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1996-11-04 Resolution
Prepared by: Don Yucuis, Finance Director, 410 E. Washington St., Iowa City, IA 52240 (319) 3§6-5052 RESOLUTION NO. 96-303 RESOLUTION SETTING A PUBLIC HEARING ON AN ORDINANCE AMENDING TITLE 3 OF THE CITY CODE ENTITLED "FINANCES, TAXATION &FEES," CHAPTER 4 ON CITY UTILITIES TO INCREASE THE RATES FOR FEES AND CHARGES FOR POTABLE WATER USE AND SERVICE, WASTEWATER TREATMENT WORKS USER CHARGES, AND SOLID WASTE DISPOSAL. WHEREAS, water, wastewater, and solid waste disposal fees which were last increased in 1996 are proposed to be increased to generate adequate revenues to pay the costs of operation, maintenance, necessary expansion and debt service for the City's wastewater treatment facilities as well as its potable water supply and treatment facilities and solid waste disposal operations; and WHEREAS, the City of Iowa City is required to comply with federal safe drinking water standards, and is planning to construct a new water supply and treatment facility; and WHEREAS, the City of Iowa City is required to comply with federal wastewater treatment standards, and is planning to make improvements to double the treatment capacity of the existing South Wastewater Treatment Plant, and to construct a sanitary sewer line to connect the two wastewater treatment plants; and WHEREAS, water and wastewater rates for fees and charges will fund these projects over time; and WHEREAS, the City of Iowa City wishes to change certain fees in the Solid Waste Disposal section of the code; and WHEREAS, City Code requires that notice and public hearing on proposed changes in rates for fees and charges be provided to the public, prior to enactment of said rates for fees. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA, that: A public hearing is hereby set for 7:00 p.m. on November 19, 1996, to be held in the Civic Center Council Chambers, to permit public input on the proposed rate increases or changes for fees and charges for water supply and treatment facilities and services, fees and charges for wastewater treatment facilities and services, and fees and charges for solid waste disposal. Resolution No. 96-303 Page 2 The City Clerk is hereby directed to publish notice of said hearing as required by § 1 4- 3A-4, City Code entitled "Rates and Charges for City Utilities" as provided by federal and local law. Passed and approved this 4th day of November , 1996. CITY-CLERK MAYOR Approved by City Attorney's Office It was moved by Norton and seconded by adopted, and upon roll call there were: Vanderhoef the Resolution be AYES: NAYS: ABSENT: Baker Kubby Lehman Norton Novick Thornberry Vanderhoef Prepared by: Rick Fosse. City Engineer, 410 E. Washington St., Iowa City, IA 52240; 319-356-5143 RESOLUTION NO, 96-304 RESOLUTION ACCEPTING THE WORK FOR THE CONSTRUCTION OF THE LONGFELLOW AREA STORM AND SANITARY SEWER PROJECT WHEREAS, the Engineering Division has recommended that the work for construction of the Longfellow Area Storm and Sanitary Sewer Project, as included in a contract between the City of Iowa City and B & D Construction of Iowa City, Iowa, dated June 2, 1 995, be accepted, and WHEREAS, the performance and payment bond has been filed in the City Clerk's office, NOW, THEREFORE· BE IT RESOLVED BY THE CITY COUNCIL OF IOWA CITY, IOWA, THAT said improvements are hereby accepted by the City Council of Iowa City, Iowa. Passed and approved this 4th day of November · 1996. CITY CLERK It was moved by Norton and seconded by adopted, and upon roll call there were: Approved by ~:ity Attorney's O'/~/~/~ Vanderhoef the Resolution be AYES: NAYS: ABSENT: X X X X X Baker Kubby Lehman Norton Novick Thornberry Vanderhoef pweng~longf el2 .re~ ENGINEER'S REPORT CITY OF I0 WA CITY November 1, 1996 Honorable Mayor and City Council Iowa City, Iowa RE: Longfellow Storm and Sanitary Sewer Project Dear Honorable Mayor and Councilpersons: I hereby certify that the construction of the Longfellow Storm and Sanitary Sewer Project has been completed by B & D Construction of Iowa City, Iowa in substantial accordance with the plans and specifications prepared by Shive- Hattery, Inc. The required performance and payment bonds are on file in the City Clerk's Office. The final contract price is $522,398.30. I recommend that the above-referenced improvements be accepted by the City of Iowa City. Sincerely, Richard A. Fosse, P.E. City Engineer 410 [^ST W^SHIt~G'TON 51'REET · IOWA CITY, IOWA 52240-1526 · (J~19) 356-5000 t FAX {319) 356-$009 Prepared by: Scott Kugler, Associate Planner, 410 E. Washington St., Iowa City, IA 52240; 319-356-5243 RESOLUTION NO. 96-305 RESOLUTION APPROVING THE PRELIMINARY PLAT OF A RESUBDIVlSION OF LOT 2, WESTPORT PLAZA, IOWA CITY, IOWA. WHEREAS, the applicant, Staples, Inc., on behalf of the owner, RandalIs International, filed with the City Clerk of Iowa City, Iowa, an application for approval of the preliminary plat of A Resubdivision of Lot 2, Westport P~aza; and WHEREAS, the Department of Plan.qing and Community Development and the Public Works Department examined the preliminary plat and recommended approval; and WHEREAS, the Planning and Zoning Commission examined the preliminary plat and, after due deliberation, recommended acceptance and approval of the plat; and WHEREAS, the preliminary plat conforms with all of the requirements of the City Ordinances of the City of Iowa City, Iowa. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA THAT: 1. The preliminary plat of A Resubdivision of Lot 2, Westport Plaza, Iowa City, Iowa, is hereby approved. 2. The Mayor and City Clerk of the City of Iowa City, Iowa are hereby authorized and directed to certify this resolution, which shall be affixed to the plat after passage and approval by law. 4th day of November , 1996. Passed and approved this CITY-CLERK MAYOR Resolution No. 96-305 Page 2 It was moved by Thornberry and seconded by adopted, and upon roll call there were: Norton AYES: NAYS: ABSENT: X X X X X X the Resolution be Baker Kubby Lehman Norton Novick Thornberry Vanderhoef STAFF REPORT To: Planning and Zoning Commission Item: SUB96-0023. A Resubdivision of Lot 2, Westport Plaza GENERAL INFORMATION: Applicant: Property Owner: Contact person: Requested action: Purpose: Location: Size: Existing land use and zoning: Surrounding land use and zoning: Comprehensive Plan: Applicable Code requirements: File date: Prepared by: Scott Kugler Date: October 17, 1996 Staples, Inc. PO Box 9328 Framingham, MA 01701-9328 RandalIs International, Inc. 101 W 23rd Ave Mitchell, SD 57301 Shive-Hattery, Inc. 800 1st St. NW Cedar Rapids, IA 52405 Phone: (31 9) 364-0227 Preliminary plat approval To create a two-lot commercial subdivi- sion South of Ruppert Road, within West- port Plaza 11.41 acres Proposed Lot I contains a grocery store; proposed Lot 2 is undeveloped with the exception of portions of two access roadways and a storm water detention facility; CC-2 North: East: South: West: Commercial, C1-1; Airport property, P/CI-1; Airport, P; Commercial, CC-2 General Industrial Chapter 14-7, Land Subdivisions September 26, 1996 45-day limitation period: November 11, 1996 BACKGROUND INFORMATION: The applicant, Staples, Inc., is requesting preliminary plat approval of A Resubdivision of Lot 2, Westport Plaza, a 2-lot commercial subdivision. The property includes 11.41 acres, and is currently the site of a Cub Foods grocery store. The applicant intends to split the undeveloped southern portion of the property off from the existing improvements associated with the Cub Foods store. ANALYSIS: The proposed preliminary plat appears to be in general conformance with the City's subdivision regulations. A site development plan has also been submitted and is being reviewed by staff in conjunction with this plat. The plat proposes the relocation of the existing access easements to conform with the actual drive locations that have already been constructed on the property. The location of the drives was altered based on an approved site plan for Cub Foods, however, a new plat was apparently never recorded to adjust the easement locations. This plat should correct this situation and bring the platted easements in line with the actual location of the drives on the property. At the time of final plat approval, the incorrect easements should be released in favor of the new corrected easements. The existing storm water management facilities on the property were designed and constructed to accommodate full development of the Westport Plaza property. The storm water management plans will not be altered by this plat. Because this property is located adjacent to the Iowa City Municipal Airport, FAA approval will be required prior to approval of a site development plan for this property. The Sensitive Areas Inventory, Phase I map indicates that fully hydric soils are present on this property. However, the site has been graded and filled since the preparation of the soils information on which the inventory is based. The Sensitive Areas Ordinance allows the City to waive its submittal requirements if the City determines the information to be unnecessary. In this case, any environmentally sensitive features that may have existed on the site were likely filled or graded when Walmart. Cub Foods, and the existing access roads and detention basins were constructed. Therefore, staff is waiving the requirement for a Sensitive Areas Site Plan with this development. STAFF RECOMMENDATION: Staff recommends that SUB96-0023, a request for preliminary plat approval of A Resub- division of Lot 2, Westport Plaza, be approved. ATTACHMENTS: 1. Location Map. 2. Prelimir~ary Plat. Approved by: Robert Miklo, Senior Planner Department of Planning and Community Development LOCATO ON MAP · .~TA~LE$ ADDITOON ©0 IIii City of Iowa City MEMORANDUM Date: October 31, 1996 From: Karin Franklin, Director, Planning & Community Devel~!~r~en~,,) David Schoon, Economic Development Coordinato~/,~,)~ Fie: Financial Assistance for Oral-B Laboratories Oral-B Laboratories requests that the City submit an application for a $'150,000 forgivable loan from the State's Community Economic Betterment Account (CEBA) program. Oral-B is considering expanding its Iowa City facility contingent upon receiving the public funding outlined in the application and receiving corporate approval. The Iowa City facility is only one of a number of potential sites that the Gillette Company (Oral-B's parent company) is considering for the proposed project, The other sites are outside of the State of Iowa. The Company & the Project The Oral-B Iowa City facility has been in operation since 1957 producing toothbrushes and interdental products. The proposed expansion would house manufacturing facilities for a new toothbrush product line. The proposed project consists of the following: · Building Addition- 56,000 square feet · New Machinery & Equipment · New Jobs ~3 million $26 million 55 total within 2 years * 10 engineers/managers at $21.63/hr * 45 technicians at $10.66/hr Depending upon approval of the project, the target date to begin the project is the end of November with plans to have the project competed by July 1997. Public Financial Assistance As previously stated, the Gillette Co. is considering locating the proposed project at either the Oral-B Iowa City facility or a site outside the State. Oral B considers financial assistance important to make the Iowa City facility financially attractive to the Gillette Board of Directors. The CEBA application process requires local financial participation in a project in order to make the project competitive. Financial assistance for the project includes the following: Mid-American Energy - Reduced Utility Rates New Industrial Jobs Training Program - Kirkwood Community College $270,300 - savings over 5 years $197,000 - funding only with withholding taxes City of Iowa City State of Iowa - CEBA City of iowa City $172,000 - partial industrial property tax exemption, savings over 5 years $150,000 - forgivable loan $40,000 - forgivable loan Financial Assistance Guidelines Attached you will find a copy of the recently adopted financial assistance guidelines with statements indicating how the characteristics of the Oral-B project compare with these guidelines. Based on this comparison, staff concludes that the characteristics of the Oral- B project match closely with the City's guidelines and would recommend the Council adopt the resolution authorizing the submission of the CEBA application. co: Rich Colgan, 0raI-B Bill DeStefano, 0rai-B Marty Kelly, ICAD FINANCIAL ASSISTANCE GUIDELINES ORAL-B LABORATORIES PRIVATE FINANCIAL CONTRIBUTION AS COMPARED TO PUBLIC ASSISTANCE REQUEST A greater percentage of contribution by the assisted business; The business' contribution to the project is greater than 97% of the project costs (this does not include operating expenses). (CEBA application, questions 26 & 27) A shorter payback period or expiration for financial assistance; The business is requesting a $40,000 forgivable loan from the City and a t~150,000 forgivable loan from the State. If the business meets their job attainment obligations, the loans need not be repaid. The partial industrial property tax exemption is for a period of 5 years. Beyond the 5 year period, the business will pay its full property tax obligation. A lower amount of financial assistance per job The application indicates the creation of 55 new jobs and the retention of approximately 40 jobs. Based on only the job creation number, the City's financial assistance per job equals approximately $3850/job ($727/job for the city's forgivable loan and 83,127/job for the partial industrial property tax exemption). CONSISTENCY WITH COMPREHENSIVE PLAN/CAPITAL IMPROVEMENTS PROGRAM/ECONOMIC DEVELOPMENT POLICY · Projects not requiring new public capital improvements; The proposed project requires no new public capital improvements. · A greater contribution by the developer for public infrastructure improvements; NA The proposed project requires no new public capital improvements. Jobs within industn//technology groups on opportunity list; The proposed project falls within the categories of Human Health & Medicine and Light Manufacturing. · Start-up companies and expansions of existing local operations; The proposed project is an expansion of an existing local operation. A greater amount of property tax base expansion. The proposed project consists of the construction of a $3.0 million building addition. Even with partial industrial property tax exemption, during the first 5 years the building will generate approximately $211,200 in property taxes (all taxing districts). After five years, the building will annually generate approximately 976,800 in property taxes. 