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Gillette Co – ‘10-K405’ for 12/31/97

As of:  Monday, 3/23/98   ·   For:  12/31/97   ·   Accession #:  950135-98-1720   ·   File #:  1-00922

Previous ‘10-K405’:  ‘10-K405’ on 3/21/97 for 12/31/96   ·   Latest ‘10-K405’:  This Filing

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/23/98  Gillette Co                       10-K405    12/31/97   13:592K                                   Bowne of Boston/FA

Annual Report — [x] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     The Gillette Company                                  15     97K 
 2: EX-4.(I)    Fiscal Agency Agreement                               47    171K 
 3: EX-10.(B)   Gillette Company Stock Equivalent Unit Plan           10     47K 
 4: EX-10.(C)   Gillette Company Incentive Bonus Plan                  7     37K 
 5: EX-10.(D)   Gillette Company Executive Life Insurance Plan        11     35K 
 6: EX-10.(L)   Gillette Estate Preservation Plan                      8     35K 
 7: EX-10.(P)   $1,000,000,000 364-Day Credit Agreement               91    266K 
 8: EX-12       Computation of Ratios of Current Assets                1      6K 
 9: EX-13       Portions of Annual Report                             44    226K 
10: EX-22       List of Subsidiaries                                   2     15K 
11: EX-23       Consent of Kpmg Peat Marwick                           1      9K 
12: EX-24       Power of Attorney                                      2±    12K 
13: EX-27       Financial Data Schedule                                1     10K 


10-K405   —   The Gillette Company
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
2Item 1. Description of Business
3Item 2. Description of Property
4Item 3. Legal Proceedings
"Item 4. Submission of Matters to A Vote of Security Holders
6Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters
"Item 6. Selected Financial Data
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
7Item 7A. Disclosures Concerning Market Risk Sensitive Instruments
"Item 8. Financial Statements and Supplementary Data
"Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
8Item 10. Directors and Executive Officers
"Item 11. Executive Compensation
"Item 12. Security Ownership of Certain Beneficial Owners and Management
"Item 13. Certain Relationships and Related Transactions
"Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
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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, 1997 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) [Download Table] INCORPORATED IN DELAWARE 04-1366970 --------------------------- ------------ (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) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-421-7000 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: [Download Table] NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED ------------------- ------------------------ COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE BOSTON STOCK EXCHANGE CHICAGO STOCK EXCHANGE PACIFIC STOCK EXCHANGE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K ((sec.)229.405 of this chapter) is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. The aggregate market value of Gillette Common Stock held by non-affiliates as of February 27, 1998 was approximately $52,280,000,000.* The number of shares of Gillette Common Stock outstanding as of February 27, 1998 was 561,318,276. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the following documents have been incorporated by reference into this Form 10-K as indicated: [Download Table] DOCUMENTS 10-K PARTS --------- ---------- 1. The Gillette Company 1997 Annual Report to Stockholders (the "1997 Annual Report")............................... Parts I and II 2. The Gillette Company 1998 Proxy Statement (The "1998 Proxy Statement")......................................... Part III ================================================================================ * This amount does not include the value of 153,551 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 1997 Annual Report on the inside front cover, at pages 2 through 5 under the caption "Letter to Stockholders" and at pages 18 through 21 under the caption "AMEE: Gateway to Growth" the texts of which are incorporated by reference. See also Item 7, "Management's Discussion" at page 5 of this report. INDUSTRY 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 1997 Annual Report at page 41 under the caption, "Business Segments," and are incorporated by reference. "Financial Information by Business Segment," containing information on net sales, profit from operations, identifiable assets, capital expenditures and depreciation for each of the last three years, appears in the 1997 Annual Report at page 40 and is 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, oral care products and alkaline batteries for consumer products. Descriptions of those businesses appear in the 1997 Annual Report at pages 6 through 17, the text of which is incorporated by reference. DISTRIBUTION In the Company's major geographic markets, traditional Gillette product lines, Duracell batteries and Oral-B products are sold to wholesalers, chain stores and large retailers and are resold to consumers primarily through food, drug, discount, stationery, hardware, toy, tobacco and department stores. Jafra skin care products are sold to independent consultants and are resold to consumers, primarily at classes in the home and office. 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. Oral-B products are marketed directly to dental professionals for distribution to patients as well as through standard distribution channels. In many small Gillette, Duracell, Braun and Oral-B markets, products are distributed 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 its toiletries and cosmetics, stationery products, Duracell, Braun, and Oral-B businesses. 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 businesses. 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 1
