ | (0.12     | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Diluted net income (loss) per common share:                             |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|                                                                        | Income from continuing operations                                                                                                          |                                                  | $         | 1.22      |         |      | $         | 0.81      |         |   | $         | 0.36    |     
|                                                                        | Loss from discontinued operations                                                                                                          |                                                  |           | (0.58     | )       |      |           | (2.24     | )       |   |           | (0.48   | )   
|                                                                        | Effect of change in accounting principle                                                                                                   |                                                  |           | (0.46     | )       |      |           |          |         |   |           |        |     
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|NET INCOME (LOSS) PER SHARE 
    DILUTED                               |                                                                                                                                            | $                                                | 0.18      |           |         | $    | (1.43     | )         |         | $ | (0.12     | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Weighted average basic shares outstanding                               |                                                                                                                                            |                                                  | 92,359    |           |         |      | 91,451    |           |         |   | 92,237    |        
|Weighted average equivalent shares                                      |                                                                                                                                            |                                                  | 2,072     |           |         |      | 787       |           |         |   | 279       |        
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Weighted average diluted shares outstanding                             |                                                                                                                                            |                                                  | 94,431    |           |         |      | 92,238    |           |         |   | 92,516    |        
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|NET INCOME (LOSS)                                                       |                                                                                                                                            | $                                                | 16,892    |           |         | $    | (132,251  | )         |         | $ | (11,008   | )      
|                                                                        | Other comprehensive income (loss):                                                                                                         |                                                  |           |           |         |      |           |           |         |   |           |         |     
|                                                                        |                                                                                                                                            | Foreign currency translation adjustment          |           |           | 60,806  |      |           |           | (60,146 | ) |           |         | (370 | )
|                                                                        |                                                                                                                                            | Minimum pension liability adjustment, net of tax |           |           | (17,654 | )    |           |           | (11,891 | ) |           |         | (244 | )
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|Other comprehensive income (loss)                                       |                                                                                                                                            |                                                  | 43,152    |           |         |      | (72,037   | )         |         |   | (614      | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        
|COMPREHENSIVE INCOME (LOSS)                                             |                                                                                                                                            | $                                                | 60,044    |           |         | $    | (204,288  | )         |         | $ | (11,622   | )      
|                                                                        |                                                                                                                                            |                                                  |           |           |         |      |           |           |         |   |           |        

See Notes to Consolidated Financial Statements.

38



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##### Table of Contents



THE DIAL CORPORATION

STATEMENT OF CONSOLIDATED CASH FLOWS

|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |        |         |  
|------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | --------------------------------- | ------- | ------ | ------- | ---- | -------- | ------- | ------- | - | -------- | ------ | ------- | -
|                                                                                      |                                                                        |                                  
|                                                                                      |                                                                        | Year Ended December 31           
|                                                                                      |                                                                        |                                  
|                                                                                      |                                                                        | 2002                              |         | 2001   |         | 2000
|                                                                                      |                                                                        |                                   |         |        |         |     
|                                                                                      |                                                                        |                                  
|                                                                                      |                                                                        | (In thousands)                   
|CASH FLOWS PROVIDED BY OPERATING
    ACTIVITIES:                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Net income (loss)                                                                     |                                                                        | $                                 | 16,892  |        |         | $    | (132,251 | )       |         | $ | (11,008  | )     
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|                                                                                      | Argentina business discontinued operation, net of
    tax              |                                   |         | 58,817 |         |      |          | 4,465   |         |   |          | (874   | )      
|                                                                                      | Specialty Personal Care segment discontinued
    operation, net of tax |                                   |         | (3,783 | )       |      |          | 202,094 |         |   |          | 45,298 |        
|                                                                                      | Effect of change in accounting principle, net of
    tax               |                                   |         | 43,308 |         |      |          |        |         |   |          |       |        
|                                                                                      | Depreciation                                                           |                                   |         | 35,835 |         |      |          | 36,368  |         |   |          | 37,513 |        
|                                                                                      | Amortization                                                           |                                   |         | 129    |         |      |          | 7,438   |         |   |          | 6,342  |        
|                                                                                      | Deferred income taxes                                                  |                                   |         | 1,245  |         |      |          | (2,302  | )       |   |          | 2,137  |        
|                                                                                      | Special charges and asset writedowns                                   |                                   |         | (1,707 | )       |      |          | 8,754   |         |   |          | 47,725 |        
|                                                                                      | Gain on special items                                                  |                                   |         |       |         |      |          |        |         |   |          | (9,243 | )      
|                                                                                      | Change in operating assets and liabilities:                            |                                   |         |        |         |      |          |         |         |   |          |        |        
|                                                                                      |                                                                        | Receivables                       |         |        | (12,776 | )    |          |         | 26,747  |   |          |        | 28,187  |  
|                                                                                      |                                                                        | Inventories                       |         |        | (9,478  | )    |          |         | 8,534   |   |          |        | 4,310   |  
|                                                                                      |                                                                        | Trade accounts payable            |         |        | 3,630   |      |          |         | (23,141 | ) |          |        | (3,807  | )
|                                                                                      |                                                                        | Income taxes payable              |         |        | 68,842  |      |          |         | (26,521 | ) |          |        | (32,961 | )
|                                                                                      |                                                                        | Other assets and liabilities, net |         |        | 14,317  |      |          |         | 46,690  |   |          |        | 17,880  |  
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Net cash provided by operating activities                                             |                                                                        |                                   | 215,271 |        |         |      | 156,875  |         |         |   | 131,499  |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|CASH FLOWS PROVIDED (USED) BY INVESTING
    ACTIVITIES:                               |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Capital expenditures                                                                  |                                                                        |                                   | (34,490 | )      |         |      | (28,644  | )       |         |   | (37,337  | )     
|Investment in and loans to joint ventures                                             |                                                                        |                                   |        |        |         |      |         |         |         |   | (13,490  | )     
|Acquisition of businesses, net of cash acquired                                       |                                                                        |                                   | (1,096  | )      |         |      | (894     | )       |         |   | (72,223  | )     
|Proceeds from disposition of discontinued
    operation                               |                                                                        |                                   | 2,000   |        |         |      | 8,000    |         |         |   |         |       
|Investment in and transfers from discontinued
    operation                           |                                                                        |                                   | (6,731  | )      |         |      | 31,442   |         |         |   | (74,201  | )     
|Proceeds from sale of assets                                                          |                                                                        |                                   | 3,045   |        |         |      | 2,305    |         |         |   | 11,207   |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Net cash provided (used) by investing
    activities                                  |                                                                        |                                   | (37,272 | )      |         |      | 12,209   |         |         |   | (186,044 | )     
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|CASH FLOWS PROVIDED (USED) BY FINANCING
    ACTIVITIES:                               |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Net change in debt resulting from interest rate
    swap termination                  |                                                                        |                                   | 13,386  |        |         |      |         |         |         |   |         |       
|Increase (decrease) in short-term debt                                                |                                                                        |                                   |        |        |         |      | (111,767 | )       |         |   | 67,915   |       
|Increase (decrease) of long-term debt                                                 |                                                                        |                                   | (332    | )      |         |      | (23,930  | )       |         |   | 168,320  |       
|Increase (decrease) in receivables sold                                               |                                                                        |                                   |        |        |         |      |         |         |         |   | (73,177  | )     
|Common stock purchased for treasury                                                   |                                                                        |                                   |        |        |         |      |         |         |         |   | (83,144  | )     
|Dividends paid on common stock                                                        |                                                                        |                                   | (14,793 | )      |         |      | (14,613  | )       |         |   | (25,762  | )     
|Proceeds from stock options exercised                                                 |                                                                        |                                   | 17,052  |        |         |      | 3,370    |         |         |   | 874      |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Net cash provided (used) by financing
    activities                                  |                                                                        |                                   | 15,313  |        |         |      | (146,940 | )       |         |   | 55,026   |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Effects of foreign exchange rate changes on cash                                      |                                                                        |                                   | (2,068  | )      |         |      | (226     | )       |         |   |         |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|Net increase in cash and cash equivalents                                             |                                                                        |                                   | 191,244 |        |         |      | 21,918   |         |         |   | 481      |       
|Cash and cash equivalents, beginning of year                                          |                                                                        |                                   | 28,310  |        |         |      | 6,392    |         |         |   | 5,911    |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       
|CASH AND CASH EQUIVALENTS, END OF
    YEAR                                            |                                                                        | $                                 | 219,554 |        |         | $    | 28,310   |         |         | $ | 6,392    |       
|                                                                                      |                                                                        |                                   |         |        |         |      |          |         |         |   |          |       

See Notes to Consolidated Financial Statements.

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##### Table of Contents



THE DIAL CORPORATION

STATEMENT OF CONSOLIDATED STOCKHOLDERS
EQUITY

|                           |                                     |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         |         |   |   |         |          |  
|-------------------------- | ----------------------------------- | -------------- | ------- | ---------- |  | -------- | ----- | -------- |  | -------- | ------- | ------------- | - | ------------- | ------- | -------- | - | - | ------- | ------- | - | - | -------- | ------- | - | - | ------- | ------- | - | - | ------- | -------- | -
|                           |                                     |                |         |            |  |          |       |          |  |          |         | Accumulated   |   |              
|                           |                                     | Common Stock   |         | Additional |  |          |       | Unearned |  |          |         | Other         |   |              
|                           |                                     |                |         | Paid-in    |  | Retained |       | Employee |  | Treasury |         | Comprehensive |   |              
|                           |                                     | Shares         |         | Amount     |  | Capital  |       | Income   |  | Benefits |         | Stock         |   | Income (loss) |         | Total   
|                           |                                     |                |         |            |  |          |       |          |  |          |         |               |   |               |         |         
|                           |                                     |               
|                           |                                     | (In thousands)
|Balance, December 31, 1999 |                                     |                | 105,481 |            |  | $        | 1,055 |          |  | $        | 448,977 |               |   | $             | 190,370 |          |   | $ | (95,802 | )       |   | $ | (130,478 | )       |   | $ | (2,851  | )       |   | $ | 411,271 |         
|                           | Exercise of stock options           |                |         | 57         |  |          |       | 1        |  |          |         | 359           |   |               |         |          |   |   |         | 630     |   |   |          | (116    | ) |   |         |         |   |   |         | 874      |  
|                           | Common stock purchased for treasury |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          | (83,144 | ) |   |         |         |   |   |         | (83,144  | )
|                           | Dividends on common stock           |                |         |            |  |          |       |          |  |          |         |               |   |               |         | (25,762  | ) |   |         |         |   |   |          |         |   |   |         |         |   |   |         | (25,762  | )
|                           | Change in employee benefits         |                |         | 142        |  |          |       | 1        |  |          |         | (47,312       | ) |               |         |          |   |   |         | 50,044  |   |   |          | (443    | ) |   |         |         |   |   |         | 2,290    |  
|                           | Net loss                            |                |         |            |  |          |       |          |  |          |         |               |   |               |         | (11,008  | ) |   |         |         |   |   |          |         |   |   |         |         |   |   |         | (11,008  | )
|                           | Other comprehensive loss            |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         | (614    | ) |   |         | (614     | )
|                           |                                     |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         |         |   |   |         |         
|Balance, December 31, 2000 |                                     |                | 105,680 |            |  |          | 1,057 |          |  |          | 402,024 |               |   |               | 153,600 |          |   |   | (45,128 | )       |   |   | (214,181 | )       |   |   | (3,465  | )       |   |   | 293,907 |         
|                           | Exercise of stock options           |                |         |            |  |          |       |          |  |          |         | (1,381        | ) |               |         |          |   |   |         | 4,926   |   |   |          | (175    | ) |   |         |         |   |   |         | 3,370    |  
|                           | Dividends on common stock           |                |         |            |  |          |       |          |  |          |         |               |   |               |         | (14,613  | ) |   |         |         |   |   |          |         |   |   |         |         |   |   |         | (14,613  | )
|                           | Change in employee benefits         |                |         | 33         |  |          |       |          |  |          |         | 19,968        |   |               |         |          |   |   |         | (15,340 | ) |   |          | (1,126  | ) |   |         |         |   |   |         | 3,502    |  
|                           | Net loss                            |                |         |            |  |          |       |          |  |          |         |               |   |               |         | (132,251 | ) |   |         |         |   |   |          |         |   |   |         |         |   |   |         | (132,251 | )
|                           | Other comprehensive loss            |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         | (72,037 | ) |   |         | (72,037  | )
|                           |                                     |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         |         |   |   |         |         
|Balance, December 31, 2001 |                                     |                | 105,713 |            |  |          | 1,057 |          |  |          | 420,611 |               |   |               | 6,736   |          |   |   | (55,542 | )       |   |   | (215,482 | )       |   |   | (75,502 | )       |   |   | 81,878  |         
|                           | Exercise of stock options           |                |         | 641        |  |          |       | 6        |  |          |         | 7,721         |   |               |         |          |   |   |         | 10,097  |   |   |          | (772    | ) |   |         |         |   |   |         | 17,052   |  
|                           | Dividends on common stock           |                |         |            |  |          |       |          |  |          |         |               |   |               |         | (14,793  | ) |   |         |         |   |   |          |         |   |   |         |         |   |   |         | (14,793  | )
|                           | Change in employee benefits         |                |         | 19         |  |          |       | 1        |  |          |         | 7,930         |   |               |         |          |   |   |         | (2,658  | ) |   |          | (456    | ) |   |         |         |   |   |         | 4,817    |  
|                           | Net income                          |                |         |            |  |          |       |          |  |          |         |               |   |               |         | 16,892   |   |   |         |         |   |   |          |         |   |   |         |         |   |   |         | 16,892   |  
|                           | Other comprehensive income          |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         | 43,152  |   |   |         | 43,152   |  
|                           |                                     |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         |         |   |   |         |         
|Balance, December 31, 2002 |                                     |                | 106,373 |            |  | $        | 1,064 |          |  | $        | 436,262 |               |   | $             | 8,835   |          |   | $ | (48,103 | )       |   | $ | (216,710 | )       |   | $ | (32,350 | )       |   | $ | 148,998 |         
|                           |                                     |                |         |            |  |          |       |          |  |          |         |               |   |               |         |          |   |   |         |         |   |   |          |         |   |   |         |         |   |   |         |         

See Notes to Consolidated Financial Statements.

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##### Table of Contents



THE DIAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

Note 1.     Nature of
Business

We manufacture and sell consumer products. We
market our products primarily under such well-known household
brand names as Dial® soaps,
Purex® detergents,
Renuzit® air fresheners and
Armour® canned meats. These products are sold
to consumers primarily though supermarkets, mass merchandisers,
drug stores, membership club stores and other outlets.
Approximately 96% of our business is in the United States.

On December 23, 2002, we announced the
pending sale of our Argentina business. The sale is subject to
satisfaction of negotiated closing conditions and receipt of
approvals under Argentinas antitrust and bulk transfer
laws. The sale is expected to close late in the second quarter
of 2003. As a result of this pending sale, Argentinas
current and historical earnings have been reclassified to a
discontinued operation in the accompanying financial statements.

On August 28, 2001, we completed the sale of
our Specialty Personal Care (SPC) business. The
accompanying financial statements have been prepared to reflect
our historical financial position and results of operations and
cash flows as adjusted for the reclassification of the SPC
business as a discontinued operation. The historical results of
operations of the SPC business up to its date of disposition and
the estimated loss on the sale of SPC are reported as a
discontinued operation in the accompanying consolidated
financial statements.

We believe that our long-term interests and those
of our shareholders would be best served if we were part of a
larger enterprise. We continue to focus on improving our
operating results as a standalone company and we will also
continue to explore opportunities to become part of a larger
company, which could include transactions with multiple parties.
No time constraints have been set for any transaction, and any
decision regarding any potential transactions will be based upon
the best interests of our shareholders. Accordingly, there is no
assurance that any sale, merger or other transactions involving
us or any of our businesses will occur in the near future or at
all.

Note
2.     Significant Accounting
Policies

Principles of
Consolidation.The accompanying
consolidated financial statements include the accounts of The
Dial Corporation and all majority-owned subsidiaries. Prior to
our assumption of Henkels interest in Dial/Henkel
LLCs operations in the second quarter of 2002, we
accounted for our investment in the Dial/Henkel LLC joint
venture and our prior investment in the Dial/ Henkel Mexico
joint venture under the equity method of accounting.
Intercompany transactions and profits have been eliminated in
consolidation.

Use of Estimates.The preparation of our financial statements requires us to make
estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. We routinely
evaluate our estimates, including those related to customer
programs and incentives, product returns, bad debts, income
taxes, pension and other post-retirement benefits, long-lived
assets, inventories, restructurings, self insurance (primarily
workers compensation), environmental matters, exit cost
reserves related to discontinued operations and contingencies
and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form
the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions and conditions.

Revenue Recognition.Sales are recorded when the risk of
loss and title to the product transfers to the purchaser. Sales
are recorded net of allowances for cash discounts, estimated
sales returns, trade promotions and other sales incentives.

Major Customers.Wal-Mart, including its affiliate
Sams Club, was our largest customer, accounting for 28%,
25%, and 22% of net sales in 2002, 2001 and 2000, respectively.
The loss of or a substantial decrease

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

in the volume of purchases by Wal-Mart or any of
our other top customers could harm our sales and profitability.

In January 2002, Kmart Corporation filed for
Chapter 11 bankruptcy protection. Kmart is one of our top
ten customers. We sell certain products to Kmart primarily
through Kmarts distributor, Fleming Companies, Inc., but
we also sell products to Kmart directly. Kmart and Fleming have
recently announced that Fleming will no longer be Kmarts
contracted distributor. As a result, during 2003, we will begin
to sell our products directly to Kmart.

Kmart has already closed approximately
300 stores and recently announced plans to close
approximately 300 additional stores in its effort to emerge
from bankruptcy. Our sales to Kmart have decreased as a result
of these store closings and from a decline in consumers visiting
Kmarts open stores. To date, Kmarts bankruptcy has
not had a material adverse effect on our planned sales or
operating results. However, the additional store closings and
potential change of Kmarts distribution system could have
an adverse impact on our sales and operating results in 2003.

Net sales to the food and mass channels
represented 78.7%, 79.0%, and 78.9% of our domestic sales in
2002, 2001 and 2000, respectively.

Marketing and Research and Development Costs.All expenditures for marketing and
research and development are charged against earnings in the
period incurred and are reported in the statement of
consolidated operations under the caption Selling,
general and administrative expenses. Our total
research and development expenditures were approximately
$16.2 million, $14.3 million and $12.1 million in
2002, 2001 and 2000, respectively. Marketing costs include the
costs of advertising and various consumer related marketing
programs.

Cash and Cash Equivalents.We consider all highly liquid
investments with original maturities of three months or less
from the date of purchase to be cash equivalents.

Inventories.Inventories are stated at the lower of
cost (first in, first out and average cost methods) or market.

