UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2005

OR

For the transition period from                      to                     

Commission file number 1-11657

TUPPERWARE BRANDS 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 if the Registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer    x                        Accelerated filer    ¨                        Non-accelerated filer    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  x

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 ($23.38) of such common equity on the New York Stock Exchange-Composite Transaction Listing on July 1, 2005, the last business day of the registrant’s most recently completed second fiscal quarter: $1,368,673,429.76.

As of March 8, 2006, 60,593,279 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 17, 2006 are incorporated by reference into Part III of this Report.

PART I

Item 1. Business

(a) General Development of Business

Tupperware Brands Corporation (“Registrant”, “Tupperware” or the “Company”), is a global direct seller of premium, innovative products across multiple brands and categories through an independent sales force of approximately 1.9 million. Product brands and categories include design-centric preparation, storage and serving solutions for the kitchen and home through the Tupperware brand and beauty and personal care products through its Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo and Swissgarde brands. 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, certain 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 then outstanding shares of common stock of the Registrant. Prior to December 5, 2005, the Registrant’s name was Tupperware Corporation. On October 18, 2000, the Registrant acquired 100 percent of the stock of BeautiControl, Inc. (“BeautiControl”) and on December 5, 2005, the Registrant acquired the direct selling businesses of Sara Lee Corporation (“International Beauty group”).

(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, J. Patrick Spainhour 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, Murray and Spainhour. 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 Report. 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 Report. 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 Report, is available in print to any shareholder who requests it in writing from the Corporate Secretary’s Department, Tupperware Brands 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 SEC their respective certifications in Exhibits 31.1 and 31.2 of this Report in response to Section 302 of the Sarbanes-Oxley Act of 2002.

BUSINESS OF TUPPERWARE BRANDS CORPORATION

The Registrant is a worldwide direct selling consumer products company engaged in the manufacture and sale of Tupperware products and cosmetics and personal care products under a variety of trade names, including

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BeautiControl, Fuller*, Nutrimetics*, NatureCare*, Avroy Shlain*, Swissgarde* and Nuvo* Cosmetics. Each business manufactures and/or 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, Flat Out*, Stuffables* and CheeseSmart* storage containers, plus many specialized products for kitchen and home.

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 markets in order to address differences in cultures, lifestyles, tastes and needs of the markets. New products introduced in 2005 included a wide range of products in all four of Tupperware’s geographic areas, covering both core business areas and new categories. New product development and introduction will continue to be an important part of Tupperware’s strategy.

BeautiControl. BeautiControl manufactures and distributes skin care products, cosmetics, bath and body care, toiletries, fragrances and related products. New products introduced in 2005 included reformulated Regeneration Gold* skin care products, reformulated and repackaged Skin Strategies* men’s skin care line and the new Beauti* color line. 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.

International Beauty. The International Beauty group manufactures and/or distributes skin care products, cosmetics, bath and body care products, toiletries, fragrances, household products, nutritional products and apparel. Sales of products are made through independent sales persons called directors and consultants, who purchase products from the International Beauty group and then sell them directly to consumers in the home or workplace.

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

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 many of such countries. For the past five fiscal years, sales in foreign countries represented, on average, approximately 81 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.

Beauty. Beauty products and image services are provided to clients via an independent sales force in 22 markets throughout the world with particularly high shares of the direct selling and/or beauty market in Mexico, South Africa, the Philippines and Australia.

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III. DISTRIBUTION OF PRODUCTS

Tupperware. Tupperware’s products are distributed worldwide primarily through “direct selling” under which products are sold to consumers outside traditional retail store channels. The system facilitates the timely distribution of products to consumers, without having to work through intermediaries, 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 are primarily sold directly to distributors, directors, managers and dealers (“Sales Force”) throughout the world. Where distributorships are granted, they have the right to market Tupperware products using parties and other non-traditional retail methods and to utilize the Tupperware trademark. The vast majority of the sales force is 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 2005, Tupperware completed the implementation 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 size of its Sales Force. Under the system, distributors and directors recruit, train, and motivate a large number of dealers. Managers are developed from among the dealer group and promoted by distributors and directors to assist in recruiting, training and motivating dealers, while continuing to hold their own parties.

As of December 31, 2005, the Tupperware distribution system had approximately 1,600 distributors, 52,000 managers, and 908,000 dealers worldwide. During the year approximately 11.9 million Tupperware demonstrations took place 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 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.

In 2005, 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 United States 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 31, 2005 BeautiControl’s total sales force was approximately 103,000.

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The BeautiControl sales force reaches customers in group settings and through home demonstrations called Spa ESCAPEs. 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 in the United States and Canada, it maintains BeautiNet* through which the sales force can place orders and recruit.

International Beauty. The International Beauty group’s products are sold through consultants and directors who are independent contractors, not employees, except in certain markets. As of December 31, 2005, the International Beauty group’s total independent contractor sales force was approximately 884,000.

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.

Beauty. There are many competitors in the cosmetics business and the principal bases of competition generally are marketing, price, quality and innovation of products, as well as competition with other “direct sales” companies for sales personnel and demonstration dates. The beauty businesses work to differentiate themselves and their products from the industry in general through the use of value-added services, technological sophistication, brand development, new product introductions and sales force training, motivation and compensation arrangements.

V. EMPLOYEES

The Registrant employs approximately 11,700 people, of whom approximately 900 are based in the United States.

VI. RESEARCH AND DEVELOPMENT

The Registrant incurred expenses of approximately $13.9 million, $13.0 million and $13.6 million for fiscal years ended 2005, 2004 and 2003, 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.

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Beauty. Materials used in the beauty businesses’ 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 the beauty businesses and through outsource arrangements are available from a number of sources. To date, the beauty businesses have been able to secure an adequate supply of raw materials for its products, and it endeavors to maintain relationships with backup suppliers in an effort to ensure that no interruptions occur in its operations.

VIII. TRADEMARKS AND PATENTS

Tupperware considers its trademarks and patents to be of material importance to its business; however, except for the Tupperware*, Fuller* and BeautiControl* trademarks, Tupperware is not dependent upon any single patent or trademark, or group of patents or trademarks. The Tupperware*, Fuller* and BeautiControl* trademarks are 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.

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

The Company has a patent on the formulae for its “REGENERATION”* and “REGENERATION²”* 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

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 dealers and their customers, as well as reduced promotional activities during such quarter. Sales generally increase in the fourth quarter as it includes traditional gift-giving occasions in many 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.

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 17, 2006).

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Positions and Offices Held and Principal Occupations

of Employment During Past Five Years

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Item 1A. Risk Factors.

Reference is made to the information set forth under the caption “Forward-Looking Information” in Part II, Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of this Report for a discussion of the Company’s risk factors.

