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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, 2004 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 26, 2004 . . . . . . . . . . . . . . . . . 1,001,845,362


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
------------------ ------------------
2004 2003 2004 2003
---- ---- ---- ----

Net Sales .......................................... $ 2,443 $ 2,254 $ 4,678 $ 4,225
Cost of Sales ...................................... 968 915 1,846 1,733
------- ------- ------- -------
Gross Profit ..................................... 1,475 1,339 2,832 2,492

Selling, General and Administrative Expenses ....... 865 834 1,666 1,607
------- ------- ------- -------
Profit from Operations ........................... 610 505 1,166 885

Nonoperating Charges (Income):
Interest income .................................. (3) (3) (6) (6)
Interest expense ................................. 11 16 23 30
Exchange ......................................... (2) 3 18 5
Other charges - net .............................. 3 6 - (3)
------- ------- ------- -------
9 22 35 26
------- ------- ------- -------
Income before Income Taxes ......................... 601 483 1,131 859

Income Taxes ....................................... 175 145 329 258
------- ------- ------- -------
Net Income ....................................... $ 426 $ 338 $ 802 $ 601
======= ======= ======= =======

Net Income per Common Share:
Basic ............................................ $ .43 $ .33 $ .80 $ .58
======= ======= ======= =======
Assuming full dilution ........................... $ .42 $ .33 $ .79 $ .58
======= ======= ======= =======

Dividends per Common Share:
Declared ......................................... $ .1625 $ .3250 $ .3250 $ .3250
Paid ............................................. $ .1625 $ .1625 $ .3250 $ .3250

Weighted average number of common shares outstanding
Basic ............................................ 1,003 1,021 1,004 1,029
Assuming full dilution ........................... 1,012 1,023 1,012 1,031


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,
2004 2003 2003
------------ ------------ ------------
(Unaudited) (Unaudited)

Current Assets:
Cash and cash equivalents .............................. $ 644 $ 681 $ 614
Trade receivables, less allowances, June 2004, $51;
December 2003, $53; June 2003, $55 .................. 884 920 1,135
Other receivables ...................................... 332 351 395
Inventories
Raw materials and supplies .......................... 122 114 116
Work in process ..................................... 250 196 221
Finished goods ...................................... 1,035 784 822
------- ------- -------
Total Inventories ................................. 1,407 1,094 1,159
------- ------- -------

Deferred income taxes .................................. 302 322 314
Other current assets ................................... 190 282 292
------- ------- -------
Total Current Assets .............................. 3,759 3,650 3,909
------- ------- -------

Property, Plant and Equipment, at cost ................... 7,162 7,099 6,696
Less accumulated depreciation ............................ (3,638) (3,455) (3,185)
------- ------- -------
Net Property, Plant and Equipment ................. 3,524 3,644 3,511
------- ------- -------

Goodwill ................................................. 1,024 1,023 975
Intangible Assets, less accumulated amortization ......... 570 494 390
Other Assets ............................................. 1,082 1,144 1,096
------- ------- -------

$ 9,959 $ 9,955 $ 9,881
======= ======= =======

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,
2004 2003 2003
------------ ------------ ------------
(Unaudited) (Unaudited)

Current Liabilities:
Loans payable .................................... $ 345 $ 117 $ 364
Current portion of long-term debt ................ 717 742 584
Accounts payable ................................. 598 574 549
Accrued liabilities .............................. 1,705 1,769 1,646
Dividends payable ................................ 163 163 166
Income taxes ..................................... 271 293 232
-------- -------- --------
Total Current Liabilities ..................... 3,799 3,658 3,541
-------- -------- --------

Long-Term Debt ..................................... 2,050 2,453 2,740
Deferred Income Taxes .............................. 652 626 625
Other Long-Term Liabilities ........................ 932 929 887
Minority Interest .................................. 69 65 42

Stockholders' Equity:
Common stock, par value $1.00 per share:
Authorized 2,320 shares
Issued: June 2004, 1,378 shares;
Dec. 2003, 1,374 shares;
June 2003, 1,372 shares ................ 1,378 1,374 1,372
Additional paid-in capital ....................... 1,375 1,273 1,233
Earnings reinvested in the business .............. 7,809 7,333 6,877
Accumulated other comprehensive loss ............. (1,082) (1,088) (1,257)
Treasury stock, at cost: June 2004, 376 shares;
Dec. 2003, 367 shares; and June 2003, 352 shares (7,021) (6,665) (6,179)
Deferred stock-based compensation ................ (2) (3) -
-------- -------- --------
Total Stockholders' Equity ............... 2,457 2,224 2,046
-------- -------- --------
$ 9,959 $ 9,955 $ 9,881
======== ======== ========

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
------------------
2004 2003
---- ----

Operating Activities
Net income ....................................... $ 802 $ 601
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................. 299 278
Deferred income taxes .......................... 32 39
Other .......................................... 14 11
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
Trade and other accounts receivable .......... 38 59
Inventories .................................. (330) (188)
Accounts payable and accrued liabilities ..... (21) 227
Other working capital items .................. (3) (68)
Other noncurrent assets and liabilities ...... 90 45
----- -----
Net cash provided by operating activities 921 1,004
----- -----
Investing Activities

Additions to property, plant and equipment ....... (228) (132)
Disposals of property, plant and equipment ....... 30 23
Acquisitions, net of cash acquired ............... (115) -
Other ............................................ 1 -
----- -----
Net cash used in investing activities ...... (312) (109)
----- -----
Financing Activities

Purchase of treasury stock ....................... (355) (786)
Proceeds from exercise of stock option and
purchase plans .............................. 100 37
Proceeds from long-term debt ..................... - 684
Repayment of long-term debt ...................... (389) (382)
Increase (Decrease) in loans payable ............. 228 (311)
Dividends paid ................................... (327) (335)
Net settlements, debt-related derivative contracts 100 7
----- -----
Net cash used in financing activities ...... (643) (1,086)
----- -----
Effect of Exchange Rate Changes on Cash .............. (3) 4
----- -----
Decrease in Cash and Cash Equivalents ................ (37) (187)
Cash and Cash Equivalents at Beginning of Period ..... 681 801
----- -----
Cash and Cash Equivalents at End of Period ........... $ 644 $ 614
===== =====
Supplemental disclosure of cash paid for:

Interest ......................................... $ 21 $ 29
Income taxes ..................................... $ 237 $ 212


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
------------------ ----------------
2004 2003 2004 2003
---- ---- ---- ----

Net Income, as reported $ 426 $ 338 $ 802 $ 601
Other Comprehensive Income,
net of tax:
Foreign Currency Translation (4) 171 7 262
Cash Flow Hedges (1) 2 (1) 4
----- ----- ----- -----
Comprehensive Income $ 421 $ 511 $ 808 $ 867
===== ===== ===== =====


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, 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)
====== ====== ====== ======

Balance December 31, 2003 $ (898) $ (193) $ 3 $(1,088)
Change in period 2 - - 2
Income tax benefit (expense) 9 - - 9
------ ------ ------ ------
Balance March 31, 2004 $ (887) (193) 3 (1,077)
Change in period (7) - (2) (9)
Income tax benefit (expense) 3 - 1 4
------ ------ ------ ------
Balance June 30, 2004 $ (891) $ (193) $ 2 $(1,082)
====== ====== ====== ======

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 2003 Annual Report to Shareholders, which
contains, at pages 37 through 66, 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, 2003.

