UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2003 Commission File Number 1-922
THE GILLETTE COMPANY
(Exact name of registrant as specified in its charter)
Incorporated in Delaware 04-1366970
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Prudential Tower Building, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 421-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No______
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes X No______
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Title of each class
Common Stock, $1.00 par value
Shares Outstanding July 31, 2003 . . . . . . . . . . . . . . . .1,020,182,696
PAGE 1
PART I. FINANCIAL INFORMATION
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ -----------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales .......................................... $ 2,254 $ 2,024 $ 4,225 $ 3,756
Cost of Sales ...................................... 870 798 1,648 1,492
------- ------- ------- -------
Gross Profit ..................................... 1,384 1,226 2,577 2,264
Selling, General and Administrative Expenses ....... 879 807 1,692 1,517
Restructuring - Gain on Sale of Vaniqa ............. - (30) - (30)
------- ------- ------- -------
Profit from Operations ........................... 505 449 885 777
Nonoperating Charges (Income):
Interest income .................................. (3) (6) (6) (11)
Interest expense ................................. 16 24 30 44
Exchange ......................................... 3 (2) 5 (8)
Other charges - net .............................. 6 8 (3) 4
------- ------- ------- -------
22 24 26 29
------- ------- ------- -------
Income before Income Taxes ......................... 483 425 859 748
Income Taxes ....................................... 145 132 258 232
------- ------- ------- -------
Net Income ....................................... $ 338 $ 293 $ 601 $ 516
======= ======= ======= =======
Net Income per Common Share:
Basic ............................................ $ .33 $ .28 $ .58 $ .49
======= ======= ======= =======
Assuming Full Dilution ........................... $ .33 $ .28 $ .58 $ .49
======= ======= ======= =======
Dividends per Common Share:
Declared ......................................... $ .3250 $ .3250 $ .3250 $ .3250
Paid ............................................. $ .1625 $ .1625 $ .3250 $ .3250
Weighted average number of common shares outstanding
Basic ............................................ 1,021 1,057 1,029 1,056
Assuming full dilution ........................... 1,023 1,062 1,031 1,061
See Accompanying Notes to Consolidated Financial Statements.
PAGE 2
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
ASSETS
(Millions)
June 30, December 31, June 30,
2003 2002 2002
------------ ------------ -----------
(Unaudited) (Unaudited)
Current Assets:
Cash and cash equivalents .............................. $ 614 $ 801 $ 980
Trade receivables, less allowances, June 2003, $55;
December 2002, $73; June 2002, $61 ................... 1,135 1,202 1,210
Other receivables ...................................... 395 311 296
Inventories
Raw materials and supplies .......................... 116 115 133
Work in process ..................................... 221 191 277
Finished goods ...................................... 822 622 800
------- ------- -------
Total Inventories ................................. 1,159 928 1,210
------- ------- -------
Deferred income taxes .................................. 314 380 507
Other current assets ................................... 292 175 294
------- ------- -------
Total Current Assets .............................. 3,909 3,797 4,497
------- ------- -------
Property, Plant and Equipment, at cost ................... 6,684 6,429 6,303
Less accumulated depreciation ............................ (3,175) (2,864) (2,756)
------- ------- -------
Net Property, Plant and Equipment ................. 3,509 3,565 3,547
------- ------- -------
Goodwill ................................................. 975 962 954
Intangible Assets, less accumulated amortization ......... 392 400 409
Other Assets ............................................. 1,096 1,139 814
------- ------- -------
$ 9,881 $ 9,863 $10,221
======= ======= =======
See Accompanying Notes to Consolidated Financial Statements.
PAGE 3
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(Millions, except per share amount)
June 30, December 31, June 30,
2003 2002 2002
------------ ------------ ------------
(Unaudited) (Unaudited)
Current Liabilities:
Loans payable .................................... $ 364 $ 673 $ 1,903
Current portion of long-term debt ................ 584 527 606
Accounts payable ................................. 549 581 532
Accrued liabilities .............................. 1,646 1,303 1,188
Dividends payable ................................ 166 170 172
Income taxes ..................................... 232 234 392
-------- -------- --------
Total Current Liabilities ..................... 3,541 3,488 4,793
-------- -------- --------
Long-Term Debt ..................................... 2,740 2,457 1,724
Deferred Income Taxes .............................. 625 692 571
Other Long-Term Liabilities ........................ 887 920 713
Minority Interest .................................. 42 46 42
Stockholders' Equity:
Common stock, par value $1.00 per share:
Authorized 2,320 shares
Issued: June 2003, 1,372 shares;
Dec. 2002, 1,370 shares;
June 2002, 1,370 shares ................ 1,372 1,370 1,370
Additional paid-in capital ....................... 1,233 1,197 1,151
Earnings reinvested in the business .............. 6,877 6,608 6,250
Accumulated other comprehensive loss ............. (1,257) (1,523) (1,428)
Treasury stock, at cost: June 2003, 352 shares;
Dec. 2002, 326 shares; and June 2002, 312 shares (6,179) (5,392) (4,965)
-------- -------- --------
Total Stockholders' Equity ............... 2,046 2,260 2,378
-------- -------- --------
$ 9,881 $ 9,863 $ 10,221
======== ======== ========
See Accompanying Notes to Consolidated Financial Statements.