1 Oral-B Laboratories QUALITY OF JOBS TO BE CREATED Higher wage rates; The application indicates an average hourly wage for new jobs being created at $12.65 and the average hourly wage for existing jobs at $14.11 (Note: these figures do not include shift differentials, bonuses, or overtime wages). The average hourly wages for all industries in Johnson County is $11.85 and the average hourly wages for manufacturing firms is $14.23 (Note: these figures do include shift differentials, bonuses, and overtime wages). · Full-time, long-term, non-seasonal positions; The new and existing jobs would be full-time, long-term, non-seasonal positions. Commitment to a safe workplace; The company has an active safety committee; a recordable incident rate 46% below the average for its industry; full-time occupation health nurse/safety supervisor; beginning activities to promote health and fitness for all employees and their families. (Joint Application, question 4) Contribution to health insurance benefits; Business provides at least 80% of standard medical and dental insurance for full-time employees. Employees share in the premium cost (single $2.50 weekly; employee and one or more dependent children $3.75 weekly; employee and spouse (with or without children) $7.00 weekly). (Dental and Medical Coverage is outlined in CEBA Application, Attachment F). Provision of fringe benefits (e.g. vacation, sick leave, retirement plans). Thirteen paid holidays; paid vacation, life insurance, short term disability insurance; Gillette Savings Plan, perfect attendance bonus; sick pay; paid pension plan; and others (CEBA Application, Attachment F). The hourly employees are represented by the Teamsters Local 238. COMMUNITY INVOLVEMENT Businesses that have a history of contributing to their communities through volunteer work, financial contributions or other means. Employees of the Iowa City facility have a 40 year history of being active in the community. Examples include school booster organizations, United Way committee chairs, children's athletic coaches. Over 73% of Oral-B employees contributed to the United Way campaign with an average gift ($47.61/person) above the average for local industry. The local plant has an annual contribution budget of $30,000, which it contributes to local organizations. The local facility also presently pays $413,000 annually in property taxes (all taxing districts). (Joint application, question 9) · New start-up businesses that demonstrate their commitment to becoming involved in the community. NA 2 Oral-B Laboratories ECONOMIC IMPACT Contribution to diversification of Johnson County economy; The expansion of Oral B Laboratories is the expansion of a manufacturing firm. Approximately, 7% of the Johnson County labor force is employed in the manufacturing sector, while nearly 44% of the labor force is employed in the government sector and 49% in the non-manufacturing sector. The creation of 55 positions at Oral-B Laboratories will further help diversify the Johnson County economy. Potential for future growth of industry; The applicant indicates that "funding of this project will enable the Oral-B Iowa City Plant to continue to be a viable competitor in our product categories. This will set the stage for future growth." (Joint Application, question 3) Builds on the resources, materials, and work force of the local community. The company indicates that approximately 45% of the company's total operating expenditures including wages and salaries will be spent within the State of Iowa. (CEBA Application, question 12) The applicant does indicate that they have 88 suppliers for raw materials and support services from the Iowa City/eastern Iowa area; plan tO use eastern Iowa machine shops for building new equipment; plan to use local firms to construct new addition; all hourly employees hired within a 50 mile commuting distance of Iowa City and three-quarters of current salaried work force were hired from the eastern Iowa area. (Joint application, question 5) ENVIRONMENTAL IMPACT The more environmentally sound the company's operation; Currently, greater than 80% of solid waste is recycled; recycles 100% of corrugated materials; working on plan to recycle 100% of plastic waste. Have active program to replace lighting and motors with more energy efficient models. (Joint application, question 6) The more environmentally sound the company's products/services. Presently only use internally generated recycled plastic material in injection molding operation. (Joint application, question 7) 3 Oral-B Laboratories GENERAL REQUIREMENTS Every applicant should provide average hourly wages for all new and existing jobs which meet or exceed the average county wage rate by industry. Ninety percent of the project positions should have a wage greater than the federal poverty wage rate for Iowa City (30% of the median income for a four person household in Iowa City). Under special circumstances, consideration will be given to those companies who cannot meet this requirement. See "Quality of Jobs to be Created" section. None of the position wages fall below the federal poverty wage rate for Iowa City (7.13/hr). Applicant must have a consistent pattern of compliance with the law and the spirit of the law, including environmental regulations, occupational safety and health laws, fair labor standards, the National Labor Relations Act, and the Americans with Disabilities Act, in order to eligible for financial assistance. Based on the applicant's response to question 35 and staff's review of various public information sources (Westlaw database, DNR, lOSHA) Oral-B Laboratories (and its parent company) appears to have a consistent pattern of compliance with the law and the spirit of the law. Applicant must demonstrate the following in order to eligible for financial assistance: the feasibility of the business venture. Project appears feasible the reliability of the job creation and financial estimates. Estimates appear reliable 0 the credit worthiness of the business. Credit worthiness is high. Project would not occur without financial assistance. The application states: The Gillette Company has other alternatives in terms of existing manufacturing sites within the U.S., i.e. Wisconsin, Minnesota, or Massachusetts, and Mexico which would not require new building construction. Additionally we have a sister toothbrush manufacturing operations in Ireland also competing for this business. It is important that Iowa City [the plant] put together the best financial outlook for this project versus the option of expanding elsewhere. A contract will be executed for any financial assistance awarded. Applicant will be required to repay all, or a prorated share, of the amount of the financial assistance awarded if the applicant does not fulfill the obligations of the contract. The company is willing to enter into a loan agreement that contains a repayment clause. (Joint Application, question 10) f:\prospect\oralb 4 Oral-B Laborator/es ORAL-B LABORATORIES Joint Application for Financial Assistance City of Iowa City and Community Economic Betterment Account Funding Application for Community Economic Betterment Account (CEBA) funds requires state and local financial involvement in an economic development project. In many incidents that form of local financial involvement includes incentives granted to the business from the City of Iowa City. Just as the State has criteria to determine the eligibility of a project, the City has guidelines we use to evaluate the appropriateness of public investment in a project (see attached). Below are a number of questions for you to answer that will help us in our evaluation. You may provide the information in the format of your choice. 1. What will be the average hourly wage for all new and existing jobs (including hourly and salaried positions) at the Iowa City facility? (Compliments CEBA question number 18, page 13) Average wage for new jobs being created = $12.65 Average wage for existing jobs = $14.11 2. Please provide a list of positions and hourly rates for each job classification that is existing and to be created. (Compliments CEBA question number 18, page 13) See attached 3. Beyond the present project, what future growth potential is there for the Iowa City operation? We anticipate that funding of this project will enable the Oral-B Iowa City Plant to continue to be a viable competitor in our product categories. This will set the stage for future growth. (Note: we have increased our employment by 85 full time, permanent positions since 1/1/95). We have had four major expansions since the plant was built in 1957. We have additional room on our site for several major expansions beyond the one being currently planned. 4. Please describe the types of worker safety programs that would be available for your employees. The plant has an active safety committee composed of both union and salaried employees. The OSItA recordable incident rate at Iowa City is 46% below the average for our type of industry. We have a full-time occupational health nurse /safety supervisor on site and have a local physician on retainer. The focus of the safety committee is moving beyond accident prevention to promoting health & wellness for all our employees and their families, 5. Please document how much of your raw materials, supportive services, machinery and equipment, and labor will come from the eastern Iowa area. ceba Raw Materials / Supportive Services - We have 88 suppliers for raw materials and support services from the Iowa City / eastern Iowa area. We have spent over $5.3 million with these firms so far during calendar 1996. Machinery & Equipment - We will be using eastern Iowa machine shops for building much of the new equipment. We expect to use local firms for the ' construction of the new building. Labor - Hourly - All of hourly employees are hired within a $0 mile commuting distance of Iowa City. - Salaried - Three quarters of our cnrrent salaried work force were hired from the eastern Iowa area. We would expect this to be true for new hires in the futm'e. 6. Please describe the energy and resource efficiency programs and waste reduction, waste exchange, and recycling programs at your Iowa City operation. (Complements CEBA question number 39, page 18) Have had an active program to replace lighting and motors with more energy efficient models for several years. All new equipment is specified to be as energy efficient as possible. We currently recycle 100% of corrugated materials and are working with Kirkwood on a plan to recycle 100% of our plastic waste. Currently, greater than 80% of our solid waste is recycled and we are pursuing other reduction and recycling options for the balance. 7. Do you use recycled materials in the production of any products or through the provision of any services at your facility? If so, please describe. We use internally generated recycled plastic material in our injection molding operation. 8. Will the Iowa City operation develop renewable energy resources or products that conserve energy? If so, please describe. Not at this time. 9. Please describe your business' history of contributing to the commun/ty through volunteer work, financial contributions, or other means. Employees of the plant have a 40 year history of being active in the community. Some examples include Junior Achievement, school booster organizations, United Way committee chairs, Chamber of Commerce, children's athletic coaches, etc. Over the last 3 years, 73% of Oral-B employees contributed to the United Way campaign with an average gift of $47.61 per person (above the average for local industry). ceba The local plant has an annual contribution budget of $30,000. A list of recent past recipients of contributions is attached. Additionally, we make numerous donations of toothbrushes to local charities and service organizations. The plant also pays $413,000 annually in property tax. 10. As with the CEBA agreement, financial assistance f~om the City of Iowa City requires a repayment clause in the loan agreement with the City. The repayment clause requires a prorated repayment ofthe financial assistance if the company does not meet its job attainment obligation..Is the company willing to enter into a loan agreement that contains a repayment clause? Yes ceba CURRENT #of Existing Salaried Positions Rate Employees in Range Rate Range $18,000.$29,999 5 930,000.939,999 14 940,000.$49,999 16 $50,000.