UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 25, 2004

OR

For the Transition period from              to             

Commission file number 1-11657

TUPPERWARE CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (407) 826-5050

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

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

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

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

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

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price ($19.00) of such common equity on the New York Stock Exchange-Composite Transaction Listing on June 25, 2004, the last business day of the registrant’s most recently completed second fiscal quarter: $1,087,019,925.

As of March 7, 2005, 59,374,517 shares of the Common Stock, $0.01 par value, of the Registrant were outstanding.

Documents Incorporated by Reference:

Portions of the Proxy Statement relating to the Annual Meeting of Shareholders to be held May 11, 2005 are incorporated by reference into Part III of this Report.

PART I

Item 1. Business

(a) General Development of Business

Tupperware Corporation (“Registrant” or “Tupperware”), a $1.2 billion multinational company, is one of the world’s leading direct sellers, supplying premium food storage, preparation and serving items to consumers in almost 100 countries through its Tupperware* brand, and premium beauty and skin care products through its BeautiControl* brand in North America, Latin America and Asia Pacific. The Registrant is a Delaware corporation that was organized on February 8, 1996 in connection with the corporate reorganization of Premark International, Inc. (“Premark”). In the reorganization, the businesses of the Registrant and certain other assets and liabilities of Premark and its subsidiaries were transferred to the Registrant. On May 31, 1996, the Registrant became a publicly held company through the pro rata distribution by Premark to its shareholders of all of the outstanding shares of common stock of the Registrant. On October 18, 2000, the Registrant acquired 100 percent of the stock of BeautiControl, Inc. (“BeautiControl”).

(b) New York Stock Exchange – Required Disclosures

General. The address of the Registrant’s principal office is 14901 S. Orange Blossom Trail, Orlando, Florida 32837. The names of the Registrant’s directors are Catherine A. Bertini, Rita Bornstein, Kriss Cloninger, III, E.V. Goings, Clifford J. Grum, Joe R. Lee, Angel R. Martinez, Bob Marbut, Robert J. Murray, David R. Parker, Joyce M. Roché and M. Anne Szostak. Members of the Audit and Corporate Responsibility Committee of the Board of Directors are Dr. Bornstein and Messrs. Cloninger, Grum (Chair), Martinez and Murray. The members of the Compensation and Governance Committee of the Board of Directors are Ms. Bertini, Ms. Roché, Ms. Szostak (Chair), and Messrs. Lee, Marbut and Parker. The members of the Executive Committee of the Board of Directors are Ms. Szostak and Messrs. Goings (Chair), Grum and Lee. The Registrant’s officers and the number of its employees are set forth below in Part I of this Annual Report on Form 10-K. The name and address of the Registrant’s transfer agent and registrar is Wells Fargo Bank, N.A., c/o Wells Fargo Shareowner Services, 161 North Concord Exchange, South St. Paul, MN 55075. The number of the Registrant’s shareholders is set forth below in Part II, Item 5 of this Annual Report on Form 10-K. The Registrant is satisfying its annual distribution requirement to shareholders under the New York Stock Exchange (“NYSE”) rules by the distribution of its Annual Report on Form 10-K as filed with the SEC in lieu of a separate annual report.

Corporate Governance. Investors can obtain access to periodic reports and corporate governance documents, including board committee charters, corporate governance principles and codes of conduct and ethics for financial executives, and the Registrant’s transfer agent and registrar through the Registrant’s website free of charge (as soon as reasonably practicable after reports are filed with the Securities and Exchange Commission (“SEC”) in the case of periodic reports) by going to www.tupperware.com and searching under Company/Investor Relations/Shareholder Information. Such information, which is provided for convenience but is not incorporated by reference into this filed document, is available in print to any shareholder who requests it in writing from the Corporate Secretary’s Department, Tupperware Corporation, P.O. Box 2353, Orlando, Florida 32802-2353. The chief executive officer of the Registrant has certified to the NYSE that he is not aware of any violation by the Registrant of NYSE corporate governance listing standards. The Registrant’s Chief Executive Officer and Chief Financial Officer have filed with the Securities and Exchange Commission their respective certifications in Exhibits 31.1 and 31.2 of the Annual Report on Form 10-K in response to Section 302 of the Sarbanes-Oxley Act of 2002.

BUSINESS OF TUPPERWARE CORPORATION

The Registrant is a worldwide direct selling consumer products company engaged in the manufacture and sale of Tupperware products and BeautiControl cosmetics and personal care products. Each business manufactures and markets a broad line of high quality products.

I. PRINCIPAL PRODUCTS

Tupperware. The core of Tupperware’s product line consists of food storage, serving and preparation products. Tupperware also has an established line of kitchen gadgets, children’s educational toys, microwave products and gifts. The line of Tupperware products has expanded over the years with products such as Modular Mates*, FridgeSmart* One Touch* canisters, the Rock ‘N Serve* microwave line, OvenWorks* and silicon baking forms for microwave or oven use, Open House and Elegant serving lines, the Chef Series* knives and cookware, Stuffables* and CheeseSmart* storage containers, plus many specialized products for kitchen and home.

(Words followed by * are registered and unregistered Trademarks of the Registrant.)

Tupperware continues to introduce new designs, colors and decoration in its product lines, to vary its product offerings by season and to extend existing products into new markets around the world. The development of new products varies in different

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markets in order to address differences in cultures, lifestyles, tastes and needs of the markets. New products introduced in 2004 included a wide range of products in all four of Tupperware’s geographic areas, covering both core business areas and new categories. Some of the new products and categories are spices and seasonings and its new Flatout*, Heat and Serve and CheeseSmart* containers. New product development and introduction will continue to be an important part of Tupperware’s strategy. Tupperware’s licensing business continues with existing partners such as The Walt Disney Company, Mattel, Warner Bros. and the National Football League.

BeautiControl. BeautiControl manufactures and distributes skin care products, cosmetics, bath and body care, toiletries, fragrances, and related products. New products introduced in 2004 included reformulated and repackaged Skinlogics* basic skin care line and Therma del Sol,* a line of in-home spa quality body treatments. BeautiControl sells its products through independent sales persons called directors and consultants, who purchase the products from BeautiControl and then sell them directly to consumers in the home or workplace. Outside the United States and Canada, BeautiControl products are sold within the Tupperware organization structure.

II. MARKETS

Tupperware. Tupperware’s business is operated on the basis of four geographic markets: Europe (Europe, Africa and the Middle East), Asia Pacific, Latin America and North America. Tupperware products are sold in almost 100 foreign countries and in the United States and it has operations in the majority of such countries. For the past five fiscal years, sales in foreign countries represented, on average, approximately 80 percent of total revenues from the sale of Tupperware products.

Market penetration varies throughout the world. Several “developing” areas that have low penetration, such as Latin America, Asia and Eastern and Central Europe, provide significant growth potential for Tupperware. Tupperware’s strategy continues to include expansion and greater penetration into new markets throughout the world.

BeautiControl. BeautiControl’s products and image services are provided to clients via an independent sales force in North America, Latin America and Asia Pacific.

III. DISTRIBUTION OF PRODUCTS

Tupperware. Tupperware’s products are distributed worldwide primarily through the “direct selling” method of distribution, in which products are sold to consumers outside traditional retail store channels. The distributorship system facilitates the timely distribution of products to consumers, and establishes uniform practices regarding the use of Tupperware trademarks and administrative arrangements with Tupperware, such as order entering, delivering and paying along with recruiting and training dealers.

Tupperware products distributed under the direct selling method are primarily sold directly to distributors or dealers throughout the world. Distributors are granted the right to market Tupperware products using parties and other non-traditional retail methods and to utilize the Tupperware trademark. The vast majority of Tupperware’s distribution system is composed of distributors, managers and dealers (known in North America as consultants) who are independent contractors and not employees of Tupperware. In certain limited circumstances, Tupperware acquires ownership of distributorships for a period of time, until an independent distributor can be installed, in order to maintain market presence. During 2004, Tupperware began the introduction of a new multi-tiered compensation plan in the United States for the benefit of its independent sales force members.

In addition to the introduction of new products and development of new geographic markets, a key element of Tupperware’s strategy is expanding its business by increasing the number of dealers, managers and distributors. Under the Tupperware system, distributors recruit, train, and motivate a large sales force. Managers are developed and promoted by distributors to assist the distributors in recruiting, training and motivating dealers, while continuing to hold their own parties. Over the past several years in Tupperware’s United States business, its distributors have transitioned to operate under a new business model, in which many administrative tasks are performed by Tupperware since sales force orders and payments are made directly to the Company. This allows the distributor to concentrate on recruiting, training and motivating sales forces.

As of December 25, 2004, the Tupperware distribution system had approximately 1,900 distributors, 58,600 managers, and 886,000 dealers worldwide.

Tupperware relies primarily on the “party” method of sales, which is designed to enable the purchaser to appreciate through demonstration the features and benefits of Tupperware products. Demonstrations, which are sometimes referred to as “Tupperware parties,” are held in homes, offices, social clubs and other locations. Tupperware products are also promoted through brochures mailed to persons invited to attend Tupperware parties and various other types of demonstrations. Sales of Tupperware products are supported by Tupperware through a program of sales promotions, sales and training aids and motivational conferences for the independent sales force. In addition, to support its sales force, Tupperware utilizes catalogs, television and magazine advertising, which help increase its sales levels with hard-to-reach customers and generate sales force leads for parties and new dealers.