PAGE 4
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
(Unaudited)
Six Months Ended
June 30
------------------
2003 2002
---- ----
Operating Activities
Net income ..................................... $ 601 $ 516
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ................ 278 244
Deferred income taxes ........................ 39 52
Other ........................................ 11 7
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
Trade and other accounts receivable ........ 59 334
Inventories ................................ (188) (160)
Accounts payable and accrued liabilities ... 227 25
Other working capital items ................ (68) (133)
Other noncurrent assets and liabilities .... 45 (185)
----- -----
Net cash provided by operating activities 1,004 700
----- -----
Investing Activities
Additions to property, plant and equipment ..... (132) (175)
Disposals of property, plant and equipment ..... 23 21
----- -----
Net cash used in investing activities .... (109) (154)
----- -----
Financing Activities
Purchase of treasury stock ..................... (786) -
Proceeds from exercise of stock option and
purchase plans ............................ 37 23
Proceeds from long-term debt ................... 684 350
Repayment of long-term debt .................... (382) (197)
Decrease in loans payable ...................... (311) (333)
Dividends paid ................................. (335) (343)
Settlements of debt-related derivative contracts 7 9
----- -----
Net cash used in financing activities .... (1,086) (491)
----- -----
Effect of Exchange Rate Changes on Cash ............ 4 -
Net Cash Used in Discontinued Operations ........... - (22)
----- -----
Increase (Decrease) in Cash and Cash Equivalents ... (187) 33
Cash and Cash Equivalents at Beginning of Period ... 801 947
----- -----
Cash and Cash Equivalents at End of Period ......... $ 614 $ 980
===== =====
Supplemental disclosure of cash paid for:
Interest ....................................... $ 29 $ 50
Income taxes ................................... $ 212 $ 149
See Accompanying Notes to Consolidated Financial Statements.
PAGE 5
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
2003 2002 2003 2002
---- ---- ---- ----
Net Income, as reported $ 338 $ 293 $ 601 $ 516
Other Comprehensive Income (Loss),
net of tax:
Foreign Currency Translation 171 47 262 7
Cash Flow Hedges 2 (1) 4 2
----- ----- ----- -----
Comprehensive Income $ 511 $ 339 $ 867 $ 525
===== ===== ===== =====
Accumulated Other Comprehensive Loss
- ------------------------------------
The balances for the components of Accumulated Other Comprehensive Loss are:
Accumulated
Foreign Other
Currency Pension Cash Flow Comprehensive
Translation Adjustment Hedges Loss
----------- ---------- ----------- -------------
Balance December 31, 2001 $(1,373) $ (56) $ (8) $(1,437)
Change in period (46) - 5 (41)
Income tax benefit (expense) 6 - (2) 4
------ ------ ------ ------
Balance March 31, 2002 $(1,413) $ (56) $ (5) $(1,474)
Change in period 172 - (2) 170
Income tax benefit (expense) (125) - 1 (124)
------ ------ ------ ------
Balance June 30, 2002 $(1,366) $ (56) $ (6) $(1,428)
====== ====== ====== ======
Balance December 31, 2002 $(1,332) $ (186) $ (5) $(1,523)
Change in period 2 - 3 5
Income tax benefit (expense) 89 - (1) 88
------ ------ ------ ------
Balance March 31, 2003 $(1,241) (186) (3) (1,430)
Change in period 185 - 3 188
Income tax benefit (expense) (14) - (1) (15)
------ ------ ------ ------
Balance June 30, 2003 $(1,070) $ (186) $ (1) $(1,257)
====== ====== ====== ======
The change in accumulated foreign currency translation adjustment for the
quarter ended June 30, 2003, was a $171 million gain, net of tax. The gains were
primarily in Europe and Brazil. The gain for the quarter ended June 30, 2002,
net of tax, was $47 million, with gains in Europe largely offset by losses in
Latin America.
See Accompanying Notes to Consolidated Financial Statements.
PAGE 6
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accounting Comments
- -------------------
Reference is made to the registrant's 2002 Annual Report to Shareholders, which
contains, at pages 32 through 54, the audited consolidated financial statements
and the notes thereto, which are incorporated by reference into the registrant's
Annual Report on Form 10-K for the year ended December 31, 2002.
With respect to the financial information for the interim periods included in
this report, which is unaudited, the management of the Company believes that all
adjustments necessary for a fair presentation of the results for such interim
periods have been included.
Financial statements of subsidiaries outside the U.S., other than those
operating in highly inflationary environments, are measured using the local
currency as the functional currency. Adjustments from translating these
financial statements into U.S. dollars are accumulated in the equity section of
the balance sheet under the caption, "Accumulated Other Comprehensive Loss."
For subsidiaries operating in highly inflationary economies, the U.S. dollar is
the functional currency. Therefore, exchange gains and losses for these
subsidiaries are included with all other transactional exchange gains and losses
in the Consolidated Statement of Income under the caption, "Exchange."
The Company accounts for its stock option plans under Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees," and
related Interpretations. Accordingly, no compensation cost is reflected in net
income, as all options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and net income per common
share if the Company had applied the fair-value-based method under Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," to record expense for stock option compensation.
Three Months Six Months
Ended June 30, Ended June 30,
2003 2002 2003 2002
---- ---- ---- ----
(Millions, except per share amounts)
- ------------------------------------
Net income, as reported $ 338 $ 293 $ 601 $ 516
Less: Compensation expense for option
awards determined by the fair-
value-based method, net of
related tax effects (25) (27) (50) (54)
------ ------ ------ ------
Pro forma net income $ 313 $ 266 $ 551 $ 462
====== ====== ====== ======
Net income per common share
Basic
As reported $ .33 $ .28 $ .58 $ .49
Pro forma .31 .25 .54 .44
Assuming full dilution
As reported $ .33 $ .28 $ .58 $ .49
Pro forma .31 .25 .54 .44
The fair value of each option grant for the Company's plans is estimated on the
date of the grant using the Black-Scholes option pricing model.