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.

The Company's annual financial statements are prepared on a calendar year basis.
For interim reporting, the Company divides the calendar year into thirteen-week
quarterly reporting periods. The first and fourth quarter may be more or less
than 13 weeks, by zero to six days, which can affect comparability between
periods. The first quarter of 2003 consisted of 12 weeks and 4 days, while the
first quarter of 2004 consisted of 12 weeks and 3 days. The fourth quarter of
2003 consisted of 13 weeks and 4 days, while the fourth quarter of 2004 will
consist of 13 weeks and 6 days.

Under generally accepted accounting principles, shipping and handling costs may
be reported as a component of either cost of sales or selling, general and
administrative expenses. The Company formerly reported all such costs related to
outbound freight in the Consolidated Statement of Income as a component of
selling, general and administrative expenses. Beginning in 2004, the Company has
elected to report the costs related to outbound freight in cost of sales. This
change resulted in the following reclassifications to the second quarter, 2003
and six months ended June 30, 2003, Consolidated Statement of Income: increased
cost of sales and reduced gross profit and selling, general and administrative
expenses by $45 million and $85 million, respectively; and reduced gross profit
as a percentage of net sales from 61.4% to 59.4% and from 61.0% to 59.0%,
respectively. There was no impact on profit from operations, net income or
earnings per share as a result of this reclassification.

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. No compensation cost is recorded on the date of grant,
as all options granted under the plans had an exercise price equal to the market
value of the underlying common stock. The Company recognizes stock-based
compensation expense related to stock appreciation rights. 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 options.


Three Months Six Months
Ended June 30, Ended June 30,
(Millions, except per share amounts) 2004 2003 2004 2003
---- ---- ---- ----

Net income, as reported $ 426 $ 338 $ 802 $ 601
Add: Compensation expense included in
reported net income, net of
related tax effects 1 - 1 -
Less: Compensation expense for option
awards determined by the fair-
value-based method, net of
related tax effects (24) (25) (48) (50)
------ ------ ------ ------
Pro forma net income $ 403 $ 313 $ 755 $ 551
====== ====== ====== ======

Net income per common share
Basic
As reported $ .43 $ .33 $ .80 $ .58
Pro forma .40 .31 .75 .54
Assuming full dilution
As reported $ .42 $ .33 $ .79 $ .58
Pro forma .40 .31 .75 .54



PAGE 7
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)




Accounting Comments (Continued)
- -------------------
In May 2004, the Company's shareholders approved the 2004 Long-Term Incentive
Plan (the "Plan"), which authorizes the Board of Directors, or a delegate
thereof, to grant stock options, stock appreciation rights, restricted stock
units, cash awards and other stock-based awards. Key employees and non-employee
directors of the Company and its subsidiaries are eligible to participate in the
Plan. The Plan became effective on May 20, 2004 and expires on May 19, 2014. The
number of shares authorized for grant under the Plan is 37,380,295. At June 30,
2004, 25,949,635 shares were available for future grants.

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.

Certain amounts in the prior year financial statements have been reclassified to
conform to the 2004 presentation.


Accounting Pronouncements
- -------------------------
In May 2004, the FASB issued FASB Staff Position (FSP) No. FAS 106-2,
"Accounting and Disclosure Requirements Related to the Medicare Prescription
Drug, Improvement and Modernization Act ("the Act") of 2003" which supersedes
FSP FAS 106-1 of the same title. The Staff Position clarifies the accounting for
the benefits attributable to new government subsidies for companies that provide
prescription drug benefits to retirees. The new accounting requirements are not
effective until the third quarter 2004. In accordance with FSP FAS 106-1, the
Company elected to defer accounting for the economic effects of the new Medicare
Act. Accordingly, any measures of the accumulated postretirement benefit
obligation or net periodic postretirement benefit cost in the financial
statements or accompanying notes do not reflect the effect of the subsidy
because the Company is unable to conclude whether the benefits provided by the
plan are actuarially equivalent to Medicare Part D under the Act.

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) 2004 2003 2003
------------ ------------ ------------

Blades & Razors $ 140 $ 140 $ 140
Duracell 633 632 584
Oral Care 191 191 172
Braun 60 60 79
Personal Care - - -
----- ----- -----
Total $1,024 $1,023 $ 975
===== ===== =====

The difference between the December 31, 2003 balance versus the June 30, 2003
balance is due to the acquisition of a majority interest in the Fujian Nanping
Nanfu Battery Co., Ltd. in China in August 2003 and the impact of foreign
currency translation. The values for the Nanfu intangibles, as well as the
related goodwill, may be adjusted in future periods as the purchase price
accounting for the acquisition is not yet final.

PAGE 9
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


The detail of intangible assets follows.

Weighted
Average June 30, 2004 December 31,2003 June 30, 2003
Amortization ---------------------- ---------------------- ----------------------
Period Carrying Accumulated Carrying Accumulated Carrying Accumulated
(Millions) (Years) Amount Amortization Amount Amortization Amount Amortization
------------ -------- ------------ -------- ------------ -------- ------------

Amortized Intangible Assets
Patents 7 $ 83 $ 58 $ 101 $ 69 $ 101 $ 61
Trademarks 9 16 10 16 9 14 6
Endorsements - 61 61 61 61 61 61
Other 19 23 5 23 3 11 3
---- ---- ----- ----- ----- -----
Total $ 183 $ 134 $ 201 $ 142 $ 187 $ 131
---- ---- ----- ----- ----- -----
Unamortized Intangible Assets
Trademarks $ 509 $ 423 $ 319
Pension 12 12 15
---- ----- -----
Total $ 521 $ 435 $ 334
---- ----- -----
Intangible Assets, net $ 570 $ 494 $ 390
==== ===== =====

Aggregate Amortization Expense:
For the three months ended
June 30, 2004 $ 5
June 30, 2003 $ 5
For the six months ended:
June 30, 2004 $ 11
June 30, 2003 $ 11

Estimated Amortization Expense:
For the Years ending
December 31, 2004 $ 21
2005 $ 8
2006 $ 5
2007 $ 4
2008 $ 4
2009 $ 3

In the second quarter of 2004, the Company made two acquisitions within the Oral
Care business segment. In April 2004, the Company completed the acquisition of
assets associated with the Rembrandt brand of at-home and professional
teeth-whitening products from the Den-Mat Corporation. The values of both
indefinite-lived and definite-lived intangible assets may be adjusted in future
periods as the purchase price allocation for the acquisition is not final. The
preliminary purchase price allocation resulted in the capitalization of $87
million related to the Rembrandt trademark as an indefinite-lived intangible
asset. In June 2004, the Company acquired shares representing all equity
interests in Zooth, Inc., a leader in licensed manual and power childrens'
toothbrushes. The purchase price accounting for this transaction is not yet
final. Both acquisitions had, in addition to the base purchase price, a
contingent cash consideration component based on certain revenue-based financial
metrics. In total, contingent cash consideration payments are capped at a
maximum of $72 million and are expected to be substantially paid over a period
of four years.

