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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 2002
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-922
The Gillette Company
(Exact name of registrant as specified in its charter)
Incorporated in Delaware 04-1366970
(State or other jurisdiction of (I.R.S. 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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]
The aggregate market value of Gillette Common Stock held by non-affiliates as
of June 30, 2002, (the last day of our most recently completed second quarter)
was approximately $32,524,000,000.*
The number of shares of Gillette Common Stock outstanding as of January 31,
2003, was 1,044,224,346.
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
- ------------------------------------------------------------------------------- ---------------
1. The Gillette Company 2002 Annual Report
to Stockholders (the "2002 Annual Report") Parts I and II
2. The Gillette Company 2003 Proxy Statement (the "2003 Proxy Statement") Part III
* 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.
Part I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business
We manufacture and sell a wide variety of consumer products throughout
the world. We have five principal business segments: Blades and Razors,
Duracell, Oral Care, Braun and Personal Care. In 2000, we sold the Stationery
Products business.
Blades and Razors
We are the world leader in blades and razors. We sell male shaving
systems under the Mach3Turbo, Mach3, SensorExcel, Sensor, Atra and Trac II
brands, and disposable razors under the Custom Plus and Good News brands. On
November 7, 2002, we introduced the Sensor3 premium disposable razor for men
and women, our newest triple blade product, which is scheduled to be available
to consumers in North America in Spring 2003. Our female shaving systems are
sold under the Gillette for Women Venus, SensorExcel for Women and Sensor for
Women brands, and our disposable razors are sold under the Agility and Daisy
brands.
Duracell
We are the world leader in alkaline batteries for consumers. Our products
include the Duracell CopperTop and Duracell Ultra alkaline batteries and
Duracell primary lithium, zinc air and rechargeable nickel-metal hydride
batteries.
Oral Care
We are the world leader in manual and power toothbrushes. We offer manual
toothbrushes under the Oral-B brand and power toothbrushes under the Braun and
Oral-B brands.
Braun
We sell electric shavers under the Braun brand and hair epilators under
the Silk-Epil brand. These products include the number one foil electric shaver
for men and the number one hair epilator for women. We also sell small
household and personal diagnostic appliances under the Braun brand.
Personal Care
We sell shaving preparations, after-shave products and deodorants and
antiperspirants under the Gillette Series, Satin Care, Right Guard, Soft & Dri
and Dry Idea brands.
Founded in 1901, we are a Delaware corporation with our registered office
in Wilmington, Delaware. As of December 31, 2002, we had manufacturing
operations at 32 facilities in 15 countries. Our products are sold in over 200
countries and territories.
Business 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 on page 53 of this
report.
Distribution
In major geographic markets, our products are sold directly to retailers
and to wholesalers for resale through retail stores. Braun personal diagnostic
appliances and Oral Care products are also sold to health care professionals.
In some small geographic markets, our products are distributed by local
distributors and through sales agents. The Company's largest customer, Wal-Mart
Stores, Inc., and its affiliates, accounted for 12% of sales in both 2002 and
2001. These sales occurred primarily in the United States and were across all
product segments.
1
Patents
Some of our patents and licenses in the Blades and Razors segment are of
substantial value and importance when considered in the aggregate.
Additionally, we hold significant patents in our Duracell, Oral Care, Braun and
Personal Care businesses. No single patent or license held by us is material to
our total business. We have licensed many of our blade and razor patents to
other manufacturers. In all of these categories, our competitors also have
significant patent positions. The patents and licenses held by us are of
varying remaining durations.
Trademarks
In general, our principal trademarks have been registered in the United
States and throughout the world where our products are sold. Our 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 us. In addition, a number of other trademarks owned by
us and our subsidiaries have significant importance within their industries.
Our rights in these trademarks endure for as long as they are used or
registered.