PAGE 7
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Accounting Pronouncements
- -------------------------
In April 2003, the Financial Accounting Standards Board (FASB) released
Statement of Financial Accounting Standards (SFAS) No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149
clarifies under what circumstances a contract with an initial net investment
meets the characteristics of a derivative, amends the definition of an
underlying contract, and clarifies when a derivative contains a financing
component in order to increase the comparability of accounting practices under
SFAS No. 133. The statement is effective for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30,
2003. The adoption of SFAS No. 149 is not expected to have a material impact on
the Company's consolidated financial statements.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." This Statement
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
were previously classified as equity. The Statement is effective for financial
instruments entered into or modified after May 31, 2003. The Company adopted
this standard on June 1, 2003. Its adoption did not have any impact on the
financial statements.
In May 2003, the consensus to EITF Issue No. 01-08, "Determining Whether an
Arrangement Contains A Lease," was issued. The guidance in the consensus applies
to the purchase or sale of goods and services under various types of contracts,
including outsourcing arrangements. Based on the criteria in the consensus, both
parties to an arrangement are required to determine whether the arrangement
includes a lease within the scope of SFAS No. 13. The new requirement applies
prospectively to new or modified arrangements for reporting periods beginning
after May 28, 2003. Accordingly, as of July 1, 2003, the Company will account
for new or modified arrangements based on this guidance, which could result in
the recognition of operating or capital leases under SFAS No. 13.
PAGE 8
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Goodwill and Intangible Assets
- ------------------------------
Total goodwill by segment follows.
Net Carrying Amount June 30, December 31, June 30,
(Millions) 2003 2002 2002
------------ ------------ ------------
Blades & Razors $ 140 $ 140 $ 142
Duracell 584 571 563
Oral Care 172 173 172
Braun 79 78 77
Personal Care - - -
------ ----- ------
Total $ 975 $ 962 $ 954
====== ===== ======
The change between the June 30, 2003, December 31, 2002, and June 30, 2002,
balances is mainly due to the impact of foreign currency translation.
The detail of intangible assets follows.
Weighted
Average June 30, 2003 December 31, 2002 June 30, 2002
Amortization ---------------------- ---------------------- ----------------------
Period Carrying Accumulated Carrying Accumulated Carrying Accumulated
(Millions) (Years) Amount Amortization Amount Amortization Amount Amortization
------------ -------- ------------ -------- ------------ -------- ------------
Amortized Intangible Assets
Patents 6 $ 101 $ 61 $ 101 $ 53 $ 103 $ 46
Trademarks 6 14 6 13 4 11 2
Software 5 12 10 12 9 16 8
Endorsements - 61 61 61 61 61 61
Other 23 11 3 11 3 12 3
---- ---- ----- ----- ----- -----
Total 7 $ 199 $ 141 $ 198 $ 130 $ 203 $ 120
---- ---- ----- ----- ----- -----
Unamortized Intangible Assets
Trademarks $ 319 $ 317 $ 314
Pension 15 15 12
---- ---- ----- ----- ----- -----
Total $ 533 $ 141 $ 530 $ 130 $ 529 $ 120
==== ==== ===== ===== ===== =====
---- ----- -----
Intangible Assets, net $ 392 $ 400 $ 409
==== ===== =====
Aggregate Amortization Expense:
For the three months ended
June 30, 2003 $ 5
June 30, 2002 $ 5
For the six months ended:
June 30, 2003 $ 11
June 30, 2002 $ 10
Estimated Amortization Expense:
For the Years ended
December 31, 2003 $ 21
2004 $ 19
2005 $ 7
2006 $ 4
2007 $ 3
PAGE 9
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Advertising
- -----------
The advertising expense detailed below is included in selling, general and
administrative expenses.
Three Months Ended Six Months Ended
(Millions) June 30 June 30
------------------ ------------------
2003 2002 2003 2002
---- ---- ---- ----
Net Sales $ 2,254 $ 2,024 $ 4,225 $ 3,756
Advertising 186 159 353 296
% Net Sales 8.2% 7.9% 8.3% 7.9%
PAGE 10
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Share Repurchase Program
- ------------------------
The Company has a share repurchase program that authorizes the purchase of up to
150 million shares in the open market or in privately negotiated transactions,
depending on market conditions and other factors. From the inception of the
program through December 31, 2002, the Company repurchased 108 million shares in
the open market for $4.5 billion. In the three months ended March 31, 2003, and
June 30, 2003, the Company repurchased 23.5 million and 2.4 million shares for
$706 million and $80 million, respectively.
Financial Information by Business Segment
- -----------------------------------------
Net sales, profit (loss) from operations and identifiable assets for each of the
Company's business segments are set forth below. There are no material
intersegment revenues.
Net Sales
--------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
--------------------- ---------------------
(Millions) 2003 2002 2003 2002
------ ------ ------ ------
Blades & Razors $1,003 $ 884 $1,896 $1,654
Duracell 432 428 816 760
Oral Care 316 275 611 540
Braun 284 233 499 420
Personal Care 219 204 403 382
------ ------ ------ ------
Total $2,254 $2,024 $4,225 $3,756
====== ====== ====== ======
Profit/(Loss) from Operations
----------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- -----------------------
(Millions) 2003 2002 2003 2002
------ ------ ------ ------
Blades & Razors $ 377 $ 324 $ 708 $ 612
Duracell 54 46 93 45
Oral Care 53 50 102 103
Braun 28 22 21 25
Personal Care 24 5 24 16
------ ------ ------ ------
Subtotal Reportable Segments 536 447 948 801
All Other (1) (31) 2 (63) (24)
------ ------ ------ ------
Total $ 505 $ 449 $ 885 $ 777
====== ====== ====== ======
(1) All Other includes the $30 million gain on the sale of Vaniqa in the three
and six months ended June 30, 2002.