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In 2004, Tupperware continued the implementation around the world of its integrated direct access strategies to allow consumers to obtain Tupperware products other than by attending a Tupperware party and to enhance its core party plan business. These strategies include retail access points, Internet selling, (which includes the option of personal websites for the North America sales force), and television shopping. In addition, Tupperware enters into business-to-business transactions, in which Tupperware sells products to a partner company, whose products are combined with Tupperware products and sold through the partner’s distribution channel, with a link back to Tupperware’s party plan business to generate additional Tupperware parties.

The distribution of products to consumers is primarily the responsibility of distributors, who often maintain their own inventory of Tupperware products, the necessary warehouse facilities, and delivery systems; however, in some situations, Tupperware performs warehousing and selling functions and pays the distributor a commission for sales activity. In certain markets, Tupperware offers distributors the use of a delivery system of direct product shipment to consumers or dealers, which can further reduce distributors’ costs and leaves them more time to recruit, train and motivate their sales forces.

BeautiControl. BeautiControl’s skin care, cosmetics and related products are sold through consultants and directors who are independent contractors, not employees of BeautiControl. As of December 25, 2004, the total sales force count was approximately 85,800.

The BeautiControl sales force reaches customers in group settings and through home demonstrations called Spa ESCAPEs or Image Parties. Introduced in 2003, Spa ESCAPEs provide the rejuvenating and relaxing benefits of a day spa while the customers learn the benefits of BeautiControl products and learn how to affordably duplicate the spa experience in their homes. Additionally, the sales force is encouraged to market the products through personal consultations, product brochures and, in the United States, company-developed and -sponsored personal internet web pages called BeautiPage* in order to utilize multiple selling opportunities.

In order to provide immediate product delivery, the sales force may maintain a small inventory of products.

In the United States, BeautiControl maintains BeautiControl.com through which consumers can order products, and BeautiNet* through which the sales force can place orders and recruit.

IV. COMPETITION

Tupperware. There are two primary competitive factors which affect the Registrant’s business: (i) competition with other “direct sales” companies for sales personnel and demonstration dates; and (ii) competition in the markets for food storage, serving and preparation containers, toys and gifts in general. Also, Tupperware has differentiated itself from its competitors through price, quality of products (lifetime warranty on most Tupperware products) and new products. Tupperware believes it holds a significant market share in each of these markets in many countries.

BeautiControl. There are many competitors in the cosmetics business and the principal bases of competition generally are marketing, price, quality and newness of products. BeautiControl has differentiated itself and its products from the industry in general through the use of a number of value-added services and by being technologically at the forefront of the industry.

V. EMPLOYEES

The Registrant employs approximately 5,900 people, of whom approximately 1,200 are based in the United States.

VI. RESEARCH AND DEVELOPMENT

The Registrant incurred expenses of approximately $13.0 million, $13.6million and $12.0 million for fiscal years ended 2004, 2003 and 2002, respectively, on research and development activities for new products.

VII. RAW MATERIALS

Tupperware. Products manufactured by Tupperware require plastic resins meeting its specifications. These resins are purchased through various arrangements with a number of large chemical companies located throughout Tupperware’s markets. As a result, Tupperware has not experienced difficulties in obtaining adequate supplies and generally has been successful in obtaining favorable resin prices on a relative basis. Research and development relating to resins used in Tupperware products are performed by both Tupperware and its suppliers.

BeautiControl. Materials used in BeautiControl’s skin care, cosmetic and bath and body care products consist primarily of readily available ingredients, containers and packaging materials. Such raw materials and components used in goods manufactured and assembled by BeautiControl are available from a number of sources. To date, BeautiControl has been able to secure an adequate supply of raw materials and components for its manufacturing, and it endeavors to maintain relationships with backup suppliers in an effort to ensure that no interruptions occur in its operations.

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VIII. TRADEMARKS AND PATENTS

Tupperware. Tupperware considers its trademarks and patents to be of material importance to its business; however, except for the Tupperware* trademark, Tupperware is not dependent upon any single patent or trademark, or group of patents or trademarks. The Tupperware* trademark is registered on a country-by-country basis. The current duration for such registration ranges from five years to ten years; however, each such registration may be renewed an unlimited number of times. The patents and trademarks used in Tupperware’s business are registered and maintained on a worldwide basis, with a variety of durations. Tupperware has followed the practice of applying for design and utility patents with respect to most of its significant patentable developments. The licensed characters from the licensors referenced under the caption “Principal Products” have become an important part of Tupperware’s business and those licenses have various durations.

BeautiControl. BeautiControl has registered its trademarks and servicemarks in the United States and has registered or is in the process of registering its principal trademarks and servicemarks in many other countries. The Company has a patent on the formulae for its “REGENERATION”* and “REGENERATION”* alpha-hydroxy acid-based products.

IX. ENVIRONMENTAL LAWS

Compliance with federal, state and local environmental protection laws has not had in the past, and is not expected to have in the future, a material effect upon the Registrant’s capital expenditures, liquidity, earnings or competitive position.

X. OTHER

Tupperware. Sales do not vary significantly on a quarterly basis; however, third quarter sales are generally lower than the other quarters in any year due to vacations by Tupperware’s dealers and their customers, as well as Tupperware’s reduced promotional activities during such quarter. Sales generally increase in the fourth quarter as it includes traditional gift-giving occasions in many of Tupperware’s markets and as children return to school and households refocus on activities that include the use of Tupperware’s products along with increased promotional activities supporting these opportunities.

BeautiControl. BeautiControl is not subject to seasonality to any significant extent.

General. Generally, there are no working capital practices or backlog conditions which are material to an understanding of the Registrant’s business. The Registrant’s business is not dependent on a small number of customers, nor is any of its business subject to renegotiation of profits or termination of contracts or subcontracts at the election of the United States government.

XI. EXECUTIVE OFFICERS OF THE REGISTRANT

Following is a list of the names and ages of all the Executive Officers of the Registrant, indicating all positions and offices with the Registrant held by each such person, and each such person’s principal occupations or employment during the past five years. Each such person has been elected to serve until the next annual election of officers of the Registrant (expected to occur on May 11, 2005).

Positions and Offices Held and Principal Occupations

of Employment During Past Five Years

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Item 2. Properties

The principal executive office of the Registrant is owned by the Registrant and is located in Orlando, Florida. The Registrant owns and maintains Tupperware manufacturing plants in Belgium, Brazil, France, Greece, Japan, Korea, Mexico, the Philippines, Portugal, South Africa and the United States, and leases manufacturing and distribution facilities in China, India, and Venezuela. The Registrant owns and maintains the BeautiControl headquarters in Texas and leases its manufacturing and distribution facilities in Texas. The Registrant conducts a continuing program of new product design and development at its facilities in Florida, Texas, Japan and Belgium. None of the owned principal properties is subject to any encumbrance material to the consolidated operations of the Registrant. The Registrant considers the condition and extent of utilization of its plants, warehouses and other properties to be good, the capacity of its plants and warehouses generally to be adequate for its needs, and the nature of the properties to be suitable for its needs.

In addition to the above-described improved properties, the Registrant owns approximately 450 acres of unimproved real estate surrounding its corporate headquarters in Orlando, Florida, which have been prepared for a variety of development purposes. The Registrant began selling this property in 2002, and this project is expected to continue through 2007.

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Item 3. Legal Proceedings

A number of ordinary-course legal and administrative proceedings against the Registrant are pending. In addition to such proceedings, there are certain proceedings that involve the discharge of materials into or otherwise relating to the protection of the environment. Certain of such proceedings involve federal environmental laws such as the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as well as state and local laws. The Registrant establishes reserves with respect to certain of such proceedings. Because of the involvement of other parties and the uncertainty of potential environmental impacts, the eventual outcomes of such actions and the cost and timing of expenditures cannot be determined with certainty. It is not expected that the outcome of such proceedings, either individually or in the aggregate, will have a materially adverse effect upon the Registrant.

As part of the 1986 reorganization involving the formation of Premark International, Inc., Premark was spun-off by Dart & Kraft, Inc., and Kraft Foods, Inc. assumed any liabilities arising out of any legal proceedings in connection with certain divested or discontinued former businesses of Dart Industries Inc., a subsidiary of the Registrant, including matters alleging product and environmental liability. The assumption of liabilities by Kraft Foods, Inc. remains effective subsequent to the distribution of the equity of the Registrant to Premark shareholders.

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

None.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Registrant has not sold any securities in 2002 through 2004 which were not registered under the Securities Act of 1933. As of March 1, 2005, the Registrant had 61,933 shareholders of record and beneficial holders. The principal United States market on which the Registrant’s common stock is being traded is the New York Stock Exchange. The stock price and dividend information set forth in Note 15 to the consolidated financial statements, entitled “Quarterly Financial Summary (Unaudited),” and the rights agreements information set forth in Note 16 to the consolidated financial statements, entitled “Rights Agreement” is included in Item 8 of Part II of this Report.

The following information relates to the repurchase of the Registrant’s equity securities by the Registrant during any month within the fourth quarter of the Registrant’s fiscal year covered by this Report:

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Item 6. Selected Financial Data

The following table contains the Company’s selected historical financial information for the last five years. The selected financial information below has been derived from the Company’s audited consolidated financial statements which, for data presented for fiscal years 2004, 2003 and 2002, are included as Item 8 of this Report. This data should be read in conjunction with the Company’s other financial information, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A)” and the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included as Items 7 and 8, respectively, in this Report.