PAGE 10
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Share Repurchase Program
- ------------------------
In the three and six months ended June 30, 2004, the Company repurchased four
million and nine million shares for $167 million and $355 million, respectively.
As of June 30, 2004, there are 42 million shares remaining on the share
repurchase program which was authorized on September 16, 2003. These shares may
be purchased in the open market or in privately-negotiated transactions,
depending on market conditions and other factors.

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) 2004 2003 2004 2003
------ ------ ------ ------

Blades & Razors $1,099 $1,003 $2,136 $1,896
Duracell 456 432 870 816
Oral Care 358 316 673 611
Braun 294 284 553 499
Personal Care 236 219 446 403
------ ------ ------ ------
Total $2,443 $2,254 $4,678 $4,225
====== ====== ====== ======



Profit/(Loss) from Operations
----------------------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
--------------------------- -----------------------
(Millions) 2004 2003 2004 2003
------ ------ ------ ------

Blades & Razors $ 420 $ 377 $ 837 $ 708
Duracell 89 54 163 93
Oral Care 68 53 123 102
Braun 24 28 45 21
Personal Care 24 24 37 24
------ ------ ------ ------
Subtotal Reportable Segments 625 536 1,205 948
All Other (15) (31) (39) (63)
------ ------ ------ ------
Total $ 610 $ 505 $1,166 $ 885
====== ====== ====== ======


PAGE 11
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Identifiable Assets
-------------------------------
June 30, Dec. 31, June 30,
(Millions) 2004 2003 2003
--------- ------- ---------


Blades & Razors $ 3,175 $ 3,099 $ 3,343

Duracell 2,656 2,754 2,559

Oral Care 1,437 1,269 1,230

Braun 1,299 1,224 1,130

Personal Care 480 470 539
------- ------- -------
Subtotal Reportable Segments 9,047 8,816 8,801

All Other 912 1,139 1,080

------- ------- -------
Total $ 9,959 $ 9,955 $ 9,881
======= ======= =======


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
------------------ ------------------
2004 2003 2004 2003
---- ---- ---- ----

Net Income ............................. $ 426 $ 338 $ 802 $ 601
====== ====== ====== ======
Common shares, basic .................. 1,003 1,021 1,004 1,029
Effect of dilutive securities:
Stock options ...................... 9 2 8 2
------ ------ ------ ------
Common shares, assuming full dilution 1,012 1,023 1,012 1,031
====== ====== ====== ======
Net Income per Common Share:

Basic ................................ $ 0.43 $ 0.33 $ 0.80 $ 0.58
====== ====== ====== ======
Assuming full dilution ............... $ 0.42 $ 0.33 $ 0.79 $ 0.58
====== ====== ====== ======


For the three-month periods ended June 30, 2004 and 2003, respectively, 29.9
million and 66.0 million shares of common stock issuable under stock options,
respectively, were not included in the calculation of diluted earnings per share
because the option exercise price was above the average market price for the
quarter. For the six-month periods ended June 30, 2004 and 2003, 28.5 million
and 60.8 million shares of common stock issuable under stock options,
respectively, were not included in the calculation of diluted earnings per share
because the option exercise price was above the average market price for the
period.


Pensions and Other Retiree Benefits
- -----------------------------------
(Millions)
Other Other
Pension Benefits Retiree Benefits Pension Benefits Retiree Benefits
------------------ ------------------ ------------------ ------------------
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
------------------ ------------------ ------------------ ------------------
2004 2003 2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ---- ---- ----

Components of Net Defined Benefit Expense
Service cost-benefits earned $20 $17 $ 1 $ 1 $40 $34 $ 2 $ 2
Interest cost on benefit obligation 40 37 7 7 80 74 14 14
Estimated return on assets (46) (40) (1) (1) (91) (80) (2) (2)
Net amortization and other 21 22 1 2 42 44 2 2
--- --- --- --- --- --- --- ---
Net defined benefit expense $35 $36 $ 8 $ 9 $71 $72 $16 $16
=== === === === === === === ===


The Company contributed $26 million and $34 million to its pension plans,
respectively, for the three and six months ended June 30, 2004. The Company
expects to contribute an additional $18 million to its pension plans in 2004 for
a total contribution of $52 million. The Company's contribution to other retiree
benefit plans was $3 million for the three and six months ended June 30, 2004.
The Company does not expect to make any further contributions to other retiree
benefit plans in 2004. The Company previously disclosed total 2004 estimated
contributions of $35 million to pension and $0 to other postretirement benefit
plans.

PAGE 13
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


Functional Excellence, 2003 Manufacturing Realignment,
Restructuring, and Asset Impairments
- -------------------------------------------------------

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 $12 million and $42 million
for the three months ended June 30, 2004 and 2003, respectively. For the six
months ended June 30, 2004 and 2003, total pretax charges under the program were
$19 million and $86 million, respectively. Functional excellence charges in 2004
included $0 and $4 million which were recorded to cost of goods sold, and $7
million and $15 million which were recorded to selling, general and
administrative expense in the the three and six month periods ended June 30,
2004, respectively. Employee-related terminations are intended to be completed
within 12 months of accrual. The employee-related 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 and local
practices. Other costs include items such as consulting, lease buy-outs, project
team expenses, and asset write-downs related to Functional Excellence programs.


2003 Manufacturing Realignment Program
- --------------------------------------

During December, 2003, the Company announced a blade and razor manufacturing,
packaging and warehouse operations realignment program throughout Europe and
Russia. The program will significantly reduce costs, improve operating
efficiency, and streamline manufacturing, packaging, and warehouse operations.
The program began in December 2003 and is expected to be completed by 2007.

The Company recorded, in the three and six months ended June 30, 2004,
approximately $10 million and $16 million, respectively to cost of sales related
to project expenses and accelerated depreciation on the Isleworth, U.K. facility
which will cease to be used as a manufacturing facility after 2006. This
facility will eventually be sold but does not yet meet the requirements of "held
for sale" accounting treatment. Other project expenses consisted primarily of
severance, based on the amounts that have been earned as of June 30, 2004, at
current service levels and pay rates and expenses related to the relocation of
equipment between impacted locations. Severance payments will span through 2007,
when the Isleworth facility will be completely closed.


PAGE 14
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)



Functional Excellence and 2003
Manufacturing Realignment Program
- ---------------------------------
Charges Charges
Accrual Accrual and Uses and Uses Charges Accrual
through Second through Second and Uses Balance
March 31, Quarter Total March 31, Quarter Since June 30,
(Millions) 2004 2004 Accruals 2004 2004 Inception 2004
------- ------ -------- -------- ------- --------- -------

Functional Excellence:
Employee-related expenses $229 $ 7 $236 $(165) $ (8) $(173) $ 63
Other 36 5 41 (32) (5) (37) 4
---- ---- ---- ----- ----- ----- -----
Total Functional Excellence Program $265 $ 12 $277 $(197) $ (13) $(210) $ 67
---- ---- ---- ----- ----- ----- -----

2003 Manufacturing Realignment Program:
Employee-related expenses
Severance payments 33 2 35 - (1) (1) 34
Other benefits 6 - 6 - - - 6
Asset-related expenses:
Asset write-offs 5 - 5 (5) - (5) -
Loss on sales of assets 4 - 4 - - - 4
Contractual obligations and other 8 8 16 (5) (8) (13) 3
---- ---- ---- ----- ----- ----- -----
Total 2003 Realignment Program 56 10 66 (10) (9) (19) 47
---- ---- ---- ----- ----- ----- -----
Total $321 $ 22 $343 $(207) $ (22) $(229) $ 114
==== ==== ==== ===== ===== ===== =====



PAGE 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Management's Discussion and Analysis of Financial Condition
and Results of Operations The Gillette Company and Subsidiary Companies
- -----------------------------------------------------------------------

EXECUTIVE OVERVIEW
- ------------------
The Gillette Company achieved record second-quarter and first-half net sales,
profit from operations, net income and net income per common share, diluted, in
the second quarter of 2004 and for the six months ended June 30, 2004.

