M & F WORLDWIDE CORP - 10-K Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from___ to ____

Commission File Number 1-13780

M & F WORLDWIDE CORP.
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(Exact name of registrant as specified in its charter)

DELAWARE 02-0423416
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

35 EAST 62ND STREET, NEW YORK, N.Y. 10021
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(Address of principal executive offices) (Zip Code)

212-572-8600
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(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, par value $.01 per share New York Stock Exchange, Inc.

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirement for the past 90 days. X Yes 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 checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). X Yes No
----- -----

The aggregate market value of the Common Stock held by non-affiliates of
the registrant (using the New York Stock Exchange closing price as of June 30,
2004, the last business day of the registrant's most recently completed second
fiscal quarter) was approximately $158,714,103. The number of shares of Common
Stock outstanding as of March 1, 2005 was 19,099,470.

Portions of the registrant's 2005 definitive Proxy Statement issued in
connection with the annual meeting of stockholders are incorporated by reference
into Part III of this Form 10-K.

THIS FORM 10-K IS BEING DISTRIBUTED TO STOCKHOLDERS IN LIEU OF A SEPARATE
ANNUAL REPORT.

M & F WORLDWIDE CORPORATION

INDEX TO ANNUAL REPORT ON FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2004

PAGE
----

PART I

Item 1 Business.......................................................... 3

Item 2 Properties........................................................ 8

Item 3 Legal Proceedings................................................. 8

Item 4 Submission of Matters to a Vote of Security Holders............... 9

PART II

Item 5 Market for Registrant's Common Equity, Related Stockholders
Matters and Issuer Repurchases of Equity Securities............... 10

Item 6 Selected Financial Data........................................... 10

Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................... 12

Item 7A Quantitative and Qualitative Disclosures about Market Risks....... 21

Item 8 Financial Statements and Supplementary Data....................... 21

Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................... 21

Item 9A Controls and Procedures........................................... 21

PART III

Item 10 Directors and Executive Officers of the Registrant................ *

Item 11 Executive Compensation............................................ *

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

Item 13 Certain Relationships and Related Transactions.................... *

Item 14 Principal Accountant Fees and Services............................ *

PART IV

Item 15 Exhibits and Financial Statement Schedules........................ 25

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* Incorporated by reference from M & F Worldwide Corp. 2005 Proxy Statement

PART I

ITEM 1. BUSINESS

M & F Worldwide Corp. ("M & F Worldwide" or the "Company") was incorporated
in Delaware on June 1, 1988 and is a holding company that conducts its
operations through its indirect wholly owned subsidiary, Mafco Worldwide
Corporation ("Mafco Worldwide"). At December 31, 2004, MacAndrews & Forbes
Holdings Inc. (formerly known as Mafco Holdings Inc.) ("Holdings"), through its
wholly owned subsidiary Mafco Consolidated Group Inc. ("MCG"), beneficially
owned 37.9% of the outstanding M & F Worldwide Common Stock.

The Company has one segment, which is the production of licorice products,
for sale to the tobacco and confectionery industries.

The Company produces a variety of licorice products from licorice root,
intermediary licorice flavors produced by others and certain other ingredients
at its facilities in Camden, New Jersey; Richmond, Virginia; Gardanne, France;
and at the facilities of its joint ventures in Xianyang Shaanxi and Weihai,
Shandong, People's Republic of China. Approximately 70% of the Company's
licorice product sales are to the worldwide tobacco industry for use as tobacco
flavor enhancing and moistening agents in the manufacture of American blend
cigarettes, moist snuff, chewing tobacco and pipe tobacco. While licorice
represents a small percentage of the total cost of manufacturing American blend
cigarettes and other tobacco products, the particular formulation and quantity
used by each brand is an important element in the brand's quality. In addition,
the Company manufactures and sells cocoa and carob products for use in the
tobacco industry.

The Company also sells licorice root residue as garden mulch under the name
Right Dress.

The Company has achieved its position as the world's leading manufacturer
of licorice products through its experience in obtaining licorice root, its
technical expertise at maintaining the consistency and quality of its product
and its ability to develop and manufacture proprietary formulations for
individual customers and applications.

OPERATING STRATEGIES

The Company intends to maintain its position as the world leader in
licorice products by improving its manufacturing process and raw material
procurement in order to achieve stable costs and by continuing to operate
ventures in strategic areas of the world to enhance its overall licorice
business.

PRODUCTS AND MANUFACTURING

LICORICE PRODUCTS. The Company produces a variety of licorice products from
licorice root, intermediary licorice extracts produced by others and certain
other ingredients at its facilities in Camden, New Jersey; Gardanne, France; and
at the facilities of its joint ventures in Xianyang Shaanxi and Weihai,
Shandong, People's Republic of China. The Company selects licorice root from
various sources to optimize flavor enhancing and chemical characteristics and
then shreds the root to matchstick size. Licorice solids are then extracted from
the shredded root with hot water. After filtration and evaporation, the
concentrated extract is converted into powder, semi fluid or blocks, depending
on the customer's requirements, and then packaged and shipped. For certain
customers, extracts from root may be blended with intermediary licorice extracts
from other producers and non-licorice ingredients to produce licorice products
that meet the individual customer's requirements. Licorice extract can be
further purified to produce licorice derivatives. The Company maintains finished
goods inventories of sufficient quantity to normally provide immediate shipment
to its tobacco and non-tobacco customers.

NON-LICORICE PRODUCTS. The Company also sells flavoring agents and plant
products to the tobacco, spice, pharmaceutical and health food industries. The
Company cleans, grinds or cuts raw spices, herbs and plant products into
finished products.

RAW MATERIALS

Licorice is derived from the roots of the licorice plant, a shrub-like
leguminous plant that is indigenous to the Middle East and Central Asia. The
plant's roots, which can be up to several inches thick and up to 25 feet long,
are harvested when the plant is about four years old. They are then cleaned,
dried and bagged or pressed into bales. Through its foreign suppliers, the
Company acquires the root in local markets for shipment to the Company's
processing facilities in Camden, New Jersey or Gardanne, France. Most of the
licorice root processed by the Company originates in Afghanistan, the People's
Republic of China, Pakistan, Iraq,

Azerbaijan, Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan, Syria and Turkey.
Through many years of experience, the Company has developed extensive knowledge
and relationships with its suppliers in these areas. Although the amount of
licorice root the Company purchases from any individual source or country varies
from year to year depending on cost and quality, the Company endeavors to
purchase some licorice root from all available sources. This enables the Company
to maintain multiple sources of supply and relationships with many suppliers so
that, if the licorice root from any one source becomes temporarily unavailable
or uneconomic, the Company will be able to replace that source with licorice
root from another area or supplier. The unrest in Afghanistan did not have a
significant effect on the Company's total root supply, and root supplies, which
had been interrupted in 2001, resumed in 2002. During 2004, the Company had
numerous suppliers of root and one vendor who supplied 49% of the Company's
total root purchases. The Company tries to maintain a sufficient licorice root
raw material inventory and open purchase contracts to meet normal production
needs for three years. At December 31, 2004, the Company had on hand a supply of
licorice root raw material approaching three years. Licorice root has an
indefinite retention period as long as it is kept dry, and therefore the Company
has experienced little, if any, material spoilage. The Company has been able to
obtain licorice root raw materials without interruption since World War II, even
though there has been periodic instability in the areas of the world where
licorice root raw materials are obtained.

In addition to licorice root, the Company also uses intermediary licorice
extracts produced by the Company's Chinese joint venture and purchases them from
other manufacturers for use as a raw material. These products are available from
producers primarily in the People's Republic of China and Central Asia in
quantities sufficient to meet the Company's current requirements and anticipated
requirements for the foreseeable future. During 2004, the Company had numerous
suppliers of intermediary licorice products of which one supplied 18% of total
purchases.

Other raw materials for the Company's non-licorice products and plant
products are commercially available through many domestic and foreign sources.

SALES AND MARKETING

All sales in the U.S. (including sales of licorice products to U.S.
cigarette manufacturers for use in American blend cigarettes to be exported) are
made through the Company's offices located in Camden, New Jersey or Richmond,
Virginia, with technical support from the Company's research and development
department. Outside the U.S., the Company sells its products from its Camden,
New Jersey offices, through its French subsidiaries, Chinese joint ventures and
through exclusive agents as well as independent distributors.

The Company has established strong relationships with its customers in the
tobacco, confectionery and other industries because of its expertise in
producing and supplying consistent quality licorice products and other flavor
enhancing agents with a high level of service and security of supply. The
Company ships products worldwide and provides technical assistance for product
development for both tobacco and non-tobacco applications.

The Company sells licorice root residue, a by-product of the licorice
extract manufacturing process, as garden mulch under the name Right Dress.
Distribution of Right Dress is limited to the area within a 200-mile radius of
Camden, New Jersey due to shipping costs and supply limitations.

In 2004, the Company's ten largest customers, eight of which are
manufacturers of tobacco products, accounted for approximately 69% of the
Company's net revenues and one customer, Altria Group Inc., accounted for
approximately 34% of the Company's 2004 net revenues. If Altria Group Inc. were
to stop purchasing licorice from the Company, it would have a significant
adverse effect on the financial results of the Company.

COMPETITION

The Company's position as the largest manufacturer of licorice products in
the world arises from its long-standing ability to provide its customers with a
steady supply of high quality and consistent products, together with superior
technical support. Producing licorice products of consistently high quality
requires an experienced work force, careful manufacturing and rigorous quality
control. The Company's long-term relationships and knowledge of the licorice
root market are of great value in enabling it to consistently acquire quality
raw materials. Although the Company could face increased competition in the
future, the Company currently encounters limited competition in sales of
licorice products to tobacco companies in many of its markets as a result of the
factors described above and the large investments in inventories of raw
materials and production facilities that are required to adequately fulfill its
customers' needs. Other markets in which the Company operates, particularly the
confectionery licorice market in Europe, are more competitive. Significant
competing producers of licorice products are government-owned and private
corporations in the People's Republic of China and Iran and a private
corporation based in Israel.

THE TOBACCO INDUSTRY

Developments and trends within the tobacco industry may have a material
effect on the operations of the Company.

U.S. cigarette consumption declined at an estimated 2.5% during 2004 and
approximately 2% annually over the previous ten years due to significant price
increases introduced by the cigarette manufacturers in order to recover costs
related to the 1998 settlement with the state attorneys general, greater
awareness of health risks by consumers, continuing restrictions on smoking areas
and sales tax increases on cigarettes. Sales of American blend cigarettes also
declined in Western Europe by approximately 8.7% during 2004 due to increased
regulation, smoking restrictions and tax increases. The rate of sales decline
during 2004 far exceeded the average rate of decline experienced by this region
over the past several years.

