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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. I-922
THE GILLETTE COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INCORPORATED IN DELAWARE 04-1366970
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
PRUDENTIAL TOWER BUILDING, BOSTON, MASSACHUSETTS 02199
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-421-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
BOSTON STOCK EXCHANGE
CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((sec.)229.405 of this chapter) is not contained herein,
and will not be contained to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of Gillette Common Stock held by non-affiliates
as of February 26, 1999 was approximately $51,422,000,000.*
The number of shares of Gillette Common Stock outstanding as of February
26, 1999 was 1,107,183,549.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following documents have been incorporated by
reference into this Form 10-K as indicated:
DOCUMENTS 10-K PARTS
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1. The Gillette Company 1998 Annual Report to Stockholders
(the "1998 Annual Report")............................... Parts I and II
2. The Gillette Company 1999 Proxy Statement (The "1999
Proxy Statement")......................................... Part III
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* This amount does not include the value of 147,862 shares of Series C ESOP
Convertible Preferred Stock issued for $602.875 per share. For purposes of
this calculation only, Gillette Common Stock held by Executive Officers or
directors of the Company has been treated as owned by affiliates.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Gillette Company was incorporated under the laws of the State of
Delaware in 1917 as the successor of a Massachusetts corporation incorporated in
1912 which corporation was the successor of a Maine corporation organized in
1901 by King C. Gillette, inventor of the safety razor.
The Company's businesses range across several industry segments, including
blades and razors, toiletries, stationery products, electric shavers, small
household appliances, hair care appliances, oral care appliances, oral care
products and alkaline batteries for consumer products. A description of the
Company and its businesses appears in the 1998 Annual Report on the inside front
cover and at pages 6 through 17, the texts of which are incorporated by
reference. See also Item 7, "Management's Discussion" at page 5 of this report.
INDUSTRY SEGMENTS
"Operating Segments and Related Information," containing information on net
sales, profit from operations, identifiable assets, capital expenditures and
depreciation for each of the last three years, appears in the 1998 Annual Report
at page 38 and is incorporated by reference.
DISTRIBUTION
In the Company's major geographic markets, traditional Gillette product
lines, Duracell batteries and Oral-B products are sold to wholesalers, chain
stores and large retailers and are resold to consumers primarily through food,
drug, discount, stationery, hardware, toy, tobacco and department stores.
Waterman and Parker products are sold to wholesalers and retailers and are
resold to consumers through fine jewelry, fine stationery and department stores,
pen specialists and other retail outlets. Braun products are sold to wholesalers
and retailers and are resold to consumers mainly through department, discount,
catalogue and specialty stores (Braun personal diagnostic appliances are also
sold directly to medical professionals). Oral-B products are marketed directly
to dental professionals for distribution to patients as well as through standard
distribution channels. In many small Gillette, Duracell, Braun and Oral-B
markets, products are distributed through local distributors and sales agents.
PATENTS
Certain of the Company's patents and licenses in the blade and razor
segment are of substantial value and importance when considered in the
aggregate. Additionally, the Company holds significant patents in its
toiletries, stationery products, Duracell, Braun, and Oral-B businesses. No
patent or license held by the Company is considered to be of material importance
when judged from the standpoint of the Company's total business. Gillette has
licensed many of its blade and razor patents to other manufacturers. In all of
these categories, Gillette competitors also have significant patent positions.
The patents and licenses held by the Company are of varying remaining durations.
TRADEMARKS
In general, the Company's principal trademarks have been registered in the
United States and throughout the world where the Company's products are sold.
Gillette products are marketed outside the United States under various
trademarks, many of which are the same as those used in the United States. The
trademark "Gillette" is of principal importance to the Company. In addition, a
number of other trademarks owned by the Company and its subsidiaries have
significant importance within their industries. The Company's rights in these
trademarks endure for as long as they are used or registered.