PAGE 11
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Identifiable Assets
-------------------------------
June 30, Dec. 31, June 30,
(Millions) 2003 2002 2002
--------- ------- ---------
(Unaudited) (Unaudited)
Blades & Razors $ 3,343 $ 3,170 $ 3,258
Duracell 2,559 2,741 2,782
Oral Care 1,230 1,094 1,057
Braun 1,130 1,065 1,014
Personal Care 539 520 535
------- ------- -------
Subtotal Reportable Segments 8,801 8,590 8,646
All Other 1,080 1,273 1,575
------- ------- -------
Total $ 9,881 $ 9,863 $10,221
======= ======= =======
PAGE 12
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Computation of net income per common share
(Millions, except per share amounts)
- ------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
2003 2002 2003 2002
---- ---- ---- ----
Net Income ............................. $ 338 $ 293 $ 601 $ 516
====== ====== ====== ======
Common shares, basic ................... 1,021 1,057 1,029 1,056
Effect of dilutive securities:
Stock options ...................... 2 5 2 5
------ ------ ------ ------
Common shares, assuming full dilution 1,023 1,062 1,031 1,061
====== ====== ====== ======
Net Income per Common Share:
Basic ................................ $ .33 $ .28 $ .58 $ .49
====== ====== ====== ======
Assuming full dilution ........ $ .33 $ .28 $ .58 $ .49
====== ====== ====== ======
As of June 30, 2003 and 2002, 66.0 million and 43.7 million shares of common
stock issuable under stock options, respectively, were not included in the
calculation of fully diluted earnings per share because the option exercise
price was above the market price.
PAGE 13
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Functional Excellence
- ---------------------
In the second quarter of 2002, the Company began actions associated with its
Functional Excellence initiative. This initiative impacts all business segments
and is focused on upgrading capabilities, while reducing overhead costs by
improving processes and eliminating duplication across all functions. Specific
program activities include outsourcing certain information technology functions,
implementing new worldwide technology tools and processes, streamlining customer
management and marketing programs, and consolidating financial functions.
Total pretax charges under the Functional Excellence initiative, including
employee termination benefits and other costs, were $31 million in the second
quarter of 2002, $121 million for the full year 2002, $44 million in the first
quarter of 2003, and $42 million in the second quarter of 2003. Employee
terminations are completed within 12 months of accrual. The employee termination
benefits are calculated using the Company's long-standing severance formulas and
vary on a country-by-country basis, depending on local statutory requirements.
Details of the Functional Excellence accrual follow. Other costs included items
such as consulting, lease buyouts and asset write downs related to Functional
Excellence programs.
Employee
(Millions) Terminations Other Total
- ---------- ------- ----- -----
Accrual Balance December 31, 2002 $85.8 $6.3 $92.1
First Quarter 2003:
Charges 38.0 6.0 44.0
Payments/Uses (43.6) (2.2) (45.8)
------ ------ ------
Accrual Balance March 31, 2003 80.2 10.1 90.3
------ ------ ------
Second Quarter 2003:
Charges 33.9 7.7 41.6
Payments/Uses (33.7) (5.7) (39.4)
------ ------ ------
Accrual Balance June 30, 2003 $80.4 $12.1 $92.5
====== ====== ======
Functional Excellence charges in 2003 included $12 million and $13 million which
were recorded to cost of goods sold, and $30 million and $73 million which were
recorded to selling, general and administrative expenses in the three and six
month periods ended June 30, 2003, respectively.
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Results for any interim period, such as those described in the following
analysis, are not necessarily indicative of results for the entire year.
Second Quarter 2003 versus 2002
- -------------------------------
Total Company: Sales for the quarter ended June 30, 2003, were $2.25 billion, an
increase of 11% versus the same quarter of the prior year. The impact of
exchange was 6%, as the strength of European currencies more than offset
unfavorable exchange in Latin America. Volume/mix contributed 5% to sales
growth, largely driven by new products. Overall, pricing had no material impact
on reported sales, as price increases in Blades and Razors were offset by lower
pricing in both Duracell and Oral Care. Profit increased 12% as compared with
the prior year, mainly due to favorable product mix in the Blades and Razors
business, cost-savings initiatives and manufacturing efficiencies, partially
offset by higher year-over-year exchange-driven European-based costs,
significantly higher advertising investment, incremental pension expense and
higher Functional Excellence charges. Heightened competitive activity is
expected for the balance of the year in Blades and Razors, which could have a
dampening effect on Gillette's 2003 and 2004 earnings potential through
increased marketing investment and potential share loss. However, this activity
is not expected to inhibit our ability to deliver on our financial growth
targets.
Blades and Razors: Second-quarter sales rose 14% compared with the second
quarter of last year. Excluding the impact of exchange, sales increased 8%.
Sales growth was driven by the success of Mach3Turbo in North America and
Europe, together with the North American launches of the Venus Passion and Venus
Spa Collection systems and Sensor3 disposable razors. Second-quarter Blades and
Razors profit was up 17%, and margin climbed 100 basis points to 37.6%,
reflecting sales performance and continued upgrading to premium systems. These
gains were partially offset by a double-digit increase in advertising support.
Duracell: Sales of Duracell for the quarter increased 1% versus those of a year
ago. Excluding the impact of exchange, sales declined by 4%, as strong alkaline
volume gains in Europe and North America were offset by lower pricing due to the
North America price-deal realignment program, and lower volumes related to the
divestiture of the carbon zinc businesses in South Africa and India. Deep
discount pricing programs have recently been announced by competition, which may
impact the dynamics of the battery category for the second half of the year. In
addition, we expect a reduction in category growth in the United States, due to
consumer destocking from first-quarter pantry-loading. Profit from operations
grew 20% versus a year ago, reflecting continued manufacturing efficiencies and
overhead containment, partially offset by a substantial increase in marketing.
The impact of lower pricing as a result of the price-deal realignment was offset
by lower promotional activity and the elimination of free cell giveaways.