Consumption of chewing tobacco and moist snuff is concentrated primarily in
the U.S. Domestic consumption of chewing tobacco products has declined for more
than a decade by approximately 4.0% per year. Chewing tobacco appeals to a
limited and declining customer base, primarily males living in rural areas.
Moist snuff consumption increased approximately 5.5% during 2004 and has risen
steadily since the mid-1970's due at least in part to the shift away from
cigarettes and other types of smoking tobacco. Consumption of moist snuff
increased approximately 3.3% over the past ten years.

Producers of tobacco products are subject to regulation in the U.S. at the
federal, state and local levels, as well as in foreign countries. Together with
changing public attitudes toward tobacco products, a constant expansion of
tobacco regulations in the U.S. since the early 1970s has been a major cause for
the decline in consumption. Moreover, the trend is toward increasing regulation
of the tobacco industry. Restrictive foreign tobacco legislation has been on the
rise in recent years as well, including restrictions on where tobacco may be
sold and used, warning labels and other graphic packaging images, product
constituent limitations and a general increase in taxes.

For more than 40 years, the sale and use of tobacco products has been
subject to opposition from government and health officials in the U.S. and other
countries due to claims that tobacco consumption is harmful to an individual's
health. In addition, the World Health Organization has identified smoking as a
significant world health risk. These claims have resulted in a number of
substantial restrictions on the marketing, advertising, sale and use of
cigarettes and other tobacco products, in diminished social acceptability of
smoking and in activities by anti-tobacco groups designed to inhibit tobacco
product sales. The effects of these claims together with substantial increases
in state, federal and foreign taxes on cigarettes have resulted in lower tobacco
consumption, which is likely to continue in the future. The Company cannot
predict the future course of tobacco regulation. Any substantial increase in
tobacco regulation may adversely affect tobacco product sales, which could
indirectly have a material adverse effect on the Company.

Over the years, there has been substantial litigation between tobacco
product manufacturers and individuals, various governmental units and private
health care providers regarding increased medical expenditures and losses
allegedly caused by use of tobacco products. In part as a result of settlements
in certain of this litigation, the cigarette companies have significantly
increased the wholesale price of cigarettes in order to recoup the cost of the
settlements. Since 1999, cigarette consumption in the U.S. has decreased due to
the higher prices of cigarettes, the increased emphasis on the health effects of
cigarettes and the continuing restrictions on smoking areas. At this time the
Company is unable to determine whether additional price increases in the future
will reduce tobacco consumption or the effect of reduced consumption on the
Company's financial performance. There can be no assurance that there will not
be an increase in health-related litigation against the tobacco industry or that
the Company, as a supplier to the tobacco industry, will not be party to such
litigation. This litigation, if successful, could have a material adverse effect
on the Company.

The tobacco industry, including cigarettes and smokeless tobacco, has been
subject to federal, state, local and foreign excise taxes for many years. In
recent years, federal, state, local and foreign governments have increased or
proposed increases to such taxes as a means of both raising revenue and
discouraging the consumption of tobacco products. The Company is unable to
predict the likelihood of enactment of such proposals or the extent to which
enactment of such proposals would affect tobacco sales. A significant reduction
in consumption of cigarettes and other tobacco products could have a material
adverse effect on the Company.

ENVIRONMENTAL MATTERS

The Company is subject to all state and federal environmental laws. During
2003, the Company replaced, at a cost of approximately $1.2 million, the
oil-fired boilers in its Camden, New Jersey facility with a new gas fired
boiler, which is in compliance with applicable regulations. Management believes
that the Company's operations are in substantial compliance with all applicable
environmental laws. Although no other material capital or operating expenditures
relating to environmental controls or other environmental matters are currently
anticipated, there can be no assurance that the Company will not incur costs in
the future relating to environmental matters that would have a material adverse
effect on the Company's business or financial condition.

SEASONALITY

The licorice product business is generally non-seasonal. However, sales of
Right Dress garden mulch occur primarily in the first seven months of the year.

SALES BACKLOG

The sales backlog of the Company at any time is generally not significant.
Domestic and foreign orders from tobacco and non-tobacco customers are received
with shipment requirements annually, quarterly, monthly or weekly depending upon
the customer's needs. Certain confectionery and health food customers negotiate
annual contracts, which were not significant at December 31, 2004.

EMPLOYEES

At December 31, 2004, the Company had approximately 198 employees. The
Company has 147 employees covered under collective bargaining agreements. The
agreement covering employees at the Camden, New Jersey facility expires at the
end of May 2005. Management believes that its employee relations are good.

CORPORATE INDEMNIFICATION MATTERS

GENERAL

The Company is indemnified by third parties with respect to certain of its
contingent liabilities, such as certain environmental and asbestos matters, as
well as certain tax and other matters. In 1995, a subsidiary of MCG, M & F
Worldwide and two subsidiaries of M & F Worldwide entered into a transfer
agreement (the "Transfer Agreement"). Under the Transfer Agreement, Pneumo Abex
Corporation (together with its successor in interest Pneumo Abex LLC, "Pneumo
Abex"), then a subsidiary of M & F Worldwide, retained the assets and
liabilities relating to the Company's former Abex NWL Aerospace Division
("Aerospace"), as well as certain contingent liabilities and the related assets,
including its historical insurance and indemnification arrangements. Pneumo Abex
transferred substantially all of its other assets and liabilities to a
subsidiary of MCG. The Transfer Agreement provides for appropriate transfer,
indemnification and tax sharing arrangements, in a manner consistent with
applicable law and existing contractual arrangements.

The Transfer Agreement requires such subsidiary of MCG to undertake certain
administrative and funding obligations with respect to certain categories of
asbestos-related claims and other liabilities, including environmental claims,
retained by Pneumo Abex. The Company will be obligated to make reimbursement for
the amounts so funded only when the Company receives amounts under related
indemnification and insurance agreements. Such administrative and funding
obligations would be terminated as to these categories of asbestos-related
claims in the case of a bankruptcy of Pneumo Abex or M & F Worldwide or of
certain other events affecting the availability of coverage for such claims from
third-party indemnitors and insurers. In the event of certain kinds of disputes
with Pneumo Abex's indemnitors regarding their indemnities, the Transfer
Agreement permits the Company to require such subsidiary to fund 50% of the
costs of resolving the disputes.

Prior to 1988, a former subsidiary of Pneumo Abex manufactured certain
asbestos-containing friction products. Pneumo Abex has been named, typically
along with 10 to as many as 100 or more other companies, as a defendant in
various personal injury lawsuits claiming damages relating to exposure to
asbestos. Pursuant to indemnification agreements, PepsiAmericas, Inc., formerly
known as Whitman Corporation (the "Original Indemnitor"), has ultimate
responsibility for all the remaining asbestos-related claims asserted against
Pneumo Abex through August 1998 and for certain asbestos-related claims asserted
thereafter. In connection with the sale by Abex in December 1994 of its Friction
Products Division, a subsidiary (the "Second Indemnitor") of Cooper Industries,
Inc. (now Cooper Industries, LLC, the "Indemnity Guarantor") assumed
responsibility for substantially all asbestos-related claims asserted against
Pneumo Abex after August 1998 and not indemnified by the Original Indemnitor.
Federal-Mogul Corporation purchased the Second Indemnitor in October 1998. In
October 2001, the Second Indemnitor filed a petition under Chapter 11 of the
U.S. Bankruptcy Code and stopped performing its indemnity obligations to the
Company. Performance of the Second Indemnitor's indemnity obligation is
guaranteed by the Indemnity Guarantor. Following the bankruptcy filing of the
Second Indemnitor, the Company confirmed that the Indemnity Guarantor would
fulfill the Second Indemnitor's indemnity obligations to the extent that they
are no longer being performed by the Second Indemnitor.

as to which it either has received or expects to receive approximately $373,000
in insurance reimbursements for matters pending or settled through December 31,
2004. Management does not expect these unindemnified matters to have a material
adverse effect on the Company's financial position or results of operations, but
Pneumo Abex is unable to forecast either the number of future asbestos-related
claimants or the amount of future defense and settlement costs associated with
present or future asbestos-related claims.

The Transfer Agreement further provides that the subsidiary of MCG will
indemnify Pneumo Abex with respect to all environmental matters associated with
Pneumo Abex's and its predecessor's operations to the extent not paid by
third-party indemnitors or insurers, other than the operations relating to
Pneumo Abex's Aerospace business, which Pneumo Abex sold to Parker Hannifin
Corporation in April 1996. Accordingly, environmental liabilities arising after
the 1988 transaction with the Original Indemnitor that relate to the Company's
former Aerospace facilities are the responsibility of Pneumo Abex. The Original
Indemnitor is obligated to indemnify Pneumo Abex for costs, expenses and
liabilities relating to environmental and natural resource matters to the extent
attributable to the pre-1988 operation of the businesses acquired from the
Original Indemnitor, subject to certain conditions and limitations principally
relating to compliance with notice, cooperation and other procedural
requirements. The Original Indemnitor is generally discharging its environmental
indemnification liabilities in the ordinary course.

It is generally not possible to predict the ultimate total costs relating
to any remediation that may be demanded at any environmental site due to, among
other factors, uncertainty regarding the extent of prior pollution, the
complexity of applicable environmental laws and regulations and their
interpretations, uncertainty regarding future changes to such laws and
regulations or their enforcement, the varying costs and effectiveness of
alternative cleanup technologies and methods, and the questionable and varying
degrees of responsibility and/or involvement by Pneumo Abex. However, the
aggregate cost of cleanup and related expenses with respect to matters for which
Pneumo Abex, together with numerous other third parties, have been named
potentially responsible parties should be substantially less than $100.0
million.

On February 5, 1996, the Company, through Pneumo Abex, entered into a
reimbursement agreement with Chemical Bank and MCG (the "Reimbursement
Agreement"). The Reimbursement Agreement provides for letters of credit totaling
$20.8 million covering certain environmental issues relating to one site not
part of the current business of Pneumo Abex. During 2000, the Environmental
Protection Agency reduced the letter of credit requirements to $2.2 million. The
cost of the letters of credit is being funded by MCG and/or the Original
Indemnitor. The Company had $2.2 million of letters of credit outstanding at
both December 31, 2004 and 2003, respectively, in connection with the
Reimbursement Agreement.

The Company has not recognized a liability in its financial statements for
matters covered by indemnification agreements. The Company considers these
obligations to be those of third-party indemnitors and monitors their financial
positions to determine the level of uncertainty associated with their ability to
satisfy their obligations. Based upon the indemnitors' active management of
indemnifiable matters, discharging of the related liabilities when required, and
financial positions based upon publicly filed financial statements, as well as
the history of insurance recovery set forth above, the Company believes that the
likelihood of failing to obtain reimbursement of amounts covered by insurance
and indemnification is remote.