For the second quarter of 2004, net sales increased 8% as compared with 2003,
driven by strong sell-in of new products, the ongoing strength of existing
products, strong growth in emerging markets, and the impact of favorable foreign
currency, partially moderated by a lower rate of growth in key Western European
markets. Net sales growth was supported by a 39% increase in advertising. The
Company's various cost-savings programs, including Functional Excellence and
other manufacturing-related initiatives, contributed to improvements in profit
from operations and operating profit margin in the second quarter of 2004 as
compared with the prior year. Profit from operations rose 21%, and operating
profit margin increased by 4 percentage points. Profit from operations grew at a
faster pace than sales due to strong growth of new, premium product offerings,
cost savings and overhead cost reductions, offset in part by higher advertising
spending. Net interest expense and foreign exchange expenses were lower as
compared with 2003, and the Company's effective income tax rate was reduced 1
percentage point to 29%. Net income climbed 26% and net income per common share,
diluted, increased 27%, slightly outpacing the percentage increase in net income
due to share repurchase activity.

Blades and Razors net sales for the second quarter of 2004 increased versus the
comparable period in 2003, driven by new premium product launches despite
weakness in several Western European markets. Blades and Razors profit from
operations increased due to higher sales of new, premium products, higher
prices, and lower overhead costs offset partially by an increase in advertising
spending. Duracell's net sales increased as compared with the second quarter of
2003 due to the acquisition in August, 2003 of the Nanfu battery company,
category growth in emerging markets and lower trade and consumer spending. In
the U.S., Duracell's dollar share remained stable during the second quarter of
2004 partially due to stepped-up advertising levels and strong consumer
marketing programs, despite significant promotional activity by value brands and
private-label. Duracell profit from operations rose significantly reflecting
cost and expense reduction activities, offset in part by higher advertising
expenses. Oral Care net sales increased due to successful new product launches,
the acquisition of the Rembrandt brand of whitening products, and growth in the
manual toothbrush segment. In the second quarter of 2004, the Company acquired
the Rembrandt brand of at-home and professional tooth-whitening products and
also Zooth, Inc., a leader in licensed manual and power toothbrushes for
children. Oral Care profit from operations increased due to the higher sales,
and cost and expense reduction activities partially offset by higher advertising
expenses. Braun net sales increased in the quarter due to favorable foreign
exchange, strong performance in the Africa, Middle East and Eastern Europe
(AMEE) region and Southern Europe, and male shaver growth in China, partially
offset by male shaver category softness in Europe and North America.
Year-to-year comparisons were also affected by the unmatched SARS-related spike
in demand for Thermoscan products in 2003. Braun profit from operations was
lower as reductions in overhead costs were offset by higher exchange-driven
European-based manufacturing costs and increased advertising expenses. Personal
Care net sales increased in all regions, driven by new product introductions.
Personal Care profit from operations was higher, due to strong new product sales
and cost reduction activities.

For the six month period ended June 30, 2004, net sales increased 11%, profit
from operations increased 32% and operating profit margin increased by 4
percentage points. The higher operating profit margin was driven by favorable
product mix and lower costs. Lower net interest expense was offset by higher
foreign exchange expense. The effective income tax rate declined by 1 percentage
point to 29%. Net income climbed 33% and net income per common share, diluted,
increased 36%, outpacing the percentage increase in net income due to share
repurchase activity. The Company delivered strong free cash flow (as defined in
the Financial Condition section) of $723 million in the period.

PAGE 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS
- ---------------------

Second Quarter 2004 versus 2003
- -------------------------------
Selected statement of income data is presented below.

For Three Months Ended June 30
---------------------------------------
% of % of %
(millions, except per share Net Net Increase/
amounts and percentages) 2004 Sales 2003 Sales (Decrease)
- --------------------------- --------------------------------------

Net sales $2,443 $2,254 8
Gross profit $1,475 60.4 $1,339 59.4 10
Advertising $ 258 10.6 $ 186 8.3 39
Sales promotion $ 93 3.8 $ 96 4.3 (3)
Other selling, general and
administrative (SG&A) expense $ 514 21.0 $ 552 24.5 (7)

Total SG&A expense $ 865 35.4 $ 834 37.0 4


Profit from operations $ 610 25.0 $ 505 22.4 21
Other (income) and expense
Net interest expense 8 13 (38)
Foreign exchange (2) 3 (>100)
Other 3 6 (50)
---- ----
Total other income and expense 9 0.4 22 1.0 (59)
---- ----

Income taxes $ 175 7.2 $ 145 6.4 21
Net income $ 426 17.4 $ 338 15.0 26
Net income per common share, diluted $ 0.42 $ 0.33 27


Total Company
- -------------
Net sales for the second quarter of 2004 were $2.44 billion, an increase of 8%
versus $2.25 billion in the second quarter of 2003, of which 2% resulted from
the impact of favorable foreign exchange. Volume/mix added 6%, and pricing was
flat, as price increases in Blades and Razors were offset by higher promotional
spending for merchandising activities in Oral Care and Personal Care. Sales
increased due to strong new product introductions, including M3 Power in Blades
and Razors and Brush-Ups in the Oral Care segment, strong growth in the emerging
markets of Latin America and AMEE, and the ongoing strength of established
products. The increase in net sales was further supported by the August, 2003
acquisition of the Nanfu battery business, as well as the Rembrandt brand in
June, 2004. Together, these businesses added 1% to net sales in the quarter. A
39% increase in advertising in the quarter further supported the increase in net
sales. Net sales were higher in all regions, though European sales were not as
strong due to weaker consumer confidence especially in France and Italy, as well
as unfavorable comparisons to the prior year launch of Mach3 Turbo.

Gross profit was $1.48 billion in the second quarter of 2004, compared with
$1.34 billion in the second quarter of 2003. As a percent of net sales, gross
profit was 60.4%, compared with 59.4% in 2003. The improvement in gross profit
was due mainly to strong growth of new, premium product offerings and
manufacturing cost savings, particularly at Duracell.


PAGE 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Total selling, general and administrative expenses amounted to 35.4% of second
quarter 2004 net sales, compared with 37.0% in the comparable period of 2003.
Within selling, general and administrative expenses, advertising expenses
increased 39% to 10.6% of net sales, from 8.3% of net sales in the prior year.
In each operating segment and in each region, advertising grew by a double-digit
percentage. Advertising expenses increased in support of new product programs,
and helped to drive stepped-up demand in developing markets. Sales promotion was
lower as a percentage of sales at 3.8% in the second quarter of 2004 versus 4.3%
in the prior year. Other selling, general and administrative expenses decreased
7%, and were down as a percentage of sales, to 21.0% from 24.5% in the second
quarter of 2003, reflecting cost reduction efforts and lower Functional
Excellence expenses due to the timing of programs.

