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, 1995 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 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 June 30, 1995 . . . . . . . . . . . . . . . . . 443,425,783
<PAGE>
<PAGE>
<TABLE>
PAGE 1
PART I. FINANCIAL INFORMATION
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales........................................ $1,601.0 $1,406.5 $3,137.0 $2,767.6
Cost of Sales.................................... 574.8 500.4 1,142.3 999.0
Gross Profit................................. 1,026.2 906.1 1,994.7 1,768.6
Selling, General and Administrative expenses..... 704.3 613.1 1,343.7 1,178.5
Profit from operations....................... 321.9 293.0 651.0 590.1
Non-operating Charges (Income):
Interest income................................ (3.1) (5.7) (4.7) (11.2)
Interest expense............................... 14.2 13.9 27.4 27.3
Exchange....................................... 4.9 29.6 7.0 61.5
Other charges - net............................ 1.9 (1.3) 8.4 (3.3)
17.9 36.5 38.1 74.3
Income before Income Taxes .................. 304.0 256.5 612.9 515.8
Income Taxes..................................... 110.9 94.3 223.7 189.6
Net Income................................... 193.1 162.2 389.2 326.2
Preferred Stock dividends, net of tax benefit.... 1.1 1.1 2.3 2.3
Net Income Available to Common Stockholders...... $ 192.0 $ 161.1 $ 386.9 $ 323.9
Net Income per Common Share...................... $ .43 $ .36 $ .87 $ .73
Dividends declared per common share.............. $ .15 $ .125 $ .15 $ .125
Average number of common shares outstanding
(thousands) 443,278 442,162 443,151 442,038
<FN>
1994 per share amounts and average number of shares outstanding have been restated to give
effect to the two-for-one stock split effected as a 100% common stock dividend to holders
of record on June 1, 1995.
See Accompanying Notes to Consolidated Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
PAGE 2
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
(Millions of dollars)
(Unaudited)
<CAPTION>
June 30 December 31
1995 1994
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................... $ 61.9 $ 43.8
Short-term investments, at cost, which
approximates market value................. 3.0 2.3
Receivables, less allowances of $47.6
($52.1 at 12/31/94)...................... 1,259.2 1,379.5
Inventories:
Raw materials and supplies............... 225.6 207.3
Work in process.......................... 127.7 95.0
Finished goods........................... 724.4 638.9
Total Inventories...................... 1,077.7 941.2
Deferred Income Taxes........................ 258.7 267.6
Prepaid expenses............................. 106.7 113.0
Total Current Assets................... 2,767.2 2,747.4
Property, Plant and Equipment, at cost........... 3,069.6 2,902.2
Less accumulated depreciation............ 1,609.7 1,491.2
Net Property, Plant and Equipment...... 1,459.9 1,411.0
Intangible Assets, less accumulated amortization 892.5 887.4
Deferred Income Taxes............................ 124.5 133.6
Other Assets..................................... 371.7 314.6
$5,615.8 $5,494.0
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
<PAGE>
<TABLE>
PAGE 3
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(Millions of dollars)
(Unaudited)
<CAPTION>
June 30 December 31
1995 1994
<S> <C> <C>
Current Liabilities:
Loans payable................................ $ 475.8 $ 344.4
Current portion of long-term debt............ 28.6 28.1
Accounts payable............................. 283.1 334.6
Accrued liabilities.......................... 618.4 788.2
Dividends payable............................ - 55.4
Deferred Income Taxes........................ 40.9 47.0
Income taxes................................. 201.3 185.5
Total Current Liabilities................. 1,648.1 1,783.2
Long-Term Debt................................... 554.5 715.1
Deferred Income Taxes............................ 197.9 186.7
Other Long-Term Liabilities...................... 906.9 774.3
Minority Interest................................ 19.2 17.4
Stockholders' Equity:
8.0% Cumulative Series C ESOP Convertible
Preferred, without par value, issued: 1995,
162,219 shares; 1994, 162,928 shares....... 97.8 98.2
Unearned ESOP Compensation................... (39.3) (44.2)
Common stock, par value $1.00 per share:
Authorized 1,160,000,000 shares
Issued: 1995, 558,740,839 shares;
1994, 558,242,410 shares........... 558.7 558.2
Additional paid-in capital................... 6.2 (1.4)
Earnings reinvested in the business.......... 3,150.6 2,830.2
Cumulative foreign currency
translation adjustments.................... (438.4) (377.1)
Treasury stock, at cost:
1995, 115,315,056 shares;l994, 115,343,404 shares (1,046.4) (1,046.6)
Total Stockholders' Equity............... 2,289.2 2,017.3
$5,615.8 $5,494.0
<FN>
1994 common stock, treasury stock and additional paid-in capital have been
restated to give effect to the two-for-one stock split effected as a 100%
common stock dividend to holders of record on June 1, 1995.