Competition
All of our markets are highly competitive. Some of our competitors are
larger and have greater resources than we do. The Blades and Razors segment is
highly competitive in terms of new technology, as well as price, marketing,
advertising and promotion. Our major competitors worldwide in blades and razors
include Pfizer Inc., with its Schick product line, and, in North America and
Europe, its Wilkinson Sword product line (Pfizer recently announced the sale of
its blade and razor business to Energizer Holdings, Inc.); and Societe Bic S.A.
The Duracell segment is highly competitive in terms of price, marketing,
advertising and promotion. Competition in the Oral Care segment is focused on
product performance, price and professional endorsement. Competition in the
electric shaver and epilator product lines is based primarily on product
performance, innovation and price. The Personal Care segment is highly
competitive in terms of price, product innovation and market positioning, with
frequent introductions of new brands and marketing concepts, especially for
products sold through retail outlets, and with product life cycles typically
shorter than in our other businesses.
Employees
At year-end, we employed approximately 30,300 persons, over 70% of them
outside the United States.
Research and Development
Our research and development efforts are significant to our product
innovation, particularly in blades and razors. In 2002, research and
development expenditures were $185 million, compared with $187 million in 2001
and $179 million in 2000.
Raw Materials
The raw materials we use to manufacture our products are purchased from a
number of suppliers, and substantially all such materials are readily
available.
Operations by Geographic Area
Net sales and long-lived assets by geographic area for each of the last
three years appear at page 54 of this report.
Availability of Reports and Other Information
Our web site is www.gillette.com. On this web site, the public can access
our annual, quarterly and current reports, changes in the stock ownership of
our directors and executive officers, and other documents filed with the
Securities and Exchange Commission as soon as reasonably practicable after the
filing date.
In addition, under the section entitled, "Corporate Governance," we post
the latest versions of our Certificate of Incorporation, Bylaws, Corporate
Governance Principles, Committee Charters and Code of Ethics for Financial
Managers and the Chief Executive Officer, including any waivers from or
amendments to the Code of Ethics.
2
ITEM 2. DESCRIPTION OF PROPERTY
We own and lease manufacturing facilities and other real estate in the
United States and a number of foreign countries. Our executive offices are
located in the Prudential Tower Building, Boston, Massachusetts, where we hold
a long-term lease. The following table sets forth our principal facilities,
defined as those measuring 250,000 square feet or more.
Business Segment Location Owned/Leased
- --------------------- ------------------------------ -------------
Blades & Razors Boston, MA (US) Owned
Isleworth, UK Owned
Berlin, Germany Owned
Naucalli, Mexico Owned
Manaus, Brazil Owned
Hemel Hempstead, UK* Leased
Devens, MA (US)* Leased
Duracell Port Elizabeth, South Africa Owned
Aarschot, Belgium Owned
Dongguan, China Owned/Leased
Lancaster, SC (US) Owned
LaGrange, GA (US) Owned
Heist, Belgium* Leased
Bethel, CT (US) Owned
Oral Care Iowa City, IA (US) Owned
Braun Kronberg, Germany Owned/Leased
Barcelona, Spain Owned/Leased
Walldurn, Germany Owned/Leased
Marktheidenfeld, Germany Owned
Mexico City, Mexico Owned/Leased
Personal Care Andover, MA (US) Owned
Reading, UK Owned/Leased
Multisegment Romeoville, IL (US) Leased
Distribution Centers Ontario, CA (US) Leased
Devens, MA (US) Leased
Toronto, Canada Leased
Altfeld, Germany Owned
*Packaging center that also serves as warehouse/distribution facility.
The above facilities are in good repair, adequately meet our needs and
operate at reasonable levels of capacity.
ITEM 3. 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, 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 our consolidated
financial position, results of operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2002.
3
EXECUTIVE OFFICERS OF REGISTRANT
Information relating to our Executive Officers is set out below.