$74,999 25 Greater than 975,000 9 Tolal 72 JOINT APPLICATION - ORAL-B QUESTION 2 NEW # of Employees in Hourly Rate ,New Salaried Positions Rate Range Rate Range 8.65.14.42 14.42,19.23 19.23.24.04 940,000.949,999 10 24.04-36.06 36.06 + Total 10 Hourly Rate 19,23-24.04 Page 1 AS?RSAL2.XLS ) ASTRI.XLS EXISTING HOURLY POSITIONS Cont Class Poeitoh Title 2-1 Custodian 3-1 Packer 4-3 Molding Machine Operator 44 Packing Machine Operator 5-1 Expeditor 5.2 Cell Tech- Level I 8-1 Shipping Personnel 9-1 Fork Truck Operator 0-2 Packing Service & Set-Up 9-3 Receiving Clerk 9-4 Pick & Pack Service Helper 10-1 Handle & Machine Service Clerk 11.1 Cell Tech Level II 12-3 Moldin9 Technician 12-4 Ouefity Technician 13.1 Cell Tech Level III 14-1 Tool & Die Maker-3rd Class 18-2 Tool & Die Maker* 2rid Class 18.3 Millwright 19-2 Moldmaker 20-1 Moldmaker Specialist 20.2 Electronics Specialist # 1 33 18 55 1 96 15 12 2 1 2 1 75 33 13 10 1 5 3 1 5 4 Total 387 Hrly. Rate Range * 9.69-12.68 9.84-12.73 9.94-12.80 9.94-12.80 10.05.12.87 10.05.12.87 10.16-12.97 10A6.13.34 10.46-13.34 10,46-13.34 10A6.13.34 10.66-13.80 10.66-13.92 11.28.14.55 11.28-14.55 11.39-14.66 11.74-15,02 12.16-16.39 12.15-16.39 12.25-16.85 12.35.17.31 12.35-17.31 N.E.W HOURLY POSITIONS Cont Xrly. Rate Class # Range ° 11-1 45 10.66-13,92 Total 45 * Effective 11119166 Page 1 JOINT APPLICATION - ORAL-B QUESTION 9 RECENT ORAL-B CONTRIBUTION HISTORY Abbe Center for Comm. Mental Health Aging Services American Assoc. of Deaf And Blind American Cancer Society American Fund for Dental Health American Lung Assoc. American-Soviet Peace Walk Assoc. of Business & Industry Boy Scouts of America Business Horizons City High Prom City High Yearbook City of Iowa City Softball Civil Air Patrol Civilian International Clear Creek Comm. School Prom Clear Creek Elementary Coralville Fire Department Crisis Center Easter Seals Explorer Post 249 Fire Safety Program Girls Junior Softball Goodwill Industries Hancher - Cinderella Hancher - Joffrey Hancher Circle Fund Handicare Hawkeye Horizons Campaign Hawkeye Swim Club Hillcrest Family Services Hoover Library Association IMS Prom Iowa Arts Festival Iowa Assoc. of Business & Industry Iowa City Area Science Center Iowa City Babe Ruth Iowa City Baseball Iowa City Booster Club Iowa City Chamber of Commerce Iowa City Firefighters Iowa City Girls Softball Iowa City Orchestra Iowa City Parks & Recreation Iowa City Iowa City Iowa City Iowa City Iowa City Iowa Iowa Iowa Iowa Iowa Iowa Iowa Iowa Iowa Policemans Assoc. Public Library Foundation Shrine Circus Soccer Youth Orchestra City Youth Soccer Dental Assoc. Head Injury High School All-Star Baseball Public Television Scholarship Fund Society of Dentistry State Police State Sheriffs Assoc Iowa City Firefighters Johnson County Care Facility Johnson County Historical Society Johnson County Military Affairs Assn. Johnson County Sheriff Junior Achievment Kidney Foundation of Iowa Knights of Columbus League of Women Voters Lions Club Lone Tree Yearbook Mercy Foundation Mercy Hospital Festival of Trees Mid-Eastern Council on Chemical National Council on Youth Leadership National Multiple Sclerious NCAA Women's Basketball Northwest Jr. High Wrestling Old Capitol Sertoma Club Partners in Education Pediatric Dentistry Pilot Club Project Serve Ragbrai Regina Booster Club Regina Education Center Regina High School Prom Ronald McDonald House Salvation Army School Net Shriners Hospital Soccer Jamboree Solon Community School Prom Special Olympics State Police Officers Suicide Help-Center Swisher American Legion U of I Foundation U of I Athletics U of I College of Dentistry U of Men's Athletics U of Mens Gymnastics U of Museum Of Art U of Pediatrics U of Scholarship Fund U of Womens Athletics United Nations Assoc. United Way Golf Tournament United Way of Johnson County Pledge VFW #2581 West Branch Prom West High Athletic Complex West High Close Up West High Music West High Prom West High School Show Choir West High Yearbook West Liberty High School Prom Young Life Youth Salute Program October 30, 1996 CITY OF I0 WA CITY Kenneth H. Boyd, Program Manager Division of Financial Assistance 200 E. Grand Avenue Des Moines, IA 50309 Dear Mr. Boyd: The City of Iowa City is pleased to submit this application for a forgivable loan from the Community Economic Betterment Account on behalf of Oral-B Laboratories. As indicated in the application, the local Oral-B Laboratories has been a corporate citizen in Iowa City for sometime. The proposed expansion project hopefully will help to ensure that the local Oral-B Laboratories facility will be in a position to compete in its industry in the future. The enclosed application contains faxed copies of a couple of the required attachments. Once the originals are received, they will be forwarded to the State. In addition to those documents, the resolution officially authorizing the City's submission of the application will be considered at the November 4 1996, Iowa City City Council meeting. A copy of the adopted resolution will be faxed to your office immediately on November 5, 1996. The City is prepared to work with you on this application to ensure that this project occurs in the State of Iowa. If you have any questions about the application or if we can bo of further assistance, please contact David Schoon (319/356-5236). Sincerely, Steph J. A~ · City Manager CC; David Schoon Rich Colgan, Oral-B Bill DeStefano, Oral-B [ CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 7 APPLICATION FOR. FINANCIAL ASSISTANCE APPLICANT INFORMATION: 1. APPLICATION TYPE (PLEASE CI-I~CK ONE) SMALL BUSINESS GAP FINANCING [ [ NEW BUSINESS OPPORTWNITY [x~ NEW PRODUCT DEVELOPMENT 2. THE COMMUNITY, CITY OR COUNTY SPONSORING THE APPLICATION: CITY OR COUNTY City of Iowa City NAME OF MAYOR OR BOARD CHAIR ADDRESS 410 E. Washington CITY/COUNTY CONTACT PERSON TELEPHONE (319)356-5236 Naomt Novtck ZIP CODE 52240 Stephen Atkt'ns - City Manager David Schoon - Economic Development Coordinator FAX (319) 356-5009 3. BUSINESS RECEIVING BENEFIT OF FUNDING: BUSINESS: ORAL-B LgBOP~ TORIES - IOWA CITY PLANT NAME OF AUTHORIZED PERSON TO OBLIGATE THE BUSINESS: J. Wedel BUSINESS ADDRESS 1832 LOWER MUSCATINE ROAD, IOWA CITY ZIP CODE 52240 BUSINESS CONTACT PERSON RON GRAY TITLE GENEIML MANAGER TELEPHONE (319) 356 -9164 FAX (319) 341-3370 BUSINESS FEDERAL ID # 94-3033824 CCl ~q '?~ '~:~qF'~ ¢P~L B _ABS ~'= 59~ !?~1 p.~x~ CE~IA APPLICATION FOP. BUSINESS F1N. ANCIAL ASSISTANCE PAGe8 RELEASE OF INFORMATION AND CERTIFICATION NOTE: Please read carefully before signing I hereby give permission to the Deparbr~ent of Economic Development {DED) to research the company'e history, make credit checks, contact the company's financial institution, and perform other related activities necessary for masonable evaluation of this proposal. I understand that all information submitted to DED relating to this application is subject to the Open Records Law (1994 Iowa Code, Chapter 22) and that confidentiality may not be guaranteed. I hereby certify that all representations, warranties or statements made or furnished to the Department tn connection with this application am true and co~ect In all ma~rial respects. I understand that it is a criminal violation under Iowa law to engage in deception and knowingly make, or cause to be made, directly or indirectly, a false statement in writing for the purpose of procuring economic development assistance from a state agency or political subdivision. SIGNATURE OF COMPANY OFFICER AUTHORIZED TO OBLIGATE BUSINESS: SIGNATURE OF MAYOR/BOARD CHAIR AUTHORIZED TO OBLIGATE COMMUNITY: NOTE: DED WILL NOT PROVIDE ASSISTANCE IN SITUATIONS WHERE IT IS DETERMINED THAT AN~I REPRESENTATION, WARRANTY OR STATEMENT MADE iN CONNECTION WITH THI,~ APPLICATION IS INCORRECT, FALSE, MISLEADING OR ERRONEOUS IN ANY MATERIAl RESPECT. IF ASSISTANCE HAS ALREADY BEEN PROVIDED BY DED PRIOR TO DI$COVEE~ OF THE INCORRECT, FALSE OR MISLEADING REPRESENTATION, DED MAY INITIATE LEGAl ACTION TO RECOVER STATE FUNDS. [CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 9 DESCRIBE THE ORGANIZATIONAL STRUCTURE OF THE BUSINESS, INCLUDING ANY PARENT COMPANIES, SUBSIDIARIES, SISTER COMPANIES, ETC. ORAL-B LABORATORIES. A DIVISION OF GILLETTE CANADA, INC. G1LLE'I'FE CANADA INC. IS A WHOLLY OWNED SUBSIDIARY OF THE GILLETTE COMPANY LIST THE NAMES OF BUSINESS OWNERS AND THE PERCENT OF OWNERSHIP HELD BY EACH. THE GILLETTE COMPANY IS A PUBLICLY TRADED COMPANY LISTED ON THE NEW YORK STOCK EXCHANGE LIST THE BUSINESS' PRIMARY AND SECONDARY STANDARD INDUSTRIAL (SIC) CODES. SIC- 39913 9 (OTHER BRUSHES) [ CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 10 DESCRiFTION AND HISTORY OF BUSINESS: (If complete description is attached, please summarize here). THIS BUSINESS WENT THROUGH MANY CHANGES IN OWNERSHIP SINCE 1919, WITH THE GILLEITE COMPANY ACOUIR1NG THE DENTAL BUSINESS OF COOPER LABORATORIES IN 1984. GROUND WAS BROKEN IN 19,57 IN IOWA CITY FOR THE INITIAL STRUCTURE FOR 11.0. 000 SQUARE FEET FOR PRECISION MANUFACTURING. THE FIRST ADDITION TO STRUCTURE WAS IN 1964, AND AGAIN E,¥PANDED IN 1974 AND 1979 TO ITS CURRENT CONFIGURATION OF 257. 000 SQUARE FEET. THE IOWA CITY PLANT 1S THE ,',/iAIN MANUFACTURING FACILITY FOR THE ORAL-B TOOTHBRUSH AND INTERDENTAL PRODUCTS. WE PRODUCE FOR THE U.S. MARKET AS WELL AS FOR A PPROXIMA TEL Y 30 FOREIGN AFFILIATES. ADDITIONAL INFORMATION PROVIDED UPON REOUEST. DESCRIBE IN DETAIL TI-12E PROPOSED "PROJECT": (e.g. company relocation, plant expression, remodeling, new product line, refinancing, etc.). (If complete description attached, please summarize here). THE PROPOSED PROJECT WOULD BE A PLANT EXPANSION OF EXISTING FACILITIES FOR .56,000 SOUARE FEET. THIS EXPANSION WOULD BE USED TO HOUSE MANUFACTURING FACILITIES FOR A NEW TOOTHBRUStt PRODUCT LINE. OUR ESTIMATED CAPITAL EXPENDITURES ARE AS FOLLOWS. SERVICES' BUILDING. ANCILL. EOUIPMENT COMMENTS YEAR 1-1997 $2.5-$3.0 MIL. $1.O MIL $6.0-$8.0 MIL. NEW PRODUCTS YEAR 2-1998 $0..5 MIL. $12. 0-$16. 0 M'IL NEW PRODUCTS YEAR 1-1997 $10. O-$12.0M1L F~¥1STING PRODUCTS IT IS ESTIMATED TtlAT IVI71tlN TWO YEARS OF THE START OF TttlS PROJECT, THE IOWA CITY PLANT WILL CREATE 55 NEIVJOBS (45 HOURLY OR PRODUCTION JOBS AND I 0 SALARIED OR PROFESSIONAL POSITIONS). I~F ~¥PANSION FOR THE tVEI4/ PROD UCT LINE DOES NOT OCCUR IN TIfE IOWA CITY PLANT WE BELIEVE 40 POSITIONS MAY BE ELIMINATED OVER THE NEXT FEW YEAR$5 [ CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 11 WILL THE PROJECT INVOLVE A TRANSFER OF OPERATIONS OR JOBS FROM ANY OTHER IOWA FACILITY OR REPLACE OPERATIONS OR JOBS CURRENTLY BEING PROVIDED BY ANOTHER IOWA COMPANY? IF YES. PLEASE INDICATE THE FACILITY(S) AND/OR COMPANY(S) A~I-~CTED 10. WHAT PERCENTAGE OF COMPANY'S SALES WILL BE OUTSIDE OF THE STATE OF IOWA? THE ORAL-B IOWA CITY PLANTblANUFACTURES TO SUPPORT WORLDWIDE DISTRIBUTION OF ORAL-B TOOTHBRUSHES AND INTERDENTAL PRODUCTS. APPROXIMATELY 69% OF PRODUCTION DOLLAR VALUE IS SHIPPED WITHIN THE UNITED STATES WHILE 3 I% IS EXPORTED TO FOREIGN AFFILIATES. IT IS ESTIMA TED THAT 99% OF SALES WILL OCCUR OUTSIDE OF THE STATEOF IOWA. 11. DESCRIBE THE BUSINESS ANTICIPATED IN-STATE CUSTOMERS AND THE PRODUCT/SERVICE THAT WILL BE PROVIDED TO EACH. PLFASE REFER TO ITIL't,t NUMBER 8 ON CAPITAL EXPENDITURE ESTI~VMTES. INCLUDED IN THE EOUIPMENT ESTIMATES FOR NEW PRODUCTS WILL BE THE ' MANUFACTURE OF PROPRIETARY EOUIPMENT WH1Ctt COULD BE MANUFACTURED LOCALLY hV TtfE STATE OF IOWA BY MACHINE MANUFACTURERS AND TOOLSHOPS. 12. WHAT PERCENTAGE OF THE COMPANY'S TOTAL OPERATING EXPENDITURES INCLUDING WAGES AND SALARIES WILL BE SPENT WITHIN THE STATE OF IOWA. EXCLUDING COST OF RAW MATERIALS USED IN TIlE PRODUCTION PROCESS (WttlCtt REPRESENTS APPROXIMATELY 47% OF TOTAL PRODUCT COSD APPROXIMATELY 75% -85% OFALL OTHER OPERATING EXPENSES WILL BE SPENT IN TIlE STATE OF IOWA. APPROk7~VIATELY $1.3 MILLION IS SPENTANNUALLY FOR 10 WA BASED RA IV MA TERIA L VENDORS.. 13. WHAT DATE WILL THE PROJECT BEGIN? NOVEA4BER 1996. TARGET DATE BY END OF BE COMPLETED? TARGETDATE JULY 1997. 14. HAS ANY PART OF THE PROJECT BEEN STARTED ~X YES NO SOME PRELIMIAARY ENGINEERING WORK FOR SITE DEVELOPMENT, ESTIMATED CONSTRUCTION COSTS tlAVE BEGUN TO HELP IN THE DECISION MAKING PROCE, SS FOR EAiPANSION IN IOWA CITY I CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 12 15. HOW MAY EMPLOYEES ARE CURRENTLY EMPLOYED BY THE COMPANY? ( TOTAL EMPLOYMENT INCLUDING ALL LOCATIONS. SUBSIDIARIES. DIVISIONS. AFFILIATES, ETC. WORLDWIDE) THE GILLEITE COMPANY F3IPLOYS OVER 36.000 WORLDWIDE. THE ORAL-B IOWA CITY PLANT CURRE, VI'LY EMPLOYS 387 HOURLY E?vIPLOYEES AND 72 SALARIED ETv[PLOYEES. TOTAL 459. W THIS COMPANY HAS MORE THAN ONE IOWA CITY FACILITY, HOW MANY FULL TIME EMPLOYEES ARE THERE AT THE FACILITY AJ~I-~C'I~D BY THIS PROPOSAL? N.A. (GILLETI'E HAS NO OTHER FACILITIES IN IOWA) OTHER IOWA FACILITL~S7 LOCATIONS N.A. HOW MANY TOTAL INDIVIDUALS HAVE BEEN EMPLOYED BY THE COMPANY AT THESE FACILITIES DURING TffE PAST YEAR. N.