Item 1B. Unresolved Staff Comment.

None.

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 manufacturing plants in Belgium, Brazil, France, Greece, Japan, Korea, Mexico, New Zealand, 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, Mexico, New Zealand and Belgium. None of the owned principal properties is subject to any encumbrance material to the consolidated operations of the Registrant except for the Registrant’s United States properties. 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 350 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 portions of this property in 2002, and this project is expected to continue through 2009.

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

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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, 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 in 1996. As part of the acquisition of the International Beauty group, Sara Lee Corporation indemnified the Registrant for any liabilities arising out of any existing litigation at the time of the acquisition and for certain legal matters arising out of circumstances which might relate to periods before or after the date of the acquisition.

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

None.

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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 2003 through 2005 which were not registered under the Securities Act of 1933. As of March 8, 2006, the Registrant had 39,619 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 16 to the consolidated financial statements, entitled “Quarterly Financial Summary (Unaudited),” and the rights agreements information set forth in Note 17 to the consolidated financial statements, entitled “Rights Agreement” is included in Item 8 of Part II of this Report and is incorporated by reference into this Item 5.

The following information relates to the repurchased 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 2005, 2004 and 2003, 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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Selected Financial Data (continued)

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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 2005 compared with 2004 and 2004 compared with 2003, and changes in financial condition during 2005. The Company’s fiscal year ends on the last Saturday of December and included 53 weeks during 2005 as compared with 52 weeks in both 2004 and 2003. This information should be read in conjunction with the consolidated financial information provided in Item 8 of this Annual 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.

Estimates included herein are those of the Company’s management and are subject to the disclosure in the Forward Looking Statements section at the end of this Item 7.

Overview

Overall, the Company finished the year with sales up four percent with minimal net impact from foreign currencies. All segments were up in reported and local currency sales except North America. BeautiControl North America led sales growth this year as a result of recruiting and activating a larger sales force. Latin America followed with strong growth as well, coming from all areas, particularly Mexico. Both Asia Pacific and Europe had slight sales growth. North America declined significantly due to a decrease in the size of the total and active sales force.

On December 5, 2005, the Company closed an acquisition of Sara Lee Corporation’s direct selling businesses, now called International Beauty (see discussion in Liquidity and Capital Resources and Note 2 to the consolidated financial statements). This segment contributed $37.9 million in sales and $0.9 million in profit in the fourth quarter of 2005. This acquisition was made to advance the strategy, begun with the acquisition of BeautiControl in 2000, of adding consumable items to the product category mix by expanding into beauty and personal care products.

For the year, net income was down two percent primarily as a result of financing costs incurred associated with the acquisition of International Beauty. Profit from the segments was up due to the sales increases discussed above and a significant reduction in the North America loss as a result of value chain improvements. Other items impacting net income were fewer gains from the Company’s land sales program based on the timing of closing deals in 2005, along with higher re-engineering and impairment charges. These items resulted in a net decline in income before taxes and accounting change of $36.3 million. During the fourth quarter of 2005, the Company received a significant tax benefit associated with settling its pre-June 1996 income taxes with its former parent company. This benefit, along with the impact of other tax audit resolutions during the year and year-end tax planning transactions, resulted in a negative full year provision for income taxes of $20.5 million. Also, during the fourth quarter of 2005, the Company adopted the provisions of FASB Interpretation No. 47, Accounting for Conditional Asset Retirement obligations, an Interpretation of FASB Statement No. 143. As a result, it recognized a $0.8 million (net of income tax benefit) charge for the cumulative effect of an accounting change to account for conditional environmental liabilities at facilities in the United States and Belgium.

In 2005, the Company generated cash flow from operating activities of $168 million, which included the fourth quarter collection of $46 million in connection with the tax settlement with the Company’s former parent company. Of this amount, approximately $16 million was previously carried as a receivable on the Company’s balance sheet. The year-end debt to total capital ratio was 69 percent compared with 46 percent last year due to

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the additional debt issued to acquire International Beauty (see additional discussion in Note 12 to the consolidated financial statements and in the liquidity and capital resources section).

Consolidated Results of Operations

Net Sales and Net Income: 2005

Net sales increased four percent in 2005, both as reported and in local currency including a $5.2 million positive impact from foreign exchange. Strong sales contributions were made by BeautiControl North America and Latin America along with slight sales improvements from last year in Europe and Asia Pacific. The improvement in Asia Pacific came from the impact of a recall related to third-party sourced product during 2004 that resulted in a $6.2 million reduction in sales ($5.5 million at 2005 exchange rates). There was no negative impact on profitability as the vendor reimbursed the Company for lost profit and related costs. The sales increases were partially offset by North America where sales declined significantly.

Net income was down two percent in spite of improvements from last year in both sales and profit from the segments. This was primarily due to higher interest expense and re-engineering and impairment charges, along with lower land sales. The Company had a negative provision for income taxes due to a settlement related to pre-June 1996 taxes as well as various audit settlements and planning transactions.

The Company will adopt SFAS 123(R), Share Based Payment in 2006, which requires 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 will result in approximately $1 million of incremental expense 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. Additionally, 2006 will include an incremental $1.5 million of compensation expense related to clarification from the Securities and Exchange Commission regarding accounting for stock options granted to retiree-eligible participants (see Note 1 to the consolidated financial statements for further discussion). This change does not impact the total compensation cost to be recognized but does accelerate it.

Net Sales and Net Income: 2004

Net sales increased three percent in 2004 due to a weaker U.S. dollar, primarily versus the euro. Excluding this $56.4 million favorable impact, net sales declined two percent. 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 the product recall noted above. Specific commentary regarding the segments is included in the regional results section of this MD&A.

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.

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.

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Unallocated Expenses: 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 2005 as compared with 2004 primarily due to decreases in professional service fees related to the Company’s compliance with the Sarbanes-Oxley Act partially offset by increased centralized global marketing costs.

During 2005, the Company continued its program to sell land for development near its Orlando, Florida headquarters which began in 2002. Pretax gains totaling $4.0 million ($2.4 million after tax) were recognized as a result of transactions completed during 2005. This amount compared with pretax gains of $11.6 million ($7.1 million after tax) during 2004. 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, management expects gains on sales of property for development of approximately $15 million during 2006.

Included in 2005 net income were pretax charges of $16.7 million for re-engineering and impairment compared with $7.0 million in 2004 ($11.2 million and $3.1 million after tax, respectively). These charges are discussed in the re-engineering costs section following.