The former Aerospace business of the Company formerly sold certain of its
aerospace products to the U.S. Government or to private contractors for the U.S.
Government ("Government"). The Company retained in the Aerospace sale certain
claims for allegedly defective pricing that the Government made with respect to
certain of these products. During 2003, the Company resolved one of those
matters at a cost of $0.4 million. In the remaining matter, the Company contests
the Government's allegations and has been attempting to resolve the matter
without litigation.

In addition, various other legal proceedings, claims and investigations are
pending against the Company, including those relating to commercial
transactions, product liability, environmental, safety and health matters and
other matters. Most of these matters are covered by insurance, subject to
deductibles and maximum limits, and by third-party indemnities. In the opinion
of management, based upon the information available at this time, the outcome of
these matters will not have a material adverse effect on the Company's financial
position or results of operations.

FEDERAL-MOGUL BANKRUPTCY

As noted above in "--General," the Second Indemnitor ceased performing,
upon filing its Chapter 11 petition, the indemnity and other obligations that it
owed to Pneumo Abex under the 1994 agreements entered into in connection with
the sale of Pneumo Abex's Friction Products Division ("the "1994 Sale
Agreements"). As a result, Pneumo Abex asserted claims for breach of such
indemnity and other obligations, and, in connection with such breaches, Pneumo
Abex asserted its rights of recoupment and setoff (the "Recoupment/Setoff
Claim"), recognized under bankruptcy law, against $5.6 million in insurance
reimbursements that came into Pneumo Abex's possession but that Pneumo Abex
would otherwise have been obliged to turn over to the Second Indemnitor under
the 1994 Sale Agreements had the Second Indemnitor continued to perform. Pending
the resolution of the Recoupment/Setoff Claim, Pneumo Abex recorded in accounts
payable an amount equal to the full value of the claim.

During December 2003, Pneumo Abex reached an agreement with the Second
Indemnitor and certain other parties, subsequently confirmed by the bankruptcy
court, pursuant to which Pneumo Abex paid to the Second Indemnitor $3.0 million
in 2004. Of the remainder it retained, Pneumo Abex paid $0.7 million in 2004 to
a subsidiary of MCG in accordance with the Transfer Agreement to reimburse
expenses that the subsidiary incurred on behalf of Pneumo Abex while procuring
the insurance reimbursements. Pneumo Abex recorded a gain of $1.9 million in the
fourth quarter of 2003 for the amount it retained.

AVAILABILITY OF CERTAIN DOCUMENTS CONCERNING THE COMPANY

The Company maintains a website at http://www.mandfworldwide.com. Current
versions of the following documents are available without charge from the
website or upon request to the Secretary, M & F Worldwide Corp., 35 East 62nd
Street, New York, New York 10021:

o The Company's Code of Business Conduct, which includes its Code of
Financial Ethics for Senior Financial Officers.

o The charters for all standing committees of the Company's Board of
Directors, namely its Audit, Compensation and Nominating/Governance
Committees.

o The Company's Corporate Governance Guidelines.

o The policy that the Nominating/Governance Committee of the Company's
Board of Directors adopted concerning criteria for the nomination of
candidates to the Board of Directors.

Electronic or paper copies of this annual report on Form 10-K, the
Company's quarterly reports on Form 10-Q, any current report on Form 8-K and any
amendment to any of these documents are similarly available.

ITEM 2. PROPERTIES

The Company's principal properties are as follows:

OWNED APPROXIMATE
OR FLOOR SPACE
LOCATION USE LEASED (SQUARE FEET)
- -------- --- ------ -------------

Camden, New Jersey Licorice manufacturing, warehousing and Owned 390,000
administration
Pennsauken, New Jersey Warehousing Leased(a) 40,000
Camden, New Jersey Warehousing Leased(b) 48,000
Gardanne, France Licorice manufacturing and administration Owned 48,900
Richmond, Virginia Manufacturing and administration for non- Owned 65,000
licorice products

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(a) Lease expires in September 2006 with an option to renew to 2007.

(b) Lease expires in December 2006.

ITEM 3. LEGAL PROCEEDINGS

Various legal proceedings, claims and investigations are pending against
the Company, including those relating to commercial transactions, product
liability, safety and health matters and other matters. The Company is involved
in various stages of legal proceedings, claims, investigations and cleanup
relating to environmental or natural resource matters, some of which relate to
waste disposal sites. Most of these matters are covered by insurance, subject to
deductibles and maximum limits, and by third-party indemnities.

The former Aerospace business of the Company formerly sold certain of its
aerospace products to the U.S. Government or to private contractors for the U.S.
Government. The Company retained in the Aerospace sale certain claims for
allegedly defective pricing that the Government made with respect to certain of
these products. During 2003, the Company resolved one of those matters at a cost
of $0.4 million. In the remaining matter, the Company contests the Government's
allegations and has been attempting to resolve the matter without litigation.

The Company believes that the outcome of such pending legal proceedings in
the aggregate will not have a material adverse effect on the Company's
consolidated financial position or results of operations. The Company carries
general liability insurance but has no health hazard policy, which, to the best
of the Company's knowledge, is consistent with industry practice.

During 2002, the French tax administration notified the Company's indirect
wholly owned French subsidiary (the "Indirect Subsidiary") that it intended to
disallow a deduction relating to French income taxes for 1996, 1997 and 1998
arising out of certain interest payments made on a note payable to the Company.
The French tax administration assessed the Indirect Subsidiary approximately 1.8
million euros for the taxes, interest and penalties. The Indirect Subsidiary
appealed the assessment and, in order to be able to pursue its appeal, obtained
bank guarantees in favor of the French tax administration in the amount of 1.4
million euros ($1.9 million as of December 31, 2004). Based on a recent decision
of the Supreme Court of France resolving a similar issue in favor of the
taxpayer, the French tax administration has determined that it intends to
abandon its assessment. Furthermore, the French tax administration has
determined that it will not require any adjustment with respect to this issue in
future tax years. As a result of these developments, the Company has reversed
the $5.0 million reserve that had been established related to this assessment
and is in the process of pursuing release of the bank guarantees of 1.4 million
euros.

See Item 1. Business; Tobacco Industry; and Corporate Indemnification
Matters.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of 2004.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER REPURCHASES OF EQUITY SECURITIES

The M & F Worldwide Common Stock is listed on the New York Stock Exchange,
Inc. ("NYSE") under the symbol MFW. The following table sets forth, for the
calendar quarters indicated, the high and low closing prices per share of the M
& F Worldwide Common Stock on the NYSE based on published financial sources.

HIGH LOW
---- ---
CALENDAR 2003
First Quarter $7.55 $5.50
Second Quarter 8.08 7.00
Third Quarter 9.73 7.49
Fourth Quarter 14.70 9.74

CALENDAR 2004
First Quarter 14.93 12.72
Second Quarter 14.00 12.40
Third Quarter 13.80 12.49
Fourth Quarter 13.72 12.94

The number of holders of record of the M & F Worldwide Common Stock as of
March 1, 2005 was 5,878.

The Company has not paid any cash dividend on the M & F Worldwide Common
Stock to date and does not intend to pay regular cash dividends on the M & F
Worldwide Common Stock. The Company's Board of Directors will review the
Company's dividend policy from time to time in light of the Company's results of
operations and financial position and such other business considerations as the
Board of Directors considers relevant. Pneumo Abex's credit agreement limits its
ability to pay dividends to the Company, which in turn may limit the ability of
the Company to pay dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations---Liquidity and Capital Resources"
and the Notes to the Company's Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K.

In order to protect the availability of the Company's net operating loss
carryforwards, the Company's charter prohibits, subject to certain exceptions,
transfers of M & F Worldwide Common Stock, until such date as fixed by the
Company's Board of Directors, to any person who owns, or after giving effect to
such transfer would own, at least 5% of the outstanding M & F Worldwide Common
Stock. The Company believes that the transfer restriction in the Company's
charter is enforceable. The Company intends to take all appropriate action to
preserve the benefit of the restriction including, if necessary, the institution
of legal proceedings seeking enforcement.

During the fourth quarter of 2004, the Company did not repurchase any of
its equity securities.

The Chief Executive Officer of the Company certified to the NYSE in April
2004 that he was not aware of any violation by the Company of the NYSE's
corporate governance listing standards.

ITEM 6. SELECTED FINANCIAL DATA

The table below reflects historical financial data which are derived from
the audited consolidated financial statements of M & F Worldwide for each of the
years in the five-year period ended December 31, 2004.

On April 19, 2001, the Company acquired a majority interest in Panavision,
Inc. ("Panavision"). On December 3, 2002, the Company divested itself of
Panavision pursuant to a settlement of certain shareholder litigation relating
to the 2001 acquisition (the "Settlement"). The Company presents the results of
Panavision's operations from April 19, 2001 until December 3, 2002 as
discontinued operations.

The selected financial data are not necessarily indicative of results of
future operations, and should be read in conjunction with Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K.

YEAR ENDED DECEMBER 31,
----------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
STATEMENT OF INCOME DATA (A): (in millions, except per share amounts)

Net revenues $ 93.4 $ 95.7 $ 96.9 $ 98.4 $ 93.1
Cost of revenues 45.1 46.3 47.3 51.6 49.2
------ ------ ------ ------ ------
Gross profit 48.3 49.4 49.6 46.8 43.9
Selling, general and administrative expenses 17.2 16.3 13.6 14.9 8.7
Gain on pension reversion -- -- -- (11.1) --
------ ------ ------ ------ ------
Operating income 31.1 33.1 36.0 43.0 35.2
Interest income 1.3 1.2 0.3 0.8 0.1
Interest expense (1.2) (2.9) (4.1) (5.0) (3.1)
Other (expense) income, net (2.4) 1.7 (1.4) (1.7) --
------ ------ ------ ------ ------
Income from continuing operations before income taxes 28.8 33.1 30.8 37.1 32.2
Income taxes (3.6) (10.5) (12.2) (18.7) (13.1)
------ ------ ------ ------ ------
Income from continuing operations 25.2 22.6 18.6 18.4 19.1
Gain (loss) from operations of discontinued business,
net of taxes of $0.6, $0.2, $8.4, respectively;
(including gain on disposal of $17.6 in 2002) -- 0.6 5.5 (12.3) --
------ ------ ------ ------ ------
Net income 25.2 23.2 24.1 6.1 19.1
Preferred stock dividends -- -- (0.3) (0.2) --
------ ------ ------ ------ ------
Net income available to shareholders $ 25.2 $ 23.2 $ 23.8 $ 5.9 $ 19.1
====== ====== ====== ====== ======

Basic earnings (loss) per common share:
Undistributed earnings from continuing operations $ 1.35 $ 1.23 $ 0.71 $ 0.74 $ 0.96
Undistributed earnings (loss) from discontinued
operations -- 0.04 0.21 (0.50) --
------ ------ ------ ------ ------
Total common stock $ 1.35 $ 1.27 $ 0.92 $ 0.24 $ 0.96
====== ====== ====== ====== ======

Diluted earnings (loss) per common share:
Undistributed earnings from continuing operations $ 1.26 $ 1.18 $ 0.71 $ 0.74 $ 0.96
Undistributed earnings (loss) from discontinued
operations -- 0.03 0.21 (0.50) --
------ ------ ------ ------ ------
Total common stock $ 1.26 $ 1.21 $ 0.92 $ 0.24 $ 0.96
====== ====== ====== ====== ======

Basic and diluted earnings (loss) per preferred share:
Distributed earnings $ -- $ -- $ 0.04 $ 0.05 $ --
Undistributed earnings from continuing operations -- -- 0.71 0.74 --
Undistributed loss from discontinued operations -- -- 0.21 (0.50) --
------ ------ ------ ------ ------
Total preferred stock $ -- $ -- $ 0.96 $ 0.29 $ --
====== ====== ====== ====== ======

DECEMBER 31,
------------------------------------------
2004 2003 2002 2001 2000
------ ------ ------ ------ ------
(in millions)

BALANCE SHEET DATA:
Total assets (b) $376.5 $382.4 $373.2 $275.2 $298.8
Long- term debt including current portion and short-term
borrowings (c) -- 34.6 60.4 84.0 29.4
Participating preferred stock (d) -- -- -- 41.7 --
Stockholders' equity 340.2 304.7 274.1 295.9 245.7

- ----------
(a) The Company reclassified certain amounts in previously issued financial
statements to conform to the 2004 presentation.