__d. 16. IF AWARDED FUNDS, HOW MANY NEW, FULL TIME EMPLOYEES V(ILL YOU ADD TO THE PAYROLL WITHIN 12, AND 24, MONTHS OF THE AWARD DATE? THE BUSINESS ACKNOWLEDGES IY IT FAILS TO CREATE THE JOBS PLEDGED BELOW BY THE END OF THE PROJECT PERIOD (USUALLY 24 MONTHS FROM THE DATE OF THE CEBA AWARD), IT WILL REIMBURSE CEBA FUNDS FOR THE EMPLOYMENT SHORTFALL. THE PREPARER OF THIS APPLICATION SHOULD ENSURE THE BUSINESS IS AWARE OF THIS PROVISION BEFORE ASKING THE BUSINESS TO SIGN THE APPLICATION FORM. FULL TIME: PART TIME: 12 MONTHS 30 12 MONTHS N.A. CUMULATIVE CUMULATIVE FU1.L TIME: PART TIME: 24 MONTHS 55 24 MONTHS N.A. CUMULATIVE CUMULATIVE 17. WHAT IS THE ESTIMATED ANqqUAL PAYROLL FOR THE NEW EMPLOYEES RESULTING FROM THIS PROJECT? YEAR I $ 890,000 YEAR 2 $1,450,000 I CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 13 18. WHAT IS TI-JE STARTING AVERAGE HOURLY WAGE RATE(NOT INCLUDING F'RINGE BENEl- rlS) PROJECTED TO BE FOR THE NEW EMPLOYEES? $,12.65 FOR EXISTING EMPLOYEES $14.11 (REPRESENTS CURRENT AVERAGE WAGE RATE) LIST OF POSITIONS AND HOURLY RATES FOR EACH JOB CLASSnelCATION TO BE CREATED AND RETAINED. SEE NF_Y'F PAGE. AN ~PLE IS TYPED IN THE FIR.ST LINE HOW MANY OF THE BUSINESS' CURRENT EMPLOYEES ARE EARNING AN HOURLY WAGE, EXCLUDING FRINGE BENEFITS, OF AT LEAST THE COUNTY THRESHOLD WAGE? 100% (JOHNSON COUNTY THRESHOLD IS $7.91 PER HOUR) (CONTACT A CEBA PROJECT MANAGER AT IDED FOR CURRENT FIGURES) CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE "14 18, Cont. LIST OF POSITIONS AND HOURLY RATE FOR CREATED AND RETAINED POSITIONS (Use Addtional Sheets if Needed) No. Hours .. Create Retain Postion Title Per Week Hourly Rate of Pay ¥~P.. £ -- ~0 Io [ CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 15 19. WILL ANY OF THE CURRENT EMY'LOYEES LOSE THEIR JOBS IF THE PROJECT DOES NOT PROCEED? X YES NO POTENTMLLY 20. IF YES. HOW MANY 40 EXPLAIN WHY: IF TIlE CORPORA TlON DECIDES TO HA VE THE NEW PRODUCT LINE MANUFACTURED ATANOTHER KYIST1NG G1LLE7TE FACILITY, IT IS E. YPECTED THAT E)fIST1NG PRODUCT LINE BUSINESS WILL DECLINE AS THE NEW PRODUCT LINE CANNIBALIZES THE OLD. ADDITIONALLY 1T IS EXPECTED THAT COST REDUCTION PROJECTS TO FURTHER AUTOMATE THE PROCESSES OF EXISTING BUSINESS COULD LEAD TO A DECLINE IN THE WORKFORCE. 21. WHAT IOWA COMPANIES DO YOU EXPECT TO SELL TO WHICH CURRENTLY BUY FROM NON-IOWA COMPANIES? WHAT PERCENTAGE OF YOUR SALES WILL FALL INTO THIS CATEGORY. N.A. SEEITEM 10 22. WHAT OTHER IOWA COMPANIES COULD BE CONSIDERED TO BE YOUR COMPETITORS? PROCTER & GA3dBLE 23. HOW WILL THIS PROJECT BENEFIT THE CITY/COUNTY. ETC. THE 101VA CITY PLANT ,EXPANSION WILL CREATE NEW JOBS AND PROVIDE TECltNICAL AND MECItANICAL TRAINING FOR NEW AND rEXISTING EMPLOYEES. TIfE PROdECT IVILL ALSO INCREASE TIlE T/LY BASE AND PAYROLL INCOIffE INTO TIlE 10IVA CITY ECONOlffY. I CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 16 I 24. IN WHAT FORM IS THE BUSINESS CONTRIBUTION TO THE PROJECT?. PLEASE EXPLAIN CLEARLY. CORPORA TE APPROPRL4TlON FINANCED BY 7FIE GILLETTE COMPANY. 25. IDENTIFY ALL AGENCIES OR INSTITUTIONS INVOLVED IN THE PROJECT, AND WHAT THEI~ INVOLVEMENT IS: IOWA CITY AREA DEVELOPMENT GROUP- ASSISTING IN OBTAINING STA TE AID MID ABdERICAN ENERGY - $270.300 RATE REDUCTION SAVINGS OVER A FIVE YEAR t'IzRIOD BASED ON PROdECTED DEMAND OF NEW LOAD IOWA CITY - SPONSORSHIP OF PROJECT; -1NDUSTRL4L PROPERTY TAX EXF_bIPTION (5 YEARS) - $172.000 -FORGIVABLE LOAN - $40,000 KIRK WOOD COkI7ffUN1TY COLLEGE - $197. 000 dOBS TRAINING PROGRAM' CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 17 26 USE OF FUNDS SUMMARY OF PROJECT COSTS AND PROPOSED FINANCING SOURCES ACTIVITY COST 1. LAND ACQUISITION 2 SITE PREPARATION $343.000 343.000 3. BUILDING ACQUISITION 4. BUILDING CONSTRUCTION $3.527.000 150.000 3.337.000 40.000 5. BUILDING REMODELING 6 MACHINERY & EQUIPMENT $25.895.000 25.895.000 7 FURNITURE 8, FIXTURES 8. PERMANENT WORKING CAPITAL detail SOURCES (SUMMARIZE ALL SOURCES FROM QUESTION 27) SOURCEA SOURCE B SOURCEC SOURCE D SOURCE E SOURCEF 9 OTHER: $172.000 172.000 10. OTHER $1 97.000 $270.300 TOTAL $30,404.300 $150,000 $29.575,000 $40,000 $172,000 27 TERMS OF PROPOSED FINANCING CODE SOURCE (INCLUDE ALL SOURCES IN QUEST 26) SOURCE A' STATE ASSISTED (CEBA) SOURCE B' GILLETTE COMPANY SOURCE C. CITY OF IOWA CITY SOURCE D: CITY OF IOWA CITY SOURCE E: KIRKWOOD COMMUNITY COLLEGE SOURCE F' MID AMERICAN ]TOTAL AMOUNT $150,000 $29.575.000 $40.000 $172.000 $197,000 $270.300 $30,404.300 197.000 270.300 $197.000 $270.300 TYPE RATE TERM FORGIVABLE LOAN I FORGIVABLE LOAN PROPERTY TAX RELIEF - 5 YRS JOBS TRAINING RATE REDUCTION SAVINGS-5 YRS ICEBA 29. 30. APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 18 EXPLAIN WHY ASSISTANCE IS NEEDED FROM THE STATE. AND WHY IT CANNOT BE OBTAINED ELSEWHERE. SPECIFIC SUPPORTING DOCUMENTATION EVIDENCED BY CASH FLOW STATEMENTS. INCOME STATEMENT, ETC. IS REQUESTED. THE GILLEUFE COMPANY HAS OTItER ALTERNATIVES IN TERMS OF EXISTING ~L4NUFACTURING SITES WITIfhV THE U.S.I.E. WISCONSIN. MINNESOTA, OR lvlASSA CttUSETTS AND MEXICO WHICH WOULD NOT REOU1RE ~VEW BUILDIMG CONSTRUCTION. ADDITIONALLY WE HAVE A SISTER TOOTHBRUStI MMNUFACTURING OPERATIONS IN IRELAND ALSO COMPETING FOR THIS BUSINES~ IT IS IMPORTANT TltAT IOWA CITY PUT TOGETHER THE BEST FINANCIAL OUTLOOK FOR THIS PROJECT VERSUS TIlE OPTION OF EXPANDING ELSEWHERE. EXPLAIN THE NEED FOR SPECIFIC TYPE OF ASSISTANCE(LOCATIONAL OR FINANCIAL OR RATE OF RETURN). CAN CONVENTIONAL FINANCING BE OBTAINED FOR ALL PROJECT COSTS? IF CEBA PROVIDED A MARKET RA'I'I~ LOAN COULD THE PROJECT PROCEED? LOW OR NO IN'ff6REST LOAN? IF NOT, WHY NOT? THE ORAL-B IOWA CITY PI~4NT IS REOUESTING A FORGIVABLE LOAN. AS REFERENCED IN ITEM 28 IVE MUST PRESENT TIlE BEST FINANCIAL PACKAGE TO INSURE THE EXPANSION IS DONE IN IOWA CITY AND NOT IN ANOTHER GILLETTE FACILITY. AN EO(PANSION WOULD BE. A SIGNIFICANT INVESTMENT FINANCED BY GILLW1TE, THEREFORE A FORGIVABLE LOAN IS THE ONLY FORM OF STATE AND LOCAL ASSISTANCE REOUESTED. ANY RECIPIENT OF CEBA FUNDS IS EXPECTED TO PROVIDE SECURITY TO THE STATE. THE SECURITY WILL BE EXERCISED, WHEN NECESSARY, DUE TO NON- PERFORMANCE AND/OR NON PAYMENT ON THE PART OF THE BUSINESS. IN ADDITION TO A LIEN AND/OR MORTGAGE. PERSONAL GUARANTEES ARE EXPECTED FOR BUSINESSES NOT PUBLICLY TRADED, AND CORPORATE GUARANTEES ARE EXPECTED WHEN THE BUSINESS RECEPIENT HAS A PARENT (OR HOLDING) COMPANY. PLEASE CHECK BELOW THE SECURITY OFFERED IN THIS PROJECT. MORTGAGE LIEN ON PERSONAL GUARANTI~E CORPORATE GUARANTEE $150,000 OTHER WHAT SENIORITY OR POSITION WHAT SENIORITY OR POSITION TIlE IOWA CITY PLANT WILL REOUESTA CORPORATE GUARANTEE IF THIS PROJECT IS APPROVED BY GILLETTE.. IF ADEQUATE SECURITY IS NOT Oi~tq::ILED, THE STATE MAY REQUIRE TH2E BUSINESS TO DEMONSTRATE PERFORMANCE(E G. JOB CREATION, INVESTMENT, ETC.) PRIOR TO RELEASE OF CEBA FUNDS). CEBA 31 APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 19 I GENERALLY A DECISION BY THE DEPARTMENT OF ECONOMIC DEVELOPMENT ON THIS APPLICATION CAN BE EXPECTED WITHIN 30 DAYS OF RECEIPT OF THE APPLICATION. IS THERE AN URGENT NEED FOR A MORE IMMEDIATE DECISION (I.E. I-2 WEEKS ONTHIS APPLICATION}? YES ,VO X PENDING STATE AND GILLETTE APPROVAL. WE WOULD START CONSTRUCTION BY 12/17/96 32. DOES THE BUSINESS CERTIFY THAT HIRING PREFERENCE WILL BE MADE TO IOWA RESIDENTS? YES X- NO 33. DOES THE BUSINESS CER'rI~-Y THAT I,II}LING PREFERENCE WILL BE MADE TO FORMER EMPLOYEES OF ANY BUSINESS MERGED OR ACQUIRED BY THE COMPANY WITI-ffN THE LAST THREE YEARS7 YES NO NOTAPPLICABLE (NONE ACOUIRED) 34. DOES THE BUSINESS CER I'1i-Y THAT AT LEAST TEN(I 0%) PERCENT OF THE POSITIONS TO BE CREATED WILL BE MADE AVAILABLE TO QUALIFIED PROMISE JOB PARTICYPANTS? YES X NO 35. HAS THE BUSINESS BEEN CITED OR CONVICTED FOR VIOLATIONS OF ANY FEDERAL OR STATE LAWS OR REGULATIONS WITHIN THE LAST FIVE YEARS ( INCLUDING ENVIRONMENT,6& OR SAFETY REGULATIONS)? YES _X NO IF YES PLEASE EXPLAIN THE CIRCUMSTANCES OF THE VIOLATIONS. CITED FOR MINOR SAFETT ~OL/tTION BY lOSHA DURING ROUTINE' INSPECTION IN 3/96. (INA DEOU,'I TE ]d~ CttLVE GUARDING - $650 FINE PAID. SITUATION WAS IMMEDI/I TEL Y CORRECTED). 36 WILL YOUR BUSINESS BE UTILIZING, OR BE LOCATED ON PROPERTY ON WHICH IS I.OCATED, UNDERGROUND TANKS (WHETHER OR NOT IN CURRENT USE) FOR THE s'rORAGE OF PETROLEUM PRODUCTS, AGRICULTURAL OR OTHER CHEMICALS, WASTE OIL OR OTHER LIQULD WASTE, OR ANY OTHER INFLAMMABLE. CORROSIVE. REACTIVE, OR EXPLOSIVE LIQUID OR GAS? YES NO X IF YES PLEASE SPECIFY. 37 WILL YOU BE STORING ABOVE GROUND ON OR ABOUT YOUR BUSINESS PREMISES, 1N TANKS OR OTHERWISE. FOR ANY LENGTH OF TIME OR FOR ANY PURPOSE, ANY LIQUID OR GAS INCLUDED IN QUESTION 36 ABOVE. OR ANY INFLAIvIMABLE. CORROSIVE, REACTIVE OR EXPLOSIVE SOLLD, EXCLUDING ORDINARY REFUSE? YES NO X-- IF YES PLEASE SPECIFY ] CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 20 38. WILL YOU BE TREATING, TRANSPORTING OR DISPOSING OF ANY LIQUID, GAS. OR SOLID INCLUDED iN QUESTIONS 36 OR. 37 ALCOVE. EITHER ON OR ABOUT YOUR BUSINESS PREMISES OR A T A LANDFILL OR OTHER TREATMENT FACILITY, OR UPON ANY PUBLIC STREET OR HIGHWAY, OR ANY WATERWAY OR BODY OF WATER. OR IN ANY AIRCRAFT7 YES NO X IF YES PLEASE SPECIFY THE SUBSTANCE AND WHAT YOU WILL BE DOING WITH IT. 39. 40 41. 42. IF THE BUSINESS GENERATES SOLID OR HAZARDOUS WASTE, IT IS REQUIRED TO SUBMIT AN AUDIT AND MANAGEMENT PLAN TO REDUCE THE AMOUNT OF THE WASTE AND TO SAFELY DISPOSE OF THE WASTE. FOR THE PURPOSES OF MEETING THIS REQUIREMENT, THE BUSINESS IN LIEU OF PROVIDING IN- HOUSE AUDITS, MAY SUBMIT AUDITS COMPLETED BY EITHER THE WASTE MANAGEMENT AUTHORITY OF THE DEPARTMENT OF NATURAL RESOURCES OR THE IOWA WASTE REDUCTION CENTER AT THE UNIVERSITY OF NORTHERN IOWA. IF AN AUDIT AND MANAGEMENT PLAN IS NOT SUBIVII'I'I ~D, THE DEPARTMENT SHALL NOT PROVIDE ASSISTANCE UN'I'LL IT IS SUBMA ORAL-B LABORATORIES. IOWA CITY PLANT POSSESSES AN UNBLEMISHED RECORD OF ENVIRONMENTAL AND SOLID WASTE MANAGE3dEN~. THIS PLANT HAS NEVER BEEN CITED FOR ENVIRONMENTAL VIOLATIONS. OUR PRODUCTION OPERATIONS USES NO MA TERL4LS IN OUR PRODUCTS TttAT GENEP, ATE HAZARDOUS' BYPRODUCTS OR WASTES WE ttAVE ONE ~L4TERIAL USED IN THE CLEANING PROCESS WHICH IS CONSIDERED tfAZARDOUS WASTE AND IS DISPOSED OF BY A LICENSED AND CERTIFIED DISPOSAL FACIIJTY. THE METttOD OF DISPOSAL FOR Tills MATERIAL IS FUEL BLENDING. IV/:.' CURRENTLY RECYCLE I00% OF OUR CORRUGATED MAIZ'RIALSAND ARE WORKING WITH KIRKWOOD ON A PLAN TO RECYCLE 100% OF OUR PLASTIC WASTE CURRENTI, Y GREATER TtIAN 80% OF OUR GENERATED SOLID WASTF IS RECYCLED. WE ARE ACTIVELY PURSUING OTttER RECYCLING AND WASTIx'_ ELIMINATION OPPORTUNITIES. AN IlvTERNAL ENVIRONMENTAL AUDIT WILL BE PERJCOPa~IED AT Tills LOCATION IN THE IST OR 2ND OUARTER OF 1997. RESULTS WILL BE PROVIDED AS NECESSARY WILL ANY PART OF THE PROJECT TAKE PLACE IN A 100 YEAR FLOOD PLAIN? YES NO X DOES THE BUSINESS PROVIDE AT LEAST 80% OF STANDARD MEDICAL AND DENTAL INSURANCE FOR FULL TIME EMPLOYEES7 YES X_. NO DOES THE COMMUNITY HAVE A COMMUNITY BUILDER PROGRAM IN PLACE? YEs x NO ICEBA 43. N.A. X X X X X APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 21 REQUIRED ATFACHMENTS. CHECK OFF EACH ONE SUBMTI-I'k_.D. IF NOT SUBM11 I t:D, EXPLAIN WHY IT IS NOT SUBMI 1'1 k.D. COMMUNITY RESOLUTION AUTHORIZING THE APPLICATION (ATTACHMENT A) BUSINESS PLAN (IF NEW BUSINESS) (ATTACHMENT B) PROFIT AND LOSS STATEMENTS (3 YEAR HISTORICAL AND 2 YEAR PROJECTIONS) (ATTACHMENT C) BALANCE SHEET (3 YEAR HISTORICAL AND 2 YEAR PROJECTIONS INCLUDING AGED ACCOLINTS RECEIVABLE SCHEDULE, AGED ACCOUNWS PAYABLE SCHEDULE AND A SCHEDULE OF OTHER DEBTS) (ATrACHIMENT D) LE 1'1 gRS OF COMMITMENT OF PROJECT FUNDS, (FROM BANKS, .M~PLICANTS, ETC.). (ATTACHMENT E) DESCRIPTION OF FRINGE BENEFITS PROVIDED TO EMPI.OYEES (ATTACHMENT COPIES OF COMPANIES QUARTERLY IOWA "EMPLOYER'S CONTRiBLrrION AND PAYROLL REPORT'' FOR THE PAST YEAR AND A COPY OF THE MOST RECENT MONTHLY PAYROLl. REGISTER (ATTACHMENT G). MAP INDICATING THE. LOCATION OF THE PROJECT. (A~FACHMENT H) ATI'ACH COST ESTIMATES FOR CONSTRUCTION, MACHINERY AND EQUIPMENT, PERMANENT WORKING CAPITAL AND PURCHASES. (A'~FACHNIENT I) X X X CERTIFICATE OF GOOD STANDING FROM 'FILE IOWA SECRETARY OF STATE OR AN AUTHORIZATION TO CONDUCT BUSINESS IN IOWA (A'I'I'ACHMENT J) CERTIFICATE OF INCUMBENCY LISTING THE CURRENT BOARD OF DIR. ECTORS AND CURRENT OFFICERS IF A CORPORATION OR A LISTING OF THE GENERAL PARTNERS IF A PARTNERSHIP. (ATTACHMENT K) CORPORATE RESOLUTION AUTHORIZING THE APPLICATION FOR CEBA FUNDS. (ATTACHNIENT L) CORPORATE SIGNATORY AUTHORIZATION NAMING AN OFFICER TO EXECUTE THE CEBA APPLICATION AND CEBA LOAN DOCUMENTS, IF APPROVED. (ATTACHMENT M). [CEBA APPLICATION FOR BUSINESS FINANCIAL ASSISTANCE PAGE 22 44. EXPLANATIONS/OTHER COIVIMENTS: ATTACtfMENT A - RESOLUTION WILL BE FORWARDED AFTER IOWA CITY COUNCIL CONSIDERATION (AFTER NO .VEMBER 4. 1996) A 7'FACttMEtVT B - N.A. AS THIS IS NOT A NEW BO~INESS ATTACHMENT C & D - PROVIDED 1S A COPY OF THE 1995 ANNUAL REPORT FOR THE GILLETTE COMPANY. THIS DOCUMENT PROVIDES FINANCIAL INFOI~_ATION FOR THE LAST THREE YEARS (PAGES 28 - 30) AS WELL AS SUMMARY 1NFORA4A TlON OVER THE LAST TEN YEARS (PAGES 42.43). THE G1LLE7~E COMPANY HAS A SOLID FINANCIAL BACKGROUND AS EVIDENCED BY ITS CURRENT LONG. TERM CREDIT RATING BY STANDARD & POORSAA-; MOODY- AA3. ATTACTqMENT E- THE IOWA CITY PLANT EXPANSION IS CURRENTLY UNDER REVIEW BY THE GILLETTE COMPANY'S CORPORATE HEADQUARTERS. GILLETTE WILL A U'I'HOR1ZE A CORPORATE APPROPRIATION TO FUND IF THE PROJECT IS APPROVED. A COPY OF THIS FOI~IAL COA,tMITMENT BY GILLETTE WILL BE FORWARDED TO TltE STATE IF THE PROJECT IS APPROVED BY GILLETTE. ATTACHMENT G - A THIRD PART TAX SERVICE PREPARES THE EMPLOYER 'S CONTRIBUTION AND PAYROLL REPORT FORTtIE IOWA CITY PLAN~ THERE IS A GLITCH IN THE SYSTEbl AND IT IS REPORTING INCORRECT LABOR MARKET INFORMATION. THE SUBSEQUENT PAGE bDR EACH QUARTER ttAS TttE CORRECT NUMBER OF EMPLOYEES FOR 77tE IOWA CITY PLANT. ATTACItMENT 1 - PLEASE NOTE TttE GILLEITE COMPANY PROVIDES THE IOWA ClIT PLANT WITH ANY REQUIRED WORKING CAPITAL. PROdECTIONS OF WORKING CAPITA L REQUIREMEtVTS ARE INCLUDED IN THE APPROPRIATION REQUEST TO GILLETTE. ATFACltMENT d - LETTER TO SECRETARY OF STATE REQUESTING CERT1FICA TE OF GOOD STANDING IS INCLUDED. ATTACIIMENT K - PLEASE SEE ANNUAL REPORT PROVIDED( PAGE 46, 47). 0C?-30-36 WED 2:33 O~b~ 3o. 1996 OralB Lower Musc~iine Roed Iowa City, Iowa $2240 De~r Mr. Coli~: This lcttcr is in~nded to describe tile job t~__i~i,$ progr*m, end financial inoengves available ti~ouSh Kkkwood Community College that arc a~glable to s~ppan Oral B. Kifk,~ood is a comprehensiv~ commamiry colle~ offering 65 vocational mchnical prepares. Spcclallzed train8 programs in instrumentation and process conlrol, just-in-time, industrial fir~ l~ipde, l~_.--,'do~ maIwmls harm& stafisu'¢al proc~a eonuol, ~omput~ aided parti~ip~lory m~a$~aen~, i~iu.slgal ~e~ welding, and foridifi safety operation ar~ also aveil~bl¢. All oftbcsc prolp'ems c~n be cuslo~_~.