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Company and its subsidiaries have significant importance within their industries. 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 new technology, as well as by competition in price, 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 cosmetics 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 businesses 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 Braun products markets 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-B products markets is focused on product performance, price and dental profession endorsement. The Duracell products markets are marked by competition in product performance, innovation and price and in marketing, advertising and promotion to retail outlets and to consumers. Many of the Company's competitors are larger and have greater resources than the Company. EMPLOYEES At year-end, Gillette employed approximately 44,000 persons, three-quarters of them outside the United States. RESEARCH AND DEVELOPMENT In 1997, research and development expenditures were $212 million, compared with $204 million in 1996 and $187 million in 1995. 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 The following table indicates the geographic sources of consolidated net sales and profit from operations of the Company for the last three years: [Enlarge/Download Table] 1997 1996 1995 --------------- --------------- --------------- NET NET NET SALES PROFIT SALES PROFIT SALES PROFIT ----- ------ ----- ------ ----- ------ United States.................................. 37% 38% 37% 41% 35% 37% Foreign........................................ 63% 62% 63% 59% 65% 63% "Financial Information by Business Segment" and "Financial Information by Geographic Area" containing information on net sales, profit from operations and identifiable assets for each of the last three years appear in the 1997 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 real estate properties in the United States and a number of foreign countries. The Company's executive offices are located in the Prudential 2
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Center, Boston, Massachusetts where it holds a long term lease. The following table sets forth the Company's principal manufacturing plants: [Download Table] BUSINESS SEGMENT LOCATION OWNED/LEASED ---------------- -------- ------------ Blades & Razors Boston, MA (US) Owned Isleworth, UK Owned Berlin, Germany Owned Shanghai, China* Leased Naucalli, Mexico* Owned Manaus, Brazil* Owned Devens, MA(US) Leased Toiletries & Cosmetics St. Paul, MN (US)* Owned/Leased Andover, MA (US) Owned Reading, UK Owned/Leased Stationery Santa Monica, CA (US) Leased Saint Herblain, France Owned/Leased Braun Kronberg, Germany Owned/Leased Barcelona, Spain Owned/Leased Walldurn, Germany Owned/Leased Marktheidenfeld, Germany Owned Mexico City, Mexico Owned/Leased Oral-B Iowa City, IA (US) Owned Duracell Port Elizabeth, S. Africa Owned Aarschot, Belgium Owned Lancaster, SC (US) Owned LaGrange, GA (US) Owned The above facilities are in good repair, adequately meet the Company's needs and operate at reasonable levels of production capacity. --------------- * Engaged in the manufacture of products for two or more business segments. 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. ------------------------ 3
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EXECUTIVE OFFICERS OF REGISTRANT Information regarding the Executive Officers of the Company as of March 19, 1998 is set out below. [Enlarge/Download Table] NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE ------------------------- -------------------------- --- Alfred M. Zeien Chairman of the Board and Chief Executive Officer since 68 Chairman of the Board and Chief February 1991 Executive Officer Michael C. Hawley President and Chief Operating Officer since April 1995; 60 President and Chief Operating Executive Vice President, International Group, December Officer 1993 - March 1995; President, Oral-B Laboratories, Inc., May 1989 - November 1993 Joseph E. Mullaney Vice Chairman of the Board and Chief Legal Officer since 64 Vice Chairman of the Board November 1990 and Chief Legal Officer Edward F. DeGraan Executive Vice President, Duracell North Atlantic Group 54 Executive Vice President since January 1997; Senior Vice President, Manufacturing and Technical Operations, Gillette North Atlantic Group, May 1991 - December 1996 Robert G. King Executive Vice President, Gillette North Atlantic Group 52 Executive Vice President since February 1997; Executive Vice President, International Group, April 1995 - January 1997; Group Vice President - Latin America, March 1991 - March 1995 Jacques Lagarde Executive Vice President, Diversified Group since October 59 Executive Vice President 1993; Vice President, February 1990 - September 1993; Chairman, Board of Management, Braun AG, February 1990 - September 1993 Jorgen Wedel Executive Vice President, International Group since 49 Executive Vice President February 1997; President, Oral-B Laboratories, Inc., November 1993 - January 1997; Group General Manager, Braun North America, November 1991 - October 1993 John M. Coleman Senior Vice President and General Counsel since February 1, 48 Senior Vice President and General 1998; Senior Vice President - Law and Public Affairs, Counsel Campbell Soup Company, September 1989 - December 1997 Charles W. Cramb Senior Vice President, Finance, Chief Financial Officer and 51 Senior Vice President, Principal Accounting Officer since July 1997; Vice Chief Financial Officer President and Controller, July 1995 - June 1997; Vice and Principal Accounting Officer President, Finance, Planning and Administration, Diversified Group, October 1992 - June 1995 Joel P. Davis Senior Vice President, Corporate Planning and Development 52 Senior Vice President since April 1995; Vice President and President, Stationery Products Group, December 1987 - March 1995 Robert E. DiCenso Senior Vice President, Personnel and Administration, since 57 Senior Vice President July 1994; Vice President, Investor Relations, January 1993 -June 1994 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 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. 4