Profit from operations was $610 million in the second quarter of 2004 (25.0% of
net sales), compared with $505 million in the comparable period of 2003 (22.4%
of net sales). The 21% profit increase was driven by favorable mix to
higher-margin premium products, manufacturing productivity and overhead
cost-saving programs, partially offset by higher advertising expenses.

Within nonoperating charges/income, net interest expense amounted to $8 million
in the second quarter of 2004, as compared to $13 million in 2003, reflecting
lower debt levels. Net foreign exchange in the second quarters of 2004 and 2003
were $2 million (income) and $3 million (expense), respectively.

The effective income tax rate was 29% in the second quarter of 2004, compared
with 30% for the same period of 2003. The reduction in the 2004 effective income
tax rate was primarily due to a favorable change in the mix of earnings to
countries taxed at rates lower than the U.S. statutory rate. The effective
income tax rate is expected to remain close to the current level for the balance
of 2004.

Net income was $426 million in the second quarter of 2004 (17.4% of net sales),
compared with $338 million in the second quarter of 2003 (15.0% of net sales),
representing growth of 26%. Net income per common share, diluted, was $.42,
compared with $.33 in the second quarter of 2003, representing growth of 27%.
The 2004 percentage growth in net income per common share, diluted, which
outpaced the percentage growth in net income, was favorably impacted by share
repurchase program activity.


Six Months Ended June 30, 2004 versus 2003
- ------------------------------------------
Selected statement of income data is presented below.

For Six Months Ended June 30
---------------------------------------
% of % of %
(millions, except per share Net Net Increase/
amounts and percentages) 2004 Sales 2003 Sales (Decrease)
- --------------------------- ----------------------------------------

Net sales $4,678 $4,225 11
Gross profit $2,832 60.5 $2,492 59.0 14
Advertising $ 494 10.6 $ 353 8.4 40
Sales promotion $ 166 3.5 $ 171 4.0 (3)
Other selling, general and
administrative (SG&A) expense $1,006 21.5 $1,083 25.6 (7)

Total SG&A expense $1,666 35.6 $1,607 38.0 4


Profit from operations $1,166 24.9 $ 885 20.9 32
Other (income) and expense
Net interest expense 17 24 (29)
Foreign exchange 18 5 >100
Other - (3) >100
---- ----
Total other income and expense 35 0.7 26 0.6 35
---- ----

Income taxes $ 329 7.0 $ 258 6.1 28
Net income $ 802 17.1 $ 601 14.2 33
Net income per common share, diluted $ 0.79 $ 0.58 36




PAGE 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Total Company
- -------------
Net sales for the six months ended June 30, 2004 were $4.68 billion, an increase
of 11% versus $4.23 billion in the first six months of 2003. Favorable foreign
exchange had a 5% impact, favorable volume/mix added 6% and pricing was flat.
Sales increased due to new product introductions, ongoing trade-up to premium
products, the ongoing strength of established products, favorable foreign
exchange, the acquisition of the Nanfu battery company in the third quarter of
2003 and the acquisition of the Rembrandt brand in the second quarter of 2004.

Gross profit was $2.83 billion in the first six months of 2004, compared with
$2.49 billion in the first six months of 2003. As a percent of net sales, gross
profit was 60.5% in the first six months of 2004, compared with 59.0% in the
first six months of 2003. The improvement in gross profit was due mainly to
favorable product mix towards higher margin, premium products and manufacturing
cost savings, particularly in Duracell.

Total selling, general and administrative expenses amounted to 35.6% of net
sales for the first six months of 2004, compared with 38.0% in the comparable
period of 2003. Within selling, general and administrative expenses, advertising
expenses increased 40% to 10.6% of net sales, from 8.4% of net sales in 2003.
Sales promotion declined slightly as compared with 2003. Other selling, general
and administrative expenses decreased 7%, and were down as a percentage of
sales, to 21.5% from 25.6% in the first six months of 2003, reflecting cost
reduction efforts and lower Functional Excellence expenses. Functional
Excellence expenses were $19 million for the first six months of 2004, and are
expected to ramp up in the second half of 2004.

Profit from operations was $1.17 billion in the first six months of 2004 (24.9%
of net sales), compared with $885 million in the comparable period of 2003
(20.9% of net sales). The 32% profit increase was driven by favorable mix to
higher-margin premium products, manufacturing productivity and overhead
cost-saving programs, partially offset by higher advertising expenses.

Within nonoperating charges/income, net interest expense amounted to $17 million
in the first six months of 2004, as compared to $24 million in 2003, reflecting
lower debt levels. Net foreign exchange expense in the first six months of 2004
and 2003 was $18 million and $5 million, respectively. The 2004 result was
driven by the reclassification of a non-cash loss to the Consolidated Statement
of Income from the accumulated other comprehensive loss section of the
Consolidated Balance Sheet related to the liquidation of certain international
subsidiaries.

The effective income tax rate was 29% for the six months ended June 30, 2004,
compared with 30% for the same period of 2003. The reduction in the 2004
effective income tax rate was primarily due to a favorable change in the mix of
earnings to countries taxed at rates lower than the U.S. statutory rate. The
effective income tax rate is expected to remain close to the current level for
the remainder of 2004.

Net income was $802 million in the first half of 2004 (17.1% of net sales),
compared with $601 million in the first six months of 2003 (14.2% of net sales),
representing growth of 33%. Net income per common share, diluted, was $.79,
compared with $.58 in the first six months of 2003, representing growth of 36%.
The 2004 percentage growth in net income per common share, diluted, which
outpaced the percentage growth in net income, was favorably impacted by share
repurchase program activity.


PAGE 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Operating Segments
- ------------------
Second Quarter 2004 versus 2003
- -------------------------------
The following table summarizes the key operating metrics for the second quarter
of 2004 versus the second quarter of 2003 for each of the Company's five
operating segments.


Blades & Oral Personal Corporate/ Total
Three Months Ended June 30, Razors Duracell Care Braun Care Other Company
- ------------------------------ --------- -------- ---- ----- -------- --------- -------
(millions, except percentages)

Net Sales:
Net sales, 2004 $1,099 $456 $358 $294 $236 $ - $2,443
Net sales, 2003 1,003 432 316 284 219 - 2,254
% Incr/(Decr) vs. 2003 10 5 14 4 8 8
Impact of exchange 2 2 3 5 3 2
Impact of volume/mix 7 3 15 - 8 6
Impact of pricing 1 - (4) (1) (3) -

Profit from operations (PFO):
PFO, 2004 $ 420 $ 89 $ 68 $ 24 $ 24 $(15) $ 610
PFO, 2003 377 54 53 28 24 (31) 505
% Incr/(Decr) vs. 2003 11.3 64.6 28.1 (13.1) 3.0 21.5
PFO as % of net sales, 2004 38.2 19.5 19.1 8.1 10.3 25.0
PFO as % of net sales, 2003 37.6 12.5 16.9 9.7 10.8


Blades and Razors
- -----------------
Net sales of $1.10 billion in the second quarter of 2004 were 10% higher than
the comparable period of 2003, including a 2% favorable foreign exchange impact.
Sales growth was driven by new premium offerings including M3 Power and Venus
Divine. Net sales were higher in North America, and consumption and trade-up in
the AMEE market were strong. Sales growth was not as strong in Europe, due to
reduced consumer spending and the 2003 Mach3 Turbo launch.