COMPETITION
The blades and razors segment is marked by competition in new technology,
as well as by competition in price, marketing, advertising and promotion to
retail outlets and to consumers. The Company's major
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competitors worldwide are Warner-Lambert Company, with its Schick and, in North
America and Europe, its Wilkinson Sword product lines, and Societe Bic S.A., a
French company. Additional competition in the United States and in certain other
markets is provided by the American Safety Razor Company, Inc. under its own
brands and a number of private label brands, as well as other private label
suppliers. The toiletries segment is highly competitive in terms of price,
product innovation and market positioning, with frequent introduction of new
brands and marketing concepts, especially for products sold through retail
outlets, and with product life cycles typically shorter than in the other
businesses of the Company. Competition in the stationery products segment,
particularly in the writing instruments market, is marked by a high degree of
competition from domestic and foreign suppliers and low entry barriers, and is
focused on a wide variety of factors including product performance, design and
price, with price an especially important factor in the commercial sector.
Competition in the Braun products markets is based primarily on product
performance, innovation, price and professional endorsement, with numerous
competitors in the small household and hair care appliances segments.
Competition in the Oral-B products markets is focused on product performance,
price and dental profession endorsement. The Duracell products markets are
marked by competition in product performance, innovation and price and in
marketing, advertising and promotion to retail outlets and to consumers. Many of
the Company's competitors are larger and have greater resources than the
Company.
EMPLOYEES
At year-end, Gillette employed approximately 43,100 persons, three-quarters
of them outside the United States.
RESEARCH AND DEVELOPMENT
In 1998, research and development expenditures were $209 million, compared
with $212 million in 1997 and $204 million in 1996.
RAW MATERIALS
The raw materials used by Gillette in the manufacture of products are
purchased from a number of suppliers, and substantially all such materials are
readily available.
OPERATIONS BY GEOGRAPHIC AREA
The following table indicates the geographic sources of consolidated net
sales and profit from operations of the Company for the last three years:
1998 1997 1996
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NET NET NET
SALES PROFIT SALES PROFIT SALES PROFIT
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United States.................................. 38% 44% 37% 38% 37% 41%
Foreign........................................ 62% 56% 63% 62% 63% 59%
Net sales by geographic area for each of the last three years appear in the
1998 Annual Report at page 39 and are incorporated by reference.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns and leases manufacturing facilities and other real estate
properties in the United States and a number of foreign countries. The Company's
executive offices are located in the Prudential
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Center, Boston, Massachusetts where it holds a long term lease. The following
table sets forth the Company's principal plants:
BUSINESS SEGMENT LOCATION OWNED/LEASED
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Blades & Razors Boston, MA (US) Owned
Isleworth, UK Owned
Berlin, Germany Owned
Shanghai, China* Leased
Naucalli, Mexico* Owned
Manaus, Brazil* Owned
Devens, MA(US) Leased
Toiletries St. Paul, MN (US)* Owned/Leased
Andover, MA (US) Owned
Reading, UK Owned/Leased
Stationery Santa Monica, CA (US) Leased
Saint Herblain, France Owned/Leased
Newhaven, UK Owned
Braun Kronberg, Germany Owned/Leased
Barcelona, Spain Owned/Leased
Walldurn, Germany Owned/Leased
Marktheidenfeld, Germany Owned
Mexico City, Mexico Owned/Leased
Oral-B Iowa City, IA (US) Owned
Duracell Port Elizabeth, S. Africa Owned
Aarschot, Belgium Owned
Lancaster, SC (US) Owned
LaGrange, GA (US) Owned
The above facilities are in good repair, adequately meet the Company's needs and
operate at reasonable levels of production capacity.
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* Engaged in the manufacture of products for two or more business segments.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject, from time to time, to legal proceedings and claims
arising out of its business, which cover a wide range of matters, including
antitrust and trade regulation, product liability, advertising 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 the consolidated
financial position, results of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF REGISTRANT
Information regarding the Executive Officers of the Company as of March 18,
1999 is set out below.
NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE
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Alfred M. Zeien Chairman of the Board and Chief Executive Officer since 69
Chairman of the Board and Chief February 1991
Executive Officer
Michael C. Hawley President and Chief Operating Officer since April 1995; 61
President and Chief Operating Executive Vice President, International Group, December
Officer 1993 - March 1995; President, Oral-B Laboratories, Inc.,
May 1989 - November 1993
Edward F. DeGraan Executive Vice President, Global Business Management, 55
Executive Vice President Gillette Grooming Products and Duracell, since January
1999; Executive Vice President, Duracell North Atlantic
Group, January 1997 - December 1998; Senior Vice President,
Manufacturing and Technical Operations, Gillette North
Atlantic Group, May 1991 - December 1996
Robert G. King Executive Vice President, Commercial Operations, Western 53
Executive Vice President Hemisphere, since January 1999; Executive Vice President,
Gillette North Atlantic Group, February 1997 - December
1998; Executive Vice President, International Group, April
1995 - January 1997; Group Vice President - Latin America,
March 1991 - March 1995
Archibald Livis Executive Vice President, Global Business Management, 60
Executive Vice President Diversified Group, since January 1999; Executive Vice
President, Diversified Group, May 1998 - December 1998;
Chairman, Braun Board of Management, October 1993 - April
1998
Jorgen Wedel Executive Vice President, Commercial Operations, Eastern 50
Executive Vice President Hemisphere, since January 1999; Executive Vice President,
International Group since February 1997 - December 1998;
President, Oral-B Laboratories, Inc., November 1993 -
January 1997; Group General Manager, Braun North America,
November 1991 - October 1993
Charles W. Cramb Senior Vice President, Finance, Chief Financial Officer and 52
Senior Vice President, Principal Accounting Officer since July 1997; Vice
Chief Financial Officer President and Controller, July 1995 - June 1997; Vice
and Principal Accounting Officer President, Finance, Planning and Administration,
Diversified Group, October 1992 - June 1995
Robert E. DiCenso Senior Vice President, Personnel and Administration, since 58
Senior Vice President July 1994; Vice President, Investor Relations, January 1993
-June 1994
The Executive Officers hold office until the first meeting of the Board of
Directors following the annual meeting of the stockholders and until their
successors are elected or appointed and qualified, unless a shorter period shall
have been specified by the terms of their election or appointment, or until
their earlier resignation, removal or death.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information required by this item with respect to the Company's common
stock appears in the 1998 Annual Report on the inside back cover under the
caption "Common Stock" and at page 40 under the caption,
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"Quarterly Financial Information," and is incorporated by reference. As of
February 26, 1999, the record date for the 1999 Annual Meeting, there were
61,686 Gillette stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in the 1998 Annual Report at
page 41 under the caption, "Historical Financial Summary," and is incorporated
by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears in the 1998 Annual Report at
pages 18 through 23 under the caption, "Management's Discussion," and is
incorporated by reference.
CAUTIONARY STATEMENT
From time to time, the Company may make statements which constitute or
contain "forward-looking" information as that term is defined within the meaning
of the Federal securities laws. These statements may be identified by such
forward-looking words as "expect," "look," "believe," "anticipate," "may,"
"will" and variations of these words or other forward-looking terminology.
Forward-looking statements made by the Company are not guarantees of future
performance. Actual results may differ materially from those in the
forward-looking statements as the result of risks and uncertainties including
those listed below. The Company assumes no obligation to update any
forward-looking information:
- the pattern of the Company's sales, including variations in sales volume
within periods, which makes forward-looking statements about sales and
earnings difficult and may result in variance of actual results from
those contained in statements made at any time prior to the period's
close;
- vigorous competition within the Company's product markets, including
pricing and promotional, advertising or other activities in order to
preserve or gain market share, the timing of which cannot be foreseen by
the Company;
- the Company's reliance on the development of new products and the
inherent risks associated with new product introductions, including
uncertainty of trade and customer acceptance and competitive reaction;
- the costs and effects of unanticipated legal and administrative
proceedings;
- the impacts of unusual items resulting from ongoing evaluations of
business strategies, asset valuations and organizational structure;
- a substantial portion of the Company's sales having been made outside the
United States, making forecasting of sales more difficult;
- the impact on sales or earnings of fluctuations in exchange rates in one
or more of the Company's geographic markets;
- the impact of the year 2000 issue on the Company's order, production,
distribution and financial systems and the systems of its suppliers and
customers;
- the possibility of one or more of the global markets in which the Company
competes being impacted by variations in political, economic or other
factors, such as inflation rates, recessionary or expansive trends, tax
changes, legal and regulatory changes or other external factors over
which the Company has no control.
