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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 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
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
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
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
------------------------------------------------ -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-421-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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<S> <C>
COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
BOSTON STOCK EXCHANGE
MIDWEST STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
</TABLE>
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 [X].
The aggregate market value of Gillette Common Stock held by non-affiliates
as of March 1, 1996 was approximately $21,261,000,000.*
The number of shares of Gillette Common Stock outstanding as of March 1,
1996 was 444,793,019.
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
Certain portions of the following documents have been incorporated by
reference into the 10-K Parts indicated:
<CAPTION>
DOCUMENTS 10-K PARTS
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<S> <C>
1. The Gillette Company 1995 Annual Report to Stockholders
(the "1995 Annual Report")............................................... Parts I and II
2. The Gillette Company 1996 Proxy Statement (The "1996 Proxy Statement")... Part III
</TABLE>
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* This amount does not include the value of 160,405.0563 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.
A description of the Company and its businesses appears in the 1995 Annual
Report on the inside front cover, at page 2, at pages 3 through 5 under the
caption "Letter to Stockholders" and at page 45 under the caption "Principal
Divisions and Subsidiaries," the texts of which are incorporated by reference.
See also Item 7, "Management's Discussion".
BUSINESS SEGMENTS
The approximate percentages of consolidated net sales and segment profit
from operations during the last five years for each of the Company's business
segments appear in the 1995 Annual Report at page 41 under the caption,
"Business Segments," and are incorporated by reference.
"Financial Information by Business Segment," and "Segment and Area
Commentary" containing information on net sales, profit from operations,
identifiable assets, capital expenditures and depreciation for each of the last
three years, appear in the 1995 Annual Report at page 40 and are incorporated by
reference.
The Company's businesses range across several industry segments, including
blades and razors, toiletries and cosmetics, stationery products, electric
shavers, small household appliances, hair care appliances, oral care appliances
and oral care products. Descriptions of those businesses appear in the 1995
Annual Report at pages 6 through 15, the text of which is incorporated by
reference.
DISTRIBUTION
In the Company's major markets, traditional Gillette product lines are sold
to wholesalers, chain stores and large retailers and are resold to consumers
primarily through food, drug, discount, stationery, tobacco and department
stores. Jafra skin care products are sold to independent consultants and are
resold to consumers, primarily at classes in the home. 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. In many small Gillette and Braun markets, products are
distributed through local distributors and sales agents. Oral-B products are
marketed directly to dental professionals for distribution to patients and also
are sold to wholesalers, chain stores and large retailers for resale to
consumers through food, drug and discount stores, and in smaller markets,
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 the toiletries
and cosmetics, writing instruments, Braun and Oral-B business segments. 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
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Company and its subsidiaries have significant importance within their business
segments. 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 product
performance, innovation and price, as well as by competition in marketing,
advertising and promotion to retail outlets and to consumers. The Company's
major 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 and cosmetic 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 business segments 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 electric shaver, small household,
hair care and oral care appliances segments is based primarily on product
performance, innovation and price, with numerous competitors in the small
household and hair care appliances segments. Competition in the oral care
product segment is focused on product performance, price and dental profession
endorsement. Many of the Company's competitors are larger and have greater
resources than the Company.
EMPLOYEES
At year-end, Gillette employed approximately 33,500 persons, three-quarters
of them outside the United States.
RESEARCH AND DEVELOPMENT
In 1995, research and development expenditures were $153.0 million,
compared with $136.9 million in 1994 and $133.1 million in 1993.
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
<TABLE>
The following table indicates the geographic sources of consolidated net
sales and profit from operations of the Company for the last three years:
<CAPTION>
1995 1994 1993
---------------- ------------------ ----------------
NET NET NET
SALES PROFIT SALES PROFIT SALES PROFIT
----- ------ ------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
United States............................ 30% 28% 32% 30% 33% 29%
Foreign.................................. 70% 72% 68% 70% 67% 71%
</TABLE>
"Financial Information by Geographic Area" and "Segment and Area
Commentary" containing information on net sales, profit from operations and
identifiable assets for each of the last three years appear in the 1995 Annual
Report under the same captions at page 40 and are incorporated by reference.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns and leases manufacturing facilities and other important
properties in the United States and abroad consisting of approximately
15,274,000 square feet of floor space, of which 70%, or about 10,652,000 square
feet, is devoted to the Company's principal manufacturing operations. Additional
premises,
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such as sales and administrative offices, research laboratories, and warehouse,
distribution and other manufacturing facilities account for about 30% of
Gillette's principal property holdings, or about 4,662,000 square feet.
Gillette's executive offices are located in the Prudential Center, Boston,
Massachusetts, where the Company holds a long-term lease covering approximately
318,000 square feet.
<TABLE>
In the United States, Gillette's principal manufacturing facilities consist
of the following:
<CAPTION>
APPROXIMATE
AREA
BUSINESS SEGMENT LOCATION (SQUARE FEET)
---------------- -------- -------------
<S> <C> <C>
Blades and Razors Boston, Massachusetts 1,560,000
Toiletries and Cosmetics Andover, Massachusetts 593,000
St. Paul, Minnesota 830,000
Westlake Village,
California 150,000
Stationery Products Santa Monica, California 320,000
Janesville, Wisconsin 215,000
Oral-B Products Iowa City, Iowa 260,000
---------
Total 3,928,000
=========
</TABLE>
Approximately 92% of these U.S. manufacturing facilities and the land they
occupy are owned by Gillette. The Santa Monica property is leased in its
entirety and 165,000 square feet of the St. Paul facility is located on leased
land.
Foreign manufacturing subsidiaries of Gillette, other than Braun and
Oral-B, operate plants with an aggregate of approximately 4,083,000 square feet
of floor space, about 85% of which is on land owned by Gillette. Many of the
international facilities are engaged in the manufacture of products for two or
more of the Company's major business segments.
<TABLE>
Braun's executive offices are located in Kronberg, Germany, and the
locations and approximate areas of its principal manufacturing facilities are as
follows:
<CAPTION>
APPROXIMATE
AREA
(SQUARE
LOCATION FEET)
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<S> <C>
Germany (3 facilities)............................. 1,386,000
Spain.............................................. 410,000
Ireland............................................ 238,000
Mexico............................................. 282,000
France............................................. 28,000
China.............................................. 67,000
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Total.................................... 2,411,000
=========
</TABLE>
Approximately 87% of these facilities and 98% of the land they occupy are
owned by Braun.
Oral-B owns its executive office building in Belmont, California. In
addition to its Iowa City plant, it owns or leases approximately 162,500 square
feet of manufacturing facilities in two countries outside the United States.
Miscellaneous manufacturing operations in North Chicago, Illinois and other
locations account for approximately 70,000 square feet.
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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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, 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
<TABLE>
Information regarding the Executive Officers of the Company as of March 21,
1996 is set out below.
<CAPTION>
NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE
------------------------- -------------------------- ---
<S> <C> <C>
Alfred M. Zeien Chairman of the Board and Chief Executive Officer 66
Chairman of the Board and Chief since February 1991; President and Chief
Executive Officer Operating Officer, January 1991 - February 1991;
Vice Chairman of the Board,
International/Diversified Operations, November
1987 - January 1991
Michael C. Hawley President and Chief Operating Officer since April 58
President and Chief Operating 1995; Executive Vice President, International
Officer Group, December 1993 - March 1995; President,
Oral-B Laboratories, Inc., May 1989 - November
1993
Joseph E. Mullaney Vice Chairman of the Board since November 1990 62
Vice Chairman of the Board
Robert G. King Executive Vice President, International Group 50
Executive Vice President since April 1995; Group Vice President - Latin
America, March 1991 - March 1995; General
Manager, Gillette de Mexico S.A. de C.V., June
1990 - February 1991
Jacques Lagarde Executive Vice President, Diversified Group since 57
Executive Vice President October 1993; Vice President, February 1990 -
September 1993; Chairman, Board of Management,
Braun AG, February 1990 - September 1993
Joel P. Davis Senior Vice President, Corporate Planning and 50
Senior Vice President Development since April 1995; Vice President and
President, Stationery Products Group, December
1987 - March 1995
Robert E. DiCenso Senior Vice President, Personnel and 55
Senior Vice President Administration, since July 1994; Vice President,
Investor Relations, January 1993 - July 1994;
Vice President, Finance, Planning and
Administration, Diversified Group, July 1988 -
December 1992
Thomas F. Skelly Senior Vice President, Finance since May 1980 62
Senior Vice President
Charles W. Cramb Vice President and Controller since July 1995; 49
Vice President and Controller Vice President, Finance, Planning and
Administration, Diversified Group, October 1992 -
June 1995; Vice President, Finance and Strategic
Planning, North Atlantic Group, January 1990 -
September 1992
</TABLE>
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 respectively 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 appears in the 1995 Annual Report at
page 48 under the caption "common stock" and at page 41 under the caption,
"Quarterly Financial Information," and is incorporated by reference. As of March
1, 1996, the record date for the 1996 Annual Meeting, there were 38,867 Gillette
stockholders of record.
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ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in the 1995 Annual Report at
pages 42 and 43 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 1995 Annual Report at
pages 24 through 26 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 in the PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995 (the "Act") or by the Securities and
Exchange Commission in its rules, regulations and releases. The Company cautions
investors that any such forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. The following are some of the
factors that could cause actual results to differ materially from estimates
contained in the Company's forward-looking statements:
- 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;
- historically, over two-thirds of the Company's sales having been made
outside the United States, making forward-looking statements more
difficult; and
- 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 currency exchange rates, inflation rates, recessionary
or expansive trends, tax changes, legal and regulatory changes or other
external factors over which the Company has no control.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
The following Financial Statements and Supplementary Data for The Gillette
Company and Subsidiary Companies appear in the 1995 Annual Report at the pages
indicated below and are incorporated by reference.
<S> <C> <C>
(1) Independent Auditor's Report...................................... Page 27
(2) Consolidated Statement of Income and Earnings Reinvested in the
Business for the Years Ended December 31, 1995, 1994 and 1993..... Page 28
(3) Consolidated Balance Sheet at December 31, 1995 and 1994.......... Page 29
(4) Consolidated Statement of Cash Flows for the Years Ended December
31, 1995, 1994 and 1993........................................... Page 30
(5) Notes to Consolidated Financial Statements........................ Pages 31
through 40
(6) Quarterly Financial Information................................... Page 41
</TABLE>
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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 1996 proxy Statement at pages 2 through 4 and at page 7
under the caption "Certain Transactions with Directors and Officers", 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 5.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the 1996 Proxy Statement
at page 8 under the caption "Compensation of Directors", at page 13 under the
caption "Incentive Payment and Award" and at pages 13 through 16 under the
caption "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 1996 Proxy Statement at
pages 6 and 7 under the caption "Stock Ownership of Certain Beneficial Owners
and Management" and at page 13 under the caption "Incentive Payment and Award"
and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the 1996 Proxy Statement
at page 8 under the captions "Certain Transactions with Directors and Officers"
and "Compensation of Directors" 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
<TABLE>
The following appear in the 1995 Annual Report at the pages indicated below
and are incorporated into Part II by reference.
<C> <S> <C>
(1) Independent Auditor's Report...................................... Page 27
(2) Consolidated Statement of Income and Earnings Reinvested in the
Business for the Years Ended December 31, 1995, 1994 and 1993..... Page 28
(3) Consolidated Balance Sheet at December 31, 1995 and 1994.......... Page 29
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993.................................. Page 30
(5) Notes to Consolidated Financial Statements........................ Pages 31
through 40
</TABLE>
SCHEDULES
The following schedule appears at page 13 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.
<TABLE>
EXHIBITS
<C> <S>
3(a) Composite Certificate of Incorporation of The Gillette Company, as amended,
filed as Exhibit 3(a) to The Gillette Company Annual Report on Form 10-K
for the year ended December 31, 1989, Commission File No. I-922,
incorporated by reference herein.
(b) The Bylaws of The Gillette Company, as amended April 15, 1993, filed as
Exhibit 3(b) to The Gillette Company Quarterly Report on Form 10-Q for the
period ended March 31, 1993, incorporated by reference herein.
4(a) Specimen of form of certificate representing ownership of The Gillette
Company Common Stock, $1.00 par value, as adopted by the Board of Directors
of the Company on December 15, 1977, filed as Exhibit 4(a) to The Gillette
Company Annual Report on Form 10-K for the year ended December 31, 1986,
Commission File No. I-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. I-911, incorporated by
reference herein.
(c) Rights Agreement dated as of November 26, 1986, and amended and restated as
of January 17, 1990, between The Gillette Company and The First National
Bank of Boston, filed as Exhibit 1 to The Gillette Company Form 8, dated
January 18, 1990, 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. I-911, incorporated by reference herein.
(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. I-922, incorporated by reference herein.
</TABLE>
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<TABLE>
<C> <S>
(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, 1995, Commission File No. I-922, incorporated by reference
herein.
(g) Instruments relating to long-term debt.
Multi-year Credit agreement dated as of June 21, 1994 among The Gillette
Company and a group of United States and international banks, filed as
Exhibit 4(f) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1994.
Form of $150,000,000 4.75% note due August 15, 1996 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, incorporated by reference herein.
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, incorporated by reference herein.
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, incorporated by reference herein.
(Others not filed, but the registrant agrees to file a copy of such
instruments upon the request of the Securities and Exchange Commission.)
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, 1994, incorporated by reference herein.
*(b) The Gillette Company Stock Equivalent Unit Plan, as amended, filed as
Exhibit 10(b) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1993, incorporated by reference herein.
*(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, 1993, incorporated by reference herein.
*(d) The Gillette Company Outside Directors' Stock Ownership Plan, filed as
Exhibit 10(d) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1993, incorporated by reference herein.
*(e) Description of 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, 1991, Commission File No. I-922, incorporated by
reference herein.
(f) Directors and Officers and Company Reimbursement Indemnity Insurance and
Pension and Welfare Fund Fiduciary Responsibility Insurance policy, filed
herewith.
*(g) The Retirement Plan for Directors of The Gillette Company, as amended,
filed as Exhibit 10(f) to The Gillette Company Annual Report on Form 10-K
for the year ended December 31, 1987, Commission File No. I-922,
incorporated by reference herein.
*(h) The Deferred Compensation Plan for Directors of The Gillette Company, as
amended, filed herewith.
</TABLE>
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<TABLE>
<C> <S>
(i) Stock Purchase Agreement dated November 24, 1986, between The Gillette
Company and a group of entities consisting of Revlon Group Incorporated,
MacAndrews & Forbes, Incorporated and certain of their affiliates, filed as
Exhibit No. 28.2 to The Gillette Company Current Report on Form 8-K dated
November 24, 1986, Commission File No. I-922, incorporated by reference
herein.
*(j) 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. I-922, incorporated by reference herein.
(k) 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. I-922, incorporated by
reference herein.
*(l) Description of agreement between The Gillette Company and Robert J. Murray
effective January 1, 1996, filed herewith.
*(m) Description of agreement between The Gillette Company and Lorne R. Waxlax
dated September 30, 1993, filed as Exhibit 10(m) to The Gillette Company
Annual Report on Form 10-K for the year ended December 31, 1993,
incorporated by reference herein.
*(n) Description of The Gillette Company Estate Preservation Plan, filed as
Exhibit 10(n) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1993, incorporated by reference herein.
*(o) 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, incorporated by reference herein.
*(p) 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, incorporated by
reference herein.
*(q) The Gillette Company Supplemental Savings Plan, as amended and restated
effective July 1, 1993, filed as Exhibit 10(r) to The Gillette Company
Annual Report on Form 10-K for the year ended December 31, 1994,
incorporated by reference herein.
11 Computation of per share earnings, filed herewith.
12 Computation of the ratios of current assets to current liabilities for the
years 1995, 1994 and 1993, filed herewith.
13 Portions of the 1995 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).
<FN>
- ---------------
* Filed pursuant to Item 14(c).
</TABLE>
B. REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K on December 18, 1995 in
connection with a Renewed Rights Agreement dated as of December 14, 1995 between
the Company and The First National Bank of Boston.
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
10
<PAGE> 12
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
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; and (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.
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.
11
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
Under date of January 23, 1996, we reported on the consolidated balance
sheet of The Gillette Company and subsidiary companies as of December 31, 1995
and 1994, and the related consolidated statements of income and earnings
reinvested in the business and cash flows for each of the years in the
three-year period ended December 31, 1995, as contained in the 1995 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 1995. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedule
listed on page 13 of this report. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this 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
January 23, 1996
12
<PAGE> 14
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------------------- ----------
BALANCE CHARGED LOSSES BALANCE
AT TO CHARGED CHARGED AT
BEGINNING PROFIT TO TO END OF
DESCRIPTION OF YEAR AND LOSS OTHER RESERVES YEAR
----------- --------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
1995
Reserves deducted from assets:
Receivables......................... $52.1 $27.4 $ .8* $ 21.1 $59.2
===== ===== ===== ====== =====
1994
Reserves deducted from assets:
Receivables......................... $45.9 $22.8 $-- $ 16.6 $52.1
===== ===== ===== ====== =====
1993
Reserves deducted from assets:
Receivables......................... $41.8 $18.0 $2.5* $ 16.4 $45.9
===== ===== ===== ====== =====
<FN>
* Acquisition balances
</TABLE>
13
<PAGE> 15
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)
THOMAS F. SKELLY
By________________________________
Thomas F. Skelly
Senior Vice President and Chief
Financial Officer
Date: March 21, 1996
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.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* ALFRED M. ZEIEN Chairman of the Board March 21, 1996
_________________________________________ of Directors, Chief Executive
Alfred M. Zeien Officer and Director
* MICHAEL C. HAWLEY President, Chief Operating
_________________________________________ Officer and Director
Michael C. Hawley
* JOSEPH E. MULLANEY Vice Chairman of the Board and March 21, 1996
_________________________________________ Director
Joseph E. Mullaney
THOMAS F. SKELLY Senior Vice President and March 21, 1996
_________________________________________ Chief Financial Officer
Thomas F. Skelly
* CHARLES W. CRAMB Vice President, March 21, 1996
_________________________________________ Controller and Principal
Charles W. Cramb Accounting Officer
* WARREN E. BUFFETT Director March 21, 1996
_________________________________________
Warren E. Buffett
* WILBUR H. GANTZ Director March 21, 1996
_________________________________________
Wilbur H. Gantz
* MICHAEL B. GIFFORD Director March 21, 1996
_________________________________________
Michael B. Gifford
* CAROL R. GOLDBERG Director March 21, 1996
_________________________________________
Carol R. Goldberg
* HERBERT H. JACOBI Director March 21, 1996
_________________________________________
Herbert H. Jacobi
* RICHARD R. PIVIROTTO Director March 21, 1996
_________________________________________
Richard R. Pivirotto
* JUAN M. STETA Director March 21, 1996
_________________________________________
Juan M. Steta
* ALEXANDER B. TROWBRIDGE Director March 21, 1996
_________________________________________
Alexander B. Trowbridge
* JOSEPH F. TURLEY Director March 21, 1996
_________________________________________
Joseph F. Turley
</TABLE>
THOMAS F. SKELLY
By__________________________________
Thomas F. Skelly
as Attorney-In-Fact
14
<PAGE> 1
The Gillette Company
and its subsidiaries
8138-54-11-A
Prudential Tower Building
Boston, MA 02199-3799
15,000,000.