The Company drove U.S. Blade/Razor market growth of 14% in June due to the
launch of M3 Power. The M3 Power razor reached a 30% dollar share in its first
month at retail and was the top-selling U.S. razor in June.

Profit from operations of $420 million was up 11% from the second quarter of
2003, and profit margin increased from 37.6% to 38.2%. The impacts of higher
sales from new products, price increases and lower overhead costs were partially
offset by a double-digit percentage increase in advertising.

Duracell
- --------
Duracell net sales of $456 million increased 5% versus the second quarter of
2003, including a 2% favorable foreign exchange impact. Net sales gains were
driven by the August, 2003 acquisition of the Nanfu battery business, strong
emerging market growth in the AMEE region and lower trade and consumer
promotional spending. These gains were partially offset by lower net sales in
North America where the business was impacted by steep price discounting and
promotional activity from low-price brands and private label.

The Company held its dollar share of the market in the second quarter of 2004
through stepped-up advertising levels and the positive impact of strong consumer
marketing programs, including promotional tie-ins with the "Lord of the Rings"
DVD release and NASCAR. However, 2004 is expected to continue to be challenging
due to the ongoing, intense competitive environment.

In the second quarter of 2004, profit from operations of $89 million increased
65%, and profit margin grew by 7.0 percentage points, compared with the second
quarter of 2003. This increase was due to higher sales and significant benefits
from cost-savings and overhead reduction programs, partially offset by higher
brand-building advertising expenses.



PAGE 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Oral Care
- ---------
Oral Care net sales in the second quarter of 2004 of $358 million were 14%
higher than the second quarter of 2003, of which 3% represented favorable
foreign exchange. Sales increased in all regions with the exception of Asia
Pacific, in line with the Company's strategy to grow net sales in the core
brushing category as well as in related categories. New products, including
Brush-Ups and the Hummingbird power flosser, contributed significantly to net
sales growth in the quarter, while the acquisition of the Rembrandt brand added
4% to net sales for the period. In core brushing, the manual toothbrush segment
was a driver of growth, particularly in the North America, Latin America, and
AMEE regions.

The Company extended its number one global dollar share position in the total
brushing category versus the prior year to 34%, driven by trade up within manual
and the global rollout of CrossAction Power.

In the second quarter of 2004, profit from operations of $68 million increased
28%, and profit margin increased by 2.2 percentage points. The increase in
profits was driven by higher net sales, improved product mix and lower overhead
costs, offset partially by a double-digit percentage increase in advertising.

Braun
- -----
Braun net sales of $294 million in the second quarter of 2004 increased 4% over
the second quarter of 2003. Favorable foreign exchange of 5% was offset
partially by a 1% negative impact of pricing. Sales growth was driven by strong
performance in female epilators in AMEE and Southern Europe, household appliance
gains in Russia and Turkey, and male shaver growth in China, offset partially by
male shaver category softness in Europe and North America and comparisons with
the unmatched 2003 SARS-related spike in demand for Thermoscan products. Braun
shavers continued to gain dollar share in key markets, despite price discounting
by competitors.

Profit from operations in the second quarter of 2004 of $24 million was lower
than the $28 million in the second quarter of 2003. Profit was down in the
quarter as lower overhead costs were offset by higher European-based
manufacturing costs and increased advertising expenses.

Personal Care
- -------------
In the second quarter of 2004, Personal Care net sales increased 8% versus the
second quarter of 2003, with foreign exchange contributing 3% of the growth.
Sales growth, achieved in all regions, was driven by the introduction of the
Gillette Complete Skincare line in the United States, Soft & Dri antiperspirants
in Latin America and Right Guard Cool Spray in the United Kingdom.

Profit from operations increased slightly to $24 million in the second quarter
of 2004 as compared with the second quarter of 2003. Profit improvement came
from growth in new products, manufacturing and procurement cost savings, and
lower overhead costs, which more than offset a double-digit percentage increase
in advertising.

PAGE 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Six Months Ended June 30, 2004 versus 2003
- ------------------------------------------
The following table summarizes the key operating metrics for the six months
ended June 30, 2004 versus 2003 for each of the Company's five operating
segments.

Blades & Oral Personal Corporate/ Total
Six Months Ended June 30, Razors Duracell Care Braun Care Other Company
- ------------------------------ --------- -------- ---- ----- -------- --------- -------
(millions, except percentages)

Net Sales:
Net sales, 2004 $2,136 $870 $673 $553 $446 $ - $4,678
Net sales, 2003 1,896 816 611 499 403 - 4,225
% Incr/(Decr) vs. 2003 13 7 10 11 10 11
Impact of exchange 5 4 5 7 4 5
Impact of volume/mix 6 3 7 5 7 6
Impact of pricing 2 - (2) (1) (1) -

Profit from operations (PFO):
PFO, 2004 $ 837 $163 $123 $ 45 $ 37 $(39) $1,166
PFO, 2003 708 93 102 21 24 (63) 885
% Incr/(Decr) vs. 2003 18.1 75.8 20.9 109.8 52.9 32.1
PFO as % of net sales, 2004 39.2 18.8 18.4 8.1 8.3 24.9
PFO as % of net sales, 2003 37.4 11.4 16.7 4.3 6.0 20.9



Blades and Razors
- -----------------
Net sales of $2.14 billion in the six months ended June 30, 2004 were 13% higher
than in the comparable period of 2003, including a 5% favorable foreign exchange
impact. Volume/mix and pricing were favorable by 6% and 2%, respectively. Sales
growth was driven by successful new product introductions such as M3 Power,
Venus Divine and Sensor Excel 3, ongoing trade-up to premium products such as
Mach3 Turbo, and price increases.

Profit from operations of $837 million was up 18% from the first half of 2003,
and profit margin increased 1.8 percentage points to 39.2%. The impact of higher
sales, favorable product mix and lower overhead costs was partially offset by a
double-digit percentage increase in advertising support.

Duracell
- --------
Duracell net sales of $870 million increased 7% versus the first six months of
2003, including a 4% favorable foreign exchange impact. Net sales gains were
driven by the August, 2003 addition of the Nanfu battery business in China.
These gains were partially offset by lower sales in North America due to
comparisons against the first quarter 2003, when demand spiked due to homeland
security concerns and incremental military sales.

The Company held its dollar share of the market in the first six months of 2004,
though 2004 is expected to continue to be challenging due to the ongoing,
intense competitive environment.

In the first six months of 2004, profit from operations of $163 million
increased 76%, and profit margin grew by 7.4 percentage points, compared with
the first six months of 2003. This increase was due to higher sales and
significant benefits from cost-savings and overhead reduction programs,
partially offset by higher advertising expenses.



PAGE 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


Oral Care
- ---------
Oral Care net sales in the six month period ended June 30, 2004 of $673 million
were 10% higher than the comparable period of 2003, with favorable foreign
exchange contributing 5%. Sales gains were driven by new products, including
Brush-Ups and the Hummingbird power flosser, the acquisition of the Rembrandt
brand and strength in most regions behind manual brushes.