Oral Care: Oral Care second-quarter sales were 15% above those of 2002, or 8%
excluding the impact of exchange. The manual and power toothbrush businesses
each grew substantially, due to successful new product introductions
(CrossAction Vitalizer and CrossAction Power battery) and the strong performance
of entry-priced toothbrushes in emerging markets. Oral Care profit from
operations grew 7% from a year ago, reflecting increased sales from new products
and improved factory performance, partially offset by the impact of exchange on
European-sourced product costs and a double-digit increase in advertising to
support new product launches.
PAGE 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Braun: Sales of Braun rose 22% above those of the previous year, or 12%
excluding the impact of exchange. Double-digit sales growth in North America and
Asia was driven by the Thermoscan ear-thermometer business, reflecting concerns
over the SARS epidemic. In addition, the new SoftPerfection epilator drove
strong growth in AMEE and Southern Europe, while the new Flex XP2 men's electric
shaver was successfully introduced in Japan. These gains helped to offset a weak
economic environment in Europe that continues to pressure the electric shaving
category. Strong sales growth and manufacturing efficiencies, partially offset
by the impact of exchange on European manufacturing costs and an increase in
advertising, resulted in an increase in profit of 28% versus the prior year.
Personal Care: Sales for the quarter increased by 8%, or 3% in constant
currency. Growth was driven by strong sales of PowerCaps premium clear gel
antiperspirants in North America and by strong European sales of Satin Care
female shave gel. Profit for the quarter increased significantly, chiefly due to
the benefit of cost-savings initiatives.
Six Months 2003 versus 2002
- ---------------------------
Total Company: Sales for the six months ended June 30, 2003, were $4.23 billion,
an increase of 13% versus the same period last year. Excluding the impact of
exchange, sales increased by 7%, attributable mainly to volume/mix. Overall,
pricing had no material impact on the period, as price increases in Blades and
Razors were more than offset by lower prices in Duracell and Oral Care. Profit
increased by 14% compared with the prior year, due to favorable product mix in
Blades and Razors, cost-savings initiatives and manufacturing efficiencies,
which more than offset higher European-based costs due to exchange, higher
advertising investment, incremental Functional Excellence expenses across all
business segments, and incremental pension expense.
Blades and Razors: Sales increased 15%, and profit increased 16%, compared with
the first six months of last year. Excluding the impact of exchange, sales
increased 10%. Sales growth was driven by the strength of premium shaving
systems, including the launch of Mach3Turbo in Europe. Profit grew at a higher
pace than sales, resulting in a margin increase of 40 basis points to 37.4%, as
favorable product mix to our premium systems more than offset a double-digit
increase in advertising.
Duracell: Sales of Duracell for the six months increased 7% versus those of a
year ago. Excluding exchange, sales increased 3%, primarily due to North America
consumer pantry-loading in the first quarter of 2003 and volume gains in Europe.
This was partially offset by lower pricing from the North America price-deal
realignment initiative and unmatched 2002 sales related to the divestiture of
the carbon zinc businesses in South Africa and India. Profit year-to-date more
than doubled due to higher sales, solid cost-saving programs and the absence of
first-quarter 2002 costs associated with withdrawing selected hearing aid
batteries. These gains were partially offset by significantly higher advertising
expenses.
Oral Care: Oral Care sales were 13% above those of 2002, or 7% above, excluding
the impact of exchange. Sales growth was driven by the success of new product
introductions in both the manual and power categories. Profit and margins were
lower than those of the prior year, as higher sales from new products and
improved factory performance were more than offset by higher European costs, due
to exchange, a significant increase in advertising investment and higher
warranty-related accruals in the first quarter of 2003.
PAGE 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Braun: Sales of Braun increased 19% over those of the prior year, including
currency gains amounting to 11 percentage points. Growth was driven by
significant gains in both male and female electric shavers, as well as strong
sales of Thermoscan, fueled by concerns over the SARS epidemic. Profit from
operations declined 13%, due to incremental warranty accruals incurred in the
first quarter of 2003, higher advertising support, and the impact of exchange on
European-based manufacturing costs, which more than offset benefits from
improved product mix, manufacturing efficiencies and strong sales growth.
Personal Care: Personal Care sales increased 6% over those of 2002, or 2% on a
constant currency basis. New product success with the PowerCaps
antiperspirant/deodorant line was partially offset by currency devaluation in
Latin America. Profit from operations increased 47%, due to higher sales and
cost-savings initiatives, which were partially offset by increased marketing
investment for new product launches.
Costs and Expenses
- ------------------
Second Quarter 2003 versus 2002
- -------------------------------
Gross profit for the three months ended June 30, 2003, was $1.38 billion, an
increase of 13% versus 2002. Gross profit as a percentage of sales of 61.4%
compared with 60.6% in 2002. This improvement stemmed from favorable product mix
in the Blades and Razors business, cost-savings initiatives and manufacturing
efficiencies, particularly at Duracell, partially offset by higher
year-over-year exchange-driven European-based manufacturing costs and
incremental Functional Excellence costs within Cost of Goods Sold.
Selling, general and administrative expenses increased by $72 million, or 9%,
versus the prior year. Advertising and sales promotion combined increased 18%
over the prior year, with advertising growing to 8.2% of sales from 7.9% in the
prior year, as support was increased for new and existing brands with
advertising across all businesses. Sales promotion increased slightly as a
percentage of sales, chiefly reflecting support for new product activity in
Blades and Razors, Oral Care and Personal Care. Other selling, general and
administrative expenses increased by 5%, compared with the prior year, but fell
160 basis points as a percentage of sales, from 28.1% in the second quarter of
2002 to 26.5% this year. Higher European-based costs due to exchange, higher
Functional Excellence charges and incremental pension expense led to the
increase.
Profit from operations was $505 million, an increase of 12% from $449 million in
2002. Profit from operations in 2002 included a $30 million pretax gain on the
sale of the Vaniqa business. Excluding this gain, profit from operations
increased by 21%.