(b) Excludes the assets of discontinued operations at December 31, 2001 of
$636.9 million.

(d) During 2001, the Company issued to PX Holding 6,182,153 shares of Series B
Preferred Stock valued at $31.7 million in connection with the 2001
Panavision acquisition and 666,667 shares of Series B Preferred Stock in
exchange for $10.0 million. PX Holding returned the Series B Preferred
Stock in 2002 as part of the Panavision divestiture.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion should be read in conjunction with Item 6.
"Selected Financial Data" and the M & F Worldwide Consolidated Financial
Statements and the Notes thereto included elsewhere in this Annual Report on
Form 10-K.

OVERVIEW

The Company is the world's largest producer of licorice products. The
Company produces a variety of licorice products from licorice root, intermediary
licorice extracts produced by others and certain other ingredients at its
facilities in the United States, France and the People's Republic of China.

Approximately 70% of the Company's licorice sales are to the worldwide
tobacco industry for use as tobacco flavor enhancing and moistening agents in
the manufacture of American blend cigarettes, moist snuff, chewing tobacco and
pipe tobacco. While licorice represents a small percentage of the total cost of
manufacturing American blend cigarettes and other tobacco products, the
particular formulation and quality used by each brand is an important element in
the brand's quality. In addition, the Company manufactures and sells cocoa and
carob products for use in the tobacco industry. Over the last several years, the
rate of consumption of tobacco products has declined in the United States.
Although the Company has experienced recent sales declines to the domestic
tobacco industry, the Company's increased sales to the international tobacco
industry have been aided by stable to slightly growing consumption of tobacco
products outside of the United States along with a shift of production to
facilities overseas by several large customers.

The Company also sells licorice worldwide to confectioners, food
processors, cosmetic companies and pharmaceutical manufacturers for use as
flavoring and masking agents, including its Magnasweet brand flavor enhancer,
which is used in various brands of chewing gum, lip balm, energy bars,
non-carbonated beverages, chewable vitamins, aspirin and other products.
Although the Company's licorice sales to its confectionary customers have
experienced some decline in recent years, licorice sales to food, cosmetic and
pharmaceutical customers, who use Magnasweet as a flavoring or masking agent,
have experienced some growth and added to the Company's overall sales stability
for its licorice products. One important facet of the Company's business
strategy is to focus on growing its business through sales of licorice-derived
products for use in non-tobacco-related applications. The Company is devoting a
substantial portion of its research and development efforts to Magnasweet and
its potential food and beverage applications as well as to finding additional
uses for components of licorice extract in cosmetic and pharmaceutical products.

The Company also sells licorice root residue as garden mulch under the name
Right Dress. Other non-licorice product sales have decreased due to our decision
to discontinue selling these products.

The Company considers revenue from international business to be that
revenue which is generated outside the United States.

THE REORGANIZATION

On October 29, 2004, the Company completed an internal reorganization (the
"Reorganization") with certain of its subsidiaries to separate the assets and
liabilities related to its licorice products business from the assets and
liabilities not related to its licorice products business. Prior to the
Reorganization, Pneumo Abex Corporation held all the assets and liabilities
associated with the licorice products business, as well as other assets and
liabilities unrelated to the licorice products business. In connection with the

Reorganization, Mafco Worldwide was formed, and Pneumo Abex Corporation
transferred all of the assets and liabilities related to that licorice products
business to Mafco Worldwide. Following the transfer of the licorice products
business to Mafco Worldwide, Pneumo Abex Corporation merged with Pneumo Abex
LLC, a newly formed, wholly owned limited liability company subsidiary of Mafco
Worldwide. Mafco Worldwide then transferred all of the membership interests in
Pneumo Abex LLC to another subsidiary of the Company, which resulted in Pneumo
Abex LLC no longer being a subsidiary of Mafco Worldwide.

The Reorganization had no effect on the Company's consolidated financial
statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The bases of management's discussion and analysis of the Company's
financial condition and results of operation are the Company's Consolidated
Financial Statements, which it prepares in accordance with accounting principles
generally accepted in the United States. The Company reviews its accounting
policies on a regular basis. The Company makes estimates and judgments as part
of its financial reporting that affect the reported amounts of assets,
liabilities, revenues and expenses and related disclosure of contingent assets
and liabilities. On an ongoing basis, the Company evaluates its estimates,
including those related to accounts receivable, investments, intangible assets,
income taxes, contingencies and litigation. The Company bases its estimates on
historical experience and on various other assumptions that it believes
reasonable under the circumstances. These estimates form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Results may differ from these estimates due
to actual outcomes being different from the assumed outcomes. The Company
believes the following critical accounting policies affect its more significant
judgments and estimates.

INVENTORY - Licorice raw materials have an infinite life as long as they
are kept dry; therefore the Company has not been required to establish an
obsolescence reserve for licorice. A reserve for the value of the products
has not been necessary based on the Company's lower of cost or market
analysis. The Company also ensures that storage facilities where the raw
materials are inventoried are properly safeguarded and maintained to
preserve its characteristics.

INCOME TAXES - The Company estimates actual current tax liability together
with temporary differences resulting from differing treatment of items,
such as net operating losses and depreciation, for tax and accounting
purposes. These temporary differences result in deferred tax assets and
liabilities. The Company must assess the likelihood that it will recover
deferred tax assets from future taxable income and, to the extent it
believes that recovery is not likely, establish a valuation allowance. The
balance of the valuation allowance at December 31, 2004, was $4.1 million.
To the extent it establishes a valuation allowance or increases this
allowance in a period, it must include and expense the allowance within the
tax provision in the consolidated statement of income. Significant
management judgment is required in determining the provision for income
taxes, deferred tax assets and liabilities and any valuation allowance
recorded against net deferred tax assets.

As part of the process of preparing our consolidated financial statements,
the Company is required to calculate the amount of income tax in each of
the jurisdictions in which it operates. On a regular basis, the amount of
taxable income is reviewed by various federal, state and foreign taxing
authorities. As such, the Company routinely provides reserves for items
that it believes could be challenged by these taxing authorities. In
addition, the Company routinely provides valuation allowances for deferred
tax assets that it believes may not be realized, e.g., capital losses.

LONG-LIVED ASSETS - The Company assesses the impairment of property, plant
and equipment and investments in joint ventures whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Some factors the Company considers important that could trigger an
impairment review include the following:

o Significant underperformance relative to expected historical or
projected future operating results;

o Significant changes in the manner of use of these assets or the
strategy for the Company's overall business; and

o Significant negative industry or economic trends.

When the Company determines that the carrying value of long-lived assets
may not be recoverable based upon the existence of one or more indicators
of impairment, it measures the impairment based on a projected discounted
cash flow method using a discount rate determined by management to be
commensurate with the risk inherent in the Company's current business
model.

GOODWILL AND INTANGIBLE ASSETS - Upon adoption of Statement of Financial
Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets" in 2002, the Company discontinued amortization of goodwill
resulting from business acquisitions. A reassessment of the useful life of
other intangible assets, consisting of product formulations, determined the
useful life of these formulations to be indefinite; therefore, the Company
also discontinued amortization of the formulations in 2002.

The Company performs impairment tests on goodwill and product formulations
annually or more frequently if events or changes in circumstances indicate
a possible impairment. The Company has elected to test these assets for
impairment in the fourth quarter of each year.

The goodwill impairment test is a two-step process, which requires
management to make judgments in determining what assumptions to use in the
calculation. The first step of the process consists of estimating the fair
value of the Company based on a discounted cash flow model using revenue
and profit forecasts and comparing the estimated fair value with the
carrying value, which includes the goodwill. If the estimated fair value is
less than the carrying value, a second step is performed to compute the
amount of the impairment by determining an "implied fair value" of
goodwill. The determination of the Company's "implied fair value" of
goodwill requires the Company to allocate the estimated fair value to the
assets and liabilities of the Company. Any unallocated fair value
represents the "implied fair value" of goodwill, which is compared to the
corresponding carrying value.

The Company measures impairment of the product formulations based on a
projected discounted cash flow. The Company also reevaluates the useful
life of the product formulations annually to determine whether events and
circumstances continue to support an indefinite useful life.

CONTINGENCIES AND INDEMNIFICATION AGREEMENTS - The Company records the
estimated impacts of various conditions, situations or circumstances
involving uncertain outcomes. These events are "contingencies," and the
accounting for such events follows SFAS No. 5, "Accounting for
Contingencies."

The accrual of a contingency involves considerable judgment by management.
The Company uses internal expertise and outside experts (such as lawyers
and tax specialists), as necessary, to help estimate the probability that
the Company has incurred a loss and the amount (or range) of the loss. When
evaluating the need for an accrual or a change in an existing accrual, the
Company considers whether it is reasonably probable to estimate an outcome
for the contingency based on its experience, any experience of others
facing similar contingencies of which the Company is aware and the
particulars of the circumstances creating the contingency. The Company has
not recognized any liability in its financial statements for matters
covered by indemnification agreements. The Company considers these
obligations to be those of third-party indemnitors and monitors their
financial positions to determine the level of uncertainty associated with
their ability to satisfy their obligations. Based upon the indemnitors'
active management of indemnifiable matters, discharging of the related
liabilities when required, and financial positions based upon publicly
filed financial statements, as well as the history of insurance recovery
related to those liabilities, the Company believes that the likelihood of
failing to obtain reimbursement of amounts covered by indemnification is
remote. See Item 1. Business--The Tobacco Industry and --Corporate
Indemnification Matters; Item 3. Legal Proceedings; and Note
12--Commitments and Contingencies to the Consolidated Financial Statements
in this Annual Report on Form 10-K.