In the first six months of 2004, profit from operations of $123 million
increased 21%, and profit margin increased by 1.7 percentage points. The
increase in profits was driven by higher sales from new products and improved
product mix, offset partially by a double-digit percentage increase in
advertising.

Braun
- -----
Braun net sales of $553 million in the six months ended June 30, 2004 climbed
11% versus the comparable period of 2003, with favorable foreign exchange
representing 7% of the increase. Growth was driven by strong performance in the
AMEE region, particularly in Russia and Turkey, partially offset by comparisons
with the unmatched 2003 SARS-related spike in demand for Thermoscan products in
both Asia and North America.

Profit from operations in the first six months of 2004 of $45 million compared
with $21 million in the first six months of 2003. Profit improvement was driven
by a favorable mix towards higher margin products, particularly male shavers and
female epilators, tempered by currency-related increases in European-based
manufacturing costs.

Personal Care
- -------------
In the six months ended June 30, 2004, Personal Care net sales increased 10%
versus the first six months of 2003, with foreign exchange contributing 4% of
the growth. Sales growth was achieved in all regions due to strong demand and
trade-up in shave preparations, particularly in Europe and North America. Net
sales growth was also driven by new products, including the Gillette Complete
skin care line in North America, and the new side-activated Right Guard Cool
Spray in the United Kingdom.

Profit from operations increased to $37 million for the six months ended June
30, 2004 as compared with $24 million in the comparable period of 2003. Profit
improvement came from growth in new products, manufacturing and procurement cost
savings, and lower overhead costs, which more than offset a double-digit
percentage increase in advertising.

PAGE 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


FINANCIAL CONDITION
- -------------------

Cash Flow
- ---------
Cash provided by operations is the Company's primary source of funds to finance
operations, capital expenditures, share repurchases, and dividends. Free cash
flow, defined as net cash provided by operating activities net of additions to
and disposals of property, plant and equipment, is used by the Company as a
measure of its liquidity, as well as its ability to fund future growth and to
provide a return to shareholders. Free cash flow is not a measure of the
residual cash flow that is available for discretionary expenditures, since the
Company has certain non-discretionary obligations, such as debt service, that
are not deducted from the measure. A reconciliation of free cash flow to the
increase in cash and cash equivalents in accordance with Generally Accepted
Accounting Principles (GAAP) follows.


2004 2003
----------------------------------------
Free GAAP Free GAAP
Cash Cash Cash Cash
Six Months Ended June 30, Flow Flow Flow Flow
- ------------------------- ----------------------------------------
(millions)

Net income $ 802 $ 601
Depreciation and amortization 299 278
Deferred income taxes and other 46 50
Decrease in accounts receivable 38 59
Increase in inventories (330) (188)
Net change in other assets and liabilities 66 204
---- ----- ----- -----
Net cash provided by operating activities $ 921 $ 921 $1,004 $ 1,004
---- ----- ----- -----
Additions to property, plant and equipment (A) (228) (132)
Disposals of property, plant and equipment (B) 30 23
---- -----
Free cash flow $ 723 $ 895
---- -----
Net cash used in investing activities (C)* $ (312) $ (109)
Net cash used in financing activities $ (643) $(1,086)
Effect of exchange rate changes on cash (3) 4
----- -----
Decrease in cash and cash equivalents $ (37) $ (187)
===== =====


*C is the sum of A, B, and $(114) million and $0 in other investing activities,
including acquisitions, net of cash acquired, in the six months ended June 30,
2004 and 2003, respectively.


Free cash flow for the six months ended June 30, 2004, was $723 million, as
compared with $895 million in the six months ended June 30, 2003. Free cash flow
was dampened in 2004 by higher inventory balances and additions to property,
plant and equipment. Inventory increased in anticipation of new product launches
in Oral Care and Braun, and also due to a planned build up of safety stock
related to the blade and razor manufacturing, packaging and warehouse operations
realignment program throughout Europe and Russia. Capital expenditures in 2004
are primarily for new product programs. The Company expects capital expenditures
to average approximately 6% of net sales for the full year of 2004.


PAGE 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


The Company used its free cash flow to finance the repurchase of 9 million
shares of Company stock for $355 million, pay dividends of $327 million, reduce
debt by $200 million, and to fund two acquisitions, the Rembrandt brand of
at-home and professional teeth-whitening products and Zooth, Inc., a leader in
licensed manual and power children's toothbrushes, totaling $115 million. In
February 2004, the Company received $103 million upon settlement of a currency
swap that hedged a maturing Euro-denominated bond. Net cash used in financing
activities for the first six months of 2004 were below last year mainly due to
lower share repurchases. Net cash used in investing activities for the first six
months of 2004 increased as compared with the prior year due to higher capital
expenditures and the two acquisitions in the second quarter of 2004.

Debt
- ----
Total debt decreased by $200 million during the six months ended June 30, 2004,
from $3.31 billion at December 31, 2003, to $3.11 billion at June 30, 2004. This
decrease was principally due to repayments of long-term debt of $389 million,
partially offset by an increase in short-term loans payable of $228 million.
Cash and cash equivalents decreased by $37 million for the same period. Cash
equivalents are invested in highly liquid deposits and marketable securities of
institutions with high credit quality.

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 $1.53 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, 2004, there was
$270 million outstanding under the Company's commercial paper program, compared
with $55 million at December 31, 2003. On October 14, 2003, the Company entered
into revolving bank credit facilities in an aggregate amount of $1.15 billion,
of which $863 million is available on a 364-day basis, expiring October 2004,
and $288 million is available for five years, expiring October 2008. Liquidity
is enhanced through a provision in the 364-day facility that gives the Company
the option to enter into a one-year term loan in an amount up to $863 million.
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 issue up to $2.80 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 registrations 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 repurchase of the Company's common stock. At June
30, 2004, $1.54 billion, at face value, was issued under these shelf
registrations, and a total of $1.26 billion was available for future debt
issuance. All proceeds from these issuances were used to reduce commercial paper
borrowings.

With its strong brands, leading market shares, strong financial condition and
substantial cash-generating capability, the Company expects to continue to have
funds available for growth through both internally generated cash flow 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 interest rates.

Market Risk
- -----------
The Company is subject to market risks, such as changes in foreign currency and
interest rates that arise from normal business operations. The Company regularly
assesses these risks and has established business strategies to provide natural
offsets, supplemented by the use of derivative financial instruments, to protect
against the adverse effects of these and other market risks.

The Company uses foreign-denominated debt and forward contracts to hedge the
impact of foreign currency changes on its net foreign investments, normally in
currencies with low interest rates. Most of the Company's transactional exchange
exposure is managed through centralized cash management. The Company hedges net
residual transactional exchange exposures primarily through forward contracts.
The Company uses primarily floating rate debt in order to match interest costs
to the impact of inflation on earnings. The Company manages its mix of fixed and
floating-rate debt by entering into interest rate swaps and forward rate
agreements.



PAGE 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS


More detailed information about the strategies, policies, and use of derivative
financial instruments is provided in the Company's 2003 Form 10-K under the
Financial Instruments and Risk Management Activities note in Notes to
Consolidated Financial Statements. The Company has established policies,
procedures, and internal controls governing the use of derivative financial
instruments and does not use them for trading, investment, or other speculative
purposes. In addition, the Company's use of derivative instruments is reviewed
by the Finance Committee of the Board of Directors annually. Financial
instrument positions are monitored using a value-at-risk model. Value at risk is
estimated for each instrument based on historical volatility of market rates and
a 95% confidence level.