Long-Lived Assets with Definite Lives.In accordance with Financial
Accounting Standards Board (FASB) Statement of
Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets, we evaluate the recoverability of property and
equipment and intangibles with definite lives not held for sale
by comparing the carrying amount of the asset or group of assets
against the estimated undiscounted future cash flows expected to
result from the use of the asset or group of assets and their
eventual disposition. If the undiscounted cash flows are less
than the carrying value of the asset or group of assets being
evaluated, an impairment loss is recorded. The loss is measured
as the difference between the fair value and carrying value of
the asset or group of assets being evaluated. Assets to be
disposed of are reported at the lower of the carrying amount or
the fair value less cost to sell. The estimated fair value is
based on the best information available under the circumstances,
including prices for similar assets or the results of valuation
techniques, including the present value of expected future cash
flows using a discount rate commensurate with the risks
involved. Intangibles with definite lives primarily consisting
of patents are amortized using the straight-line method over the
period of expected benefit.

Property and Equipment.Property and equipment are stated at
cost, net of accumulated depreciation. Depreciation is provided
principally by use of the straight-line method at annual rates
as follows:

|                              |  |  |                                     | 
|----------------------------- |  |  | ----------------------------------- | 
|Buildings                     |  |  | 2% to 5%                            | 
|Machinery and other equipment |  |  | 5% to 33%                           | 
|Leasehold improvements        |  |  | Lesser of lease term or useful life | 

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Goodwill and Intangibles.Prior to 2002, goodwill that arose
prior to November 1970 was not amortized, but other goodwill and
intangibles with indefinite lives were amortized over useful
lives ranging from 10 to 40 years. Effective
January 1, 2002, all goodwill and other intangibles with
indefinite lives ceased to be amortized. Intangible assets with
indefinite lives are analyzed for impairment, on at least an
annual basis, as required by the SFAS No. 142.

Other intangible assets with definite lives,
including trademarks, patents and customer lists, are amortized
over useful lives ranging from 10 to 40 years. Intangible
assets with definite lives are analyzed for impairment as
required by the SFAS No. 144.

Net Income (Loss) Per Common Share.Basic net income (loss) per
common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during
the year before giving effect to stock options considered to be
dilutive common stock equivalents. Diluted net income (loss) per
common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during
the year after giving effect to stock options considered to be
dilutive common stock equivalents. Shares held by the Employee
Equity Trust are not considered outstanding for net income
(loss) per share calculations until the shares are released from
the Trust and transferred to an employee or transferred on
behalf of an employee. In accordance with SFAS No. 128,
Earnings per share, the same number of potential
common shares used in calculating the diluted earnings per share
for income from continuing operations is used in calculating all
other reported diluted earnings per share amounts.

At December 31, 2002, there were 106,372,531
shares of common stock issued and there were 95,462,098 shares
outstanding, including shares held by the Employee Equity Trust.
At December 31, 2002, and December 31, 2001, a total
of 2,365,901 and 3,175,315, respectively, of the issued shares
were held by the Employee Equity Trust. At December 31,
2002, and December 31, 2001, a total of 10,910,433 and
10,847,386 shares of common stock, respectively, were held in
treasury.

In addition to common stock, we are authorized to
issue 10,000,000 shares of preferred stock, par value of
$.01 per share, none of which has been issued.

Stock Options.We
have two stock-based employee compensation plans, which are
described in more detail in Note 15. We account for these
plans under the recognition and measurement provisions of APB
Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. We have adopted
the disclosure-only provisions of SFAS No. 123,
Accounting for Stock-Based Compensation, as amended
by SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure.
Accordingly, no compensation cost has been recognized for the
stock option plans. Awards under our plans vest over periods
ranging from immediate vesting to five years, depending upon the
type of award. The following table illustrates

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the effect on net income and earnings per share
if the fair value based method had been applied to all
outstanding and unvested awards in each period presented, using
the Black-Scholes valuation model.

|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                                                                                                                              |  | 2002           |        | 2001 |  | 2000
|                                                                                                                                              |  |                |        |      |  |     
|                                                                                                                                              |  |               
|                                                                                                                                              |  | (In thousands)
|Net income (loss) as reported                                                                                                                 |  | $              | 16,892 |      |  | $    | (132,251 | ) |  | $ | (11,008 | )
|Deduct: Total stock-based employee compensation
    expense determined under fair value method for all awards, net
    of related tax effects |  |                | 6,342  |      |  |      | 6,290    |   |  |   | 1,930   |  
|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  
|Pro forma net income (loss)                                                                                                                   |  | $              | 10,550 |      |  | $    | (138,541 | ) |  | $ | (12,938 | )
|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  
|Net income (loss) per share-basic-as reported                                                                                                 |  | $              | 0.18   |      |  | $    | (1.45    | ) |  | $ | (0.12   | )
|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  
|Pro forma net income (loss) per
    share  basic                                                                                             |  | $              | 0.11   |      |  | $    | (1.51    | ) |  | $ | (0.14   | )
|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  
|Net income (loss) per share-diluted-as
    reported                                                                                           |  | $              | 0.18   |      |  | $    | (1.43    | ) |  | $ | (0.12   | )
|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  
|Pro forma net income (loss) per
    share  diluted                                                                                           |  | $              | 0.11   |      |  | $    | (1.50    | ) |  | $ | (0.14   | )
|                                                                                                                                              |  |                |        |      |  |      |          |   |  |   |         |  



| |                              
| | -----------------------------
| | New Accounting Pronouncements

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. This
Statement amends SFAS No. 123 to provide alternative
methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation.
Specifically, SFAS No. 148 prohibits companies from
utilizing the prospective method of transition, the only method
offered under the original SFAS No. 123, in fiscal years
beginning after December 15, 2003. However, the statement
permits two additional transition methods for companies that
adopt the fair value method of accounting for stock-based
compensation, which include the modified prospective and
retroactive restatement methods. Under the prospective method,
expense is recognized for all employee awards granted, modified,
or settled after the beginning of the fiscal year in which the
recognition provisions are first applied. The modified
prospective method recognizes stock-based employee compensation
cost from the beginning of the fiscal year in which the
provisions are first applied, as if the fair value method had
been used to account for all employee awards granted, modified,
or settled in fiscal years beginning after December 15,
1994. Under the retroactive restatement method, all periods
presented are restated to reflect stock-based employee
compensation cost under the fair value method for all employee
awards granted, modified, or settled in fiscal years beginning
after December 15, 1994. In addition, this Statement amends
the disclosure requirements of SFAS No. 123 to require
prominent disclosures in both annual and interim financial
statements about the method of accounting for stock-based
employee compensation and the effect of the method used on
reported results with a prescribed specific tabular format and
requiring disclosure in the Summary of Significant
Accounting Policies or its equivalent. We have adopted the
new disclosure requirements for 2002, and are evaluating the
impact if we were to adopt the fair value method of accounting
for stock-based employee compensation under all three methods.

In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. This
Interpretation clarifies that a guarantor is required to
recognize a liability for the fair value of the obligation
undertaken in issuing a guarantee and requires certain related
disclosures. Currently, under such guarantees we could be liable
for lease payments extending through 2006 with minimum lease
payments totaling approximately $7.6 million. We are
currently analyzing the impact of FIN No. 45 on our
business.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 supersedes guidance
established in the FASBs Emerging Issues Task Force
(EITF) Issue No. 94-3 regarding certain exit
and disposal costs. The provisions of this Statement are

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

effective for exit or disposal activities that
are initiated after December 31, 2002. We do not anticipate
a financial impact as a result of this Statement.

In April 2002, the FASB issued SFAS No. 145,
Rescission of Statements No. 4, 44, and 64, Amendment
of SFAS No. 13, and Technical Corrections. This
Statement rescinds SFAS No. 4 that required all gains and
losses from the extinguishment of debt to be aggregated and, if
material, classified as an extraordinary item. Gains and losses
from the extinguishment of debt will no longer be considered
extraordinary. SFAS No. 145 is effective for fiscal years
beginning after May 15, 2002. As part of our capital
allocation strategy, we are currently considering repurchasing
debt. We are currently evaluating the financial impact of this
statement on a debt-repurchasing plan.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This statement supersedes SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and
the accounting and reporting provisions of the Accounting
Principles Board (APB) Opinion No. 30,
Reporting the Results of Operations  Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business
(as previously defined in the Opinion). There was no effect from
adopting SFAS No. 144 effective January 1, 2002, as
required.

In June 2001, the FASB issued SFAS No. 142,
Goodwill and Other Intangible Assets. Under the
provisions of SFAS No. 142, goodwill and intangible assets
with indefinite lives are no longer amortized but are subject to
annual impairment tests. SFAS No. 142 also established a
new method of testing goodwill for impairment. We adopted SFAS
No. 142 effective January 1, 2002 and ceased the
amortization of goodwill and intangibles with indefinite lives.
Amortization expense of these items was $7.3 million
pre-tax ($0.05 per diluted share) and $6.6 million pre-tax
($0.05 per diluted share), respectively in 2001 and 2000,
respectively. In addition, we recorded an impairment charge on
our Argentina intangible assets from the change in accounting
principle in the first quarter of 2002. The amount of this
charge was $43.3 million after tax ($44.0 million
pre-tax) and is included in Cumulative effect of the change
in accounting principleline on the consolidated statement
of operations and comprehensive income.

In August 2001, the FASB issued EITF release
Issue No. 01-09, Accounting for Consideration Given
by a Vendor to a Customer or a Reseller of the Vendors
Products. EITF 01-09 consolidates the previously
discussed Issue No. 00-14 Accounting for Certain
Sales Incentives and Issue No. 00-25 Vendor
Income Statement Characterization of Consideration Paid to a
Reseller of the Vendors Products. EITF 01-09
does not change the accounting treatment set forth by
EITF 00-14 and EITF 00-25. We adopted EITF 01-09
effective January 1, 2002.

The implementation of EITF 01-09 requires a
change to the way we previously classified certain sales
incentives that were previously recorded as selling, general and
administrative expenses. We have restated our historical net
sales, cost of sales, and selling, general and administrative
expense as a result of the implementation of the consensus of
Issue 01-09.

The following table illustrates the effect of the
changes from adopting EITF 01-09.

|                    |  |               |       |              |  |                   |       |                    |  |                                |  |                                            
|------------------- |  | ------------- | ----- | ------------ |  | ----------------- | ----- | ------------------ |  | ------------------------------ |  | -------------------------------------------
|                    |  | Year Ended    |       | Year Ended   |  |                   |       |                   
|                    |  | December 31,  |       | December 31, |  |                   |       | Treatment Prior to
|                    |  | 2001          |       | 2000         |  | Current Treatment |       | January 1, 2002   
|                    |  |               |       |              |  |                   |       |                   
|                    |  |              
|                    |  | (in millions)
|Trade promotions    |  | $             | 322.8 |              |  | $                 | 318.1 |                    |  | Reduction of net sales         |  | Selling, general and administrative expense
|Coupons and rebates |  | $             | 10.9  |              |  | $                 | 7.0   |                    |  | Reduction of net sales         |  | Selling, general and administrative expense
|Free product        |  | $             | 10.2  |              |  | $                 | 9.3   |                    |  | Increase to cost of goods sold |  | Selling, general and administrative expense

45



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Derivative Financial Instruments.Effective January 1, 2001, we
adopted SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133
requires that all derivative financial instruments that qualify
for hedge accounting, such as interest rate swap contracts and
forward purchase contracts, be recognized in the financial
statements and measured at fair value regardless of the purpose
or intent for holding them. Changes in the fair value of
derivative financial instruments are either recognized in income
or stockholders equity (as a component of comprehensive
income), depending on whether the derivative is being used to
hedge changes in fair value or cash flows.

Our use of financial instruments is limited to
purposes other than trading and includes the management of
interest rate risk. The financial impacts of these hedging
instruments are offset in part or in whole by corresponding
changes in the underlying exposures being hedged. We may use
financial instruments for the management of foreign currency,
employee benefits, commodity expense or other risks in the
future.



|        |              
|------- | -------------
|Note 3. | Special Items



| |                                                      
| | -----------------------------------------------------
| | 2002 Special Items  Pre-Tax Gain
    of $3.8 million

We recorded a net gain of $1.7 million
($0.9 million after-tax) associated with the sale of our
Mexico manufacturing facility and the reversal of special item
reserves established in 2001 and 2000, which were deemed no
longer necessary, offset in part by a writedown of the carrying
value of our Guatemala manufacturing facility. In addition, we
recorded a $2.1 million gain associated with the previously
dissolved Dial/ Henkel joint ventures for the reversal of
reserves that were no longer required.



| |                                                        
| | -------------------------------------------------------
| | 2001 Special Items  Pre-Tax
    Charge of $8.8 million

On August 30, 2001, we announced a special
charge to consolidate manufacturing facilities in the United
States and Argentina. In addition, in the third quarter of 2001
we incurred a special charge in connection with the closure of
our Mexico City manufacturing facility. Excluding the Argentina
portion of the charge, which has been reclassified to
discontinued operations, we recorded charges of
$9.8 million ($8.3 million after-tax) during 2001.
During 2001, we also recorded $1.0 million, pre-tax, of
special item reserves established in 2000, which were no longer
deemed necessary.

We recorded employee separation charges related
to severance packages for 64 manufacturing employees in the
United States and 69 manufacturing and 33 general, selling and
administrative employees in Mexico. The predominately
involuntary packages were based on salary levels and past
service and were recorded upon acceptance of the package.

We wrote down the carrying value of the Compton
and Mexico manufacturing plants by approximately
$1.9 million. As a result of the closure of our Mexico
manufacturing facility, some inventory, primarily raw material,
became unusable. Accordingly, a charge was recorded for the
difference between cost and net realizable value.

We expensed the $2.8 million cumulative
currency translation adjustment previously recorded to other
comprehensive loss in stockholders equity that related to
our Mexico operations.



| |                                                         
| | --------------------------------------------------------
| | 2000 Special Items  Pre-Tax
    Charge of $47.8 million

On June 28, 2000 and on October 18,
2000, we announced special items related to the Specialty
Personal Care business, the Dial/ Henkel joint ventures,
severance costs for prior management and other actions to
improve operational efficiencies. The special charges related to
the Dial/ Henkel joint ventures totaling $30.5 million
pre-tax are discussed in Note 6 and excluded from this note.
Excluding the joint venture and the Specialty Personal Care and
Argentina portions of the charge, which have been reclassified
to discontinued operations, we recorded charges of
$17.3 million during 2000.

46



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

We recorded employee separation charges related
to severance packages for three prior executive officers,
80 manufacturing employees located in the United States and
103 primarily general, selling and administrative employees
located in the United States and Mexico. The executive severance
charges were recorded based either on contractual agreements or
in accordance with our policies. The remaining severance charges
were predominately involuntary packages and are based on salary
levels and past service and were recorded upon acceptance of the
package.

We recorded accelerated depreciation on the
Bristol, Pennsylvania plant during 2000 for assets that were
taken out of service prior to the end of their normal service
lives. Accordingly, we changed the estimated useful lives of
such assets, resulting in accelerated depreciation. We also
wrote down the carrying value of this plant and certain other
assets by approximately $5.4 million.

The following table shows the components of these
special items and changes to related reserves during 2002, 2001
and 2000:

|                                           |                                                           |               |      |      |   |      |      |     |  |   |      |     | 
|------------------------------------------ | --------------------------------------------------------- | ------------- | ---- | ---- | - | ---- | ---- | --- |  | - | ---- | --- | 
|                                           |                                                           | 2002          |      | 2001 |   | 2000
|                                           |                                                           |               |      |      |   |     
|                                           |                                                           |              
|                                           |                                                           | (In millions)
|                                           | Employee separations                                      |               | $    |     |   |      | $    | 2.1 |  |   | $    | 6.5 | 
|                                           | Other exit costs                                          |               |      | (0.5 | ) |      |      | 1.8 |  |   |      | 1.1 | 
|                                           |                                                           |               |      |      |   |      |      |     |  |   |      |    
|Special items reserved                     |                                                           |               | (0.5 | )    |   |      | 3.9  |     |  |   | 7.6  |    
|                                           | Asset writedowns and discontinued product
    inventories |               |      | (1.2 | ) |      |      | 4.9 |  |   |      | 9.7 | 
|                                           |                                                           |               |      |      |   |      |      |     |  |   |      |    
|Total special (income) charge              |                                                           | $             | (1.7 | )    |   | $    | 8.8  |     |  | $ | 17.3 |    
|                                           |                                                           |               |      |      |   |      |      |     |  |   |      |    
|Accrued special items at beginning of year |                                                           | $             | 3.1  |      |   | $    | 3.8  |     |  | $ |     |    
|Cash payments                              |                                                           |               | (2.4 | )    |   |      | (4.6 | )   |  |   | (3.8 | )  
|Special items reserved                     |                                                           |               | (0.5 | )    |   |      | 3.9  |     |  |   | 7.6  |    
|                                           |                                                           |               |      |      |   |      |      |     |  |   |      |    
|Accrued special items at end of year       |                                                           | $             | 0.2  |      |   | $    | 3.1  |     |  | $ | 3.8  |    
|                                           |                                                           |               |      |      |   |      |      |     |  |   |      |    

Note 4.     Acquisition
of Businesses

In the second quarter of 2000, we acquired two
businesses for $72.2 million in cash. The acquisitions
included the Coast bar soap and the Zout stain remover
businesses in the United States. In 2002 and 2001 we made
additional earnout payments of $1.1 million and
$0.9 million for the Zout business due to the achievement
of specified level of gross sales. A final earnout payment will
be made in 2003 if a specified level of gross sales of Zoutproduct is achieved. The results of operations of the
acquired businesses are included in our consolidated results of
operations from their respective acquisition dates. The total
combined net sales of the acquisitions, from their respective
acquisition dates through the end of 2000, was
$22.8 million.

In addition, we acquired the Plusbelle hair care
business in Argentina during the second quarter of 2000 for
$47.9 million in cash and assumed $1.3 million in
liabilities. The Plusbelle hair care business has been
reclassified as a discontinued operation effective with the
pending sale of Dial Argentina.

Note 5.     Discontinued
Operations

Argentina
Operations In December
2002, we announced that we had reached an agreement to sell our
Argentina business to an entity designated by Southern Cross
Group, a private equity investor in Argentina. The transaction
is structured as the sale of assets of Dial Argentina, S.A.,
which includes the stock of its two subsidiaries, Sulfargen,
S.A. and The Dial Corporation San Juan, S.A. The sale is subject
to satisfaction of negotiated closing conditions and receipt of
approvals under Argentinas antitrust and bulk transfer
laws. The sale currently is expected to close late in the second
quarter of 2003. The sales price is $6.0 million resulting
in

47



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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

tax benefits of approximately $61 million.
As a result, we recorded an after-tax loss of $62.4 million
on the pending disposal and classified our Argentina business as
a discontinued operation. This non-cash loss includes the
reversal of the $92.8 million currency translation
adjustment that had previously been recorded as a reduction of
equity and an accrual for estimated exit and closing costs. In
the first quarter of 2002, we also recorded an after-tax
impairment charge of $43.3 million for the Argentina
business as a result of adopting the SFAS No. 142,
Goodwill and Other Intangible Assets.