Net interest expense decreased, due to significantly lower rates year-over-year.
Exchange was a net loss in the quarter, versus a net gain in the prior year.
The effective tax rate was 30%, versus 31% in the year before. The decrease is
primarily due to favorable changes in the mix of earnings by country taxed at
rates lower than the U.S. statutory rate.
Net income of $338 million was 15% above the $293 million in the prior year.
Diluted net income per common share of $.33 was 18% above the $.28 reported for
2002. Net income for 2002 included a one-time $21 million aftertax gain on the
sale of the Vaniqa business, which had a $.02 favorable impact on diluted net
income per common share last year. Excluding the impact of Vaniqa, diluted net
income per common share increased 27%. The growth in diluted net income per
common share was driven by strong operating results, a lower tax rate, and the
effect of stock repurchases.
PAGE 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Six Months Ended June 30, 2003 versus 2002
- ------------------------------------------
Gross profit for the six months ended June 30, 2003, was $2.58 billion, an
increase of 14% versus 2002. Gross profit as a percentage of sales of 61.0%
compared with 60.3% in 2002. This was due to favorable product mix in Blades and
Razors, cost-savings initiatives and manufacturing efficiencies that more than
offset higher European-based costs.
Selling, general and administrative expenses increased $175 million, or 12%.
Advertising and sales promotion expenses combined increased by 17%, with
advertising up 19%, to 8.3% of sales from 7.9% in the prior year, and sales
promotion up 13% versus last year. Other selling, general and administrative
expenses were above those of the prior year, reflecting incremental Functional
Excellence expense, incremental pension expense, and higher European-based costs
due to the strengthening of the Euro.
Profit from operations was $885 million, up 14% versus $777 million a year
earlier. Profit from operations in 2002 included a $30 million pretax gain on
the sale of the Vaniqa business. Excluding the impact of the Vaniqa gain, profit
from operations increased by 18%.
Net interest expense decreased due to
significantly lower rates. Exchange was a net loss, versus a net gain in the
prior year.
The effective tax rate was 30%, versus 31% in the prior year. The decrease is
primarily due to favorable changes in the mix of earnings by country taxed at
rates lower than the U.S. statutory rate.
Net income was $601 million, up 16% versus $516 million a year earlier. Diluted
net income per common share of $.58 was 18% above $.49 in 2002. Net income in
2002 included a one-time $21 million aftertax gain on the sale of the Vaniqa
business that had a $.02 favorable impact on diluted net income per common
share. Excluding the impact of the Vaniqa gain, diluted net income per common
share increased by 23%. The growth in diluted net income per common share was
driven by strong operating results, a lower tax rate, and the effect of stock
repurchases.
Financial Condition
- -------------------
Cash provided by operations is the Company's primary source of funds to finance
operating needs, capital expenditures, stock repurchases and dividend payments.
Free cash flow for the six months ended June 30, 2003, was $895 million,
compared with $546 million in the same period last year. Free cash flow is
defined as cash flow remaining from operations after capital investments. The
Company believes that free cash flow is an important measure of its liquidity,
as well as its ability to fund future growth and to provide a return to
shareholders. A reconciliation of net cash provided by operating activities to
free cash flow follows.
Six months ended
June 30
------------------
(Millions) 2003 2002
- ---------- ---- ----
Net cash provided by operating activities $1,004 $700
Less: additions to property, plant and equipment (132) (175)
Plus: disposals of property, plant and equipment 23 21
---- ----
Free cash flow $895 $546
==== ====
PAGE 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net cash provided by operating activities was $1.0 billion during the six months
ended June 30, 2003, compared with $700 million during the same period in 2002.
The increase in net cash provided by operating activities in 2003 is due
primarily to $193 million in lower pension funding and higher profits.
Reductions in capital spending during the first half of 2003 were due primarily
to timing. Capital spending continues to be focused on new products and
cost-reduction projects.
The Company spent $786 million to repurchase 26 million shares and paid $335
million in dividends during the six months ended June 30, 2003. Net debt (total
debt less cash and cash equivalents) increased by $218 million to $3.1 billion
at June 30, 2003, from $2.9 billion at December 31, 2002. The Company believes
that net debt is an important consideration in evaluating its liquidity.
The Company's investment grade long-term credit ratings of AA- from Standard &
Poor's and Aa3 from Moody's and commercial paper ratings of A1+ from Standard &
Poor's and P1 from Moody's provide a high degree of flexibility in obtaining
funds. The Company has the ability to issue up to $1.47 billion in commercial
paper in the U.S. and Euro markets. The Company's commercial paper program is
supported by its revolving credit facility and other sources of liquidity,
primarily the Company's cash flow from operations. At June 30, 2003, there was
$258 million outstanding under the Company's commercial paper program, a
decrease of $291 million from $549 million outstanding at December 31, 2002. The
reduction in commercial paper reflects the impact of debt issuances, partially
offset by maturing debt repayments. The Company has a 364-day revolving bank
credit facility in the amount of $1.1 billion that expires on October 14, 2003.
Liquidity is enhanced through a provision in this agreement that gives the
Company the option to enter into a one-year term loan in the amount of up to
$1.1 billion. The Company believes it has sufficient alternative sources of
funding available to replace its commercial paper program, if necessary.
During 2002, two shelf registration statements were filed allowing the Company
to offer to the public up to $2.8 billion in debt securities in the U.S. It is
currently anticipated that the proceeds from the sale of any debt securities
issued under these shelf registration statements will be used to repay
commercial paper borrowings and replace other maturing debt, although the
proceeds may also be used for other corporate purposes, including the repurchase
of the Company's common stock.