PENSIONS - The Company sponsors defined benefit and defined contribution
pension plans, which cover certain current and former employees of the
Company who meet eligibility requirements. The Company's actuarial
consultants use several statistical and other factors that attempt to
estimate future events to calculate the expense and liability related to
the plans. These factors include assumptions about the discount rate,
expected return on plan assets and rate of future compensation increases as
determined by the Company, within certain guidelines. In addition, the
Company's actuarial consultants also use subjective factors such as
withdrawal and mortality rates to estimate these factors. The actuarial
assumptions used by the Company may differ materially from actual results
due to changing market and economic conditions, higher or lower withdrawal
rates or longer or shorter life spans of participants, among other things.
Differences from these assumptions may result in a significant difference
with the amount of pension expense/liability that the Company recorded.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any or participate in any off-balance sheet
arrangements.

CONSOLIDATED OPERATING RESULTS

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

Total net revenues decreased by $2.3 million, or 2.4% to $93.4 million in
the 2004 period from $95.7 million in the 2003 period. Domestic sales to the
tobacco industry in the United States declined by $3.3 million due to lower
shipment volume resulting from inventory reductions and shifting of production
to overseas facilities on the part of several large customers. Domestic sales to
the international tobacco industry increased by $1.4 million due to higher
shipment volume. Non-tobacco revenues decreased by $0.5 million in the 2004
period compared to the 2003 period and non-licorice sales declined by $0.8
million in 2004 due to the Company's decision to discontinue selling certain of
these products. Foreign sales increased by $0.9 million, mainly impacted by a
favorable exchange translation effect on Euro sales of $1.4 million.

Cost of revenues was $45.1 million in the 2004 period and $46.3 million in
the 2003 period, a decrease of $1.2 million. The decrease in cost of revenues
was due to the decline in sales volume. As a percentage of revenues, cost of
revenues remained stable for the periods at 48.3% in 2004 and 48.4% in 2003.

Gross profit was $48.3 million in the 2004 period and $49.4 million in the
2003 period. The decline in gross profit was due to the decrease in sales
volume.

Selling, general and administrative expenses were $17.2 million in the 2004
period and $16.3 million in the 2003 period, an increase of $0.9 million. The
increase was due primarily to higher professional fees partially offset by
higher pension income in the 2004 period as compared to the 2003 period.

Interest income was $1.3 million in the 2004 period compared to $1.2
million in the 2003 period. The increase of $0.1 million is due to higher
average cash and cash equivalents balances available for investment in the 2004
period.

Interest expense was $1.2 million in the 2004 period and $2.9 million in
the 2003 period. The decrease in expense was due to lower outstanding debt in
the 2004 period.

Other (expense) income was $2.4 million of expense during the 2004 period
and $1.7 million of income in the 2003 period. The expense in 2004 primarily
resulted from the write off of deferred financing costs related to the early
repayment of the Company's outstanding debt. The income in 2003 results from the
reduction of two liabilities associated with the resolution of two separate
Corporate Indemnification matters partially offset by the amortization of
deferred financing costs.

The provision for income taxes as a percentage of income was 12.4% in the
2004 period and 31.7% in the 2003 period. The lower rate in 2004 is due
principally to a reversal of reserves for certain prior year issues due to the
resolution of certain tax audits. The lower rate in 2003 results from a lower
state tax rate compared to 2002 and the reversal of reserves for certain prior
year issues due to the resolution of uncertainties in 2003. Excluding the
reversal of the reserves, the effective tax rate would have been 37.8% in 2004
and 35.7% in 2003.

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

Total net revenues decreased by $1.2 million or 1.2% to $95.7 million in
2003 from $96.9 million in 2002. The Company's domestic revenues decreased by
$2.2 million in the 2003 period as compared to the 2002 period. Increases in
domestic revenues of $1.0 million to the tobacco industry worldwide were more
than offset by lower revenues of $1.1 million from the Company's confectionary
customers and $2.1 million in lower revenues from the Company's United States
non-licorice, nutraceutical and spice customers. The decline in confectionary
revenues was a result of lower selling prices in the mix of products sold to
customers during 2003. The decrease in United States non-licorice sales resulted
from the Company's decision to discontinue selling certain of these products.
The Company's foreign sales increased by $1.0 million due to a $2.3 million
foreign exchange translation effect on its Euro sales offset in part by lower
average selling prices.

Cost of revenues was $46.3 million in the 2003 period and $47.3 million in
2002. The decrease of $1.0 million was due primarily to the lower revenues. As a
percentage of revenue, cost of revenues was 48.4% in 2003 and 48.8% in 2002.

Gross profit was $49.4 million for the 2003 period and $49.6 million for
the 2002 period, a decrease of $0.2 million, which mainly reflects the decline
in sales.

Selling, general and administrative expenses were $16.3 million in the 2003
period and $13.6 million in the 2002 period, an increase of $2.7 million. The
increase was due primarily to higher insurance costs, higher legal fees and
lower pension income from pension plans in the 2003 period as compared to the
2002 period.

Interest income was $1.2 million in the 2003 period and $0.3 million in the
2002 period. The increase was primarily due to interest income on the cash
invested with the proceeds of the Settlement in December 2002.

Interest expense was $2.9 million in the 2003 period and $4.1 million in
the 2002 period. The decrease was due to lower outstanding debt in the 2003
period.

Other income (expense), net was $1.7 million of other income, net in the
2003 period compared to $1.4 million of other expense, net in the 2002 period.
The increase results from the reduction of two liabilities associated with the
resolution of two separate Corporate Indemnification matters during 2003,
partially offset by the amortization of deferred financing costs. Other income
of $0.9 million results from the settlement of certain U.S. Government claims
for allegedly defective pricing with respect to product sales made by the former
Aerospace business of the Company. Other income of $1.9 million represents the
Company's share of the amount obtained as part of the resolution of the
Recoupment/Setoff Claim.

The provision for income taxes as a percentage of income from continuing
operations was 31.7% in the 2003 period and 39.6% in the 2002 period. The
decrease was due to a lower state tax rate of $0.4 million and the reversal of
reserves of $1.3 million for certain prior year issues due to the resolution of
uncertainties in 2003.

The Company recorded a gain from operations of the discontinued business,
net of taxes of $0.6 million in 2003 and $5.5 million in 2002. The gain in 2003
results from the finalization of the Company's 2002 tax returns and the tax
attributes that the discontinued business used while it was included in the
Company's consolidated tax return. The gain in 2002 results from losses
attributable to the operations of the discontinued business offset by the gain
on the disposal of the business of $17.6 million in December 2002.

RELATED PARTY TRANSACTIONS

THE TRANSFER AGREEMENT

In connection with the 1995 transfer to a subsidiary of MCG of certain of
Pneumo Abex's consolidated assets and liabilities, with the remainder being
retained, the Company, a subsidiary of MCG and two subsidiaries of the Company
entered into the Transfer Agreement. Under the Transfer Agreement, Pneumo Abex
retained the assets and liabilities relating to Aerospace, as well as certain
contingent liabilities and the related assets, including its historical
insurance and indemnification arrangements. Pneumo Abex transferred
substantially all of its other assets and liabilities to the subsidiary of MCG.
The Transfer Agreement provides for appropriate transfer, indemnification and
tax sharing arrangements, in a manner consistent with applicable law and
existing contractual arrangements.

The Transfer Agreement requires such subsidiary of MCG to undertake certain
administrative and funding obligations with respect to certain categories of
asbestos-related claims and other liabilities, including environmental claims,
retained by Pneumo Abex. The Company will be obligated to make reimbursement for
the amounts so funded only when the Company receives amounts under related
indemnification and insurance agreements. Such administrative and funding
obligations would be terminated as to these categories of asbestos-related
claims in the case of a bankruptcy of Pneumo Abex or M & F Worldwide or of
certain other events affecting the availability of coverage for such claims from
third-party indemnitors and insurers. In the event of certain kinds of disputes
with Pneumo Abex's indemnitors regarding their indemnities, the Transfer
Agreement permits the Company to require such subsidiary of MCG to fund 50% of
the costs of resolving the disputes.

MCG and the Company are parties to a registration rights agreement (as
amended, the "Company/MCG Registration Rights Agreement") providing MCG with the
right to require the Company to use its best efforts to register under the
Securities Act, and the securities or blue sky laws of any jurisdiction
designated by MCG, all or portion of the issued and outstanding common stock
owned by MCG in the Abex Merger (the "Registrable Shares"). Such demand rights
are subject to the conditions that the Company is not required to (1) effect a
demand registration more than once in any 12-month period, (2) effect more than
one demand registration with respect to the Registrable Shares, or (3) file a
registration statement during periods (not to exceed three months) (a) when the
Company is contemplating a public offering, (b) when the Company is in
possession of certain material non-public information, or (c) when audited
financial statements are not available and their inclusion in a registration
statement is required. In addition, and subject to certain conditions described
in the Company/MCG Registration Rights Agreement, if at any time the Company
proposes to register under the Securities Act an offering of common stock or any
other class of equity securities, then MCG will have the right to require the
Company to use its best efforts to effect the registration under the Securities
Act and the securities or blue sky laws of any jurisdiction designated by MCG of
all or a portion of the Registrable Shares as designated by MCG. The Company is
responsible for all expenses relating to the performance of, or compliance with,
the Company/MCG Registration Rights Agreement except that MCG is responsible for
underwriters' discounts and selling commissions with respect to the Registrable
Shares it sells.

AFFILIATED PAYMENTS

During 2004, 2003, and 2002, three executive officers of the Company were
executives of Holdings. The Company did not compensate such executive officers,
but, in 2004 and 2003, the Company paid to Holdings $1.5 million for the value
of the services provided by such officers to the Company and charged that amount
to compensation expense. In 2002, because Holdings did not require payment of
this amount, the value of the services of $1.5 million for that year is
reflected in the accompanying Consolidated Financial Statements as compensation
expense and a corresponding increase to additional paid-in-capital in accordance
with Securities and Exchange Commission Staff Accounting Bulletin 79,
"Accounting for Expenses or Liabilities Paid by Principal Stockholder(s)." None
of the executive officers received any payment from the Company or additional
payment from Holdings in connection with such compensation expense. The
Management Services Agreement, pursuant to which Holdings provides the services
of the three executive officers to the Company in exchange for a management
service fee of $1.5 million annually, expires on December 31, 2005.