The tax rates on the loss on disposal and the
impairment charge were 49.4% and 4.5% respectively. These rates
differ from federal statutory rate in that no tax benefit was
provided on the impairment charge related to nondeductible
goodwill which becomes fully deductible on the disposal of Dial
Argentina. The combined tax rate for these related items is
36.9%.

The results of the discontinued Argentina
operation are as follows, in thousands:

|                                                              |  |      |         |      |  |      |        |   |  |   |        | 
|------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                                                              |  | 2002 |         | 2001 |  | 2000
|                                                              |  |      |         |      |  |     
|Net sales                                                     |  | $    | 52,258  |      |  | $    | 80,843 |   |  | $ | 73,747 | 
|Operating income (loss)                                       |  |      | 6,775   |      |  |      | (4,540 | ) |  |   | 459    | 
|Tax (expense) benefit from operations                         |  |      | (3,193  | )    |  |      | 75     |   |  |   | 415    | 
|(Loss) income from operation, net of tax                      |  |      | 3,582   |      |  |      | (4,465 | ) |  |   | 874    | 
|Loss on disposal of Argentina, net of $61,017 tax
    benefit |  | $    | (62,399 | )    |  |      |       |   |  |   |       | 

Assets and liabilities of the discontinued
Argentina operation included in our consolidated financial
statements as of December 31 were as follows, in thousands:

|                                              |                                              |      |        |        |  |   |        |        | 
|--------------------------------------------- | -------------------------------------------- | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                              |                                              | 2002 |        | 2001  
|                                              |                                              |      |        |       
|Cash and cash equivalents                     |                                              | $    | 1,657  |        |  | $ | 1,104  |       
|Receivables                                   |                                              |      | 3,988  |        |  |   | 18,499 |       
|Inventories                                   |                                              |      | 10,483 |        |  |   | 7,947  |       
|Deferred income taxes                         |                                              |      |       |        |  |   | 1,739  |       
|Other current assets                          |                                              |      | 2,419  |        |  |   | 1,273  |       
|                                              |                                              |      |        |        |  |   |        |       
|                                              | Current assets of discontinued operation     |      | $      | 18,547 |  |   | $      | 30,562 | 
|                                              |                                              |      |        |        |  |   |        |       
|Property and equipment, net                   |                                              |      |       |        |  |   | 23,958 |       
|Deferred income taxes                         |                                              |      |       |        |  |   | 1,353  |       
|Intangibles, net                              |                                              |      |       |        |  |   | 44,667 |       
|Other non-current assets                      |                                              |      | 2,226  |        |  |   | 6,737  |       
|                                              |                                              |      |        |        |  |   |        |       
|                                              | Non-current assets of discontinued operation |      | $      | 2,226  |  |   | $      | 76,715 | 
|                                              |                                              |      |        |        |  |   |        |       
|Trade accounts payable                        |                                              |      | 13,512 |        |  |   | 8,988  |       
|                                              |                                              |      |        |        |  |   |        |       
|Current liabilities of discontinued operation |                                              | $    | 13,512 |        |  | $ | 8,988  |       
|                                              |                                              |      |        |        |  |   |        |       

Specialty Personal
Care On August 28,
2001, we completed the sale of our Specialty Personal Care
(SPC) business. Businesses included in the sale segment
consisted of a variety of skin, hair, bath, body and foot care
products sold under the Freeman and Sarah Michaels brand names.
The sale was in line with our strategy to fix or jettison
under-performing businesses. As a result of the sale, we
recorded an after-tax loss of $198.4 million related to the
write-off of assets and to record an accrual for estimated exit
costs. Proceeds from the sale were primarily used to repay debt.
As a result of this transaction, we sold the stock of our
wholly-owned subsidiary, Sarah Michaels, Inc., and the
inventories, fixed assets and intangibles of the business, but
retained the related receivables and liabilities arising on or
prior to closing.

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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As consideration for the sale, we received
aggregate purchase price consideration of $12.0 million,
which consisted of $8.0 million in cash and two
subordinated promissory notes in the amount of $2.0 million
each. On December 31, 2001, the $4.0 million in
promissory notes had not been recorded by us because of
uncertainties regarding the realizability of such amounts. In
the first quarter of 2002, we entered into an agreement with the
buyer of this business to resolve disputes that arose in
connection with the sale. Under the terms of that agreement, we
received full payment on one of these notes, forgave the other
note and agreed to bear the cost of some disputed expenses. In
the first quarter of 2002, we recorded the $2.0 million
($1.3 million after-tax) received as a reduction of the
loss previously recognized on the sale of the business. In the
fourth quarter of 2002, we further reduced the loss previously
recorded on the disposal of the business by $4.0 million
($2.5 million after-tax) as a result of reversing certain
exit cost accruals because of lower than expected costs
associated with exiting the discontinued operation. At
December 31, 2002, we still have approximately
$14.4 million of accruals related to the discontinued
business, primarily for future operating lease payments.

As a result of the loss recognized on the sale,
we recorded a current tax benefit of approximately
$40.0 million. This tax benefit resulted in cash savings in
the third and fourth quarters of 2001 and the first nine months
of 2002. The loss on the sale is primarily comprised of the
write-off of goodwill and inventories. In addition, the sale
resulted in approximately $52.3 million in capital losses
for which no tax benefits were provided. We will realize
benefits on that capital loss only to the extent that we
generate capital gains within five years of the sale.

The results of the discontinued SPC business are
as follows, in thousands:

|                                                                                                                    |  |      |       |      |  |      |          |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                                                                                                    |  | 2002 |       | 2001 |  | 2000
|                                                                                                                    |  |      |       |      |  |     
|Net sales                                                                                                           |  | $    |      |      |  | $    | 26,228   |   |  | $ | 99,122  |  
|Operating loss                                                                                                      |  |      |      |      |  |      | (4,811   | ) |  |   | (70,277 | )
|Tax (expense) benefit from operations                                                                               |  |      |       |      |  |      | 1,120    |   |  |   | 24,980  |  
|Loss from operations, net of tax                                                                                    |  |      |       |      |  |      | (3,691   | ) |  |   | (45,298 | )
|Net adjustment (loss) on disposal of SPC, net of
    ($2,222) and $40,000 tax benefit in 2002 and 2001 respectively |  | $    | 3,783 |      |  | $    | (198,403 | ) |  |   |        |  

The consolidated financial statements included in
this Form 10-K have been prepared to reflect our historical
financial position and results of operations and cash flows as
adjusted for the reclassification of the business as a
discontinued operation. The historical results of operations of
the business up to its date of disposition and the estimated
loss on the sale are reported as a discontinued operation in the
consolidated financial statements.

Note 6.     Dial/
Henkel Joint Ventures

In April 1999, we formed Dial/ Henkel LLC, a
joint venture with Henkel KGaA of Düsseldorf, Germany. Dial
and Henkel each owned 50% of this joint venture. This joint
venture was formed to develop and market a range of enhanced
laundry products in North America. In 1999, this joint venture
acquired the Custom Cleanerhome dry cleaning business
and launched the Purex Advancedlaundry detergent line.

In March 2000, we formed another joint
venture with Henkel named Dial/ Henkel Mexico S.A. de C.V.
Henkel owned 51% and Dial owned 49% of this joint venture. This
joint venture was formed primarily to develop and market
consumer detergent and household cleaning products in Mexico. In
May 2000, this joint venture acquired 80% of Fabrica de
Jabon Mariano Salgado, S.A. de C.V., a manufacturer and
marketer of consumer detergents and household cleaning products
in Mexico.

During the third quarter of 2000, the Dial/
Henkel LLC joint venture decided to discontinue operations of
Purex Advanced laundry detergent. As a result, in 2000
the Dial/ Henkel LLC joint venture reflected Purex

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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Advancedas a
discontinued operation and the joint venture recorded special
charges to writedown its inventories and establish reserves for
exit costs. Our portion of the loss on disposal of Purex
Advanced is $12.6 million and is included in the
special charge portion of the Loss of Dial/ Henkel joint
ventureson our books. In addition, we recorded a charge of
$5.4 million to write down to net realizable value of fixed
assets used to manufacture Purex Advanced.

During the fourth quarter of 2000, the Dial/
Henkel LLC joint venture recorded a $15 million special
charge relating to the Custom Cleanerhome dry cleaning
business. This charge consisted of recording inventory at net
realizable value and writing down impaired goodwill and deferred
tax assets. Our share of this charge was $7.5 million and
is included on our books in the special charge portion of the
Loss of Dial/ Henkel joint ventures.

In December 2000, we sold our interest in
the Dial/ Henkel Mexico joint venture to Henkel for
$18.9 million, and recorded a $5.0 million loss as
part of the previously announced special charges. In 2000, the
Dial/ Henkel Mexico joint venture had $32.7 million in
sales and our share of the operating loss was $0.5 million.

In the third quarter of 2001, Dial/ Henkel LLC
discontinued the Custom Cleaner home dry cleaning
business.

In the second quarter of 2002, Henkel received
certain intellectual property rights related to the former
Custom Cleaner business in exchange for their interest in
Dial/ Henkel LLC, which had no operations in 2002. Prior to our
assumption of Henkels interest in Dial/ Henkel LLC, we
accounted for this joint venture under the equity method of
accounting. During 2002, we recorded a $2.1 million gain
related to lower than expected costs associated with the
discontinued Custom Cleaner business. Our
$3.0 million share of the joint ventures net income
in 2001 resulted from lower than expected marketing costs of the
Custom Cleaner and Purex Advancedbusinesses and
lower than expected costs of exiting the joint venture. In 2000,
the two Dial/ Henkel joint ventures resulted in net losses to us
of $37.6 million, which included $30.5 million in
special charges related to exit activities. These results are
detailed below, in thousands as of December 31:

|                                                              |                                                    |      |       |       |  |      |         |       |  |   |         |         |  
|------------------------------------------------------------- | -------------------------------------------------- | ---- | ----- | ----- |  | ---- | ------- | ----- |  | - | ------- | ------- | -
|                                                              |                                                    | 2002 |       | 2001  |  | 2000
|                                                              |                                                    |      |       |       |  |     
|Total net loss incurred by joint ventures                     |                                                    | $    |      |       |  | $    | (11,349 | )     |  | $ | (63,966 | )      
|Dials Portion of Joint Venture                               |                                                    |      |       |       |  |      |         |       |  |   |         |        
|Loss on sale of Dial/ Henkel Mexico joint
    venture(1)      |                                                    | $    |      |       |  | $    |        |       |  | $ | (4,989  | )      
|Loss from operations of Dial/ Henkel Mexico joint
    venture |                                                    |      |      |       |  |      |        |       |  |   | (519    | )      
|Earnings (loss) from operations of Purex Advanced             |                                                    |      |      |       |  |      | 1,516   |       |  |   | (2,386  | )      
|Earnings (loss) from discontinuing Purex
    Advanced(1)      |                                                    |      | 66    |       |  |      |        |       |  |   | (17,981 | )      
|Earnings (loss) from operations of Custom Cleaner             |                                                    |      |      |       |  |      | 734     |       |  |   | (4,239  | )      
|Special charge (gain) of Custom Cleaner(1)                    |                                                    |      | 2,020 |       |  |      |        |       |  |   | (7,501  | )      
|Gain on write-off of investment in joint venture              |                                                    |      |      |       |  |      | 740     |       |  |   |        |        
|                                                              |                                                    |      |       |       |  |      |         |       |  |   |         |        
|                                                              | Dials net earnings (loss) from joint
    ventures |      | $     | 2,086 |  |      | $       | 2,990 |  |   | $       | (37,615 | )
|                                                              |                                                    |      |       |       |  |      |         |       |  |   |         |        



---



|    |              
|--- | -------------
|(1) | Special item.

The Dial/ Henkel LLC agreement provided for a
monthly marketing, sales and administrative fee, a trademark fee
and a tolling fee paid to us during 2000. A monthly technology
fee was paid to Henkel. In addition, during 2000 Henkel paid a
disproportionate share of the marketing expenses of Purex
Advanced incurred by the Dial/ Henkel LLC joint venture.
During the joint ventures exit activities, disproportionate
losses were taken by the partners of the joint venture based on
negotiations between the joint venture partners.

50



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 7.     Other
Income  Gain on Special Items

During the second quarter of 2000, we sold the
Dial Center for Innovation (DCI), formerly known as
the Dial Technical and Administration Center, and accompanying
23-acre parcel in Scottsdale, Arizona to an unrelated third
party developer for a purchase price of $15.3 million. At
that time, we entered into an operating lease with this third
party for the existing DCI building pending construction of a
new DCI building. The land and building have been removed from
our consolidated balance sheet and a gain of $6.7 million
related to the sale of land was recognized in 2000. In the
fourth quarter of 2000, we paid the buyer $4.2 million and
in return, our obligation to construct a new building was
replaced by an exclusive option to construct a new DCI building.
This option expires in the second quarter of 2003. The lease on
our existing DCI building expires August 2008.

During 2000, we recorded a $4.6 million
curtailment gain resulting from changes to retiree medical plan
benefits.

Note
8.     Inventories

Inventories consisted of the following at
December 31, in thousands:

|                           |  |      |         |      |  |   |         | 
|-------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                           |  | 2002 |         | 2001
|                           |  |      |         |     
|Raw materials and supplies |  | $    | 34,575  |      |  | $ | 26,416  | 
|Work in process            |  |      | 8,515   |      |  |   | 8,139   | 
|Finished goods             |  |      | 88,418  |      |  |   | 87,475  | 
|                           |  |      |         |      |  |   |         | 
|                           |  | $    | 131,508 |      |  | $ | 122,030 | 
|                           |  |      |         |      |  |   |         | 

Note 9.     Property
and Equipment

Property and equipment consisted of the following
at December 31, in thousands:

|                                     |  |      |          |      |  |   |          |  
|------------------------------------ |  | ---- | -------- | ---- |  | - | -------- | -
|                                     |  | 2002 |          | 2001
|                                     |  |      |          |     
|Land                                 |  | $    | 4,507    |      |  | $ | 4,567    |  
|Buildings and leasehold improvements |  |      | 79,081   |      |  |   | 77,976   |  
|Machinery and other equipment        |  |      | 423,423  |      |  |   | 423,734  |  
|Construction in progress             |  |      | 13,281   |      |  |   | 14,667   |  
|                                     |  |      |          |      |  |   |          |  
|                                     |  |      | 520,292  |      |  |   | 520,944  |  
|Less accumulated depreciation        |  |      | (299,500 | )    |  |   | (291,945 | )
|                                     |  |      |          |      |  |   |          |  
|                                     |  | $    | 220,792  |      |  | $ | 228,999  |  
|                                     |  |      |          |      |  |   |          |  

51



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note
10.     Intangibles

Intangibles subject to amortization consisted of
the following at December 31, in thousands:

|                  |       |          |       |              |  |          |      |          |   |              |       |          |  |   |       |       |  |   |      |      |   |   |     |       | 
|----------------- | ----- | -------- | ----- | ------------ |  | -------- | ---- | -------- | - | ------------ | ----- | -------- |  | - | ----- | ----- |  | - | ---- | ---- | - | - | --- | ----- | 
|                  |       |          |       |             
|                  |       | 2002     |       | 2001        
|                  |       |          |       |             
|                  |       | Gross    |       |              |  | Net      |      | Gross    |   |              |       | Net     
|                  |       | Carrying |       | Accumulated  |  | Carrying |      | Carrying |   | Accumulated  |       | Carrying
|                  |       | Value    |       | Amortization |  | Value    |      | Value    |   | Amortization |       | Value   
|                  |       |          |       |              |  |          |      |          |   |              |       |         
|Patents           |       | $        | 2,171 |              |  | $        | (149 | )        |   | $            | 2,022 |          |  | $ | 1,002 |       |  | $ | (82  | )    |   | $ | 920 |      
|Other intangibles |       |          | 900   |              |  |          | (578 | )        |   |              | 322   |          |  |   | 900   |       |  |   | (516 | )    |   |   | 384 |      
|                  |       |          |       |              |  |          |      |          |   |              |       |          |  |   |       |       |  |   |      |      |   |   |     |      
|                  | Total |          | $     | 3,071        |  |          | $    | (727     | ) |              | $     | 2,344    |  |   | $     | 1,902 |  |   | $    | (598 | ) |   | $   | 1,304 | 
|                  |       |          |       |              |  |          |      |          |   |              |       |          |  |   |       |       |  |   |      |      |   |   |     |      

Intangibles not subject to amortization consisted
of the following:

|                            |  |      |         |      |  |   |         | 
|--------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                            |  | 2002 |         | 2001
|                            |  |      |         |     
|Goodwill(1)                 |  | $    | 312,678 |      |  | $ | 310,839 | 
|Trademarks                  |  |      | 39,426  |      |  |   | 39,141  | 
|Pension related intangibles |  |      | 9,300   |      |  |   | 7,860   | 
|                            |  |      |         |      |  |   |         | 
|                            |  | $    | 361,404 |      |  | $ | 357,840 | 
|                            |  |      |         |      |  |   |         | 



---



|    |                                                               
|--- | --------------------------------------------------------------
|(1) | Additions to goodwill were the result of the Zout
    earnout.

In connection with the implementation of SFAS
No. 142, effective January 1, 2002, we ceased
amortizing our intangible assets with indefinite lives.
Amortization expense of these items was $7.3 million and
$6.6 million in 2001 and 2000, respectively. Amortization
expense, net of tax, was approximately $5.1 million and
$4.6 million in 2001 and 2000 respectively, or $0.05 per
diluted share in both years. Accordingly, net loss and net loss
per diluted share, excluding this amortization expense, would
have been $127.2 million or $1.38 per diluted share in
2001, and $6.4 million or $0.07 per diluted share in 2000.
For the year ended December 31, 2002 amortization of
intangibles with definite lives was $0.1 million and is not
expected to materially change in the near future.