~l to bo ~mpe~. ~ proc~sa employ~ spoolrio and ca~ b~ del~red on ~ite at an~ tim~ of the day. We are prepared to offer Oral B the full scrvicc~ oflarkwood Community College Workplace Development Services staff to prepare a customized traizi~ prosram to meet the specific training n~:Is of your workfor~. We will be pleas~ to conduct ~u~ ~omprchc~sive job ll~ninl~ n~xls ~ ~md any e,~ploy~ skill ~k~ssm~ut n~,oasaO' to d~velop tbe prosram, Funding a,~istanco is available to Oral B i~ough the Iowa Industrial New ~obs Training p£os~-nm (260 E). This innovative job refining program was catabllshed elcv~a 10~ra ~o by the Iowa Lc~ature and has dLstn'buted over 150 million dollars ~o over 600 businea~c~ thal have cith~ expanded or located in Iowa, n~ulting i~ the ~-~ation of over 47.000 new jobs. Each conmsct is funded by the eel· of~a~ exempt and/or rexable ccrfific~tes end rcpeid over 10 years throush the div~on of prol~rt~ Us.xes f~om the i~c~eased value of buildInS, machine7 and ~:tuipment, and/or employe~ sLelc withh01dinE ~. Ther~ is vo ~ expen~ to thz company. Kirkwo~ Communily College 6301 K]rkv,~ Blvd. SW · P.O. Bc~x 2068* C. ed~r Rapids, IA 52406· Phaee: 319/398-5623 0C?-30-36 ~KD Z33 PX ~¢ prepare~ ~ pr~c~on ~or your proj~'~ ~n 1~6 t~ W'0iild ~!~lil! ifil ~5~ i~lt ~ 5{ $27~,000.00 with a net ~r$ itmd available of $197,000.00. I have ~ttacbed the spreadgaeet tooumemin8 that pmjectio~ Our assm~tom were based on your hitins 45 new e~ploy~s at an average rat~ ofowr $10.00 l~r hour ~d 10 new employees at sn averas~ mt~ of Within the limits of the available ~ tl~ u~,t~ dolLsn can be used to pay I~y direct training ~ mw, h u imlmaioml dc,~lopmcat, ~tAoyee pre-scre,~-~ ~.~ ~ costs; instructor salaxic~, t~a,~l and ~ employee uawJ md hough8 {apmse$, either domesrio or imemalio:~ trai~s maIerM$ and equipmere. Up to ~0'/~ of the ~ dollan nmy also be used to pzy up to ~0~ of the ~w employees $ro,, wages ibr ~ reaaonable on-the-job ~ 10~riod. l~h~mi~l ~ may also be m~ilsbl~ fl'lrouBh ~'m D~ocatmd Work~ C.~nt~r md ~h~ local ITPA ot~. Apr 'elunin~ oo.u'aa is & non-bi~dln~ ~em. The only financial oblivion commlttcd to by thc co'~p~ay is p~n~m of our lcsal ~ in pr=pari~ thc contraa if they choose not to So to a ~ coattact for some reason. This amounts to oxgy scvcral hundred dollars. A prellmtl~ co~.c~ sc~s ~c official s~r~8 dat~ off the proj~ ~ eligible ~ ca~ b~ rcimbur~d back io tl~ d_._~ or,he ~ conlr~ re~a~le~ ofwh~ te f~l co~raa is approved and t~ bomt salcs proceeds re~iv~d. A p~i,,~y alp~'mea caa r_e,~i- ia forc~ for an indefinite pm'iod of time. I ~v~ attached an il~ormation sheet descnqinS bow the program work$ and what constitut~ ~ eligible trai~$ cxpeme. Kirkwood hal established a strol!g record of effeclive job trahfu~ programs, and we look forward to working with Oral B to e~mre the sucem,~ ~rt up of your proposed new facility. If you bavc any qucslio~ or ueed my addilional inform,ion, please feel ~ee to call me at 319-398-5623. Sincerel~,~ , Ion OMn~~ Bx~cutiv~ Director Workplace Developmere 10/30/% MidAmerican lllllIGy 106 Eael Sated $V,~,~. P O. BICm 43S0 October 30, 1996 Mr. Bill D~tofano, Controller Oral-R Laboratori~. Iowa City PI~I 1832 Lower Mur~0,ino Rooxl Iowa City, IA 52240 Dear Bill: Wc'm pleased to learn Oral-B is considering expanding the Iowa City PlanL It's been out privilege to have the Plant a~ a customer for many years. Now, we want to do our part in h~lping you g~n corporate suplron for tiao oxp~asion of this Plan[ To this cnd, wc will d0vclop a fivc-ycar reduced ratc on thc incre, osod electric lead duc to thc expansion. Itas~ on lead information supplicd our John Fuelling, Etlergy Consultant ill our Iowa City office, by your Ron ]::re'r, w~ estimate the redu~cl rat~ will give Ortt!*]B a $270,300 savings from cun~nt ratc~ over the five year period. John F. will work out th~ details with your plant cnginccrin8 associatc~. Please us¢ this as our letter of comml!m,nt in your CEllA AppJlcation.. We look forward to working with you as this pmj ,e. ct movc,$ forward. If you have any questions, plcas~ do not hesitate to ~al] John F. at 341-4439 or me at (319)-333-8810 Economic Development Consultant c: John Fuelling David $¢hoon Marty Kelly * 13 Paid Holidays - paid a~er probationary period - mu~ work Re day before/day after * ' Paid Vacation week ai~er I year weeks a.~er 3 years wee~ al%r 9 years weeks ~er 15 years weeks a.~er 20 years Formally scheduled in Dew, ember each year Shutdown - generally taken around the July 4th & 5th holidays Taken in full week increments Insurance - effective two calendar months alter date of hire. Life Insurance - Company paid $28,000 term - all employeez Short Term Disability - Company paid 65% of gross weekly wages - $250/week maximum Maximum of 13 week~ paid per disability One week waiting period I~surance Cont'd. Medical and Dental - Employee eontribut~ weekly as follows: 8in~e- $2.50 Employee and one or more dependent children- $3:75 Employee and spouse (with or without children) - $7.00 Dental coverage: Twice a year - routine check-up, dearting, x-rays, fluoride paid Restorative treatment - some paid at 80%, some at 50% after $50 deductible per year $1,000 maximum per year Orthodontia for dependents under 19 years Medical coverage: Heritage National Healthplan Preventive coverage - scheduled physicals Non-routine care coverage Must see a participating provider $10 co-payment for doctor's office visits $100 co-payment for overnight stay at hospital $100 co-payment for surgeon if in-patient surgery $5/$10 co-payment on prescriptions $10 co-payment for chiropractic Paid in full - outpatient surgical outpatient physical therapy (up to 60 visits per disability), emergency ambulance services Gillette Savings Plan Eligible to join after probationary period Can set aside 2 to 15% of earnings into 8 dlfterent options First 10°4, company matches $.$0 on the dollar HaEofthe fir~ 10% is pretaxed set-aside, h~d_Fis after taxes Last 5% is unmatched, and employee has the option ofpre- or after taxe4 Managed by Fidelity Investments out of Boston, MA Perfect Attendance Eligible for program in the first full calendar quarter you are employed For every quarter you ~re here with no absences, you receive 8 hour~ pay Sick Pay Provision Ma0dmum of 20 hours of sick pay per year, based on hours worked the prior year Must call into the plant to report your illness prior to the start of the shift Any unused sick pay is paid to you after the first ofeach new year Paid Pension Plan Coverage effective after $ years of service Nonnai retirement age- 65 $23.25 per month per year of service as of I/1/96 Can retire as early as age 55 with a reduction in benefit Other Thlm;s that we Offer Coverage for Jury Duty Paid and Unpaid Bereavement Leaves of Absence Active Trfilning Duty Coverage Employee Brush Purchasing Company Picnic every two years Attachment G Copy of the Most Recent Monthly Payroll Register The company has requested that its most recent monthly payroll register be kept confidential in order to protect the privacy of each of its individual employees. The iowa Department of Economic Development treats the business's payroll register as confidential and withholds it from public disclosure. The City will follow that policy and will not disclose it to the public unless ordered by a court, the lawful custodian of the record, or by another person duly authorized to release the information. Note: Available in the Joint ,4pp//cation for Financial Assistance: City of Iowa City and Community Econorr~ic Betterment Account Funding is a listing of pay ranges for salaried and hourly positions. Eraplayer's Contribution & Payroll Report 65-5300 ( 12- 93) Page __ of Payment Computation 1 ?ot8~ wages (A{~ Pages) .............................. 2 Taxable Wages (All Pages) ............ 3 Conldbul;On Due (.era 2 x .0030) ......................... 4 Surcharge Due (Item 2 X .0005) ..................... 5. Tote{ lines 3 and 4 ...................................... 6. Interea! Due (See Instrucl~ons) ...................... 7. Penalty Due (See Insltuctions) ...................... 8. ]'oral Due (items 5. 6 and 7} ............... 9. Amount Due from Previous Querier ............. 10 Credml Due tram Previous Quartet ................ 11. Amounl Prod ...................................... (Make chock payable to Job Service of Iowa 4,239,656.97 2,304,142.9~ 6, 912.43 1, 152.07 8. 064 . 50 8,064.50 0.00 0.00 8,064.50 202583-1 Apr-May-Jun 1996 $14,700 .30% 94-3033824 07-31-96 Em~oy~ Name & Add,e~ ORAL-B LBTRS DIV.OF GILLETTE C ON[ GILLETTE PARK SOUTH BOSTON MA 02127-1096 2-96 .0S% Payroll Listing 14. Check ,l payroll reporting is by: [] magnet,c tape [] cartridge ~diske,e 15. SacleT Security Number 16. Last Name Firel Name MI 17. Total Wage Paid 18. Taxable Wages Pe,d 19. Total For This Page Labor Market Information .,~h~.$,~ ,a~ ~ ~0~ ~,, o,,~ ~..~ 1056 1080 1108 au~leee~Tele~hone 714 963-1311 O.,e 07/2Q./96 9:02 07120196 54849-05 in Fact 9TSG 'j7775 1~c GJ. ller~e of [;04 Payment Computation 1. Tom; Wages (,All Pages) ................................ 2. Taxable Wage~ (All Pages) ............................ 3. C0tltrlbutlon Due Otem 2X · Dr'130) ......................... 4. ~Jrche~ge Duo ptsm 2 X .BOOS) .......................... 5. 'lotel lines 3 and 4 ...................................... 8. Int~'est Due (~ Instructions) ...................... 7. Penalty Due (Se~ InSlruetions) ..................... 8. Tot~ Due(items 5. 6 and 7) ........................ 9. Amount Due from Previous Quarter .......... 10. Credit Due from Previo. us Q~Jarl~r ................ 11. Amount Paid ................................................ (Make check payable to Job Sen,iCe of Iowa (If no wages Ibis quaAOt. see inffiru~0n~ 4,086,948.79 3~853,393.05 11,560.18 1,926.70 13,486.88 13,486.88 0.00 0.00 13,486.88 202583-1 Jan-F~b-Mar 1-96 1996 $14,700 94-3033824 04~30-96 Employ~ Neme& ORAL-B LBTRS DIV.OF GILLETTE C ONE GILLETTE PARK BOSTO~ MA 02~27-1D~6 Payroll Listing 14. Check It pay~ofi ~eporbngis by. [] megnel, c tape [] cartridge [] dlsk0lle 15. Social Secur;ly Number 18. Last Name Firs1 Name MI 17. Total Wage Paid 18. Taxable Wages Paid (WAGE8 ON TAP~) Labor Market Information c.,,..~.. 1540 I' 19 TOtal For This Page 1540 1043 e,~,.,,?~.~,, 714 963-1311 ?:49 04/211~6 STS/At torne~ in Fact STaG J0~$3 Employer'a Contribution & Payroll Report - 65-5300 (12-93) Page N0.056 [TPJ] Payment Computation 1. Total Wagea (All Pages) ................................ 2. Taxable Wages (.~11 Pages) ........................... 3. Contrlhu[(on (l~m 2X ,B~lq0) ........................... 4. Surcharge Due {11e~n 2 X .0005) .......................... $. Total lines 3and 4 .......................................... 6. Interest Due (See In~-uctions) ...................... 7. Penalby Oue {~ee J~Istmctiofi8) ...................... ." Total Due (items 5, 6 and 7) .......................... g. Amount Due from Previous Quarte~ ............. '10. Credit Due from Previous Quarte~ ................ 11. ,Nnount Paid .................................................. (Make check payabra to Job SaUce of Iowa (1! no wages this quarter. see insttuc~a) 4,349,407.79 545,403.52 1,636.21 272.70 733.97 ?23.97 O.OO 1,174.94 733.97 202583-1 Oct-Nov-Dec 1995 $14.200 .30% 94-30~3824 01-3t-96 Emp~er Na~e & Add~e~ ORAL'B LBTRS DIV,OF GILLETTE ONE GILLETTE PARK BOSTON ¢ MA 02127- 1096 Payroll Listing 14. Check l_f payroll reporting ls by: [~ ma~etlcta,oe 15. ~ociN E, ecurlty Number 1§. Last N~'ne First Name 0 cart~dge 0 olskette 17. Total Wage Paid 18. Taxable Wages P~ (WAGES ON TAPE) 19. Total For This Page LabOr Market Information ~,~-- loll 964 1011 963-1311 12~07 01121196 O4~g~G ?.ot~ Ou~'te:rly Magea · °L GILLETTE FINL SU£B ?K ~ ~193569165 Eraplayer's Contribution & Payroll Report - 65-5300 (12-93) ~:0.0S6 gO~ Page of Payment Computation 1. Total Wages (All Pages) ....................... $ 2. Taxable Wages (All Pages) ............................ 3. Conlribulion Due (Item 2X .0030) ...........................$ 4. ~drcharge Due - (~tem ~X .OgOS) .........................$ 5. Total lima 3 snd 4 ..........................................$ 8. Intere~l I~Je (~6~ leatractions) ..................... $ ?. Penalty Due (~ Inetructions) ...................... $ 8. Total Due (Items 5. 6 and 7) .......................... 9. AmOUnt Due from Prav~,oue QuaJ'ter ............. 10. Credit Due from Previous Quaxte~ ................ 11. Amount Ps~d.. ................................................ (Make check payable to Job Service of (If no wsges this quarter. see instruction3) 3,735,744.34 400,059.28 1,200.i8 200.03 -257.82 0.00 1,658.03 -257.82 2025&3-1 Jul-Aug-Sep 3-95 1995 ~14,200 .30~. 