The Company participates in Holdings' directors and officers insurance
program, which covers the Company as well as Holdings and its other affiliates.
The limits of coverage are available on aggregate losses to any or all of the
participating companies and their respective directors and officers. The Company
reimburses Holdings for its allocable portion of the premiums for such

coverage, which the Company believes is more favorable than the premiums the
Company could secure were it to secure its own coverage. At December 31, 2004,
the Company has recorded prepaid expenses, other assets and accrued liabilities
of $1.2 million, $4.8 million and $2.6 million relating to the financing of the
directors and officers insurance program. At December 31, 2003, the Company had
recorded prepaid expenses, other assets, accrued liabilities and other
liabilities of $1.5 million, $6.0 million, $2.7 million and $2.8 million
relating to the financing of the directors and officers insurance program.

Since the end of 2003, Allied Security Holdings LLC ("Allied Security"), an
affiliate of Holdings, has provided contract security officer services to the
Company. For 2004, the Company made aggregate payments to Allied Security for
such services of approximately $0.3 million.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities was $23.8 million, $35.5 million
and $37.3 million for the years ended December 31, 2004, 2003 and 2002,
respectively. The decrease in net cash provided by operating activities of $11.7
million between the 2004 period and the 2003 period was caused by the changes in
the components of working capital, primarily an increase in trade receivables
and inventories and a decrease in payables and accrued expenses related in part
to the payment in 2004 in the settlement of the Federal-Mogul Recoupment /Setoff
claim. The decrease in net cash provided of $1.8 million between the 2003 period
and the 2002 period resulted mainly from the changes in working capital from
year to year partially offset by the increase in income from continuing
operations.

Net cash used in investing activities in 2004 was comprised of
contributions of $4.2 million for the investment in a Chinese joint venture and
$1.6 million for capital expenditures. The Company is not planning any
significant capital expenditures for 2005. Net cash used in investing activities
in 2003 was for capital expenditures of $2.1 million, of which approximately
$1.2 million was for the replacement of the Company's oil-fired boilers in its
Camden, New Jersey facility with a new gas-fired boiler. Net cash provided by
investing activities of $89.3 million in 2002 reflects the proceeds from a
settlement of litigation partially offset by capital expenditures of $0.8
million.

Net cash used in financing activities in 2004 totaled $29.7 million as a
result of scheduled debt repayments of $15.6 million, including an excess cash
flow payment of $8.3 million and an early repayment of the remaining outstanding
debt of $19.0 million, partially offset by cash provided from the exercise of
stock options of $4.1 million and a capital contribution of $0.8 million. Net
cash used in financing activities in 2003 and 2002 primarily reflects the
repayment of debt under the Company's credit agreement, which was partially
offset in 2003 by cash provided from stock option exercises of $1.9 million.

The Company has certain cash obligations and other commercial commitments,
which will affect its short-term liquidity. At December 31, 2004, such
obligations and commitments which do not include options for renewal were as
follows:

PAYMENTS DUE BY PERIOD
-------------------------------------------
LESS
THAN 1 1-3 4-5 AFTER 5
Contractual Obligations TOTAL YEAR YEARS YEARS YEARS
- ----------------------- ----- ---- ----- ----- -----
(in millions)

Raw Material Purchase Obligations $17.9 $12.1 $ 5.8 $-- $--
Insurance Premiums 2.6 2.6 -- -- --
Management Fees 1.5 1.5 -- -- --
Operating Leases 0.7 0.3 0.4 -- --
----- ----- ----- ---- ----
Total Contractual Cash Commitments $22.7 $16.5 $ 6.2 $-- $--
===== ===== ===== ==== ====

The Company currently expects to contribute approximately $0.1 million to
its pension plans in 2005 based on current legal requirements.

On April 19, 2001, the Company entered into an Amended and Restated Credit
Agreement (the "Amended Credit Agreement") with a group of banks pursuant to
which the Company could borrow up to $105.0 million. The Amended Credit
Agreement included a $90.0 million five-year term loan facility and a $15.0
million (reduced to $10.0 million in December 2002) five-year revolving loan
facility. The Amended Credit Agreement permits the Company to choose between
various interest rate options and specify the interest rate period to which the
interest rate options are to apply, subject to certain parameters. Borrowing
options available are (i) the Alternate Base Rate Loans ("ABR Loans") and (ii)
Eurodollar Loans, plus a borrowing margin. The borrowing margin for ABR Loans
and Eurodollar Loans is 3.0% and 4.0%, respectively. Substantially all the
domestic assets of Mafco Worldwide are pledged to secure the Amended Credit
Agreement. The Amended Credit Agreement contains various restrictive covenants,
which include, among other things, limitations on indebtedness and liens,
minimum interest coverage and maximum leverage ratios, operating cash flow
maintenance and limitations on the sale of assets.

The five year $90.0 million term loan was repayable in quarterly
installments which commenced on June 30, 2001. In addition, a mandatory
repayment was required in April of each year based upon prior year excess cash
flow (as defined in the Amended Credit Agreement). During 2004, the Company
repaid all of the term debt outstanding under the Amended Credit Agreement. As a
result, the Company had no debt outstanding at December 31, 2004. The Company
also wrote off deferred financing costs of $1.5 million associated with the
early repayment of that debt. The write-off is presented in other (expense)
income in the consolidated statements of income.

At December 31, 2004, $4.4 million of the revolving loan facility was
reserved for lender guarantees on outstanding letters of credit and $5.6 million
was available for borrowings.

The Company's French subsidiary has credit agreements renewable annually
with two banks whereby it may borrow up to 2.9 million Euros (approximately $3.9
million at December 31, 2004) for working capital purposes. The subsidiary had
no borrowings at December 31, 2004.

Although there can be no assurance, the Company believes that its cash and
cash equivalents borrowings available under its credit agreements and
anticipated cash flow from operating activities, will be sufficient to meet the
Company's expected operating needs and investment and capital spending
requirements for the foreseeable future.

M & F Worldwide is a holding company whose only material assets are its
ownership interest in its subsidiaries and approximately $92.4 million in cash
and cash equivalents. The Company is considering various alternatives for the
application of its cash and cash equivalents on hand. M & F Worldwide's
principal business operations are conducted by its subsidiaries, and M & F
Worldwide has no operations of its own. Accordingly, M & F Worldwide's only
source of cash to pay its obligations, other than cash and cash equivalents on
hand, is expected to be distributions with respect to its ownership interest in
its subsidiaries. There can be no assurance that M & F Worldwide's subsidiaries
will generate sufficient cash flow to pay dividends or distribute funds to M & F
Worldwide or that applicable state law and contractual restrictions, including
negative covenants contained in the debt instruments of such subsidiaries, will
permit such dividends or distributions. Under the Amended Credit Agreement,
Mafco Worldwide may not: (a) pay a dividend on, make a payment on account of the
purchase, redemption or retirement of, or make any other distribution on any
share of any class of its capital stock; (b) loan or advance funds to M & F
Worldwide except for expenses necessary to maintain M & F Worldwide's corporate
existence and other out-of-pocket expenses in the ordinary course of business
resulting from M & F Worldwide's status as a public company; and (c) pay any
management or administrative fee to M & F Worldwide or pay a salary, bonus or
other form of compensation, other than in the ordinary course of business, to
any person who is a significant stockholder or executive officer of M & F
Worldwide.

NEW ACCOUNTING PRONOUNCEMENTS

In December, 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 123(R), "Share-Based Payment". Among other things, SFAS No.123(R)
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the income statement based on their fair
values. The Company is required to adopt the provisions of Statement No. 123(R)
in its interim period beginning July 1, 2005. Adoption of Standard No. 123(R) is
not expected to have a material impact on the Company's financial statements.

In November, 2004, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 151, "Inventory Costs, an amendment of ARB No.43, Chapter 4". Among
other things, SFAS No. 151 clarifies that certain operating costs should be
recognized as current period charges and requires the allocation of fixed
production overheads to inventory. The Company is required to adopt the
provisions of SFAS No. 151 during the first fiscal year beginning after June 15,
2005. Adoption of Standard No. 151 is not expected to have a material impact on
the Company's financial statements.

IMPACT OF INFLATION

The Company presents its results of operations and financial condition
based upon historical cost. While it is difficult to measure accurately the
impact of inflation due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on its results of
operations and financial condition have been minor.

TAX MATTERS

In 1995, MCG and the Company entered into a tax sharing agreement. Under
the indemnification provisions of the tax sharing agreement and with respect to
periods ending on or prior to June 15, 1995, MCG will generally be required to
pay any tax liabilities of the Company, except for foreign income taxes related
to Aerospace. At December 31, 2004, the Company had available net operating loss
carryforwards of approximately $22.4 million, which expire in years 2008 through
2012.

During 2002, the French tax administration notified the Company's indirect
wholly owned French subsidiary (the "Indirect Subsidiary") that it intended to
disallow a deduction relating to French income taxes for 1996, 1997 and 1998
arising out of certain interest payments made on a note payable to the Company.
The French tax administration assessed the Indirect Subsidiary approximately 1.8
million euros for the taxes, interest and penalties. The Indirect Subsidiary
appealed the assessment and, in order to be able to pursue its appeal, obtained
bank guarantees in favor of the French tax administration in the amount of 1.4
million euros ($1.9 million as of December 31, 2004). Based on a recent decision
of the Supreme Court of France resolving a similar issue in favor of the
taxpayer, the French tax administration determined that it intends to abandon
its assessment. Furthermore, the French tax administration has determined that
it will not require any adjustment with respect to this issue in future tax
years. As a result of these developments, the Company has reversed the $5.0
million reserve that had been established related to this assessment and is in
the process of pursuing release of the bank guarantees of 1.4 million euros.

OTHER LIQUIDITY RISKS

LICORICE RAW MATERIAL SUPPLY

In addition to the liquidity risks noted above, the Company may encounter
liquidity risks arising from its supply of licorice root raw material. The
Company tries to maintain a sufficient licorice root raw material inventory and
open purchase contracts to meet normal production needs for three years. At
December 31, 2004, the Company had on hand a supply of licorice root raw
material approaching three years. Licorice root has an indefinite retention
period as long as it is kept dry, and therefore has experienced little, if any,
material spoilage. Although the Company has been able to obtain licorice root
raw materials without interruption since World War II, since there has been
periodic instability in the areas of the world where licorice root raw materials
are obtained, the Company may in the future experience a short supply of
licorice root raw materials due to these or other instabilities. If the Company
is unable to obtain licorice root raw materials, or is unable to obtain them in
a cost-effective manner, the Company's business will be severely hampered and
the Company will experience severe liquidity difficulties.