Effective January 1, 2002, we recorded a
$43.3 million after-tax impairment ($44.0 million
pre-tax) to intangibles as a result of implementing SFAS
No. 142. See Note 5 for further discussion of this
impairment charge.



|         |                          
|-------- | -------------------------
|Note 11. | Other Current Liabilities

Other current liabilities consisted of the
following at December 31, in thousands:

|                                   |  |      |         |      |  |   |         | 
|---------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                   |  | 2002 |         | 2001
|                                   |  |      |         |     
|Accrued compensation               |  | $    | 52,038  |      |  | $ | 43,358  | 
|Accrued promotions and advertising |  |      | 33,629  |      |  |   | 35,723  | 
|Other employee benefit liabilities |  |      | 17,790  |      |  |   | 25,024  | 
|Interest payable                   |  |      | 15,037  |      |  |   | 11,265  | 
|Dividends payable                  |  |      | 3,477   |      |  |   | 3,443   | 
|Other                              |  |      | 39,246  |      |  |   | 34,465  | 
|                                   |  |      |         |      |  |   |         | 
|                                   |  | $    | 161,217 |      |  | $ | 153,278 | 
|                                   |  |      |         |      |  |   |         | 

52



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |     
|-------- | ----
|Note 12. | Debt

We held no short-term debt at December 31,
2002 or December 31, 2001. Long-term debt consisted of the
following at December 31, in thousands:

|                                                                   |                         |      |         |         |  |   |         |         | 
|------------------------------------------------------------------ | ----------------------- | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                                                   |                         | 2002 |         | 2001   
|                                                                   |                         |      |         |        
|$250 million 7.0% Senior Notes due 2006, net
    of issue discount |                         | $    | 247,460 |         |  | $ | 246,768 |        
|$200 million 6.5% Senior Notes due 2008, net
    of issue discount |                         |      | 198,785 |         |  |   | 198,573 |        
|                                                                   |                         |      |         |         |  |   |         |        
|Total long-term debt                                               |                         |      | 446,245 |         |  |   | 445,341 |        
|Fair market gain on termination of interest rate
    swap          |                         |      | 12,148  |         |  |   |        |        
|                                                                   |                         |      |         |         |  |   |         |        
|                                                                   | Reported long-term debt |      | $       | 458,393 |  |   | $       | 445,341 | 
|                                                                   |                         |      |         |         |  |   |         |        

In the third quarter of 2001, we entered into two
interest rate swap contracts which effectively converted our
$250 million 7% Senior Notes due in 2006, to floating rate
debt. We designated the swaps as fair value hedges. Accordingly,
the fair value of the swaps was recorded as an asset and the
carrying value of the underlying debt was increased by an equal
amount in accordance with SFAS No. 133. During the
third quarter of 2002, the swaps were terminated resulting in a
net gain of $13.4 million. The gain is recorded with total
reported debt and will be amortized as a reduction of interest
expense over the remaining term of the $250 million 7%
Senior Notes due 2006.

We also have outstanding $200 million of
6.5% Senior Notes due 2008, which were issued in 1998. The
Indenture governing these Senior Notes also imposes restrictions
with respect to, among other things, our ability to place liens
on certain properties and enter into certain sale and leaseback
transactions.

We have outstanding $250 million of 7.0%
Senior Notes due 2006, which were issued in 2001. The Indenture
governing these Senior Notes imposes restrictions with respect
to, among other things, our ability to place liens on certain
properties and enter into certain sale and leaseback
transactions. In addition, the Indenture governing these Senior
Notes requires us to purchase from the holders of the Senior
Notes, upon the exercise of such purchase right by each holder,
all or any part of their Senior Notes at a purchase price equal
to 101% of the principal amount of the Senior Notes plus
interest, upon the occurrence of either (i) a change of
control of Dial that is followed by a rating decline or
(ii) a significant asset sale yielding gross proceeds to us
of $500 million or more in the aggregate that is followed
by a rating decline. A rating decline is deemed to
have occurred if, no later than 90 days after the public
notice of either the occurrence or intention to effect a change
of control or significant asset sale, either of the rating
agencies assigns a rating to the Senior Notes that is lower than
Baa3, in the case of a rating by Moodys, or BBB-, in the
case of a rating by Standard & Poors.

The events of default under the indentures
governing our Senior Notes include the following:



| |   |                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to pay principal or interest when due                                                                                                                                                                                                         
|
| |  | failure to comply with covenants                                                                                                                                                                                                                      
|
| |  | commencing any proceeding for bankruptcy,
    insolvency or reorganization                                                                                                                                                                            
|
| |  | default under any other indebtedness for borrowed
    money having an aggregate principal amount outstanding of at
    least $50 million, which default results in such
    indebtedness being declared due and payable prior to its
    maturity date

In the first quarter of 2002, we terminated our
credit facility and replaced it with a new $150 million
revolving credit facility. The new facility is comprised of two
commitments: $75 million under commitments available until
March 2005 and $75 million under commitments available
until March 2003. In May of 2002, this new credit facility was
increased to $200 million, with $100 million available
until March 2005 and

53



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$100 million available until March 2003. The
credit facility requires us to pay commitment fees to the
lenders. Borrowings under the facility bear interest at our
option, at the banks prime rate or LIBOR plus a credit
spread. The credit spread and the commitment fees paid for the
facility are subject to adjustment should our debt ratings
change. There were no amounts borrowed under this facility at
December 31, 2002. In the first quarter of 2003, we expect
to renew the $100 million of commitments that expire in
March 2003 under the same terms and conditions

Our credit facility requires us to maintain a
minimum net worth of $100 million plus 50% of net income
(if positive) earned from the date of the facility. For purposes
of calculating our minimum net worth, we exclude foreign
currency translation gains or losses, gains or losses relating
to any sale or other disposition of our Argentina operations
and/or the Armour food business and the $43.3 million
after-tax impairment charge taken in the first quarter of 2002
for Argentina. We also are limited to a maximum ratio of funded
debt to earnings before interest, taxes, depreciation and
amortization (EBITDA) of 3.0 to 1.0. Our credit facility
also limits our ability to incur additional unsecured
indebtedness, sell, lease or transfer assets, enter into sale
and leaseback transactions, place liens on properties and
complete certain acquisitions without our lenders consent.

The events of default under our $200 million
credit facility include the following:



| |   |                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | failure to pay principal or interest when due                                                                                                                     
|
| |  | failure to comply with covenants, representations
    and warranties under the credit agreement                                                                   
|
| |  | default in the payment of, or failure to comply
    with covenants relating to, other indebtedness with a principal
    amount outstanding of at least $15 million
|
| |  | default under any material contract which results
    in liabilities or damages in excess of $25 million                                                          
|
| |  | commencing any proceeding for bankruptcy,
    insolvency or reorganization                                                                                        
|
| |  | entry of a final, non-appealable judgment in
    excess of $25 million                                                                                            
|
| |  | a change in control of Dial                                                                                                                                       

At December 31, 2002, we were in compliance
with all covenants under our credit facility, our
$250 million of 7.0% Senior Notes due 2006 and our
$200 million of 6.5% Senior Notes due 2008.

Interest expense incurred in 2002, 2001 and 2000
was, in thousands, $29,922, $36,797 and $42,386, respectively.
Interest paid to lenders in 2002, 2001 and 2000 was, in
thousands, $29,890, $37,071 and $40,896, respectively. The fair
value of our Senior Notes was, in thousands, $477,687 and
$440,310 at December 31, 2002 and 2001, respectively.

54



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |             
|-------- | ------------
|Note 13. | Income Taxes

The following table presents the U.S. and
international components of income (loss) from continuing
operations before income taxes and the provision (benefit) for
income taxes, for years ended December 31, in thousands:



| |                                                                  
| | -----------------------------------------------------------------
| | INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE INCOME TAXES:

|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |        |        |        | 
|----------------------------------------- | --------------------------------------------------------- | ------------------ | -------- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------ | ------ | ------ | 
|                                          |                                                           | 2002               |          | 2001    |        | 2000  
|                                          |                                                           |                    |          |         |        |       
|                                          | United States                                             |                    | $        | 177,878 |        |        | $ | 121,971 |        |        | $ | 47,020 |       
|                                          | International                                             |                    |          | 4,295   |        |        |   | (3,898  | )      |        |   | 3,462  |       
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|                                          | Income from continuing operations before income
    taxes |                    | $        | 182,173 |        |        | $ | 118,073 |        |        | $ | 50,482 |       
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|PROVISION (BENEFIT) FOR INCOME
    TAXES: |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|                                          | Current Tax Expense:                                      |                    |          |         |        |        |   |         |        |        |   |        |       
|                                          |                                                           | U.S. federal       |          | $       | 55,851 |        |   | $       | 40,090 |        |   | $      | 16,274 |       
|                                          |                                                           | U.S. state & local |          |         | 7,523  |        |   |         | 6,426  |        |   |        | (2,240 | )     
|                                          |                                                           | International      |          |         | 2,373  |        |   |         | (384   | )      |   |        | 457    |       
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|                                          |                                                           |                    | Subtotal |         |        | 65,747 |   |         |        | 46,132 |   |        |        | 14,491 | 
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|                                          | Deferred Tax Expense:                                     |                    |          |         |        |        |   |         |        |        |   |        |       
|                                          |                                                           | U.S. federal       |          |         | 1,548  |        |   |         | 13     |        |   |        | 558    |       
|                                          |                                                           | U.S. state & local |          |         | 78     |        |   |         | (2,394 | )      |   |        | 2,017  |       
|                                          |                                                           | International      |          |         | (434   | )      |   |         | 14     |        |   |        | 0      |       
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|                                          |                                                           |                    | Subtotal |         |        | 1,192  |   |         |        | (2,368 | ) |        |        | 2,575  | 
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       
|                                          | Provision for income taxes                                |                    | $        | 66,939  |        |        | $ | 43,765  |        |        | $ | 17,066 |       
|                                          |                                                           |                    |          |         |        |        |   |         |        |        |   |       

Income taxes paid/(refunds) in 2002, 2001 and
2000 amounted to, in thousands, $2,274, $(7,316), and $27,419,
respectively.

The following table presents a reconciliation of
the statutory U.S. federal income tax rate to our effective tax
rate on continuing operations, for years ended December 31:

|                             |  |      |      |      |  |      |      |   |  |  |      |  
|---------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                             |  | 2002 |      | 2001 |  | 2000
|                             |  |      |      |      |  |     
|Federal statutory rate       |  |      | 35.0 | %    |  |      | 35.0 | % |  |  | 35.0 | %
|State income taxes           |  |      | 2.6  |      |  |      | 2.2  |   |  |  | (0.3 | )
|Foreign Sales Exclusion      |  |      | (0.2 | )    |  |      | (0.6 | ) |  |  | (5.5 | )
|Joint venture income or loss |  |      | (0.3 | )    |  |      | 0.3  |   |  |  | 8.1  |  
|Other, net                   |  |      | (0.4 | )    |  |      | 1.2  |   |  |  | (3.5 | )
|                             |  |      |      |      |  |      |      |   |  |  |      |  
|Effective income tax rate    |  |      | 36.7 | %    |  |      | 37.1 | % |  |  | 33.8 | %
|                             |  |      |      |      |  |      |      |   |  |  |      |  

55



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table presents the components of
deferred tax assets and (liabilities) of continuing
operations at December 31, in thousands:

|                                             |                               |      |         |        |  |   |         |        | 
|-------------------------------------------- | ----------------------------- | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                             |                               | 2002 |         | 2001  
|                                             |                               |      |         |       
|Property, plant and equipment                |                               | $    | (45,375 | )      |  | $ | (42,801 | )     
|Pension and other employee benefits          |                               |      | 73,382  |        |  |   | 80,492  |       
|Reserves, accruals and other                 |                               |      | 36,730  |        |  |   | 26,016  |       
|Deferred state income taxes                  |                               |      | 7,859   |        |  |   | 5,030   |       
|Capital and net operating loss carryforwards |                               |      | 27,039  |        |  |   | 22,782  |       
|Valuation allowance                          |                               |      | (19,368 | )      |  |   | (21,382 | )     
|                                             |                               |      |         |        |  |   |         |       
|                                             | Total net deferred tax assets |      | $       | 80,267 |  |   | $       | 70,137 | 
|                                             |                               |      |         |        |  |   |         |       

SFAS 109, Accounting for Income
Taxes requires that a valuation allowance be established
when it is more likely than not that all or a portion of a
deferred tax asset will not be realized. Changes in the
valuation allowance from period to period are included in the
tax provision in the period of change. In determining whether a
valuation allowance is required, we take into account all
evidence with regard to utilization of the deferred tax asset
including our past earnings history, expected future earnings,
the character and jurisdiction of such earnings and carryback
and carryforward periods.

In 2001, we established a full valuation
allowance for $19.4 million of deferred tax assets related
to the $52.3 million capital loss from the sale of the
Specialty Personal Care business in 2001. This capital loss can
only be utilized to offset net capital gains, and will expire on
December 31, 2006. As of December 31, 2002, we
continue to maintain a full valuation allowance against the
potential future tax benefits of the capital loss carryforward.
We expect to continue to maintain a full valuation allowance on
the potential future tax benefits of the capital loss
carryforward until it is more likely than not that the capital
losses will be utilized.

Also included in the 2001 deferred tax assets was
$2.0 million related to a foreign tax loss, for which a
full valuation allowance was provided. The foreign tax loss
carryover expired unused in 2002, and the carryover was
eliminated from the valuation allowance in 2002. Also included
in 2002 was $6.3 million of net operating loss
carryforwards reattributed from a disposed subsidiary.

U.S. income tax is not provided when foreign
earnings are indefinitely reinvested in accordance with
Accounting Principles Board Opinion No. 23,
Accounting for Income Taxes, Special Areas. We
determine whether our foreign subsidiaries have invested or will
invest a significant portion of their undistributed earnings
indefinitely. We reassess our determination on a periodic basis.
Changes to our determination may be warranted based on our
experience as well as plans regarding future international
operations and expected tax payments. Changes in the
determination from period to period are included in our tax
provision in the period of change. As of December 31, 2002,
we had not provided for any U.S. taxes on approximately
$14.0 million of undistributed earnings from our non-U.S.
subsidiaries since these earnings are indefinitely reinvested.

Note 14.     Pension
and Other Benefits

Pension Plans.Trusteed, noncontributory pension
plans cover substantially all employees, with benefit levels
supplemented in most cases by defined matching contributions to
employees 401(k) plans. We amended the pension plan to
calculate benefits using an age and pay-based credit formula
beginning January 1, 2001. Under the former plan, defined
benefits were based primarily on final average salary and years
of service. The accrued pension benefit under the former plan
was frozen as of December 31, 2000, and will grow to
reflect increases in employees base pay. Funding policies
provide that payments to defined benefit pension trusts shall be
at least equal to the minimum funding required by applicable
regulations.

56



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table provides information on the
status of the plans at December 31, in thousands:

|                                                           |  |      |         |      |  |   |         |  
|---------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                           |  | 2002 |         | 2001
|                                                           |  |      |         |     
|Change in Projected Benefit
    Obligation:                |  |      |         |      |  |   |         |  
|Projected benefit obligation at beginning of year          |  | $    | 216,349 |      |  | $ | 192,996 |  
|Service cost                                               |  |      | 5,924   |      |  |   | 4,746   |  
|Interest cost                                              |  |      | 16,094  |      |  |   | 15,352  |  
|Plan amendments                                            |  |      | 2,356   |      |  |   | (4,097  | )
|Actuarial loss                                             |  |      | 20,438  |      |  |   | 18,768  |  
|Benefits paid                                              |  |      | (12,105 | )    |  |   | (11,416 | )
|                                                           |  |      |         |      |  |   |         |  
|Projected benefit obligation at end of year                |  | $    | 249,056 |      |  | $ | 216,349 |  
|                                                           |  |      |         |      |  |   |         |  
|Change in Plan Assets:                                     |  |      |         |      |  |   |         |  
|Fair value of plan assets at beginning of year             |  | $    | 154,659 |      |  | $ | 199,106 |  
|Actual return on plan assets                               |  |      | 1,771   |      |  |   | (38,979 | )
|Company contributions                                      |  |      | 15,055  |      |  |   | 5,948   |  
|Benefits paid                                              |  |      | (12,105 | )    |  |   | (11,416 | )
|                                                           |  |      |         |      |  |   |         |  
|Fair value of plan assets                                  |  | $    | 159,380 |      |  | $ | 154,659 |  
|                                                           |  |      |         |      |  |   |         |  
|Reconciliation of Funded Status:                           |  |      |         |      |  |   |         |  
|Funded status                                              |  | $    | (89,676 | )    |  | $ | (61,690 | )
|Unrecognized transition obligation                         |  |      | (16     | )    |  |   | (35     | )
|Unrecognized prior service cost                            |  |      | 6,026   |      |  |   | 4,295   |  
|Unrecognized actuarial loss                                |  |      | 70,965  |      |  |   | 35,706  |  
|Contribution deposited on October 15                       |  |      |         |      |  |   | 981     |  
|                                                           |  |      |         |      |  |   |         |  
|Accrued pension cost                                       |  | $    | (12,701 | )    |  | $ | (20,743 | )
|                                                           |  |      |         |      |  |   |         |  
|Amounts Recognized in the Consolidated Balance
    Sheet:  |  |      |         |      |  |   |         |  
|Prepaid pension cost                                       |  | $    | 5,658   |      |  | $ | 9,109   |  
|Accrued benefit liability                                  |  |      | (18,359 | )    |  |   | (29,852 | )
|Additional minimum liability                               |  |      | (57,142 | )    |  |   | (27,888 | )
|Intangible asset                                           |  |      | 9,301   |      |  |   | 7,860   |  
|Equity  accumulated other
    comprehensive loss, pre-tax |  |      | 47,841  |      |  |   | 20,028  |  
|                                                           |  |      |         |      |  |   |         |  
|Net amount recognized                                      |  | $    | (12,701 | )    |  | $ | (20,743 | )
|                                                           |  |      |         |      |  |   |         |  

At December 31, 2002 and 2001, the plans
held 84,367 shares of common stock of Dial. The projected
benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated
benefit obligations in excess of plan assets were, in thousands,
$249,056, $228,544 and $159,380, as of December 31, 2002,
and $215,457, $199,328 and $151,902, as of December 31,
2001.

57



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Components of the net periodic pension cost are
summarized in the following table, in thousands:

|                                              |                                |      |         |      |   |      |         |        |   |   |         |       |  
|--------------------------------------------- | ------------------------------ | ---- | ------- | ---- | - | ---- | ------- | ------ | - | - | ------- | ----- | -
|                                              |                                | 2002 |         | 2001 |   | 2000
|                                              |                                |      |         |      |   |     
|Calculation of Net Periodic Pension
    Cost: |                                |      |         |      |   |      |         |        |   |   |         |      
|Service cost                                  |                                | $    | 5,924   |      |   | $    | 4,746   |        |   | $ | 4,567   |      
|Interest cost                                 |                                |      | 16,094  |      |   |      | 15,352  |        |   |   | 14,766  |      
|Expected return on plan assets                |                                |      | (16,812 | )    |   |      | (17,601 | )      |   |   | (15,683 | )    
|Amortization of:                              |                                |      |         |      |   |      |         |        |   |   |         |      
|                                              | Net transition obligation      |      |         | (18  | ) |      |         | (18    | ) |   |         | 327   |  
|                                              | Unrecognized past service cost |      |         | 623  |   |      |         | 622    |   |   |         | 1,094 |  
|                                              | Actuarial loss/(gain)          |      |         | 221  |   |      |         | (1,006 | ) |   |         | (471  | )
|                                              |                                |      |         |      |   |      |         |        |   |   |         |      
|Net periodic pension cost                     |                                | $    | 6,032   |      |   | $    | 2,095   |        |   | $ | 4,600   |      
|                                              |                                |      |         |      |   |      |         |        |   |   |         |      
|Other comprehensive loss, pre-tax             |                                | $    | 27,813  |      |   | $    | 20,028  |        |   | $ | 375     |      
|                                              |                                |      |         |      |   |      |         |        |   |   |         |      
|Assumptions:                                  |                                |      |         |      |   |      |         |        |   |   |         |      
|Discount rate for obligation                  |                                |      | 6.75    | %    |   |      | 7.25    | %      |   |   | 8.00    | %    
|Long-term rate of investment return           |                                |      | 9.00    | %    |   |      | 10.00   | %      |   |   | 10.00   | %    
|Salary increase rate                          |                                |      | 4.50    | %    |   |      | 4.00    | %      |   |   | 4.00    | %    

Defined Contribution Plans.We maintain various 401(K) defined
contribution plans whereby employees can contribute up to 21% of
their total pay. We contribute to these plans throughout the
year. For the years ended December 31, 2002, 2001, and
2000, defined contribution plan expense was, in thousands,
$6,128, $5,613 and $2,645, respectively.

