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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Registration number 33-52465
A. Full title of the plan:
THE GILLETTE COMPANY
GLOBAL EMPLOYEES STOCK OWNERSHIP PLAN
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
The Gillette Company
Prudential Tower Building
Boston, MA 02199
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Financial Statements
December 31, 1998 and 1997
With Independent Auditors' Report Thereon
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INDEPENDENT AUDITORS' REPORT
The Administrative Committee
The Gillette Company Global Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for plan
benefits of The Gillette Company Global Employee Stock Ownership Plan as of
December 31, 1998 and 1997 and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial statements
are the responsibility of the Plan's management. Our responsibility is to
express an opinion on these 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 audit includes examining, on a test basis, evidence supporting
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 financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits as of December
31, 1998 and 1997 and the changes in net assets available for plan benefits for
the years then ended in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
March 19, 1999
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Net Assets Available for Plan Benefits
December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- ----------
Assets:
<S> <C> <C>
The Gillette Company common stock, at market value $41,623,735 34,893,429
Cash 1,422 3,612
Employees' contributions receivable 1,107,819 826,938
Employer's contributions receivable 269,915 214,268
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Net assets available for plan benefits $43,002,891 35,938,247
=========== ==========
</TABLE>
See accompanying notes to financial statements.
2
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Statements of Changes in Net Assets Available for Plan Benefits
Years ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ ----------
Additions to net assets attributed to:
Investment income:
<S> <C> <C>
Dividends on The Gillette Company common stock $ 312,546 210,497
Realized gains on investments sold 1,767,363 1,294,021
Change in unrealized (depreciation) appreciation in the
market value of investments (3,662,233) 5,692,073
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(1,582,324) 7,196,591
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Contributions:
Employee 11,088,686 8,821,695
Employer 2,728,611 2,311,534
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13,817,297 11,133,229
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Total additions 12,234,973 18,329,820
Deduction from net assets attributed to:
Benefit payments 5,170,329 3,444,377
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Net increase 7,064,644 14,885,443
Net assets available for plan benefits:
Beginning of year 35,938,247 21,052,804
------------ ----------
End of year $ 43,002,891 35,938,247
============ ==========
</TABLE>
See accompanying notes to financial statements.
3
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(1) DESCRIPTION OF THE PLAN
The Gillette Company Global Employee Stock Ownership Plan (the "Plan") is a
defined contribution plan sponsored by The Gillette Company (the
"Company"). The following provides only general information. Participants
should refer to the Plan document for a more complete description of the
Plan's provisions.
GENERAL
The Plan was adopted by the Board of Directors of the Company on December
16, 1993 to become effective June 1, 1994. Its goal is to provide eligible
Gillette employees the opportunity to purchase common stock of the Company
through payroll deduction and Company contributions. All Plan assets are
held by the Plan Fiduciary, Banque Internationale a Luxembourg (the
"Fiduciary"). Buck Consultants is the record keeper for the Plan.
ELIGIBILITY
Employees eligible to participate in the Plan include all regular employees
of participating subsidiaries of the Company with the exception of
employees considered to be an executive, officer, director, or 10%
shareholder of the Company and employees eligible for a savings plan
maintained in the United States, Canada, or Puerto Rico. Eligible employees
may enroll in the Plan on the first day of each calendar quarter and on the
initial participation date for each participating subsidiary.
CONTRIBUTIONS
Eligible employees may contribute 2% to 10% of their compensation to the
Plan through payroll deductions. A participating employee may change the
contribution rate once each calendar quarter.
Employer contributions are made to the accounts of participants who are
contributing to the Plan in amounts equal to 1% of each participant's
eligible pay.
INVESTMENTS
All employee and employer contributions are converted into U.S. dollars and
then invested in shares of the Company common stock generally on the 15th
day of each month (or if that date is not a business day, the next
preceding business day). Sales of Company common stock are made generally
on the last business day of each month and subsequently converted into the
applicable local currencies to pay Plan benefits. Any dividends on shares
of the Company common stock are invested in additional shares of the
Company common stock.
VESTING
Participants are immediately vested in all shares of Company common stock
credited to their respective Plan accounts.
4 (Continued)
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1998 and 1997
BENEFIT PAYMENTS
Distributions of account balances will be made when the employment of a
participant ceases unless upon retirement, the participant's account is
credited with at least 100 shares of Company stock and the participant
elects to defer payment. If an election is made to defer the distribution,
retirees may make up to two requests a year for distributions of all or a
portion of their account balance.
For those retirees who do not elect to defer payment and for all other
participants who terminate employment for reasons other than retirement, a
distribution of Plan benefits is made in the form of a lump sum payment.
All distributions are made in cash, unless the participant elects to
receive the benefit payment in the form of shares of the Company common
stock; however, in the event of a participant or retiree's death, all
distributions will be made in the form of a lump sum cash payment.
While employed, participants may elect to take up to two in-service
withdrawals from their account balances during a calendar year. Shares
purchased with Company contributions and dividends thereon are not eligible
for in-service withdrawal until 24 months from their date of purchase.
PLAN EXPENSES
Brokerage commissions, fees and other security transaction costs are paid
by participants as part of the purchase and sale of Company common stock.
All contributions and cash dividends awaiting investment are held in an
interest bearing account maintained by the Plan Fiduciary. Any interest
earned on the account is used to pay costs relating to the administration
of the Plan. Any remaining costs of administering the Plan are allocated
and paid by the Company subsidiaries participating in the Plan.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, 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 accompanying financial statements are prepared on the accrual basis of
accounting.