During the six months ended June 30, 2003, $686 million was issued in public
offerings under these shelf registration statements, consisting of $300 million
2.875% notes, due March 2008, $300 million 2.50% notes, due June 2008, $83
million in floating rate notes, due April 2043, and $3 million issued under the
Gillette medium-term note program. All proceeds from these issuances were used
to reduce commercial paper borrowings. The $83 million floating rate notes are
redeemable at the option of the holder at various prices on a yearly basis from
April 2004 to April 2014 and each third anniversary thereafter to maturity. The
floating rate notes are also redeemable at the Company's option at various
prices from April 2033 to maturity. At June 30, 2003, a total of $1.29 billion
remained available under these shelf registrations.
With its strong brands, leading market positions, strong financial condition and
substantial cash-generating capability, management expects to continue to have
capital available for growth through both internally generated funds and
significant credit resources. The Company has substantial unused lines of credit
and access to worldwide financial markets, enabling the Company to raise funds
at favorable rates.
The Company has no material contingent commitments. The Company has no material
"off balance sheet" arrangements and no non-consolidated Variable Interest
Entities.
PAGE 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Functional Excellence
- ---------------------
In the second quarter of 2002, the Company began actions associated with its
Functional Excellence initiative, which is described in Notes to Consolidated
Financial Statements. The total cost of this project is estimated at $350-$400
million through 2005. Annualized savings from the Functional Excellence
initiative are currently expected to be approximately $300-$350 million by 2006.
During 2002, the Company recorded expenses related to this initiative in the
amount of $121 million ($79 million after taxes, or $.07 in diluted net income
per common share), with $31 million ($20 million after taxes, or $.02 in diluted
net income per common share) recorded in the second quarter. In the first and
second quarters of 2003, charges of $44 million ($42 million after taxes, or
$.04 in diluted net income per common share) and $42 million ($30 million after
taxes, or $.03 in diluted net income per common share) were recorded,
respectively. Functional Excellence charges in 2003 included $12 million and $13
million which were recorded to cost of goods sold, and $30 million and $73
million which were recorded to selling, general and administrative expenses in
the three and six month periods ended June 30, 2003, respectively.
It is currently expected that total 2003 Functional Excellence expenses will be
in the range of $130-$150 million. Additional costs will be recorded in 2004 and
2005 as programs are developed and approved. These forward-looking cost and
savings numbers contain management estimates that are subject to change over
time.
PAGE 20
DISCLOSURE CONTROLS AND PROCEDURES
Item 4. Controls and Procedures
The Company's management, under the supervision and with the participation of
the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO),
have evaluated the Company's disclosure controls and procedures as of June 30,
2003, and they have concluded that these controls and procedures are effective.
There have been no significant changes in internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
PAGE 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are subject, from time to time, to legal proceedings and claims arising out
of our business, which cover a wide range of matters, including antitrust and
trade regulation, advertising, product liability, contracts, environmental
issues, patent and trademark matters and taxes. Management, after review and
consultation with counsel, considers that any liability from all of these legal
proceedings and claims would not materially affect our consolidated financial
position, results of operations or liquidity.
Item 4. Submission of Matters to a Vote of Security Holders
At its Annual Meeting on May 15, 2003, the shareholders of The Gillette Company
took the following actions:
1. Elected the following four directors for terms to expire at the 2006 Annual
Meeting of Shareholders, with votes as indicated opposite each director's name:
For Withheld
----------- ----------
Roger K. Deromedi 855,992,794 37,327,741
Dennis F. Hightower 848,538,082 44,782,453
Herbert H. Jacobi 849,038,534 44,282,001
Nancy J. Karch 818,144,466 75,176,069
The directors whose term of office as a director continued after the meeting are
Edward F. DeGraan, Wilbur H. Gantz, Michael B. Gifford, Ray J. Groves, James M.
Kilts, Fred H. Langhammer, Jorge Paulo Lemann and Marjorie M. Yang.
2. Approved a shareholder proposal recommending the declassification of the
Board of Directors. The vote was 476,154,703 for the proposal and 272,996,469
against, with 12,130,525 abstentions and 132,038,838 broker nonvotes.
3. Rejected a shareholder proposal that the Company establish a policy of
expensing stock options. The vote was 309,948,512 for the proposal and
430,554,039 against, with 20,777,206 abstentions and 132,040,778 broker
nonvotes.
Item 5. Other Information
Cautionary Statement
- --------------------
Certain statements that we may make from time to time, including statements
contained in this report, constitute "forward-looking statements" under the
federal securities laws. Forward-looking statements may be identified by words
such as "plans," "expects," "believes," "anticipates," "estimates," "projects,"
"will" and other words of similar meaning used in conjunction with, among other
things, discussions of future operations, acquisitions and divestitures,
financial performance, our strategy for growth, product development and new
product launches, market position and expenditures.
Forward-looking statements are based on current expectations of future events,
but actual results could vary materially from our expectations and projections.
Investors are cautioned not to place undue reliance on any forward-looking
statements. We assume no obligation to update any forward-looking statements. We
caution that historical results should not be relied upon as indications of
future performance.
PAGE 22
PART II. OTHER INFORMATION
Factors that could cause actual results to differ materially from those
expressed in any forward-looking statement made by us, or on our behalf, include
the following, some of which are described in greater detail below:
- - the pattern of our sales, including variations in sales volume within periods;
- - consumer demands and preferences, including the acceptance by our customers
and consumers of new products and line extensions;
- - the mix of products sold;
- - our ability to control our internal costs and the cost of raw materials;
- - competitive factors, including the prices, promotional incentives and trade
terms of our products and our response, as well as those of our customers and
competitors, to changes in these terms;
- - business combinations and divestitures of our competitors and customers;
- - our technological advances and/or those of our competitors;
- - new patents granted to us or our competitors;
- - changes in exchange rates in one or more of our geographic markets;
- - changes in laws and regulations, including trade regulations and tax laws,
governmental actions affecting the manufacturing and sale of our products,
unstable governments and legal systems, and nationalization of industries;
- - changes in accounting policies;
- - acquisition, divestiture or other collaborative activities; or
- - the impact of general political and economic conditions or hostilities in the
United States or in other parts of the world.