International operations accounted for 76, 75 and 74 percent of the Company’s sales in 2005, 2004 and 2003, respectively. They also accounted for 97 percent of the Company’s net segment profit in 2005 and all of the Company’s net segment profit in 2004 and 2003. The inclusion of a full year of International Beauty results of operations in 2006 is expected to increase the percent contribution from international operations.

Gross Margin: Gross margin as a percentage of sales decreased to 64.3 percent in 2005 compared with 65.3 percent in 2004, which was up from 64.6 percent in 2003. The lower gross margin percentage in 2005 was primarily due to higher raw material costs, particularly resin, and higher promotional sales in Europe in an effort to stimulate sales force recruiting, customer demand and party attendance. Management currently estimates that raw material price increases in 2006 will result in an approximate $9 million increase to cost of products sold.

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. Specific segment commentary is included in the regional results section of this MD&A.

Costs and Expenses: Delivery, sales and administrative expense (DS&A) as a percentage of sales was 54.6, 56.3, and 57.1 percent, in 2005, 2004, and 2003, respectively. In 2005, the decline in DS&A as a percent of sales was due to a continued focus on operating expense reductions throughout the Company, particularly in North America despite the lower sales volume.

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 an increase in unallocated expenses, excluding foreign exchange charges, which are included in other expense.

As discussed in Note 1 to the consolidated financial statements, the Company includes costs related to the distribution of its products in delivery, sales and administrative expense. As a result, the Company’s gross margin may not be comparable with other companies that include these costs in cost of products sold.

Re-engineering Costs. 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

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actions designed to reduce costs and improve operating efficiency. These actions may result in re-engineering costs related to facility downsizing and closure as well as related asset write downs and other costs 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 2005, re-engineering and impairment charges of $16.7 million included $10.2 million primarily related to severance costs incurred to reduce headcount in the Company’s South Carolina, Orlando, Australian mold making, Belgium, France and Portugal operations. In December 2004, the Company reached a decision to restructure its manufacturing facility, in Hemingway, South Carolina. In 2005, the Company implemented its plans related to the Hemingway facility, which resulted in the elimination of 269 positions and pretax severance and outplacement costs of approximately $7.2 million. An additional $0.9 million of severance was recorded for the elimination of 43 positions in the Company’s United States sales operation. The balance of the $16.7 million charge was largely related to impairment charges recorded to write down the value of certain of the Company’s United States warehousing and distribution capacity and related equipment, as well as a former manufacturing facility in Halls, Tennessee. In addition to headcount reductions, an additional $3.2 million of pretax costs were incurred to relocate equipment to other facilities. As a result of the capacity shift, the Company also realized a $5.6 million net reduction of its reserve for United States produced inventory that is accounted for under the last-in first-out (LIFO) method as that inventory was sold. Both of these items were recorded in cost of goods sold.

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 $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. The decision in December of 2004 to restructure the manufacturing facility in Hemingway, South Carolina in early 2005 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 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, there were 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 strictly under an 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.

For further details of the re-engineering actions, refer to Note 3 to the consolidated financial statements.

Tax Rate. The effective tax rates for 2005, 2004, and 2003 were (31.2), 14.8, and 15.3 percent, respectively. In 2005, the Company reached a settlement with its former parent company resulting in a cash receipt of approximately $46 million including interest related to pre-June 1996 tax liabilities. This generated a net tax benefit of approximately $25 million after considering amounts previously recorded as a receivable on the

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Company’s balance sheet and a provision for taxes related to the interest portion of the settlement. This transaction, together with various audit settlements and year-end tax planning transactions, resulted in the negative provision for income taxes for 2005. In 2004, the rate reflected the impact of re-engineering actions and gains on property dispositions, including the hurricane related insurance gain discussed earlier, as well as the net favorable resolution of domestic and international tax audit contingencies. In addition, the 2003 rate reflected a significant tax benefit related to the liquidation of the Company’s Argentine legal entity.

The Company has recognized deferred tax assets based upon its analysis of the likelihood of realizing the benefits inherent in them and where it 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.

Management expects a tax rate of approximately 24 percent for 2006 based upon anticipated improvement in domestic operating results, the inclusion of International Beauty operations for the full year and the absence of the 2005 benefit for resolution of tax contingencies as outlined above.

Net Interest. The Company incurred $45.1 million of net interest expense compared with $13.0 million of net interest expense in 2004 and $13.8 million in 2003. The sharp increase in 2005 was due to slightly higher interest rates in 2005 along with the requirement to pay a make-whole payment of $21.9 million for the call of the Company’s $150 million notes in connection with entering into new financing arrangements for the acquisition of International Beauty and $6.0 million for the discharge of obligations related to $100 million of bonds due in 2006. Issuance costs of approximately $0.8 million related to retired debt were also written off as part of interest expense. A credit of $3.2 million to recognize net deferred gains on an interest rate swaps related to these debt agreements that were previously closed offset some of this expense. Interest expense also included a $3.1 million payment to close an interest rate hedge the Company previously entered to lock in the base interest rate on the previously expected refinancing of its 2006 notes. As the Company’s progress in its acquisition of International Beauty made it no longer probable in the third quarter of 2005 that the debt would be refinanced, this agreement was no longer an effective hedge. See additional discussion in Liquidity and Capital Resources.

The decline in 2004 reflected the Company’s entering into two interest rate swap agreements discussed below and the lower resulting interest rates during 2004. Also contributing to the decline was lower debt levels during the year. Offsetting the impacts of these items was the absence of a 2003 adjustment related to prior hedging activity.

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 totaled a notional amount of $150 million and were to expire in 2011. The Company received semi-annual interest payments at 7.91 percent and made floating rate interest payments based on the six-month LIBOR rate plus a spread of about 3.7 percentage points. These interest rate swap agreements were terminated in conjunction with the acquisition financing for International Beauty as discussed above.

Reflecting current interest rates, projected borrowings and their effective term structure, and additional debt outstanding due to the International Beauty acquisition, management anticipates that 2006 net interest expense will be approximately $45 million.

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Regional Results 2005 vs. 2004

Europe

The slight increase in European sales was primarily due to higher business-to-business sales of $11.5 million at exchange rates consistent with 2004. The Company only pursues business-to-business relationships that benefit its core party plan business; consequently, activity in one period may not be indicative of future periods. The emerging markets of Russia, Turkey and Poland had strong increases in 2005 with growth of 41 percent from last year. The largest sales growth contribution came from Russia, which was up over 50 percent and contributed the largest dollar increase from last year of all markets in the segment. South Africa and France also contributed nicely to sales growth from 2004 due to larger total and active sales forces. These positive results were partially offset by large sales declines in the Nordics, Netherlands, Austria and Germany.