Lloyd's
Policy #: FD 940228
Policy Period: June 1, 1995 to June 1, 1996
Lloyd's and Other Underwriters (AIG)
Policy #: FD 940229
Policy Period: June 1, 1995 to June 1, 1996
June 1, 1995
June 1, 1996
Nos. 1, 2 and 3
8138-54-11
bas-06/08/95.14
<PAGE> 2
<TABLE>
CHUBB GROUP OF INSURANCE COMPANIES BINDER
EXECUTIVE PROTECTION DEPARTMENT
- --------------------------------------------------------------------------------
<S> <C>
1. COVERAGE: Excess Directors & Officers Liability &
Reimbursement Policy
2. FORM: Form 14-02-207
3. COMPANY: Federal Insurance Company
4. INSURED: THE GILLETTE COMPANY
5. POLICY NO: 81385411
6. TERM: 6/1/95-6/1/96
7. BINDER PERIOD: 6/1/95-7/1/95
8. LIMIT OF LIABILITY: $15,000,000
9. DEDUCTIBLE AMOUNT: $15,000,000 Annual Aggregate
$ 1,000,000 Deductible
10. CONDITIONS: Expiring Terms (Endorsements 1 - 4)
11. ANNUAL PREMIUM: $180,000 (net)
12. IMPORTANT BINDER CONDITIONS:
</TABLE>
A. This binder of insurance does not itself carry any extended
reporting period. Such extended reporting period may only be exercised if the
policy is issued. If this binder of insurance is terminated for any reason other
than issuance of the policy it represents, the insured shall have no right to
exercise the extended reporting period.
B. This binder is intended for use as evidence that insurance described
above has been effected for the term indicated, against which the Federal
policy will be duly issued. Please advise Federal Insurance Company
immediately of any discrepancies, inaccuracies or necessary changes.
By Karen E. Rothwell
-----------------
Authorized Employee
May 31,1995
-----------
Date
<PAGE> 3
EXECUTIVE RISK [GRAPHIC]
May 26, 1995
Joan Goldberg
Johnson & Higgins of Boston
Three Center Plaza
Boston, MA 02108
RE: CONFIRMATION OF BINDING FOR THE GILLETTE COMPANY
Dear Joan:
On behalf of EXECUTIVE RE INDEMNITY INC. we are pleased to bind coverage on the
following terms:
- - This Excess Indemnity Policy will be issued by EXECUTIVE RE INDEMNITY INC. ON
FORM C21066 (ED. 4/92).
- -----------------------
- - Limit of Liability: $10,000,000 (inclusive of defense expenses)
- - Total Underlying Limits of Liability: $30,000,000.00
- - Policy Period: From June 1, 1995 To June 1, 1996
- - Premium: $75,000.00 Due July 1, 1995
- - Endorsements: The titles and headings are for convenience only. Please refer
to the policy and endorsements for a description of coverage.
- C21939 CHANGE OF INSURER NAME ENDORSEMENT
- D21160 PRIOR AND PENDING LITIGATION EXCLUSION
- D21388 AMEND NOTICE OF CANCELLATION
<PAGE> 4
THE GILLETTE CO May 26, 1995
Page 2
- - Assigned Policy No.: 752-002028-95
Important
- ---------
THIS COVERAGE IS BOUND SUBJECT TO OUR RECEIPT, REVIEW AND ACCEPTANCE OF THE
FOLLOWING INFORMATION:
NO REQUIRED ITEMS
UNTIL WE RECEIVE, REVIEW AND ACCEPT THIS MATERIAL, WE RESERVE THE RIGHT TO AMEND
OR RESCIND THIS POLICY.
THIS BINDER OF COVERAGE IS SUBJECT TO OUR RECEIPT, ON OR BEFORE JULY 1, 1995, OF
PAYMENT IN FULL OF THE PREMIUM DUE. IF WE DO NOT RECEIVE PAYMENT OF THE PREMIUM
DUE ON OR BEFORE JULY 1, 1995, WE WILL ASSUME THAT YOU DO NOT WISH TO PURCHASE
THIS COVERAGE FROM US, AND THE POLICY DESCRIBED IN THE BINDER WILL BE VOID, AS
NEVER HAVING BEEN IN EFFECT. WE APPRECIATE THE OPPORTUNITY TO BE OF SERVICE TO
YOU, AND WE LOOK FORWARD TO RECEIVING PAYMENT OF THE PREMIUM BY JULY 1, 1995 SO
THAT THE COVERAGE DESCRIBED IN THE BINDER CAN BE MADE EFFECTIVE.
If you have any questions, please call me at (203) 244-8956.
Sincerely
Jonathan Pizzo
Underwriter
<PAGE> 5
June 2, 1995
Mr. Thomas P. Welgoss
Manager
Corporate Insurance
THE GILLETTE COMPANY
Prudential Tower Building
Boston Massachusetts 02199
U.S.A.
Dear Tom:
RE: EXCESS DIRECTORS & OFFICERS LIABILITY INSURANCE
ACE INSURANCE COMPANY
RENEWAL DATE: JUNE 1, 1995
I am pleased to provide you with your ACE excess Directors & Officers Liability
binder of insurance evidencing coverage of $10,000,000 excess $60,000,000
(Individual D&O) and $10,000,000 excess $40,000,000 (Corporate Reimbursement) as
follows:
QUOTE
- -----
ACE is pleased to acknowledge receipt of Dlrs 155,000 and confirm binding the
following:-
POLICY PERIOD: June 1, 1995 to June 1, 1996
LIMIT OF LIABILITY: $10 million
ATTACHMENT: $60 million D&O $40 million CR.
AGGREGATE LIMIT: $10 million
PREMIUM: $155,000
STRUCTURE: NAME LIMIT
---- -----
London $15M $15M
Chubb $15M $15M
Aetna $10M $10M
CODA $20M -
ACE $10M $10M
<PAGE> 6
SPECIAL CONDITIONS
- ------------------
1) Followed Policies are London C.R. and CODA D&O.
2) Discovery Period & Percent: as per followed policy.
3) Cancellation Period: as per followed policy.
4) Coverage is D&O and C.R.
5) Cover will be issued on Policy Form D&O 6-88. Policy No. GS-7692D
6) Endorsements to be included:
- Specific Combined Limit of Liability Endorsement
- Endorsement amending Section II - A & C
We look forward to receipt of the u/l policies.
UNQUOTE
- -------
This policy is issued as an offshore placement. The insurance is placed with an
Insurer not admitted to write insurance by any state. The Insurer is not under
the jurisdiction of, or subject to, supervision, regulation, or examination by
the States. In case of insolvency, payment of claims is not guaranteed and you
will not be protected by any state guarantee funds.
Any applicable taxes, including but not limited to Federal Excise Tax, are the
responsibility of the Insured to settle and are in addition to the premium.
Should you have any questions, please do not hesitate to contact me at (809)
299-8810.
Very truly yours,
George F. Leite
Account Executive
cc: Joan Goldberg - J&H Boston
<PAGE> 7
June 2, 1995
Mr. Thomas P. Welgoss
Manager
Corporate Insurance
THE GILLETTE COMPANY
Prudential Tower Building
Boston Massachusetts 02199
U.S.A.
Dear Tom,
RE: CODA DIRECTORS & OFFICERS LIABILITY INSURANCE
RENEWAL DATE: JUNE 1, 1995
---------------------------
I am pleased to provide you with your CODA Directors and Officers Liability
binder of insurance evidencing coverage of $20,000,000 excess/dic $40,000,000 as
follows:
QUOTE
- -----
<TABLE>
CODA is pleased to acknowledge receipt of Dlrs 145,000 and confirm binding the
following:
<S> <C> <C>
POLICY PERIOD: June 1, 1995 to June 1, 1996
LIMIT OF LIABILITY: $20 Million
ATTACHMENT $40 Million
PREMIUM: 6/1/95-96 $155,000
Minus ($ 10,000) XS/DIC
6/1/96-97 $165,000 (Deposit Premium)
6/1/97-98 $155,000 (Deposit Premium)
--------
Total $465,000
Less cash on hand $320,000
--------
Amount Due: $145,000
</TABLE>
<PAGE> 8
PAGE 2
<TABLE>
<CAPTION>
STRUCTURE: NAME LIMIT
---- -----
<S> <C>
London 15m
Chubb 15m xs 15m
Aetna 10m xs 30m
</TABLE>
SPECIAL CONDITIONS:
- ------------------
1) The cover provided will be XS/DIC.
2) Cover will be issued on Policy Form CODA 03 ED 05/92
3) Endorsements to be included:
- Outside Positions Endorsement: Sublimit, Non-Specific Individuals
End. 06 ED 05/89. Limit $5,000,000
- Outside Positions Endorsement: Sublimit, Specific Individuals End. 07
ED 05/89. Limit $15,000,000
- Insured Definition Endorsement
- Extended Definition of Insured Endorsement
We look forward to receipt of the u/l policies.
UNQUOTE
- -------
This Policy is issued as an offshore placement. The insurance is placed with an
Insurer not admitted to write insurance by any State. The Insurer is not under
the jurisdiction of, or subject to, supervision, regulation, or examination by
the States. In case of insolvency, payment of claims is not guaranteed and you
will not be protected by any State Guarantee Funds.
Any applicable taxes, including but not limited to Federal Excise Tax, are the
responsibility of the Insured to settle and are in addition to the premium.
<PAGE> 9
PAGE 3
Should you have any questions, please call me at (809) 299-8810.
Very truly yours,
George F. Leite
Account Executive
cc: Joan Goldberg - J&H Boston
<PAGE> 10
<TABLE>
CHUBB GROUP OF INSURANCE COMPANIES BINDER
EXECUTIVE PROTECTION DEPARTMENT
- --------------------------------------------------------------------------------
<S> <C>
1. COVERAGE: Excess Fiduciary Liability
2. FORM: Form 14-02-182
3. COMPANY: Federal Insurance Company
4. INSURED: THE GILLETTE COMPANY
5. POLICY NO: 81344529
6. TERM: 7/1/94 - 7/1/96
7. BINDER PERIOD: 7/1/94 - 8/1/94
8. LIMIT OF LIABILITY: $ 5,000,000
9. DEDUCTIBLE AMOUNT: $20,000,000 Annual Aggregate
$ 100,000 Deductible
10. CONDITIONS: Expiring Terms (Endorsements 1 -6)
11. ANNUAL PREMIUM: $ 12,500 Annual
12. IMPORTANT BINDER CONDITIONS:
</TABLE>
A. This binder of insurance does not itself carry any extended
reporting period. Such extended reporting period may only be exercised if the
policy is issued. If this binder of insurance is terminated for any reason other
than issuance of the policy it represents, the insured shall have no right to
exercise the extended reporting period.
B. This binder is intended for use as evidence that insurance described
above has been effected for the term indicated, against which the Federal
policy will be duly issued. Please advise Federal Insurance Company immediately
of any discrepancies, inaccuracies or necessary changes.
By Karen E. Rothwell
-----------------
Authorized Employee
June 30, 1995
-------------
Date
<PAGE> 11
The Gillette Company
as more fully set forth in
underlying policy
81344529-A
5,000,000.
5,000,000.
The Aetna Casualty and Surety Company
06FF100761487 BCA
July 1, 1994 to July 1, 1995
None
July 1, 1994
Nos. 1 and 2
None
bas-07/08/94.08
<PAGE> 12
[LOGO]
To: Thomas Welgoss
Insurance described below has been bound:
Name of Insureds: THE GILLETTE COMPANY
Mailing Address The Prudential Center
Boston, MA 02199
Location(s) Worldwide
Form of Coverage(s) Fiduciary Liability Amount or Limit
$20,000,000 Annual Aggregate
Limit of Liability
$100,000 Deductible
Insurance Carrier(s) THE AETNA CASUALTY AND SURETY COMPANY
Insurance Effective: July 1, 1994
From: July 1, 1996
Rate or Premium: $130,000 (Two-year prepaid)
Provisions Applicable: Aetna Policy No. 06 FF 100887749 BCA with terms as
noted on attached.
Copies of this Advice have been sent to: Walter E. Grote
Manager
THE AETNA CASUALTY AND SURETY COMPANY
<PAGE> 13
THE GILLETTE COMPANY
FIDUCIARY LIABILITY RENEWAL - 7/1/94 - 7/1/96
Limit - $20,000,000 Annual Aggregate
Deductible/Domestic Plans: $100,000
Deductible/Foreign Plans: $100,000
Premium: $130,000 Two-year prepaid
Endorsements:
- - Name of Designated Trust or Plan
- - FR-1
- - FR-2
- - Deductible Endorsement (Foreign & Domestic)
- - Pollution Exclusion
- - 502(L)
- - 502(i)
- - Omnibus Welfare Plan Endorsements (a series of endorsements resulting in
worldwide coverage, subject to certain limitations as described therein).
- - Merged/Terminated Plan Endorsement
- - Exclusion of COBRA from exclusions
- - Notice Requirement Threshold of $25,000,000 (Expiring Special Endorsement #3).
- - Territory & Warranty End. (Endorsement #6 modified by deletion of a sub-limit
and other changes). Wording per 6/29/94 Aetna telefax, copy attached
- - Managed Companies Interpretive Letter
- - Defense Costs within the limit of liability for foreign plans.
Coverage is bound subject to underwriter's receipt, review and acceptance of the
completed and signed applications.
<PAGE> 14
PENSION AND WELFARE FUND FIDUCIARY RESPONSIBILITY INSURANCE POLICY
NAME OF DESIGNATED TRUST OR PLAN ENDORSEMENT
It is agreed that as of the effective date hereof the complete name of the
Designated Trust or Plan under the attached policy is:
THE GILLETTE COMPANY RETIREMENT PLAN (#001)
THE GILLETTE COMPANY EMPLOYEES SAVINGS PLAN (#002)
THE GILLETTE COMPANY EMPLOYEE STOCK OWNERSHIP PLAN (#007)
ORAL-B LABORATORIES, INC. PENSION PLAN FOR HOURLY EMPLOYEES OWENS BRUSH CO.
(#001)
ORAL-B LABORATORIES, INC. SAVINGS PLAN (#005)
THE PARKER PEN PENSION PLAN
THE PARKER PEN RETIREMENT PLAN FOR PRODUCTION WORKERS
THE PARKER PEN RETIREMENT PLAN FOR SKILLED WORKERS
THE PARKER PEN 401(K) PLAN
THE PARKER PEN PENSION PLAN, AS SPONSORED BY PARKER PEN UK LTD., PARKER PEN
HOLDINGS LTD. & PARKER PEN LTD.
PENSION AGREEMENT BETWEEN ORAL-B LABS, IOWA CITY PLANT & CHAUFFEURS, TEAMSTERS
& HELPERS LOCAL UNION 238
BRAUN CANADA LTD. DEFINED CONTRIBUTION PLAN
GILLETTE CANADA INC. AND ORAL-B LABS (CANADA) DEFINED BENEFIT PLAN
GILLETTE UK LTD., JAFRA, AND BRAUN UK DEFINED BENEFIT PLAN
ORAL-B LABS (UK) DEFINED BENEFIT PLAN
PARKER PEN HOLDINGS (UK) DEFINED BENEFIT/DEFINED CONTRIBUTION PLAN
This endorsement forms a part of the policy to which attached, effective on the
inception date of the policy unless otherwise stated herein.
Endorsement effective JULY 1, 1994 Policy No. 06 FF 100887749 BCA
Endorsement No. N/A
THE GILLETTE COMPANY RETIREMENT PLAN THE AETNA CASUALTY AND SURETY COMPANY
By: By:
--------------------------------- ------------------------------------
(Authorized Representative)
<PAGE> 1
THE GILLETTE COMPANY
DIRECTORS' COMPENSATION DEFERRAL PROVISIONS
- - The directors may elect to defer payment of all or part of their cash
compensation, whether retainers or attendance fees, beyond retirement or
resignation from the Board to receive payment (i) in a lump sum in
January of the year following retirement or resignation or (ii) in ten
or less equal annual installments beginning in January of the year
following retirement or resignation, or, in either case, upon an earlier
Change in Control, as that term is defined in The Gillette Company
Retirement Plan, as described below.
- - The election to defer must be communicated in writing to the Secretary
before December 15, for amounts to be earned in starting in the
following year, or at any time during the year for amounts to be earned
in the future and must include payment instructions and whether upon a
Change in Control of the Corporation the deferral election should
continue in effect or the amounts so deferred plus interest equivalents
accrued to date should be paid immediately in the form of a lump sum
payment. Only one deferral election may be made in any calendar year.
- - An election to defer remains in effect from year to year unless revoked
or amended by notice in writing to the Secretary at any time during the
year for amounts earned in the future. Only one such revocation may be
made in any calendar year.
- - With respect to the calendar year in which a director is first elected
to the Board, the director may elect to defer amounts to be earned
during that calendar year by delivering a deferral election to the
Secretary any time prior to the date the director is elected to serve on
the Board.
- - Directors' deferred compensation earns an amount equivalent to interest
at a rate fixed on the first trading day in October at the average yield
on U.S. Treasury notes or bonds maturing in one year. That rate on
October 2, 1995 was 5.72%.
- - Interest equivalents are credited semiannually, on June 30 and December
3l. Payment is deferred on the same basis as payment of retainers and
fees. The unpaid balance remaining in a director's account after
retirement or resignation continues to earn interest equivalents until
the payment of all installments has been completed.