See Accompanying Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<PAGE>
<TABLE>
PAGE 4
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
1995 1994
<S> <C> <C>
Operating Activities
Net income $ 389.2 $ 326.2
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 112.9 100.6
Other .7 9.7
Changes in assets and liabilities, net of
effects from acquisition of businesses:
Accounts receivable 119.4 141.2
Inventories (130.8) (163.2)
Accounts payable and accrued liabilities (230.3) (185.1)
Other working capital items 50.4 (3.2)
Other non-current assets and liabilities 27.0 89.1
Net cash provided by operating activities 338.5 315.3
Investing Activities
Additions to property, plant & equipment (147.1) (150.7)
Disposals of property, plant & equipment 13.0 8.5
Acquisition of businesses, less cash acquired (16.4) (5.3)
Other (1.4) 8.0
Net cash used in investing activities (151.9) (139.5)
Financing Activities
Proceeds from exercise of stock option and
purchase plans 6.4 7.2
Decrease in long-term debt (9.2) (42.8)
Increase/(decrease) in loans payable (42.5) 30.9
Dividends paid (124.2) (104.1)
Net cash used in financing activities (169.5) (108.8)
Effect of Exchange Rate Changes on Cash 1.0 .3
Increase in Cash and Cash Equivalents 18.1 67.3
Cash and Cash Equivalents at Beginning of Year 43.8 37.1
Cash and Cash Equivalents at End of Quarter $ 61.9 $ 104.4
Supplemental disclosure of cash paid for:
Interest $ 28.2 $ 17.5
Income taxes $ 118.6 $ 113.4
Non-cash investing and financing activities:
Acquisition of businesses:
Fair value of assets acquired $ 16.4 $ 3.5
Cash paid 16.4 5.3
Liabilities assumed $ - $ (1.8)
<FN>
See Accompanying Notes to Consolidated Financial Statements
/TABLE
<PAGE>
<PAGE> PAGE 5
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Comments
Reference is made to the registrant's 1994 annual report to stockholders,
which contains, at pages 28 through 40, financial statements and the notes
thereto.
For interim reporting purposes, advertising expenses are charged to operations
as a percentage of sales based on estimated sales and advertising expense for
the full year.
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, consisting only of normal recurring accruals necessary to a
fair presentation of the results for such interim periods, have been included.
Realignment Reserve Status
In the fourth quarter of 1993, the Company established a reserve for a
realignment plan resulting in a 1993 fourth quarter charge to profit from
operations of $262.6 million ($164.1 million after taxes, or $.37 per share).
The realignment reserve included costs that are classified into two major
categories as follows:
1. Costs associated with the closure and disposal of major manufacturing
facilities in all business segments, due principally to excess
manufacturing capacity caused by falling global trade barriers.
2. Costs associated with organizational realignment and related work force
reductions to improve the Company's competitive positioning of its
business and adaptation to the continuing trend of more open world
trade.
A summary of these realignment costs follows:
Pre-Tax $ Millions
Original Charges Reserve
Realignment Through Balance
Reserve 6/30/95 6/30/95
1. Closure of manufacturing facilities $72.0 $39.2 $32.8
2. Other Realignment Activities
a) Integration of various functions 41.6 27.5 14.1
b) Downsizing of operations 80.2 55.8 24.4
c) Integration of Parker Pen 14.9 11.4 3.5
d) Other asset impairments 53.9 43.2 10.7
Total $262.6 $177.1 $ 85.5
Through June 30, 1995, 1,757 positions were eliminated. The realignment
program continues to be implemented, and realignment activities are
planned to be ongoing through the fourth quarter 1995 with some charges
continuing into 1996.<PAGE>
<PAGE>
PAGE 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
In reviewing the following analysis, it should be understood that results
for any interim period are not necessarily indicative of the results for the
entire year.
Second Quarter 1995 versus 1994
Sales for the quarter ended June 30, 1995, were $1.60 billion, a 14%
increase over the same quarter of the prior year. This gain reflected a 9%
increase from volume and new products and a 5% favorable combined effect of
fluctuations in exchange rates and in selling prices. Profit from
operations was $321.9 million, up 10% from $293.0 million reported in the
second quarter of 1994. Net income of $193.1 million increased 19% compared
with $162.2 million a year earlier. Net income per common share of $.43
gained 19% over the $.36 reported a year earlier. Sales from foreign
operations increased substantially over those of the prior year and domestic
sales were higher.
Sales of the Company's blade and razor products were substantially higher in
the quarter, and profits were considerably higher than those of the prior
year. This increase reflects the impact of geographic expansion, the
continued growth of the Gillette Sensor, SensorExcel and Sensor for Women
Shaving Systems and the Custom Plus disposable razor and the improving
European currencies and economic conditions.