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

The following is a discussion of the results of operations for 2004 compared with 2003 and 2003 compared with 2002, and changes in financial condition during 2004. The Company’s fiscal year ends on the last Saturday of December and will include 53 weeks during 2005. This information should be read in conjunction with the consolidated financial information included as Item 8 of this Report.

The Company’s primary means of distributing its product is through independent sales organizations and individuals, which are also its customers. The majority of the Company’s products are in turn sold to end customers who are not members of the Company’s sales forces. The Company is largely dependent upon these independent sales organizations and individuals to reach end consumers and any significant disruption of this distribution network would have a negative financial impact on the Company and its ability to generate sales, earnings and operating cash flows. The Company’s primary business drivers are the size, activity and productivity of its independent sales organizations.

Overview

Overall, the Company had a good year in 2004 with net income and cash flow up significantly. Reported sales in U.S. dollars were up slightly but down slightly in local currencies. The year was really a mix of the positive and the negative on the sales front. Significant declines in both the United States and Japan as well as flat sales in Germany were balanced by continued strength in the Company’s emerging markets as well as improvement in many of the Company’s smaller established markets. In particular, both Russia and China continued to grow quickly. In addition, BeautiControl North America had an outstanding year showing significant sales growth on the strength of a substantially larger total and active sales force. With the nearly flat sales in Germany, combined with a planned reduction in business-to-business sales of nearly $10 million, Europe did well to maintain a flat sales level. The segment continued to battle a challenging consumer spending environment in most of the established markets. Asia Pacific struggled with continued difficulties in Japan and to a lesser extent, Indonesia, during the year. Indonesia has been addressing reductions in its sales force and their activity and now must contend with the aftereffects of the tsunami at the end of 2004. The Company continues to gather data to determine the impact of this tragedy on its business not only in Indonesia but throughout the region. While the impact is difficult to foresee, the Company does not currently believe that it will have material impact on the Asia Pacific segment. Japan is in the midst of a business transformation from what had become a wholesale buyers club for high priced third party sourced product to a party plan business promoting an earnings opportunity and core Tupperware product line. These challenges overshadowed the success showed in most of the other major markets with the Philippines making good progress and Korea continuing to move forward. Beauty sales continue to be a developing opportunity with continued progress in Malaysia/Singapore and beauty products will be launched in the Philippines in the latter part of 2005. Latin America also had a nice year with strong local currency sales growth as Mexico rebounded from early difficulties to show a slight sales increase and both Venezuela and Brazil made significant progress in improving pricing and cost structures. The sale of beauty products continued in Mexico and is being launched in Venezuela. Product registration is in process in Brazil in anticipation of launch there as well, although the timing is not yet determinable. The faster expansion of beauty in Latin America is a major focus for the Company and it is prepared to make strategic investments, in the form of higher operating costs, as necessary to further this objective. North America reflected weakness in the United States business which is still battling unfavorable sales force statistics. The market has been involved in a transformation involving refreshing its party format and the roll out of a new multi-tiered compensation plan that will provide everyone within the sales force the opportunity to reach the top level of the organization without significant monetary investment. Similar models have been used successfully within the Company and the United States direct selling industry. While the changes are progressing on schedule, the full benefit is not expected in 2005 and North American sales are not expected to grow during the year.

For the year, net income was up significantly on the strength of local currency improvement in four of the Company’s five segments as well as a generally weaker U.S. dollar. There was also a significant reduction in foreign exchange losses due to the Company’s 2003 decision to halt a program to hedge certain cash flows and higher gains on property dispositions primarily related to an ongoing program to market land for development near the Company’s headquarters offices in Orlando, Florida. Additionally, the net favorable resolution of domestic and international income tax contingencies/settlements resulted in a favorable effective tax rate during 2004 which was slightly lower than that of 2003. A more normalized rate of approximately 22 percent is foreseen for 2005. Cost rationalization activities continued in 2004 and resulted in a charge for re-engineering and impairment costs of $7 million for severance and write offs related to closed or restructured facilities. In addition, a significant restructure of the Company’s Hemingway, South Carolina manufacturing facility was announced in January 2005. Other manufacturing and cost rationalization efforts will continue under the Company’s strategy of reducing its dependence on internally produced product and relying more on outsourced product. The Company also expects to make strategic investments to increase focus on the sales force earnings opportunity, to accelerate its expansion of beauty in Latin America and Asia Pacific and in public relations to highlight its improved product line, party format and business opportunity.

A focus on balance sheet management continued during 2004 and resulted in solid cash flow. This result, combined with the strong net income, led to a net debt-to-capital ratio of 35 percent at the end of 2004 as compared with about 50 percent at the end of 2003. The Company remains confident in its ability to continue to finance ongoing operations, including making strategic investments in operating costs necessary to secure the long-term success of the Company, an expected increase in capital spending and its dividend program, through available financing sources.

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Consolidated Results of Operations

Net Sales and Net Income. Net sales increased slightly in 2004 due to a weaker U.S. dollar, primarily versus the euro. Excluding this $56.4 million favorable impact, net sales declined slightly. In local currency, Europe was about flat with 2003 while Latin America posted a strong increase and BeautiControl North America was up substantially. Offsetting these improvements were large declines in both North America and Asia Pacific. Partially responsible for the decline in Asia Pacific was the impact of a recall related to third-party sourced product during 2004 that resulted in a $6.2 million reduction of net sales. There was no negative impact to profitability as the vendor has agreed to reimburse the Company for lost profits and related costs. Specific commentary regarding the segments is included in the regional results section of MD&A.

Net sales in 2003 increased modestly including an $87.1 million favorable impact resulting from the weaker U.S. dollar, primarily versus the euro. Excluding this impact, net sales for the year were down slightly. In local currency, Europe had a strong increase and BeautiControl North America showed significant growth. Offsetting these improvements, Asia Pacific was down slightly while Latin America had a larger decline and North America declined significantly. Also impacting 2003’s sales levels was the completion of the implementation of a modification in the distributor model in the United States. Under this model, sales are made directly to the sales force with distributors compensated through commission payments. This model results in a higher company sales price that includes the margin previously realized by the distributors. This change had no significant impact on profit but also benefited the Company as it includes payment with order in most cases and results in reduced receivables. At the end of 2002, approximately 70 percent of United States distributors had been converted. Excluding the approximately $27 million impact of this new model and the impact of foreign currency, total company net sales for 2003 declined 4 percent from 2002.

In 2004, net income increased significantly. The higher net income was as a result of significant improvement in all of the Company’s reporting segments with the exception of North America which incurred a larger loss than in 2003. A portion of the improvement in the segments was due to a weaker U.S. dollar, primarily versus the euro. In local currency, BeautiControl North America had a significant increase and Latin America was up sharply. Europe and Asia Pacific both had strong increases in local currency profit. Also contributing to the improved net income were lower total unallocated costs as well as higher gains resulting from the disposition of property. A lower effective tax rate, discussed in the tax rate section, further contributed to the improved net income. Included in these net improvements was the offsetting impact of higher expenses for stock-based compensation. As discussed in the new pronouncements section, the Company prospectively adopted the fair-value-method of accounting for stock options in 2003. While this change had a minimal impact on 2003 results due to the timing of grants which were largely awarded late in the year, it resulted in a pretax expense of approximately $3 million in 2004 that was recorded in the applicable segment or unallocated as it related to corporate participants. As also discussed in the new pronouncements section, the Company will adopt SFAS 123(R) in the third quarter of 2005 which will require the Company to record compensation expense for all unvested options that were issued prior to the Company’s adoption of fair-value accounting. These options were not previously considered under the Company’s decision to adopt fair-value accounting prospectively. This change is expected to result in an incremental cost of approximately $0.8 million in 2005 and $1 million in each of 2006 and 2007 if the options vest over the longest possible time frame, or the same total amount more quickly if they vest sooner based on stock price appreciation as provided in the awards.

The Company allocates corporate operating expenses to its reporting segments based upon estimated time spent related to those segments where a direct relationship is present and based upon segment revenue for general expenses. The unallocated expenses reflect amounts unrelated to segment operations. Allocations are determined at the beginning of the year based upon estimated expenditures and are not adjusted. The unallocated expenses declined during 2004 as compared with 2003 due to the absence of significant foreign exchange losses incurred in 2003 related to a program to hedge certain foreign cash flows during the year as discussed below. This decline was partially offset by increases in professional service fees related to the Company’s compliance with the Sarbanes-Oxley Act and increased incentive accruals from the Company’s improved performance.

In 2002, the Company began a program to hedge, for the following twelve months, certain foreign cash flows related to the euro, Japanese yen, Korean won and Mexican peso. In the fourth quarter of 2002, the Company elected to terminate the Mexican peso portion of this program as a result of a significant decline in Mexican income and the higher relative cost of the Mexican peso portion forward contracts. As a result, it recognized a $1.2 million pretax gain that had been deferred pending the completion of the related transactions. Additionally, as the cost of the program increased, the Company determined that those costs exceeded the benefits and no new contracts for the other currencies were entered with maturities subsequent to December 27, 2003. In this program, the Company utilized forward contracts coupled with high-grade U.S. dollar denominated securities. The program hedged foreign cash flows but also had the effect of largely mitigating the foreign exchange impact on the net income comparison between 2003 and 2002. During 2003, the Company incurred net foreign exchange losses of $15.8 million compared with net losses of $5.0 million in 2002 which were included in unallocated expenses in both periods.