- - In the event of death, payment will be made to the estate of the
director in a lump sum representing the entire unpaid balance.
- - Deferred retainers or attendance fees, plus accrued interest
equivalents, paid to a director after retirement or resignation from the
Board or upon a Change in Control are taxable as ordinary income in the
year payment is received.
- - Effective January l, l991 retainers and attendance fees are subject to
taxation for Social Security in the year received. Between January 1,
1988 and December 31, 1990 retainers and attendance fees were subject to
taxation for Social Security in the year earned. Since January 1, 1988
retainers and attendance fees have been included in the Social Security
earnings test for benefits eligibility in the year earned.
If you wish to make a deferral or a change to your present deferral arrangement,
a deferral election form must be filed with the Secretary. Forms will be
provided by the Secretary's Office.
(3/21/96) (DEFPROVS)
<PAGE> 1
EXHIBIT 10(L)
DESCRIPTION OF AGREEMENT BETWEEN THE GILLETTE COMPANY AND
ROBERT J. MURRAY
Pursuant to a noncompetition agreement between The Gillette Company and
Robert J. Murray, former Executive Vice President, Gillette North Atlantic,
effective January 1, 1996, for a period ending December 31, 2000, or upon his
earlier death, Mr. Murray will receive $450,000 per year in 1996 and 1997 and
$320,000 per year in 1998, 1999 and 2000.
<PAGE> 1
EXHIBIT 11
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, SHARES IN MILLIONS)
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE -- ASSUMING NO DILUTION
Net income as reported..................................... $823.5 $698.3 $288.3
Less: Preferred Stock Dividends, net of tax benefit........ (4.7) (4.7) (4.7)
------ ------ ------
Net income available to Common Shareholders................ $818.8 $693.6 $283.6
====== ====== ======
Average common shares outstanding.......................... 443.5 442.3 440.9
Reported net income per common share....................... $ 1.85 $ 1.57 $ .64
NET INCOME PER COMMON SHARE -- ASSUMING FULL DILUTION
Net income available to Common Shareholders (as above)..... $818.8 $693.6 $283.6
Add: Series C ESOP Preferred Stock dividend, net of tax
benefit................................................. 4.7 4.7 4.7
Deduct: Additional ESOP costs, net of tax benefit.......... (1.6) (2.2) (2.7)
------ ------ ------
Adjusted net income available to common shareholders....... $821.9 $696.1 $285.6
====== ====== ======
Average common shares outstanding.......................... 443.5 442.3 440.9
Add: Conversion of Series C ESOP Preferred Stock........... 6.5 6.6 6.6
Net additional common shares upon exercise of
stock options...................................... 5.8 4.2 3.5
------ ------ ------
Adjusted average common shares outstanding................. 455.8 453.1 451.0
------ ------ ------
Net income per common share -- assuming full dilution...... $ 1.80 $ 1.54 $ .63
</TABLE>
1994 and 1993 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.
15
<PAGE> 1
Exhibit 12
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
STATEMENT RE: COMPUTATION OF RATIOS OF CURRENT ASSETS TO CURRENT LIABILITIES
Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Current Assets 3,104.5 2,700.4 2,528.0
Current Liabilities 2,124.0 1,736.2 1,760.3
Current Ratio 1.46 1.46 1.44
</TABLE>
<PAGE> 1
THE GILLETTE COMPANY
Founded in 1901, The Gillette Company is the world leader in male grooming
products, a category that includes blades and razors, shaving preparations and
electric shavers. Gillette also holds the number one position worldwide in
selected female grooming products, such as wet shaving products and hair
epilation devices. The Company is the world's top seller of writing instruments
and correction products. In addition, the Company is the world leader in
toothbrushes and oral care appliances.
Gillette manufacturing operations are conducted at 50 facilities in 24
countries, and products are distributed through wholesalers, retailers and
agents in over 200 countries and territories.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
FINANCIAL HIGHLIGHTS.................................................. 1
MISSION AND VALUES.................................................... 2
LETTER TO STOCKHOLDERS................................................ 3
REVIEW OF OPERATIONS.................................................. 6
WORLD-CLASS LEADERSHIP................................................ 16
MANAGEMENT'S DISCUSSION............................................... 24
FINANCIAL STATEMENTS.................................................. 28
HISTORICAL FINANCIAL SUMMARY.......................................... 42
PRINCIPAL DIVISIONS AND SUBSIDIARIES.................................. 45
CORPORATE AND STOCKHOLDER
INFORMATION......................................................... 48
</TABLE>
<PAGE> 2
THE GILLETTE COMPANY
MISSION AND VALUES
The Gillette Company is a globally focused consumer products company which seeks
competitive advantage in quality, value-added personal care and personal use
products. We compete in three large, worldwide business: personal grooming
products, stationery products and small electrical appliances.
As a company, we share skills and resources among business units to
optimize performance. We are committed to a plan of sustained sales and profit
growth which recognizes and balances both short- and long-term objectives.
MISSION
Our mission is to achieve or enhance clear leadership, worldwide, in the
existing or new core consumer product categories in which we choose to compete.
Current core categories are:
- - Male grooming products, including blades and razors, electric shavers,
shaving preparations and deodorants and antiperspirants.
- - Selected female grooming products, including wet shaving, hair removal and
hair care appliances, deodorants and antiperspirants and party plan skin care
and cosmetic products.
- - Writing instruments and correction products.
- - Certain areas of the oral care market, including toothbrushes, interdental
devices and oral care appliances
- - Selected areas of the high-quality small household appliance business,
including coffeemakers and food preparation products.
To achieve this mission, we will also compete in supporting product areas that
enhance the Company's ability to achieve or hold the leadership position in core
categories.
VALUES
In pursuing our mission, we will live by the following values:
PEOPLE
We will attract, motivate and retain high-performing people in all areas of our
business. We are committed to competitive, performance-based compensation,
benefits, training and personal growth based on equal career opportunity and
merit. We expect integrity, civility, openness, support for others and
commitment to the highest standards of achievement. We value innovation,
employee involvement, change, organizational flexibility and personal mobility.
We recognize and value the benefits in the diversity of people, ideas and
cultures.
CUSTOMER FOCUS
We will invest in and master the key technologies vital to category success. We
will offer consumers products of the highest levels of performance for value.
We will provide quality service to our customers, both internal and external, by
treating them as partners, by listening, understanding their needs, responding
fairly and living up to our commitments. We will be a valued customer to our
suppliers, treating them fairly and with respect. We will provide these quality
values consistent with improving our productivity.
GOOD CITIZENSHIP
We will comply with applicable laws and regulations at all government levels
wherever we do business. We will contribute to the communities in which we
operate and address social issues responsibly. Our products will be safe to
make and to use. We will conserve natural resources, and we will continue to
invest in a better environment.
We believe that commitment to this mission and these values will
enable the Company to provide a superior return to our shareholders.
<PAGE> 3
LETTER TO STOCKHOLDERS
Sales and earnings of The Gillette Company advanced to
record levels in 1995, extending the pattern of strong
and consistent growth achieved over the last several years.
It is especially notable that sales reached new highs in all
major business segments, geographic regions and oper-
ating groups.
Total sales increased 12% to $6.79 billion. Net income and earnings per common
share grew at a faster rate of 18% to $824 million and $1.85 per share. In 1994,
sales, net income and earnings per common share also grew at 12%, 18% and 18%,
respectively.
For the 90th consecutive year, the Company paid cash dividends on its common
stock. Dividends declared increased 20% to 60 cents per share, up from 50 cents
in 1994, after adjusting for a two-for-one stock split in June.
The strong improvement in Gillette financial results in 1995 is in line with
the Company's progress from 1990 to 1995. During that period, sales grew at
more than a 9% compounded annual rate, net income at 17%, earnings per common
share at 18% and dividends per common share at 17%. Quarterly earnings per share
have advanced at a double-digit rate each period for more than five years -- 22
consecutive quarters.
The Company's consistent profitable growth has been reflected in the
excellent performance of Gillette common stock. In 1995, Gillette stock again
outperformed the stock market averages in terms of total return. The annual
return to stockholders was 41% in 1995, higher than the returns for the Dow
Jones Industrial Average and the Standard & Poor's 500 in a very strong market
year.
This superior performance has been sustained over an extended period. During
the last five years, the compounded annual rate of return to Gillette
stockholders has been 29% - far ahead of the 18% return for the DJIA and the
17% for the S&P 500. In terms of dollars, the market value of Gillette stock has
more than tripled, from $6.1 billion at the end of 1990 to $23.2 billion at the
end of 1995.
Over the last 10 years, the compounded rate of return on Gillette stock has
been 31%, about twice that of the market averages. The value of a $1,000
investment in Gillette stock at the end of 1985 grew to $14,924 by the end of
1995 -- more than three times the value of a comparable investment
[PHOTO]
Gillette Chairman
Alfred M. Zeien,
left and President
Michael C. Hawley
3
<PAGE> 4
"Over three-fourths Of 1995 sales came from
categories in which we hold the worldwide leader-
ship position."
in either of the market averages.
This outstanding stock performance reflects not only the past growth of our
business, but also a perception among investors that the steady improvement in
the Company's business fundamentals places us in an excellent position to
sustain our strong, profitable growth.
<TABLE>
<CAPTION>
Compounded
Investment Value Rate of
12/31/85 12/31/95 Return
- -------------------------------------------------------------
<S> <C> <C> <C>
Gillette $1,000 $14,924 31%
DJIA $1,000 $ 4,590 16%
S&P 500 $1,000 $ 3,983 15%
- --------------------------------------------------------------
</TABLE>
The improvement in fundamentals has many interrelated aspects. A primary
focus is on carrying out the Company's mission to achieve or enhance clear
leadership worldwide in the core consumer product categories in which we choose
to compete. In 1995, more than three-fourths of our sales came from product
categories in which Gillette holds the worldwide leadership position. This
proportion has risen by 20 percentage points in the last five years.
To generate these results, we emphasize geographic expansion and three
principal growth drivers -- research and development, capital spending and
advertising. In combination, these growth drivers should rise at least as fast
as sales over the long term to assure future growth. In 1995, they rose 16%,
compared with 12% for sales. To sustain a healthy rate of growth and assure a
proper balance of short- and long-term objectives, we look to continue to
increase the level of incremental spending on these growth drivers over time by
as much as we add to profit from operations.
Illustrating the effectiveness of this approach, 42% of our 1995 sales came
from products introduced in the last five years, compared with 30% in 1990. This
percentage, although lower than the 45% peak reached in 1994, is especially
impressive when we consider that the original Sensor shaving system, introduced
in 1990, was not included in this statistic in 1995. Our objective is to
maintain the new product ratio at well over 40% of sales.
New product activity is at an all-time high, with more than 20 products
launched in 1995. An equally strong level of activity is expected in 1996, along
with the geographic rollout of major products such as the SensorExcel shaving
system, the Gillette Series male grooming line and Satin Care for Women shaving
gel.
Geographic expansion, which plays a key role in our growth plans, has
contributed importantly to the Company's improved business fundamentals.
Gillette was among the most global of consumer products companies five years
ago, and we have become even more so.
As previously closed markets have opened up with the end of the Cold War,
Gillette has seized the resulting business opportunities. In 1995, 70% of our
sales and 72% of operating profits were generated outside the United States, up
from two-thirds of sales and profits in 1990. This growth has been paced by
substantial gains in Asia-Pacific and Eastern European markets. For example, the
Company's sales in the Former Soviet Union, Poland, Hungary and China rose 50%
last year. Given the growth potential of these regions, we expect to increase
the managerial and financial resources devoted to their business development.
In addition to new products and geographic expansion, the Company's prospects
have been enhanced by selective acquisitions. In the past few years, the largest
among them have been Parker Pen, the Pro oral care line and Thermoscan.
Parker Pen, which substantially increased the size and strength of our
stationery products franchise, was acquired in mid-1993 and has been
successfully integrated into our ongoing operations worldwide. Today, we are the
clear global market leader in writing instruments and correction products, and
operating profit margins for our stationery products business have improved
three points since 1992.
GILLETTE FIVE-YEAR PRICE TREND
Closing Weekly Stock Price
[Graph showing weekly closing prices for Gillette Company Common Stock for the
Five Year Period 1991 - 1995.]
4
<PAGE> 5
"In 1995, the three growth drivers of R&D, capital spend-
ing and advertising rose a combined 16% compared
with 12% for sales."
The Pro oral care line, purchased in late 1995, significantly enhances the
Oral-B franchise in the fast-growing Latin American region. The acquisition
strengthens Oral-B's number one position in the worldwide toothbrush market.
Thermoscan, the leading marketer of infrared ear thermometers, was acquired
at the end of 1995. The Thermoscan instant thermometer is an innovative,
technology-based appliance compatible with Braun technical and marketing
strengths. We see the opportunity to expand this rapidly growing product line
around the world. It also could provide, long term, a platform for Braun
expansion into other personal home diagnostics products.
The review of operations section of this Annual Report describes the 1995
performance of our product lines. Management's Discussion reviews the financial
aspects of our business.
We'd like to highlight a few examples illustrating the buildup of Gillette
business strengths.
The Sensor shaving system franchise has continued its exceptional growth,
with a more than 20% sales increase in 1995. This reflected not only sustained
demand for the original Sensor system, but also outstanding acceptance of the
Sensor for Women and SensorExcel shaving systems. Total sales of the Sensor
family of products -- amounting in 1995 to 42% of all Gillette blade and razor
sales dollars -- now exceed total worldwide sales of our two leading competitors
combined. The Sensor franchise will be strengthened further by the launch this
year of the SensorExcel for Women system.
The Company's innovative clear gel technology is the primary factor in the
substantial growth of our deodorant/antiperspirant business. Introduced with the
Gillette Series brand, clear gel technology has been incorporated into our
established deodorants/antiperspirants. By 1995, gel products accounted for
about 30% of our total sales in this category. Gels also have contributed to the
sustained growth of the entire Series line.
The Braun Oral-B plaque remover, which debuted in 1991, strengthened its
position as the clear worldwide leader in oral care appliances, and the outlook
is favorable for continued strong gains. As sales of the plaque remover have
climbed, a fast-growing demand for refill brushes has developed. Including both
Braun appliances and Oral-B products, the Company's total oral care sales rose
to nearly $700 million in 1995, more than twice the level five years earlier.
. . .
Underlying all the advances described in this letter are talented,
well-trained and highly-motivated managers whose leadership skills in the
competitive global arena in which Gillette operates are without peer. We urge
you to read a special report, beginning on page 16, that highlights the value of
this resource to Gillette.
. . .
Our comments would be incomplete without noting the retirement of a longtime
colleague. Robert J. Murray, Executive Vice President -- North Atlantic Group,
retired at the end of 1995 after a distinguished career of 34 years. Bob's
dedication and leadership abilities made significant contributions to the
Company's success.
In closing, our record is a reflection of the world-class brands, products
and people that in combination are the fundamental strengths of Gillette. They
are the source of our confidence that The Gillette Company is well-positioned to
continue its worldwide growth in 1996 and the years beyond.
/s/ Alfred M. Zeien
Alfred M. Zeien
Chairman of the Board
/s/ Michael C. Hawley
Michael C. Hawley
President
March 1, 1996
"New product activity is at an all-time high,
with more than 20 new products
launched in 1995."
5
<PAGE> 6
BLADES & RAZORS
Further enhancing its worldwide leadership position,
Gillette in 1995 achieved record results in its principal
line of business. Sales of blades and razors climbed sub-
stantially, and profits posted a considerable increase.
The consistent sales growth that has characterized the Company's blade and razor
business accelerated in 1995, driven principally by the continued resounding
success of the Sensor family of shaving systems.
[GRAPHIC]
The chief contributor to the increasing momentum was the top-of-the-line
SensorExcel shaving system, which registered sizable sales gains and enlarged
its market share in every country in which it is sold. Distribution has been
extended to nearly 60 markets, and the rollout continues.
[GRAPHIC]
Notwithstanding the Company's success in attracting consumers to the
SensorExcel system, sales of the original Sensor system moved ahead modestly.
This product, launched in 1990, remained the best seller in the United States
and many international markets.
[GRAPHIC]
The Sensor franchise also was strengthened by exceptional consumer demand for
the Sensor for Women shaving system. Introduced in 1992, this innovative product
has achieved substantial advances in sales and market share. The new SensorExcel
for Women shaving system, now being introduced in key markets worldwide, should
further improve the market position of the Sensor franchise. The system leatures
a specially-shaped handle with a soft, textured rubber grip and an enhanced
spring-mounted twin blade cartridge with protective microfins.
[GRAPHIC]
Reflecting the growing prominence of the Sensor franchise, the Trac II and
Atra twin blade shaving systems have gradually been overtaken as the market
leaders. Both of these older brands retain significant shares in the United
States and abroad, and sales in 1995 rose slightly.
The Company's disposable razor sales climbed considerably, with Gillette
brands again the top sellers worldwide. Led by strong gains overseas,
particularly in Latin America, the CustomPlus disposable razor recorded a
sizable sales advance. Rapid geographic expansion of this product, as well as of
the new CustomPlus Pivot razor introduced at midyear, will continue in 1996. In
the United States, the Good News brand remained the number one disposable razor
for the 201h consecutive year, as sales moved notably higher.
[GRAPHIC]
Although overall sales of Gillette double edge blades were
THE GILLETTE SENSOREXCEL
FOR WOMEN SHAVING SYSTEM [ARROW POINTING RIGHT]
6
<PAGE> 7
marginally lower, double edge blade sales in developing markets rose well above
those of 1994, and the Company maintained its traditional worldwide leadership
in this category.
[GRAPHIC]
In 1995, excellent progress was made in accelerating growth through two
continuing global business strategies. The first is to increase blade market
value by building the Sensor franchise and by upgrading consumers from double
edge to better-performing twin blade products. The second strategy is to expand
the Company's global presence. During the year, Gillette augmented its thriving
business in India, the world's largest blade market, with the acquisition of
Wiltech India, Ltd. The Company also established new selling organizations in
Eastern Europe and achieved major distribution and sales gains in the Former
Soviet Union.