The segment’s largest market, Germany, was down eight percent from last year. While it ended the year with a larger sales force size, for most of the year it operated at a sales force size disadvantage. Additionally, a sales force size advantage for most of the fourth quarter did not offset lower sales force productivity due to a difficult consumer environment. Sales in 2005 in Germany totaled $231.0 million, as compared with $251.1 million in 2004, translated at 2005 exchange rates. The German market also accounts for a substantial portion of the segment’s profit.

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The segment overall ended the year with a 13 percent sales force size advantage and achieved a six percent average active sales force size advantage in the fourth quarter of 2005 versus 2004.

Overall, the segment’s sales decline absent the business-to-business impact noted above was due to lower sales volume, partially offset by a slight increase in overall pricing. The average pricing increase was negatively impacted by the mix of products sold. There was also a negative impact from the mix of markets generating sales. The emerging markets tend to sell products with lower average price points than those of Western Europe.

Although local currency sales increased slightly, profit was down 13 percent as reported and 12 percent in local currency primarily due to a lower gross margin and higher operating expenses. The lower gross margin was a result of higher resin costs, which were not totally offset by price increases, and a less favorable sales mix. The increased operating expenses were primarily for higher promotional expenses in Germany to increase the size of the sales force.

Management expects 2006 European sales to be about even with 2005 in local currency. Continued growth in emerging and developing markets will be offset by a difficult comparison from high business-to-business sales in 2005. The return on sales is expected to remain at about 20 percent.

Asia Pacific

Net sales for the year increased slightly both as reported and in local currency. This comparison benefited from the inclusion in 2004 of a product recall in Japan of $5.5 million, at the 2005 foreign exchange rate. Excluding this benefit, local currency sales would have been flat. Significant sales increases in China and Korea combined with a strong increase in Australia were partially offset by significant sales declines in Japan and the Philippines.

In China, direct selling has been limited by law, and the Company reaches consumers through independent store fronts. China sales grew over 70 percent and contributed the largest dollar increase in the Asia Pacific segment during 2005 with almost 2,000 storefronts operating at the end of 2005, which was up over 50 percent from last year. Storefront sales productivity was up as well.

Korea benefited from higher business-to-business transactions and core sales during the year, while Australia grew sales through a higher active and more productive sales force.

Although sales declined in Japan, strategic progress was made through focus on the product and the party. More specifically, in 2005, the product mix was rebalanced to obtain more sales from full-price products versus discounted items, which resulted in a better gross margin. Promotional programs encouraged the sales force to sell product benefits rather than sell at a discount. Additionally, the selling process was improved along with the catalogues and brochures to appeal more to the end consumer. These actions all support moving toward a direct selling sales force rather than a wholesale buyers club. In the second half of the year in Japan, the year-over-year average active sales force size declines stabilized and sales force productivity turned positive.

The Philippines had a large decline in active sales force size, which resulted in a significant sales decline partially due to the poor economic and political climate in this market.

Asia Pacific had a small decline in overall sales volume for the year, but was able to offset that with a more favorable mix of products sold as well as lower overall sales discounting as noted above in the Japan commentary.

In spite of a slight sales increase, both reported and local currency profit declined moderately reflecting results in Japan and the Philippines, including increased promotional spending in the Philippines in an attempt to stimulate sales force growth and sales in 2005 while competing in a difficult economic environment. The product recall in Japan mentioned earlier had no impact on the profitability comparison as the vendor reimbursed the Company for lost profit and costs related to the recall.

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Effective January 1, 2006, the Company will change its reporting segments to incorporate the management structure put in place following the International Beauty acquisition. Asia Pacific will be reported along with Mexico, and the Philippines will be included in the International Beauty segment.

Management expects local currency sales and profit for Asia Pacific and Mexico to be up by low-single digit percentages in 2006, reflecting continued growth in Australia, Mexico and China and weakness in Japan.

Latin America

Latin America had a strong increase in sales for the year that included a slight benefit from a weaker U.S. dollar. Local currency sales increased 11 percent driven by improvements in all areas, particularly Mexico. The sales increase in Mexico was driven by an increase in the total and active sales force count along with continued growth in the sale of BeautiControl products. Beauty sales grew 20 percent compared with 2004 and accounted for 10 percent of Mexican sales. Venezuela and Brazil also contributed to the increase for the year. In Brazil, the sales force was smaller but more productive than the prior year, as there was an increase in volume as well as improved pricing. Venezuela’s sales force advantage led to the current year increase, which was mostly driven by higher volume and, to a lesser extent, improved pricing. This segment had sequential improvement every quarter in the average active sales force size and finished the year with a fourth quarter advantage of nine percent.

The overall sales increase was driven largely by lower product discounting that led to higher average price points. As expected, the reduced discounting did lead to some erosion of sales volume.

Segment profit improved slightly due to sales growth in this segment. However, profit growth was less than sales growth due to strategic investments made to expand BeautiControl’s sales contribution in Mexico. Additionally, an unfavorable sales mix impacted profit.

Effective January 1, 2006, all Tupperware markets in Latin America, except Mexico, will be reported in the International Beauty segment reflecting a new management structure designed to capitalize on the catalog merchandising programs that work well in South America, as well as to gain back-end synergies. The 2006 outlook for the Latin American markets is included within the segment they will be reported under going forward.

North America

North America had a substantial decline in sales in 2005 as sales volume declined and was only partially offset by an improved product mix that included fewer sales force support items. This was due almost exclusively to the performance in the United States, which continued to struggle and had a 28 percent decline in the number of average active sellers in 2005 versus 2004. The Company is seeking to improve its U.S. business through a refreshed, interactive party format, continuing to introduce innovative and fashion forward products, public relations activities to ensure a broad understanding of the Company’s current product categories, innovations and fashionability and a better balance between its emphasis on products and its sales force earnings opportunity. In April 2005, the Company completed its implementation of a multi-tier compensation system for its sales force. The new system is more competitive in the U.S. market than the previous format and emphasizes building one’s business through recruiting. The Company is currently training its independent sales force to operate successfully under this new model. The new model offers life-time rather than temporary commissions on the sales of people within a consultant’s “downline” organization, removes geographic boundaries for recruiting within the nation and provides everyone within the sales force the opportunity to reach the top level of the organization without significant monetary investment.

There was a significant decrease in the segment loss for the year in spite of the substantial sales decline, also from the United States results. This was largely due to value chain improvements implemented during 2004 and 2005 including a restructure of its manufacturing operations in Hemingway, South Carolina to source the

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majority of its products from the Company’s other manufacturing facilities. The Company also realized a net benefit of $7.2 million from reduced LIFO reserve needs as United States-produced inventory was sold. Additionally, the United States benefited from an approximate $4 million reallocation of corporate overhead charges.