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During 2004, the Company continued its program to sell land for development near its Orlando, Florida headquarters which began in 2002. Pretax gains totaling $11.6 million ($7.1 million after tax) were recognized as a result of transactions completed during 2004. This amount compared with pretax gains of $3.7 million ($2.2 million after tax) during 2003. Gains on land transactions are recorded based upon when the transactions close and proceeds are collected. Transactions in one period may not be representative of what may occur in other periods. In 2004, the Company also recognized a $1.5 million gain related to the partial settlement of an insurance claim related to hurricane damage incurred at the Company’s headquarters. Based upon transactions currently in various stages of negotiation and closure, gains on sales of property for development of approximately $8 million are expected during 2005. Included in 2004 net income were pretax charges of $7.0 million for re-engineering and impairment compared with $6.8 million in 2003 ($4.3 million and $3.1 million after tax, respectively). These charges are discussed in the re-engineering costs (gains) section following.

In 2003, net income declined significantly. This decline came from lower results in all segments except Europe as well as a significant increase in unallocated expenses and a significant reduction in gains on disposal of assets. These items were partially offset by significant declines in re-engineering and impairment charges and net interest expense. Business segment results are discussed in the regional results section. The increase in unallocated expenses from $20.9 million in 2002 to $40.5 million in 2003 was due to a significant increase in foreign exchange losses from the Company’s program to hedge certain foreign cash flows. Unallocated expenses also increased in 2003 due to an increase in costs related to worldwide research and product development costs previously included in the reporting segments, executive retirement compensation and a discretionary annual incentive award. Gains on disposal of assets declined primarily due to the absence of gains recognized in 2002 on the sales of facilities closed as part of re-engineering activities. Refer to re-engineering costs (gains) section for further details.

Included in 2003 results were $3.7 million of pretax gains ($2.2 million after tax) on sales of property held for development near the Company’s Orlando, Florida headquarters. Also included in 2003 results were re-engineering and impairments charges totaling $6.8 million pretax ($3.1 million after tax) related to re-engineering actions taken primarily in the United States, Brazil and Argentina. Specifics of these costs as well as the $20.8 million pretax costs incurred in 2002 are discussed in the re-engineering section following. In comparison, the 2002 results included $14.1 million ($8.5 million after tax) of net gains from re-engineering actions made up of gains recognized on the sale of facilities closed as part of prior actions less costs incurred to design and implement the actions. Also included in 2002 results were pretax gains of $10.0 million for sales of Orlando property held for development. These gains exclude a $4.4 million gain on the sale of the Company’s Convention Center complex and $1.3 million of internal costs for management incentives directly related to the sales program (net after-tax gains of $5.4 million).

International operations accounted for 76, 74 and 70 percent of the Company’s sales in 2004, 2003 and 2002, respectively. They also accounted for all of the Company’s net segment profit in 2004 and 2003 and 79 percent of its segment profit in 2002.

Gross Margin. Gross margin as a percentage of sales increased to 65.3 percent in 2004 compared with 64.6 percent in 2003. The 2003 margin percent was down from 66.3 percent in 2002. The impact of the change in the U.S. business model discussed above increased gross margin by about 1.6 percentage points in 2003 and 0.6 percentage points in 2002. The higher gross margin percentage in 2004 was due to improvements in Europe, Asia Pacific and BeautiControl. Latin America was about flat and North America had a modest decline. On an overall basis in 2004, the increase was largely the result of better pricing and mix as well as reduced manufacturing costs which offset the impact of lower volume in North America. The impact of the recall noted above also had a nominal impact on the margin rate as it reduced net sales without impacting the total gross margin dollar amount. Specific segment commentary is included in the regional results section of MD&A.

The decline in 2003 compared with 2002 was due to slight reductions in Europe, Asia Pacific and Latin America; a large decline after considering the impact of the new business model in North America; and a large reduction in Latin America. Refer to the regional results section for discussion of the individual segments’ margin performance. On an overall basis, the reduction was largely related to unfavorable volume and its impact on manufacturing capacity utilization, inventory usage and product discounting requirements. The discounting impact was predominantly in the United States.

Costs and Expenses. Delivery, sales and administrative expense as a percentage of sales was 56.3, 57.1 and 56.0 percent, in 2004, 2003 and 2002, respectively. In 2004, the decline was due to lower distribution expenses as a result of cost reduction efforts, more effective promotional programs and a reduced provision for uncollectible accounts. These impacts were partially offset by the increase in unallocated expenses, excluding the foreign exchange charges which are included in other expense, as discussed above. In 2003, the increase was primarily due to higher commission expense of about $20 million related to the business model change in the United States and increased sales in BeautiControl North America. Also contributing to the increase were higher domestic pension and retiree medical expenses and the favorable resolution of a pre-acquisition contingency in BeautiControl North America in 2002. Partially offsetting these increases was reduced promotional spending in 2003, as 2002 included promotional investments made in Europe, Japan, Korea and Mexico in an effort to maintain sales force activity. While the European investments largely stabilized in 2002, the others continued into 2003, although at a reduced level.

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Re-engineering Costs (Gains). As the Company continuously evaluates its operating structure in light of current business conditions and strives to maintain the most efficient possible cost structure, it periodically implements various actions designed to reduce costs and to improve operating efficiency. These actions may result in re-engineering costs related to facility downsizing and closure as well as related asset write downs that may be necessary in light of the revised operating landscape. In addition, the Company may recognize gains upon disposal of closed facilities. Over the past three years, the Company has incurred such costs (gains) as detailed below that were included in the following income statement captions (in millions):

In 2004, the re-engineering and impairment charges included severance costs of approximately $3.3 million primarily related to headcount reductions in the United States, Japan and the Philippines. The Philippines action also resulted in an asset impairment charge of approximately $0.7 million. Also included in 2004 charges was a pretax $3.2 million write off of currency translation adjustments related to the Company’s decision to liquidate a foreign subsidiary during the year which was previously classified in other comprehensive income. In December 2004, the Company reached a decision to restructure its manufacturing facility in Hemingway, South Carolina. The Company determined that the best way to balance the requirements of cost effectiveness and utilization of worldwide manufacturing capacity was for the Hemingway facility to be a center of excellence for high tech production and distribution. This decision resulted in an asset impairment charge of approximately $0.4 million in the fourth quarter of 2004. Partially offsetting these charges was the reversal of approximately $0.8 million of prior accruals primarily due to lower than estimated severance costs in Europe as all activities were concluded. In January 2005, the Company announced its plans related to the Hemingway facility which will result in the elimination of approximately 250 positions and pretax severance and outplacement costs of approximately $6.8 million that are expected to be recorded in the first quarter of 2005. In addition to these costs, the Company expects to incur approximately $2.4 million of pretax costs to relocate equipment to other facilities. Finally, the Company expects to realize a reduction of its reserve for United States produced inventory that is accounted for under the last-in first-out (LIFO) method as that inventory is sold. In 2005, this reduction is expected to be in the high single digit millions of dollars and begin being realized in the second quarter of 2005.

In 2003, the re-engineering and impairment charges included net severance costs of approximately $2.0 million primarily related to downsizing North American and Brazilian operations and to a lesser degree, the Mexican and Corporate Headquarters staffs. In addition, it incurred impairment charges of approximately $4.8 million primarily related to a write-down of the Company’s former Halls, Tennessee manufacturing facility as well a write-down of its net investment in Argentina as a result of a decision to liquidate its legal entity and operate under a strictly importer model. The delivery, sales and administrative expense related to a charge for bad debts related to an adjustment to the Brazilian business model in connection with the downsizing.

Included in 2002 costs were re-engineering and impairment charges of $20.8 million that provided for severance and other exit costs related to the decision to consolidate European operations related to finance, marketing and information technology and the establishment of regional areas. Also included were severance and impairment charges related to the downsizing of European, Latin American and Japanese manufacturing operations as well as the downsizing of marketing operations in Mexico, Japan, the United Kingdom and BeautiControl. Included in operating expenses was $0.1 million incurred for internal and external consulting costs to design and execute the re-engineering actions as well as $3.4 million other operating expenses related to the write-down of inventory and reserves for receivables as a result of marketing office restructuring. As part of the program, the Company sold its Spanish manufacturing facility, its Convention Center complex in Orlando, Florida and one of its manufacturing/distribution facilities in Japan and recognized pretax gains totaling $39.4 million.

For further details of the re-engineering actions, refer to Note 2 to the consolidated financial statements.