- the effects of rapid technological change on product development
differentiation, acceptance and costs including technological advances of
competitors;
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- the effects of patents including possible new patents granted to
competitors or challenges to Company patents and expiration of patents,
which affect competition and product acceptance.
ITEM 7A. DISCLOSURES CONCERNING MARKET RISK SENSITIVE INSTRUMENTS
The information required by this item appears in the 1998 Annual Report at
page 21 under the caption, "Market Risk," and is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements and Supplementary Data for The Gillette
Company and Subsidiary Companies appear in the 1998 Annual Report at the pages
indicated below and are incorporated by reference.
(1) Independent Auditors' Report................................ Page 39
(2) Consolidated Statement of Income for the Years Ended
December 31, 1998, 1997 and 1996............................ Page 24
(3) Consolidated Balance Sheet at December 31, 1998 and 1997.... Page 25
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996............................ Page 26
(5) Consolidated Statement of Stockholders' Equity for the
periods ended December 31, 1998, 1997 and 1996.............. Page 27
(6) Notes to Consolidated Financial Statements.................. Pages 28
through 40
(7) Computation of per share earnings........................... Pages 24, 28,
40 and 41
(8) Quarterly Financial Information............................. Page 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item with respect to the Directors of the
Company appears in the 1999 Proxy Statement at pages 2 through 4, 7 and 8 under
the caption "Company Transactions with Directors and Officers," and at page 21
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance," the
texts of which are incorporated by reference.
The information required for Executive Officers of the Company appears at
the end of Part I of this report at page 4.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the 1999 Proxy Statement
at pages 8 through 17 under the captions "Compensation of Non-Employee
Directors", "Personnel Committee Report on Executive Compensation", "Gillette
Comparative Five-Year Investment Performance", and "Executive Compensation" and
is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item concerning the security ownership of
certain beneficial owners and management appears in the 1999 Proxy Statement at
pages 6 and 7 under the caption "Stock Ownership of Five Percent Beneficial
Owners and Management" and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the 1999 Proxy Statement
at pages 7 and 8 under the caption "Company Transactions with Directors and
Officers" and is incorporated by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS
The following appear in the 1998 Annual Report at the pages indicated below
and are incorporated into Part II by reference.
(1) Independent Auditor's Report................................ Page 39
(2) Consolidated Statement of Income for the Years Ended
December 31, 1998, 1997 and 1996............................ Page 24
(3) Consolidated Balance Sheet at December 31, 1998 and 1997.... Page 25
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996............................ Page 26
(5) Consolidated Statement of Stockholders' Equity for the
periods ended December 31, 1998, 1997 and 1996.............. Page 27
(6) Notes to Consolidated Financial Statements.................. Pages 28
through 40
(7) Computation of per share earnings........................... Pages 24, 28
and 40 and 41
SCHEDULES
The following schedule appears at page 12 of this report:
II. Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are either
not required or not applicable.
EXHIBITS
3(a) Composite Certificate of Incorporation of The Gillette
Company, as amended, filed as Exhibit 3(i) to The Gillette
Company Quarterly Report on Form 10-Q for the period ended
March 31, 1998, Commission File No. 1-922, incorporated by
reference herein.
(b) The Bylaws of The Gillette Company, as amended October 15,
1998, filed as Exhibit 3 to The Gillette Company Quarterly
Report on Form 10-Q for the period ended September 30, 1998,
incorporated by reference herein.
4 Instruments Defining the Rights of Security Holders,
Including Indentures.
(a) Specimen of form of certificate representing ownership of
The Gillette Company Common Stock, $1.00 par value,
effective December 10, 1996, filed as Exhibit 4(a) to The
Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1996, Commission File No. 1-922,
incorporated by reference herein.
(b) Form of Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock of the
Gillette Company filed as Exhibit A to Exhibit 1 to The
Gillette Company Current Report on Form 8-K, dated December
30, 1985, Commission File No. 1-911, incorporated by
reference as Exhibit 4(c) to The Gillette Company Annual
Report on Form 10-K for the year ended December 31, 1996,
Commission File No. 1-922, incorporated by reference herein.