SALES OF PRODUCT LINE
$ MILLIONS
BAR GRAPH
1991..............1750
1992..............1978
1993..............2118
1994..............2351
1995..............2638
7
<PAGE> 8
TOILETRIES & COSMETICS
Reflecting strong growth in several important product cat-
egories, sales of the toiletries and cosmetics line rose in
1995. Profits were lower, however, due to the negative
impact of results in the Jafra skin care and cosmetics busi-
ness in Mexico.
Worldwide sales of deodorants/antiperspirants, the largest Gillette toiletries
category, were markedly above those of 1994. In the United States, this was
chiefly due to significant advances by clear gel versions of every Gillette
brand - Right Guard, Soft & Dri, Dry Idea and the Gillette Series. With these
gains, the Company's share of the domestic market reached its highest level in
20 years. International sales increased sharply, led by strong acceptance of the
Gillette Series brand, which now is sold in about 60 countries. Distribution to
such large markets as Brazil and the Former Soviet Union is planned for 1996.
[GRAPHIC]
Reflecting sizable sales gains in the United States and abroad, shave
preparations turned in an excellent performance. The domestic increase was due
to advances by Gillette Foamy and Gillette Series shave preparations, as well as
brisk demand for new Satin Care for Women, the first non-soap-based shaving gel
for women. This innovative product will be distributed throughout overseas
markets in 1996, further strengthening the Company's leading position in the
worldwide shave preparations market.
[GRAPHIC]
Gillette Series after-shave conditioners and fragrances also recorded much
higher sales, substantially improving their share of this important market in
Europe and the United States.
In late 1995, the Company introduced the Gillette Series Pacific Light
collection of men's toiletries - deodorants/antiperspirants, shave preparations
and aftershaves - combining superior performance with a distinctive, clean
scent. Both the shave preparations and after-shaves also feature added skin care
ingredients.
Within hair care products, the Company continued to emphasize White Rain, the
number two volume brand in the United States. Sales were stable, as a strong
performance by the White Rain Exotics line countered weaker sales of other White
Rain prod ucts. At year-end, the White Rain Solutions line of revitalizing hair
care products was introduced to encouraging trade response.
Operating in North America, Europe and Latin America, Jafra sells its
high-quality skin care and color cosmetic products through consultants at
classes in the home or office. Sales in 1995
[GRAPHIC]
NEW GILLETTE SERIES PACIFIC
LIGHT SHAVING GEL AND AFTER-
SHAVE SKIN CONDITIONER GEL [ARROW POINTING RIGHT]
8
<PAGE> 9
declined sharply, as Jafra's business in Mexico, its largest market, was
significantly affected by the devaluation of the peso and related economic
difficulties. International markets other than Mexico posted a substantial sales
advance, while domestic sales rose well above those of the year before. A major
factor was the highly successful introduction of Generation III skin care
products for individual skin care needs.
[GRAPHIC]
Supported by technologically innovative products, such as clear gel
antiperspirants, Satin Care for Women shaving gel and the Gillette Series line,
all marketed with a global perspective, the Company's revitalized toiletries
business is in an excellent position for sustained growth.
SALES OF PRODUCT LINE
$ MILLIONS
BAR GRAPH
1991.............. 947
1992.............. 971
1993..............1047
1994..............1162
1995..............1236
9
<PAGE> 10
STATIONERY PRODUCTS
On the strength of record 1995 results, Gillette again was
the clear worldwide leader in the highly competitive writ-
ing instruments and correction products businesses. Sales
of stationery products showed good progress, and profits
climbed sharply.
With its Parker, Paper Mate and Waterman franchises, the Company holds a strong
position within all writing systems, price levels, distribution channels and
geographic areas.
Worldwide sales of Parker writing instruments, the largest part of the
Company's stationery products business, moved well above those of a year ago.
This was chiefly due to sizable sales gains by improved models of the popular
Jotter and Vector brands, which turned in particularly good performances in the
United States and abroad. In the prestige segment, two new Parker Duofold
Limited Editions, the Mandarin Yellow and commemorative MacArthur pens, also
were very well received.
[GRAPHIC]
Complementing this highly successful program of new product development,
Parker rapidly expanded its business in Eastern Europe during the year and
achieved substantial growth in its traditional strongholds of the Middle East
and Far East.
[GRAPHIC]
Paper Mate writing instruments posted a moderate advance in worldwide sales,
with continued brisk demand for the Dynagrip family of pens more than offsetting
lower sales of Flexgrip pens. Significantly higher sales of the Sharpwriter
disposable mechanical pencil also contributed to the upward trend. In the marker
category, where sales increased sharply, the Paper Mate Multi Marker range of
permanent markers was launched successfully in the United States and Europe.
The Waterman line of luxury writing instruments recorded sizable sales gains
worldwide, paced by an excellent performance in the United States and supported
by a strong program of new product development and geographic expansion. Sales
in the prestige segment rose substantially, spurred by the highly favorable
reception given the new Preface pen, especially in Europe. Growth in the
mid-priced range was led by the Hemisphere pen, introduced in 1994, which more
than doubled its sales in the United States. Waterman sales also climbed
significantly throughout the Asia-Pacific region, the Middle East and Latin
America, as distribution in these areas accelerated during the year.
Worldwide sales of Liquid Paper correction products
[GRAPHIC]
THE PARKER DUOFOLD
MANDARIN YELLOW
FOUNTAIN PEN [ARROW POINTING RIGHT]
10
<PAGE> 11
moved ahead slightly. This advance was primarily attributable to much higher
sales of Liquid Paper correction pens in both domestic and international
markets. Another factor was the continued growth of Liquid Paper DryLine
correction films, particularly in Europe. Liquid Paper correction fluids,
despite lower sales, retained their longtime position as the worldwide market
leader.
With a strong combination of superior products, powerful brand name
recognition and increasing worldwide presence, the Company is in an advantageous
position to accelerate the profitable growth of its stationery products business
in the years to come.
[GRAPHIC]
THE WATERMAN
EXPERT 2 LINE
OF WRITING
INSTRUMENTS
SALES OF PRODUCT LINE
$ MILLIONS
BAR GRAPH
1991...............460
1992...............520
1993...............633
1994...............807
1995...............862
11
<PAGE> 12
BRAUN
Braun sales and profits rose substantially to record levels
in 1995. This outstanding performance strengthened
Braun's position as the clear worldwide leader in several
major product categories.
Sales of Braun hair removal products climbed sharply. Men's electric shaver
sales were significantly higher, reflecting the exceptional success of premium
Flex Integral shavers, which were distributed worldwide during the year.
This new shaver range provides faster and closer shaves by incorporating a
middle cutter positioned between two shaving foils mounted on a pivoting head.
Excellent consumer acceptance of the Flex Integral shaver line enabled Braun to
enhance its humber one position worldwide in the men's electric shaver market.
[GRAPHIC]
THE IMPROVED
BRAUN ORAL-B
PLAQUE
REMOVER
Braun Silk-epil electric hair epilators for women achieved sizable sales
gains in 1995, improving their leading share of market worldwide. Contributing
to this advance was the new Silk-epil Select model, which features two speed
settings and an adjustable tweezer grip.
[GRAPHIC]
THE SUPERVOLUME
TWIST HAIR DRYER
The personal care line, which includes oral care and hair care appliances,
generated strong sales growth. Buoyed by brisk demand for an improved model
featuring a control grip handle, sales of Braun Oral-B plaque removers climbed
substantially. Replacement brush heads also registered a sharp sales increase.
Reflecting these gains, Braun augmented its clear worldwide leadership in oral
care appliances.
Among hair care appliances, the continued success of the Supervolume brand in
the United States and abroad, as well as the introduction of the Supervolume
Twist with additional styling options, drove hair dryer sales much higher,
strengthening Braun's leading position in the worldwide pistol grip hair dryer
market. Sales of hairstylers also moved ahead significantly, due principally to
three new shaper appliances for natural, easy-to-maintain hairstyles.
Household appliance sales rose slightly in 1995, as progress in Germany,
other European markets and the Far East more than offset the effects of intense
competition in the United States. New products generating a major portion of
sales included the MultiMix handmixer in its first full year on the market, the
top-of-the-line Culinary Series handblender and new pump- and steam-driven
espresso machines.
[GRAPHIC]
THE BRAUN
STYLE SHAPER
HAIRSTYLER
THE BRAUN
FLEX INTEGRAL
ELECTRIC SHAVER [ARROW POINTING RIGHT]
12
<PAGE> 13
[PHOTO]
SALES OF PRODUCT LINE
$ MILLIONS
BAR GRAPH
1991..............1216
1992..............1326
1993..............1249
1994..............1348
1995..............1621
At year-end, Braun entered the personal home diagnostics market with the
acquisition of California-based Thermoscan Inc., the leading marketer of
electronic infrared ear thermometers for rapid temperature measurement. During
1996, Braun will extend distribution of these innovative instant thermometers to
Europe and the Far East.
Braun continued to expand geographically in 1995, entering eight new markets,
including India and the Philippines. An increasing global presence, together
with superior new products planned for 1996, creates a solid foundation for
continued strong Braun growth.
[GRAPHIC]
13
<PAGE> 14
ORAL-B
Recognized worldwide for its superior oral care products,
Oral~B attained notably higher sales in 1995. Profits grew
much more rapidly, as Oral-B's significant investments
in new product programs delivered excellent returns.
Oral-B develops, markets and distributes worldwide an extensive range of
innovative oral care products in a close and well-established relationship with
dental professionals. The Oral-B line, led by toothbrushes, also includes
interdental products, specialty toothpastes, mouth rinses and professional
dental products.
Used by more dentists and consumers worldwide than any other brand, Oral-B in
1995 was again the best-selling toothbrush in the world. Sales of Oral-B
toothbrushes increased considerably, supported by the substantial growth of two
top-of-the-line entries. Sustained demand for the Advantage toothbrush,
introduced in 1993, enabled this product to turn in another strong performance.
[GRAPHIC]
[GRAPHIC]
The Advantage Control Grip toothbrush, featuring a handle with a rubberized
grip for greater comfort and control, registered impressive sales results in its
first year of worldwide distribution.
During the year, Oral-B introduced two innovative toothbrushes for children
that feature squeezable handles, brilliant colors and traditional Oral-B brush
head quality. The new Squish Grip toothbrush for five-to-eight-year-olds and the
Gripper toothbrush for preteens are appealing to children, while addressing
oral care issues of concern to parents.
Consumer response in the United States has been highly favorable, and the new
toothbrushes will be distributed abroad in 1996.
Worldwide sales of interdental products climbed rapidly for the eighth
consecutive year, spurred by gains throughout Oral-B's range of quality dental
flosses. The Ultra Floss brand, with its network of shred-resistant interlocking
fibers that stretch thin to fit between teeth and then spring back to brush away
plaque, recorded a sizable sales increase in its second marketing year. Sales of
interdental brushes and the compact interdental brush also rose sharply.
[GRAPHIC]
In highly competitive product categories, Oral-B specialty toothpaste sales
were well above 1994 levels, offsetting lower oral rinse sales. Among
professional products, Oral-B Minute-Foam fluoride treatment for dental office
use made an excellent showing.
FROM LEFT, THE ORAL-B
ADVANTAGE, ADVANTAGE
CONTROL GRIP AND
SQUISH GRIP TOOTHBRUSHES [ARROW POINTING RIGHT]
14
<PAGE> 15
[PHOTO]
SALES OF PRODUCT LINE
$ MILLIONS
BAR GRAPH
1991...............308
1992...............366
1993...............363
1994...............402
1995...............440
[GRAPHIC]
During the year, Oral-B opened businesses in Egypt, Indochina and North
Africa, bringing to 35 the number of new markets entered in the past six years.
In Vietnam, where Oral-B started selling imported toothbrushes in 1994, a new
joint venture manufacturing plant is under construction, with production
scheduled to begin in 1996. In late 1995, Oral-B acquired the Pro oral care
line, which is distributed primarily in Latin America and will complement
Oral-B's existing business in that region.
Innovative new products resulting from a high level of research and
development spending, together with geographic expansion and selective
acquisitions, should sustain Oral-B's bright prospects around the world.
15
<PAGE> 16
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS
In 1995, the Company achieved record levels of net sales, profit from
operations, net income and net income per common share.
SALES
Net sales in 1995 climbed 12% to $6.79 billion, compared with $6.07 billion
in 1994. The growth was due to an 8% increase from volume and new products and a
4% gain from the combined effect of selling prices and exchange rates. In 1994,
these factors affected sales by an 11% increase and a 1% gain, respectively.
Without Parker Pen, 1994 sales increased 9%.
Sales in the United States advanced 6% in 1995, after an 11% gain in 1994.
Foreign sales rose 15% in 1995, following a 13% gain in 1994. Sales of
operations outside the United States accounted for 70% of sales in 1995 and 68%
in 1994.
An analysis of sales by business segment follows.
<TABLE>
<CAPTION>
(Millions of dollars) % Increase
-------------------------------- ----------------
95 94 93 95/94 94/93
=====================================================================================
<S> <C> <C> <C> <C> <C>
Blades & Razors............. $2,635 $2,351 $2,118 12 11
Toiletries &
Cosmetics................. 1,236 1,162 1,047 6 11
Stationery Products......... 862 807 633 7 27
Braun Products.............. 1,621 1,348 1,249 20 8
Oral-B Products............. 440 402 363 9 11
Other....................... 1 -- 1 -- --
-------------------------------- -------------
$6,795 $6,070 $5,411 12 12
================================ =============
</TABLE>
Further information by business segment is set forth on pages 6 through 15.
Sales of the Company's blade and razor products were significantly higher
than those of the prior year. This increase was attributable to geographic
expansion, the continued growth of the Gillette Sensor, SensorExcel and Sensor
for Women shaving systems, the CustomPlus disposable razor and the improving
European currencies and economic conditions. In 1994, the Gillette Sensor
franchise was the primary contributor to sales growth.
Toiletries and cosmetics sales were above those of the year before. The
increase was due to the continuing international rollout of the Gillette Series
male grooming line, the strong growth of clear gel deodorant/antiperspirant
products in the United States and the favorable acceptance of Satin Care for
Women shaving gel. Sales in 1995 were unfavorably impacted by the adverse
economic conditions in Mexico affecting Jafra. In 1994, sales were appreciably
higher, due to the strength of the Gillette Series line and other
deodorant/antiperspirant brands, reflecting the favorable response to clear gel
technology.
Sales of stationery products surpassed those of the prior year, paced by
gains in the United States, Europe and Asia-Pacific. Sales increased
substantially in 1994, due primarily to the full-year inclusion of Parker Pen.
In 1995, sales of Braun products increased substantially over those of 1994,
particularly in the major markets of Europe and Japan. The success of new
products, including the Flex Integral shaver, and the continuing growth of the
Braun Oral-B plaque remover and the Supervolume hair dryer contributed to this
sales increase. Sales in 1994 were well above those of the prior year, due to
increases in the United States and Japan.
Oral-B sales increased appreciably over those of the previous year, as the
success of new products contributed to significant gains in international
markets. In 1994, sales advanced in all major geographic regions, aided by new
products.
GROSS PROFIT
Gross profit increased $406 million in 1995 and $482 million in 1994. As a
percent of sales, gross profit was 62.6% in 1995, as compared with 63.4% and
62.2% in 1994 and 1993, respectively. The decrease in 1995 was attributable to
higher costs in Brazil, caused by the lower devaluation of its currency.
However, this was offset by lower exchange losses in nonoperating charges.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to 42.4% of sales,
compared with 43.2% in 1994 and 42.1% in 1993. In absolute terms, these expenses
increased 10% in 1995, 15% in 1994 and 5% in 1993.
These increases reflected the higher level of marketing support given to
major brands, particularly the Gillette Sensor franchise, the Gillette Series
line and new Braun products. In 1995, $614 million was spent on advertising,
including sampling, and $597 million on sales promotion, for a total of $1,211
million, an increase of 12% over 1994. This compares with 1994 amounts of $545
million, $533 million and $1,078 million, respectively. In 1993, these were
$428 million, $450 million and $878 million, respectively. The spending in 1995
and 1994 represented 17.8% of sales, compared with
24
<PAGE> 17
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
16.2% in 1993. Spending for research and development grew 12% in 1995, compared
with 3% and 8% in 1994 and 1993, respectively. Other marketing and
administrative expenses rose 8% in 1995, 11% in 1994 and 6% in 1993.
PROFIT FROM OPERATIONS
Profit from operations was $1,371 million, compared with $1,227 million in 1994
and $825 million in 1993, after a realignment provision of $263 million.
Compared with 1994, profit from operations in 1995 increased 12%,
representing 20.2% of sales, compared with 20.2% in 1994 and 20.1% in 1993,
before realignment expense.
Within the United States, profit from operations rose 3%, compared with 16%
in 1994 and 10% in 1993. In 1995, profit growth in the United States was limited
by higher marketing expenses in support of new product introductions and by
expenses to implement cost reduction programs. Outside the United States, it
increased 16%, compared with gains of 12% in 1994 and 13% in 1993.
An analysis of profit from operations by business segment follows.
<TABLE>
<CAPTION>
% Increase/
(Millions of dollars) (Decrease)
------------------------------------- ----------------
95 94 (a)93 (b)93 95/94 94/93(b)
========================================================================================
<S> <C> <C> <C> <C> <C> <C>
Blades & Razors........... $ 960 $ 878 $692 $ 797 9 10
Toiletries &
Cosmetics............... 75 79 (6) 58 (6) 36
Stationery
Products................ 109 95 27 64 15 47
Braun Products............ 255 200 146 167 27 20
Oral-B Products........... 33 25 17 45 31 (45)
-------------------------------------- -------------
1,432 1,277 876 1,131 12 13
-------------------------------------- =============
Corporate................. (61) (50) (51) (44)
--------------------------------------
$1,371 $1,227 $825 $1,087
======================================
</TABLE>
(a) after charges for realignment (b) before charges for realignment
See Notes to Consolidated Financial Statements for geographic area and segment
data.
Profits for the blade and razor segment were considerably higher in 1995 and
1994, due to sales growth and improved product mix. In 1995, gains were led by
strong growth in most international markets.
In 1995, the toiletries and cosmetics segment reported lower profits, as
substantial gains in most markets did not offset the unfavorable impact of the
adverse economic conditions on Jafra Mexico. In 1994, the strong gain in profits
was due to domestic sales growth, which offset costs associated with new
products.
Profits for the stationery segment were sharply higher in 1995, due to sales
growth and lower product costs. In 1994, profits were substantially higher,
reflecting the full-year inclusion of Parker Pen.