Tax Rate. The effective tax rates for 2004, 2003 and 2002, were 14.8, 15.3 and 23.3 percent, respectively. The rates reflected the impact of re-engineering actions and gains on property dispositions including the hurricane gain discussed earlier as well as the net favorable resolution of domestic and international tax audit contingencies in 2004. In addition, the 2003 rate reflected a significant tax benefit related to the liquidation of the Company’s Argentine legal entity. Excluding the impact of re-engineering and impairment costs, portions of which did not result in a tax benefit, and gains on property disposition which reflected a tax expense at a higher domestic tax rate, the effective tax rates were 13.1, 18.5 and 19.5 percent in 2004, 2003 and 2002, respectively. The decrease in 2004 from 2003, excluding the impact of re-engineering and impairment charges and gains on property disposition, was primarily due to the favorable contingency resolution mentioned above. Also contributing to the decline was a more favorable mix

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of income toward lower tax jurisdictions as well as the establishment of deferred tax assets related to the expected future utilization of foreign income tax credits in the United States. The Company has recognized these deferred tax assets based upon its analysis of the likelihood of realizing the benefits inherent in them and has concluded that it is more likely than not that the benefits would ultimately be realized and as such, no valuation allowance was necessary. This assessment was based upon expectations of improving domestic operating results as well as anticipated gains related to the Company’s sales of land held for development near its Orlando, Florida headquarters. In addition, certain tax planning transactions may be entered into to facilitate realization of these benefits. Refer to the critical accounting policies section for additional discussion of the Company’s methodology for evaluating deferred tax assets. The decrease from 2002 to 2003, excluding the impact of re-engineering and impairment charges and gains on property disposition was largely due to the impact of a more favorable mix of income as discussed above. A tax rate of approximately 22 percent is expected for 2005 based upon anticipated improvement in domestic operating results and the absence of the benefit from tax contingency resolution.

Net Interest. The Company incurred $13.0 million of net interest expense in 2004 compared with $13.8 million in 2003 and $21.8 million in 2002. The decline in 2004 reflects the Company’s entrance into two interest rate swap agreements discussed below and the lower resulting interest rates during 2004. Also contributing to the decline were lower debt levels during the year. Offsetting the impacts of these items was the absence of a 2003 adjustment related to prior hedging activity. The decline in 2003 was due to lower debt levels, the decision to discontinue the Company’s foreign income hedging program as discussed in the net income section and net gains on a Japanese yen interest rate swap. Also contributing to the decline was the 2003 adjustment related to prior hedging activity and the benefit of lower short-term interest rates. As of the end of 2004, the Company carried about 46 percent of its debt in floating interest rates based upon the terms and the utilization of swap agreements.

On July 1, 2003, the Company entered into two interest rate swap agreements on a portion of its long-term debt effective September 29, 2003. The Company received premiums totaling approximately $0.8 million for both agreements. The swap agreements total a notional amount of $150 million and expire in 2011. The Company receives semi-annual interest payments at 7.91 percent and makes floating rate interest payments based on the six-month LIBOR rate plus a spread of about 3.7 percentage points.

Reflecting current interest rates and projected borrowings, the Company anticipates that 2005 net interest expense will be approximately $13 to $14 million.

Regional Results 2004 vs. 2003

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Europe

The strong increase in European sales was due to the stronger euro during 2004. Excluding this impact, sales were about flat with 2003. This result reflected the impact of several markets doing very well whose impact was offset by others that did not perform as well. The best result of the year was in Russia, the segment’s leading emerging market, which had a significant sales increase on the heels of the continued growth of the sales force as the market continued to expand. In addition, another emerging market, Turkey, had a substantial increase in sales during the year. Both markets benefited from larger total and active sales forces. Also, Russia experienced a nearly 50 percent growth in its distributor count. Poland, the segment’s other key emerging market showed a modest sales increase for the year. Combined, the emerging markets grew nearly 60 percent during the year. Also contributing sales increases were South Africa, which was up significantly, and the Nordics which had a strong increase for the year. South Africa benefited from significantly larger total and active sales forces and the Nordics had a strong increase in its total sales force which resulted in a slightly higher active sales force. The Nordics also benefited from a significant business-to-business transaction. Overall, however, business-to-business sales were down nearly $10 million during the year, at consistent exchange rates, as the volume of transactions was intentionally reduced during 2004. The Company only pursues business-to-business relationships that benefit its core party plan business. Additionally, the timing of these transactions is based upon reaching agreements with business partners and their product needs. Consequently, activity in one period may not be indicative of future periods. The segment’s largest market, Germany, finished the year about flat with 2003. While it struggled at times, particularly in the middle part of the year, the market was able to counter continuing difficult economic conditions and low consumer spending as the year closed. For 2004, total sales in this market were $252.6 million as compared with $255.0 million in 2003, translated at 2004 exchange rates. Offsetting the favorable results noted above, Austria had a large decline for the year, due primarily to the absence of a significant business-to-business transaction that occurred in 2003. France recorded a modest decline due to lower sales force productivity. Overall for the segment, better pricing and an improved product mix offset the impact of lower sales volume. The segment was able to maintain a strong advantage in total and active sales force to carry into 2005.

Despite the flat local currency sales, the segment had a good increase in profit even after excluding the benefit of the stronger euro. This improvement was led by sales related increases in South Africa, Russia and the Nordics. It further benefited from lower manufacturing costs and lower provisions for uncollectible receivables. Additionally, continuing cost control activities benefited most of the markets and helped Germany post a slight increase in profit. As is the case for sales, the German market accounts for a substantial portion of the segment’s profit. The segment’s gross margin was up slightly during the year on the strength of the improved performance in manufacturing noted above.

The Company continued to expand its integrated direct access (IDA) channel activity that began in 2001. The IDA channels are a convergence of the core party plan business with retail access points, Internet sales and television shopping. These channels benefit the core party direct selling business through the generation of party and recruiting leads as well as allowing the Company to attract consumers who may not be reached through the traditional party plan. Although the number of European retail access point locations was down in the fourth quarter from 350 last year, the average number of sites open during the year was about flat with 2003. There is no Internet selling by the Company in this segment and television shopping has been limited to tests.

For 2005, overall sales growth is expected although Germany is expected to again operate near flat. Some incremental promotional and strategic investment costs are foreseen for Europe in 2005, but even with the increase in operating costs, a return on sales in excess of 20 percent is expected.

Asia Pacific

Net sales for the year declined modestly as the combination of a significant increase in the Philippines along with continued sharp growth in China were insufficient to counter the impact of substantial declines in Japan and Indonesia. After excluding the favorable impact of stronger currencies versus the U.S. dollar, particularly the Australian dollar and Japanese yen, 2004 sales had a large decline compared with 2003. In addition to the Philippines and China, Malaysia/Singapore increased modestly and Australia had a slight sales increase. Strong recruiting propelled the Philippines and resulted in a good increase in the total sales force size and a substantial increase in the active sales force. China continued to expand its number of outlets and increased focus on outlet productivity has also been successful. In China, direct selling is prohibited by law, so the Company reaches consumers through independent store fronts. There were over 1,400 storefronts at the end of 2004. The improvement in Malaysia/Singapore was largely the result of increases in the first half of the year as the absence of a business-to-business transaction that was completed in 2003 as well as lower recruiting hurt results in the second half of the year. Countering these impacts in Malaysia/Singapore was the continued growth of beauty sales during 2004 which doubled its contribution as compared with 2003. Australia finished 2004 with a flat total sales force and a modest decline in the active sales force but was able to end the year on a high note with a strong sales increase and a slightly improved active sales force in the fourth quarter. Even before the devastating tsunami that hit Indonesia, the market had experienced some sales force and related sales declines. The Company is not currently able to fully evaluate the longer term implications of the tsunami on Indonesia and the rest of the segment but they are not currently expected to be material. While remaining the largest market in the segment, Japan is undergoing a significant transformation. The Company has made a decision to transition that market from a wholesale buyer’s method offering a large proportion of high-price, third-party-sourced products back

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to a party plan business promoting an earnings opportunity with a core Tupperware product line. As a result, the market experienced a significant sales decline for the year. This decline was compounded by the negative $6.2 million impact of the product recall discussed earlier in the net sales section. This market transition is expected to take time but ultimately result in a more productive business.

Despite the sales decline, the segment had a substantial increase in profit. Though partially buoyed by a stronger Australian dollar, even in local currency terms, the segment finished the year with a strong increase in profitability. The increase was led by China’s sales growth as well as cost containment efforts, particularly in the Philippines, Korea and Australia. Improved cost performance in manufacturing, primarily from lower mold costs, also contributed to the increase. The product recall in Japan mentioned earlier had no negative impact on profitability as the vendor has agreed to reimburse the Company for lost profit and related costs of the recall. Overall, the segment had a modest increase in its gross margin rate after considering the impact of the product recall which had the effect of increasing the margin rate slightly as it reduced sales but did not impact the gross margin dollar amount. This improvement was due to higher volume that offset the impact of unfavorable pricing, largely due to the transition of the Japanese market noted above which results in the sale of a lower priced product line as well as lower sales force statistics during the transition.

In the third quarter of 2003, the Company’s direct selling license to operate in Indonesia expired. As a result of continued delays in anticipated government business regulations, the Company has been unable to renew its license under its ownership structure and has been operating without a license. The Company has been in contact with the appropriate Indonesian government officials as well as other members of the direct selling industry similarly impacted to attempt to resolve the situation. The Company has now formed a new legal structure and is in the process of applying for a license. It expects to be granted a license shortly and begin selling under it. However, until any resolution is final, it is possible that the government could order the Company to cease operations in Indonesia which could materially impact the segment’s sales and segment profit. However, the availability of the new structure largely mitigates the risk of material negative impact. This situation is not related to the Indonesian declines discussed above.

A slight decline in the return on sales is expected for Asia Pacific in 2005, mainly as a result of planned operating cost investments to build infrastructure to enable faster growth of the beauty business in the region.