Name and Current Position Five-Year Business History Age
- --------------------------- ---------------------------------------------------------------- ----
James M. Kilts Chairman of the Board and Chief Executive Officer since 55
Chairman of the Board and January 2001 and February 2001, respectively; President and
Chief Executive Officer Chief Executive Officer, Nabisco Group Holdings Corp.,
December 1999 - December 2000; President and Chief
Executive Officer, Nabisco Holdings Corp. and Nabisco, Inc.,
January 1998 - December 1999; Executive Vice President,
Worldwide Food, Philip Morris Companies, January 1994 -
March 1997
Edward F. DeGraan President and Chief Operating Officer since July 2000; Acting 59
President and Chief Executive Officer, October 2000 - February 2001;
Chief Operating Officer Executive Vice President, Global Business Management,
January 2000 - July 2000; Executive Vice President, Global
Business Management, Gillette Grooming Products and
Duracell, January 1999 - January 2000; Executive Vice
President, Duracell North Atlantic Group, January 1997 -
December 1998
Michael T. Cowhig Senior Vice President, Global Manufacturing and Technical 56
Senior Vice President Operations, since September 2002; Senior Vice President,
Global Supply Chain and Business Development, January 2000
- August 2002; Senior Vice President, Manufacturing and
Technical Operations, Global Business Management -
Grooming, January 1999 - January 2000; Senior Vice
President, Manufacturing and Technical Operations, Gillette
North Atlantic Group, January 1997 - January 1999
Charles W. Cramb Senior Vice President, Finance, and Chief Financial Officer 56
Senior Vice President and since December 1999; Senior Vice President, Finance, Chief
Chief Financial Officer Financial Officer and Principal Accounting Officer, July 1997 -
December 1999; Vice President and Controller, July 1995 -
June 1997
Edward E. Guillet Senior Vice President, Human Resources, since July 2001; Vice 51
Senior Vice President President, Corporate Human Resources, July 1997 - June 2001
Peter Klein Senior Vice President, Strategy and Business Development, 56
Senior Vice President since March 2001; Executive Vice President, Strategy,
Business Development, Marketing Services and e-Business,
Nabisco Holdings Corp. and Nabisco, Inc., April 1998 -
December 2000; Partner and Managing Director, The
Cambridge Group, November 1991 - March 1998
4
Name and Current Position Five-Year Business History Age
- ---------------------------- -------------------------------------------------------------- ----
Kathy S. Lane Senior Vice President, Corporate Information Technology 45
Senior Vice President and and Applications, and Chief Information Officer since
Chief Information Officer March 2002; General Manager, eBusiness & IT, General
Electric Oil & Gas, December 2000 - March 2002; Senior
Vice President and Chief Information Officer, Vendor
Financial Services, General Electric Company, February 1999 -
December 2000; Manager, General Electric Corporate
Initiatives Group, General Electric Company, September 1998 -
February 1999; Director, Technology Services, Pepsi Cola
International, June 1997 - September 1998
John F. Manfredi Senior Vice President, Corporate Affairs, since March 2001; 62
Senior Vice President Executive Vice President, Corporate Affairs, Nabisco Holdings
Corp. and Nabisco, Inc., April 1995 - December 2000
Edward D. Shirley Senior Vice President, Global Value Chain and Global 46
Senior Vice President Marketing Resources, since May 2002; President, Commercial
Operations Europe, January 2000 - April 2002; President,
Business Development and Administration, Europe, January
1999 - December 1999; Executive Director, Group Sales,
Worldwide, Braun GmbH, April 1998 - December 1998;
Executive Director, Group Sales, Europe, Braun GmbH,
March 1997 - March 1998
Richard K. Willard Senior Vice President and General Counsel since November 54
Senior Vice President and 1999; Partner, Steptoe & Johnson LLP, 1988 - October 1999
General Counsel
Claudio E. Ruben Vice President, Controller and Principal Accounting Officer 55
Vice President, Controller since January 2001; Vice President, Investor Relations,
and Principal Accounting June 1999 - December 2000; Vice President, Internal Audit,
Officer February 1998 - June 1999; Vice President, Finance and
Administration, International Group, October 1995 -
January 1998
A. Bruce Cleverly President, Global Business Management - Oral Care, since 57
Vice President February 2001; Senior Vice President, Global Business
Management - Duracell, January 1999 - January 2001;
President, Oral-B Laboratories, February 1997 -
December 1998
