1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1998 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) 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: 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. [ ] The aggregate market value of Gillette Common Stock held by non-affiliates as of February 26, 1999 was approximately $51,422,000,000.* The number of shares of Gillette Common Stock outstanding as of February 26, 1999 was 1,107,183,549. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the following documents have been incorporated by reference into this Form 10-K as indicated: DOCUMENTS 10-K PARTS --------- ---------- 1. The Gillette Company 1998 Annual Report to Stockholders (the "1998 Annual Report")............................... Parts I and II 2. The Gillette Company 1999 Proxy Statement (The "1999 Proxy Statement")......................................... Part III - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- * This amount does not include the value of 147,862 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. 2 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. The Company's businesses range across several industry segments, including blades and razors, toiletries, stationery products, electric shavers, small household appliances, hair care appliances, oral care appliances, oral care products and alkaline batteries for consumer products. A description of the Company and its businesses appears in the 1998 Annual Report on the inside front cover and at pages 6 through 17, the texts of which are incorporated by reference. See also Item 7, "Management's Discussion" at page 5 of this report. INDUSTRY SEGMENTS "Operating Segments and Related Information," containing information on net sales, profit from operations, identifiable assets, capital expenditures and depreciation for each of the last three years, appears in the 1998 Annual Report at page 38 and 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. 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 (Braun personal diagnostic appliances are also sold directly to medical professionals). 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, 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 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 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 1 3 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 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, price and professional endorsement, 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 43,100 persons, three-quarters of them outside the United States. RESEARCH AND DEVELOPMENT In 1998, research and development expenditures were $209 million, compared with $212 million in 1997 and $204 million in 1996. 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: 1998 1997 1996 --------------- --------------- --------------- NET NET NET SALES PROFIT SALES PROFIT SALES PROFIT ----- ------ ----- ------ ----- ------ United States.................................. 38% 44% 37% 38% 37% 41% Foreign........................................ 62% 56% 63% 62% 63% 59% Net sales by geographic area for each of the last three years appear in the 1998 Annual Report at page 39 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 4 Center, Boston, Massachusetts where it holds a long term lease. The following table sets forth the Company's principal plants: 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 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 Newhaven, UK Owned 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, advertising 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 5 EXECUTIVE OFFICERS OF REGISTRANT Information regarding the Executive Officers of the Company as of March 18, 1999 is set out below. NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE ------------------------- -------------------------- --- Alfred M. Zeien Chairman of the Board and Chief Executive Officer since 69 Chairman of the Board and Chief February 1991 Executive Officer Michael C. Hawley President and Chief Operating Officer since April 1995; 61 President and Chief Operating Executive Vice President, International Group, December Officer 1993 - March 1995; President, Oral-B Laboratories, Inc., May 1989 - November 1993 Edward F. DeGraan Executive Vice President, Global Business Management, 55 Executive Vice President Gillette Grooming Products and Duracell, since January 1999; Executive Vice President, Duracell North Atlantic Group, January 1997 - December 1998; Senior Vice President, Manufacturing and Technical Operations, Gillette North Atlantic Group, May 1991 - December 1996 Robert G. King Executive Vice President, Commercial Operations, Western 53 Executive Vice President Hemisphere, since January 1999; Executive Vice President, Gillette North Atlantic Group, February 1997 - December 1998; Executive Vice President, International Group, April 1995 - January 1997; Group Vice President - Latin America, March 1991 - March 1995 Archibald Livis Executive Vice President, Global Business Management, 60 Executive Vice President Diversified Group, since January 1999; Executive Vice President, Diversified Group, May 1998 - December 1998; Chairman, Braun Board of Management, October 1993 - April 1998 Jorgen Wedel Executive Vice President, Commercial Operations, Eastern 50 Executive Vice President Hemisphere, since January 1999; Executive Vice President, International Group since February 1997 - December 1998; President, Oral-B Laboratories, Inc., November 1993 - January 1997; Group General Manager, Braun North America, November 1991 - October 1993 Charles W. Cramb Senior Vice President, Finance, Chief Financial Officer and 52 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 Robert E. DiCenso Senior Vice President, Personnel and Administration, since 58 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. 