In 1995 and 1994, profits for the Braun segment were substantially higher, due
to increased sales of products with higher profit margins.
Oral-B profits rose strongly in 1995, primarily in the United States. Profits
in 1994 declined, due to higher costs associated with new products.
NONOPERATING CHARGES/INCOME
Net interest expense (interest expense less interest income) amounted to $49
million in 1995, $42 million in 1994 and $33 million in 1993. The increase in
1995 was due to lower interest income. Interest expense was slightly lower than
in 1994, as lower average borrowing offset higher average interest rates.
Net exchange losses of $17 million, compared with the 1994 and 1993 totals of
$77 million and $105 million, respectively, were attributable primarily to
subsidiaries in highly inflationary countries. The decrease in 1995 and 1994
reflected the continued favorable impact of the economic recovery plan
implemented in Brazil in mid-1994. Translation adjustments resulting from
currency fluctuations in non-highly inflationary countries are accumulated in a
separate section of stockholders' equity, as noted on page 32. In 1995, the
negative adjustment was $100 million, due principally to the weakening of the
Mexican peso against the U.S. dollar, compared with a favorable adjustment of
$38 million in 1994 and a negative adjustment of $150 million in 1993.
TAXES AND NET INC0ME
In 1995, the effective tax rate on income was 36.5%, compared with rates of
36.8% and 37.5% in 1994 and 1993, respectively.
Net income for 1995 was $824 million, compared with $698 million in 1994 and
$288 million in 1993. Net income per common share in 1995 was $1.85, compared
with $1.57 and $.64 in 1994 and 1993, respectively. In 1993, net income and net
income per common share were reduced by $139 million and $.32,
25
<PAGE> 18
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
respectively, for the cumulative one-time effect of adopting mandated accounting
changes for income taxes, postretirement benefits other than pensions and
postemployment benefits.
Compared with 1993, before the charges for realignment and the cumulative
effect of adopting accounting changes, both 1994 net income and net income per
common share increased 18%.
FINANCIAL CONDITION
The Company's financial condition continued to be strong in 1995. While net debt
increased $236 million, this reflected spending for the acquisition of
businesses in the Company's core business categories.
Net debt (total debt, net of associated swaps, less cash and short-term
investments) at December 31, 1995, amounted to $1.28 billion, compared with
$1.04 billion in 1994 and $1.26 billion in 1993.
The market value of Gillette equity was over $23 billion at the end of 1995.
The Company's book equity position amounted to $2.51 billion at the end of 1995,
compared with $2.02 billion at the end of 1994 and $1.48 billion at the end of
1993.
Net cash provided by operating activities in 1995 was $821 million, compared
with $806 million in 1994 and $732 million in 1993. Requirements for net working
capital increased in all three years, reflecting the growth of the business. The
Company's current ratio for 1995 was 1.46, compared with ratios of 1.56 and 1.44
for 1994 and 1993, respectively.
Capital spending in 1995 amounted to $471 million, compared with $400 million
and $352 million in 1994 and 1993, respectively. Spending in all three years was
principally for the Sensor system franchise, other twin blade shaving products
and Braun products.
At year-end 1995, there was $373 million outstanding under the U.S.
commercial paper program and no borrowings under the Company's $400 million
revolving credit agreements. At year-end 1994 and 1993, there was $292 million
and $154 million, respectively, in debt outstanding under the commercial paper
program. At year-end 1994 and 1993, there was no debt outstanding under the
revolving credit agreements.
During 1995, the Company replaced its $500 million revolving credit
agreements with new revolving facilities provided by a syndicate of 14 banks for
$100 million, expiring June 20, 1996, and $300 million, expiring June 20, 2000.
The Company generally borrows through the commercial paper market, and these
facilities primarily provide back-up to that program.
Both Moody's and Standard & Poor's maintained the Company's long-term credit
ratings in 1995. Moody's rates the Company's long-term debt Aa3, while the
Standard & Poor's rating is AA-. The commercial paper rating is AI+ by Standard
& Poor's and P1 by Moody's.
In 1995, the Company spent $278 million for acquisitions in its core
businesses, compared with $26 million in 1994. In 1993, the Company spent $481
million for acquisitions, primarily for Parker Pen.
In 1995 and 1994, no long-term debt was issued. In 1993, the Company issued
$500 million in 1ong-term notes. This indebtedness was primarily used to repay
short-term debt used for the Parker Pen acquisition and maturing long-term debt.
Gillette continues to have access to substantial sources of capital in world
financial markets. The Company's ability to generate funds internally, its
substantial unused lines of credit and its access to worldwide credit markets
are ample to cover all anticipated needs.
FORWARD-LOOKING INFORMATION
Management is unaware of any trends or conditions that could have a material
adverse effect on the Company's consolidated financial position, future results
of operations or liquidity.
However, investors should also be aware of factors which could have a
negative impact on prospects and the consistency of progress. These include
political, economic or other factors such as currency exchange rates, inflation
rates, recessionary or expansive trends, taxes and regulations and laws
affecting the worldwide business in each of the Company's markets; competitive
product, advertising, promotional and pricing activity; dependence on the rate
of development and degree of acceptance of new product introductions in the
marketplace; and the difficulty of forecasting sales at certain times in certain
markets.
26
<PAGE> 19
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Company is responsible for the objectivity and integrity of the accompanying
consolidated financial statements, which have been prepared in conformity with
generally accepted accounting principles. The financial statements of necessity
include the Company's estimates and judgments relating to matters not con-
cluded by year-end. Financial information contained elsewhere in the Annual
Report is consistent with that included in the financial statements.
The Company maintains a system of internal accounting controls that includes
careful selection and development of employees, division of duties, and written
accounting and operating policies and procedures augmented by a continuing
internal audit program. Although there are inherent limitations to the
effectiveness of any system of accounting controls, the Company believes that
its system provides reasonable, but not absolute, assurance that its assets are
safeguarded from unauthorized use or disposition and that its accounting records
are sufficiently reliable to permit the preparation of financial statements that
conform in all material respects with generally accepted accounting principles.
KPMG Peat Marwick LLP, independent auditors, are engaged to render an
independent opinion regarding the fair presentation in the financial state-
ments of the Company's financial condition and operating results. Their report
appears below. Their examination was made in accordance with generally accepted
auditing standards and included a review of the system of internal accounting
controls to the extent they considered necessary to determine the audit proce-
dures required to support their opinion.
The Audit Committee of the Board of Directors is composed solely of directors
who are not employees of the Company. The Committee meets periodically and
privately with the independent auditors, with the internal auditors and with the
financial officers of the Company to review matters relating to the quality of
the financial reporting of the Company, the internal accounting controls and the
scope and results of audit examinations. The Committee also reviews com- pliance
with the Company's statement of policy as to the conduct of its business,
including proper accounting and dealing with auditors. In addition, it is
responsible for recommending the appointment of the Company's independent
auditors, subject to stockholder approval.
===============================================================================
INDEPENDENT AUDITORS' REPORT
[KPMG Peat Marwick LLP Logo]
THE STOCKHOLDERS AND BOARD OF DIRECTORS OF THE GILLETTE COMPANY
We have audited the accompanying consolidated balance sheet of The Gillette
Company and subsidiary companies as of December 31, 1995 and 1994, and the
related consolidated statements of income and earnings reinvested in the
business and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An auditing the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Gillette
Company and subsidiary companies at December 31, 1995 and 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
In 1993, the Company changed its methods of accounting for income taxes,
postretirement medical benefits and postemployment benefits.
/s/KPMG Peat Marwick LLP
Boston, Massachusetts
January 23, 1996
27
<PAGE> 20
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME AND
EARNINGS REINVESTED IN THE BUSINESS
<TABLE>
<CAPTION>
(Millions of dollars, except per share amounts)
Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES .......................................................... $6,794.7 $6,070.2 $5,410.8
Cost of Sales ...................................................... 2,540.2 2,221.9 2,044.3
--------------------------------------
GROSS PROFIT ....................................................... 4,254.5 3,848.3 3,366.5
Selling, General and Administrative Expenses ....................... 2,883.2 2,621.6 2,279.2
Realignment Expense ................................................ -- -- 262.6
--------------------------------------
PROFIT FROM OPERATIONS ............................................. 1,371.3 1,226.7 824.7
Nonoperating Charges (Income)
Interest income .................................................. (9.9) (19.0) (27.3)
Interest expense ................................................. 59.0 61.1 59.8
Other charges - net .............................................. 25.3 80.5 109.5
--------------------------------------
74.4 122.6 142.0
--------------------------------------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES ..................................... 1,296.9 1,104.1 682.7
Income Taxes ....................................................... 473.4 405.8 255.8
--------------------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES ............................................... 823.5 698.3 426.9
Cumulative Effect of Accounting Changes ............................ -- -- (138.6)
--------------------------------------
NET INCOME ......................................................... 823.5 698.3 288.3
Preferred Stock dividends, net of tax benefit ...................... 4.7 4.7 4.7
--------------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS ........................ 818.8 693.6 283.6
Earnings Reinvested in the Business at beginning of year ........... 2,830.2 2,357.9 2,259.6
--------------------------------------
3,649.0 3,051.5 2,543.2
Common Stock dividends declared .................................... 266.3 221.3 185.3
--------------------------------------
Earnings Reinvested in the Business at end of year ................. $3,382.7 $2,830.2 $2,357.9
======================================
INCOME PER COMMON SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES ..................................... $ 1.85 $ 1.57 $ .96
Cumulative Effect of Accounting Changes .......................... -- -- (.32)
--------------------------------------
NET INCOME PER COMMON SHARE ....................................... $ 1.85 $ 1.57 $ .64
======================================
Dividends declared per common share ............................... $ .60 $ .50 $ .42
Weighted average number of common shares outstanding (millions) .. 443.5 442.3 440.9
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
28
<PAGE> 21
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Millions of dollars)
December 31, 1995 and 1994 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ................................................ $ 47.9 $ 43.8
Short-term investments, at cost, which approximates market value ......... 1.6 2.3
Receivables, less allowances: 1995 - $59.2; 1994 - $52.1 ................. 1,659.5 1,379.5
Inventories .............................................................. 1,035.1 941.2
Deferred income taxes .................................................... 220.2 220.6
Prepaid expenses ......................................................... 140.2 113.0
-------------------------
TOTAL CURRENT ASSETS .................................................. 3,104.5 2,700.4
-------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost less accumulated depreciation ....... 1,636.9 1,411.0
INTANGIBLE ASSETS, less accumulated amortization ........................... 1,221.4 887.4
OTHER ASSETS ............................................................... 377.5 314.6
-------------------------
$ 6,340.3 $ 5,313.4
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable ............................................................ $ 576.2 $ 344.4
Current portion of long-term debt ........................................ 26.5 28.1
Accounts payable and accrued liabilities ................................. 1,273.3 1,178.2
Income taxes ............................................................. 248.0 185.5
-------------------------
TOTAL CURRENT LIABILITIES ............................................. 2,124.0 1,736.2
-------------------------
LONG-TERM DEBT ............................................................. 691.1 715.1
DEFERRED INCOME TAXES ...................................................... 72.7 53.1
OTHER LONG-TERM LIABILITIES ................................................ 919.2 774.3
MINORITY INTEREST .......................................................... 20.0 17.4
STOCKHOLDERS' EQUITY
8.0% Cumulative Series C ESOP Convertible Preferred, without par value,
Issued: 1995 - 160,701 shares; 1994 - 162,928 shares ................... 96.9 98.2
Unearned ESOP compensation ............................................... (34.3) (44.2)
Common stock, par value $1 per share
Authorized 1,160,000,000 shares
Issued: 1995 - 559,718,438 shares; 1994 - 558,242,410 shares ........... 559.7 558.2
Additional paid-in capital ............................................... 31.1 (1.4)
Earnings reinvested in the business ...................................... 3,382.7 2,830.2
Cumulative foreign currency translation adjustments ...................... (477.0) (377.1)
Treasury stock, at cost:
1995 - 115,254,353 shares; 1994 - 115,343,404 shares ................... (1,045.8) (1,046.6)
-------------------------
TOTAL STOCKHOLDERS' EQUITY ............................................. 2,513.3 2,017.3
-------------------------
$ 6,340.3 $ 5,313.4
=========================
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
29
<PAGE> 22
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Millions of dollars)
Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .................................................. $ 823.5 $ 698.3 $ 288.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of accounting changes ................... -- -- 138.6
Provision for realignment expense ......................... -- -- 164.1
Depreciation and amortization ............................. 248.4 215.4 218.5
Other ..................................................... (3.1) 15.1 51.8
Changes in assets and liabilities, net of effects
from acquisition of businesses:
Accounts receivable ..................................... (286.1) (147.4) (101.8)
Inventories ............................................. (94.1) (66.7) (56.0)
Accounts payable and accrued liabilities ................ 67.0 93.7 10.8
Other working capital items ............................. 60.7 37.4 (30.7)
Other noncurrent assets and liabilities ................. 4.2 (40.3) 48.1
-------------------------
Net cash provided by operating activities ........... 820.5 805.5 731.7
-------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment .................. (471.1) (399.8) 352.0)
Disposals of property, plant and equipment .................. 30.0 24.9 10.2
Acquisition of businesses, less cash acquired ............... (276.7) (25.6) 452.9)
Other ....................................................... 12.1 16.9 (35.6)
-------------------------
Net cash used in investing activities ............... (705.7) (383.6) 830.3)
-------------------------
FINANCING ACTIVITIES
Proceeds from exercise of stock option and
purchase plans ............................................ 31.6 18.4 24.5
Proceeds from long-term debt ................................ -- -- 500.0
Reduction of long-term debt ................................. (19.6) (200.7) (414.8)
Increase (decrease) in loans payable ........................ 133.6 (12.9) 177.5
Dividends paid .............................................. (259.7) (217.1) (183.3)
-------------------------
Net cash provided by (used in) financing activities.. (114.1) (412.3) 103.9
-------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ....................... 3.4 (2.9) (3.5)
-------------------------
INCREASE IN CASH AND CASH EQUIVALENTS ......................... 4.1 6.7 1.8
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................ 43.8 37.1 35.3
-------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ...................... $ 47.9 $ 43.8 $ 37.1
=========================
Supplemental disclosure of cash paid for:
Interest ................................................. $ 62.4 $ 61.6 $ 72.5
Income taxes ............................................. $ 289.1 $ 240.6 $ 180.9
Noncash investing and financing activities:
Acquisition of businesses
Fair value of assets acquired ......................... $ 394.9 $ 19.0 $ 705.8
Cash paid ............................................. 278.3 25.6 481.1
-------------------------
Liabilities assumed ................................... $ 116.6 $ (6.6) $ 224.7
=========================
- -------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
30
<PAGE> 23
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Gillette Company is a global consumer products firm with manufacturing
operations conducted at 50 facilities in 24 countries and products distributed
through wholesalers, retailers and agents in over 200 countries and
territories. The Company is the world leader in male grooming products, a
category that includes blades and razors, shaving preparations and electric
shavers, and also in selected female grooming products, such as wet shaving
products and hair epilation appliances. The Company is the world's top seller of
writing instruments and correction products and is the world leader in
toothbrushes and oral care appliances.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Inter-company accounts and transactions are eliminated.
Accounts of subsidiaries outside the United States and Canada are included on
the basis of fiscal years generally ending November 30, except for the Braun
group of companies, whose fiscal year ends September 30.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash, time deposits and all highly liquid debt
instruments with an original maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. In general, cost is
currently adjusted standard cost, which approximates actual cost on a first-in,
first-out basis.
DEPRECIATION
Depreciation is computed primarily on a straight-line basis over the estimated
useful lives of assets.
ADVERTISING
Advertising costs are expensed in the year incurred.
INTANGIBLE ASSETS
Intangible assets principally consist of goodwill, which is amortized on the
straight-line method, generally over a period of 40 years. Other intangible
assets are amortized on the straight-line method over a period of from 13 to 40
years. The carrying amounts of intangible assets are assessed for impairment
when operating profit from the applicable related business indicates that the
carrying amount of the assets may not be recoverable.
NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income less dividends
on preferred stock, net of tax benefits, by the weighted average number of
common shares outstanding.
The calculation of fully diluted net income per common share assumes
conversion of the preferred stock into common stock, and also adjusts net income
for the ESOP debt service expense due to the assumed replacement of the
preferred stock dividends with common stock dividends. The dilutive effect is
not significant.
INCOME TAXES
The Company reinvests unremitted earnings of foreign operations and,
accordingly, does not provide for Federal income taxes that could result from
the remittance of such earnings. These unremitted earnings amounted to $2.43
billion at December 31, 1995.
Beginning in 1993, deferred taxes are provided for using the asset and
liability method for temporary differences between financial and tax reporting.
RECLASSIFICATION OF PRIOR YEARS
Prior year financial statements have been reclassified to conform to 1995
presentations.
ACQUISITIONS AND DIVESTITURES
In 1995, the Company acquired businesses in the blade and razor, Braun and
Oral-B segments and completed payments on a prior acquisition for an aggregate
amount of $278 million. These acquisitions have been accounted for by the
purchase method of accounting. Their results of operations, which have been
included in the Company's consolidated financial statements, have not materially
affected the consolidated financial position or results of operations.
In 1994, the Company increased its interest in several businesses at a total
cost of $26 million.
31
<PAGE> 24
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOREIGN CURRENCY TRANSLATION
Net exchange gains or losses resulting from the translation of assets and
liabilities of foreign subsidiaries, except those in highly inflationary
economies, are accumulated in a separate section of stockholders' equity titled,
"Cumulative foreign currency translation adjustments." Also included are the
effects of exchange rate changes on intercompany transactions of a long-term
investment nature and transactions designated as hedges of net foreign
investments.
An analysis of this account follows.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ...... $(377.1) $(415.0) $(265.2)
Translation adjustments, including
the effect of hedging ........... (120.4) 43.0 (154.2)
Related income tax effect ......... 20.5 (5.1) 4.4
-------------------------------------
Balance at end of year ............ $(477.0) $(377.1) $(415.0)
=====================================
</TABLE>
Included in Other charges are net exchange losses of $17.0 million, $77.4
million and $105.4 million for 1995, 1994 and 1993, respectively, primarily
relating to subsidiaries in highly inflationary countries, principally Brazil.