94-303~24 10-31-95 Employ~ Name & Addteaa ORAL-B LBTR~ DIV.OF G~LLETTE C ONE GILLETTE PARK BOSTON ~A 02127~1096 Payroll ListInB 14. CI'~C.N i1 payroll reporbng is by: (:~ magnetic tape 15. SOcial Security Number 16. Last Name Fi,st Nsme MI r-1 dWkslle 17. Tolat Wage Pelcl 18. Taxable Wages Paid (WAGES ON TAPE) 19. Total FO~ 'Thin Page L~lbor Market Information · ',~ 960 960 923 -- 714 963-1311 1:25 10124195 $TS/At[orney in Fact 10/24/95 $4849.05 $TSG ji§87 F~le ~4~ 2~ 245 Kale 3.5~ 160 1~1 EQUIPMENT COST ESTIMATE NEW PRODUCT TOOTHBRUSH FACILITY: PNEUMATIC COMPRESSOR VACUUM SYST .EM RESIN FEEDING SYSTEM IN-PROCESS DATA COLLECTION SYSTEM OVERHEAD HOIST TOOLROOM UPGRADE BRUSHMAKING EQUIPMENT (14 (~ $505,000) MOLDING PRESSES (14 (~$$40,000) MOLDS (14 ~ $480,000) PACKAGING EQUIPMENT TOTAL CAPITAL 50,000 50,000 100,000 50,000 750,000 990,000 7,070,000 7,560,000 6,720,000 2,555,000 25,895,000 Oral B Laboratories Iowa City Plant Building Expansion Proposal One Overall Building Cost: $55.00 per sq. fl. x 56,250 sq. fl. = Architectural = $33.00/s.f. Mechanical = $15.00/s.f. Electrical -- $7.00/s.f. Sitework (landscaping/dock) Utilities Reface south and east facades o£ existing building and add canopy Contingency (10%) Design Fees (7%) Total Project $3,09~750.00 $90,000.00 $30,000.00 $75,000.00 $328,875.00 $253,233.00 $3,870,858.00 296648-0 iowa City Plant Secretary of State of Iowa Hoover Building Des Moines, IA. 50319 October 18, 1996 Dear Secretary of State, This letter requests that Oral-B Laboratories receive a certificate of Good Standing in the State of Iowa. Our company is applying for financial assistance from the C.E.B.A. government program, and is required to submit proof of our good standing in conjunction with the request for funds. Please find enclosed a check for $5.00 to cover the processing fees. Thank you for your help in this matter. Sincerely, William DeStefano D Controller 0ral- B Iowa City Plant A Gillette Company 1832 Lower Muscatine Road P.O. Box 4502 iowa City, iowa 52240-4502 Tel: (319) 338-5,111 Fax: (319) 356-9165 world-Class ~ronds. Produc;s People CERTIFICATE OF AUTHORIZATION I, Jill C. Richardson, am Secretary of The Gillette Company and Assistant Secretary of Gillette Canada Inc. The Bylaws of Gillette Canada Inc. adopted and other actions taken by its Board of Directors, authorize Jorgen Wedel to execute and deliver on behalf of Oral-B Laboratories, a Division of Gillette Canada Inc., an application to obtain CEBA funds; and Jorgen Wedel and Joanna Ambrosio are designated as authorized signers on promissory notes and instruments for the borrowing of money or guarantee of payments on behalf of Oral-B Laboratories, a Division of Gillette Canada Inc. IN WITNESS WHEREOF, I hereunto set my hand this 28th day of October, 1996. Jill C. Richardson Secretary, The Gillette Company Assistant Secretary, Gillette Canada Inc. Prepared by: David Schoon, Eco. Dev., 410 E. Washington St., Iowa City, IA 52240 {319) 356-5236 RESOLUTION NO. 96-306 RESOLUTION AUTHORIZING APPLICATION FOR GRANT MONIES FROM THE IOWA DEPARTMENT OF ECONOMIC DEVELOPMENT FOR COMMUNITY ECONOMIC BETTERMENT ACCOUNT (CEBA) FUNDS TO ASSIST ORAL-B LABORATORIES EXPANSION AND AUTHORIZING CITY PARTICIPATION IN THE FORM OF A $40,000 FORGIVABLE LOAN. WHEREAS, the Iowa City Community Economic Betterment Account {CEBA) program provides loans to cities to promote economic development and create long-term employment opportunities; and WHEREAS, it is in public interest to use State funding to encourage economic development in Iowa City, Iowa; and WHEREAS, the City of Iowa City desires to apply for and obtain $150,000 in CEBA funding from the Iowa Department of Economic Development in the form of a forgivable loan, in order to assist in the expansion of the Oral-B Laboratories facility in Iowa City, Iowa; and WHEREAS, it is necessary to provide a local contribution in the amount of $40,000 in order to obtain a competitive CEBA; and WHEREAS, the City has the authority to provide financial assistance for promotion of economic development. NOW THEREFORE BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA, THAT: It is in the public interest to encourage economic development by the City of Iowa City, as applicant, and Oral-B Laboratories as the business, applying for CEBA funding. The Mayor and City Clerk are hereby authorized to make formal application for financial assistance to the Iowa Department of Economic Development for Community Economic Betterment Account funds in the amount of ~150,000. As part of the local contribution necessary for a competitive CEBA, the City Council agrees to provide a $40,000 forgivable loan. The City Manager is hereby authorized to take any additional actions required by the State Department of Economic Development and the CEBAprogram in order to secure said funding. Resolution No. 96-306 Page 2 Passed and approved this 4th day of November , 1996. ATTEST: CITY-CLERK Appro_xed by /'~J It was moved by Vanderhoef and seconded by adopted, and upon roll call there were: Thornberry the Resolution be AYES: NAYS: ABSENT: X X X X X Baker Kubby Lehman Norton Novick Thornberry Vanderhoef 1995 Annual Report THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES FINANCIAl. HIGHI. IGHTS (In millions, except per share amounts) 1995 1994 Change Net sales ......................................... $6,794.7 $6,070.2 + 12% Profit from operations ............................... 1,371.3 1,226.7 -~ 12% Income before income taxes .......................... 1,296.9 1,104.1 * 17% Net income ....................................... 823.5 698.3 + 18% Net income per common share" ....................... 1.85 1.57 · 18% Dividends declared per common share~' . ................. 60 .50 + 20% NET SA I. ES PROFIT FR ONI INCOME IN COM E PER O PER AT10 N S k5 Before taxes COM hlON SIIA R E · After taxes S ,\lilhons S Millions $ Milhons $ Per sl',ate~ 7000 1400 1400 ? 00 ;600 4200 840 840 2800 %0 560 I 2'0 1400 250 280 40 0 0 0 0 lbe tn[o.natto,l /at 1993 ~8 be/ore spectal cb,.gcs [o~ ~cahg.ment expenses a.d the cu.mlatwc effect o/ ac cottntt}tg cba.gcs. ttco-fi~r.o.e stock spbts m 1991 and 1995. F1V E-YIiA R COM POUND El) Net sales Profit from operanons 9% 12% ANNUAL GR O\VTtt Income after taxes 17% RATE Income per ¢0177117011 sha re 18% "Over three-fourths of 1995 sales came from categories in which we hold the worldwide leader- ship position." m either of tile market averages. Tins outstanding stock perfor- mance reflects not only tile past growth of our business, but also a perceptran among IlIVestors that the steady mlprovemcnt m the Company's business fundanlen- tals places ns in nll excellent poqmon m tugrain our strong, profitable growth. (hlIcuc $ 1,000 S 14,924 310,0 I)IIA $1.000 S 4,590 16°,o S&I' S00 $1,000 $ 3.983 '['he mlprovement in fulldamen- tals has many interrelated aspects. A primary focus is on cnrrymg out the Company's mission to achieve or enhance clear leadership world- wide in ihe core consumer product categories m which we choose to compete. In 1995, more than three-fourths of our sales came from product categories in which Gillette holds the worldwide lead- ership position. This propornon ha~ risen by 20 percentage points m the last five years. To generate these results, we emphasize geographic expansmn and three principal growth dr~v- ers - research and development, capital spending and advertising. In combination, these growth drivers should risc at least as fast as sales over the Jong tel'Ill ~o as- sure future growth. In 1995, they rose 16%,compared with 12% for sales.'lb sustain a healthy rate of growth and assure a propel' balance of short- and long-term objectives, xve look to continue to increase the level of incrcmcntal spending on these growth drivers over tone by as much as we add to profit fi'om operations. Illustratmg the effectiveness of this approach, 42% of our 1995 sales came from products intro- duced in the last five )'ears, com- pared with 30% m 1990. This percentage, nhhough lower than the 45% peak reached in 1994, is especially impressive xvhen we consider that the original Sensor shaving system, introdaced in 1990, was not included in this statistic in 1995. Our oblective is to maintain the new product ratio at xvell over 40% of sales. New product activity isat an all-time high, w~th more than 20 products launched in 1995. An equally strong level of nctivity is expected m 1996, along with the geograplnc rollout of malor products such as the SensorExcel shaving system, the Gillette Series male groomingline and Satin Care for Women shaving gel. Gcogral)lnc expansion, which plays a key role m oIIr growth plans, has contrdmted m~portantly to the Company's improved busi- ness fimdamemals. Gillette was among the most global of con- sumer products companies five years ago, and we have become even more so. As previously closed markets have opened up with tl~e end of the Cokt Win; Gillette bas seized the resulting business opportuni- ties. In 1995, 70% of our sales and 72% of operating profits were geuerated outside the United States, tip from txvo-tlnrds of sales and profits in 1990. This growth has heen paced by sub- stantial gains ill Asia-Pacific and Eastern Earopean markets. For example, the Company's sales in tile Former Soviet Union, Poland, Hungary and China rose 50% last 5'ear. Given tile growth poten- tial of these regions, we expect to increase the managerial and fi- nancial resources devoted to their business development. In addition to new products and geographic expaasion, tile Company's prospects have been enhanced by selective acquisi- tions. Ill the past few years, tile largest among them have been Parker Pen, the Pro oral care lille and Thermoscall. Parker Pen, Much snbstantmJly increased the s~ze and strength of our stationery prodnets fi'anchise, was acquired m mid-1993 and has been successfully integrated into our ongoing operations worldxvide. 'lbday, we are tile clear global market leader ill writ- ing instruments and correction products, and operating profit margins for our stationery prod- ucts bt,smess have improved three points since 1992. "In 1995, the three growth drivers of R&D, capital spend- ing and advertising rose a combined 16%, compared with 12% for sales." The Pro oral care line, pur- cbased in late 1995, siga,ficantly enhances the Oral-B franchise m the fast-grooving Latin American region. Tbe acquisition strengthens OraI-B's number one position in the worldwide toothbrush market. Thermoscan, the leading mar- keter of infrared ear thermom- eters, was acquired at ihe end of 1995. The Thermoscan instant thermometer is an innovative, technology-based apphance com- patible with Braun tecbnical and markenng strengths. We sec the opportunity to expand tins rap- idly growlug prodnct line around the world. h also could provide, long term, a platform for Braun expansion into other personal home diagnostics products. The review of operations secnon of this Annual Report describes tbe 1995 performance of our product lines. Manage- mem's Discussion reviews the fi- nancial aspects of our bnsmcss. We'd like to bighhgbt a few examples ilh~stratmg the buildup of (hllettc business strengths. The Sensor shaviug system franchise bas continued ~ts excep- tionalgrowth, with a more than 20% sales increase in 1995. Tins reflected not only sustained demand for the original Sensor system, but also outstanding acceptance of the Sensor for Women aud SensorExcel shaving systems. Total sales of the Sensor family of products - amounting in 1995 to 42% of all Gillette blade and razor sales dollars - now exceed total worldwide sales of our two leading competitors combined. The Sensor franchise xvill be streugtbened further by tire lauucb this 5'ear of the SensorExcel for Women system. The Company's innovative clear gel tecbnology is the primary factor m the substantml growtb of our deodorant/antiperspirant business. httroduced with the Gillette Series brand, clear gel technology has beeu incorporated into our established deodorants/ antipcrspirants. By 1995, gel products accounted for about 30% of our total sales in this cat- egory. Gels also bave contributed to the sustained growth of the en- nre Series line. The Braun Oral-B plaque remover, wbicb debuted in 1991, strengthened its position as the clear worldwide leadel' m oral care appliances, aud the outlook is favorable for continued strong gains. As sales of tire plaque remover have climbed, a fa,t- growing demaud for refill brushes bas developed. Including both Braua appliances and Oral-B products, tile Company's total oral care sales rose to nearly $700 million in 1995, moretban twice tbe level five years earlier. Underlying all tbc advances de- scribed m tiffs letter are talented, "New product activity is at an all-time high, with more than 20 new products launched in 1995." well-trained and highly-mouvatcd managers wbose leadership skills in the compentivc global arena in wbicb Gdlette operates are with- out peer. We urge you to read a special report, beginning on page 16, that higblights the value of this resource to Gillette. Our conilllents would be inconl- piece withnot noting tbc retire- merit of a longrune colleague. Robert J. Murray, Executive Vice President - North Atlantic Group, retired at the end of 1995 after a distinguished career of 34 years. Bob's dedication and leadersbp abilities made significaut contnbu- :ions to the Company's success. In closing, our record is a reflec- tion of tbe xvorld-class brands, products and people that in binanon are the fimdamental strengtbs of Gillette. Tbey are the source of nor confidcnce that The Gillette Company is well-positioned to continue ~ts worldwide growth in 1996 and tile years beyond. Alfied M Ze~en Chairman of tile Board Michael C. Fhm, ley President March 1, 1996 BLADES & RAZORS Further enhancing its worldwide leadership position, Gillette in 1995 achieved record results in its principal line of business. Sales of blades and razors climbed sub- stantially, and profits posted a considerable increase. ~ he consistent sales growth that bas cbaracterized tile Company's blade and razor busi- ucss accelerated m 1995, driven principally by the contmoed resounding success of the Sensor family of shaving systems. The chief contributor to the increasing momentum was the top- of-the-line SensorExcel shaving system, which registered sizable sales gains and enlarged its market sha~e m every country in which uis sold. l)istribution bas been extended to nearly 60 markets, and the rollout continues. Notwithstanding the Company~ SUCCCSS II1 at[ractlllg COllSU[llo~s to the SensorExcel system, sales of the original Sensor syswm moved ahead mudcstly. ']'his prod- uct, latmcbed in 1990, remained the best seller m the United States and many interna- riohal markets. The Sensor franchise also was strengthened by exceptional con- sumer demand for the Sensor for ~0111011 shaving system. Intro- duced m 1992, this innovative product has achieved substantml advances Ill sales and market share. The new SensorExcel for Women shaving system, now being introduced in key markets worldwide, should further m~- prove the market pmmon of tbe Sensor fi'nnchise. The system fea- tures a specially-shaped handle with a soft, textured rubber grip alld aR ellhanced sprulg-moullted twin blade carmdge with protec- tive microfills. Reflecting the growing promi- nence of the Sensor franchise, the 'lYac II and Au'a ~wm blade shaving systems have grad u- ally been overtaken as the market leaders. Both of these older brands retain signifi- cant shares m the United States and abroad, and sales m 1995 rose shghtly. The Company's disposable rarer sales climbed considerably, w:th Gillette brands again the top sellers worldwide. Led by strong gains overseas, particularly in l,atin Ame, ica, the CustomPlos &sposahle razor recorded a sizable sales advance. Rapid geographic expansion of tlus prod- uct, as well as of the new · CustonH)lus Pivot razor introduced at midyear, wfil con- tmuc m 1996. lathe United States, the Good News brand remained the number one &sposable rnzor for the 20th consecutive )'ear, as sales moved notably higher. Ahhough overall sales of Gillette double edge blades were lJtl. (,11 l.