Sales of Braun products rose significantly, particularly in Europe and
Japan. The growth of new products, the ongoing introduction of the new Flex
Integral shaver in Japan and selected European markets and the favorable
response to the Braun Oral-B plaque remover contributed to this sales
increase. Profits were substantially higher, due primarily to sales of
products with higher profit margins.
Toiletries and cosmetics sales were moderately above those of the prior
year. The expansion of the Gillette Series male grooming line in
Continental Europe, the continuing growth of clear gel deodorant/
antiperspirant products in the United States and Europe and the successful
launch of Satin Care, the new female shaving gel, contributed to the
increase. The devaluation of the Mexican Peso negatively affected Jafra
sales and profits. Impacted by the marketing support given to new products
and by Jafra, profits were sharply lower, but were partly offset by a
significant improvement in Europe.
Sales of stationery products surpassed those of the prior year, due
principally to increases in Asia-Pacific and European markets. Profits were
sharply higher as gains in the United States, Europe and Asia Pacific were
partly offset by lower sales in Latin America.
Oral-B sales in the second quarter climbed sharply from those of the prior
year's second quarter with gains in international markets and in the United
States. Profits were significantly higher, primarily in the United States.
<PAGE>
<PAGE>
PAGE 7
Six Months 1995 versus 1994
Sales for the six months ended June 30, 1995 were $3.14 billion, a 13%
increase over the $2.77 billion reported in the same period of the prior
year. This gain reflected a 9% increase from volume and new products
and a 4% favorable combined effect of fluctuations in exchange rates and
in selling prices. Sales from foreign operations increased
substantially over those of the prior year, while domestic sales rose
modestly.
Sales and profits of the Company's blade and razor products were sharply
higher than those of the prior year. This increase was attributable to
geographic expansion, the continued growth of the Gillette Sensor
franchise, including SensorExcel and Sensor for Women, the Custom Plus
disposable razor and the improving European currencies and economic
conditions.
Sales of Braun products climbed sharply over those of the prior year
particularly in the major markets of Germany and Japan. The growth of
new products, the introduction of the new Flex Integral shaver and the
favorable response to the Supervolume hairstyling appliance and the
Braun Oral-B plaque remover contributed to this sales increase,
Profits were substantially higher, aided by an emphasis on sales of
products with higher profit margins.
Toiletries and cosmetics sales rose moderately over those of the prior
year. The increase was due to the expansion of the Gillette Series male
grooming line in Continental Europe, the continuing growth of clear gel
deodorant/antiperspirant products in the United States and Europe, and
the introduction of Satin Care female shaving gel. Sales and profits
were unfavorably impacted by the devaluation of the Mexican Peso.
Profits were well below those of the prior year, as the impact of Jafra
Mexico offset significant gains in Europe and the United States.
Sales of stationery products exceeded those of the prior year due to
increases in Asia-Pacific and European markets. Profits also advanced,
as gains in the United States, Europe and Asia-Pacific were offset by
lower sales in Latin America due to currency fluctuations in Brazil and
Mexico.
Oral-B sales were well above those of the prior year, as the success of
new products contributed to substantial gains in international markets,
which were partly offset by a moderate decline in the United States.
Profits were sharply lower, primarily in the United States, due to costs
associated with new products.
The approximate percentages of consolidated net sales for each of the
Company's business segments are set forth below.
<PAGE>
<PAGE>
PAGE 8
Blades Toiletries
& & Stationery Braun Oral-B
Period Razors Cosmetics Products Products Products
Six Months 1995 38% 18% 13% 24% 7%
Six Months 1994 38% 19% 14% 22% 7%
Gross profit was $1,994.7 million, an increase of $226.1 million, or 13%,
from 1994. The gross profit percentage of sales was 63.6%, compared with
63.9% for the same period in 1994. The decrease is attributable to higher
costs in Brazil, reflecting the lower devaluation of its currency. This is
offset in Non-Operating Charges by substantially lower exchange losses.
Selling, general and administrative expenses increased by $165.2 million, or
14%. Combined advertising and sales promotion expenses were the primary
contributors to this change, increasing 18% over those of the prior year.
Spending on research and development increased 9%, while other marketing and
administrative expenses increased 12%.
Profit from operations was $651.0 million, up 10% from $590.1 million a year
earlier. Profit from operations increased significantly in foreign
operations and remained level in the United States.
Net exchange losses were substantially lower than those of the prior year,
due to the stablization of the Brazilian currency. The effective tax rate
was lower for the six-month period, while net interest expense was higher.
Net income of $389.2 million increased 19%, compared with $326.2 million in
1994. Net income per common share of $.87 increased 19% over the $.73
reported a year earlier.
* * * * * *
Interim financial results may also be viewed on an organizational basis. For
this purpose, operating profits from major operational units are reported
before net corporate headquarters expense, net interest expense, exchange
losses and income taxes.