Joseph F. Dooley President, Commercial Operations North America, since 49
Vice President July 2000; Senior Vice President, General Merchandise -
Commercial Operations Western Hemisphere, March 1999 -
June 2000; Senior Vice President and General Manager,
Duracell North America, September 1997 - February 1999
Ernst A. Haberli President, Commercial Operations International, since 54
Vice President October 2001; President, North American Tissue Operations
and Technology, Fort James Corporation, January 2000 -
December 2000; Director, Fort James Corporation, May 1998 -
December 2000; Executive Vice President and Chief
Financial Officer, Fort James Corporation, January 1997 -
December 1999
5
Name and Current Position Five-Year Business History Age
- --------------------------- ------------------------------------------------------------- ----
Peter K. Hoffman President, Global Business Management - Blades and Razors, 54
Vice President since January 2000; Senior Vice President, Grooming - Global
Business Management, January 1999 - December 1999;
President, Duracell North Atlantic, Commercial Operations,
January 1998 - December 1998; Senior Vice President,
Business Management, Gillette North America Group,
October 1995 - December 1997
Mark M. Leckie President, Global Business Management - Duracell, since 49
Vice President April 2001; President and Chief Executive Officer, Heinz
Canada, H.J. Heinz Company, October 2000 - April 2001;
President, U.S. Grocery Division, Campbell Soup Company,
September 1997 - June 1999
Joseph Scalzo President, Global Business Management - Personal Care, 44
Vice President since October 2001; Vice President, Worldwide Core Brand
Development, The Coca-Cola Company, February 2000 -
September 2001; Senior Vice President & Chief Marketing
Officer, Minute Maid Division, The Coca-Cola Company,
August 1998 - January 2000; Vice President and Managing
Director, U.S. Refrigerated Products, The Coca-Cola
Company, February 1997 - July 1998
The Executive Officers hold office until the first meeting of the Board
of Directors following the Annual Meeting of 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.
6
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 our common stock
appears in this report on the inside back cover under the caption, "Common
Stock," and is incorporated by reference, and at page 55 of this report under
the caption, "Quarterly Financial Information." As of January 31, 2003, there
were 45,103 Gillette stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears at page 56 of this report
under the caption, "Historical Financial Summary."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item appears at pages 22 through 30 of
this report under the caption, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
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 made by us, or on our behalf,
include the following, some of which are described in greater detail below:
- - the pattern of our sales, including variations in sales volume within
periods;
- - consumer demands and preferences, including the acceptance by our customers
and consumers of new products and line extensions;
- - the mix of products sold;
- - our ability to control our internal costs and the cost of raw materials;
- - competitive factors, including the prices, promotional incentives and trade
terms for our products, and our response, as well as those of our customers
and competitors, to changes in these terms, and business combinations and
divestitures of our competitors and customers;
- - our technological advances and/or those of our competitors;
- - new patents granted to us or our competitors;
- - changes in exchange rates in one or more of our geographic markets;
- - changes in laws and regulations, including trade regulations and tax laws,
governmental actions affecting the manufacturing and sale of our products,
unstable governments and legal systems, and nationalization of industries;
- - changes in accounting policies;
- - acquisition, divestiture or other collaborative activities; or
- - the impact of general political and economic conditions or hostilities in the
United States or in other countries in which we currently do business.
7
COMPETITIVE ENVIRONMENT
We experience intense competition for sales of our products in most
markets. Our products compete with widely advertised, well-known, branded
products, as well as private label products, which typically are sold at lower
prices. In most of our markets, we have major competitors, some of which are
larger and more diversified than we are. Aggressive competition within our
markets to preserve, gain or regain market share can affect our results in any
given period.