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PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The information required by this item with respect to the Company's common stock appears in the 1997 Annual Report on the inside back cover under the caption "common stock" and at page 41 under the caption, "Quarterly Financial Information," and is incorporated by reference. As of February 27, 1998, the record date for the 1998 Annual Meeting, there were 56,720 Gillette stockholders of record. On November 14, 1997, the Company sold 6 percent notes due November 14, 2000 in the aggregate principal amount of $300 million to a syndicate of underwriters led by ABN AMRO Bank N.V. The underwriters subscribed to the notes at 100.960% of their principal amount less a combined management and underwriting commission of 0.200% and a selling concession of 1.175% of the principal amount of the notes. In addition, the Company paid certain expenses of the underwriters. The notes were sold pursuant to the exemption provided by Regulation S for offers and sales of securities outside the United States. ITEM 6. SELECTED FINANCIAL DATA The information required by this item appears in the 1997 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 1997 Annual Report at pages 22 through 24 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, almost two-thirds of the Company's sales having been made outside the United States, making forecasting of sales more difficult; - the impact on sales or earnings of fluctuations in exchange rates in one or more of the Company's geographic markets; 5
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- the impact of the year 2000 on the Company's order, production, distribution and financial systems and the systems of its suppliers and customers; - 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 inflation rates, recessionary or expansive trends, tax changes, legal and regulatory changes or other external factors over which the Company has no control. ITEM 7A. DISCLOSURES CONCERNING MARKET RISK SENSITIVE INSTRUMENTS The following statements provide information about the Company's market sensitive financial instruments and constitutes a "forward-looking statement." The Company uses financial instruments, including fixed and variable rate debt, as well as swap, forward and option contracts to finance its operations and to hedge interest rate, currency, commodities, and certain equity-linked compensation liability exposures as well as to enhance its stock repurchase program. The swap, forward and option contracts are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company does not hold or issue financial instruments for trading, profit, or speculative purposes. Derivative positions are constantly monitored using techniques including fair market value, sensitivity analysis and a value at risk model. A near term change in currency, interest rates, commodity prices and stock equity prices when evaluated with the above three methodologies for: - forward contracts - foreign currency swaps - interest rate swaps, - commodity swaps and - equity contracts, will not materially impact the consolidated financial position, results of operations or cash flows of the Company. The above financial instruments, when individually evaluated by the various methods, do not expose the Company to material market risks. When the instruments above are combined with each other, and with the underlying exposures, a further reduction in market risk for the Company is realized. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Financial Statements and Supplementary Data for The Gillette Company and Subsidiary Companies appear in the 1997 Annual Report at the pages indicated below and are incorporated by reference. [Download Table] (1) Independent Auditors' Report................................ Page 25 (2) Consolidated Statement of Income for the Years Ended December 31, 1997, 1996 and 1995............................ Page 26 (3) Consolidated Balance Sheet at December 31, 1997 and 1996.... Page 27 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995............................ Page 28 (5) Consolidated Statement of Stockholders' Equity for the periods ended December 31, 1997, 1996 and 1995.............. Page 29 (6) Notes to Consolidated Financial Statements.................. Pages 30 through 40 (7) Computation of per share earnings........................... Pages 26 and 30 (8) Quarterly Financial Information............................. Page 41 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 6