[.l'l I. SLNSOI~.I.X(.}.I IOR \\'OMI'N SIIA\'ING $'fS'['I M ~ TOILETR1ES & COSMETICS Reflecting strong growth in several important product cat- egories, sales of the toiletties and cosmetics line rose in 1995. Profits were lower, however, due to the negative impact of results in the Jafra skin care and cosmetics busi- ness in Mexico. Worktwide sales of deodorants/antiperspirants, the largest Gillette toiletries category, were markedly above those of 1994. In the United States, this was chiefly due to significant advances by clear gel versions of every Gillette brand - Right Guard, Soft & Dri, - .- ~ Dry ]dea and the ...~....,~,..~.~ .: Gillette Series. ¢.~ ""'"'" With these gains, '=~"~- ; the Company's ~.r::., ; share of the domestic market reached its high- est level m 20 )'ears. lnternatiooal sales increased sharply, led by strong acceptance of tile Gillette Series braud, which now is sold io about 60 countries. Distribution to such large markets as Brazil and the Former Soviet Union is planned for 1996. Reflecting s~zable sales gains m the United States and abroad, shave preparations turned m an excellent performance. The domestic increase was due to advances by Gillette Foamy and Gillette Series shave preparations, as well as brisk demand for new Satin Care for \Volhen, the Erst non-soap- based shaving gel for women. This innovative product will be distributed throaghout overseas markets in 1996, further strength- enmg the Company's leading position ill tile worldwide shave preparations market. Gillette Series after-shave conditioners and fragrances also recorded much higher sales, sub- stantially improving their share of this important market m Europe and the United States. In late ]995, tile Company in- troduced the Gillette Series Pacific Light collection of men's toiletties - deodorants/aotipcrspirants, shave preparations and after- shaves - combining superior per- formmice with a distinctive, clean scent. Both the shave prepara- tions and after-shaves also feature added skin care ingredients. Within hair care products, the Company continued to emphasize White P, ain, the number two vol- ume brand in the United States. Sales were stable, as a strong performance by tile White P, am Exotics line countered weaker sales of other White Rain prod- ucts. At year-end, tile White Ram Solutions hne of rev~talizing hair care products was introduced to encouraging trade response. Operating in North America, Europe and Latin America, Jafi'a sells ~ts high-quality skin care and color cosinetic products through collsultants at classes m tile home or office. Sales in 1995 NE\V GILLEI~E SERIES I)AClt IC I.IGIIr SHAVING Gt:I ^NI) aFH!R- SI lAVE SKIN CONDITIONER GEl. R.z~ Gel Xtra Protection with Moisturlzers , ',~..1'. %i~nlh,._,111[J~, ,11Jt',.[~.'~.J h'~ lilt' I ~.'J,I P.'d lll',L' ',t clJ .lhl~~. L' li11~',t.' ~J ~hL' ', ~_',1 r hIF. hl~. %IP,.'~.L",',II. II In[ll~LJtl~_JJt)11 ~1 ( ,,.'nvl .m~m JJl Jill' i[It. Jl llll}~l~. ,I[I~,L· J'q I ~,,J UL [",. :- - '.11..' h j~t.'l'%j'~ll,lllJ'-.. k~.t[111 ( ,1IL' J(JJ' \\(1111L'11%h.1~. 111.~ ?.-J ,111,,J [Jl~,' (.~JJclJc · ,~ ffh .i .~h~l~.lJ pL'p,j',c¢[l', c, [J1~,' (, ~111j~.111~ ',~ J~[P~:11.,-~,,, i,, iii ,111 c",.ccJJcnJ pil%l- jliljj ti~l' ,,i.l,~[,1111L-d ~1-~ J\~. lb. STATIONERY PRODUCTS On the strength of record 1995 results, Gillette again was the clear worldwide leader in the highly competitive writ- ing instruments and correction products businesses. Sales of stationery products showed good progress, and profits climbed sharply. Wts Parker, Paper Mate and Waterman fi'anchises, the Company holds a strong posi- noa within all writing systems, price levels, distnhution channels and geogra ph i c a teas. ~ Worldwide sales of Parker writ- mg instruments, the largest part of the Company's stationery products business, moved well above fi~ose of a year ago. This was cbiefly due to sizable sales gains by nnproved models of the popular Jotter and Vector brands, which turned in particularly good performances in tl~e United States and abroad. In the prestige segment, two . new Parker Duofold the Mandarin Yellow and conlnlemol'~t ire MacArthur pens, also were very well ~ ~; received. Complementing this highly successful program of new product development, Parker rapidly ex- panded its business · :~ in Eastern Europe __. during the year and achieved substantial growth in its traditional strongholds of the Middle East and Far East. Paper Mate writing instruments posted a moderate advance m world,vide sales, with continued brisk demand for the l)ynagrip family of pens more d~an offset- ting lower sales of Flexgrip pens. Significantly higher sales of tile Sharpwriter disposable mechani- cal pencil also contributed to tile upward trend. In the marker category, where sales increased sbarply, the Paper Mate Multi Marker range of permanent mark- ers was launched successfully in tile Urnted States and Europe. -Fbe Waterman line of luxury writing instruments recorded siz- able sales gains worldwide, paced by an excellent performance in the Urnted States and supported by a strong program of new prod- uct development and geographic expansion. Sales in the prestige segment rose substantially, spurred by the highly favorable reception given the new Preface pen, espe- cially m Europe. Growth in the mid-priced range was led by the Hemisphere pen, introduced m 1994, which more than doubled its sales in tile Urnted States. \Vaterman sales also climbed significantly throughout the Asia- Pacific region, the Middle East and Latin America, as distribn- tion m these areas accelerated during the year. \Vorldwide sales of l.iquid Paper correction products lite PARKER DUOFOI.I) MANI)ARIN YELLOW FOUNTAIN F'LN 1111 \\ .\11 I'~ \J ~.\ XI'I I,~1 2 i I\1 \\Rill\(, I\%IRI \llNtx BRAUN Braun sales and profits rose substantially to record levels in 1995. This outstanding performance strengthened Braun's position as the clear worldwide leader in several major product categories. Sles of Braun hail- ,'eraoval products climbed sharply./vieWs elecmc shaver sales were signifi- cantly highel; reflecting the excep- tioual success of premium Flex ,~ Integral shavers, which , were disu'ibnted world- ~ xvide during tile )'car. _ This new shaver range provides faster and closer shaves by mcor- porating a middle cutter positioned bet;veen two shaving foils mounted on a pivoting bead. Excellent constimer 1111. IXIPI{OVI;I) acceptance of BRAUN O1.~,\1~.1', the Flcx Integral I'I.AQUt J~.l 5. l()\'l.ll shaver line enahled Bratill to enhance its num- ber one positmn worlciwide in tile inell's electric shaver market. Braun Silk4pil electric hair cpilators for women achieved sizable sales gains iu 1995, improving their leading share of market '1 HE $UPF. RVOI.I_)M[.~ worldwide. TWIST tt^l!', DRYER Contributing to this advance was tile new Silk4pil Select model, which features two speed settings and an adjustable tweezer grip. 'File personal care lille, which includes oral care and hair care appliances, generated strong sales growth. Buoyed by brisk denland for an improved model featuring a control grip handle, sales of Braun Oral-B plaque removers climbed substanually. Replace- merit brush tieads also registered a sharp sales increase. Reflecting these gains, Braun augmented its clear worldwide leadership m oral care apphances. Among hair care apphances, the continued success of the Supervolume brand in the Uaited States and abroad, as well as the introductiou of tile Supervolume 'l\vist with additional styling op- tions, drove hair dryer sales much higher, strengthening Braun~s lead- ing posmon ill tile worldwide pis- tol grip hair dryer market. Sales of hairstylers also moved ahead sig- nificantly, due principally to three new shaper appliances for natn- ral, easy-to-maintain hairstyles. Household appbance sales rose shghtly iu 1995, as progress ill Germany, other European illar- kets and tile Far East more than offset the effects of intense com- petition itt tile United States. New products generating a major por- lion of sales included tile MultiMix handmixer in its first fnll year on the market, the top-of- the-line Culinary Series handblender and uew pump- and steam-driven espresso nlachHles. ~ttE BRAt~N b'[ YI,E $IIAPkR I IAIRS'I YLI!t~ HIE BRAUN H.I,X INTEGRAl. I' LECTRIC SI IAVEB ORAL-B Recognized worldwide for its superior oral care products, Oral-B attained notably higher sales in 1995. Profits grew much more rapidly, as Oral-B's significant investments in new product programs delivered excellent returns. OI-B develops, markets and distributes worldwide an extenswc range of inoovatn'e oral care products m a close and well-estabhshed relationship wid~ dental professionals. The Oral-B line, led by toodfi~rushes, also in- cludes imerdcntnl products, spe- c,alty [oothpasles, motlth rinses and proDssional dental products. Used by more dentists and consumers worldwide than ally other brnnd, Oral-B in 1995 was again the best-selling toothbrush m fiw world. Sales of Oral-B mothbrushes increased cons~der- ably, supported by the substanhal growth of two top-of-dw-line ciitrlcs. Sustained demand for AdXalltage toothbrush, hltro- duced m 1993, cnabled dfi':, prod- ucl to turn m ,111olhcF bt I'011g performance. The Advantage Control Grip tooth brush, featuring a handle with a rubberized grip for greater comfort and control, registered impressive sales results in ~ts first )'ear of worldwide distrdmuon. 1)uring tile yeal; Oral-B intro- duced two mn0vauve tooth- brushes for children that feature squeezable handles, brilham col- ors and tradmoaal Oral-B brush head quality. The new Squish Grip tomhbrush for five-to-e~ght- year-olds and tl~e (;ripper toolh- brush for pretcens are appeahng to children, whdc addressing oral care issuc~ of COIICL'[11 tO pal-enls. Consumer respollsc il~ the United 5taws has been lughi> favorable, nnd tl~e new t0oti~brt.shes will be distributed abroad in 1996. \Vorldv,,ide sales of interdental products climbed rapidly for tile eighth consecutive year, spurred by gains throughout OraI-B's range of quality dental flosses. The Uhra Floss brand, w~fi~ its network of shred-resistant inter- locking fihers that stretch d~in to fit between teeth and then spring back to brush away plaque, re- corded a s~zable sales increase m its second marketing year. Sak's oJ toterdental brushes and the com- pact toterdental brush % also rose sharply. '~ I I igl I p ti '~'v...,- tire product catego- ries, Oral-B specialty mothpaste sales were well above 1994 levels, offse~ung lower oral rinse sales. AmOllg professional products, Oral-B Minute-Foam fluoride treatmere for dental off<e use made an excellent showing. I RO.".I LLtl. lite ORAl .B At)\':\ N ['A(;I'. ADVAN'IA(,[ CON l'F, OI (;RII' AND SQUISH Glql' I'L)O'I ItlIRUSlILS ~ [11C I1LltlII1CF O~ I1L'%V 111,1F- ' kct~ checked m the p,lsi ~tx ¥L',II'~. /~' -L,~,~;_.