Multi-Employer Pension Plans.We participate in one multi-employer
pension plan. For the years ended December 31, 2002, 2001,
and 2000, our costs were, in thousands, $1,612, $1,713 and
$1,704, respectively.

Post-Retirement Benefits Other Than
Pensions.We have defined benefit
post-retirement plans that provide medical and life insurance
for eligible employees, retirees and dependents. In addition, we
retained the obligations for such benefits for eligible retirees
of Armour and Company (sold in 1983).

We accrue post-retirement benefits other than
pensions during the years the eligible employees provide
services. The status of these plans is as follows as of
December 31, in thousands:

|                                        |  |      |         |      |  |   |         |  
|--------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                        |  | 2002 |         | 2001
|                                        |  |      |         |     
|Change in Benefit Obligation:           |  |      |         |      |  |   |         |  
|Benefit obligation at beginning of year |  | $    | 200,902 |      |  | $ | 162,012 |  
|Service cost                            |  |      | 1,648   |      |  |   | 1,295   |  
|Interest cost                           |  |      | 15,051  |      |  |   | 14,458  |  
|Plan participants contributions        |  |      | 939     |      |  |   | 957     |  
|Amendments                              |  |      | 2,404   |      |  |   | (2,377  | )
|Actuarial loss                          |  |      | 48,314  |      |  |   | 43,405  |  
|Benefits paid                           |  |      | (20,998 | )    |  |   | (18,848 | )
|                                        |  |      |         |      |  |   |         |  
|Benefit obligation at end of year       |  | $    | 248,260 |      |  | $ | 200,902 |  
|                                        |  |      |         |      |  |   |         |  

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                         |  |      |          |      |  |   |          |  
|-------------------------------------------------------- |  | ---- | -------- | ---- |  | - | -------- | -
|                                                         |  | 2002 |          | 2001
|                                                         |  |      |          |     
|Change in Plan Assets:                                   |  |      |          |      |  |   |          |  
|Fair value of plan assets at beginning of year           |  | $    |         |      |  | $ |         |  
|Employer contribution                                    |  |      | 20,059   |      |  |   | 17,891   |  
|Plan participants contribution                          |  |      | 939      |      |  |   | 957      |  
|Benefits paid                                            |  |      | (20,998  | )    |  |   | (18,848  | )
|                                                         |  |      |          |      |  |   |          |  
|Fair value of plan assets at end of year                 |  | $    |         |      |  | $ |         |  
|                                                         |  |      |          |      |  |   |          |  
|Funded status                                            |  | $    | (248,260 | )    |  | $ | (200,902 | )
|Unrecognized net loss                                    |  |      | 64,464   |      |  |   | 18,987   |  
|Unrecognized prior service cost                          |  |      | (13,666  | )    |  |   | (18,528  | )
|                                                         |  |      |          |      |  |   |          |  
|Accrued benefit cost                                     |  | $    | (197,462 | )    |  | $ | (200,443 | )
|                                                         |  |      |          |      |  |   |          |  
|Amounts Recognized in the Consolidated Balance
    Sheet |  | $    | (197,462 | )    |  | $ | (200,443 | )
|                                                         |  |      |          |      |  |   |          |  

Components of the net periodic benefit cost are
summarized in the following table, as of December 31, in
thousands:

|                                              |                                 |      |        |        |   |      |        |        |   |   |        |        |  
|--------------------------------------------- | ------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                              |                                 | 2002 |        | 2001   |   | 2000
|                                              |                                 |      |        |        |   |     
|Calculation of Net Periodic Benefit
    Cost: |                                 |      |        |        |   |      |        |        |   |   |        |       
|Service cost                                  |                                 | $    | 1,648  |        |   | $    | 1,295  |        |   | $ | 1,332  |       
|Interest cost                                 |                                 |      | 15,051 |        |   |      | 14,458 |        |   |   | 13,110 |       
|Amortization of:                              |                                 |      |        |        |   |      |        |        |   |   |        |       
|                                              | Unrecognized prior service cost |      |        | (2,458 | ) |      |        | (2,534 | ) |   |        | (2,442 | )
|                                              | Actuarial loss/(gain)           |      |        | 2,838  |   |      |        | 196    |   |   |        | (316   | )
|                                              |                                 |      |        |        |   |      |        |        |   |   |        |       
|Net periodic benefit cost                     |                                 | $    | 17,079 |        |   | $    | 13,415 |        |   | $ | 11,684 |       
|                                              |                                 |      |        |        |   |      |        |        |   |   |        |       
|Curtailment gain                              |                                 | $    |       |        |   | $    |       |        |   | $ | (4,583 | )     
|                                              |                                 |      |        |        |   |      |        |        |   |   |        |       
|Assumptions:                                  |                                 |      |        |        |   |      |        |        |   |   |        |       
|Discount rate for obligation                  |                                 |      | 6.75   | %      |   |      | 7.25   | %      |   |   | 8.00   | %     

The assumed health care cost trend rate used to
measure the accumulated post-retirement benefit obligation at
December 31, 2002 was 10.0%, gradually declining to a rate
of 5% in 2006.

The 2002, 2001 and 2000 components of net
periodic post-retirement benefit cost reflect expense of
approximately $12.3 million, $10.8 million and
$8.6 million, respectively, incurred on the Armour employee
benefit liabilities, which are included in Other
expenses  net in the statement of
consolidated operations.

Effect of one-percentage-point change in
assumed health care cost trend rates:

|                                                                |  |          |        |            |  |   |         |  
|--------------------------------------------------------------- |  | -------- | ------ | ---------- |  | - | ------- | -
|                                                                |  | Increase |        | (Decrease)
|                                                                |  |          |        |           
|Effect on the total of service and interest cost
    components |  | $        | 1,609  |            |  | $ | (1,381  | )
|Effect on accumulated post-retirement benefit
    obligation    |  | $        | 21,174 |            |  | $ | (18,670 | )

Note 15.     Stock
Options

On August 15, 1996, we were spun-off from
our former parent. Options granted between 1990 and 1996 to
certain officers and employees to acquire our common stock were
granted under our former parents stock option plans. These
options have been adjusted for stock splits and the spin-off in
1996. These options were

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

granted at the market prices on the dates of
grant, became exercisable 50% after one year and 100% after two
years and expire after 10 years. No additional options will
be granted under these plans.

We adopted The Dial Corporation Stock Incentive
Plan in 1996 (1996 Plan), which is administered by
the Executive Compensation Committee of the Board of Directors.
Under the 1996 Plan, the aggregate number of shares of common
and preferred stock covered by awards to any one individual
cannot exceed 1,000,000 shares for any three-year period and no
more than 9,600,000 shares are cumulatively available for
options intended to qualify as incentive stock
options under the Internal Revenue Code. The term of the
options is 10 years. The Plan provides that options are
generally to be granted at the market price on the date of
grant; however, the 1996 Executive Compensation Committee may
grant options at less than such market price. The 1996 Plan also
authorizes the issuance of stock appreciation rights and
restricted stock. During the year ended December 31, 2002,
no stock appreciation rights or restricted stock were awarded.

Under the 1996 Plan, options to purchase 345,456
shares were granted at the market price on the dates of grant
during 2002. These options, which are all classified as
non-qualified options, become one-third exercisable after one
year, two-thirds exercisable after two years, and 100%
exercisable after three years. The options expire after
10 years.

During 2002, options to purchase 51,800 shares
were also granted to non-employee members of the Board of
Directors at the market price on the date of grant. Of these
options issued, 50,600 are exercisable 50% after one year and
100% after two years, while the balance of 1,200 shares, which
were issued in exchange for director fees, are 100% exercisable
on the date of grant. The options expire after 10 years.

A summary of the status of our stock option plans
as of December 31, 2002, and changes during the years ended
December 31, 2000, 2001 and 2002, are presented below:

|                                     |                                    |        |            |                  |   |  |       |       | 
|------------------------------------ | ---------------------------------- | ------ | ---------- | ---------------- | - |  | ----- | ----- | 
|                                     |                                    |        |            | Weighted Average
|                                     |                                    | Shares |            | Exercise Price  
|                                     |                                    |        |            |                 
|Outstanding at December 31,1999      |                                    |        | 6,507,054  |                  |   |  | 17.90 |      
|                                     | Granted                            |        |            | 3,104,015        |   |  |       | 19.85 | 
|                                     | Exercised                          |        |            | (100,620         | ) |  |       | 7.90  | 
|                                     | Canceled                           |        |            | (1,263,061       | ) |  |       | 19.92 | 
|                                     |                                    |        |            |                  |   |  |       |      
|Outstanding at December 31,
    2000 |                                    |        | 8,247,388  |                  |   |  | 16.29 |      
|                                     | Granted                            |        |            | 4,647,366        |   |  |       | 13.72 | 
|                                     | Exercised                          |        |            | (311,583         | ) |  |       | 10.26 | 
|                                     | Canceled                           |        |            | (432,717         | ) |  |       | 18.57 | 
|                                     |                                    |        |            |                  |   |  |       |      
|Outstanding at December 31,
    2001 |                                    |        | 12,150,454 |                  |   |  | 15.41 |      
|                                     | Granted                            |        |            | 397,256          |   |  |       | 19.58 | 
|                                     | Exercised                          |        |            | (1,182,706       | ) |  |       | 12.39 | 
|                                     | Canceled                           |        |            | (399,580         | ) |  |       | 17.51 | 
|                                     |                                    |        |            |                  |   |  |       |      
|Outstanding at December 31,
    2002 |                                    |        | 10,965,424 |                  |   |  | 15.81 |      
|                                     |                                    |        |            |                  |   |  |       |      
|                                     | Options exercisable at end of year |        |            | 5,755,095        |   |  |       | 13.71 | 
|                                     |                                    |        |            |                  |   |  |       |      

Tax benefits on options exercised were recorded
as increases to additional paid-in capital and totaled
$3.3 million and $0.1 million in 2002 and 2001,
respectively, with no affect in 2000.

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
stock options outstanding and exercisable at December 31,
2002:

|                         |  |             |            |             |  |          |     |             |  |          |       |  |  |  |           |  |  |   |       | 
|------------------------ |  | ----------- | ---------- | ----------- |  | -------- | --- | ----------- |  | -------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                         |  |             |            | Weighted    |  |          |     |             |  |         
|                         |  |             |            | Average     |  |          |     |             |  |         
|                         |  |             |            | Remaining   |  | Weighted |     |             |  | Weighted
|                         |  |             |            | Contractual |  | Average  |     |             |  | Average 
|                         |  | Options     |            | Life        |  | Exercise |     | Options     |  | Exercise
|Range of Exercise Prices |  | Outstanding |            | (in years)  |  | Price    |     | Exercisable |  | Price   
|                         |  |             |            |             |  |          |     |             |  |         
|$ 7.31-$10.96            |  |             | 357,253    |             |  |          | 5.5 |             |  | $        | 10.44 |  |  |  | 292,756   |  |  | $ | 10.35 | 
|$10.97-$14.61            |  |             | 6,806,537  |             |  |          | 6.0 |             |  |          | 13.25 |  |  |  | 4,101,842 |  |  |   | 13.14 | 
|$14.62-$18.26            |  |             | 1,991,342  |             |  |          | 6.7 |             |  |          | 15.42 |  |  |  | 1,222,418 |  |  |   | 15.30 | 
|$18.27-$21.92            |  |             | 400,871    |             |  |          | 8.5 |             |  |          | 20.70 |  |  |  | 51,371    |  |  |   | 21.29 | 
|$21.93-$25.57            |  |             | 190,116    |             |  |          | 6.3 |             |  |          | 23.53 |  |  |  | 50,750    |  |  |   | 23.33 | 
|$25.58-$29.22            |  |             | 140,305    |             |  |          | 6.0 |             |  |          | 27.46 |  |  |  | 34,458    |  |  |   | 26.74 | 
|$29.23-$32.88            |  |             | 1,075,000  |             |  |          | 6.0 |             |  |          | 29.73 |  |  |  | 1,500     |  |  |   | 29.72 | 
|$32.89-$36.53            |  |             | 4,000      |             |  |          | 6.3 |             |  |          | 35.11 |  |  |  | 0         |  |  |   |      | 
|                         |  |             |            |             |  |          |     |             |  |          |       |  |  |  |           |  |  |   |       | 
|                         |  |             | 10,965,424 |             |  |          | 6.2 |             |  | $        | 15.81 |  |  |  | 5,755,095 |  |  | $ | 13.71 | 
|                         |  |             |            |             |  |          |     |             |  |          |       |  |  |  |           |  |  |   |       | 

We apply Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for our
stock option plans. We have adopted the disclosure-only
provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for
Stock-Based Compensation, as amended by
SFAS No. 148. Accordingly, no compensation cost has
been recognized for the stock option plans. Had compensation
cost for our stock option plans been determined based on the
fair value at the grant date consistent with the provisions of
SFAS No. 123 and the amendment of
SFAS No. 148, our net income (loss) and net
income (loss) per share would have been reduced to the pro
forma amounts indicated below.

Average assumptions used in determining the
estimated fair value of stock options under the Black-Scholes
valuation model, and the estimated fair values are as follows.

|                                           |  |      |      |      |  |      |      |   |  |   |      |  
|------------------------------------------ |  | ---- | ---- | ---- |  | ---- | ---- | - |  | - | ---- | -
|                                           |  | 2002 |      | 2001 |  | 2000
|                                           |  |      |      |      |  |     
|Estimated fair value of options, per share |  | $    | 6.74 |      |  | $    | 3.99 |   |  | $ | 4.16 |  
|Expected average risk-free interest rate   |  |      | 3.8  | %    |  |      | 4.8  | % |  |   | 6.4  | %
|Expected life in years                     |  |      | 5.0  |      |  |      | 3.0  |   |  |   | 3.1  |  
|Expected volatility                        |  |      | 34.6 | %    |  |      | 35.6 | % |  |   | 35.0 | %
|Expected dividend rate                     |  |      | 0.8  | %    |  |      | 0.3  | % |  |   | 1.2  | %

|                                                        |  |                |        |      |  |      |          |   |  |   |         |  
|------------------------------------------------------- |  | -------------- | ------ | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                                        |  | 2002           |        | 2001 |  | 2000
|                                                        |  |                |        |      |  |     
|                                                        |  |               
|                                                        |  | (In thousands)
|Net income (loss) as reported                           |  | $              | 16,892 |      |  | $    | (132,251 | ) |  | $ | (11,008 | )
|                                                        |  |                |        |      |  |      |          |   |  |   |         |  
|Pro forma net income (loss)                             |  | $              | 10,550 |      |  | $    | (138,541 | ) |  | $ | (12,938 | )
|                                                        |  |                |        |      |  |      |          |   |  |   |         |  
|Net income (loss) per share 
    basic  as reported   |  | $              | 0.18   |      |  | $    | (1.45    | ) |  | $ | (0.12   | )
|                                                        |  |                |        |      |  |      |          |   |  |   |         |  
|Pro forma net income (loss) per
    share  basic       |  | $              | 0.11   |      |  | $    | (1.51    | ) |  | $ | (0.14   | )
|                                                        |  |                |        |      |  |      |          |   |  |   |         |  
|Net income (loss) per share 
    diluted  as reported |  | $              | 0.18   |      |  | $    | (1.43    | ) |  | $ | (0.12   | )
|                                                        |  |                |        |      |  |      |          |   |  |   |         |  
|Pro forma net income (loss) per
    share  diluted     |  | $              | 0.11   |      |  | $    | (1.50    | ) |  | $ | (0.14   | )
|                                                        |  |                |        |      |  |      |          |   |  |   |         |  

We adopted The Dial Corporation Employee Stock
Purchase Plan (ESPP) in 2000. Under this plan, up to
650,000 shares of common stock may be purchased by eligible
employees through payroll deductions of

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

up to 15% of their eligible compensation, not to
exceed $25,000. The purchase price is equal to the lesser of
(a) 85% of the fair market value of the stock on first day
of the offering period or (b) 85% of the fair market value
of the stock on the last day of the offering period. During
2002, employees purchased approximately 54,191 shares under
this plan.



|         |       
|-------- | ------
|Note 16. | Leases

Certain sales, warehouse and administration
offices and equipment are leased. These leases expire in periods
ranging generally from one to five years, and some provide for
renewal options ranging from one to eight years. Leases that
expire are generally renewed or replaced by similar leases,
depending on business needs at that time. Net rent paid in 2002,
2001 and 2000 totaled, in thousands, $12,186, $13,032, $13,589,
respectively.

At December 31, 2002, our future minimum
rental payments and anticipated rental income with respect to
non-cancelable operating subleases with terms in excess of one
year were as follows, in thousands:

|                                 |  |      |        |      |  |      |        |      |  |      |        |       |  |   |        |  |  |   |        |  |  |   |        | 
|-------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ----- |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                 |  | 2003 |        | 2004 |  | 2005 |        | 2006 |  | 2007 |        | After
|                                 |  |      |        |      |  |      |        |      |  |      |        |      
|Future minimum rental payments   |  | $    | 14,023 |      |  | $    | 13,917 |      |  | $    | 12,994 |       |  | $ | 12,179 |  |  | $ | 10,346 |  |  | $ | 10,421 | 
|Future anticipated rental income |  |      | 2,294  |      |  |      | 2,315  |      |  |      | 1,890  |       |  |   | 1,118  |  |  |   |       |  |  |   |       | 
|                                 |  |      |        |      |  |      |        |      |  |      |        |       |  |   |        |  |  |   |        |  |  |   |        | 
|Net future rental commitments    |  | $    | 11,729 |      |  | $    | 11,602 |      |  | $    | 11,104 |       |  | $ | 10,061 |  |  | $ | 10,346 |  |  | $ | 10,421 | 
|                                 |  |      |        |      |  |      |        |      |  |      |        |       |  |   |        |  |  |   |        |  |  |   |        | 

Future anticipated rental income is the result of
sub-lease agreements on non-cancelable leases that we hold. The
total rental obligation related to these sub-leases for 2003,
2004, 2005 and 2006, in thousands, are $2,455, $2,457, $1,826
and $1,169, respectively. We have accrued for the difference
between the lease obligation and the expect sub-lease income.



|         |                                                                                              
|-------- | ---------------------------------------------------------------------------------------------
|Note 17. | Financial Instruments with Off-Balance-Sheet
    Risk and Fair Value of Financial Instruments

Financial Instruments with Off-Balance-Sheet
Risk

Our use of financial instruments is limited to
purposes other than trading and primarily includes management of
interest rate and commodity expense. We may use financial
instruments for the management of interest rate risk or other
risks in the future.



| |                              
| | -----------------------------
| | Interest Rate Risk Management

At December 31, 2002, we had
$446.2 million in long-term debt outstanding, comprised of
$200 million ($198.8 million net of issue discount) of
6.5% Senior Notes due 2008, and $250 million
($247.5 million net of issue discount) of 7.0% bonds due
2006. Our Senior Notes fixed interest rates to maturity.