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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 1998 Proxy Statement at pages 2 through 4 and at pages 7 and 8 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 4. ITEM 11. EXECUTIVE COMPENSATION The information required by this item appears in the 1998 Proxy Statement at pages 8 through 17 under the captions "Compensation of Directors", "Gillette Comparative Five-Year Investment Performance", "Personnel Committee Report on Executive Compensation", "Executive Compensation" and "Retirement Plan" 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 1998 Proxy Statement at pages 6 and 7 under the caption "Stock Ownership of Certain Beneficial Owners and Management" and is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item appears in the 1998 Proxy Statement at pages 7 through 9 under the captions "Certain Transactions with Directors and Officers" and "Compensation of Directors" and is incorporated by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K A. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS FINANCIAL STATEMENTS The following appear in the 1997 Annual Report at the pages indicated below and are incorporated into Part II by reference. [Download Table] (1) Independent Auditor's Report................................ Page 25 (2) Consolidated Statement of Income for the Years Ended December 31, 1997, 1996 and 1995............................ Page 26 (3) Consolidated Balance Sheet at December 31, 1997 and 1996.... Page 27 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995............................ Page 28 (5) Consolidated Statement of Stockholders' Equity for the periods ended December 31, 1997, 1996 and 1995.............. Page 29 (6) Notes to Consolidated Financial Statements.................. Pages 30 through 40 (7) Computation of per share earnings........................... Pages 26 and 30 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. 7
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EXHIBITS [Download Table] 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 Instruments Defining the Rights of Security Holders, Including Indentures. (a) Specimen of form of certificate representing ownership of The Gillette Company Common Stock, $1.00 par value, effective December 10, 1996, filed as Exhibit 4(a) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by reference herein. (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 as Exhibit 4(c) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by reference herein. (c) Amendment to Certificate of Designations, Preferences and Rights of Series A Junior Participating Preferred Stock dated December 9, 1996, filed as Exhibit 4(c) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, File No. 1-922, incorporated by reference herein. (d) Renewed Rights Agreement dated as of December 14, 1995 between The Gillette Company and The First National Bank of Boston, filed as Exhibit 4 to The Gillette Company Current Report on Form 8-K, dated December 18, 1995, Commission File No. 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. (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. 1-922, incorporated by reference herein. (g) 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, Commission File No. 1-922, incorporated by reference herein. (h) 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, Commission File No. 1-922, incorporated by reference herein. (i) Fiscal Agency Agreement dated as of November 14, 1997, including form of $300,000,000 6% notes due November 14, 2000, among The Gillette Company, Morgan Guaranty Trust Company of New York, London office and Banque Paribas Luxembourg, filed herewith. 10 Material Contracts *(a) The Gillette Company 1971 Stock Option Plan, as amended filed as Appendix A to the 1997 Proxy Statement, Commission File No. 1-922, incorporated by reference herein. *(b) The Gillette Company Stock Equivalent Unit Plan, as amended filed herewith. 8
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[Enlarge/Download Table] *(c) The Gillette Company Incentive Bonus Plan, as amended, filed herewith. *(d) The Gillette Company Executive Life Insurance Program, filed herewith. (e) Directors and Officers and Company Reimbursement Indemnity Insurance and Pension and Welfare Fund Fiduciary Responsibility Insurance policy, filed as Exhibit 10(e) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by reference herein. *(f) Description of Conversion of Outside Directors' Vested Pension Benefit into Deferred Stock Units, filed as Exhibit 10(f) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by reference herein. *(g) The Gillette Company Deferred Compensation Plan for Outside Directors, filed as Exhibit 10(g) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by reference herein. *(h) 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. 1-922, incorporated by reference herein. (i) Letter Agreement, dated July 20, 1989, between The Gillette Company and Berkshire Hathaway Inc., filed as Exhibit 4(a) to The Gillette Company Current Report on Form 8-K, dated July 20, 1989, Commission File No. 1-922, incorporated by reference herein. *(j) Description of agreement between The Gillette Company and Robert J. Murray effective January 1, 1996, filed as Exhibit 10(l) to The Gillette Company Annual Report on Form 10-K for the year ending December 31, 1995, Commission File No. 1-922, incorporated by reference herein. *(k) 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, Commission File No. 1-922, incorporated by reference herein. *(l) The Gillette Company Estate Preservation Plan, filed herewith. *(m) 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, Commission File No. 1-922, incorporated by reference herein. *(n) The Gillette Company Supplemental Savings Plan, as amended, filed as Exhibit 10(n) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922 incorporated by reference herein. (o) Multi-year Credit Agreement dated as of December 20, 1996 among The Gillette Company, Morgan Guaranty Trust Company of New York, as agent, and a syndicate of domestic and foreign banks, filed as Exhibit 10(o) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by reference herein. (p) $1,000,000,000 364-Day Credit Agreement dated as of December 20, 1996 and amended and restated as of October 20, 1997 among The Gillette Company, Morgan Guaranty Trust Company of New York, as agent and a syndicate of domestic and foreign banks, filed herewith. (q) Agreement and Plan of Merger dated as of September 12, 1996, by and among The Gillette Company, Alaska Acquisition Corp. and Duracell International Inc., filed as Exhibit 2.1 to The Gillette Company Current Report on Form 8-K filed September 16, 1996, Commission File No. 1-922, incorporated by reference herein. 9