CHANGES IN TECHNOLOGY AND NEW PRODUCT INTRODUCTIONS
In most product categories in which we compete, there are continuous
technological changes and frequent introductions of new products and line
extensions. Our ability to successfully introduce new products and/or extend
lines of established products will depend on, among other things, our ability
to identify changing consumer tastes and needs, develop new technologies,
differentiate our products and gain market acceptance of new products. We
cannot be certain that we will successfully achieve these goals.
With respect specifically to primary alkaline batteries, category growth
could be adversely affected by the following additional factors:
- - technological or design changes in portable electronic and other devices that
use batteries as a power source;
- - continued improvement in the service life of primary batteries;
- - improvements in rechargeable battery technology; or
- - the development of new battery technologies.
INTELLECTUAL PROPERTY
We rely upon patent, copyright, trademark and trade secret laws in the
United States and in other countries to establish and maintain our proprietary
rights in technology, products and our brands. Our intellectual property
rights, however, could be challenged, invalidated or circumvented. We do not
believe that our products infringe the intellectual property rights of others,
but such claims, if they are established, can result in material liabilities or
loss of business.
COST-SAVINGS STRATEGY
We have implemented and approved a number of programs designed to reduce
costs. Such programs will require, among other things, the consolidation and
integration of facilities, functions, systems and procedures, all of which
present significant management challenges. There can be no assurance that such
actions will be accomplished as rapidly as anticipated or that the full extent
of expected cost reductions will be achieved.
SALES AND OPERATIONS OUTSIDE OF THE UNITED STATES
Sales outside of the United States represent a substantial portion of our
business. In addition, we have a number of manufacturing facilities and
suppliers located outside of the United States. Accordingly, the following
factors could adversely affect operating results in any reporting period:
- - changes in political or economic conditions;
- - trade protection measures;
- - import or export licensing requirements;
- - changes in the mix of earnings taxed at varying rates;
- - unexpected changes in regulatory requirements or tax laws; or
- - longer payment cycles in certain countries.
We are also exposed to foreign currency exchange rate 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.
8
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 retail trade customers to provide more favorable
trade terms.
We can be negatively affected by changes in the policies of our retail
trade customers, such as inventory destocking, limitations on access to shelf
space and other conditions. Many of our customers, particularly our high-volume
retail trade customers, have engaged in accelerated efforts to reduce inventory
levels and shrinkage and to change inventory delivery systems. While we expect
the level of trade inventory of our products to decline over time, the speed
and magnitude of such reductions and/or our inability to develop satisfactory
inventory delivery systems could adversely affect operating results in any
reporting period.
EFFECT OF POTENTIAL MILITARY ACTION OR WAR
The threat of potential military action or war, as well as attendant
political activity, has created an atmosphere of economic uncertainty
throughout the world. Our results may be impacted by the macroeconomic effects
of those events. A disruption in our supply chain as a result of such actions
may significantly affect our business and its prospects. In addition, such
events may also result in heightened domestic security and higher costs for
importing and exporting shipments of components and finished goods. Any of
these occurrences may have a material adverse effect on our financial position,
cash flow or results in any reporting period.
ITEM 7A. DISCLOSURES CONCERNING MARKET RISK SENSITIVE INSTRUMENTS
The information required by this item appears at pages 26 and 27 of this
report under the caption, "Market Risk."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements and Supplementary Data for The
Gillette Company and Subsidiary Companies appear in this report at the pages
indicated below.