Based on the Company's overall evaluation of its market risk exposures from all
of its financial instruments at June 30, 2004, a near-term change in market
rates would not materially affect the consolidated financial position, results
of operations, or cash flows of the Company.



FUNCTIONAL EXCELLENCE AND 2003 MANUFACTURING REALIGNMENT PROGRAM

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. During the three and six month periods ended June 30, 2004
and 2003, the Company recorded the following expenses related to this
initiative.



Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
(millions) 2004 2003 2004 2003
- ---------- ----- ---- ----- ----

Functional Excellence expense recorded in:
Cost of goods sold $ 4 $12 $ 4 $13
Selling, general and administrative expense $ 8 $30 $15 $73
--- --- --- ---
Total functional excellence expense $12 $42 $19 $86
=== === === ===


2003 Manufacturing Realignment Program
- --------------------------------------
During 2003, the Company announced a blade and razor manufacturing, packaging
and warehouse operations realignment program throughout Europe and Russia. The
program will significantly reduce costs, improve operating efficiency, and
streamline operations. The program began in December 2003 and will be completed
during 2007. This program is further described in Notes to Consolidated
Financial Statements.

During the three and six months ended June 30, 2004, the Company recorded
charges of $10 million and $16 million, respectively, to cost of goods sold for
this program, related mainly to accelerated depreciation of certain assets,
severance accruals and costs related to the relocation of equipment between
impacted locations.

PAGE 26
DISCLOSURE CONTROLS AND PROCEDURES


Item 4. Controls and Procedures

Our management, under the supervision and with the participation of our Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), has evaluated the
effectiveness of our disclosure controls and procedures as defined in Securities
and Exchange Commission ("SEC") Rule 13a-15(e) as of the end of the period
covered by this report. Based upon that evaluation, management has concluded
that our disclosure controls and procedures are effective to ensure that
information we are required to disclose in reports that we file or submit under
the Securities Exchange Act is accumulated and communicated to management,
including the CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure and is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms.

Further, during the fiscal quarter covered by this report, there have been no
changes in internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.

PAGE 27
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 legal 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 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities.

Total Number
of Shares Maximum Number
Purchased as Part of Shares
Total Number Average of Publicly that May Yet Be
of Shares Price Paid Announced Plans Purchased Under the
Period Purchased (3) per Share or Programs(1) Plans or Programs
- ------ ----------- ---------- ----------------- -------------------
04/01/04 - 04/30/04 4,840 $40.80 - 46,000,000
05/01/04 - 05/31/04 2,694,536 $41.09 2,694,100 43,305,900
06/01/04 - 06/30/04 1,305,989 $43.22 1,305,900 42,000,000
Total Second Quarter 4,005,365 (2) $41.78 4,000,000 42,000,000


(1) The share repurchase program was announced on 9/16/03 and authorizes the
purchase of up to 50 million shares of the Company's common stock. There is
no expiration date specified for this program.

(2) Includes 5,365 shares which were repurchased by the Company under
equity-based programs.

(3) All share repurchases were effected in accordance with the safe harbor
provisions of Rule 10b-18 of the Securities Exchange Act.


PART II

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

At its Annual Meeting on May 20, 2004, the shareholders of The Gillette Company
took the following actions:

1. Elected the following four directors for terms to expire at the 2007 Annual
Meeting of Shareholders, with votes as indicated opposite each director's name:

For Withheld
----------- ----------
Edward F. DeGraan 649,308,442 232,145,002
Wilbur H. Gantz 649,794,321 231,659,123
James M. Kilts 649,048,302 232,405,143
Jorge Paulo Lemann 649,649,409 231,804,036

The directors whose term of office as a director continued after the meeting are
Roger K. Deromedi, Michael B. Gifford, Ray J. Groves, Dennis F. Hightower,
Herbert H. Jacobi, Nancy J. Karch, Fred H. Langhammer, and Marjorie M. Yang.

2. Approved the ratification of the appointment of KPMG LLP as auditor for the
year 2004. The vote was 845,717,159 for the proposal, 34,262,266 against, with
1,480,336 abstentions.

3. Approved the 2004 Long-Term Incentive Plan. The vote was 678,986,585 for the
proposal and 66,922,841 against, with 7,737,562 abstentions and 127,812,773
broker nonvotes.

4. Approved a shareholder proposal recommending the declassification of the
Board of Directors. The vote was 507,153,817 for the proposal and 237,783,465
against, with 8,687,594 abstentions and 127,834,885 broker nonvotes.

5. Rejected a shareholder proposal to limit the services provided by the
auditor. The vote was 84,829,697 for the proposal and 659,809,461 against, with
9,004,086 abstentions and 127,816,517 broker nonvotes.

6. Rejected a shareholder proposal that the Company establish a policy of
expensing stock options. The vote was 308,916,221 for the proposal and
329,534,532 against, with 113,772,029 abstentions and 129,236,979 broker
nonvotes.

PAGE 28
PART II. 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.

Factors that could cause actual results to differ materially from those
expressed in any forward-looking statement 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 and reduce our internal costs and the cost of raw
materials;

- - competitive factors, including prices, promotional incentives, and trade terms
for our products, and our response, as well as those of our customers and
competitors, to changes in these terms;

- - product introductions and innovations by us and our competitors;

- - technological advances by us and our competitors;

- - new patents granted to us and our competitors;

- - changes in exchange rates in one or more of our geographic markets;

- - changes in laws and regulations, including trade regulations, accounting
standards 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, divestitures and similar transactions by us, our competitors,
or customers; and

- - the impact of general political and economic conditions or hostilities in the
United States and in other parts of the world.

PAGE 29
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 introduce new products and/or extend lines of
established products successfully 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 any
such claims, if they were successful, could 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 30
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;
- - changes in regulatory requirements or tax laws; and
- - longer payment cycles in certain countries.

We are also exposed to foreign currency exchange rate risk 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 and our reported earnings will
be affected by changes in exchange rates.


Retail Environment
- ------------------
With the growing trend toward 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 significant 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 trade inventory levels, 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 Potential Military Action or War
- ------------------------------------------
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 31
PART II. OTHER INFORMATION


Item 6(a) Exhibits

The following exhibits are included herewith:

10.1 The Gillette Company Deferred Compensation Plan, filed herewith.

10.2 The Gillette Company 2004 Long-Term Incentive Plan, as corrected for
typographical errors, filed herewith.

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).

32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.


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 April 29, 2004, a current report on Form 8-K
containing one exhibit: a press release announcing the Company's financial
results for the first quarter of 2004.


PAGE 32
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/ Joseph J. Schena
- --------------------------------
Joseph J. Schena
Vice President, Controller
and Principal Accounting Officer

July 29, 2004

EXHIBIT INDEX


Exhibit Number and Description

Exhibit 10.1 The Gillette Company Deferred Compensation Plan, filed herewith.

Exhibit 10.2 The Gillette Company 2004 Long-Term Incentive Plan, as corrected
for typographical errors, filed herewith.

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 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002.