At the time of the issuance of the
$250 million 7% bonds due 2006, we entered into two
interest rate swaps, which together were designated as hedges of
that issue. The interest rate swaps had a total notional amount
of $250 million. In August of 2002, the interest rate swaps
were terminated and we received a payment of $13.4 million.
The gain on the termination of the swaps was deferred and is
classified as a part of long-term debt. The deferred gain will
be amortized over the remaining term of the $250 million 7%
bonds as a reduction of interest expense. The amortization of
the gain on the terminated swaps effectively reduces the fixed
rate of the $250 million 7% notes to approximately 5.4%
annually.

We are currently investing our accumulated cash
balance in a variety of short-term investment vehicles with low
principle risk. The weighted average yield on the invested cash
at December 31, 2002 was 1.43%. Each 50 basis point change
in the yield on the invested cash would result in an approximate
$1.2 million change in our other expense, net.

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In January 2003, we entered into two interest
rate swaps contracts that effectively changes the interest rate
on a portion of our Senior Notes from fixed to variable. The
total notional value of the interest rate swaps that expire in
September 2008 is $200 million, effectively converting 45%
of our total debt to variable interest rates. Under the terms of
the swaps, we pay a variable rate of interest based on a 6-month
LIBOR plus 278 basis points and receive a fixed interest of
6.5%. Variable interest rates are paid and reset semi-annually.
The Six-Month LIBOR rate on January 9, 2003 was 1.39%. The
interest rate swaps expose us to the risk of changes in LIBOR
based interest rates. Each 50 basis point change in the
swaps floating rate would change our pre-tax interest
expense by $1 million.



| |                 
| | ----------------
| | Foreign Currency

We are exposed to risks from fluctuations in
foreign currency exchange rates, primarily U.S. Dollar/ Canadian
Dollar and U.S. Dollar/ Argentine Peso.

Historically, the Argentine Pesos value has
been pegged by the Argentine government as equal to
the U.S. Dollar. However, in late December 2001, the
Argentine government declared strict limitations on bank
withdrawals, effectively blocking all convertibility of
Argentine Pesos to U.S. Dollars at December 31, 2001.
On February 12, 2002, the Argentine Government abandoned
the dual exchange rate and allowed the Argentine Peso to float
freely against other currencies. During 2002, the
U.S. Dollar/ Argentine Peso exchange rate fluctuated
between 1:1.6 and 1:3.9. If there were a 10% change in the
exchange rates for the U.S. Dollar to the Argentine Peso
from those at December 31, 2002 until the expected sale
date, the gain or loss would be immaterial.

At December 31, 2002, one U.S. Dollar
was worth 1.6 Canadian Dollars. For the year ended
December 31, 2002, the U.S. Dollar/ Canadian Dollar
exchange rate fluctuated between a high of 1:1.6 to 1:1.5. If
there were a 10% change in the exchange rates for the
U.S. Dollar to the Canadian Dollar from those at
December 31, 2002, the foreign currency gain or loss would
be immaterial.



| |                              
| | -----------------------------
| | Employee Benefit Plan Expense

We offer our directors and management deferred
compensation plans. Under these plans, participants can defer a
portion of their compensation into either Dial stock units or
various cash accounts. For deferrals made into stock units,
deferred compensation due to participants is included on the
balance sheet in Stockholders Equity under the caption
Employee Benefits with no recognition of any
investment gains or losses. The deferred funds are placed in a
Rabbi Trust using shares of Dial common stock. The Trust is also
included on the balance sheet in Stockholders Equity under
the caption Employee Benefits.

For deferrals into cash accounts, deferred
compensation due to participants and any accumulated investment
gains or losses is included on the balance sheet as a liability
under the captions Pension and other benefitsand Other Liabilities. We place the
deferred funds in a Rabbi Trust, which purchases life insurance
policies on the participants lives, with Dial as the
beneficiary. The policies have cash surrender value that accrues
tax-free earnings largely based on the performance of the
S&P 500. The cash surrender value asset and any accumulated
investment gains or losses are included on the balance sheet as
an asset under the caption Other assets.

Fair Value of Financial Instruments

The carrying values of cash and cash equivalents,
receivables, accounts payable and short-term bank borrowings
approximate fair values due to the short-term maturities of
these instruments. The fair value of our Senior Notes is
estimated based upon quoted market prices. The fair value of the
Senior Notes was $477.7 million at December 31, 2002.

63



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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 18.     Segments
of an Enterprise

We are organized into two business segments:
(i) Domestic Branded and (ii) International and Other.
The segments were identified based on the economic
characteristics, types of products sold, the customer base and
method of distribution. Effective January 1, 2002, we began
to include the International operating segment in the
International and Other business segment due to its immaterial
size. Prior to January 1, 2002, we included sales of
industrial chemicals, which includes soap pellets and chemicals,
principally glycerin and fatty acids that are by-products of the
soap making process, in the International and Other business
segment. Effective January 1, 2002, we began to include
industrial chemicals in the Personal Cleansing operating segment
within the Domestic Branded business segment. Prior to the
fourth quarter of 2001, we included discontinued product
activity in the International and Other business segment. In the
fourth quarter of 2001, we began to include discontinued
activity in the business segment that launched the product. The
historical segment information has been restated to reflect the
changes.

In December 2002, we announced the pending sale
of our Argentina business and on August 28, 2001 we
disposed of our Specialty Personal Care segment. The segment
information has been restated to reflect historical segment
information as adjusted for the reclassification of the
Argentina Business and Specialty Personal Care as discontinued
operations.

The Domestic Branded business segment consists of
four aggregated operating segments that manufacture and market
non-durable consumer packaged goods through grocery store, drug
store and mass merchandiser retail outlets. It is comprised of
the Personal Cleansing, Laundry Care, Air Fresheners and Food
Products operating segments. Our subsidiary, ISC International,
Ltd., a manufacturer of translucent soaps, is included in the
Personal Cleansing operating segment. The following table sets
forth the percentage of net sales represented by each franchise
within the Domestic Branded segment:

|                   |       |      |    |      |   |      |    |     |   |  |    |     |  
|------------------ | ----- | ---- | -- | ---- | - | ---- | -- | --- | - |  | -- | --- | -
|                   |       | 2002 |    | 2001 |   | 2000
|                   |       |      |    |      |   |     
|Laundry Care       |       |      | 39 | %    |   |      | 37 | %   |   |  | 34 | %  
|Personal Cleansing |       |      | 31 |      |   |      | 32 |     |   |  | 33 |    
|Food Products      |       |      | 16 |      |   |      | 16 |     |   |  | 17 |    
|Air Fresheners     |       |      | 14 |      |   |      | 15 |     |   |  | 16 |    
|                   |       |      |    |      |   |      |    |     |   |  |    |    
|                   | Total |      |    | 100  | % |      |    | 100 | % |  |    | 100 | %
|                   |       |      |    |      |   |      |    |     |   |  |    |    

Our International and Other business segment
includes our commercial markets and international businesses.
Our international operations are focused in Canada, Puerto Rico
and exports to Asia and Latin America. During 2002, 2001 and
2000, approximately 82%, 72% and 62%, respectively, of our
international sales came from these markets. In total,
international sales represent 4.4%, 4.6% and 5.1% of sales in
2002, 2001 and 2000, respectively. Our commercial markets
business sells our products, both branded and nonbranded,
through the commercial channel to hotels, hospitals, schools and
other institutional customers.

Information as to our operations in different
business segments is set forth below. The calculation of
operating income for each segment includes an allocation of
certain general and administrative expenses based on each
segments share of consolidated net sales. The accounting
policies of the business segments are the same as those
described in the summary of significant accounting policies
(Note 2).

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                         |         |                |   |               |  |       |   |        |   |  |   |           | 
|------------------------ | ------- | -------------- | - | ------------- |  | ----- | - | ------ | - |  | - | --------- | 
|                         |         | Domestic       |   | International |  |      
|                         |         | Branded        |   | and Other     |  | Total
|                         |         |                |   |               |  |      
|                         |         |               
|                         |         | (In thousands)
|Net Sales:               |         |                |   |               |  |       |   |        |   |  |   |          
|                         | 2002    |                | $ | 1,182,263     |  |       | $ | 99,968 |   |  | $ | 1,282,231 | 
|                         | 2001    |                |   | 1,095,115     |  |       |   | 94,217 |   |  |   | 1,189,332 | 
|                         | 2000    |                |   | 985,410       |  |       |   | 92,236 |   |  |   | 1,077,646 | 
|Operating Income/(loss): |         |                |   |               |  |       |   |        |   |  |   |          
|                         | 2002(1) |                |   | 208,394       |  |       |   | 11,948 |   |  |   | 220,342   | 
|                         | 2001(2) |                |   | 169,288       |  |       |   | (6,215 | ) |  |   | 163,073   | 
|                         | 2000(3) |                |   | 118,406       |  |       |   | 10,754 |   |  |   | 129,160   | 
|Capital Expenditures:    |         |                |   |               |  |       |   |        |   |  |   |          
|                         | 2002    |                |   | 33,601        |  |       |   | 889    |   |  |   | 34,490    | 
|                         | 2001    |                |   | 26,550        |  |       |   | 2,094  |   |  |   | 28,644    | 
|                         | 2000    |                |   | 33,749        |  |       |   | 3,588  |   |  |   | 37,337    | 
|Assets at year end:(4)   |         |                |   |               |  |       |   |        |   |  |   |          
|                         | 2002    |                |   | 1,135,218     |  |       |   | 14,521 |   |  |   | 1,149,739 | 
|                         | 2001    |                |   | 1,005,874     |  |       |   | 18,242 |   |  |   | 1,024,116 | 



---



|    |                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes special net gain of $1.7 million
    gain ($2.4 million gain in International and Other offset
    in part by $0.7 million charge in Domestic Branded) from
    manufacturing asset sales and writedowns and reversal of
    restructure reserves.
|   
|(2) | Includes special charges of $8.8 million in
    Domestic Branded from asset writedowns, discontinuing product
    inventories and other exit costs.                                                                                                        
|   
|(3) | Includes special charges of $17.3 million
    ($15.5 million in Domestic Branded and $1.8 on
    International and Other) from asset writedowns, discontinuing
    product inventories and other exit costs.                                               
|   
|(4) | Goodwill at December 31, 2002 and 2001 is
    included in Domestic Branded.                                                                                                                                                                                

Wal-Mart, including its affiliate Sams
Club, was our largest customer in 2002, 2001, and 2000,
accounting for approximately 28%, 25% and 22%, respectively, of
net sales. No other customer accounted for more than 10% of net
sales in 2002, 2001 or 2000.

65



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##### Table of Contents



THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 19.     Condensed
Consolidated Quarterly Results (Unaudited)

|                                           |           |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |   |       |   | 
|------------------------------------------ | --------- | ----------------------------------------- | ---------------------------------------- | -------------- | ----- | ------------- | ------- | -------------- | ----- | ---- | ------- | ---- | ----- | ---- | ------- | ---- | ----- | - | ------- | - | ---- | - | -------- | - | ----- | - | ------- | - | ----- | - | ------- | - | ----- | - | 
|                                           |           |                                           |                                          |                |       |               |         |               
|                                           |           | First Quarter                             |                                          | Second Quarter |       | Third Quarter |         | Fourth Quarter
|                                           |           |                                           |                                          |                |       |               |         |               
|                                           |           | 2002                                      |                                          | 2001           |       | 2002          |         | 2001           |       | 2002 |         | 2001 |       | 2002 |         | 2001
|                                           |           |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |     
|                                           |           |                                          
|                                           |           | (In thousands, except for per share data)
|Net sales                                  |           | $                                         | 294,579                                  |                |       | $             | 271,099 |                |       | $    | 320,015 |      |       | $    | 296,237 |      |       | $ | 334,003 |   |      | $ | 311,952  |   |       | $ | 333,634 |   |       | $ | 310,044 |  
|Gross profit                               |           |                                           | 108,407                                  |                |       |               | 87,997  |                |       |      | 123,179 |      |       |      | 99,253  |      |       |   | 123,591 |   |      |   | 104,705  |   |       |   | 125,065 |   |       |   | 116,144 |  
|Operating income                           |           |                                           | 47,600                                   |                |       |               | 33,738  |                |       |      | 57,586  |      |       |      | 39,291  |      |       |   | 57,632  |   |      |   | 38,400   |   |       |   | 57,524  |   |       |   | 51,644  |  
|Income from continuing operations          |           |                                           | 23,096                                   |                |       |               | 14,327  |                |       |      | 31,778  |      |       |      | 17,852  |      |       |   | 30,184  |   |      |   | 15,734   |   |       |   | 30,176  |   |       |   | 26,395  |  
|Income (loss) from discontinued operations |           |                                           | 1,736                                    |                |       |               | (1,230  | )              |       |      | 1,654   |      |       |      | (3,111  | )    |       |   | 918     |   |      |   | (201,150 | ) |       |   | (59,342 | ) |       |   | (1,068  | )
|Effect of Change in Accounting Principle   |           |                                           | (43,308                                  | )              |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |  
|Net income (loss)                          |           | $                                         | (18,476                                  | )              |       | $             | 13,097  |                |       | $    | 33,432  |      |       | $    | 14,741  |      |       | $ | 31,102  |   |      | $ | (185,416 | ) |       | $ | (29,166 | ) |       | $ | 25,327  |  
|Net income (loss) per share:               |           |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |  
|                                           |  Basic   |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |   |      
|                                           |           | Continuing operations                     |                                          |                | 0.25  |               |         |                | 0.16  |      |         |      | 0.34  |      |         |      | 0.20  |   |         |   | 0.33 |   |          |   | 0.17  |   |         |   | 0.32  |   |         |   | 0.29  |  
|                                           |           | Discontinued operations                   |                                          |                | 0.02  |               |         |                | (0.02 | )    |         |      | 0.02  |      |         |      | (0.03 | ) |         |   | 0.01 |   |          |   | (2.20 | ) |         |   | (0.64 | ) |         |   | (0.01 | )
|                                           |           | Effect of Change in Accounting Principle  |                                          |                | (0.47 | )             |         |                |      |      |         |      |      |      |         |      |      |   |         |   |     |   |          |   |      |   |         |   |      |   |         |   |      |  
|                                           |           |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |  
|                                           |           | Net income (loss)                         |                                          |                | (0.20 | )             |         |                | 0.14  |      |         |      | 0.36  |      |         |      | 0. 16 |   |         |   | 0.34 |   |          |   | (2.03 | ) |         |   | (0.31 | ) |         |   | 0.28  |  
|                                           |  Diluted |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |   |      
|                                           |           | Continuing operations                     |                                          |                | 0.25  |               |         |                | 0.16  |      |         |      | 0. 33 |      |         |      | 0.19  |   |         |   | 0.32 |   |          |   | 0.17  |   |         |   | 0.32  |   |         |   | 0.28  |  
|                                           |           | Discontinued operations                   |                                          |                | 0.02  |               |         |                | (0.02 | )    |         |      | 0.02  |      |         |      | (0.03 | ) |         |   | 0.01 |   |          |   | (2.17 | ) |         |   | (0.62 | ) |         |   | (0.01 | )
|                                           |           |                                           | Effect of Change in Accounting Principle |                |       | (0.47         | )       |                |       |     |         |      |       |     |         |      |       |  |         |   |      |  |          |   |       |  |         |   |       |  |         |   |       |  | 
|                                           |           |                                           |                                          |                |       |               |         |                |       |      |         |      |       |      |         |      |       |   |         |   |      |   |          |   |       |   |         |   |       |   |         |  
|                                           |           | Net income (loss)                         |                                          | $              | (0.20 | )             |         | $              | 0.14  |      |         | $    | 0.35  |      |         | $    | 0.16  |   |         | $ | 0.33 |   |          | $ | (2.00 | ) |         | $ | (0.31 | ) |         | $ | 0.27  |  

Note 20.     Litigation
and Claims

On May 21, 1999, we were served with a
complaint filed by the U.S. Equal Employment Opportunity
Commission (the EEOC) in the U.S. District
Court for the Northern District of Illinois, Eastern Division.
This action is entitled Equal Opportunity Commission v.
The Dial Corporation, Civil Action
No. 99 C 3356. The EEOC alleges that Dial engaged
in a pattern and practice of discrimination against a class of
female employees at our Aurora plant by subjecting them to
sexual harassment and failing to take prompt remedial action
after these employees complained about the alleged harassment.
The EEOC is seeking injunctive relief and unspecified
compensatory and punitive damages.

Dial has denied the EEOCs allegations. The
trial is scheduled to begin in late April 2003. During initial
settlement discussions, the EEOC indicated that it is seeking
$15 million to resolve this case. Based upon our
investigation, we do not believe the facts warrant such a large
settlement. Accordingly, we are preparing for trial.

There currently are 89 potential claimants.
Compensatory and punitive damages are limited to a maximum of
$300,000 for each potential claimant. However, we currently
believe that the number of claimants who ultimately will be
eligible to recover damages, if any, in this case is much fewer
than 89 based upon the potential claimants individualized
allegations and our defenses. Nevertheless, no assurances can be
given regarding the number of potential claimants who will
ultimately be eligible to recover monetary damages.

Depending on the outcome, this case could have a
material adverse effect on our operating results in the period
in which the case is resolved. In addition, negative publicity
resulting from this lawsuit could adversely affect our sales and
operating results.

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THE DIAL CORPORATION


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As is the case with many companies, we also face
exposure to actual or potential claims and lawsuits involving
our business and assets. We are currently party to a number of
lawsuits consisting of ordinary, routine litigation incidental
to our business, including general and product liability and
workers compensation claims. We believe that any
liabilities resulting from these claims, after taking into
account amounts already accrued and exclusive of any potential
insurance recovery, should not have a material adverse effect on
our financial position, cash flows or operating results.



|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

We have never filed a Current Report on
Form 8-K to report a change in accountants.