(1) Independent Auditors' Report Page 31
(2) Consolidated Statement of Income for the Years Ended
December 31, 2002, 2001 and 2000 Page 32
(3) Consolidated Balance Sheet at December 31, 2002 and 2001 Page 33
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000 Page 34
(5) Consolidated Statement of Stockholders' Equity for the Years
Ended December 31, 2002, 2001 and 2000 Page 35
(6) Notes to Consolidated Financial Statements Pages 36 through 55
(7) Pages 32, 38, 39, 40,
Computation of Per Share Earnings 55, 56
(8) Quarterly Financial Information Page 55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
9
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item with respect to our Directors
appears in the 2003 Proxy Statement under the captions, "Election of
Directors," "Transactions with Directors and Management" and "Section 16(a)
Beneficial Ownership Reporting Compliance," and is incorporated by reference.
The information required for our Executive Officers appears at the end of Part
I of this report at pages 4 through 6.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the 2003 Proxy Statement
under the captions, "Director Compensation and Stock Ownership," "Executive
Compensation," "Compensation Committee Report," and "Gillette Comparative
Five-Year Performance Graph," and is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Except for the information concerning equity compensation plans, the
information required by this item is incorporated by reference from our 2003
Proxy Statement under the caption, "Securities Ownership of Directors and
Officers."
The following table gives information about our common stock that may be
issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2002, including the 1971
Stock Option Plan, the Duracell Shares Plan and the James M. Kilts
Non-Statutory Stock Option Plan.
Number of securities
remaining available
for future issuance
Number of securities under equity
to be issued upon Weighted-average compensation plans
exercise of outstanding exercise price of (excluding securities
options, warrants and outstanding options, reflected in the
Plan Category rights warrants and rights first column)
- --------------------------------------- ------------------------- ---------------------- ----------------------
Equity compensation plans approved
by security holders(1) 76,538,023 $37.33 28,254,171
Equity compensation plans not approved
by security holders(2) 2,000,000 $34.16 --
---------- ------ ----------
Total 78,538,023 $37.25 28,254,171
---------- ------ ----------
(1) Includes 49,270 options at a weighted-average exercise price of $30.56
remaining in the Duracell Shares Plan assumed by the Company upon its merger
with Duracell in 1996. The plan will cease to exist when all outstanding
options have been exercised.
(2) Represents stock options granted to the Chief Executive Officer at the time
of his employment. A description of the material terms of the award can be
found at pages 51 and 52 of this report under the caption, "Stock Compensation
Plans and Capital Stock."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the 2003 Proxy Statement
under the captions, "Transactions with Directors and Management" and
"Employment Contracts, Termination of Employment and Change-in-Control
Arrangements," and is incorporated by reference.
10
ITEM 14. CONTROLS AND PROCEDURES
As of a date within 90 days prior to the filing of this report (the
"Evaluation Date"), the Chief Executive Officer and Chief Financial Officer
evaluated the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14), and they have concluded that the
Company's disclosure controls and procedures are effective to bring to their
attention material information relating to the Company for the purposes of this
report. In addition, they have concluded that there have been no significant
changes in the Company's internal controls or in other factors that could
significantly affect those internal controls, including any corrective actions
with regard to significant differences and material weaknesses, subsequent to
the Evaluation Date.
11
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM
8-K
A. Financial Statements, Schedules and Exhibits
Financial Statements
The following appear in this report at the pages indicated below and are
incorporated into Part II by reference.
(1) Independent Auditors' Report Page 31
(2) Consolidated Statement of Income for the Years Ended
December 31, 2002, 2001 and 2000 Page 32
(3) Consolidated Balance Sheet at December 31, 2002 and 2001 Page 33
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000 Page 34
(5) Consolidated Statement of Stockholders' Equity for the Years
Ended December 31, 2002, 2001 and 2000 Page 35
(6) Notes to Consolidated Financial Statements Pages 36 through 55
(7) Pages 32, 38, 39, 40,
Computation of Per Share Earnings 55, 56
Schedules
All required schedule information is included in the Notes to
Consolidated Financial Statements or is omitted because it is either not
required or not applicable.
Exhibits
3 (a) Composite Certificate of Incorporation of The Gillette Company, as
amended, filed as Exhibit 1.1 to The Gillette Company Registration
Statement on Form 8-A on January 11, 2001, Commission File No. 1-922,
incorporated by reference herein.