(c) Amendment to Certificate of Designations, Preferences and
Rights of Series A Junior Participating Preferred Stock
dated December 9, 1996, filed as Exhibit 4(c) to The
Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-922, incorporated by
reference herein.
(d) Renewed Rights Agreement dated as of December 14, 1995
between The Gillette Company and The First National Bank of
Boston, filed as Exhibit 4 to The Gillette Company Current
Report on Form 8-K, dated December 18, 1995, Commission File
No. 1-911, incorporated by reference herein.
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(e) Certificate of Designation of the Series C ESOP Convertible
Preferred Stock of The Gillette Company, dated January 17,
1990, filed as Exhibit 4(e) to The Gillette Company Annual
Report on Form 10-K for the year ended December 31, 1989,
Commission File No. 1-922, incorporated by reference herein.
(f) Certificate of Amendment relating to an increase in the
amount of authorized shares of preferred stock and common
stock, filed as Exhibit 3(i) to The Gillette Company
Quarterly Report on Form 10-Q for the period ended March 31,
1998, Commission File No. 1-922, incorporated by reference
herein.
(g) Form of $150,000,000 6.25% note due August 15, 2003, issued
pursuant to Registration Statement No. 33-54974 of The
Gillette Company, filed November 24, 1992, as amended May
14, 1993 and June 24, 1993 and the Trust Indenture filed
therewith as Exhibit 4.1, filed as part of Exhibit 4(f) to
The Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1993, Commission File No. 1-922,
incorporated by reference herein.
(h) Form of $150,000,000 and $50,000,000 5.75% notes due October
15, 2005, issued pursuant to Registration Statement No.
33-50303 of The Gillette Company, filed September 17, 1993
and the Trust Indenture filed as Exhibit 4.1 to Registration
Statement No. 3354974 of The Gillette Company, as amended
May 14, 1993 and June 24, 1993, filed as part of Exhibit
4(f) to The Gillette Company Annual Report on Form 10-K for
the year ended December 31, 1993, Commission File No. 1-922,
incorporated by reference herein.
The Company has issued non-registered debt instruments
copies of which will be furnished to the Commission upon
request.
10 Material Contracts
*(a) The Gillette Company 1971 Stock Option Plan, as amended
filed as Appendix A to the 1997 Proxy Statement, Commission
File No. 1-922, incorporated by reference herein.
*(b) The Gillette Company Stock Equivalent Unit Plan, as amended,
filed herewith.
*(c) The Gillette Company Incentive Bonus Plan, as amended, filed
as Exhibit 10(c) to The Gillette Company Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated
by reference herein.
*(d) The Gillette Company Executive Life Insurance Program, filed
as Exhibit 10(d) to The Gillette Company Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated
by reference herein.
(e) Directors and Officers and Company Reimbursement Indemnity
Insurance and Pension and Welfare Fund Fiduciary
Responsibility Insurance policy, filed as Exhibit 10(e) to
The Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1996, Commission File No. 1-922,
incorporated by reference herein.
*(f) Description of Conversion of Outside Directors' Vested
Pension Benefit into Deferred Stock Units, filed as Exhibit
10(f) to The Gillette Company Annual Report on Form
10-K for the year ended December 31, 1996, Commission File
No. 1-922, incorporated by reference herein.
*(g) The Gillette Company Deferred Compensation Plan for Outside
Directors, filed as Exhibit 10(g) to The Gillette Company
Annual Report on Form 10-K for the year ended December 31,
1996, Commission File No. 1-922, incorporated by reference
herein.
*(h) Description of severance pay and benefit arrangements for
employees in the event of a change in control, filed as
Exhibit 10(j) to The Gillette Company Annual Report on Form
10-K for the year ending December 31, 1989, Commission File
No. 1-922, incorporated by reference herein.
(i) Letter Agreement, dated July 20, 1989, between The Gillette
Company and Berkshire Hathaway Inc., filed as Exhibit 4(a)
to The Gillette Company Current Report on Form
8-K, dated July 20, 1989, Commission File No. 1-922,
incorporated by reference herein.