Sales of the North Atlantic Group in the quarter were significantly higher,
and for the six months considerably higher, than those of the corresponding
periods of a year ago. Operating profits in the quarter and for the six
months were significantly above those of last year.
Sales of the International Group in the quarter and for the six months were
sharply above those of last year. Profits in the quarter were higher
than,and for the six months were well above, those of last year.
The Diversified Group's sales and profits, which now include results of the
Stationery Group, increased substantially in the quarter and for the six
months, compared with those of the prior year.
<PAGE>
<PAGE>
PAGE 9
Financial Condition
Net cash provided by operating activities for the six months ended
June 30, 1995, amounted to $339 million, compared with $315 million in the
same period last year. The increase in 1995 was the result of lower working
capital requirements and higher Net Income.
Net debt (total debt, net of associated swaps, less cash and short-term
investments) at June 30, 1995, amounted to $1.05 billion, compared with $1.04
billion at year-end 1994. The Company's current ratio at June 30, 1995, was
1.68, compared with 1.54 at December 31, 1994.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to legal proceedings and claims arising out of its
business, which cover a wide range of matters, including antitrust and trade
regulation, product liability, contracts, environmental issues, patent and
trademark matters and taxes. Management, after review and consultation with
counsel, considers that any liability from all of these legal proceedings and
claims would not materially affect the consolidated financial position,
results of operations, or liquidity of the Company.
<PAGE>
<PAGE>
PAGE 10
Item 6 (a) Exhibits
<TABLE>
Exhibit 11
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(Millions of dollars, except per share amounts; shares in millions)
<CAPTION>
Six Months Ended June 30
1995 1994
<S> <C> <C>
Net Income Per Common Share-Assuming No Dilution
Net income as reported....................... $ 389.2 $ 326.2
Less: Preferred Stock Dividends, net of tax
benefit............................... (2.3) (2.3)
Net income available to Common Shareholders.. $ 386.9 $ 323.9
Average common shares outstanding............ 443.2 442.0
Reported net income per common share......... $ .87 $ .73
Net Income Per Common Share-Assuming Full Dilution
Net income available to Common Shareholders
(As Above)................................. $ 386.9 $ 323.9
Add: Series C ESOP Preferred Stock Dividend,
net of tax benefit......................... 2.3 2.3
Deduct: Add'l. ESOP Costs, net of tax benefit (.8) (1.1)
Adjusted Net Income available to common share-
holders.................................... $ 388.4 $ 325.1
Average common shares outstanding............ 443.2 442.0
Add: Conversion of Series C ESOP Preferred
Stock.................................. 6.5 6.6
Net additional common shares upon
exercise of stock options.............. 5.0 3.7
Adjusted average common shares outstanding... 454.7 452.3
Net income per common share -
assuming full dilution..................... $ .85 $ .72
1994 per share amounts and average number of shares outstanding have been
restated to give effect to the two-for-one stock split effected as a 100%
common stock dividend to holders of record on June 1, 1995.
</TABLE>
Exhibit 27 Financial Data Schedule filed herewith.
Item 6 (b). Reports on Form 8-K
There were no reports on Form 8-K filed by the Company during the period
covered by this report.<PAGE>
<PAGE>
PAGE 11
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)
THOMAS F. SKELLY
Thomas F. Skelly
Senior Vice President and
Chief Financial Officer
July 27, 1995
CHARLES W. CRAMB
Charles W. Cramb
Vice President, Controller and
Principal Accounting Officer
July 27, l995
<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data reported in this exhibit are based on unaudited statements but
include all adjustments which the company considers necessary for a fair
presentation of results for this period.
</LEGEND>
<CIK> 0000041499
<NAME> THE GILLETTE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 61,900
<SECURITIES> 3,000
<RECEIVABLES> 1,306,800
<ALLOWANCES> 47,600
<INVENTORY> 1,077,700
<CURRENT-ASSETS> 2,767,200
<PP&E> 3,069,600
<DEPRECIATION> 1,609,700
<TOTAL-ASSETS> 5,615,800
<CURRENT-LIABILITIES> 1,648,100
<BONDS> 554,400
<COMMON> 558,700
0
97,800
<OTHER-SE> 1,632,700
<TOTAL-LIABILITY-AND-EQUITY> 5,615,800
<SALES> 3,137,000
<TOTAL-REVENUES> 3,137,000
<CGS> 1,142,300
<TOTAL-COSTS> 1,142,300
<OTHER-EXPENSES> 1,347,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,400
<INCOME-PRETAX> 612,900
<INCOME-TAX> 223,700
<INCOME-CONTINUING> 389,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 389,200
<EPS-PRIMARY> .87
<EPS-DILUTED> .85
</TABLE>