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[Enlarge/Download Table] (r) Stockholders Agreement dated as of September 12, 1996 among The Gillette Company, KKR Partners II, L.P. and DI Associates, L.P., filed as Exhibit 10.1 to The Gillette Company Current Report on Form 8-K filed September 16, 1996, Commission File No. 1-922, incorporated by reference herein. (s) Registration Rights Agreement dated as of September 12, 1996 among The Gillette Company, KKR Partners II, L.P. and DI Associates, L.P., filed as Exhibit 10.2 to The Gillette Company Current Report on Form 8-K filed September 16, 1996, Commission File No. 1-922, incorporated by reference herein. 12 Computation of the ratios of current assets to current liabilities for the years 1997, 1996 and 1995, filed herewith. 13 Portions of the 1997 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). --------------- * Filed pursuant to Item 14(c). B. REPORTS ON FORM 8-K There were no reports on Form 8-K filed by the registrant during the fourth quarter of the period covered by this report. 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 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; (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; (10) No. 333-19133 filed December 31, 1996, and all amendments thereto, relating to shares issuable and deliverable under the Duracell Shares Plan and Stock Option Plan for Key Employees of Duracell International Inc. and Subsidiaries and (11) No. 333-25533 filed April 21, 1997, and all amendments thereto, relating to shares issuable and deliverable under The Gillette Company 1971 Stock Option Plan. 10
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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
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INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors of THE GILLETTE COMPANY: Under date of January 28, 1998, we reported on the consolidated balance sheet of The Gillette Company and subsidiary companies as of December 31, 1997 and 1996, and the related consolidated statements of income, cash flows and stockholders' equity for each of the years in the three-year period ended December 31, 1997, as contained in the 1997 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 1997. In connection with our audits of the aforementioned consolidated financial statements, we also audited the financial statement schedule on page 13 of this report. The financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on the 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 28, 1998 12
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THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (MILLIONS OF DOLLARS) [Enlarge/Download Table] ADDITIONS DEDUCTIONS ---------------------- ---------- CHARGED LOSSES BALANCE AT TO CHARGED BALANCE AT BEGINNING PROFIT CHARGED TO TO END OF DESCRIPTION OF YEAR AND LOSS OTHER RESERVES YEAR ----------- ---------- -------- ---------- -------- ---------- 1997 ----- Reserves deducted from assets: Receivables....................... $81 $42 -- $49 $74 === === === === === 1996 ----- Reserves deducted from assets: Receivables....................... $82 $42 $ 1* $44 $81 === === === === === 1995 ----- Reserves deducted from assets: Receivables....................... $75 $34 $ 1* $28 $82 === === === === === * Acquisition balances 13
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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) By CHARLES W. CRAMB ------------------------------------ Charles W. Cramb Senior Vice President, Chief Financial Officer and Principal Accounting Officer Date: March 20, 1998 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. [Enlarge/Download Table] SIGNATURES TITLE DATE ---------- ----- ---- * ALFRED M. ZEIEN Chairman of the Board March 20, 1998 ----------------------------------------------------- of Directors, Chief Executive Officer Alfred M. Zeien and Director * MICHAEL C. HAWLEY President, Chief Operating Officer March 20, 1998 ----------------------------------------------------- and Director Michael C. Hawley * JOSEPH E. MULLANEY Vice Chairman of the Board, Chief March 20, 1998 ----------------------------------------------------- Legal Officer and Director Joseph E. Mullaney * CHARLES W. CRAMB Senior Vice President, March 20, 1998 ----------------------------------------------------- Chief Financial Officer and Charles W. Cramb Principal Accounting Officer * WARREN E. BUFFETT Director March 20, 1998 ----------------------------------------------------- Warren E. Buffett * WILBUR H. GANTZ Director March 20, 1998 ----------------------------------------------------- Wilbur H. Gantz * MICHAEL B. GIFFORD Director March 20, 1998 ----------------------------------------------------- Michael B. Gifford * CAROL R. GOLDBERG Director March 20, 1998 ----------------------------------------------------- Carol R. Goldberg * HERBERT H. JACOBI Director March 20, 1998 ----------------------------------------------------- Herbert H. Jacobi * HENRY R. KRAVIS Director March 20, 1998 ----------------------------------------------------- Henry R. Kravis * RICHARD R. PIVIROTTO Director March 20, 1998 ----------------------------------------------------- Richard R. Pivirotto * JUAN M. STETA Director March 20, 1998 ----------------------------------------------------- Juan M. Steta * ALEXANDER B. TROWBRIDGE Director March 20, 1998 ----------------------------------------------------- Alexander B. Trowbridge *By CHARLES W. CRAMB --------------------------------------------------- Charles W. Cramb as Attorney-In-Fact 14

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