(b) The Bylaws of The Gillette Company, as amended March 14, 2002, filed as
Exhibit 3(a) to The Gillette Company Quarterly Report on Form 10-Q for
the period ended March 31, 2002, Commission File No. 1-922,
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 January 21, 2003,
filed herewith.
(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. 1-922, incorporated
by reference herein.
(c) Amendment to Certificate of Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock of The Gillette Company,
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,
Commission 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. 1-922, incorporated by reference
herein.
(e) 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.
12
(f) Registration Statement filed on Form 8-A, dated January 11, 2001,
revising the description of The Gillette Company's registered
securities and corresponding rights, Commission File No. 1-922,
incorporated by reference herein.
The Company has issued long-term debt and will furnish copies of the
instruments defining the rights of holders of such debt to the Commission
upon request.
10 Material Contracts
*(a) The Gillette Company 1971 Stock Option Plan, as amended, filed as
Exhibit 10(a) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 2001, Commission File No. 1-922, incorporated by
reference herein.
*(b) The Gillette Company Stock Equivalent Unit Plan, as amended, filed as
Appendix B to the 2001 Proxy Statement, Commission File No. 1-922,
incorporated by reference herein.
*(c) The Gillette Company Incentive Bonus Plan, as amended, filed as Appendix
D to the 2001 Proxy Statement, Commission File No. 1-922, incorporated
by reference herein.
*(d) The Gillette Company Executive Life Insurance Program, as amended, filed
as Exhibit 10(d) to The Gillette Company Annual Report on Form 10-K for
the year ended December 31, 2000, Commission File No. 1-922,
incorporated by reference herein.
*(e) The Gillette Company Deferred Compensation Plan for Outside Directors,
as amended, filed as Exhibit 10(e) to The Gillette Company Annual Report
on Form 10-K for the year ended December 31, 2001, Commission File No.
1-922, incorporated by reference herein.
*(f) Employment Agreement, dated January 19, 2001, between The Gillette
Company and James M. Kilts, as amended, filed as Exhibit 10(a) to The
Gillette Company Quarterly Report on Form 10-Q for the period ended
September 30, 2001, Commission File No. 1-922, incorporated by reference
herein.
*(g) Amendment to Employment Agreement, dated January 19, 2001, between The
Gillette Company and James M. Kilts, filed as Exhibit 10.1 to The
Gillette Company Quarterly Report on Form 10-Q for the period ended
September 30, 2002, Commission File No. 1-922 incorporated by reference
herein.
*(h) Stock Option Agreement, dated January 19, 2001, between The Gillette
Company and James M. Kilts, filed herewith. (Filed previously as Exhibit
A to Employment Agreement, dated January 19, 2001, between The Gillette
Company and James M. Kilts, as amended, filed as Exhibit 10(a) to The
Gillette Company Quarterly Report on Form 10-Q for the period ended
September 30, 2001, Commission File No. 1-922.)
*(i) Employment Agreement, dated March 19, 2002, between The Gillette Company
and Edward F. DeGraan, filed as Exhibit 10(i) to The Gillette Company
Annual Report on Form 10-K for the year ended December 31, 2001,
Commission File No. 1-922, incorporated by reference herein.
*(j) Form of Agreement Relating to Change of Control between The Gillette
Company and its Executive Officers, filed as Exhibit 10(j) to The
Gillette Company Annual Report on Form 10-K for the year ended December
31, 2001, Commission File No. 1-922, incorporated by reference herein.
*(k) Form of Agreement Relating to Terms of Employment between The Gillette
Company and its named Executive Officers other than Messrs. Kilts and
DeGraan, filed as Exhibit 10(k) to The Gillette Company Annual Report on
Form 10-K for the year ended December 31, 2001, Commission File No.
1-922, incorporated by reference herein.
(l) 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.