INVESTMENTS
Investments in the Company common stock are stated at market value, based
on the composite closing price of the stock on the New York Stock Exchange
as reported by Reuters. Purchases and sales of the Company's common stock
are recorded on the trade date (the date the order to buy or sell is
executed).
Dividend income is recorded on the ex-dividend date net of any U.S.
withholding taxes. Realized gains and losses are based upon the identified
cost method.
5 (Continued)
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1998 and 1997
CASH
Amounts shown as cash are foreign cash balances held by the Fiduciary that
are to be invested in Company stock in the following month. The balances
have been translated into U.S. dollars using the effective exchange rates
as of December 31, 1998 and 1997.
CONTRIBUTIONS RECEIVABLE
Contributions held at the participating subsidiaries and pending transfer
to the Fiduciary have been translated into U.S. dollars using the effective
exchange rates as of December 31, 1998 and 1997.
(3) INVESTMENT IN GILLETTE COMPANY COMMON STOCK
Investments in the Gillette Company common stock held by the Plan at
December 31, 1998 and 1997 were as follows:
1998 1997
---- ----
Number of shares 870,553 694,826
Cost $ 32,922,372 22,498,309
Market Value $ 41,623,735 34,893,429
The 1997 share amounts have been restated to reflect the two-for-one stock
split effective May 15, 1998.
The realized gains on sales of The Gillette Company common stock were
determined as follows:
1998 1997
---- ----
Proceeds on sales of shares $ 5,165,842 3,441,987
Cost 3,398,479 2,147,966
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$ 1,767,363 1,294,021
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(4) PLAN PARTICIPANTS
As of December 31, 1998, the Plan had 8,297 participants employed at
Company subsidiaries located in Argentina, Australia, Austria, Belgium,
Chile, Colombia, Costa Rica, Czech Republic, Denmark, Dominican Republic,
Ecuador, Egypt, El Salvador, Finland, France, Germany, Guatemala, Hong
Kong, Hungary, Indonesia, Ireland, Italy, Japan, Korea, Malaysia, Mexico,
Netherlands, New Zealand, Norway, Panama, Peru, Philippines, Poland,
Portugal, Singapore, Spain, Slovakia, South Africa, Sweden, Switzerland,
Taiwan, Thailand, Turkey, United Kingdom, Uruguay and Venezuela.
6 (Continued)
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THE GILLETTE COMPANY
GLOBAL EMPLOYEE STOCK OWNERSHIP PLAN
Notes to Financial Statements
December 31, 1998 and 1997
(5) PLAN AMENDMENT AND TERMINATION
Although the Company intends to continue the Plan indefinitely, it reserves
the right on behalf of itself and its participating subsidiaries to modify
or terminate the Plan at any time; however, the Plan may not be amended to
adversely affect the rights of participants with respect to shares
previously credited to their accounts.
In the event of termination, the assets held by the Plan Fiduciary may
continue to be held subject to the provisions of the Plan, or at the
direction of the Board of Directors of the Company, the assets of the Plan
may be distributed to the participants.
(6) TAX STATUS
The Plan is not qualified under Section 401(a) of the Internal Revenue
Code, and is exempt from the provisions of Title I of ERISA pursuant to
Section 4(b)(4) thereof. The Company believes that the Fiduciary should be
viewed as a directed custodian and that, for U.S. tax purposes, the
participating employees should be treated as the owners of the shares of
Company stock held for their account under the Plan.
The Company has received a private letter ruling from the Internal Revenue
Service confirming that the participating employees should be treated as
the beneficial owners of the shares of Company stock held for their account
under the Plan for U.S. tax purposes and that, subject to certain
procedural conditions, the information provided by the employees may be
relied upon in determining the applicable U.S. tax withholding rate on
dividends paid by the Company with respect to these shares.
(7) SUBSEQUENT EVENTS
Subsequent to December 31, 1998, the Company's subsidiaries Brazil, India
and Morocco commenced participation in the Plan.
7
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Financial Statements of The Gillette Company
Global Employee Stock Ownership Plan
The following audited financial statements are enclosed with this report:
1. Statement of Net Assets Available for Plan Benefits as of December
31, 1997.
2. Statement of Changes in Net Assets Available for Plan Benefits for
the years ended December 31, 1998 and December 31, 1997.
Exhibits
23.1 Independent Auditors' Report
23.2 Independent Auditors' Consent
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee of The Gillette Company Global Employee Stock
Ownership Plan has caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
The Gillette Company
Global Employee Stock Ownership Plan
BY ROBERT E. DICENSO
---------------------
Robert E. DiCenso
Date: March 31, 1999
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Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Gillette Company Global
Employee Stock Ownership Plan:
We consent to the incorporation by reference in the registration statement No.
33-52465 on Form S-8 of The Gillette Company Global Employee Stock Ownership
Plan of our report dated March 19, 1999, relating to the statement of net
assets available for plan benefits of The Gillette Company Global Employee
Stock Ownership Plan as of December 31, 1998 and 1997, and related statement of
changes in net assets available for plan benefits for the period then ended
which report appears in the December 31, 1998 annual report on Form 11-K of The
Gillette Company Global Employee Stock Ownership Plan.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
March 30, 1999