During the fourth quarter of 2005, there was $5.6 million of restructuring costs recorded for the U.S. market primarily related to warehousing and distribution. Going into 2006, the focus will continue to be on improving the value chain, including the cost base, in expectation of a lower loss in 2006, although management expects sales to be down by a single-digit percentage.

BeautiControl North America

BeautiControl North America had substantial increases in both sales and segment profit again in 2005 which were largely volume related. A higher proportion of sales of low priced items to support increased recruiting resulted in a slightly lower average selling price. The improved performance was a result of substantial increases in both the total and active sales forces during the year with the business closing 2005 with a 20 percent advantage in the total sales force. BeautiControl has now had 17 consecutive quarters of sales increases.

The sales force growth was fueled by both a strong earnings opportunity and an easy, replicable interactive party experience, the “Spa ESCAPE”. 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 sales force leadership development, all provide the impetus for continued growth.

The sales growth was the primary reason for the profit improvement along with the absence of an approximate $2.5 million charge in the first quarter of 2004 related to an accrual for legal matters and an executive retirement.

Management expects sales in 2006 to increase by a double-digit percentage and to generate an improved return on sales.

International Beauty

International Beauty sales and profit were included in the Company’s results beginning on December 5, 2005 with the closing of the acquisition of Sara Lee Corporation’s direct selling businesses. The sales and profit were $37.9 million and $0.9 million, respectively, including $1.8 million of purchase accounting amortization.

Sales and profit were strong in Mexico and South Africa, partially offset by some weakness in Australia and the Philippines. After considering incremental interest expense related to the acquisition, this segment had little net impact on 2005 earnings.

Going forward, this segment will include the acquired businesses along with Tupperware Central and South America and the Philippines. In 2006, management expects local currency sales to increase organically by 3 to 5 percent, with greater growth in profit from continuing good results in Mexico and a lower investment in South America.

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Regional Results 2004 vs. 2003

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 continues 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 active 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, at consistent exchange rates.

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.

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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. The segment’s gross margin was up slightly during the year on the strength of the improved performance in manufacturing noted above.

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, there were over 1,200 storefronts open 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 whose contribution doubled 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.

In Japan, the Company began its transition from a wholesale buyer’s method offering a large proportion of high-priced, third-party-sourced products back 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 impact of the product recall discussed earlier in the net sales section.

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 impact on profitability as the vendor agreed to reimburse the Company for lost profit and costs related to 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.

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,

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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. Beauty sales grew over 50 percent in Mexico in 2004 to reach nine percent of total Mexican sales versus approximately seven percent in 2003. 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.

North America

North America had 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 with the transformation outlined in the discussion of results in 2005 versus 2004. The active sales force was down 21 percent during 2004.

The significant increase in the segment loss for the year was also from the 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 related to excess inventory. The negative impacts in 2004 overwhelmed the benefits derived from cost control measures previously put in place.

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.

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.

Financial Condition

Liquidity and Capital Resources. Working capital increased, reaching $218.0 million as of December 31, 2005 compared with $173.9 million as of December 25, 2004 and $121.0 million as of December 27, 2003. The current ratio was 1.5 to 1 at the end of 2005 compared with 1.6 to 1 at the end of 2004 and 1.4 to 1 at the end of 2003. The $44.1 million overall working capital increase in relation to the acquisition of International Beauty is summarized as follows:

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The 2005 working capital increase, exclusive of the impact from International Beauty, was due to an increase in cash primarily from cash generated from operations, including the settlement of pre-June 1996 income taxes with the Company’s former parent, along with proceeds received upon the exercise of stock options, partially offset by the pay down of debt. Another impact was a decrease in accounts payable in the existing businesses primarily due to the timing of year end. The December 31 year end for 2005 resulted in more of the Company’s trade payables coming due before the end of the year. Of the Company’s year end cash balance of $181.5 million, approximately $100 million, including the tax accruals shown above, are expected to be paid out in connection with the acquisition. The tax accruals related to International Beauty are for approximately $80 million of taxes withheld for the benefit of a subsidiary of Sara Lee Corporation related to the sale of the Mexican operations and other income tax items related to the acquisition.

The 2004 working capital increase was primarily due to a more than doubling of cash on hand to $91 million. The increase was due to cash generated by operations, proceeds from asset disposition, 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 had a legal structure change that 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.

In conjunction with closing the International Beauty acquisition on December 5, 2005, the Company entered into a new credit agreement that included a seven-year $775 million term loan bearing an annual interest rate of 150 basis points over the LIBOR rate and a $200 million revolving credit facility. This agreement replaced its previously existing $200 million revolving line of credit. The Company used cash on hand and the term loan borrowings to fund the amount due to Sara Lee Corporation, to discharge its then outstanding $100 million notes due in 2006 and to repay its $150 million notes due in 2011. The settlement of the 2011 notes required make-whole payments to the note holders of approximately $22 million. In anticipation of this transaction, the Company closed fixed to variable interest rate swaps with combined notional amounts totaling $150 million that were scheduled to expire in 2011 with the notes. These swaps were entered to convert the Company’s $150 million notes from fixed to variable interest rates. Closing these swaps resulted in a loss of approximately $3.1 million that was recorded as a component of income when the notes were settled. As also discussed in the market risk section, the Company exited an agreement to lock in a fixed 10-year treasury rate that was to provide the base interest for an anticipated refinancing of its $100 million 2006 notes. The $3.1 million cost to exit this arrangement was recorded as a component of interest expense in the third quarter of 2005. In addition to the amounts discussed above, upon closure of the transaction, the Company expensed unamortized debt issuance costs relating to the settled debt totaling approximately $0.8 million as well as net gains deferred related to previously terminated hedging arrangements associated with the settled debt. These net gains were approximately $3.2 million. Unamortized debt issuance costs of approximately $0.6 million related to the Company’s existing revolving credit agreement were added to the costs related to the new revolver and are being amortized over its 5-year term. Borrowings under the credit agreement are secured by substantially all of the Company’s domestic assets and 65 percent of its stock in its significant foreign subsidiaries. Principal payments on the term loan are 1 percent of the original amount per year in years 1 to 6 and the first 3 quarters of year 7 in quarterly installments. The balance will be due in a balloon payment at the end of the seven-year term. The agreement also requires additional principal payments consisting of 100 percent of cash generated from certain asset sales and new debt issuances as well as up to 50 percent of excess cash flows. Excess cash flows are substantively defined as net cash provided by operating activities less capital expenditures, required debt payments and dividends paid up to $60 million annually. The new debt agreement contains covenants of a similar nature to those under the previous agreement. While the new covenants are more restrictive than the previous covenants and could inhibit the Company’s ability to pay dividends or buy back stock, the Company currently believes it will be able to continue paying its current $0.22 per share quarterly dividend under the covenant requirements. The Company will

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provide detailed covenant calculations in its first quarter 2006 10-Q when the initial calculation is required under its credit agreement. See further information in Note 7 to the consolidated financial statements.