*(m) Description of The Gillette Company Personal Financial Planning
Reimbursement Program, as amended, filed as Exhibit 10(q) to The
Gillette Company Annual Report on Form 10-K for the year ended December
31, 2000, Commission File No. 1-922, incorporated by reference herein.
*(n) 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, Commission File No. 1-922, incorporated by reference
herein.
13
*(o) The Gillette Company Supplemental Retirement Plan, as amended, filed as
Exhibit 10(v) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1999, Commission File No. 1-922, incorporated by
reference herein.
*(p) The Gillette Company Supplemental Savings Plan, as amended, filed as
Exhibit 10(p) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 2001, Commission File No. 1-922, incorporated by
reference herein.
(q) $1,100,000,000 364-Day Credit Agreement, dated as of October 15, 2002,
among The Gillette Company, JPMorgan Chase Bank, as agent, and a
syndicate of domestic and foreign banks, filed as Exhibit 10.2 to The
Gillette Company Quarterly Report on Form 10-Q for the period ended
September 30, 2002, Commission File No. 1-922, incorporated by
reference herein.
12 Statement regarding Computation of Ratio of Earnings to Fixed Charges,
filed herewith.
13 Portions of the 2002 Annual Report to Stockholders of The Gillette
Company incorporated by reference in this Form 10-K, filed herewith.
21 List of Subsidiaries of The Gillette Company, filed herewith.
23 Independent Auditors' Consent, filed herewith.
24 Power of Attorney, filed herewith.
99 Additional Exhibits
(a) Certification pursuant to 18 U.S.C. Section 1350 by the Chief Executive
Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
(b) Certification pursuant to 18 U.S.C. Section 1350 by the Chief Financial
Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
* Management contract or compensatory plan or arrangement.
B. REPORTS ON FORM 8-K IN THE FOURTH QUARTER
The Company filed a current report on Form 8-K on October 29, 2002,
containing one exhibit: the press release issued by the Company on October 25,
2002.
14
SIGNATURES
Pursuant to the requirements of Section 13 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: /s/ CHARLES W. CRAMB
------------------------------------
Charles W. Cramb
Senior Vice President and Chief Financial
Officer
Date: March 4, 2003
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
- ------------------------- ------------------------------ --------------
* JAMES M. KILTS Chairman of the Board March 4, 2003
- ----------------------- of Directors, Chief Executive
James M. Kilts Officer and Director
* EDWARD F. DEGRAAN President, Chief Operating March 4, 2003
- ----------------------- Officer and Director
Edward F. DeGraan
* CHARLES W. CRAMB Senior Vice President and March 4, 2003
- ----------------------- Chief Financial Officer
Charles W. Cramb
* CLAUDIO E. RUBEN Vice President, Controller March 4, 2003
- ----------------------- and Principal Accounting
Claudio E. Ruben Officer
* WARREN E. BUFFETT Director March 4, 2003
- -----------------------
Warren E. Buffett
* WILBUR H. GANTZ Director March 4, 2003
- -----------------------
Wilbur H. Gantz
* MICHAEL B. GIFFORD Director March 4, 2003
- -----------------------
Michael B. Gifford
* RAY J. GROVES Director March 4, 2003
- -----------------------
Ray J. Groves
* DENNIS F. HIGHTOWER Director March 4, 2003
- -----------------------
Dennis F. Hightower
* HERBERT H. JACOBI Director March 4, 2003
- -----------------------
Herbert H. Jacobi
* NANCY J. KARCH Director March 4, 2003
- -----------------------
Nancy J. Karch
* JORGE PAULO LEMANN Director March 4, 2003
- -----------------------
Jorge Paulo Lemann
* RICHARD R. PIVIROTTO Director March 4, 2003
- -----------------------
Richard R. Pivirotto
* MARJORIE M. YANG Director March 4, 2003
- -----------------------
Marjorie M. Yang
*By /s/ CHARLES W. CRAMB
---------------------
Charles W. Cramb
for himself and
as Attorney-In-Fact
15