67



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##### Table of Contents






PART III




Item 10.     Directors
and Executive Officers of the Registrant

Information concerning Dials directors and
executive officers is set forth below and under the caption
Section 16(a) Beneficial Ownership Reporting
Compliance in our Proxy Statement relating to the 2003
Annual Meeting of Stockholders to be held on June 5, 2003
(the Proxy Statement), which is incorporated by
reference into this Form 10-K. With the exception of this
foregoing information and other information specifically
incorporated by reference into this Form 10-K, the Proxy
Statement is not being filed as a part hereof.

|                                   |  |     |    |          |  |                                                                                                             
|---------------------------------- |  | --- | -- | -------- |  | ------------------------------------------------------------------------------------------------------------
|Name                               |  | Age |    | Position
|                                   |  |     |    |         
|Herbert M. Baum(1)(6)              |  |     | 66 |          |  | Chairman of the Board, President and Chief
    Executive Officer                                            
|Conrad A. Conrad                   |  |     | 57 |          |  | Executive Vice President and Chief Financial
    Officer                                                    
|Bernhard J. Welle                  |  |     | 54 |          |  | Executive Vice President  Shared
    Services                                                              
|Robert F. Bernstock                |  |     | 52 |          |  | Senior Vice President & General
    Manager  Air Fresheners, Food Products & Branded
    Commercial Markets
|Stephen D. Blum                    |  |     | 59 |          |  | Senior Vice President  Investor
    Relations                                                              
|Arthur E. Hanke                    |  |     | 55 |          |  | Senior Vice President  Sales                                                                               
|Evon L. Jones                      |  |     | 38 |          |  | Senior Vice President and Chief Information
    Officer                                                     
|Christopher J. Littlefield         |  |     | 36 |          |  | Senior Vice President, General Counsel and
    Secretary                                                    
|John F. Tierney                    |  |     | 50 |          |  | Senior Vice President and Controller                                                                        
|Greg A. Tipsord                    |  |     | 37 |          |  | Senior Vice President and General
    Manager  Laundry Care                                                
|Stephen L. Tooker                  |  |     | 43 |          |  | Senior Vice President and General
    Manager  Personal Cleansing                                          
|Mark L. Whitehouse                 |  |     | 46 |          |  | Senior Vice President  International,
    Innovation and Business Development                              
|Joy A. Amundson(4)(5)              |  |     | 48 |          |  | Director                                                                                                    
|Joe T. Ford(1)(3)(4)               |  |     | 65 |          |  | Director                                                                                                    
|Thomas L. Gossage(1)(2)(5)         |  |     | 68 |          |  | Director                                                                                                    
|Donald E. Guinn(1)(2)(4)           |  |     | 70 |          |  | Director                                                                                                    
|James E. Oesterreicher(1)(2)(3)(6) |  |     | 61 |          |  | Director                                                                                                    
|Michael T. Riordan(4)(5)(6)        |  |     | 52 |          |  | Director                                                                                                    
|Barbara S. Thomas(3)(5)            |  |     | 53 |          |  | Director                                                                                                    
|Salvador M. Villar(2)(3)           |  |     | 52 |          |  | Director                                                                                                    



---



|    |                                               
|--- | ----------------------------------------------
|(1) | Member of the Executive Committee             
|   
|(2) | Member of the Audit Committee                 
|   
|(3) | Member of the Executive Compensation Committee
|   
|(4) | Member of the Finance Committee               
|   
|(5) | Member of the Governance Committee            
|   
|(6) | Member of the Management Succession Committee 

Herbert M. Baum.Mr. Baum has been Chairman of the Board, President and
Chief Executive Officer of Dial since August 2000 and a Director
of Dial since 1997. Mr. Baum served as President and Chief
Operating Officer of Hasbro, Inc., a manufacturer and marketer
of toys, from January 1999 to August 2000. Mr. Baum also
served as Chairman and Chief Executive Officer of Quaker State
Corporation from 1993 to

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##### Table of Contents



1999. Mr. Baum also is a director of Action
Performance Companies, Inc.; America West Holdings; the
Cosmetic, Toiletry and Fragrance Association; Grocery
Manufacturers of America; Meredith Corporation and
PepsiAmericas, Inc. Mr. Baum previously served as a
director of Midas, Inc. and Fleming Companies, Inc., but has
notified each of them that he will not stand for re-election at
their respective annual meetings in May 2003.


Conrad A. Conrad.Mr. Conrad has served as
Executive Vice President and Chief Financial Officer since
January 2001. From August 2000 to January 2001, he served as
Senior Vice President and Chief Financial Officer.
Mr. Conrad joined Quaker State in 1974 and held various
positions in Quaker States audit and finance divisions
until he was named President and Chief Operating Officer in 1990
and Vice Chairman and Chief Financial Officer in 1994.

Bernhard J. Welle.Mr. Welle has served as Executive
Vice President  Shared Services of Dial since August
2000. From August 1996 to August 2000, he served as Senior Vice
President  Human Resources of Dial. From 1987 to
August 1996, Mr. Welle served as Vice President, Human
Resources of the Consumer Products Business of the Predecessor
Company.

Robert F. Bernstock.Mr. Bernstock has served as
Senior Vice President & General Manager  Air
Fresheners, Food Products & Branded Commercial Markets
of Dial since October 2002. From January 2002 to September 2002,
he served as Special Advisor to the Chairman & CEO of
Verticalnet, Inc., a provider of collaborative supply chain
solutions software, and as a consultant to Dial. From January
2001 to January 2002, Mr. Bernstock served as Acting
Chairman, President and CEO of Atlas Commerce, Inc.
(Atlas), a provider of collaborative supply chain
solutions software prior to the acquisition of Atlas by
Verticalnet, Inc., in January 2002. From March 1998 to January
2001, he served as President, CEO and Director of Vlasic Foods
International Inc. (Vlasic), a producer, marketer
and distributor of branded convenience food products. On
January 29, 2001, Vlasic and its United States operating
subsidiaries filed voluntary petitions for reorganization relief
pursuant to Chapter 11 of the United States Bankruptcy
Code. From July 1997 to March 1998, Mr. Bernstock served as
Executive Vice President of Campbell Soup Company, a
manufacturer and marketer of prepared food products, and
President of its U.S. Grocery Division. Mr. Bernstock
serves as a Director of Verticalnet, Inc.

Stephen D. Blum.Mr. Blum has served as Senior Vice President 
Investor Relations of Dial since March 2002. From September 2000
to March 2002, Mr. Blum served as Vice
President  Investor Relations of Dial. From May 1999
to September 2000, he served as Director  Investor
Relations of J.C. Penney Company, Inc., a department store,
drugstore, catalog and e-commerce retailer. From March 1994 to
May 1999, Mr. Blum served as Senior Vice
President  Corporate Relations of Quaker State
Corporation.

Arthur E. Hanke.Mr. Hanke has served as Senior
Vice President  Sales of Dial since January 1999.
From September 1998 to January 1999, he served as Vice
President  Corporate Sales of Dial, and from the
Spin-off to September 1998, he served as Vice
President  Customer Management of Dial.

Evon L. Jones.Mr. Jones has served as Senior
Vice President and Chief Information Officer since May 2001.
From 1998 to 2001, Mr. Jones served as Senior Vice
President and Chief Information Officer for America West
Holdings Corporation.

Christopher J. Littlefield.Mr. Littlefield has served as
Senior Vice President, General Counsel and Secretary of Dial
since September 2000. From August 1998 to September 2000,
Mr. Littlefield served as Vice President and Associate
General Counsel of Dial. From January 1998 to August 1998, he
served as Corporate Counsel of Dial. Prior to joining Dial,
Mr. Littlefield served as a corporate and securities
attorney for the law firm of Snell & Wilmer, L.L.P.

John F. Tierney.Mr. Tierney has served as Senior
Vice President and Controller of Dial since September 2000. From
February 1999 to August 2000, Mr. Tierney served as Vice
President and Controller of Dial. From 1997 to 1999,
Mr. Tierney served as Senior Vice President and Chief
Financial Officer of Global Passenger Services, LLC, a provider
and consolidator of entertainment and student transportation
services.

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##### Table of Contents



Greg A. Tipsord.Mr. Tipsord has served as Senior
Vice President and General Manager  Laundry Care
since October 2002. From March 2002 to October 2002,
Mr. Tipsord served as Senior Vice President and General
Manager  Personal Cleansing and from August 2000 to
March 2002, he served as Vice President and General
Manager  Personal Cleansing. From April 2000 to
August 2000, Mr. Tipsord served as Vice
President  Marketing and from October 1996 to April
2000, he served as Marketing Director  Personal
Cleansing.

Stephen L. Tooker.Mr. Tooker has served as Senior
Vice President and General Manager  Personal
Cleansing since October 2002. From March 2002 to October 2002,
Mr. Tooker served as Senior Vice President and General
Manager  Laundry Care and from August 2000 to March
2002, he served as Vice President and General
Manager  Laundry Care. Mr. Tooker also served as
President of Dial/Henkel LLC, the joint venture between Dial and
Henkel KGaA, from September 2000 to April 2002. Mr. Tooker
served as Vice President  Detergents Marketing for
Dial/Henkel LLC from June 1999 to August 2000. From December
1998 to June 1999, he served as Marketing Director 
Laundry Care. From the Spin-off until December 1998,
Mr. Tooker served as Assistant Controller 
Planning and Development.

Mark L. Whitehouse.Mr. Whitehouse has served as
Senior Vice President  International,
Innovation & Business Development since October 2002.
From October 2001 to October 2002, he served as Senior Vice
President  Innovation and Air Fresheners. From August
2000 to October 2001, Mr. Whitehouse served as Senior Vice
President and General Manager  Specialty Personal
Care of Dial. From July 1997 to August 2000, Mr. Whitehouse
served as Vice President-Marketing and from May 1999 to
September 2000, he served as President of Dial/ Henkel LLC.

Joy A. Amundson.Ms. Amundson has been a Director
of Dial since 1997 and currently serves on the Finance and
Governance Committees of the Board of Directors.
Ms. Amundson is a principal in Amundson Partners, Inc., a
healthcare consulting practice. She was Senior Vice President of
Abbott Laboratories, a diversified health care products and
services company, until October 2001. Ms. Amundson was also
President of Ross Products, a division of Abbott Laboratories.
She held a number of management positions after joining Abbott
Laboratories in 1982. Ms. Amundson also is a director of
ILEX, Inc., Lutheran General Hospital and Oridion Medical, Inc.

Joe T. Ford.Mr. Ford was a Director of the
Predecessor Company from 1991 through 1996, and has continued as
a Director of Dial since the Spin-off. Mr. Ford currently
serves on the Executive, Executive Compensation and Finance
Committees of the Board of Directors. Mr. Ford is Chairman
of ALLTEL Corporation (ALLTEL), a telecommunications
and information services company. Mr. Ford retired as Chief
Executive Officer of ALLTEL on July 1, 2002, but retained
his position as Chairman. Mr. Ford became Chief Executive
Officer of ALLTEL in 1987 and Chairman of the Board in 1991.
Mr. Ford also is a director of EnPro Industries, Inc.;
Stephens Group, Inc. and Textron, Inc.

Thomas L. Gossage.Mr. Gossage was a Director of the
Predecessor Company from 1993 through 1996, and has continued as
a Director of Dial since the Spin-off. Mr. Gossage
currently serves on the Executive, Audit and Governance
Committees of the Board of Directors. Mr. Gossage retired
as the Interim Chief Executive Officer of Hercules Incorporated
(Hercules), a worldwide producer of chemicals and
related products in May 2001. Mr. Gossage had originally
retired as Chairman from Hercules in January 1997.
Mr. Gossage also is a director of Fluor Corporation.

Donald E. Guinn.Mr. Guinn was a Director of the
Predecessor Company from 1986 through 1996, and has continued as
a Director of Dial since the Spin-off. Mr. Guinn currently
serves on the Executive, Audit and Finance Committees of the
Board of Directors. Mr. Guinn is Chairman Emeritus of
Pacific Telesis Group, a telecommunications holding company
(known as PacTel), which merged with SBC
Communications Inc. in 1997. Mr. Guinn served as Chairman
and Chief Executive Officer of PacTel from 1984 through his
retirement in 1988. He also is a director of Bank of America
Corporation; Pacific Mutual Life Insurance Company and its
affiliate, Pacific LifeCorp.

James E. Oesterreicher.Mr. Oesterreicher has been a
Director of Dial since 2000 and currently serves on the
Executive, Audit and Executive Compensation Committees of the
Board of Directors.

70



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##### Table of Contents



Mr. Oesterreicher retired as Chairman and
Chief Executive Officer of J.C. Penney Company, Inc., a
department store, drugstore, catalog and e-commerce retailer, in
September 2000. Mr. Oesterreicher had been with
J.C. Penney since 1964 and held a number of other
management positions. He also is a director of Brinker
International, Inc. and TXU Corp.


Michael T. Riordan.Mr. Riordan has been a Director
of Dial since 1997 and currently serves on the Finance and
Governance Committees of the Board of Directors. He was most
recently Chairman, President and Chief Executive Officer of
Paragon Trade Brands, Inc., a leading manufacturer of private
label disposable diapers and related products, prior to its
acquisition by Tyco Healthcare, Inc. in January 2002.
Mr. Riordan also served as President and Chief Operating
Officer of Fort James Corporation, a paper products
manufacturer, from 1997 to 1998. Prior to the merger of Fort
Howard Corporation with James River Corporation,
Mr. Riordan served as Chairman of the Board, President and
Chief Executive Officer of Fort Howard Corporation.
Mr. Riordan also is a director of American Medical
Security, Inc.; Potlatch Corporation and Wallace Computer
Services, Inc.

Barbara S. Thomas.Ms. Thomas has been a Director of
Dial since 1997 and currently serves on the Executive
Compensation and Governance Committees of the Board of
Directors. Ms. Thomas is the Interim Chief Executive
Officer of Ocean Spray Cranberries, Inc., a cooperative of
cranberry and grapefruit growers in the United States and
Canada. Ms. Thomas served as President of Warner-Lambert
Consumer Healthcare, the over-the-counter pharmaceuticals
business of the Warner-Lambert Company, from 1997 until its
purchase by Pfizer Inc. in July 2000. Ms. Thomas was with
the Pillsbury Company from 1993 to 1997, serving last as
President of Pillsbury Canada Ltd. Prior to joining Pillsbury,
Ms. Thomas served as Senior Vice President of Marketing for
Nabisco Brands, Inc. Ms. Thomas also is a director of Ocean
Spray Cranberries, Inc. and Rayovac Corporation.

Salvador M. Villar.Mr. Villar has been a Director of
Dial since 1998 and is currently serving on the Audit and
Executive Compensation Committees of the Board of Directors.
Mr. Villar is President and Chief Executive Officer of
California Commerce Bank, a unit of Citigroup. Mr. Villar
has been with California Commerce Bank since 1981.
Mr. Villar also is a director of Banamex USA Bancorp.



| |                    
| | -------------------
| | Dial Code of Ethics

We have adopted a Code of Ethics & Business
Responsibilities (our Code of Ethics) that applies
to our principal executive officer, principal financial officer,
principal accounting officer or controller and persons
performing similar functions. Our Code of Ethics is located on
our website (www.dialcorp.com). Any amendments or waivers to our
Code of Ethics that apply to the principal executive officer or
senior financial officers will be promptly disclosed on our
website as required by law or by the Securities and Exchange
Commission or by the New York Stock Exchange.




Item 11.     Executive
Compensation

Information concerning executive compensation
matters is incorporated herein by reference to Executive
Compensation, Option Grants in Last Fiscal
Year, Aggregated Stock Option Exercises in Last
Fiscal Year and Fiscal Year-End Options Values,
Pension Plans and Employment and Change of
Control Agreements in the Proxy Statement; provided,
however, that the Executive Compensation Committee Report
on Executive Compensation and the Stock Price
Performance Graph contained in the Proxy Statement are not
incorporated by reference herein.






|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

Information concerning the common stock
beneficially owned by each of our directors, by all our
executive officers and directors as a group and by each of our
known stockholders to be the beneficial owner of more than 5% of
the outstanding common stock is incorporated herein by reference
to Common Stock

71



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##### Table of Contents



Ownership of Directors and Executive
Officers and Common Stock Ownership of Certain
Beneficial Owners in the Proxy Statement.


We maintain the predecessor 1992 Stock Incentive
Plan (the 1992 Plan), the 1996 Stock Incentive
Plan (the 1996 Plan), and the Employee Stock
Purchase Plan (the ESPP), pursuant to which we may
grant equity awards to eligible persons.

The following table gives information about
equity awards under these plans.

|                                                               |       |                         |            |                      |  |                         |       |     |  |  |   |           | 
|-------------------------------------------------------------- | ----- | ----------------------- | ---------- | -------------------- |  | ----------------------- | ----- | --- |  |  | - | --------- | 
|                                                               |       | (a)                     |            | (b)                  |  | (c)                    
|                                                               |       |                         |            |                      |  |                        
|                                                               |       |                         |            |                      |  | Number of Securities   
|                                                               |       |                         |            |                      |  | Remaining Available For
|                                                               |       | Number of Securities    |            |                      |  | Future Issuance Under  
|                                                               |       | to be Issued Upon       |            | Weighted-average     |  | Equity Compensation    
|                                                               |       | Exercise of Outstanding |            | Exercise Price of    |  | Plans (Excluding       
|                                                               |       | Options, Warrants       |            | Outstanding Options, |  | Securities Reflected in
|Plan Category                                                  |       | and Rights              |            | Warrants and Rights  |  | Column (a))            
|                                                               |       |                         |            |                      |  |                        
|Equity compensation plans approved by security
    holders     |       |                         | 10,990,740 | (1)                  |  | $                       | 15.81 | (2) |  |  |   | (3)(4)(5)
|Equity compensation plans not approved by
    security holders |       |                         | 0          |                      |  | $                       | 0.00  |     |  |  | 0 |          
|                                                               |       |                         |            |                      |  |                         |       |     |  |  |   |          
|                                                               | Total |                         |            | 10,990,740           |  |                         |       |     |  |  |   |           | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 26,481 share under the ESPP and
    10,965,259 under the 1992 and 1996 Plans.                                                                                                                                                                                                                                                                                                          
|   
|(2) | The weighted average exercise price of
    outstanding options, warrants and rights is calculated based
    solely on those awards that have a specific exercise price. If
    outstanding ESPP shares and outstanding restricted stock units
    and similar rights were included, and deemed to have an exercise
    price of zero, the weighted average exercise price would be
    $15.7315.
|   
|(3) | At December 31, 2002, there were
    522,911 shares remaining available for future issuance
    under the ESPP.                                                                                                                                                                                                                                                                                 
|   
|(4) | At December 31, 2002, there were no shares
    remaining available for future issuance under the 1992 Plan.                                                                                                                                                                                                                                                                                     
|   
|(5) | The 1996 Plan has an unlimited number of
    nonqualified stock options that can be issued.                                                                                                                                                                                                                                                                                                     




Item 13.     Certain
Relationships and Related Transactions

During the last fiscal year, there were no
relationships or related transactions that are required to be
disclosed herein.




Item 14.     Controls
and Procedures

Within the 90 days prior to the date of this
report, we carried out an evaluation, under supervision and with
participation of management, including our Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of
the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon
that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that Dials disclosure controls and
procedures are effective in timely alerting them to material
information relating to the company (including its consolidated
subsidiaries) required to be included in our periodic SEC
filings. There were no significant changes in our internal
controls or other factors that could significantly affect these
controls subsequent to the date of their evaluation and there
were no corrective actions with regard to significant
deficiencies and material weaknesses.