The Company’s two debt rating agencies, Standard and Poor’s and Moody’s, have both rated the new debt. Standard and Poor’s lowered its corporate credit rating of the Company from BB+ to BB and assigned a stable outlook. Moody’s lowered its corporate family rating of the Company to Ba2.

As of December 31, 2005, the Company had $192.2 million available under its revolving line of credit and about $120 million available under other uncommitted lines of credit. Current and committed borrowing facilities and cash generated by operating activities are expected to be adequate to finance working capital needs and capital expenditures.

The Company’s major markets for its products are Australia, France, Germany, Japan, Mexico and the United States. A significant downturn in the Company’s business in these markets would adversely impact the Company’s ability to generate operating cash flows. While the current downturns in Japan, Germany and the United States Tupperware business noted earlier have limited the ability of these markets to contribute to the Company’s operating cash flows as compared with the past they have not resulted in a material negative impact to the Company as a whole. 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 Japanese, German and Tupperware United States 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, the success of new products and promotional programs.

The debt-to-total capital ratio at the end of 2005 was 69 percent compared with 46 percent at the end of 2004. Debt is defined as total debt and capital is defined as total debt plus shareholders’ equity. The increase from the same period a year ago reflected increased debt from financing the acquisition of International Beauty.

Operating Activities. Net cash provided by operating activities for 2005 was $167.6 compared with $121.4 million in 2004 and $105.6 million in 2003.

The increase from 2004 to 2005 was primarily due to $46 million received in connection with settling pre-June 1996 income taxes with the Company’s former parent. The Company also received a refund of approximately $10 million from the United States Internal Revenue Service in settlement of audits for the period 1996 to 2001. These items were partially offset by a decrease in accounts payable and accrued liabilities. There was a cash inflow from settling hedge contracts this year versus an outflow last year due to a weaker U.S. dollar during 2005 than in 2004.

Investing Activities. For 2005, 2004 and 2003, the Company spent $52.0, $43.6 and $40.0 million respectively, for capital expenditures. The most significant type of spending in all years was for molds for new products with the greatest amount spent in Europe. The increase from last year was due to improvements made to property being developed for disposition, which will be recovered in future sales, as well as from manufacturing maintenance. Full year 2006 capital expenditures are expected to be about $70 million reflecting an increase from 2005 for International Beauty, capacity expansion at BeautiControl North America to service the growth environment there and for a manufacturing facility in Europe.

Partially offsetting the capital spending was $8.0 million in 2005 and $16.6 million in 2004, of proceeds related to the sale of certain property, plant and equipment in addition to insurance proceeds received in 2005 for property damaged by a hurricane during the third quarter of 2004. The proceeds from the sales were primarily related to land for development near the Company’s Orlando, Florida headquarters. Cumulative proceeds from the Company’s program to sell land for development which began in 2002, are now expected to be up to $125 million by the end of 2009, including $43 million received through the end of 2005. Expected proceeds for 2006 are $15 million.

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Investing activities in 2005 also included a net cash outflow of $464.3 million to acquire International Beauty, which was funded by a new term loan and cash on hand. See discussion above in Liquidity and Capital Resources.

Financing Activities. 2005 included net proceeds from issuance of term debt of $762.5 million to fund the acquisition of International Beauty and refinance existing debt. See detailed discussion in Liquidity and Capital resources including settlement of historical debt and related covenant restrictions.

Dividends. During 2005, 2004 and 2003, the Company declared dividends of $0.88 per share of common stock totaling $52.4 million, $51.6 million and $51.4 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 spending needs, its share repurchase program concluded in 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 dividend level as projected cash flows from operations as well as additional property sales are expected to be sufficient to maintain the dividend without restricting the Company’s ability to finance its operations, make necessary investments in the future growth of the business of the nature included in its 2006 earnings outlook or its near-term debt repayment obligations. If there is an event requiring the use of cash, such as a strategic acquisition, the Company would need to reevaluate whether to maintain its current dividend payout.

Stock Option Exercises. During 2005, 2004 and 2003, the Company received proceeds of $30.2 million, $4.1 million, $0.9 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 representing the bulk of the shares issued under the program. The MSPP loans provide for the repayment of 25 percent of the principal after 5 and 6 years with the remaining 50 percent due at the end of the eighth year. There were no new participants during 2005, 2004, or 2003. During 2005, 2004, and 2003, respectively, two, two, and one participant left the Company and sold 38,802, 37,000, and 30,100 shares to the Company, at the current market price, to satisfy loans totaling $0.8 million, $0.7 million, and $0.6 million. The MSPP permits the surrender of shares in lieu of payment of the loan with the surrendered shares valued at the then current market price. During the year 18 executives surrendered 254,441 shares to satisfy $5.6 million of loans and four participants made cash payments to satisfy loan payment obligations totaling $0.6 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. Based upon the loan payment schedule, the Company expects to receive $1.3 million of payments during 2006. See Note 9 to the consolidated financial statements for further details of the MSPP.

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

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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 31, 2005, and December 25, 2004 the loan balance was $7.3 and $7.4 million respectively.

Contractual Obligations

The following summarizes the Company’s contractual obligations at December 31, 2005, and the effect such obligations are expected to have on its liquidity and cash flow in future periods (in millions).

Application of Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon the Company’s consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts. Actual results may differ from these estimates under different assumptions or conditions. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Allowance for Doubtful Accounts. The Company maintains current and long-term receivable amounts with most of its independent distributors and sales force in certain markets. The Company regularly monitors and assesses its risk of not collecting amounts owed to it by its customers. This evaluation is based upon an analysis of amounts currently and past due along with relevant history and facts particular to the customer. It is also based upon estimates of distributor business prospects, particularly related to the evaluation of the recoverability of long-term amounts due. This evaluation is done market by market and account by account based upon historical experience, market penetration levels, access to alternative channels and similar factors. It also considers collateral of the customer that could be recovered to satisfy debts. Based upon the results of this analysis, the Company records an allowance for uncollectible accounts for this risk. This analysis requires the Company to make significant estimates, and changes in facts and circumstances could result in material changes in the allowance for doubtful accounts.

Inventory valuation. The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of the inventory and the estimated market value based upon estimates of future demand. The demand is estimated based upon the historical success of product lines as well as

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the projected success of promotional programs, new product introductions and new markets or distribution channels. The Company prepares projections of demand on an item by item basis for all of its products. If inventory quantity exceeds projected demand, the excess inventory is written down. However, if actual demand is less than projected by management, additional inventory write-downs may be required.

Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets also are recognized for credit carryforwards. Deferred tax assets and liabilities are measured using the enacted rates applicable to taxable income in the years in which the temporary differences are expected to reverse and the credits are expected to be used. The effect on deferred tax assets and liabilities of the change in tax rates is recognized in income in the period that includes the enactment date. An assessment is made as to whether or not a valuation allowance is required to offset deferred tax assets. This assessment requires estimates as to future operating results as well as an evaluation of the effectiveness of the Company’s tax planning strategies. These estimates are made based upon the Company’s business plans and growth strategies in each market and are made on an ongoing basis; consequently, future material changes in the valuation allowance are possible. At the end of 2005, the Company had net domestic deferred tax assets of approximately $149.2 million for which no valuation allowance has been provided. Of this total, approximately $54.2 million relates to recurring type temporary differences which reverse regularly and are replaced by newly originated items. The balance is expected to be realized within the next 15 years based upon an increase in domestic income from BeautiControl North America as well as expected improvement in the United States Tupperware business. Also, expected gains related to the Company’s previously discussed Orlando land sales activities will result in the realization of a portion of these assets. In addition, certain tax planning transactions are available to the Company should they be necessary.

Promotional and Other Accruals. The Company frequently makes promotional offers to its independent sales force to encourage them to meet specific goals or targets for sales levels, party attendance, recruiting or other business critical activities. The awards offered are in the form of cash, product awards, special prizes or trips. The cost of these awards is recorded during the period over which the sales force qualifies for the award. These accruals require estimates as to the cost of the awards based upon estimates of achievement and actual cost to be incurred. The Company makes these estimates on a market by market and program by program basis. It considers the historical success of similar programs, current market trends and perceived enthusiasm of the sales force when the program is launched. During the promotion qualification period, actual results are monitored and changes to the original estimates that are necessary are made when known. Like the promotional accruals, other accruals are recorded at a time when the liability is probable and the amount is reasonably estimable. Adjustments to amounts previously accrued are made when changes in the facts and circumstances that generated the accrual occur.

Valuation of Goodwill. The Company conducts an annual impairment test of its recorded goodwill in the second quarter of each year. Additionally, in the event of a change in circumstances that would lead the Company to believe that an impairment may have occurred, a test would be done at that time as well. The Company’s recorded goodwill relates primarily to that generated by its acquisition of BeautiControl in October 2000 and International Beauty in December 2005. The valuation of its goodwill is dependent upon the estimated fair market value of its BeautiControl operations both in North America and overseas and the historical segment operations of International Beauty. The Company estimates the fair value of its BeautiControl operations and will estimate the value of its International Beauty operations using discounted future cash flow estimates. Such a valuation requires the Company to make significant estimates regarding future operations and the ability to generate cash flows including projections of revenue, costs, utilization of assets and capital requirements. It also requires estimates in allocating the goodwill to the different segments that include BeautiControl operations, BeautiControl North America, Latin America and Asia Pacific. Lastly, it requires estimates as to the appropriate discounting rates to be used. The results of the reviews conducted to date related to BeautiControl indicate fair values in excess of the carrying values of the respective business operations. The most sensitive estimate in this evaluation is the projection of operating cash flows as these provide the basis for the fair market valuation. If operating cash flows were to be 20 percent worse

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than projected, the Company would still have no goodwill impairment in any segment. If operating cash flows were to be more than 20 percent worse than projected, the Company would need to calculate a potential impairment as it relates to BeautiControl operations in Latin America. In both North America and Asia Pacific, a reduction of operating cash flows of more than 75 percent would be required to necessitate calculating a potential impairment. A significant impairment would have an adverse impact on the Company’s net income and could result in a lack of compliance with the Company’s debt covenants.

Other Intangible Assets. The Company recorded as assets the fair value of various trademarks and trade names of $197.4 million in conjunction with its acquisition of International Beauty. These amounts have an indefinite life and will be evaluated for impairment the same as discussed in goodwill valuation above. Additionally, the Company recorded $62.0 million for valuation of the International Beauty sales force, and $3.6 million for product formulations. The estimated aggregate annual amortization expense associated with the above intangibles for each of the five succeeding years is $24.1 million, $12.9 million, $8.8 million, $5.5 million and $4.0 million, respectively.

Retirement Obligations. The Company’s employee pension and other post-employment benefits (health care) costs and obligations are dependent on its assumptions used by actuaries in calculating such amounts. These assumptions include health care cost trend rates, salary growth, long-term return on plan assets, discount rates and other factors. The health care cost trend assumptions are based upon historical results, near-term outlook and an assessment of long-term trends. The salary growth assumptions reflect the Company’s historical experience and outlook. The long-term return on plan assets are based upon historical results of the plan and investment market overall, as well as the Company’s belief as to the future returns to be earned over the life of the plans. The discount rate is based upon current yields of AA rated corporate long-term bond yields. These assumptions can have a material impact on the Company’s financial results. For example, a 1 percentage point increase in the Company’s health care cost trend rate would have resulted in a $0.5 million decrease in the Company’s pretax earnings for the year and a $5.9 million increase in its obligation. For each percentage point change in the domestic pension long-term rate of return assumption, pretax earnings would change by approximately $0.3 million. The Company’s key assumptions and funding expectations are indicated in Note 12 to the consolidated financial statements.

For 2005, the Company increased its health care cost trend rate to 10 percent for all participants grading down to 5 percent in 2010. This change represented an increase of one percentage point for post-65 participants and three percentage points for pre-65 participants. As a result, 2005 pretax expense related to the Company’s post-employment health care plan increased approximately $0.5 million. Additionally, it has reduced the discount rate to 5.50 percent related to all domestic post-employment plans which is expected to result in an additional approximately $0.4 million of expense combined for all such plans. Unrecognized losses on post-employment plans as shown in Note 12 to the consolidated financial statements are not expected to result in a material increase of pretax expense as compared with that of 2005.

Effective June 30, 2005, the Company froze the accrual of benefits to participants under its domestic defined benefit pension plans. This action necessitated a remeasurement of its accumulated benefit obligation under the plans and resulted in a pretax decrease of $5.1 million ($3.3 million after tax). This change results in the elimination of the service cost component of net periodic pension expense as it relates to these plans and an ongoing annual reduction of approximately $2.5 million or about $1.2 million as compared with 2005.

Due to an excess of lump sum retirement distributions from its domestic pension plans as compared with service and interest costs, the Company recorded a settlement charge of approximately $0.9 million in 2005. The Company is currently still evaluating what, if any, impact such payments may have on the 2006 expense.