CUSTOMERS

In 2004, the Company's ten largest customers, eight of which are
manufacturers of tobacco products, accounted for approximately 69% of the
Company's net revenues and one customer, Altria Group Inc. accounted for
approximately 34% of the Company's 2004 net revenues. If Altria Group Inc. were
to stop purchasing licorice from the Company, it would have a significant
adverse effect on the financial results of the Company, which would also create
severe liquidity problems for the Company.

CORPORATE INDEMNIFICATION MATTERS

Prior to 1988, a former subsidiary of Pneumo Abex manufactured certain
asbestos-containing friction products. Pneumo Abex has been named, typically
along with 10 to as many as 100 or more other companies, as a defendant in
various personal injury lawsuits claiming damages relating to exposure to
asbestos. Pursuant to indemnification agreements, the Original Indemnitor has
ultimate responsibility for all the remaining asbestos-related claims asserted
against Pneumo Abex through August 1998 and for certain asbestos-related claims
asserted thereafter. In connection with the sale by Pneumo Abex in December 1994
of its Friction Products Division, the Second Indemnitor assumed responsibility
for substantially all asbestos-related claims asserted against Pneumo Abex after
August 1998 and not indemnified by the Original Indemnitor. Federal-Mogul
Corporation purchased the Second Indemnitor in October 1998. In October 2001,
the Second Indemnitor filed a petition under Chapter 11 of the U.S. Bankruptcy
Code and stopped performing its indemnity obligations to the Company.
Performance of the Second Indemnitor's indemnity obligation is guaranteed by the
Indemnity Guarantor. Following the bankruptcy filing of the Second Indemnitor,
the Company confirmed that the Indemnity Guarantor would fulfill the Second
Indemnitor's indemnity obligations to the extent that they are no longer being
performed by the Second Indemnitor.

Pneumo Abex's former subsidiary maintained product liability insurance
covering substantially all of the period during which asbestos-containing
products were manufactured. The subsidiary commenced litigation in 1982 against
a portion of these insurers in order to confirm the availability of this
coverage. As a result of settlements in that litigation, other coverage
agreements with other carriers and payments by the Original Indemnitor, the
Second Indemnitor and the Indemnity Guarantor pursuant to their indemnities,
Pneumo Abex is receiving reimbursement each month for substantially all of its
monthly expenditures for asbestos-related claims. As of December 31, 2004, the
Company incurred or expected to incur approximately $559,000 of unindemnified
costs, as to which it either has received or expects to receive approximately
$373,000 in insurance reimbursements. Management does not expect these
unindemnified matters to have a material adverse effect on the Company's
financial position or results of operations, but Pneumo Abex is unable to
forecast either the number of future asbestos-related claimants or the amount of
future defense and settlement costs associated with present or future
asbestos-related claims.

The Transfer Agreement further provides that MCG will indemnify Pneumo Abex
with respect to all environmental matters associated with Pneumo Abex's and its
predecessor's operations to the extent not paid by third-party indemnitors or
insurers, other than the operations relating to Pneumo Abex's Aerospace
business, which Pneumo Abex sold to Parker Hannifin Corporation in April

1996. Accordingly, environmental liabilities arising after the 1988 transaction
with the Original Indemnitor that relate to the Company's former Aerospace
facilities are the responsibility of Pneumo Abex. The Original Indemnitor is
obligated to indemnify Pneumo Abex for costs, expenses and liabilities relating
to environmental and natural resource matters to the extent attributable to the
pre-1988 operation of the businesses acquired from the Original Indemnitor,
subject to certain conditions and limitations principally relating to compliance
with notice, cooperation and other procedural requirements. The Original
Indemnitor is generally discharging its environmental indemnification
liabilities in the ordinary course.

On February 5, 1996, the Company, through Pneumo Abex, entered into the
Reimbursement Agreement. The Reimbursement Agreement provides for letters of
credit totaling $20.8 million covering certain environmental issues relating to
one site and not related to the current business of Pneumo Abex. During 2000,
the Environmental Protection Agency reduced the letter of credit requirements to
$2.2 million. The cost of the letters of credit is being funded by MCG and/or
the Original Indemnitor. Pneumo Abex had $2.2 million of letters of credit
outstanding at both December 31, 2004 and 2003, respectively, in connection with
the Reimbursement Agreement.

The Company has not recognized any liability in its financial statements
for matters covered by indemnification agreements. The Company considers these
obligations to be those of third-party indemnitors and monitors their financial
positions to determine the level of uncertainty associated with their ability to
satisfy their obligations. Based upon the indemnitors' active management of
indemnifiable matters, discharging of the related liabilities when required, and
financial positions based upon publicly filed financial statements, as well as
the history of insurance recovery set forth above, the Company believes that the
likelihood of failing to obtain reimbursement of amounts covered by insurance
and indemnification is remote.

The former Aerospace business of the Company formerly sold certain of its
aerospace products to the U.S. Government or to private contractors for the U.S.
Government. Certain claims for allegedly defective pricing that the Government
made with respect to certain of these aerospace product sales were retained by
Pneumo Abex in the Aerospace sale. During 2003, Pneumo Abex resolved one of
these matters at a cost of $0.4 million. In the remaining matter, Pneumo Abex
contests the Government's allegations and has been attempting to resolve the
matter without litigation.

Various legal proceedings, claims and investigations are pending against
the Company, including those relating to commercial transactions, product
liability, safety and health matters and other matters. Most of these matters
are covered by insurance, subject to deductibles and maximum limits, and by
third-party indemnities. The Company believes that the outcome of these matters
in the aggregate will not have a material adverse effect on the Company's
consolidated financial position or results of operations. The Company carries
general liability insurance but has no health hazard policy, which, to the best
of the Company's knowledge, is consistent with industry practice.

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K for the year ended December 31, 2004, as
well as certain of the Company's other public documents and statements and oral
statements, contains forward-looking statements that reflect management's
current assumptions and estimates of future performance and economic conditions.
Such statements are made in reliance upon the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The Company cautions investors
that any forward-looking statements are subject to risks and uncertainties that
may cause actual results and future trends to differ materially from those
projected stated or implied by the forward-looking statements. In addition, the
Company encourages investors to read the summary of the Company's critical
accounting policies under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Critical Accounting Policies."

In addition to factors described in the Company's Securities and Exchange
Commission filings and others, the following factors could cause the Company's
actual results to differ materially from those expressed in any forward-looking
statements made by the Company; (a) economic, climatic or political conditions
in countries in which the Company sources licorice root; (b) economic, climatic
or political conditions that have an impact on the worldwide tobacco industry or
on the consumption of tobacco products in which licorice products are used; (c)
additional government regulation of tobacco products, tobacco industry
litigation or enactment of new or increased taxes on cigarettes or other tobacco
products, to the extent any of the foregoing curtail growth in or actually
reduce consumption of tobacco products in which licorice products are used; (d)
the failure of third parties to make full and timely payment to the Company for
environmental, asbestos, tax and other matters for which the Company is entitled
to indemnification; (e) any inability

to obtain indemnification for any significant group of asbestos-related claims
pending against the Company; (f) lower than expected cash flow from operations;
(g) significant increases in interest rates; and (h) unfavorable foreign
currency fluctuations. The Company assumes no responsibility to update the
forward-looking statements contained in this Annual Report on Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company is exposed to market risk from changes in foreign currency
exchange rates and interest rates, which could affect its business, results of
operations and financial condition. The Company manages its exposure to these
market risks through its regular operating and financing activities.

As of December 31, 2004 and 2003, the Company's net foreign currency market
exposures of $1.1 million and $0.4 million, respectively, are primarily the
Euro. Most of the Company's export sales and purchases of licorice raw materials
are made in U.S. dollars. The Company's French subsidiary sells in several
foreign currencies as well as the U.S. dollar and purchases raw materials
principally in U.S. dollars. Since the exposures are not material, the Company
does not generally hedge against foreign currency fluctuations. In addition,
management does not foresee nor expect any significant changes in foreign
currency exposure in the near future.

A 10% appreciation in foreign currency exchange rates from the prevailing
market rates would result in a $0.1 million increase to the related net
unrealized gain for December 31, 2004 and a negligible increase for December 31,
2003. Conversely, a 10% depreciation in these currencies from the prevailing
market rates would result in a $0.1 million decrease to the related net
unrealized gain for December 31, 2004 and a negligible decrease for December 31,
2003.

At December 31, 2004, the Company had no outstanding debt, and therefore
was not subject to changes in interest rates.

Neither the Company nor its subsidiaries had any interest rate swap
agreements in effect at December 31, 2004. Management does not foresee nor
expect any significant changes in its exposure to interest rate fluctuations or
in how such exposure is managed.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the financial statements and supplementary data listed in the
accompanying Index to Consolidated Financial Statements and Financial Statement
Schedules on page F-1 herein. Information required by other schedules called for
under Regulation S-X is either not applicable or is included in the financial
statements or notes thereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company's management, with the participation of the Company's Chief
Executive Officer and the Chief Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as such term
is defined in Rules 13(a)-15(e) and 15d-(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) as of December 31, 2004. Based on that
evaluation, the Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were effective
as of December 31, 2004. There were no material changes in the Company's
internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of
2004.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. The Company's
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles.

Our internal control over financial reporting includes those policies and
procedures that:

o Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;

o Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and

o Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risks that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the company's internal control
over financial reporting as of December 31, 2004. In making this assessment,
management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control-Integrated
Framework.

Based on our assessment, management believes that, as of December 31, 2004,
the company's internal control over financial reporting is effective.

The company's independent registered public accounting firm has issued an
audit report on our assessment of the company's internal control over financial
reporting, which appears below.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

THE BOARD OF DIRECTORS AND STOCKHOLDERS
M&F WORLDWIDE CORP.

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that M&F
Worldwide Corp. maintained effective internal control over financial reporting
as of December 31, 2004, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (the COSO criteria). M&F Worldwide
Corp.'s management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's
internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion, management's assessment that M&F Worldwide Corp. maintained
effective internal control over financial reporting as of December 31, 2004, is
fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, M&F Worldwide Corp. maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2004, based on the
COSO criteria.

We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the 2004 consolidated financial
statements of M&F Worldwide Corp. and our report dated March 8, 2005 expressed
an unqualified opinion thereon.

/s/Ernst & Young LLP

New York, New York
March 8, 2005

PART III

The Company will provide the information otherwise set forth in Part III,
Items 10 through 14, of Form 10-K in its definitive proxy statement for its 2005
annual meeting of stockholders, which is to be filed pursuant to Regulation 14A
not later than April 30, 2005.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1 and 2) Financial statements and financial statement schedule.

See Index to Consolidated Financial Statements and Financial Statement
Schedule, which appears on page F-1 herein. All other schedules for which
provision is made in the applicable accounting regulations of the Securities &
Exchange Commission are not required under the related instructions or are
inapplicable and therefore have been omitted.