INVENTORIES
<TABLE>
<CAPTION>
December 31, December 31,
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies ............. $ 231.8 $207.3
Work in process ........................ 127.3 95.0
Finished goods ......................... 676.0 638.9
-------------------------
$1,035.1 $941.2
=========================
</TABLE>
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C> <C>
Land ......................................... $ 37.4 $ 36.9
Buildings .................................... 509.9 465.8
Machinery and equipment ...................... 2,714.2 2,399.5
-------- --------
3,261.5 2,902.2
Less accumulated depreciation ................ 1,624.6 1,491.2
-------- --------
$1,636.9 $1,411.0
======== ========
</TABLE>
<TABLE>
<CAPTION>
INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
Goodwill ($43.8 million not
subject to amortization) ............. $1,229.4 $ 905.0
Other intangible assets ................ 187.4 148.1
----------------------------
1,416.8 1,053.1
Less accumulated amortization .......... 195.4 165.7
----------------------------
$1,221.4 $ 887.4
============================
</TABLE>
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
<TABLE>
<CAPTION>
December 31, December 31,
{Millions of dollars) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Accounts payable ....................... $ 400.3 $ 334.6
Advertising and sales
promotion ............................ 227.5 218.0
Payroll and payroll taxes .............. 221.3 197.8
Other taxes ............................ 71.1 45.5
Interest payable ....................... 8.8 12.2
Dividends payable on
common stock ......................... 66.7 55.4
Realignment expense .................... 30.2 107.3
Miscellaneous .......................... 247.4 207.4
----------------------------
$1,273.3 $1,178.2
============================
</TABLE>
<TABLE>
<CAPTION>
OTHER LONG-TERM LIABILITIES
- --------------------------------------------------------------------------------
<S> <C> <C>
Pensions .......................................... $449.6 $368.4
Postretirement medical ............................ 209.1 193.1
Incentive plans ................................... 131.6 116.6
Realignment expense ............................... (11.0) 15.0
Miscellaneous ..................................... 139.9 81.2
---------------------
$919.2 $774.3
=====================
</TABLE>
DEBT
Loans payable at December 31, 1995 and 1994, included $223 million and $142
million, respectively, of commercial paper. The Company's commercial paper
program is supported by its revolving credit facilities. Long-term debt is
summarized as follows.
<TABLE>
<CAPTION>
December 31, December 31,
(Millions of dollars) 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Commercial paper ............................. $15O.O $150.0
5.75% Notes due 2005 ......................... 200.0 200.0
6.25% Notes due 2003 ......................... 150.0 150.0
4.75% Notes due 1996 ......................... 150.0 150.0
8.03 % Guaranteed ESOP
notes due through 2000 ..................... 41.2 51.5
Other, primarily foreign
currency borrowings ........................ 26.4 41.7
----------------------
Total long-term debt ......................... 717.6 743.2
Less current portion ......................... 26.5 28.1
----------------------
Long-term portion ............................ $691.1 $715.1
======================
</TABLE>
32
<PAGE> 25
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1995 and 1994, the Company had swap agreements that converted
$500 million in U.S. dollar-denominated long-term fixed rate debt securities
into multi-currency principal and floating interest rate obligations over the
term of the respective issues. As of December 31, 1995, the $150 million notes
due 1996 were swapped into floating interest rate U.S. dollar obligations, the
$150 million notes due 2003 and the $200 million notes due 2005 were swapped to
Deutschmark principal and floating interest rate obligations, resulting in an
aggregate principal amount of $533 million at a weighted average interest rate
of4.7%.At December31, 1994, the aggregate principal amounted to $500 million,
with a weighted average interest rate of 5.6%.
In addition, at December 31, 1995, the Company had a forward exchange
contract, maturing in 1996, that established a $42 million Yen principal, .5%
interest obligation with respect to $43 million of U.S. dollar commercial paper
debt included in Long-Term Debt. At December 31, 1994, the Company had forward
exchange contracts that established Deutschmark and Yen principal and interest
obligations with respect to $119 million of U.S. dollar commercial paper debt
included in Long-Term Debt, with a weighted average interest rate of 3.7%.
Exchange rate movements give rise to changes in the values of these
agreements that offset changes in the values of the underlying exposure. Amounts
associated with these agreements were liabilities of $32.6 million at December
31, 1995, and were nil at December 31, 1994.
The weighted average interest rate on Loans payable was 5.8% at December 31,
1995, and 6.5% at December 31, 1994. The weighted average interest rate on total
long-term debt, including associated swaps and excluding the guaranteed ESOP
notes, was 4.7% at December 31, 1995, compared with 5.3% at December 31, 1994.
The Company has a $100 million revolving bank credit agreement that expires
in June 1996 and a $300 million revolving bank credit agreement expiring in June
2000, both of which may be used for general corporate purposes. Under the
agreements, the Company has the option to borrow at various interest rates,
including the prime rate, and is required to pay a weighted average facility fee
of .065% per annum. At year-end 1995 and 1994, there were no borrowings under
these agreements.
Based on the Company's intention and ability to maintain its $300 million
revolving credit agreement beyond 1996, $150 million of commercial paper
borrowings and the $150 million notes due 1996 were classified as long-term debt
at December 31, 1995. As of December 31, 1994, $150 million of commercial paper
borrowings was so classified.
Aggregate maturities of total long-term debt for the five years subsequent to
December 31, 1995, are $176.5 million, $15.1 million, $10.7 million, $8.8
million and $5.1 million, respectively.
Unused lines of credit, including the revolving credit facilities, amounted
to $1.02 billion at December 31, 1995.
FINANCIAL INSTRUMENTS
The Company uses financial instruments, principally swaps, forward contracts and
options, to manage foreign currency and interest rate exposures and to hedge
certain employee benefit costs. These contracts hedge transactions and balances
for periods consistent with its committed exposures and do not constitute
investments independent of these exposures. The Company does not hold or issue
financial instruments for trading purposes, nor is it a party to any leveraged
contracts.
Realized and unrealized foreign exchange gains and losses on financial
instruments are recognized and offset foreign exchange gains and losses on the
underlying exposures. The interest differential paid or received on swap and
forward agreements is recognized as an adjustment to interest expense.
In December 1995, the Company purchased an out-of-the-money, foreign currency
weighted-average basket put option that partially protects 1996 U.S. dollar
results of foreign operations in selected currencies. The strike price is $847
million, with a cost of $4.7 million. The option, which matures in 1996, is
marked to market and included within profit from operations. At December 31,
1994, similar contracts, which expired unexercised in 1995, had a strike price
of $520 million and a cost of $5.7 million.
The Company has also hedged certain employee benefit expenses linked to its
stock price by entering into equity swap and option contracts that mature in
1998 and 2002, respectively. At December 31, 1995, the notional principal amount
of such contracts was $33 million, with a cost of $2.8 million. The cost is
amortized over the duration of the contracts, and gains or losses are recognized
as adjustments to the carrying amount of the underlying liabilities.
The above amounts exclude the swap and forward agreements described in the
Debt note.
33
<PAGE> 26
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Several major international financial institutions are counterparties to the
Company's financial instruments. It is Company practice to monitor the financial
standing of the counterparties and to limit the amount of exposure with any one
institution. The Company may be exposed to credit loss in the event of
nonperformance by the counterparties to these contracts, but does not anticipate
such nonperformance.
With respect to trade receivables, concentration of credit risk is limited,
due to the diverse geographic areas covered by Company operations. Any probable
bad debt loss has been provided for in the allowance for doubtful accounts.
The estimated fair values of the Company's financial instruments are
summarized as follows.
<TABLE>
<CAPTION>
Carrying Estimated
(Millions of dollars) Amount Fair Value
- --------------------------------------------------------------------------------
DECEMBER 31, 1995
<S> <C> <C>
Long-term investments .................... $ 86.7 $ 89.3
Total long-term debt ..................... (717.6) (722.2)
Foreign currency and interest
rate contracts ......................... (19.6) (25.9)
Equity contracts ......................... 3.2 3.3
DECEMBER 31, 1994
Long-term investments .................... $ 63.8 $ 63.8
Total long-term debt ..................... (743.2) (685.3)
Foreign currency and interest
rate contracts ......................... 10.3 (53.6)
</TABLE>
The carrying amounts for cash, short-term investments, receivables, accounts
payable and accrued liabilities, and loans payable approximate fair value
because of the short maturity of these instruments. The fair value of long-term
investments is estimated based on quoted market prices. The fair value of
long-term debt, including the current portion, is estimated based on current
rates offered to the Company for debt of the same remaining maturities. The fair
values of foreign currency, interest rate and equity contracts are estimated
based on dealer quotes. These values represent the estimated amount the Company
would receive or pay to terminate agreements, taking into consideration current
market rates and the current creditworthiness of the counterparties.
REALIGNMENT PLAN
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. Through December 31, 1995,
$68.1 million has been charged against the original reserve of $72.0 million.
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. As of
December 31, 1995, $175.3 million was charged against the original reserve of
$190.6 million.
Through December 31, 1995, cash expenditures, after income tax effects,
amounted to $43.3 million, noncash costs amounted to $108.8 million and 2,208
positions were eliminated. All realignment projects have been implemented, and
activities are ongoing in 1996.
LEASE COMMITMENTS
Minimum rental commitments under noncancellable leases, primarily for office and
warehouse facilities, are $43.3 million in 1996, $34.8 million in 1997, $27.2
million in 1998, $21.3 million in 1999, $16.3 million in 2000 and $12.6 million
for years thereafter. Rental expense amounted to $68.2 million in 1995, $63.2
million in 1994 and $60.5 million in 1993.
RESEARCH AND DEVELOPMENT
Research and development costs, included in selling, general and administrative
expenses, amounted to $153.0 million in 1995, $136.9 million in 1994 and $133.1
million in 1993.
34
<PAGE> 27
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
Deferred income taxes are recognized for the expected tax consequences of
temporary differences by applying enacted statutory tax rates, applicable to
future years, to differences between the financial reporting basis and tax basis
of assets and liabilities.
Income before income taxes and income tax expense are summarized below.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes
United States ................ $ 452.4 $ 426.6 $271.7
Foreign ...................... 844.5 677.5 411.0
-----------------------------------
Total income before
income taxes ................. $1,296.9 $1,104.1 $682.7
===================================
Current tax expense
Federal ...................... $ 193.5 $ 81.6 $ 88.7
Foreign ...................... 218.9 208.2 222.7
State ........................ 41.0 27.4 37.1
Deferred tax expense
Federal ...................... (16.1) 42.4 (15.8)
Foreign ...................... 42.2 39.2 (73.9)
State ........................ (6.1) 7.0 (3.0)
-----------------------------------
Total income tax expense ....... $ 473.4 $ 405.8 $255.8
===================================
</TABLE>
An analysis of deferred tax expense/(benefit) follows.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Depreciation ................. $ 26.4 $ 6.2 $ 2.6
Benefit plans ................ (30.2) 16.4 (5.6)
Realignment program .......... 38.7 52.6 (98.5)
Other ........................ (14.9) 13.4 8.8
------------------------------------
Total deferred tax
expense (benefit) .......... $ 20.0 $88.6 $(92.7)
====================================
</TABLE>
A reconciliation of the statutory Federal income tax rates to the Company's
effective tax rate follows.
<TABLE>
<CAPTION>
(Percent) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal tax rate ..... 35.0% 35.0% 35.0%
Rate differential on
foreign income ................. (1.8) 1.0 (3.4)
Effect of foreign currency
translation .................... .5 (.1) 4.1
State taxes (net of
Federal tax benefits) .......... 1.8 2.0 3.2
Other differences .............. 1.0 (1.1) (1.4)
------------------------------------
Effective tax rate ............. 36.5% 36.8% 37.5%
====================================
</TABLE>
The components of deferred tax assets and deferred tax liabilities are shown
below.
<TABLE>
<CAPTION>
1995 1994
--------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(Millions of dollars) Assets Liabilities Assets Liabilities
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT
Realignment
program ........................ $ 7.2 $ -- $ 40.3 $ --
Benefit plans .................... 49.7 -- 38.6 --
Advertising and
sales promotion ................ 11.4 -- 15.4 --
Inventory reserves ............... 12.1 -- 17.6 --
Misc. reserves &
accruals ..................... 24.6 -- 13.4 --
All other ........................ 115.2 -- 95.3 --
--------------------- ---------------------
Total Current .................. 220.2 -- 220.6 --
--------------------- ---------------------
Noncurrent
Benefit plans .................... 80.3 -- 61.2 --
Property, plant
and equipment .................. -- 137.6 -- 111.2
Realignment
program ........................ -- 5.6 --
All other ........................ -- 15.4 -- 8.7
--------------------- ---------------------
Total Noncurrent ............... 80.3 153.0 66.8 119.9
--------------------- ---------------------
Net Noncurrent ..................... $ 72.7 $ 53.1
====== ======
Net Deferred Tax
Assets ........................... $147.5 $167.5
====== ======
</TABLE>
CONTINGENCIES
The Company is subject to legal proceedings and claims arising out of its
business that cover a wide range of matters, including antitrust and trade
regulation, contracts, environmental issues, product liability, patent and
trademark matters and taxes.
Management, after review and consultation with counsel, considers that any
liability from all of these pending lawsuits and claims would not materially
affect the consolidated financial position, results of operations or liquidity
of the Company.
35
<PAGE> 28
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PENSION PLANS
The Company has noncontributory defined benefit pension plans in effect for
substantially all of its domestic employees. Benefits are based on age, years of
service and the level of compensation during the final years of employment. The
funding policy of the Company for these plans is to contribute annually the
amount necessary to meet the minimum funding standards established by the
Employee Retirement Income Security Act. In addition, the Company has various
foreign retirement programs, including defined benefit, defined contribution and
other plans, covering the majority of foreign employees. In Germany, under
common local practice and enabling tax law, pension costs are accrued but
unfunded.
Total pension expense for 1995 was $86.0 million, compared with $69.6 million
and $57.0 million in 1994 and 1993, respectively. The components of net pension
expense follow.
<TABLE>
<CAPTION>
1995 1994 1993
------------------ ----------------- -----------------
(Millions of dollars) Domestic Foreign Domestic Foreign Domestic Foreign
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Defined Benefit Plans
Service cost--benefits earned .................. $ 15.2 $ 27.5 $ 15.0 $ 25.2 $ 12.3 $ 20.1
Interest cost on projected benefit obligation .. 50.4 47.0 42.0 40.1 38.1 35.5
Actual (return) loss on plan assets ............ (149.3) (57.1) 1.7 (28.3) (46.3) (64.5)
Net amortization and deferral .................. 113.6 28.9 (37.8) 3.2 9.9 46.0
---------------- ---------------- ----------------
29.9 46.3 20.9 40.2 14.0 37.1
Other Pension Costs
Defined contribution plans ..................... -- 3.6 -- 3.0 -- 1.7
Foreign plans not on SFAS 87 ................... -- 6.2 -- 5.5 -- 4.2
---------------- ---------------- ----------------
Total Pension Expense ............................ $ 29.9 $ 56.1 $ 20.9 $ 48.7 $ 14.0 $ 43.0
================ ================ ================
</TABLE>
The funded status of the Company's principal defined benefit plans and the
amounts recognized in the balance sheet at December 31 follow.
<TABLE>
<CAPTION>
(Millions of dollars)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vested benefit ...................................... $554.9 $569.2 $428.5 $480.7 $431.1 $438.8
Nonvested benefit ................................... 82.5 30.1 78.9 25.1 70.4 22.0
---------------- ---------------- ----------------
Accumulated benefit obligation ...................... 637.4 599.3 507.4 505.8 501.5 460.8
Benefit obligation related to future
compensation levels ............................... 147.8 81.4 99.6 78.7 108.8 66.4
---------------- ---------------- ----------------
Projected benefit obligation ........................ 785.2 680.7 607.0 584.5 610.3 527.2
Fair value of plan assets, invested primarily
in equities and debt securities ................... 641.3 324.5 491.5 291.9 489.4 268.1
---------------- ---------------- ----------------
Plan assets less than projected benefit obligation .. (143.9) (356.2) (115.5) (292.6) (120.9) (259.1)
Unrecognized transition obligation (asset) .......... 3 12.1 .1 11.0 (2.3) 10.8
Unrecognized prior service cost ..................... 21.0 9.9 24.6 11.3 27.4 9.5
Unrecognized net loss ............................... 158.0 43.5 124.5 37.6 117.1 44.3
Minimum liability adjustment ........................ (23.3) (16.8) (2.4) (8.2) (8.9) (15.4)
---------------- ---------------- ----------------
Net prepaid (accrued) pension cost included
in consolidated balance sheet ..................... $ 12.1 $(307.5) $ 31.3 $(240.9) $ 12.4 $(209.9)
================ ================ ================
</TABLE>
The primary assumptions used in determining related obligations of the plans
are shown below.
<TABLE>
<CAPTION>
(Percent)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate ............... 6 3/4 6 - 9 8 1/2 5 - 9 7 5 - 9
Increase in compensation levels ...... 5 3 1/2 - 6 5 3 1/2 - 6 1/2 5 3 1/2 - 7 1/2
Long-term rate of return on assets ... 9 6 - 10 1/2 9 5 - 10 9 5 - 10
</TABLE>
36
<PAGE> 29
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER POST RETIREMENT BENEFITS
The Company and its subsidiaries also provide certain health care and life
insurance benefits to eligible retired employees, principally in the United
States. Substantially all of the Company's domestic employees and some employees
in foreign countries become eligible for these benefits upon retirement.
Domestic participants retiring after January 1, 1992, are required to pay some
portion of such medical costs if hired before July 1, 1990, or all of such costs
if hired after that date. The Company's employee stock ownership plan (ESOP) was
established to assist in financing retiree medical costs.
Effective January 1, 1993, the Company adopted SFAS 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," for U.S. operations
and recognized immediately the aftertax transitional obligation of $109 million
as a cumulative effect of an accounting change. For foreign operations, adoption
was made in 1995, with immaterial effect to the financial position and results
of operations. This standard requires that the cost of these benefits be
recognized in the financial statements during employees' active working lives.