Latin America

Latin America had a slight increase in sales for the year that was hampered by a stronger U.S. dollar, primarily as it compared with the Mexican peso and the Venezuelan bolivar. Excluding this impact, sales for the year had a strong increase versus 2003. There was improvement in all of the segment’s major markets of Mexico, the largest, Venezuela and Brazil. While the segment generally posted lower sales force statistics over the year, these declines were largely the result of tighter standards being put in place that the Company believes will ultimately result in a more active and productive sales force. This result provides a solid base for the continued growth of beauty sales, which are planned to become increasingly important in this segment. Beauty sales continue to progress in Mexico and grew over 50 percent in 2004 to reach nine percent of total Mexican sales versus approximately seven percent last year. In order to accelerate the growth of beauty in Mexico, the Company is planning to make additional operating cost investments in the market during 2005. Beauty sales just began in Venezuela in the fourth quarter of 2004 and in Brazil, beauty products are currently in the process of being registered. In addition to the expansion of beauty, Mexico was able to stabilize its business during 2004 to register a slight sales increase during the year. Improved pricing in Venezuela and Brazil, as well as improved volume in Venezuela, provided the impetus for substantial sales increases in both markets.

These sales increases, as well as continued improvement in the cost structures in all markets, particularly Venezuela and Brazil, led to a sharp increase in local currency profit for the segment after considering the negative foreign exchange impact of weaker currencies in Mexico, Venezuela and Brazil. The gross margin rate for the segment was about flat with last year as good improvement in Brazil was offset by slight decrements in both Venezuela and Mexico. The decline in Mexico was largely due to an increase in discounts on the core Tupperware line of products as it worked to stabilize the business. This impact was partially offset by a strong increase in volume as well as a lower proportion of support items sold during the year compared with 2003. The improvement in Brazil was largely pricing related which offset a slight decrease in volume.

On the heels of the expected continued growth of beauty, sales are expected to increase during 2005; however, the above mentioned investments in the expansion of beauty will pressure the margin in 2005.

North America

North America finished 2004 with a substantial decline in local currency sales after considering a small benefit from a stronger Canadian dollar. This decline was due almost exclusively to the performance in the United States which continued to struggle as it seeks to transform itself into a more vibrant market with focus on an interactive party and a significant opportunity for the sales force. These changes have clearly been neither easy nor rapid with the active sales force being down 21 percent during 2004. The U.S. market is one in which the Company is working to fully roll out its interactive party format. In this market it is called the

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“Taste of Tupperware”, and it is designed to make the experience more entertaining for the hostess and her guests and easier for the sales force consultant to learn and execute. The Company believes that these attributes make it simpler to schedule future parties from among the party guests and to recruit hostesses and others who see the simplicity of the format. Additionally, the Company implemented its new, multi-tier sales force compensation plan in two of its ten regions in 2004, and expects to roll out the new plan in the rest of the regions in the market in 2005. This method of compensation makes the Company’s business opportunity offering competitive in the market by going from temporary to life-time commissions on the sales of people within a consultant’s “downline” organization, removing geographic boundaries for recruiting within the nation and providing everyone within the sales force the opportunity to reach the top level of the organization without significant monetary investment. The Company believes the new compensation plan brings a better balance between the product and business opportunity offerings in the U.S. market.

The significant increase in the segment loss for the year was also from United States results. This was largely due to a decrease in sales volume which led to higher manufacturing costs per unit as well as increased charges for excess inventory. As noted earlier in the re-engineering section, the Company has already taken steps to restructure its manufacturing operations in Hemingway, South Carolina and will source the majority of its products from the Company’s other manufacturing facilities throughout the world. Upon completion of this action, annualized benefits are expected to be approximately $6 million, which will be fully realized beginning in 2006. In addition to this benefit, in 2005, the Company expects to realize a benefit from reduced LIFO reserve needs as United States produced inventory is sold. The negative impacts in 2004 overwhelmed the benefits derived from cost control measures previously put in place. Going into 2005, the United States will continue to focus on improving its value chain including its cost base.

The Company will continue to focus on its IDA initiatives utilizing retail access points, TV shopping and the Internet to obtain access to more consumer groups but will continue to limit access to those activities where the sales force can have maximum involvement and interaction with the consumer to remind them of the benefits of the party. Another impact of the lower sales during the year was reduced distributor profitability which negatively impacted the number of retail access points open this year compared with last year as fewer distributors were able to make the financial commitment. The Company is evaluating other, less expensive venues to allow for more affordable retail access point opportunities and has introduced the “Showcase on the Run” concept during the year. This is an easily transportable sales venue that may be quickly set up and taken down and allows selling from a more “cart-like” structure. During the year, IDA accounted for about 8 percent of segment sales compared with 11 percent last year.

As 2005 will continue to be a year of transition for the United States, segment net sales are not expected to grow and a continuing segment loss is expected, although at a lower level than that incurred in 2004. North America will also benefit in 2005 from reduced cost allocations related to occupancy costs and the corporate allocation. This impact, approximately $4 million in total, will bring its general corporate allocation in line with the expected reduced sales level. Additionally, some occupancy costs currently borne by the United States are being reallocated to other segments in recognition of the utilization of the headquarters location as a worldwide focus for the sales force. Trips to the headquarters are often used as an incentive award for the sales forces around the world. The reallocation of costs will not materially impact the other segments.

BeautiControl North America

BeautiControl North America had an outstanding year with substantial increases in both sales and segment profit. This performance was a result of substantial increases in both the total and active sales forces during the year and the business closed 2004 with a 30 percent advantage in the total sales force. This advantage provides a solid base for the continued growth of the market as 2004 represented the highest sales year ever for the business which has doubled in size since its acquisition in the fourth quarter of 2000. The sales force growth was fueled by both a strong earnings opportunity and an easy, replicable interactive party experience, the Spa ESCAPEs. Both of these drivers permit a natural flow to recruiting as party attendees are drawn by the experience to inquire as to the earnings opportunity which is also a very powerful motivator. These factors, when combined with continued leadership development, all provide the impetus for continued growth.

The sales growth was the primary reason for the profit improvement despite a $2.5 million charge in the first quarter of 2004 related to an accrual for legal matters and an executive retirement. The litigation was settled later in the year with minimal incremental impact on profit. The segment also improved its gross margin percentage during the year primarily through changing the format of its kit of products for new consultants. Moving into 2005, the Company anticipates continued improvement in the segment’s return on sales and expects it to reach double digits.

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Regional Results 2003 vs. 2002

Europe

The significant increase in sales was due to the strengthening of the euro during the year. The increase in sales beyond the favorable impact of foreign exchange was due to significant increases in Austria, Russia and Germany. In 2003, German sales totaled $233.7 million compared with $213.2 million in 2002 translated at 2003 exchange rates. This increase was due to strong growth in total sales force over last year and the market ended the year with a double digit percentage sales force size advantage over 2002 which led to an increase in average active sales force over the course of the year. The increase also reflected improved sales force productivity. In Austria, most of the increase was due to a business-to-business transaction with a local grocery chain under which consumers could purchase a limited selection of Tupperware products at a discount if they purchased a prescribed amount of the chain’s products. During 2003, the segment had $13.8 million of such sales compared with approximately $11.6 million in 2002, translated at 2003 exchange rates. The Russian sales force size increased substantially during the year and the market was also able to generate strong improvement in sales force activity resulting in a nearly 90 percent increase in average active sales force. This improvement was largely due to the addition of new distributors, strong promotional offerings and training initiatives oriented toward improving activity and productivity. The segment’s other major markets also increased sales to a lesser degree. Partially offsetting these increases were declines in Spain and the Central Mediterranean Countries as well as the impact of the Company’s decision at the end of 2002 to suspend its party plan business in the United Kingdom. Overall, the segment generated a significant sales force size advantage at the end of 2003 as compared with 2002 and a good increase in average active sales force in the fourth quarter. In general, this improvement showed the benefits of the Company’s promotional investments in the first half of 2002 which served to keep the sales force engaged during difficult business conditions and provided a point of strength going into 2003 and growth in many of the segment’s emerging markets.

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The Company continued to expand IDA channel activity. The Company had about 350 retail access points open in Europe at the end of 2003 compared with about 200 at the end of 2002. These efforts, which permit additional contact with consumers, contributed to the significant sales force size advantage noted above.

The significant increase in segment profit was driven by two primary factors: the stronger euro during the year and the significant sales gains discussed above. Partially offsetting these items and resulting in the modest local currency increase in 2003 was the 2002 recognition of a $21.9 million pretax gain on the sale of the Company’s former Spanish manufacturing facility. In addition, gross margin percentage improved during the year as production volume was up and overhead spending was down. These benefits were partially offset, however, by the sale of a relatively higher proportion of discounted product and the inability to offset through price increase the higher local currency cost of products in non-euro markets. Promotional spending as a percentage of sales was also down for the year as investments made in the first half of 2002 were not repeated.

Asia Pacific

Asia Pacific’s sales increased modestly due to the weaker U.S. dollar, primarily as it relates to the Australian dollar and the Japanese yen. Excluding the favorable currency impact, sales for the year were down slightly. The decline was primarily due to significant declines in Korea, the Philippines and Taiwan and a modest decline in Japan. Offsetting these items were substantial increases in Australia and India, a sharp increase in China and a strong increase in Malaysia/Singapore. The Taiwan decline was due to the Company’s decision last year to convert the market to an importer. While sales declined, profitability has improved as a result of this change. Korea showed sequential improvement in the fourth quarter and continued to refine a new compensation plan implemented in the first quarter of 2003 to better attract recruits into the business and make the manager level more attractive to overcome the dramatic loss of highly productive managers that originally resulted from a change required by government regulatory actions aimed against the direct selling industry. Although recruiting was successful, showing a substantial increase in the latter part of 2003, the market continued to face a challenge as a result of the significant reduction in sales force size. The Philippines also showed improvement in the fourth quarter and closed the year with a strong sales force size advantage. In Japan, an unfavorable mix of products as well as discounting some high-priced items were largely responsible for the decline. Australia’s increase was a result of increased volume generated by a more productive and slightly larger sales force. The emerging markets of India and China continue to progress as business expansion produced increased volume in both markets, particularly in China which had a substantial increase in the number of outlets open. The Malaysia/Sinpapore increase was due to a strong second half that included a business-to-business transaction. First half weakness was largely due to the SARS threat. The market finished the year with a modest increase in sales force size. This advantage, coupled with similar improvement in productivity yielded the volume increase that drove the full-year sales improvement.