In conjunction with the benefit freeze, the Company increased its basic contribution related to one of its domestic defined contribution plans from 3 percent of eligible employee compensation up to the Social Security Wage Base to 5 percent.

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Impact of Inflation

Inflation as measured by consumer price indices has continued at a low level in most of the countries in which the Company operates.

New Pronouncements

Refer to discussion of new pronouncements in the notes to the consolidated financial statements.

Market Risk

One of the Company’s market risks is its exposure to the impact of interest rate changes. The Company has elected to manage this risk through the maturity structure of its borrowings, interest rate swaps, the currencies in which it borrows and the interest rate lock described below. The Company has previously set a target, over time, of having approximately half of its borrowings with fixed rates based either on the stated terms or through the use of interest rate swap agreements. As discussed earlier, the Company’s post-acquisition term debt carries a variable interest rate. The Company entered into swap agreements in December 2005 and January 2006 to fix the rate on approximately half of the debt for at least three years at a rate of approximately 6.3 percent. If short-term interest rates varied by 10 percent the Company’s annual interest expense would be impacted by approximately $2.7 million.

The Company had intended to refinance its $100 million notes when they came due in 2006. To protect itself from the risk of higher interest rates, in March 2005, the Company entered into an agreement to lock in a fixed 10-year treasury rate of approximately 4.70 percent that would provide the base interest for the debt to be issued in the refinancing. This derivative was designated as a cash flow hedge and was recorded at its fair value on a quarterly basis. In light of the refinancing necessary for the International Beauty acquisition, the agreement was terminated since it was no longer an effective hedge. This action resulted in a charge of $3.1 million in interest expense during the third quarter of 2005.

During 2002, the Company entered an interest rate swap agreement with a notional amount of 6.7 billion Japanese yen that matures on January 24, 2007. The Company pays a fixed rate payment of 0.63 percent semi annually and receives a Japanese yen floating rate payment based on the LIBOR rate which is determined two days before each interest payment date. At inception the Company believed that this agreement would provide a valuable economic hedge against rising interest rates in Japan by converting the variable interest rate implicit in the Company’s rolling net equity hedges in Japan to a fixed rate. The balance of net equity hedges in Japan has since been reduced with a large reduction occurring in the second quarter of 2005. The Company, however, currently plans to maintain the interest rate swap agreement until maturity. This agreement does not qualify for hedge accounting treatment under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. Accordingly, changes in the market value of the swap are recorded as a component of net interest expense as incurred. As of December 31, 2005, the cumulative loss was about $0.4 million. The change in the cumulative loss for 2005 was a net gain of $0.4 million and for 2004 was a net loss of $0.1 million.

A significant portion of the Company’s sales and profit comes from its international operations. Although these operations are geographically dispersed, which partially mitigates the risks associated with operating in particular countries, the Company is subject to the usual risks associated with international operations. These risks include local political and economic environments, and relations between foreign and U.S. governments.

Another economic risk of the Company is exposure to foreign currency exchange rates on the earnings, cash flows and financial position of the Company’s international operations. The Company is not able to project in any meaningful way the possible effect of these fluctuations on translated amounts or future earnings. This is due to the Company’s constantly changing exposure to various currencies, the fact that all foreign currencies do not react in the same manner in relation to the U.S. dollar and the large number of currencies involved, although the Company’s most significant exposures are to the euro and Mexican peso.

Although this currency risk is partially mitigated by the natural hedge arising from the Company’s local product sourcing in many markets, a strengthening U.S. dollar generally has a negative impact on the Company.

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In response to this fact, the Company uses financial instruments, such as forward contracts, to hedge its exposure to certain foreign exchange risks associated with a portion of its investment in international operations. In addition to hedging against the balance sheet impact of changes in exchange rates, the hedge of investments in international operations also has the effect of hedging a portion of cash flows from those operations. The Company also hedges with these instruments certain other exposures to various currencies arising from amounts payable and receivable, non-permanent intercompany loans and forecasted purchases.

The Company continuously monitors its foreign currency exposure and may enter into contracts to hedge exposure in 2006.

See further discussion regarding the Company’s hedging activities in Note 7 to the consolidated financial statements.

The Company is also exposed to rising material prices in its manufacturing operations and in particular the cost of oil and natural gas-based resins. This is the primary material used in production of Tupperware products, and totaled about $81 million in 2005. A 10 percent fluctuation in the cost of resin could therefore impact the Company’s annual cost of sales in the $8 million dollar range as compared with the prior year. The Company manages this risk by utilizing a centralized procurement function that is able to take advantage of bulk discounts while maintaining multiple suppliers and also enters into short-term pricing arrangements. It also manages its margin through the pricing of its products, with price increases generally in line with consumer inflation, and its mix of sales through its promotional programs and discount offers. It may also, on occasion, make advance material purchases to take advantage of what it perceives to be favorable pricing. At this point in time, the Company has determined that entering forward contracts for resin prices is not cost beneficial and has no such contracts in place. However, should circumstances warrant, the Company may consider such contracts in the future.

The Company’s program to sell land held for development is also exposed to the risks inherent in the real estate development process. Included among these risks are the ability to obtain all government approvals, the success of buyers in attracting tenants for commercial developments in the Orlando real estate market and general economic conditions, such as interest rate increases.

Forward-Looking Statements

Certain written and oral statements made or incorporated by reference from time to time by the Company or its representatives in this report, other reports, filings with the Securities and Exchange Commission, press releases, conferences or otherwise are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Statements contained in this report that are not based on historical facts are forward-looking statements. Risks and uncertainties may cause actual results to differ materially from those projected in forward-looking statements. The risks and uncertainties include successful recruitment, retention and activity levels of the Company’s independent sales force; disruptions caused by the introduction of new distributor operating models or sales force compensation systems; success of new products and promotional programs; the ability to obtain all government approvals on and generate profit from land development; the success of buyers in attracting tenants for commercial development; economic and political conditions generally and foreign exchange risk in particular; increases in plastic resin prices; the introduction of beauty product lines outside the United States; the costs and covenant restrictions associated with financing the acquisition of new businesses and the disruption caused by taking focus from on-going lines of business to integrate acquired businesses into the organization; integration of non-traditional product lines into Company operations; and other risks detailed in the Company’s report on Form 8-K dated April 10, 2001, as filed with the Securities and Exchange Commission.

Investors should also be aware that while the Company does, from time to time, communicate with securities analysts, it is against the Company’s policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, it should not be assumed that the Company agrees with any statement or report issued by any analyst irrespective of the content of the confirming financial forecasts or projections issued by others.

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Item 8. Financial Statements and Supplementary Data

Consolidated Statements of Income