The other postretirement benefit expense for 1995, 1994 and 1993 was $15.1
million, $12.1 million and $9.2 million, respectively. The components of the net
expense follow.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost .................................... $19.1 $15.7 $14.7
Service cost income .............................. (2.9) (4.4) (5.2)
Actual return on assets .......................... (3.4) -- (.4)
Net amortization and expense ..................... 2.3 .8 .1
-------------------------
Other postretirement benefit
expense ... ................................... $15.1 $12.1 $ 9.2
=========================
</TABLE>
The status of the Company's principal plans and the amounts recognized in the
balance sheet follow.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Retirees ................................ $171.1 $146.8 $113.0
Fully eligible active employees ......... 20.7 25.5 32.8
Other active employees .................. 26.5 45.7 65.4
--------------------------------
Accumulated postretirement
benefit obligation .................... 218.3 218.0 211.2
Fair value of plan assets ............... (17.4) (10.3) (7.2)
Unrecognized net gain (loss) ............ 8.2 (14.6) (10.1)
--------------------------------
Accrued postretirement liability ........ $209.1 $193.1 $193.9
================================
</TABLE>
The accumulated postretirement benefit obligation in the United States was
determined using an assumed discount rate of 6.75%, 8.5% and 7% in 1995, 1994
and 1993, respectively. The assumed health care cost trend rate was 13% in 1993,
12% in 1994 and 11% in 1995, decreasing to 5% by the year 2001. A one percentage
point increase in the trend rate would have increased the accumulated
postretirement benefit obligation by 14%, and interest and service cost by 11%,
in 1995.
Outside the United States, the assumptions used were consistent with, but not
identical to, those used domestically.
ESOP shares allocated to participants reduce Company obligations over the
period of allocation. The account balance is assumed to have an annual yield of
12%. In addition, the Company established a retiree health benefits account
within its domestic pension plan that will be used to partially fund health care
benefits for future retirees.
EMPLOYEE STOCK OWNERSHIP PLAN
In 1990, the Company sold to the ESOP 165,872 shares of a new issue of 8%
cumulative Series C convertible preferred stock for $100 million, or $602.875
per share.
Each share of Series C stock is entitled to vote as if it were converted to
common stock and is convertible into 40 common shares at $15.07188 per share. At
December 31, 1995, 160,701 Series C shares were outstanding, of which 103,860
shares were allocated to employees and the remaining 56,841 shares were held in
the ESOP trust for future allocations. The 160,701 Series C shares are
equivalent to 6,428,054 shares of common stock, about 1.4% of the Company's
outstanding voting stock.
The Series C stock is redeemable upon the occurrence of certain changes in
control or other events, at the option of the Company or the holder, depending
on the event, at varying prices not less than the purchase price plus accrued
dividends.
The ESOP purchased the Series C shares with borrowed funds guaranteed by the
Company. The ESOP loan principal and interest is being repaid on a semiannual
basis over a 10-year period by Company contributions to the ESOP and by the
dividends paid on the Series C shares.
37
<PAGE> 30
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As the ESOP loan is repaid, a corresponding amount of Series C stock held in
the trust is released to participant accounts. Allocations are made quarterly to
the accounts of eligible employees, generally on the basis of an equal amount
per participant. In general, regular U.S. employees participate in the ESOP
after completing one year of service with the Company.
The unpaid balance of this loan is reported as a liability of the Company. An
unearned ESOP compensation amount is reported as an offset to the Series C share
amount in the equity section.
Plan costs and activity for this plan follow.
<TABLE>
<CAPTION>
(Millions of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensation expense .......................... $ 6.0 $ 6.4 $ 8.5
Cash contributions and
dividends paid .............................. 14.2 13.9 15.8
Principal payments ............................ 10.3 9.2 10.3
Interest payments ............................. 3.9 4.7 5.5
</TABLE>
PREFERRED STOCK PURCHASE RIGHTS
At December 31, 1995, the Company had 56,361,517 preferred stock purchase rights
outstanding as follows: one-eighth of a right for each outstanding share of
common stock and a total of 803,507 rights for the outstanding Series C
preferred stock. Each right may be exercised to purchase one two-hundredth of a
share of junior participating preferred stock for $160. The rights only become
exercisable, or separately transferable, 10 days after a person acquires 20% or
more, or 10 business days after a tender offer commences that could result in
ownership of more than 30%, of the Company's common stock.
If any person acquires 30% or more of the common stock (except in an offer
for all common stock that has been approved by the Board of Directors), or in
the event of certain mergers or other transactions involving a 20% or more
stockholder, each right not owned by that person or related parties will enable
its holder to purchase, at the right's exercise price, common stock (or a
combination of common stock and other assets) having double that value. In the
event of certain merger or asset sale transactions with another party, similar
terms would apply to the purchase of that party's common stock.
The rights, which have no voting power, expire on December 9, 1996. Upon
approval by the Board of Directors, the rights may be redeemed for $.01 each
under certain conditions, which may change after any person becomes a 20%
stockholder.
At December 31, 1995, there were authorized 5,000,000 shares of preferred
stock without par value, of which 161,701 Series C shares were issued and
outstanding and 400,000 Series A shares were reserved for issuance upon exercise
of the rights.
Pursuant to action by the Board of Directors on December 14, 1995, effective
with the expiration or earlier termination of the existing rights, one new right
for each share of common stock outstanding and 40 new rights for each share of
Series C preferred stock outstanding will be issued. Each new right will
initially represent the right to purchase one ten-thousandth of a share of
junior participating preferred stock for $225. The new rights will only become
exercisable, or separately transferable, on the earlier of the tenth business
day after the Company announces that a person has acquired 15% or more, or the
tenth business day after a tender offer commences that could result in ownership
of more than 15%, of the Company's common stock.
If any person acquires 15% or more of the common stock (except in an offer
for all common stock that has been approved by the Board of Directors), or in
the event of certain mergers or other transactions involving a 15% or more
stockholder, each new right not owned by that person or related parties will
enable its holder to purchase, at the new right's exercise price, common stock
(or a combination of common stock and other assets) having double that value. In
the event of certain merger or asset sale transactions with another party,
similar terms would apply to the purchase of that party's common stock.
The new rights, which have no voting power, expire on December 14, 2005,
subject to extension. Upon approval by the Board of Directors, the rights may be
redeemed for $.01 each under certain conditions, which may change after any
person becomes a 15% stockholder.
38
<PAGE> 31
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
In April 1995, stockholders voted to increase the authorized $1 par value common
stock from 580 million shares to 1.16 billion shares. Accordingly, as previously
authorized by the Board of Directors, the 100% common stock dividend to
stockholders of record June 1, 1995, having the effect of a two-for-one split,
became effective. All share information has been adjusted for this stock split.
<TABLE>
<CAPTION>
(Thousands of shares) (Millions of dollars)
------------------------------------ ----------------------------------
Common Stock Additional
------------------------------------ Common Paid-in Treasury
Issued In Treasury Outstanding Stock Capital Stock
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992 ................... 555,748 (115,410) 440,338 $555.8 $(41.0) $(1,047.2)
Conversion of Series C ESOP Preferred Stock .... -- 14 14 -- .1 .1
Stock option and purchase plans ................ 1,427 -- 1,427 1.4 21.7 --
------------------------------------ ----------------------------------
Balance at December 31, 1993 ................... 557,175 (115,396) 441,779 557.2 (19.2) (1,047.1)
Conversion of Series C ESOP Preferred Stock .... -- 53 53 -- .3 .5
Stock option and purchase plans ................ 1,067 -- 1,067 1.0 17.5 --
------------------------------------ ----------------------------------
Balance at December 31, 1994 ................... 558,242 (115,343) 442,899 558.2 (1.4) (1,046.6)
Conversion of Series C ESOP Preferred Stock .... -- 89 89 -- .5 .8
Stock option and purchase plans ................ 1,476 -- 1,476 1.5 32.0 --
------------------------------------ ----------------------------------
Balance at December 31, 1995 ................... 559,718 (115,254) 444,464 $559.7 $ 31.1 $(1,045.8)
==================================== ==================================
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
STOCK OPTION AND STOCK EQUIVALENT UNIT PLANS
<TABLE>
<CAPTION>
1995 1994 1993
------------------- ------------------- -------------------
Average Average Average
Per Share Per Share Per Share
(Thousands of shares) Shares Option Price Shares Option Price Shares Option Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 11,190 $23.41 9,084 $18.59 8,694 $16.42
Granted ......................... 3,964 41.86 3,294 34.00 1,964 24.20
Exercised ....................... (1,735) 19.39 (1,154) 15.44 (1,530) 13.46
Cancelled ....................... (62) 38.61 (34) 30.57 (44) 19.94
------ ------ -----
Outstanding at end of year ...... 13,357 29.33 11,190 23.41 9,084 18.59
====== ===== =====
Shares reserved for future grants 8,963 12,864 124
====== ====== =====
</TABLE>
The Stock Option Plan authorizes the granting of options on shares of the
Company's common stock to selected key employees, including those who also may
be officers, and to nonemployee directors, at not less than the fair market
value of the stock on the date of grant. All outstanding options have 10-year
terms and are exercisable one year from the date of grant, provided the employee
optionee is still employed or the director continues to serve. The plan also
permits payment for options exercised in shares of the Company's common stock
and the granting of incentive stock options.
The Stock Purchase Plan provides for the sale at fair market value of the
Company's common stock to selected key employees, excluding officers and
directors. At December 31, 1995,232, 138 shares were reserved for issuance under
the plan.
The Stock Equivalent Unit Plan provides for awards of basic stock units to
key employees, although awards have not been made to executive officers since
1990. Each unit is treated as equivalent to one share of the Company's common
stock. However, the employee only receives appreciation, if any, in the market
value of the stock and dividend equivalent units as dividends are paid.
Appreciation on basic stock units is limited to 100% of the original market
value. Benefits accrue over seven years and vesting commences in the third year.
Plan expense amounted to $26.7 million in 1995, $19.1 million in 1994 and $14.5
million in 1993.
In 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation," which permits either recording the
estimated value of stock-based compensation over the applicable vesting period
or disclosing the unrecorded cost and the related effect on earnings per share
in the Notes to the Financial Statements. The Company will apply current
accounting rules and will comply with the disclosure provision.
39
<PAGE> 32
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INFORMATION BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
(Millions of dollars) Blades & Toiletries & Stationery Braun Oral-B
1995 Razors Cosmetics Products Products Products Other Corporate Total
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................ $2,634.7 $1,236.2 $ 862.2 $1,621.1 $ 440.0 $ .5 $ -- $6,794.7
Profit from operations ... 960.7 74.9 108.7 254.9 32.9 (.4) (60.4) 1,371.3
Identifiable assets ...... 2,123.0 695.3 1,171.2 1,483.1 523.6 3.3 340.8 6,340.3
Capital expenditures ..... 219.5 54.4 43.5 110.5 39.6 .1 3.5 471.1
Depreciation ............. 84.6 28.4 19.1 69.8 11.6 .4 3.6 217.5
1994
- ---------------------------------------------------------------------------------------------------------------------------------
Net sales ................ $2,350.7 $1,162.0 $ 806.7 $1,348.2 $ 401.9 $ .7 $ -- $6,070.2
Profit from operations ... 878.2 79.3 94.9 200.4 25.0 (.5) (50.6) 1,226.7
Identifiable assets ...... 1,833.6 615.2 1,103.4 1,089.9 347.5 3.0 320.8 5,313.4
Capital expenditures ..... 181.1 33.0 30.4 110.0 38.2 .4 6.7 399.8
Depreciation ............. 72.5 20.2 23.8 57.3 8.0 .4 1.9 184.1
1993
- ---------------------------------------------------------------------------------------------------------------------------------
Net sales ................ $2,117.6 $1,047.1 $ 633.1 $1,248.8 $ 363.1 $ 1.1 $ -- $5,410.8
Profit from operations* .. 692.2 (6.2) 27.0 146.4 16.9 (.6) (51.0) 824.7
Identifiable assets ...... 1,629.5 619.3 1,063.0 955.0 306.6 1.2 384.6 4,959.2
Capital expenditures ..... 161.7 40.5 23.7 90.5 27.7 .1 7.8 352.0
Depreciation ............. 73.0 20.5 19.8 64.4 8.2 .3 2.8 189.0
*After realignment
expense of ............. 104.3 64.6 37.5 20.9 28.7 -- 6.6 262.6
=================================================================================================================================
</TABLE>
FINANCIAL INFORMATION BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
(Millions of dollars) Western Latin Total United
1995 Europe America Other Foreign States Corporate Total
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales .................. $2,470.2 $877.9 $1,381.8 $4,729.9 $2,064.8 $ -- $6,794.7
Profit from operations ..... 540.6 203.8 290.7 1,035.1 396.6 (60.4) 1,371.3
Identifiable assets ........ 2,872.0 691.3 722.4 4,285.7 1,713.8 340.8 6,340.3
1994
- ----------------------------------------------------------------------------------------------------------------------------
Net sales .................. $2,119.3 $859.8 $1,146.6 $4,125.7 $1,944.5 $ -- $6,070.2
Profit from operations ..... 438.3 228.9 225.0 892.2 385.1 (50.6) 1,226.7
Identifiable assets ........ 2,380.8 629.7 645.1 3,655.6 1,337.0 320.8 5,313.4
1993
- ----------------------------------------------------------------------------------------------------------------------------
Net sales .................. $1,948.9 $761.7 $ 940.7 $3,651.3 $1,759.5 $ -- $5,410.8
Profit from operations* .... 316.0 177.6 125.8 619.4 256.3 (51.0) 824.7
Identifiable assets ........ 2,191.8 626.4 502.0 3,320.2 1,254.4 384.6 4,959.2
*After realignment
expense of ............... 109.8 39.6 30.6 180.0 76.0 6.6 262.6
============================================================================================================================
</TABLE>
SEGMENT AND AREA COMMENTARY
Profit from operations is net sales less cost of sales and selling, general and
administrative expenses, but is not affected either by nonoperating
charges/income or by income taxes. Nonoperating charges/income consists
principally of net interest expense and exchange losses.
In calculating profit from operations for individual business segments,
substantial expenses incurred at the operating level which are common to more
than one segment are allocated on a net sales basis. Certain headquarters
expenses of an operational nature also are allocated to business segments and
geographic areas.
The principal products included in each of the Company's major business
segments are described in the review of operations, which appears earlier.
All intercompany transactions have been eliminated, and transfers of finished
goods between geographic areas are not significant. Assets in the Corporate
column include deferred income tax assets, prepaid and intangible pension
assets, oil and gas investments, and nonqualified benefit trusts.
40
<PAGE> 33
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
OTHER FINANCIAL INFORMATION
BUSINESS SEGMENTS
The percentages of consolidated net sales and segment profit from operations,
before corporate expenses, during the last five years for each of the Company's
major business segments are set forth below.
<TABLE>
<CAPTION>
Blades & Toiletries & Stationery Braun Oral-B
Razors Cosmetics Products Products Products
--------------- --------------- --------------- ---------------- ----------------
Net Segment Net Segment Net Segment Net Segment Net Segment
Year Sales Profit Sales Profit Sales Profit Sales Profit Sales Profit
==============================================================================================================
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995........... 39% 67% 18% 5% 13% 8% 24% 18% 6% 2%
1994........... 39% 69% 19% 6% 13% 7% 22% 16% 7% 2%
1993*.......... 39% 70% 19% 5% 12% 6% 23% 15% 7% 4%
1992........... 38% 66% 19% 9% 10% 5% 26% 16% 7% 4%
1991........... 37% 62% 20% 13% 10% 5% 26% 16% 7% 4%
==============================================================================================================
</TABLE>
* Segment profit percentages are before realignment expense.
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Millions of dollars, except per share amounts)* Three Months Ended
----------------------------------------------------------
1995 March 31 June 30 September 30 December 31 Total Year
============================================================================================================================
<S> <C> <C> <C> <C> <C>
Net sales ...................................... $1,536.0 $1,601.0 $1,669.8 $1,987.9 $6,794.7
Gross profit ................................... 968.5 1,026.2 1,057.3 1,202.5 4,254.5
Profit from operations ......................... 329.1 321.9 338.1 382.2 1,371.3
Income before taxes ............................ 308.9 304.0 318.5 365.5 1,296.9
Net income ..................................... 196.1 193.1 202.2 232.1 823.5
Net income per common share .................... .44 .43 .46 .52 1.85
Dividends declared per common share............. -- .15 .15 .30 .60
Stock price range: (composite basis)
High ........................................... 42 5/8 45 1/8 48 1/4 55 3/8
Low ............................................ 35 3/8 39 7/8 40 1/2 47 1/8
1994
============================================================================================================================
Net sales ...................................... $1,361.1 $1,406.5 $1,503.4 $1,799.2 $6,070.2
Gross profit ................................... 862.5 906.1 957.2 1,122.5 3,848.3
Profit from operations ......................... 297.1 293.0 297.7 338.9 1,226.7
Income before income taxes ..................... 259.3 256.5 272.2 316.1 1,104.1
Net income ..................................... 164.0 162.2 172.2 199.9 698.3
Net income per common share .................... .37 .36 .39 .45 1.57
Dividends declared per common share............. -- .12 1/2 .12 1/2 .25 .50
Stock price range: (composite basis)
High ........................................... 33 5/8 34 7/8 36 1/2 38 1/4
Low ......................................... 28 7/8 31 1/8 32 3/8 34 3/4
============================================================================================================================
</TABLE>
* Per common share amounts and stock prices have been restated to reflect a
two-for-one stock split in 1995.
41
<PAGE> 34
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
HISTORICAL FINANCIAL SUMMARY
(In millions, except per share amounts, stock price and employees)
<TABLE>
<CAPTION>
Profit Income Net Depreciation
Net from before Net interest and Total Capital
Year sales operations taxes income expense amortization assets expenditures
=====================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995 $6,795 $1,371 $1,297 $824 $ 49 $248 $6,340 $471
1994 6,070 1,227 1,104 698 42 215 5,313 400
- ---------------------------------------------------------------------------------------------------------------------
1993* 5,411 825 683 288 33 219 4,959 352
1992 5,163 967 830 513 56 211 4,190 321
1991 4,684 862 694 427 94 193 3,887 286
1990 4,345 773 593 368 120 177 3,671 255
1989 3,819 664 474 285 115 149 3,114 223
1988 3,581 614 449 269 101 141 2,868 189
1987 3,167 523 392 230 82 126 2,731 147
1986** 2,818 229 58 16 47 108 2,540 199
1985 2,400 371 272 160 48 88 2,425 157
=====================================================================================================================
</TABLE>
Per common share amounts, shares outstanding and stock prices have been restated
to reflect two-for-one stock splits in 1986, 1987, 1991 and 1995.