While the weaker U.S. dollar versus the Australian dollar and Japanese yen improved the comparison slightly, segment profit for 2003 was down substantially primarily as a result of a $13.1 million gain recognized in 2002 as a result of the sale of one of the Company’s Japanese manufacturing/distribution facilities partially offset by $2.7 million of related closure costs. Excluding the impact of these items, Japanese profitability was down significantly due largely to an unfavorable mix of products that negatively impacted the gross margin realized. Also, Indonesia had a significant decline in profit for the year; also due to an unfavorable product mix as well as increased administrative expenses. The segment’s margin was further negatively impacted by increased inventory obsolescence charges, primarily in Korea, and increased mold costs. Offsetting these declines were sharp improvements in China and India as small losses in 2002 compared with 2003 profit as the markets continued to grow and develop the economies of scale necessary for sustained profitability. Australia and Malaysia/Singapore were also up substantially during the year due to the improved sales noted above. In addition, Australia achieved an improved gross margin through the sale of a more favorable mix of products and lower discounting.

Latin America

Sales were down significantly in 2003, largely due a decline in Mexico, by far the segment’s largest market, that was due to a stronger U.S. dollar versus the Mexican peso and reduced volume. The volume reduction was largely due to a substantial decline in average active sellers during the year. Partially compensating for these impacts was better pricing as the heavy discounting of 2002 was not repeated in 2003 to the same level. However, for the first time since the second quarter of 2002, the market had a favorable sales comparison to the prior year in the fourth quarter of 2003. Also contributing was a substantial decline in Brazil due to reduced volume with a sales force that was about half the size it was at the end of 2002. Providing a partial offset was a significant increase in Venezuela as a substantial increase in active sellers led to improved volume.

Segment profit in 2003 was half what it was in the prior year, which was also driven by Mexican performance. The stronger U.S. dollar compared with the Mexican peso was partially responsible for the decline as well as an unfavorable product mix in Mexico and significantly reduced capacity utilization, as a result of reduced sales volume noted above. Partially offsetting these negative impacts were substantial improvements in Brazil and Venezuela profitability. Despite the reduced sales in Brazil, the market reduced its loss with an improved gross margin due to a better mix of products. The market underwent a headcount reduction in the fourth quarter of 2003 in an effort to better align costs with current sales levels. The improved sales in Venezuela noted above resulted in a significant improvement in profitability and the market achieved a profit in 2003 as compared with a loss in 2002.

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North America

North America had a significant sales decline attributable to both the United States and Canada. The United States sales, as noted earlier, were impacted by the conversion to a new business model which resulted in higher company selling prices offset by increased commission payments. This conversion added approximately $27 million to the 2003 sales level as compared with 2002 and excluding this impact, sales would have been down 30 percent for the year. This decline was due to a significant decline in the total sales force as well as reduced activity and productivity during the year. The declines in these sales force statistics were partially due to the impact of the Company’s relationship with Target and its effect on the core party business. In the fourth quarter of 2002, the Company significantly expanded its relationship with Target Corporation and began selling in over 1,100 Target stores in the United States. Although the sales in this channel exceeded expectations, the relationship was designed to provide party scheduling and recruiting opportunities for the Company’s sales force and the scale and positioning of the expanded presence did not mesh well with the party plan business as it did not ultimately achieve those objectives. As a consequence, the Company ended its relationship with Target effective September 1, 2003. The Company introduced “Taste of Tupperware” parties in 2003, which are intended to enhance the party experience by making it more fun and interactive.

During the year, IDA sales represented 11 percent of sales compared with 9 percent in 2002, excluding Target.

The North American segment loss resulted from the sales decline noted above as well as a significant reduction in gross margin percentage due to aggressive product discounting during 2003 and lower capacity utilization.

BeautiControl North America

BeautiControl had a significant sales increase in 2003 and registered its highest sales year ever as a strong increase in total sales force as well as improved productivity helped generate increased sales volume. The Company emphasized group selling with its Spa ESCAPEs experience party format as well as multiple ordering opportunities in more one-on-one selling situations to generate increased sales volume. Further, through continuation of its sales force leadership development program, the Company improved recruiting by highlighting and incenting the available business opportunity for the sales force.

The decrease in segment profit during the year was due to 2002’s inclusion of a $2.3 million benefit from the favorable resolution of a pre-acquisition contingency. This impact coupled with a lower margin offset the benefit of the increased sales volume. The lower margin was due to a less favorable mix of products due to increased sales of items to support the Spa ESCAPEs format and more entry kits to support the sales force increase. These items carried a lower margin than traditional product line sales items. The Company took actions to improve the margin realized on these types of sales and saw improvement in the latter half of 2003 and in 2004. Excluding the impact of the $2.3 million benefit noted above, the segment had an improved return on sales during 2003.

Financial Condition

Liquidity and Capital Resources. Working capital continued to increase, reaching $173.9 million as of December 25, 2004 compared with $121.0 million as of December 27, 2003 and $77.1 million as of December 28, 2002. The current ratio was 1.6 to 1 at the end of 2004 compared with 1.4 to 1 at the end of 2003 and 1.3 to 1 at the end of 2002. The 2004 working capital increase was primarily due to a more than doubling of cash on hand to $91 million at the end of 2004. The increase was due to cash generated by operations, proceeds from asset dispositions, largely related to the Company’s sale of land for development in Orlando, Florida, as well as lower debt payments as a majority of the Company’s long-term debt does not begin to mature until 2006. Also contributing to the working capital increase was an increase in non-trade amounts receivable largely related to value added tax receivables in Greece, which has undergone a legal structure change that has delayed collection. Further contributing to the increase in working capital was the weaker U.S. dollar compared with currencies in a majority of the Company’s overseas operations. This impact was responsible for approximately $5.3 million of the net increase. During 2004, the Company wrote off approximately $11 million of current accounts receivable against previously established allowances, primarily in Latin America with no impact on income. Working capital is expected to increase modestly in 2005.

The 2003 working capital increase was due to increases in cash, inventories, current deferred taxes and other current assets. The buildup of cash was from the cash generated by operations as well as proceeds from asset disposals, largely related to the Company’s sale of land for development in Orlando, Florida, and lower debt payments. The increase in inventories was largely due to the impact of a weaker U.S. dollar, especially against the euro. Also contributing were increases in the United States, Mexico and BeautiControl. The U.S. and Mexican increases were due to sales falling short of production forecasts while the BeautiControl

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increase was due to stocking for January 2004 promotional programs. The increase in current deferred taxes reflected an increase in temporary differences generated by the recognition of domestic income for tax purposes. Non-trade amounts receivable increased primarily due to an increase in recoverable value added taxes in Europe due to the change in legal structure in Greece and the timing of receipts in other jurisdictions. Also contributing to the increase was higher vendor receivables related to sourcing agreements. The working capital increase was further influenced by declines in accounts payable and short-term debt. The slight decline in accounts payable reflected the offsetting impacts of the weaker U.S. dollar and local currency declines in Japan and the United States due to lower year end purchases. The reduction in short-term debt reflected the payment of a $15 million medium term note that was due in mid-2003. Partially offsetting these increases was an increase in other accrued liabilities reflecting an increase in current income taxes payable as a result of higher payments due in several foreign jurisdictions from increased income levels, primarily related to Europe, and the timing of estimated tax payments.

On November 5, 2004, the Company closed on a new committed revolving line of credit that permits borrowings up to $200 million and expires on November 4, 2009. The agreement includes an accordion feature whereby the Company may opt, with the lenders assent, to increase available credit to $250 million. Borrowings under the agreement are due no later than the expiration of the agreement or in the event of non-compliance with covenants, may become immediately due and payable. There are no restrictions on prepayments. With the closing of this agreement, the Company’s previously existing $150 million line of credit that was originally scheduled to expire in April 2005 was terminated. Based upon the Company’s current debt ratings, the agreement includes an annual facility fee of 0.2 percent of the total committed balance that is due and payable quarterly. Borrowings are subject to a variable interest rate of LIBOR plus 0.8 percentage points. Both the facility fee and borrowing rate increase or decrease in an inverse relationship to changes in the Company’s debt rating. The minimum facility fee and interest rate is 0.15 percent and LIBOR plus 0.6 percentage points, respectively; the maximums are 0.375 percent and LIBOR plus 1.625 percentage points. The agreement contains reasonable and customary covenant restrictions. Specifically, the Company is required to meet the following financial covenants:

At the end of 2004, the Company had borrowings of $249 million compared with maximum borrowings permitted under the covenants of more than $450 million. The Company does not anticipate its covenants to restrict its ability to finance its operations or ability to pay dividends.