*(j) Description of agreement between The Gillette Company and
Robert J. Murray effective January 1, 1996, filed as Exhibit
10(l) to The Gillette Company Annual Report on Form 10-K for
the year ending December 31, 1995, Commission File No.
1-922, incorporated by reference herein.
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*(k) Description of The Gillette Company Estate Planning Program,
filed as Exhibit 10(o) to The Gillette Company Annual Report
on Form 10-K for the year ended December 31, 1993,
Commission File No. 1-922, incorporated by reference herein.
*(l) The Gillette Company Estate Preservation Plan, filed as
Exhibit 10(l) to The Gillette Company Annual Report on Form
10-K for the year ended December 31, 1997, incorporated by
reference herein.
*(m) The Gillette Company Supplemental Retirement Plan, as
amended and restated June 16, 1994, filed as Exhibit 10(a)
to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1994, Commission File No. 1-922,
incorporated by reference herein.
*(n) The Gillette Company Supplemental Savings Plan, as amended,
filed as Exhibit 10(n) to The Gillette Company Annual Report
on Form 10-K for the year ended December 31, 1996,
Commission File No. 1-922 incorporated by reference herein.
(o) Multi-year Credit Agreement dated as of December 20, 1996
among The Gillette Company, Morgan Guaranty Trust Company of
New York, as agent, and a syndicate of domestic and foreign
banks, filed as Exhibit 10(o) to The Gillette Company Annual
Report on Form 10-K for the year ended December 31, 1996,
Commission File No.
1-922, incorporated by reference herein.
(p) $2,000,000,000 364-Day Credit Agreement dated as of December
20, 1996 and amended and restated as of October 20, 1997 and
October 19, 1998 among The Gillette Company, Morgan Guaranty
Trust Company of New York, as agent and a syndicate of
domestic and foreign banks, filed herewith.
(q) Registration Rights Agreement dated as of September 12, 1996
among The Gillette Company, KKR Partners II, L.P. and DI
Associates, L.P., filed as Exhibit 10.2 to The Gillette
Company Current Report on Form 8-K filed September 16, 1996,
Commission File No. 1-922, incorporated by reference herein.
12 Computation of the ratios of current assets to current
liabilities for the years 1998, 1997 and 1996, filed
herewith.
13 Portions of the 1998 Annual Report to Stockholders of The
Gillette Company incorporated by reference in this Form
10-K, filed herewith.
22 List of subsidiaries of The Gillette Company, filed
herewith.
23 Independent Auditors' Consent, filed herewith.
24 Power of Attorney, filed herewith.
27 Financial Data Schedule (not considered to be filed).
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* Filed pursuant to Item 14(c).
B. REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by the registrant during the fourth
quarter of the period covered by this report.
OTHER MATTERS
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the following Registration Statements of the
registrant on Form S-8 (1) No. 33-27916, filed April 10, 1989, and amended
thereafter, which incorporates by reference therein Registration Statements on
Form S-8 Nos. 2-90276, 2-63951 and 1-50710, and all amendments thereto, all
relating to shares issuable and deliverable under The Gillette Company 1971
Stock Option Plan and 1974 Stock Purchase Plan and on Form S-7 No. 2-41016
relating to shares issuable and deliverable under The Gillette Company 1971
Stock Option Plan; (2) No. 33-9495, filed October 20, 1986, and all amendments
thereto, relating to shares and plan interests in The Gillette Company
Employees' Savings Plan; (3) No. 2-93230, filed September 12, 1984, and all
amendments thereto, relating to shares and plan interests in the
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Oral B Laboratories Savings Plan; (4) No. 33-56218, filed December 23, 1992,
relating to shares and plan interests in The Gillette Company Employees' Savings
Plan; (5) No. 33-52465, filed March 1, 1994, and all amendments thereto,
relating to shares issuable and deliverable under The Gillette Company Global
Employee Stock Ownership Plan; (6) No. 33-53257, filed April 25, 1994, and all
amendments thereto, relating to shares issuable and deliverable under The
Gillette Company Outside Director's Stock Ownership Plan; (7) No. 33-53258,
filed April 25, 1994, and all amendments thereto, relating to shares issuable
and deliverable under The Gillette Company 1971 Stock Option Plan; (8) No.
