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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
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Total 3,928,000
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</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)
-------- ------------
<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.
5
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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.
7
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NUTTER, McCLENNEN & FISH, LLP
EXHIBIT 5
ATTORNEYS AT LAW
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2699
TELEPHONE: 617 439-2000 FACSIMILE: 617 973-9748
CAPE COD OFFICE DIRECT DIAL NUMBER
HYANNIS, MASSACHUSETTS
March 22, 1996
12742-398
Meditrust
197 First Avenue
Needham, MA 02194
Gentlemen:
Reference is made to the Registration Statement on Form S-8 (the
"Registration Statement"), which Meditrust, a Massachusetts business trust (the
"Company"), has filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to 7,435
shares of beneficial interest, without par value (the "Shares"), of the Company
issuable pursuant to that certain Agreement dated as of March 8, 1996 between
the Company and Robert Cataldo (the "Agreement").
We have acted as counsel for the Company in connection with the
Registration Statement and are familiar with the proceedings taken and proposed
to be taken by the Company in connection with the authorization, registration,
sale and issuance of the Shares. We have examined the Restated Declaration of
Trust and By-laws of the Company and all amendments thereto, and certificates of
public officials and such other documents, records and materials as we have
deemed necessary in connection with this opinion letter. Based upon the
foregoing, and in reliance upon information from time to time furnished to us by
the Company's officers, trustees and agents, we are of the opinion that, upon
issuance in compliance with the terms of the Agreement, the Shares will be duly
and validly issued, fully paid and non-assessable.
We understand that this opinion letter is to be used in connection with
the Registration Statement as finally amended, and hereby consent to the filing
of this opinion letter with and as a part of the Registration Statement as so
amended. It is understood that this opinion letter is to be used in connection
with the offer and sale of the Shares only while the
<PAGE> 2
NUTTER, McCLENNEN & FISH, LLP
Meditrust
March 22, 1996
Page 2
Registration Statement, as it may be amended from time to time as contemplated
by Section 10(a)(3) of the Securities Act, is effective under the Securities
Act.
Very truly yours,
Nutter, McClennen & Fish, LLP
PRE/DGK/dmp
<PAGE> 1
EXHIBIT 10
AGREEMENT
THIS AGREEMENT is entered into as of the 8th day of March, 1996 by and
between Meditrust, a Massachusetts business trust, and Robert Cataldo of
Lexington, Massachusetts ("Mr. Cataldo").
W I T N E S S E T H:
WHEREAS, Mr. Cataldo is a trustee of Meditrust and has performed
extensive services to Meditrust relating to (a) the restructuring and/or workout
of loans and sale/leaseback transactions entered into by Meditrust and/or its
subsidiaries and various entities owned or controlled by Charles F. Brennick
and/or his relatives and affiliates and (b) all transactions and issues relating
thereto including, without limitation, the Highwatch and Wisconsin transactions,
the Towers Financial Corporation litigation and the so-called "RSNY"
transactions (collectively, the "Transactions"); and
WHEREAS, Meditrust desires to compensate Mr. Cataldo for said services.
NOW, THEREFORE, the parties hereby act and agree as follows:
1. Meditrust has on this day issued to Mr. Cataldo 7,435 shares of
beneficial interest of Meditrust as payment in full for all services rendered,
or to be rendered, by Mr. Cataldo in the future relating to the Transactions.
2. Mr. Cataldo, for himself, his heirs and assigns, hereby forever
releases, remises and discharges Meditrust, its subsidiaries and all of their
agents, officers, trustees, directors, shareholders, employees and successors
(collectively, the "Meditrust Entities"), from any and all claims for payments
of any kind, including without limitation,
<PAGE> 2
compensation, costs, fees or expenses arising out of any past or future services
rendered by Mr. Cataldo to the Meditrust Entities in connection with or relating
to the Transactions.
3. The Declaration of Trust establishing Meditrust, dated August 6,
1985, as amended (the "Declaration"), a copy of which is duly filed in the
Office of the Secretary of State of the Commonwealth of Massachusetts, provides
that the name "Meditrust" refers to the Trustees under the Declaration
collectively as Trustees, but not individually or personally; and that no
trustee, officer, shareholder, employee or agent of Meditrust shall be held to
any personal liability, jointly or severally, for any obligation of, or claim
against Meditrust. All persons dealing with the company, in any way, shall look
only to the assets of Meditrust for the payment of any sum or the performance of
any obligation.
WITNESS the execution hereof under seal as of the day and year first
above written.
MEDITRUST
SEAL
By: /s/ David F. Benson
----------------------------
Its: President
SEAL
/s/ Robert Cataldo
-------------------------------
Robert Cataldo
-2-
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of Meditrust on Form S-8 dated March 22, 1996 of our reports dated
January 29, 1996 on our audits of the consolidated financial statements and
financial statement schedules of Meditrust as of December 31, 1995 and 1994 and
for the years ended December 31, 1995, 1994 and 1993, which reports are
included or incorporated by reference in the Meditrust Annual Report on Form
10-K dated February 29, 1996. Our report on the 1995 consolidated financial
statements of Meditrust appears in Meditrust's Current Report on Form 8-K dated
January 29, 1996.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
March 22, 1996