* In 1993, charges for realignment expense reduced profit from operations and
income before income taxes by $263 million, net income by $164 million and net
income per common share by $.37. In addition, in 1993, the cumulative effect of
adopting mandated changes in the methods of accounting for income taxes,
postretirement benefits and postemployment benefits reduced net income by $139
million and net income per common share by $.32.
** In 1986, special charges for restructuring expense reduced profit from
operations by $179 million and, along with tender offer response costs and a
change in accounting for oil and gas investments, reduced income before taxes by
$243 million, net income by $165 million and net income per common share by
$.32.
SOURCE OF 1995 SALES
PERCENT BY BUSINESS SEGMENT
[CUSTOMER TO SUPPLY INFORMATION]
PERCENT BY GEOGRAPHIC AREA
[CUSTOMER TO SUPPLY INFORMATION]
42
<PAGE> 35
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
HISTORICAL FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Per Common Share
Net property, ------------------- Average com- Year-end
plant and Long-term Stockholders' Net Dividends mon shares stock
equipment debt equity income declared outstanding price Employees Year
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,637 $ 691 $2,513 $1.85 $.60 444 $52 1/8 33,500 1995
1,411 715 2,017 1.57 .50 442 37 3/8 32,800 1994
- --------------------------------------------------------------------------------------------------------------------------------
1,215 840 1,479 .64 .42 441 29 3/4 33,400 *1993
1,075 554 1,496 1.16 .36 439 28 3/8 30,900 1992
931 742 1,157 .97 .31 423 28 31,200 1991
862 1,046 265 .80 .27 388 15 5/8 30,400 1990
745 1,041 70 .68 .24 387 12 1/4 30,400 1989
683 1,675 (85) .61 .21 1/2 438 8 1/4 29,600 1988
664 840 599 .50 .19 5/8 460 7 1/8 30,100 1987
637 915 461 .03 .17 509 6 1/8 32,100 **1986
504 436 898 .32 .16 1/4 494 4 3/8 31,400 1985
================================================================================================================================
</TABLE>
INVESTOR RETURNS
Compounded Annual Return to Investors,
Assuming Reinvestment of Dividends (through 12/31/95 )
[CUSTOMER TO SUPPLY INFORMATION]
Value of $1,000
Invested 12/31/85
[CUSTOMER TO SUPPLY INFORMATION]
43
<PAGE> 36
PRINCIPAL DIVISIONS AND SUBSIDIARIES
NORTH ATLANTIC
GROUP
The North Atlantic Group manufactures and markets the Company's traditional
shaving and personal care products in North America and Western Europe. Sales
rose notably, and profits registered a sizable gain.
INTERNATIONAL
GROUP
The International Group produces and sells the Company's traditional shaving,
personal care and stationery products throughout the world, except for North
America and Western Europe. Sales increased significantly, and profits were
appreciably higher than in the prior year.
DIVERSIFIED
GROUP
The Diversified Group consists of Braun, Oral-B and Jafra, each organized on a
worldwide product line basis, and the Stationery Products Group, which makes and
markets the Company's stationery products in North America and Western Europe.
Sales were considerably above those of 1994, and profits climbed substantially.
NORTH ATLANTIC
GROUP
President and Chief Operating Officer,
Michael C. Hawley
Vice Presidents:
Sharon E. Keith, Marketing Research
Herbert W. Moller,
Finance and Strategic Planning
Richard W. Monaghan, Human Resources
BUSINESS MANAGEMENT
Senior Vice President, Peter K. Hoffman
Vice Presidents:
Peter M. Clay, Gillette Toiletries
John M. Darman, Blades and Razors
Carole E. Johnson, Personal Care
MANUFACTURING AND TECHNICAL OPERATIONS
Senior Vice President, Edward E DeGraan
Vice Presidents:
Dr. Richard J. Bertozzi,
Toiletties Technology Laboratory
Ralph J. Chesnauskas,
Engineering and Implementation
Charles E Deeban,
Program and Materials Management
Thomas L. Gallerani,
Shaving Technology Laboratory
Detlef-J. Schacht, Manufacturing
EUROPEAN DIVISION
President, Allan G. Boath
General Managers:
Franco Bigontina, Southeast Europe
Alain Calviera, Western Europe
Luis Gigliani, Southwest Europe
Robert H. Leger, Northern Europe
Helmut Lezuo, Central Europe
NORTH AMERICAN DIVISION
President, Ronald J. Rossi
Gillette U.S.A.
Vice President and General Manager,
Bruce Swinsky
Gillette Canada
President, Donald N. MacDuff
INTERNATIONAL
GROUP
Executive Vice President, Robert G. King
Vice Presidents:
Donald Gaiter, Technical Operations
Eduardo V. Kello, Business Management
Frank O'Connell, Human Resources
Claudio E. Ruben,
Finance and Administration
LATIN AMERICAN GROUP
Group Vice President, Norman M. Roberrs
General Managers:
Carlos Daireaux, Brazil
Alberto Duenas, Venezuela
Hans Eben, Andean Region
Milton C. Henrique, Colombia
Fabio Marulanda, Stationery Group
Jorge Micozzi, Argentina
Praxedes M. Rivera-Ferrer,
Caribbean Region
Kenneth Rule, Mexico
AFRICA, MIDDLE EAST AND
EASTERN EUROPE GROUP
Group Vice President, Jose Luis Ribera
General Managers:
Per Benemar, Former Soviet Union
Robert A. Crespi, Turkey
Gurbrinder S. Gill, Eastern Region
Silvio R. Perl, Operations Group
David J. Waldron, Stationery Group
ASIA-PACIFIC GROUP
Group Vice President, Ian E. Jackson
Area General Managers:
G. Bruce Dean, Australia, New Zealand
and South Pacific
Richard L. Guilfoile, Japan
Ying Meng Lai,
China, Hong Kong and Korea
Marcel A. Reid, Stationery Group
Chin Yong Teh, Southeast Asia
44
<PAGE> 37
CORPORATE AND STOCKHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of stockholders will take place on Thursday, April 18, 1996,
at the John E Kennedy Library and Museum, Columbia Point, Boston, Massachusetts.
The meeting will convene at 10 a.m.
CORPORATE HEADQUARTERS
Prudential Tower Building
Boston, Massachusetts 02199
(617) 421-7000
INCORPORATED
State of Delaware
COMMON STOCK
Major stock exchanges: New York, Boston, Midwest, Pacific, London, Frankfurt,
Zurich
New York Stock Exchange Symbol: G
At year-end, stockholders numbered 36,700, living in all 50 states and more than
30 countries abroad.
TRANSFER AGENT
AND REGISTRAR
The First National Bank of Boston
c/o Boston EquiServe
P.O. Box 644
Mail Stop 45-02-09
Boston, Massachusetts 02102-0644
(617) 575-3170
Toll free: (800) 730-4001
Hearing impaired: (800) 952-9245 (TTY/TDD)
Via Internet: http://www.EQUISERVE.com
AUDITORS
KPMG Peat Marwick LLP
FORM 10-K
The Company's 1995 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission, is available without charge from the office of the
Secretary by written request, or by calling toll-free (800) 291-7615.
DIVIDEND REINVESTMENT
AND STOCK PURCHASE PLAN
Stockholders of record of at least one share of Gillette common stock are
invited to participate in the Dividend Reinvestment and Stock Purchase Plan. The
plan provides a convenient, economical and systematic means of acquiring
additional shares of the Company's common stock through the reinvestment of cash
dividends. Participants also may invest additional cash amounts in the purchase
of shares as frequently as once each month.
Interested stockholders can obtain a descriptive brochure and
enrollment card from:
The First National Bank of Boston
c/o Boston EquiServe
P.O. Box 1681
Mail Stop 45-01-06
Boston, Massachusetts 02105-1681
(617) 575-3170
Toll free: (800) 730-4001
Hearing impaired: (800) 952-9245 (TTY/TDD)
QUARTERLY REPORTS
Currently, the Company mails quarterly reports only to registered holders of
Gillette common stock. If your shares are registered in the name of a broker or
other nominee, and you would like to receive the quarterly reports, the Company
will gladly mail them directly to you. You may add your name to our mailing list
by writing to the office of the Secretary, or by calling toll-free
(800) 291-7615.
45
<PAGE> 1
EXHIBIT 22
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT
DECEMBER 31, 1995
<TABLE>
<CAPTION>
ORGANIZED
UNDER
NAME LAWS OF
---- ---------
<S> <C>
Compania Gillette de Argentina............................................ Delaware
Its Subsidiaries:
Compania Gillette de Argentina S.A. ................................. Argentina
Gillette Australia Pty Ltd................................................ Australia
Braun Inc. ............................................................... Delaware
Gillette Beteiligungs -- GmbH............................................. Germany
Its subsidiaries:
Gillette Deutschland GmbH & Co. ..................................... Germany
Helit Innovative Buroproduckte Gmbh.................................. Germany
Societe de Participations Financieres Gillette....................... France
Its subsidiary:
Waterman S.A. .................................................. France
Braun AG............................................................. Germany
Its subsidiaries:
Braun Electric Austria Gesellschaft mbH......................... Austria
Braun Canada Ltd./Ltee.......................................... Canada
Braun Espanola, S.A. ........................................... Spain
Braun Finland Oy................................................ Finland
Braun France S.A. .............................................. France
Braun Ireland Ltd. ............................................. Ireland
Braun Italia S.r.l. ............................................ Italy
Braun Japan K.K. ............................................... Japan
Braun de Mexico y Cia. de C.V. ................................. Mexico
Braun Nederland B.V. ........................................... Netherlands
Braun (U.K.) Ltd. .............................................. England
Gillette do Brasil, Inc. and Jafra Comercio Participacoes e Servicos, Delaware
Inc. ...................................................................
Their subsidiary:
Gillette do Brasil & Cia. ........................................... Brazil
Its subsidiaries:
Gillette da Amazonia S.A. ...................................... Brazil
Gillette Canada Inc. ..................................................... Canada
Its subsidiaries:
Oral-B Laboratories Pty. Limited..................................... Australia
Oral-B Laboratories GmbH............................................. Germany
Oral-B Laboratorios, S.A. de C.V. ................................... Mexico
Gillette de Colombia S.A. ................................................ Colombia
Colton Development, Inc. ................................................. Delaware
Colton Gulf Coast, Inc. .................................................. Delaware
Colton East, Inc. ........................................................ Delaware
Colton North Central, Inc. ............................................... Delaware
Colton West, Inc. ........................................................ Delaware
Gillette Capital Corporation.............................................. Delaware
Its subsidiaries:
Jafra Cosmetics International, Inc. ................................. California
Silkcare Incorporated................................................ Minnesota
Gillette Direct Response Group, Inc. ..................................... Massachusetts
Gillette Espanola, S.A. .................................................. Spain
Gillette Far East Trading Limited......................................... Hong Kong
Gillette Foreign Sales Corporation Limited................................ Jamaica
</TABLE>
16
<PAGE> 2
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT -- (CONTINUED)
<TABLE>
<CAPTION>
ORGANIZED
UNDER
NAME LAWS OF
---- ---------
<S> <C>
Gillette France S.A. ..................................................... France
Gilfin B.V. .............................................................. Netherlands
Parkfin Limited........................................................... England
Compania Giva, S.A. ...................................................... Delaware
Its subsidiary:
Compania Gillette de Venezuela S.A. ................................. Venezuela
Indian Shaving Products Limited........................................... India
Compania Interamericana Gillette, S.A. ................................... Panama
Gillette Egypt S.A.E. .................................................... Egypt
Gillette Pakistan Limited................................................. Pakistan
Inversiones Gilco (Chile) Limitada........................................ Chile
Gillette Group Italy S.p.A................................................ Italy
Grupo Jafra, S.A. de C.V. ................................................ Mexico
Gillette (Japan) Inc. .................................................... Delaware
Gillette Manufacturing (USA), Inc. ....................................... Massachusetts
Gillette de Mexico, Inc. and Mexico Manufacturing Company................. Delaware
Their subsidiary:
Gillette de Mexico S.A. de C.V. ..................................... Mexico
Gillette del Peru, Inc. and Lima Manufacturing Company.................... Delaware
Partners in:
Gillette del Peru, S.C. ............................................. Peru
Gillette (Philippines), Inc. ............................................. Philippines
Gillette Sanayi ve Ticaret A.S. .......................................... Turkey
Gillette (Shanghai) Limited............................................... China
Shenmei Daily Use Products Limited Company................................ China
Gillette South Africa Limited............................................. South Africa
Gillette (Switzerland) AG................................................. Switzerland
Gillette Industries Plc................................................... England
Its subsidiaries:
Gillette U.K. Limited................................................ England
Jafra Cosmetics International Limited................................ England
Parker Pen Holdings.................................................. England
The Gillette Company (USA), Inc. ......................................... Massachusetts
Gillette Poland S.A. ..................................................... Poland
Gillette Home Diagnostics, Inc............................................ Delaware
Its subsidiary:
Thermoscan Inc....................................................... Delaware
Gillette Oral Care, Inc................................................... Delaware
</TABLE>
All of the voting securities of each subsidiary listed above are owned by
its parent company or parent partners except that the percentage ownership in
Indian Shaving Products Limited, Shenmei Daily Use Products Limited Company,
Gillette (Shanghai) Limited, Gillette Pakistan Limited, Gillette Egypt S.A.E.,
Gillette Poland S.A. and Gillette France S.A. is 51%, 50%, 70%, 75%, 90.2%,
99.0% and 99.9%, respectively.
There are a number of additional subsidiaries in the United States and
foreign countries which, considered in the aggregate, do not constitute a
significant subsidiary.
17
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
We consent to incorporation by reference in the following registration
statements of The Gillette Company (1) No. 33-9495 on Form S-8, (2) No. 2-93230
on Form S-8, (3) Nos. 33-56218 and 33-27916 on Form S-8 which incorporate by
reference therein registration statements on Form S-8 Nos. 2-90276, 2-63951 and
1-50710 and No. 2-41016 on Form S-7, (4) No. 33-54974 on Form S-3, (5) No.
33-50303 on Form S-3, (6) No. 33- 52465 on Form S-8, (7) No. 33-53257 on Form
S-8, (8) No. 33-53258 on Form S-8, (9) No. 33-55051 on Form S-3, (10) No.
33-59125 on Form S-8 and (11) No. 33-63707 on Form S-8, of our reports dated
January 23, 1996, relating to the consolidated balance sheet of The Gillette
Company and subsidiary companies as of December 31, 1995 and 1994, consolidated
statements of income and earnings reinvested in the business, and cash flows for
each of the years in the three-year period ended December 31, 1995, and the
related financial statement schedule, which reports appear in the December 31,
1995 Annual Report on Form 10-K of The Gillette Company.
Our reports refer to a change in accounting for income taxes,
postretirement and medical benefits and postemployment benefits.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 21, 1996
18
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned hereby constitute Thomas F. Skelly and Joseph E.
Mullaney, or either of them, our true and lawful attorneys with full power to
sign for us in our name and in the capacity indicated below the Annual Report on
Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, filed for the Company with the Securities and Exchange Commission for the
year ended December 31, 1995, and any and all amendments and supplements
thereto, hereby ratifying and confirming our signatures as they may be signed by
our said attorneys, or either of them, to said Report and to any and all
amendments and supplements to said Report.
WITNESS Our Hand and Seal on the Date set forth below.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
ALFRED M. ZEIEN Chairman of the Board March 21, 1996
- --------------------------------------------- of Directors, Chief Executive
Alfred M. Zeien Officer and Director
MICHAEL C. HAWLEY President, Chief Operating March 21, 1996
- --------------------------------------------- Officer and Director
Michael C. Hawley
JOSEPH E. MULLANEY Vice Chairman of the Board and March 21, 1996
- --------------------------------------------- Director
Joseph E. Mullaney
THOMAS F. SKELLY Senior Vice President and March 21, 1996
- --------------------------------------------- Chief Financial Officer
Thomas F. Skelly
CHARLES W. CRAMB Vice President, Controller and March 21, 1996
- --------------------------------------------- Principal Accounting Officer
Charles W. Cramb
WARREN E. BUFFETT Director March 21, 1996
- ---------------------------------------------
Warren E. Buffett
WILBUR H. GANTZ Director March 21, 1996
- ---------------------------------------------
Wilbur H. Gantz
MICHAEL B. GIFFORD Director March 21, 1996
- ---------------------------------------------
Michael B. Gifford
CAROL R. GOLDBERG Director March 21, 1996
- ---------------------------------------------
Carol R. Goldberg
HERBERT H. JACOBI Director March 21, 1996
- ---------------------------------------------
Herbert H. Jacobi
RICHARD R. PIVIROTTO Director March 21, 1996
- ---------------------------------------------
Richard R. Pivirotto
JUAN M. STETA Director March 21, 1996
- ---------------------------------------------
Juan M. Steta
ALEXANDER B. TROWBRIDGE Director March 21, 1996
- ---------------------------------------------
Alexander B. Trowbridge
JOSEPH F. TURLEY Director March 21, 1996
- ---------------------------------------------
Joseph F. Turley
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE GILLETTE COMPANY FOR THE YEAR ENDED DECEMBER 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000041499
<NAME> THE GILLETTE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 47,900
<SECURITIES> 1,600
<RECEIVABLES> 1,718,700
<ALLOWANCES> 59,200
<INVENTORY> 1,035,100
<CURRENT-ASSETS> 3,104,500
<PP&E> 3,261,500
<DEPRECIATION> 1,624,600
<TOTAL-ASSETS> 6,340,300
<CURRENT-LIABILITIES> 2,124,000
<BONDS> 691,100
<COMMON> 559,700
0
96,900
<OTHER-SE> 1,856,700
<TOTAL-LIABILITY-AND-EQUITY> 6,340,300
<SALES> 6,794,700
<TOTAL-REVENUES> 6,794,700
<CGS> 2,540,200
<TOTAL-COSTS> 2,540,200
<OTHER-EXPENSES> 2,883,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,000
<INCOME-PRETAX> 1,296,900
<INCOME-TAX> 473,400
<INCOME-CONTINUING> 823,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 823,500
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.80
</TABLE>