PAGE 23
PART II. OTHER INFORMATION
Competitive Environment
- -----------------------
We experience intense competition for sales of our products in most markets. Our
products compete with widely advertised, well-known, branded products, as well
as private label products, which typically are sold at lower prices. In most of
our markets, we have major competitors, some of which are larger and more
diversified than we are. Aggressive competition within our markets to preserve,
gain or regain market share can affect our results in any given period.
Changes in Technology and New Product Introductions
- ---------------------------------------------------
In most product categories in which we compete, there are continuous
technological changes and frequent introductions of new products and line
extensions. Our ability to successfully introduce new products and/or extend
lines of established products will depend on, among other things, our ability to
identify changing consumer tastes and needs, develop new technologies,
differentiate our products and gain market acceptance of new products. We cannot
be certain that we will successfully achieve these goals.
With respect specifically to primary alkaline batteries, category growth could
be adversely affected by the following additional factors:
- - technological or design changes in portable electronic and other devices that
use batteries as a power source;
- - continued improvement in the service life of primary batteries;
- - improvements in rechargeable battery technology; or
- - the development of new battery technologies.
Intellectual Property
- ---------------------
We rely upon patent, copyright, trademark and trade secret laws in the United
States and in other countries to establish and maintain our proprietary rights
in technology, products and our brands. Our intellectual property rights,
however, could be challenged, invalidated or circumvented. We do not believe
that our products infringe the intellectual property rights of others, but such
claims, if they are established, can result in material liabilities or loss of
business.
Cost-Savings Strategy
- ---------------------
We have implemented and approved a number of programs designed to reduce costs.
Such programs will require, among other things, the consolidation and
integration of facilities, functions, systems and procedures, all of which
present significant management challenges. There can be no assurance that such
actions will be accomplished as rapidly as anticipated or that the full extent
of expected cost reductions will be achieved.
PAGE 24
PART II. OTHER INFORMATION
Sales and Operations Outside of the United States
- -------------------------------------------------
Sales outside of the United States represent a substantial portion of our
business. In addition, we have a number of manufacturing facilities and
suppliers located outside of the United States. Accordingly, the following
factors could adversely affect operating results in any reporting period:
- - changes in political or economic conditions;
- - trade protection measures;
- - import or export licensing requirements;
- - changes in the mix of earnings taxed at varying rates;
- - unexpected changes in regulatory requirements or tax laws; or
- - longer payment cycles in certain countries.
We are also exposed to foreign currency exchange rate risks with respect to our
sales, profits, and assets and liabilities denominated in currencies other than
the U.S. dollar. Although we use instruments to hedge certain foreign currency
risks (through foreign currency forward, swap and option contracts and non-U.S.
dollar denominated financings) and we are partially hedged through our foreign
manufacturing operations, there can be no assurance that we will be fully
protected against foreign currency fluctuations.
Retail Environment
- ------------------
With the growing trend towards retail trade consolidation, especially in
developed markets such as the United States and Europe, we are increasingly
dependent upon key retailers whose bargaining strength is growing. Accordingly,
we face greater pressure from retail trade customers to provide more favorable
trade terms.
We can be negatively affected by changes in the policies of our retail trade
customers, such as inventory destocking, limitations on access to shelf space
and other conditions. Many of our customers, particularly our high-volume retail
trade customers, have engaged in accelerated efforts to reduce inventory levels
and shrinkage and to change inventory delivery systems. While we expect the
level of trade inventory of our products to decline over time, the speed and
magnitude of such reductions, and/or our inability to develop satisfactory
inventory delivery systems, could adversely affect operating results in any
reporting period.
Effect of Military Hostilities and Political Activity
- ------------------------------------------------------
Recent military hostilities and the threat of future hostilities, as well as
attendant political activity, have created an atmosphere of economic uncertainty
throughout the world. A disruption in our supply chain, an increase in import or
export costs and/or other macroeconomic events resulting from military or
political events could adversely affect operating results in any reporting
period.
PAGE 25
PART II. OTHER INFORMATION
Item 6(a) Exhibits
The following exhibits are included herein:
12 Statement Regarding Computation of Ratio of Earnings to Fixed
Charges.
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).
32 Certification Pursuant to Rule 13a-14(b) and Section 906 of the
Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63
of Title 18, United States Code).
Item 6(b) Reports on Form 8-K
The following reports on Form 8-K were filed or furnished to the
Commission:
(a) The Company furnished, on May 6, 2003, a current report on Form 8-K
containing one exhibit: a Press Release announcing the Company's financial
results for the first quarter of 2003.
(b) The Company filed, on May 27, 2003, a current report on Form 8-K containing
two exhibits: the Opinion of Ropes & Gray and the Consent of Ropes & Gray
related to the public offering of the Company's 2.50% Senior Note due 2008.
PAGE 26
SIGNATURE
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE GILLETTE COMPANY
(Registrant)
/s/ Claudio E. Ruben
- --------------------------------
Claudio E. Ruben
Vice President, Controller
and Principal Accounting Officer
August 5, 2003
EXHIBIT INDEX
Exhibit Number and Description
Exhibit 12 Statement Regarding Computation of Ratio of Earnings to
Fixed Charges.
Exhibit 31.1 Certification of Chief Executive Officer Pursuant to Rule
13a-14(a).
Exhibit 31.2 Certification of Chief Financial Officer Pursuant to Rule
13a-14(a).
Exhibit 32 Certification Pursuant to Rule 13a-14(b) and Section 906
of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350,
Chapter 63 of Title 18, United States Code).