72



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##### Table of Contents






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

(a) Financial Statements and
Schedules

|     |  |                               |  |                                                                                                                                                       |  |      |    | 
|---- |  | ----------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|     |  |                               |  |                                                                                                                                                       |  | Page
|     |  |                               |  |                                                                                                                                                       |  |     
|(i)  |  | Financial Statements          |  |                                                                                                                                                       |  |     
|     |  | (1)                           |  | Managements Report on Responsibility for
    Financial Reporting                                                                                     |  |      | 33 | 
|     |  | (2)                           |  | Independent Auditors Report                                                                                                                          |  |      | 34 | 
|     |  | (3)                           |  | Consolidated Financial Statements:                                                                                                                    |  |      |    | 
|     |  |                               |  | Consolidated Balance Sheet at December 31,
    2002, and December 31, 2001                                                                            |  |      | 35 | 
|     |  |                               |  | Statement of Consolidated Operations and
    Comprehensive Income for the years ended December 31, 2002,
    December 31, 2001, and December 31, 2000 |  |      | 36 | 
|     |  |                               |  | Statement of Consolidated Cash Flows for the
    years ended December 31, 2002, December 31, 2001, and
    December 31, 2000                          |  |      | 37 | 
|     |  |                               |  | Statement of Consolidated Stockholders
    Equity for the years ended December 31, 2002,
    December 31, 2001, and December 31, 2000                |  |      | 38 | 
|     |  |                               |  | Notes to Consolidated Financial Statements                                                                                                            |  |      | 39 | 
|    
|(ii) |  | Financial Statement Schedules |  |                                                                                                                                                       |  |     

Schedules have been omitted because of the
absence of conditions under which they are required or because
the required material information is included in consolidated
financial statements or notes to the consolidated financial
statements included herein.

(b) Reports on Form 8-K

We filed a Current Report on Form 8-K,
dated October 1, 2002, reporting that Dial issued a press
release relating to the conference call to announce its third
quarter 2002 results to be held on Thursday, October 17,
2002, a copy of which was furnished as
Exhibit 99.

We also filed a Current Report on
Form 8-K, dated October 17, 2002, reporting that Dial
issued a press release declaring a quarterly dividend on Dial
Common Stock, a copy of which was filed as Exhibit 99.1.
Dial issued a second press release relating to its financial
results for the third quarter ended September 28, 2002, and
its outlook for the balance of the year, a copy of which was
furnished as Exhibit 99.2.

We also filed a Current Report on
Form 8-K, dated January 7, 2003, reporting that Dial
issued a press release relating to the conference call to
announce its fourth quarter and fiscal year 2002 results to be
held on Wednesday, January 29, 2003, a copy of which was
furnished as Exhibit 99.

We also filed a Current Report on
Form 8-K, dated January 24, 2003, reporting that Dial
supplied information related to its consolidated income
statement for the first, second and third quarters of 2002 and
the first nine months of 2002, each of which had been restated
to reflect Dials Argentina business as a discontinued
operation. Dial had previously disclosed that it had entered
into an agreement to sell its Argentina business and, subject to
negotiated closing conditions and Argentine governmental
consents, the transaction was expected to close late in the
first quarter or early in the second quarter of 2003.

We also filed a Current Report on
Form 8-K, dated January 29,2003, reporting that Dial
issued a press release relating to its fourth quarter and full
year 2002 earnings and outlook for fiscal 2003, a copy of which
was furnished as Exhibit 99.

We also filed a Current Report on
Form 8-K, dated February 7, 2003, reporting that Dial
issued a press release relating to its analyst and investor
conference to be held on Thursday, February 20, 2003, a
copy of which was furnished as Exhibit 99.

We also filed a Current Report on
Form 8-K, dated February 20, 2003, reporting that, as
previously announced in Dials press release dated
February 7, 2003, Dial held an analyst and investor
conference on February 20, 2003. A copy of the presentation
was furnished as Exhibit 99.

73



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##### Table of Contents



(c) Exhibits

|        |    |             |  |                                                                                                                              |  |                                                                                                                                          
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             |  |                                                                                                                             
|Number  |    | Description |  | Method of Filing                                                                                                            
|        |    |             |  |                                                                                                                             
|        | 3  | (a)         |  | Restated Certificate of Incorporation of the
    Company                                                                     |  | Incorporated by reference to Exhibit 3(a) of
    Dials Form 10/A (Am. No. 2), dated July 26,
    1996 (the Form 10).                   
|        | 3  | (b)         |  | Bylaws of the Company                                                                                                        |  | Incorporated by reference to Exhibit 3(b) of
    Dials Form 10-Q for the quarter ended July 4,
    1998.                                
|        | 4  | (a)         |  | Form of Rights Agreement between the Company and
    the Rights Agent                                                        |  | Incorporated by reference to Exhibit 4 of
    the Form 10.                                                                               
|        | 4  | (b)         |  | Indenture, dated September 23, 1996, between
    The Dial Corporation and Norwest Bank Arizona, N.A.                         |  | Incorporated by reference to Exhibit 4(b) of
    Dials Form 10-K for the fiscal year ended
    December 31, 1998 (the 1998 Form 10-K).
|        | 4  | (c)         |  | First Supplemental Indenture, dated
    September 23, 1996, between The Dial Corporation and
    Norwest Bank Arizona, N.A.  |  | Incorporated by reference to Exhibit 4(c) of
    the 1998 Form 10-K.                                                                     
|        | 4  | (d)         |  | Second Supplemental Indenture, dated
    August 17, 2001 between The Dial Corporation and Wells
    Fargo Bank Arizona, N.A. |  | Incorporated by reference to Exhibit 4.1 of
    the Form 8-K dated August 17, 2001.                                                      
|        | 10 | (a)         |  | Directors Indemnification Agreement+                                                                                        |  | Incorporated by reference to Exhibit 10(a)
    of the Form 10-Q for the quarter ended September 28,
    1996.                            
|        | 10 | (b)         |  | Officers Indemnification Agreement+                                                                                         |  | Incorporated by reference to Exhibit 10(b)
    of the Q3 1996 Form 10-Q.                                                                 
|        | 10 | (c)         |  | The Dial Corporation Future Investment
    Restoration Plan+                                                                 |  | Incorporated by reference to Exhibit 10(d)
    of the Form 10-K for the fiscal year ended
    December 31, 2001.                         
|        | 10 | (d)         |  | The Dial Corporation Future Security Restoration
    Plan+                                                                   |  | Incorporated by reference to Exhibit 10(e)
    of the 2001 10-K.                                                                         
|        | 10 | (e)         |  | The Dial Corporation Amended & Restated 1996
    Stock Incentive Plan+*                                                      |  |                                                                                                                                          
|        | 10 | (f)         |  | Annual Incentive Plan Agreement+                                                                                             |  | Incorporated by reference to Exhibit 10(f)
    of the Form 10-K for the fiscal year ended
    December 28, 1996.                         
|        | 10 | (g)         |  | Form of The Dial Corporation Directors
    Charitable Award Program+                                                        |  | Incorporated by reference to Exhibit 10(f)
    of the Form 10.                                                                           
|        | 10 | (h)         |  | Form of Change of Control Agreements with certain
    Executive Officers of the Company+                                     |  | Incorporated by reference to Exhibit 10(h)
    of the 1998 Form 10-K.                                                                    
|        | 10 | (i)         |  | The Dial Corporation Benefits Protection Trust
    for Change-In-Control Arrangements+                                       |  | Incorporated by reference to Exhibit 10(a)
    of the Form 10-Q for the quarter ended March 30, 2002.                                    
|        | 10 | (j)         |  | Credit Agreement*                                                                                                            |  |                                                                                                                                          
|        | 10 | (k)         |  | Form of The Dial Corporation Employee Equity Trust                                                                           |  | Incorporated by reference to Exhibit 10(k)
    of the Form 10.                                                                           
|        | 10 | (l)         |  | The Dial Corporation Amended and Restated
    Directors Deferred Compensation Plan+                                          |  | Incorporated by reference to Exhibit 10(k)
    of the Form 10-K for the 2001 Form 10-K.                                                  
|        | 10 | (m)         |  | The Dial Corporation Amended and Restated
    Management Deferred Compensation Plan+                                         |  | Incorporated by reference to Exhibit 10(l)
    of the Form 10-K for the 2001 Form 10-K.                                                  
|        | 10 | (n)         |  | Employment Agreement with Herbert M. Baum, dated
    August 15, 2002+                                                        |  | Incorporated by reference to Exhibit 10.1 of
    the Form 10Q for the quarter ended September 28, 2002.                                  

74



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|        |    |             |  |                                                                                                         |  |                    
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------- |  | -------------------
|Exhibit |    |             |  |                                                                                                        
|Number  |    | Description |  | Method of Filing                                                                                       
|        |    |             |  |                                                                                                        
|        | 10 | (o)         |  | Waiver of Claims and Acknowledgment Agreement
    with Mark R. Shook dated October 14, 2002+*           |  |                    
|        | 21 |             |  | List of Significant Subsidiaries*                                                                       |  |                    
|        | 23 |             |  | Consent of Deloitte & Touche LLP*                                                                       |  |                    
|        | 24 |             |  | Power of Attorney                                                                                       |  | See Signature Page.
|        | 99 | (a)         |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002* |  |                    
|        | 99 | (b)         |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002* |  |                    
|        | 99 | (c)         |  | Code of Ethics & Business Responsibilities*                                                             |  |                    
|        | 99 | (d)         |  | Corporate Governance Guidelines*                                                                        |  |                    



---



|  |                                                             
|- | ------------------------------------------------------------
|+ | Management contract or compensatory plan or
    arrangement.
| 
|* | Filed herewith.                                             

75



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
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, in Scottsdale, Arizona,
on March 12, 2003.



| |                     
| | --------------------
| | THE DIAL CORPORATION



| |     |                    
| | --- | -------------------
| | By: | /s/ HERBERT M. BAUM

| |                                 
| | --------------------------------
| |                                 
| | Herbert M. Baum                 
| | Chairman of the Board, President
| | and Chief Executive Officer     

KNOW ALL PERSONS BY THESE PRESENT that the
persons whose signatures appear below, constitute and appoint
Herbert M. Baum and Conrad A. Conrad, and each of them, as their
true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for them and in their names,
places and steads, in any and all capacities, to sign the Annual
Report on Form 10-K for the fiscal year ended
December 31, 2002, and any and all amendments to the
Form 10-K, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every
act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as they might or
could do in person, thereby ratifying and confirming all that
said attorney-in-fact and agent, or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

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 as of March 12, 2003.

|                                       |  |                                                                                                |  | 
|-------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | 
|                                       |  |                                                                                               
|Signature                              |  | Title                                                                                         
|                                       |  |                                                                                               
|/s/ HERBERT M. BAUMHerbert M. Baum     |  | Chairman of the Board, President and Chief
    Executive Officer (Principal Executive Officer)
|                                      
|/s/ CONRAD A. CONRADConrad A. Conrad   |  | Executive Vice President and Chief Financial
    Officer (Principal Financial Officer)        
|                                      
|/s/ JOHN F. TIERNEYJohn F. Tierney     |  | Senior Vice President and Controller (Principal
    Accounting Officer)                       
|                                      
|/s/ JOY A. AMUNDSONJoy A. Amundson     |  | Director                                                                                      
|                                      
|/s/ JOE T. FORDJoe T. Ford             |  | Director                                                                                      
|                                      
|/s/ THOMAS L. GOSSAGEThomas L. Gossage |  | Director                                                                                      
|                                      
|/s/ DONALD E. GUINNDonald E. Guinn     |  | Director                                                                                      

76



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|                                                 |  |          |  | 
|------------------------------------------------ |  | -------- |  | 
|                                                 |  |         
|Signature                                        |  | Title   
|                                                 |  |         
|                                                
|/s/ JAMES E. OESTERREICHERJames E. Oesterreicher |  | Director
|                                                
|/s/ MICHAEL T. RIORDANMichael T. Riordan         |  | Director
|                                                
|/s/ BARBARA S. THOMASBarbara S. Thomas           |  | Director
|                                                
|/s/ SALVADOR M. VILLARSalvador M. Villar         |  | Director

77



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##### Table of Contents



I, Herbert M. Baum, certify that:

1.     I have reviewed
this annual report on Form 10-K of The Dial Corporation;

2.     Based on my
knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of
registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.     The
registrants other certifying officers and I have indicated
in this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.



| |                                                                 
| | ----------------------------------------------------------------
| | /s/ HERBERT M. BAUM                                             
| |                                                                 
| | Herbert M. Baum                                                 
| | Chairman of the Board, President and Chief
    Executive Officer

Date:

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I, Conrad A. Conrad, certify that:

1.     I have reviewed
this annual report on Form 10-K of The Dial Corporation;

2.     Based on my
knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report;

3.     Based on my
knowledge, the financial statements, and other financial
information included in this annual report, fairly present in
all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;

4.     The
registrants other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the registrant and have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5.     The
registrants other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrants auditors and the audit committee of
registrants board of directors (or persons performing the
equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6.     The
registrants other certifying officers and I have indicated
in this annual report whether there were significant changes in
internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.



| |                                   
| | ----------------------------------
| | /s/ CONRAD A. CONRAD              
| |                                   
| | Conrad A. Conrad                  
| | Executive Vice President and Chief
| | Financial Officer                 

Date:

79



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EXHIBIT INDEX

|        |    |             |  |                                                                                                                              |  |                                                                                                                                          
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |             |  |                                                                                                                             
|Number  |    | Description |  | Method of Filing                                                                                                            
|        |    |             |  |                                                                                                                             
|        | 3  | (a)         |  | Restated Certificate of Incorporation of the
    Company                                                                     |  | Incorporated by reference to Exhibit 3(a) of
    Dials Form 10/A (Am. No. 2), dated July 26,
    1996 (the Form 10).                   
|        | 3  | (b)         |  | Bylaws of the Company                                                                                                        |  | Incorporated by reference to Exhibit 3(b) of
    Dials Form 10-Q for the quarter ended July 4,
    1998.                                
|        | 4  | (a)         |  | Form of Rights Agreement between the Company and
    the Rights Agent                                                        |  | Incorporated by reference to Exhibit 4 of
    the Form 10.                                                                               
|        | 4  | (b)         |  | Indenture, dated September 23, 1996, between
    The Dial Corporation and Norwest Bank Arizona, N.A.                         |  | Incorporated by reference to Exhibit 4(b) of
    Dials Form 10-K for the fiscal year ended
    December 31, 1998 (the 1998 Form 10-K).
|        | 4  | (c)         |  | First Supplemental Indenture, dated
    September 23, 1996, between The Dial Corporation and
    Norwest Bank Arizona, N.A.  |  | Incorporated by reference to Exhibit 4(c) of
    the 1998 Form 10-K.                                                                     
|        | 4  | (d)         |  | Second Supplemental Indenture, dated
    August 17, 2001 between The Dial Corporation and Wells
    Fargo Bank Arizona, N.A. |  | Incorporated by reference to Exhibit 4.1 of
    the Form 8-K dated August 17, 2001.                                                      
|        | 10 | (a)         |  | Directors Indemnification Agreement+                                                                                        |  | Incorporated by reference to Exhibit 10(a)
    of the Form 10-Q for the quarter ended September 28,
    1996.                            
|        | 10 | (b)         |  | Officers Indemnification Agreement+                                                                                         |  | Incorporated by reference to Exhibit 10(b)
    of the Q3 1996 Form 10-Q.                                                                 
|        | 10 | (c)         |  | The Dial Corporation Future Investment
    Restoration Plan+                                                                 |  | Incorporated by reference to Exhibit 10(d)
    of the Form 10-K for the fiscal year ended
    December 31, 2001.                         
|        | 10 | (d)         |  | The Dial Corporation Future Security Restoration
    Plan+                                                                   |  | Incorporated by reference to Exhibit 10(e)
    of the 2001 10-K.                                                                         
|        | 10 | (e)         |  | The Dial Corporation Amended & Restated 1996
    Stock Incentive Plan+*                                                      |  |                                                                                                                                          
|        | 10 | (f)         |  | Annual Incentive Plan Agreement+                                                                                             |  | Incorporated by reference to Exhibit 10(f)
    of the Form 10-K for the fiscal year ended
    December 28, 1996.                         
|        | 10 | (g)         |  | Form of The Dial Corporation Directors
    Charitable Award Program+                                                        |  | Incorporated by reference to Exhibit 10(f)
    of the Form 10.                                                                           
|        | 10 | (h)         |  | Form of Change of Control Agreements with certain
    Executive Officers of the Company+                                     |  | Incorporated by reference to Exhibit 10(h)
    of the 1998 Form 10-K.                                                                    
|        | 10 | (i)         |  | The Dial Corporation Benefits Protection Trust
    for Change-In-Control Arrangements+                                       |  | Incorporated by reference to Exhibit 10(a)
    of the Form 10-Q for the quarter ended March 30, 2002.                                    
|        | 10 | (j)         |  | Credit Agreement*                                                                                                            |  |                                                                                                                                          
|        | 10 | (k)         |  | Form of The Dial Corporation Employee Equity Trust                                                                           |  | Incorporated by reference to Exhibit 10(k)
    of the Form 10.                                                                           
|        | 10 | (l)         |  | The Dial Corporation Amended and Restated
    Directors Deferred Compensation Plan+                                          |  | Incorporated by reference to Exhibit 10(k)
    of the Form 10-K for the 2001 Form 10-K.                                                  
|        | 10 | (m)         |  | The Dial Corporation Amended and Restated
    Management Deferred Compensation Plan+                                         |  | Incorporated by reference to Exhibit 10(l)
    of the Form 10-K for the 2001 Form 10-K.                                                  

80



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|        |    |             |  |                                                                                                         |  |                                                                                                        
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------
|Exhibit |    |             |  |                                                                                                        
|Number  |    | Description |  | Method of Filing                                                                                       
|        |    |             |  |                                                                                                        
|        | 10 | (n)         |  | Employment Agreement with Herbert M. Baum, dated
    August 15, 2002+                                   |  | Incorporated by reference to Exhibit 10.1 of
    the Form 10Q for the quarter ended September 28, 2002.
|        | 10 | (o)         |  | Waiver of Claims and Acknowledgment Agreement
    with Mark R. Shook dated October 14, 2002+*           |  |                                                                                                        
|        | 21 |             |  | List of Significant Subsidiaries*                                                                       |  |                                                                                                        
|        | 23 |             |  | Consent of Deloitte & Touche LLP*                                                                       |  |                                                                                                        
|        | 24 |             |  | Power of Attorney                                                                                       |  | See Signature Page.                                                                                    
|        | 99 | (a)         |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002* |  |                                                                                                        
|        | 99 | (b)         |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002* |  |                                                                                                        
|        | 99 | (c)         |  | Code of Ethics & Business Responsibilities*                                                             |  |                                                                                                        
|        | 99 | (d)         |  | Corporate Governance Guidelines*                                                                        |  |                                                                                                        



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|  |                                                             
|- | ------------------------------------------------------------
|+ | Management contract or compensatory plan or
    arrangement.
| 
|* | Filed herewith.                                             

81