(3) Exhibits

EXHIBIT NO. DESCRIPTION
----------- -----------

2.1 Stock Purchase Agreement, dated as of April 19, 2001 by
and between PX Holding Corporation and M & F Worldwide
Corp. (incorporated by reference to Exhibit 2.1 to M & F
Worldwide Corp.'s Form 8-K dated April 20, 2001).

2.2 Stock Purchase Agreement, dated April 28, 1988, between
Pneumo Abex and Whitman Corporation (incorporated by
reference to Exhibit 2.1 to Pneumo Abex's Registration
Statement on Form S-1, Commission File No. 33-22725) as
amended by an Amendment, dated as of August 29, 1988, and
a Second Amendment and related Settlement Agreement, dated
September 23, 1991 (incorporated by reference to Exhibit
10.4 to Abex Inc.'s Annual Report on Form 10-K for 1992).

3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to M & F
Worldwide's Form 8-K dated April 30, 1996).

3.2 Certificate of Designation, Powers, Preferences and Rights
of Series B Non-Cumulative Perpetual Participating
Preferred Stock of M & F Worldwide Corp. (incorporated by
reference to Exhibit 4.2 to M & F Worldwide Corp.'s Form
8-K dated April 20, 2001).

3.3 By-laws of the Company as currently in effect
(incorporated by reference to Exhibit 3.2 to M & F
Worldwide's Form 10-K dated December 31, 1995).

3.4 Amendment to the Company's By-laws concerning the advance
notice provision (incorporated by reference to Exhibit
10.23 to M & F Worldwide Corp.'s Form 10-Q dated August
14, 2001).

4 Registration Rights Agreement between Mafco and the
Company (incorporated by reference to Exhibit 2 to the
Schedule 13D dated June 26, 1995 filed by Holdings Inc.,
MCG Holdings Inc. and Mafco in connection with the
Company's capital stock).

10.1 Transfer Agreement among the Company, MCG Intermediate
Holdings Inc., Pneumo Abex and PCT International Holdings
Inc. (incorporated by reference to Exhibit 10.1 to PCT's
Current Report on Form 8-K dated June 28, 1995).

10.2 Letter Agreement, dated as of June 26, 1995, between the
Company and Mafco (incorporated by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K dated
June 28, 1995).

10.3 Letter Agreement, dated as of February 5, 1996, between
the Company and Mafco (incorporated by reference to
Exhibit 6 to Amendment No. 2 to Schedule 13D dated
February 8, 1996 filed by Holdings Inc., MCG Holdings Inc.
and Mafco in connection with the Company's capital stock).

10.4 M & F Worldwide 1995 Stock Plan (the "1995 Stock Plan")
for employees of the Company and employees of affiliated
corporations (incorporated by reference to Annex C to the
Proxy Statement/Prospectus included in the Company's
Registration Statement on Form S-1 (File No. 33-92186)),
as amended (incorporated by reference to Exhibit 10.19 to
M & F Worldwide Corp.'s Form 10-K for 1996).

10.5 The Company's 1997 Stock Option Plan (incorporated by
reference to Exhibit 10.25 to M & F Worldwide Corp.'s Form
10-K for 1996).

10.6 Credit Agreement dated as of November 17, 1997 among
Pneumo Abex, the lenders (as defined in the Credit
Agreement), Chase Manhattan Bank, Chase Securities Inc.,
Bank Boston, N.A. and Chase Manhattan Bank Delaware
(incorporated by reference to Exhibit 10.27 to M & F
Worldwide Corp.'s Form 10-K for 1997).

10.7 Contract dated as of May 31, 1997 between Mafco Worldwide
and Licorice and Paper Employees Association of Camden,
New Jersey AFL-CIO (incorporated by reference to Exhibit
10.28 to M & F Worldwide Corp.'s Form 10-K for 1997).

10.8 Employment agreement, dated August 1, 2000, between the
Registrant Pramathesh S. Vora (incorporated by reference
to M & F Worldwide Corp.'s Form 10-K for 2000).

10.9 The Company's 2000 Stock Option Plan for employees of the
Registrant and employees of affiliated corporations
(incorporated by reference to Exhibit 99.1 to M & F
Worldwide's Registrant Statement on Form S-8, Commission
File No. 333-9162).

10.10 Credit Agreement, dated as of April 17, 2001, among
Flavors Holdings Inc., a Delaware corporation, Pneumo Abex
Corporation, a Delaware corporation, the several banks and
other financial institutions or entities from time to time
parties thereto, BNP Paribas, as documentation agent, and
JP Morgan Chase Bank, as paying agent (incorporated by
reference to Exhibit 99.3 to M & F Worldwide Corp.'s Form
8-K dated April 20, 2001).

10.11 Guarantee and Collateral Agreement, dated as of April 19,
2001, by and among Pneumo Abex Corporation, Flavors
Holdings Inc., PVI Acquisition Corp., EVD Holdings Inc.,
Concord Pacific Corporation, the Lenders party thereto,
BNP Paribas, as Documentation Agent and The Chase
Manhattan Bank as Paying Agent (incorporated by reference
to Exhibit 99.4 to M & F Worldwide Corp.'s Form 8-K dated
April 20, 2001).

10.12 Employment agreement dated August 1, 2001, between the
Registrant and Stephen G. Taub. (incorporated by reference
to Exhibit 10.29 to M & F Worldwide Corp.'s 2001 Form
10-K).

10.13 First Amendment, dated as of October 28, 2002, to the
Amended and Restated Credit Agreement, dated as of April
17, 2001, among Flavors Holdings Inc., a Delaware
corporation, Pneumo Abex Corporation, a Delaware
corporation, the several banks and other financial
institutions or entities from time to time parties
thereto, BNP Paribas, as documentation agent, and JP
Morgan Chase Bank, as paying agent. (incorporated by
reference to Exhibit 10.4 to M & F Worldwide Corp.'s Form
10-Q for the quarterly period ended September 30, 2002).

10.14 Amendment No. 1 to the Instrument of Assignment and
Assumption, dated as of December 3, 2002, by and between
Holdings Inc., M & F Worldwide Corp. and Panavision Inc.
(incorporated by reference to M & F Worldwide Corp.'s Form
8-K dated December 18, 2002).

10.15 Mafco-Pneumo Abex Corporation Letter Agreement, dated as
of December 3, 2002, by and between Holdings Inc., M & F
Worldwide Corp. and Pneumo Abex Corporation (incorporated
by reference to M & F Worldwide Corp.'s Form 8-K dated
December 18, 2002).

10.16 Management Services Agreement, dated as of October 29,
2003, by and between Mafco Holdings Inc. and M & F
Worldwide Corp.

10.17 M & F Worldwide Corp. 2003 Outside Directors Deferred
Compensation Plan.

10.18 The Company's 2003 Stock Option Plan for employees of the
Registrant and employees of affiliated corporations.

10.19 Second Amendment, dated as of March 18, 2004, to the
Amended and Restated Credit Agreement, dated as of April
17, 2001, among Flavors Holdings Inc., a Delaware
corporation, Pneumo Abex Corporation, a Delaware
corporation, the several banks and other financial
institutions or entities from time to time parties
thereto, BNP Paribas, as documentation agent, and JP
Morgan Chase Bank, as paying agent. (incorporated by
reference to Exhibit 10.4 to M & F Worldwide Corp.'s Form
10-Q for the quarterly period ended September 30, 2002).

10.20 Third Amendment, dated as of October 28, 2004, to the
Amended and Restated Credit Agreement, dated as of April
17, 2001, among Flavors Holdings Inc., a Delaware
corporation, Pneumo Abex Corporation, a Delaware
corporation, the several banks and other financial
institutions or entities from time to time parties
thereto, BNP Paribas, as documentation agent, and JP
Morgan Chase Bank, as paying agent. (incorporated by
reference to Exhibit 10.4 to M & F Worldwide Corp.'s Form
10-Q for the quarterly period ended September 30, 2002).

21* List of subsidiaries

23.1* Consent of Independent Registered Public Accounting Firm

24* Powers of attorney executed by Messrs. Perelman, Beekman,
Coppola, Durnan, Folz, Gittis, Meister, Slovin, and Taub.

31.1* Certification of Howard Gittis, Chief Executive Officer,
dated March 11, 2005.

31.2* Certification of Todd J. Slotkin, Chief Financial Officer,
dated March 11, 2005.

32.1* Certification of Howard Gittis, Chief Executive Officer,
dated March 11, 2005, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (furnished herewith).

32.2* Certification of Todd J. Slotkin, Chief Financial Officer,
dated March 11, 2005, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (furnished herewith).

- ----------
*Filed herewith

SIGNATURES

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

M & F WORLDWIDE CORP.

Dated: March 11, 2005 By: /s/Howard Gittis
--------------------------------------
Howard Gittis
Chairman of the Board,
President and Chief Executive Officer

Dated: March 11, 2005 By: /s/Todd J. Slotkin
--------------------------------------
Todd J. Slotkin
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)

Dated: March 11, 2005 By: /s/Laurence Winoker
--------------------------------------
Laurence Winoker
Senior Vice President,
Treasurer and Controller
(Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, the
following persons have signed this report on behalf of the Registrant and in the
capacities and on the dates indicated.

SIGNATURE TITLE DATE
--------- ----- ----

Ronald O. Perelman * Director March 11, 2005
- -------------------------------------------------------------
Ronald O. Perelman

Philip E. Beekman * Director March 11, 2005
- -------------------------------------------------------------
Philip E. Beekman

Rosanne F. Coppola * Director March 11, 2005
- -------------------------------------------------------------
Rosanne F. Coppola

Jaymie A. Durnan * Director March 11, 2005
- -------------------------------------------------------------
Jaymie A. Durnan

Theo W. Folz * Director March 11, 2005
- -------------------------------------------------------------
Theo W. Folz

Howard Gittis * Director March 11, 2005
- -------------------------------------------------------------
Howard Gittis

Paul M. Meister * Director March 11, 2005
- -------------------------------------------------------------
Paul M. Meister

Bruce Slovin * Director March 11, 2005
- -------------------------------------------------------------
Bruce Slovin

Stephen G. Taub * Director March 11, 2005
- -------------------------------------------------------------
Stephen G. Taub

* The undersigned by signing his name hereto does hereby execute this Form
10-K pursuant to powers of attorney filed as exhibits to this Form 10-K.

Dated: March 11, 2005 By: /s/Todd J. Slotkin
--------------------------------------
Todd J. Slotkin
Attorney-in-Fact

Item 8, Item 15 (a)(1) and (2) and (d)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 2004

The following consolidated financial statements of M & F Worldwide are
included in Item 8:

As of December 31, 2004 and 2003 and for the years ended December 31, 2004,
2003 and 2002.

Pages
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Report of Independent Registered Public Accounting Firm.................. F-2

Consolidated Balance Sheets...................................