33-59125, filed May 5, 1995, and all amendments thereto, relating to shares and
plan interests in The Gillette Company Employees' Savings Plan; (9) No. 33-63707
filed October 26, 1995, and all amendments thereto, relating to shares and plan
interests in the Parker Pen 401(K) Plan; (10) No. 333-19133 filed December 31,
1996, and all amendments thereto, relating to shares issuable and deliverable
under the Duracell Shares Plan and Stock Option Plan for Key Employees of
Duracell International Inc. and Subsidiaries and (11) No. 333-25533 filed April
21, 1997, and all amendments thereto, relating to shares issuable and
deliverable under The Gillette Company 1971 Stock Option Plan.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event a claim for indemnification against such liabilities (other than the
payments by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
10
12
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
Under date of February 11, 1999, we reported on the consolidated balance
sheet of The Gillette Company and subsidiary companies as of December 31, 1998
and 1997, and the related consolidated statements of income, cash flows and
stockholders' equity for each of the years in the three-year period ended
December 31, 1998, as contained in the 1998 Annual Report to Stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1998. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the financial statement schedule on page 12 of this report. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
February 11, 1999
11
13
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(MILLIONS OF DOLLARS)
ADDITIONS DEDUCTIONS
---------------------- ----------
CHARGED LOSSES
BALANCE AT TO CHARGED BALANCE AT
BEGINNING PROFIT CHARGED TO TO END OF
DESCRIPTION OF YEAR AND LOSS OTHER RESERVES YEAR
----------- ---------- -------- ---------- -------- ----------
1998
- -----
Reserves deducted from assets:
Receivables....................... $74 $43 -- $38 $79
=== === === === ===
1997
- -----
Reserves deducted from assets:
Receivables....................... $81 $42 -- $49 $74
=== === === === ===
1996
- -----
Reserves deducted from assets:
Receivables....................... $82 $42 $ 1* $44 $81
=== === === === ===
* Acquisition balances
12
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GILLETTE COMPANY
(Registrant)
By CHARLES W. CRAMB
------------------------------------
Charles W. Cramb
Senior Vice President, Chief
Financial Officer and
Principal Accounting Officer
Date: March 31, 1999
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
* ALFRED M. ZEIEN Chairman of the Board March 31, 1999
- ----------------------------------------------------- of Directors, Chief Executive Officer
Alfred M. Zeien and Director
* MICHAEL C. HAWLEY President, Chief Operating Officer March 31, 1999
- ----------------------------------------------------- and Director
Michael C. Hawley
* CHARLES W. CRAMB Senior Vice President, March 31, 1999
- ----------------------------------------------------- Chief Financial Officer and
Charles W. Cramb Principal Accounting Officer
* WARREN E. BUFFETT Director March 31, 1999
- -----------------------------------------------------
Warren E. Buffett
* WILBUR H. GANTZ Director March 31, 1999
- -----------------------------------------------------
Wilbur H. Gantz
* MICHAEL B. GIFFORD Director March 31, 1999
- -----------------------------------------------------
Michael B. Gifford
* CAROL R. GOLDBERG Director March 31, 1999
- -----------------------------------------------------
Carol R. Goldberg
* HERBERT H. JACOBI Director March 31, 1999
- -----------------------------------------------------
Herbert H. Jacobi
* HENRY R. KRAVIS Director March 31, 1999
- -----------------------------------------------------
Henry R. Kravis
* JORGE PAULO LEMANN Director March 31, 1999
- -----------------------------------------------------
Jorge Paulo Lemann
* RICHARD R. PIVIROTTO Director March 31, 1999
- -----------------------------------------------------
Richard R. Pivirotto
* ALEXANDER B. TROWBRIDGE Director March 31, 1999
- -----------------------------------------------------
Alexander B. Trowbridge
* MARJORIE M. YANG Director March 31, 1999
- -----------------------------------------------------
Marjorie M. Yang
*By CHARLES W. CRAMB
---------------------------------------------------
Charles W. Cramb
as Attorney-In-Fact
13