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 1998 Annual Report on the inside back cover under the caption "Common Stock" and at page 40 under the caption, 4 6 "Quarterly Financial Information," and is incorporated by reference. As of February 26, 1999, the record date for the 1999 Annual Meeting, there were 61,686 Gillette stockholders of record. ITEM 6. SELECTED FINANCIAL DATA The information required by this item appears in the 1998 Annual Report at page 41 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 1998 Annual Report at pages 18 through 23 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 within the meaning of the Federal securities laws. These statements may be identified by such forward-looking words as "expect," "look," "believe," "anticipate," "may," "will" and variations of these words or other forward-looking terminology. Forward-looking statements made by the Company are not guarantees of future performance. Actual results may differ materially from those in the forward-looking statements as the result of risks and uncertainties including those listed below. The Company assumes no obligation to update any forward-looking information: - 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; - a substantial portion 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; - the impact of the year 2000 issue 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. - the effects of rapid technological change on product development differentiation, acceptance and costs including technological advances of competitors; 5 7 - the effects of patents including possible new patents granted to competitors or challenges to Company patents and expiration of patents, which affect competition and product acceptance. ITEM 7A. DISCLOSURES CONCERNING MARKET RISK SENSITIVE INSTRUMENTS The information required by this item appears in the 1998 Annual Report at page 21 under the caption, "Market Risk," and is incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following Financial Statements and Supplementary Data for The Gillette Company and Subsidiary Companies appear in the 1998 Annual Report at the pages indicated below and are incorporated by reference. (1) Independent Auditors' Report................................ Page 39 (2) Consolidated Statement of Income for the Years Ended December 31, 1998, 1997 and 1996............................ Page 24 (3) Consolidated Balance Sheet at December 31, 1998 and 1997.... Page 25 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996............................ Page 26 (5) Consolidated Statement of Stockholders' Equity for the periods ended December 31, 1998, 1997 and 1996.............. Page 27 (6) Notes to Consolidated Financial Statements.................. Pages 28 through 40 (7) Computation of per share earnings........................... Pages 24, 28, 40 and 41 (8) Quarterly Financial Information............................. Page 40 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 1999 Proxy Statement at pages 2 through 4, 7 and 8 under the caption "Company Transactions with Directors and Officers," and at page 21 under the caption "Section 16(a) Beneficial Ownership Reporting Compliance," 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 1999 Proxy Statement at pages 8 through 17 under the captions "Compensation of Non-Employee Directors", "Personnel Committee Report on Executive Compensation", "Gillette Comparative Five-Year Investment Performance", and "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 1999 Proxy Statement at pages 6 and 7 under the caption "Stock Ownership of Five Percent 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 1999 Proxy Statement at pages 7 and 8 under the caption "Company Transactions with Directors and Officers" and is incorporated by reference. 6 8 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 1998 Annual Report at the pages indicated below and are incorporated into Part II by reference. (1) Independent Auditor's Report................................ Page 39 (2) Consolidated Statement of Income for the Years Ended December 31, 1998, 1997 and 1996............................ Page 24 (3) Consolidated Balance Sheet at December 31, 1998 and 1997.... Page 25 (4) Consolidated Statement of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996............................ Page 26 (5) Consolidated Statement of Stockholders' Equity for the periods ended December 31, 1998, 1997 and 1996.............. Page 27 (6) Notes to Consolidated Financial Statements.................. Pages 28 through 40 (7) Computation of per share earnings........................... Pages 24, 28 and 40 and 41 SCHEDULES The following schedule appears at page 12 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. EXHIBITS 3(a) Composite Certificate of Incorporation of The Gillette Company, as amended, filed as Exhibit 3(i) to The Gillette Company Quarterly Report on Form 10-Q for the period ended March 31, 1998, Commission File No. 1-922, incorporated by reference herein. (b) The Bylaws of The Gillette Company, as amended October 15, 1998, filed as Exhibit 3 to The Gillette Company Quarterly Report on Form 10-Q for the period ended September 30, 1998, 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. 1-911, 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. 1-911, incorporated by reference herein. 7 9 (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. 1-922, 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, 1998, 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. The Company has issued non-registered debt instruments copies of which will be furnished to the Commission upon request. 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. *(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, 1997, incorporated by reference herein. *(d) 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, 1997, incorporated by reference herein. (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. 8 10 *(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 as Exhibit 10(l) to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1997, incorporated by reference herein. *(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) $2,000,000,000 364-Day Credit Agreement dated as of December 20, 1996 and amended and restated as of October 20, 1997 and October 19, 1998 among The Gillette Company, Morgan Guaranty Trust Company of New York, as agent and a syndicate of domestic and foreign banks, filed herewith. (q) 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 1998, 1997 and 1996, filed herewith. 13 Portions of the 1998 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 9 11 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. 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. 10 12 INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors of THE GILLETTE COMPANY: Under date of February 11, 1999, we reported on the consolidated balance sheet of The Gillette Company and subsidiary companies as of December 31, 1998 and 1997, 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, 1998, as contained in the 1998 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 1998. In connection with our audits of the aforementioned consolidated financial statements, we also audited the financial statement schedule on page 12 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 February 11, 1999 11 13 THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (MILLIONS OF DOLLARS) 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 ----------- ---------- -------- ---------- -------- ---------- 1998 - ----- Reserves deducted from assets: Receivables....................... $74 $43 -- $38 $79 === === === === === 1997 - ----- Reserves deducted from assets: Receivables....................... $81 $42 -- $49 $74 === === === === === 1996 - ----- Reserves deducted from assets: Receivables....................... $82 $42 $ 1* $44 $81 === === === === === * Acquisition balances 12 14 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 31, 1999 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. SIGNATURES TITLE DATE ---------- ----- ---- * ALFRED M. ZEIEN Chairman of the Board March 31, 1999 - ----------------------------------------------------- of Directors, Chief Executive Officer Alfred M. Zeien and Director * MICHAEL C. HAWLEY President, Chief Operating Officer March 31, 1999 - ----------------------------------------------------- and Director Michael C. Hawley * CHARLES W. CRAMB Senior Vice President, March 31, 1999 - ----------------------------------------------------- Chief Financial Officer and Charles W. Cramb Principal Accounting Officer * WARREN E. BUFFETT Director March 31, 1999 - ----------------------------------------------------- Warren E. Buffett * WILBUR H. GANTZ Director March 31, 1999 - ----------------------------------------------------- Wilbur H. Gantz * MICHAEL B. GIFFORD Director March 31, 1999 - ----------------------------------------------------- Michael B. Gifford * CAROL R. GOLDBERG Director March 31, 1999 - ----------------------------------------------------- Carol R. Goldberg * HERBERT H. JACOBI Director March 31, 1999 - ----------------------------------------------------- Herbert H. Jacobi * HENRY R. KRAVIS Director March 31, 1999 - ----------------------------------------------------- Henry R. Kravis * JORGE PAULO LEMANN Director March 31, 1999 - ----------------------------------------------------- Jorge Paulo Lemann * RICHARD R. PIVIROTTO Director March 31, 1999 - ----------------------------------------------------- Richard R. Pivirotto * ALEXANDER B. TROWBRIDGE Director March 31, 1999 - ----------------------------------------------------- Alexander B. Trowbridge * MARJORIE M. YANG Director March 31, 1999 - ----------------------------------------------------- Marjorie M. Yang *By CHARLES W. CRAMB --------------------------------------------------- Charles W. Cramb as Attorney-In-Fact 13