As of December 25, 2004, the Company had $192 million available under the line of credit, which does not include any amount related to the accordion feature noted above. The Company uses this credit line to finance the majority of its operations and also had $85 million of foreign uncommitted lines of credit. The line of credit, the foreign uncommitted lines of credit, cash generated by operating activities as well as proceeds from the Company’s program to sell land for development as discussed below are expected to be adequate to finance working capital needs and capital expenditures.

On August 26, 2004, Standard and Poor’s Rating Services, one of the Company’s debt rating agencies, announced that it had revised its outlook on the Company from negative to stable. At the same time, it affirmed the Company’s BB+ corporate credit and unsecured debt rating. This action had no material impact on the Company.

The Company’s major markets for its products are France, Germany, Mexico, Japan and the United States. A significant downturn in the Company’s businesses in these markets would adversely impact the Company’s ability to generate operating cash flows. While the current downturns in Japan and the United States noted earlier have limited the ability of these markets to contribute operating cash flows to the Company, they have not resulted in a material negative impact to the Company as a whole. The combined operating cash flows for 2004 of these two markets were improved over last year. Additionally, the combined favorable results in the other major markets as well as improvement in many smaller markets were sufficient to overcome the negative impact of the United States and Japanese operating results on cash flows from operating activities. Operating cash flows would also be adversely impacted by significant difficulties in the recruitment, retention and activity of the Company’s independent sales force and a lack of success of new products and promotional programs.

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The total debt-to-capital ratio at the end of 2004 was 46.1 percent compared with 54.1 percent at the end of 2003 and its net debt-to-capital ratio was 35.2 percent at the end of 2004 compared with 49.5 percent at the end of 2003. The decreases reflect a lower debt balance due primarily to the revaluation of debt associated with the interest rates swaps discussed earlier, as well as increased equity from the positive operating results and lower accumulated other comprehensive loss from a generally weaker U.S. dollar. Based on debt maturity schedules, the Company does not expect any meaningful debt reductions until at least 2006 and expects to have a higher cash balance at the end of 2005. As a result, it believes that the net debt-to-capital ratio presented above represents a more meaningful comparative measure of the Company’s cash flow management than total debt-to-capital and, as such, presents both measures. It is currently the Company’s expectation that it will largely maintain its long-term borrowing level and that it will seek to refinance the $100 million notes that are due in 2006. As discussed in the market risk section following, in 2005, the Company elected to lock in a fixed base interest rate for this refinancing.

Operating Activities. Cash provided by operating activities was $121.4 million in 2004 compared with $105.6 million in 2003 and $128.2 million in 2002. The 2004 increase was due to a significant increase in net income during the year as well as improvement in accounts payable and accrued liabilities and other cash flows. The improvement in accounts payable and accrued liabilities was due largely to higher accruals for amounts due related to costs to comply with Sarbanes Oxley and higher management incentive accruals due to improved results. The improvement in inventories reflected increased focus on inventory levels throughout the Company. The better other cash flow was largely a result of reduced prepayments, primarily in Europe. Offsetting these impacts were significant increases in the income tax balance sheet lines resulting from the creation of deferred tax assets from the United States loss. These assets are primarily related to domestic credit carryforward amounts. Additionally, there was a decrease in taxes payable in several overseas markets. Also offsetting the favorable net cash flow was a significant negative impact on in cash flows from the hedging of intercompany loans. In response to the volatility manifested in 2003 related to the cash impact of the Company’s hedging activities, in mid-2004, the Company decided to enter into additional net equity hedges as discussed more fully in the market risk section of MD&A to mitigate this risk and expects less cash exposure going forward.

The 2003 decrease was a result of a lower decrease in accounts receivable following the significant improvement during 2002, a significant increase in net deferred income taxes as a result of temporary differences created by the recognition of domestic income for tax purposes as well as domestic credit carryforward amounts generated by the negative operating results in the United States. Also part of the decrease was a lowering of net value added taxes recoverable at the end of 2002 compared with an increase in 2003 as well as the inclusion in 2002 of amounts received upon closing interest rate swap agreements (refer to Note 6 to the consolidated financial statements for a discussion of the swap agreement terminations). Partially offsetting these items was a significant increase in the net settlement of hedge contracts primarily due to the appreciation of the euro relative to the U.S. dollar.

Cash flow reflected the payment of $5.0 million, $7.8 million and $20.3 million of re-engineering costs in 2004, 2003 and 2002, respectively.

Investing Activities. For 2004, 2003 and 2002, respectively, capital expenditures totaled $43.6 million, $40.0 million and $46.9 million. The most significant individual component of capital spending was new molds. The increase in 2004 capital spending was due largely to an increase in mold spending in Europe. The decline in 2003 capital spending was due to a generally more conservative spending approach, as well as benefits of centralizing product development oversight at the corporate level and its favorable impact on mold spending. Capital expenditures are expected to be between $55 million and $60 million in 2005. The projected increase versus 2004 spending levels reflects some shift to 2005 from 2004 when spending was below the Company’s expectations, stronger foreign currencies and spending related to land development of approximately $5 million.

During 2002, as a result of re-engineering actions, the Company sold its former Spanish manufacturing facility, its Convention Center complex in Orlando, Florida and one of its Japanese manufacturing/distribution facilities. All of these facilities were closed as a result of re-engineering actions and generated combined proceeds of approximately $45 million. Also in 2002, the Company began to sell land held for development near its Orlando, Florida headquarters totaling approximately 500 acres. Sales during 2002 generated proceeds of approximately $13 million and an additional $5 million during 2003. During 2004, the Company continued to market this property and generated proceeds of approximately $13 million. Proceeds from this program are expected to be between $80 and $90 million by the end of 2007. Much of the balance of proceeds from asset disposals relates to the rotation of fleet automobiles in markets where the Company finds it more economical to purchase rather than lease as well as an insurance recovery for hurricane damaged property on the Company’s Orlando, Florida headquarters site.

Dividends. During 2004, 2003 and 2002, the Company declared dividends of $0.88 per share of common stock totaling $51.6 million, $51.4 million and $51.3 million, respectively. At the time of its emergence as a publicly held corporation with its spin off from Premark International, Inc. in May 1996, the Company established a target of paying 35 percent of trailing four quarter income as a dividend. At that time, such a policy equated to a dividend level of approximately $0.88 per share annually. Despite decreases in income, the Company has maintained sufficient cash flows from operations and dispositions of property to fund its historical requirement for cash over the period since the spin off, including working capital and capital needs, its share repurchase program in

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1998, its acquisition of BeautiControl in 2000, debt service and its dividend. While the payment of a dividend on common shares is a discretionary decision made on a quarterly basis, in the absence of a significant event requiring cash, the Company has no current expectation of altering the current dividend level as projected cash flows from operations as well as additional property sales are expected to be more than sufficient to maintain the dividend without restricting the Company’s ability to finance its operations or make necessary investments in the future growth of the business of the nature included in its 2005 earnings outlook. If there is an event requiring the use of cash, such as a share repurchase program or a strategic acquisition, the Company would need to reevaluate whether to maintain its current dividend payout.

Stock Option Exercises. During 2004, 2003 and 2002, the Company received proceeds at $4.1 million, $0.9 million and $4.6 million, respectively, related to the issuance of stock options. The corresponding shares were issued out of the Company’s balance held in treasury.

Subscriptions Receivable. In October 2000, a subsidiary of the Company adopted a Management Stock Purchase Plan (the MSPP), which provides for eligible executives to purchase Company stock using full recourse loans provided by the subsidiary. Under the MSPP, in 2000, the subsidiary issued full recourse loans for $13.6 million to 33 senior executives to purchase 847,000 shares. There were no new participants during 2004, 2003 or 2002. During 2004, 2003 and 2002, respectively, two, one and three participants left the Company and sold, 37,000, 30,100 and 78,000 shares to the Company, at the current market price, to satisfy loans totaling $0.7 million, $0.6 million and $1.3 million. An additional participant left the Company during 2004 and made a cash payment of $0.7 million to satisfy the loan obligation. Also during 2004, a participant elected to make a voluntary advance loan payment totaling $0.6 million. The participant who left the Company in 2003 also paid approximately $0.1 million to satisfy the remainder of his loan. Based upon the provisions of the Sarbanes-Oxley Act of 2002, no further loans under this plan will be permitted. During the first quarter of 2005, two additional participants left the Company and sold, at the current market price, 39,000 shares to satisfy loans totaling $0.8 million. Based upon the loan payment schedule, the Company expects to receive $2.5 million of payments during 2005.

In 1998, the Company made a non-recourse, non-interest bearing loan of $7.7 million (the loan) to its chairman and chief executive officer (chairman), the proceeds of which were used by the chairman to buy in the open market 400,000 shares of the Company’s common stock (the shares). The shares are pledged to secure the repayment of the loan. The loan has been recorded as a subscription receivable and is due November 12, 2006, with voluntary prepayments permitted commencing on November 12, 2002. Ten percent of any annual cash bonus awards are being applied against the balance of the loan. As the loan is reduced by voluntary payments after November 12, 2002, the lien against the shares will be reduced. The subscription receivable is being reduced as payments are received. As of December 25, 2004 and December 27, 2003, the loan balance was $7.4 million and $7.5 million, respectively.

Contractual Obligations

The following summarizes the Company’s contractual obligations at December 25, 2004, and the effect such obligations are expected to have on its liquidity and cash flow in future periods.