~, ' ';"." ';" .. ,.':"'; "' " / -~'~ ~ ~ / ' ' Oi'aI-B ,lcquH'cd the Pro oral c,~rc ~ ' ' " hnc, xx hlch J~ tJJ~tl ,hutcd prim,~- WO R L D - C L A S S L F. A D E R S H I P 115iylla P~sicwicz was short ~ o[cash. That's a faradtar problem for most everyone. But .]t~st>na was a Polish 1rational liv- mgon her own m Beqing, China. And she was only 18. It was 1988, and Justyna had just arm'ed m China, one of a select group of Polish high school graduates to have won hdl sclml- arslups to study abroad. Ah'eady flucnt m Enghsh and Russian, w~thin a year she was proficwnt m Mandarin Chinese and was enrolled in a four-year degree program m international relations at the prestigious Foreign Affairs College m Beqmg. But toonov ,,,.'as very t~ght. .qo .lt~St.X'~l~l anti three friends started a transl,ltion service fin Pol- ish businesses investing m China. Aftcr a few months, the students realized they were capable of much more than lUSt translating. Over the next year, their business blossomed Jllto negotmtmg con- tracts, sourcing materials and O[~lallllllg qt~bcont ractors. clientele grew steadily, and the work took them to malor Chinese otics, mostly on weekemts as theH- class schcdulc permitted. Eyes sparkling as she recalls those days, Justyna, now 25 and a toiletrics assistant brand manager for Gillette l'oland, says, "I loved the business and the negotiating. You had to be smart and thor- get<, and keep an eye on every- thing. h was absolutely full." The Iresmess I~ug had b~tten hard. Justyna's ncxt move was to Boston, where she enrolled m the Simmons College everang MBA program. She also came to the at- tennon of Frank ()'Cormell, who recrmted her for the Company's Internat~onal Tramee Program, wbch he directs. After success- ' t RIgobctto 1:111o, 13tt51ncss t~ Dtlecto~, Sb,lt.mg. A~1,1.1',i~ i]9c ~" a16~. "It is highly likely that the controlling factor in the Company's rate of growth is the rate at which we can add talented, globally-focused individuals to our management team." (;dlcttc Cba.ma. AI/~ed M. Zcwn fully completing this full-time assigument - and graduating first in her class at S~mmons-Justyna left Boston last December to con- tinue her Gillette careen Few Compaay employees have Justyua's unusual background. But in her character and early professkraal skills, she shows pronnse of aclncving the world- class standard of leadership that typifies and distmgtnshcs (gillette today. In the words of Gillette Cbau-maa Alfi'cd M. Zeien, "h is highly likely that the controlling factor ia the Company's talc of growlh is the rate at which wc can add talented, globally-focused individuals to our management team." Throughout the organiza- tion, hundreds of employees at all levels are being groomed for increasingly rcsponsd~lc posttrans on tins global team. Helping bring ont the finest m every iadividnal- enabling each to be the best he or she can be in the pursuit of organizational excellence - is tile hallmark of the Company's de- velopment efforts. Gillette takes this responsibility seriously, ia- vesting about $100 million annu- all)' in worldwide training and development programs so that all the Company's employees, hy improving their job skills in an atmosphere of creativity, communication and quality con- sciousness, may achieve personal recognition and sncccss. Training may he formal, such as tile Company's lung-standing technical apprenticeship programs in the United States, Europe and Latin America. Or training may be informal, with a virtually con- tinuous round of workshops and seminars worldwide. For exteraaJ study, Gillette offers in some countries a generous trotion refund program for London - Born and rca~ed m tto.g Ko,tg. educated m Aust~alta and England, John Better bas it,orbed lot Gdlettc tbrottgbottt the A~ta-Pacttic rcgmn and nou' beads OraI.B opclattons tn Westc~n ]:t. ope. those xvorking toxvard under- graduate or graduate degrees. These and similar efforts have been among the many factors that have contributed to the dra- matic growth m tile Company's productivit); with sales per employee more than doubling in the last 10 years, even after adjustment for price changes and exchange fluctuanons. L~ficashing the talents of employees at every level depends Oil creating all ellvJrolllllellt ill which Gillette leaders - those of today and tomorrow- are both challenged and empowered to be innovative in aclueving business objecnves. "When you begin a nexv iob, overall strategics and objectives are discussed and then you are left to perform," says John Bower, Oral-B area vice president, Western Europe. "This brings out tile best in people who want to show what they can do, and at Gillette, you're always trying to do things better." "Ideally, job responsibilities are progressive," says Gillette Presi- dent Michael C. ttawley. "The Company develops its managers by giving them increasing levels of responsibility over time." Leadership call be diffi- cnh to define, but ill a soccess- ful company, leadership begins with behaviors that are firmly gronnded m a well-defined set of values that constitute tile corpo- rate cuhure. At Gillette, as de~ scribed in tile Company's Mission and \;alues, "We expect integrity, civd~ty, openness, support for others atlCJ conlnlitmellt to tile highest standards of achievement. We valae innovation, employee involvement, change, organiza- nonal flexibility and personal mobility. We recognize and value the benefits m ttle&versity of people, ideas and cultrites." Leadership also is character: a strong sense of personal respon- sibility, steadiness in tile face of Madrid - Kevin Baker, l'lam..g Satellite l:manctal Manager. Soutbtvest E.rope, says cxpatrtate asstgnments "help get yOlt go the ne.xt let.eL adversity, initiative and the will- ingness to take risks, decisive- ness, versatility and cnthusiasnt. But if leadership is charactcl; can it be learned? "h's certainly true that some people are born with elements of leadership," comments Leticia Navarro, presi- dent of Jafi'a Cosmetics Interna- tional, who has worked for tile Company in Boston, Mexico City and Los Angeles. "Charisma is inherent, but other qualities of leadership can be nuttreed in those witb the potential." Helping young man- agers hone their leaders}up skills as tile:,, stretch for growth is the primary objective of an intensive leadership train- ing program developed by Gillette 15 years ago. Since then, m "Our management is focused on people, on learning what you want to do in a culture in which it is fun to achieve." P.Io Vababo, General Manager, Btatot No~dtc of some sort and, while doing st), to get along with each other, re- gardless of background, ethnicity, race or gender. At the end of the session, teaill members provKle each other with extensive ked- hack on management skills, style and helmvioL At the same tone, each attendee is given detailed qucst~onoaires on these same ~ssues completed earlier and anonymously by colleagues and sabordinates back at the office. This one/two punch, as IllOre than one i~11ager " bas dcso ibed it, offers some 100 sessions held aronnd the xvorld, this program has hosted more than 1,500 managers from about 50 countries. Participants work together on tealns for four days as tile), attempt to resolve a business problem Los Angeles - *' We're geared to rotegrating the persoual. prores. stona[ and economic deuelopment o[ toorim., " states ]a[ra Cosmctws Internahonal Pre~tdent Lettoga Navarro, 5hotun with her daughter; Fernanda. San Jose. Costa Rica - "As company .~ltral,{~ everyone understands the Gdlctte way of doing thing3." says A lelandro Dal); Gdlette Costa Rtca. ptctmed at a "If you aspire to be a general manager, you want the range of experiences that will make you complete and comfortable in that role." Jube K~ul,a, Nortb Amerwa Marketing ~5cc Prcstdent, Stationery Products the opportumty for a more ob- jective perception of one's own strengths and weaknesses, a per- sonal awareness that optimally sparks personal growth. Aleiandro Daly, company manager of Gillette Costa Rica, notes that, "The program really gives you insight on how your style is perceived by other people. Even though I thought I had a ~eal 'opea door' policy with my suhordinates, it turned out that my team didn't really feel as com- fortable coming to me with ideas as I had thought. This forum gave them the means of transmit- ting their views, and my commu- nication with them improved a lot afterwards." C areful assessment and nurturing of all of (;illette's pro- fessionals and managers world- wide ~s accomplished through a system of formal annual reviews to which the Company devotes considerable time and energy. Employees are dosdy evaluated on their performance, with coaching from incmediate super- visors on how to improve areas of weakness. Short- and long-term career goals also are discussed, so the best possible match may be made between an employce's personal interests and the Company's business needs. "ltr my experience, these discussions have always been very valuable," says Pirjo Valiaho, general man- ager of Braun operations in Denmark, Finlaud, Norway and Sweden. "Our managenrent is focused on people, on learning what you want to do in a cuhurc in which it is fun to achieve." One goal of these reviews is to give employees dcmonstratmg a strong dcgrce of competence op- portunities for a series of varied assignments, with each successive Boston - To ]idle Krupa, Noltb Ametu'a Marketing Vice President, Stationery PI oduct$. leadership I~ "empowering people to do wba! 1s ~CqUlred of tbem Io achieve clearly delmed oblectn,cs " appointment involving both greater responsibdity and risk. For diversity of experience, high- performing managers ntay bc offered opportunities that cross business functions, operating umts or geographic areas. Such assigmnents enable the employee to accumulate the skills and reputation that can he iuvestcd in new opportnnities as the)' arise. Julie Krupa, a Canadmn who is vice president, Marketing, for the North American Division of the Stationery Products Group, attcsts to the value of this ap- proach. After ioining Gillette Canada in 1976, Julie wm'ked m increasingly senior iobs in market research and then tnarkctmg that involved hath shaving and toilet- ries brands. She later moved to Boston, where she helped hunch tire Gillette Series [inc of male toden-ics. But she had never worked in sales, winch she felt Kronberg, Germany - Braun Gmtq., Controlle~ I'autck Cagmoncle. a French- man, says career toOl,CS to the U.5. and Germany bal,e gn.en wonderJul opImr- Inntries to fits fort1 children. was a serious drawback, and so requested a txvo-year sales as- signment. Adnfitting there was initial discomfort in moving from "marketing expert to sales nov- ice," Julie says, "If you aspire to be a general manageL you want the range of experiences that will make you complete and comfort- able in that role." K eepmg track of career paths for all Gillette managers and professionals, assuring that no promising employee is over- looked in the searcb for execu- tive talent, is the pnrpose of the Company's other review process, tile Management Developeneat Annual P, ev~ew (MDAR}. All mtens~ve evaluation of Jlonlall resources, tile MDAR analyzes the strengths and weaknesses of current and future leaders to plan more effectively for organizationnl needs. The process culminates as ~20~, the Company's chairman and president personall)' review the performance, career and prospects of those holding tbe Company's 800 most senior positions. At a company as globally- oriented as Gillette - about tbree- quarters of sales, profits aod employees are outside the United States- more and more of these jobs are held by those who have worked outside their home coun- try. Illdeed, 17 of those curreotly holding the top 20 positions in tbe Company bare served abroad, and tile globalizing of managerial development bas long been viewed as a key growth strategy. Building an experienced, effectwe and versatile manage- ment corps that can move h'eely aronnd tbe world is the goal of Gillettc's groxving Expatriate Program. Through diverse rotor- national assignments, proven performers increase their own - and tile Company's - competitive advantage by enlarging the scope of their market and cultural knowledge. "'Fhesc managers are better because they call draw upon a broader base of experience to make "Being able to experience new mar- kets, new cultures, new issues provides a perspective that is invaluable in a rapidly globalizing world." hm Jackson. Vice l'rcstdent. As~et-I',lCt/tc (;roul~ decisions when confronted w~tb novel s~tuations," says Ned (;uillet, director of Administra- tion, President's Office. Stole 350 Gillette manag- ers, 15 percent of whom are Americans, now xvork outside their home country, and there is universal agreement amoog them Madrid - Cadns Matos. Contu,11c~. .5~,utblt'cs t ht. o/w. :s [,u tin cd tt'~tb ],t.u's. I.ou~s. I.dw, ud and Oht,c~. ",~h,umx pe,,i,le ,llt~litld ~lhlkCF of the benefits of such expatriate assignments. According to fan Jackson, group race president for the Gdlette Asia-Pacific Group, who has worked in four couutries duriug his 1 6-year career, "In my v~ew, a good expat assignment is one of tim best development op- portonines avafiable. Being able V) experience new markets, I1¢W cuhures, new issues provides a perspective that is invaluable iu a rapidly globalizing world. Such a pcrspecm'e ~s hard, if oot im- possfi~le, to gain from operating solely in one's home country." Moving employees between countries and operating umts is facilitated by the fact that (hllcttc uses the same personnel systems throughout the world, with a standard system of lob cvahmhons, annual reviews and d~e MDAR supporung the easy exchange of people. ~ requent visits of managers to beadquarters - both at re- gioaal and corporate levels- reinforce a common Gdlctte world cuhure, as does tl~e regular travel by senior executives to Io. cal nmrkets. These visits are as much geared to personal crabra- tions of the local management team as they are to I'CVIC~VS of the business. It's an opportunity for top nlanagement [o "experi- ence the individual," fashioning an informal impression that supplements data rcviexved each year in the MI)AR. In addition to local managers toteracting with top management and executives within their own group, the presence of local per- sonnel at Gillctte's many regional and worldwide meetings exposes them to peers aod executives from other operating groups. Aside from the business benefits dmt accrue from this opportunity to cxchauge ideas and strategies, such meetings eoable managers to becomc known throughout tile Company. "It quickly becomes apparent not only who is good at what he or she docs, but also who has the [eadcrship qualmcs that may mark them as having the potcn- tml to move up," says Mr. Zeien. "Good executives are pirates, constantly on the lookout to attrac~ the very best people to their own organ.zation." Eng Seng 1)~cu, Oral-B area vice president for the Asia- Pacific region, who bas worked m seven locations over h~s 23- year Gillette career, believes the Company's accelerated inter- dimsional transfer of managers facilitates more creative ap- proaches to maximizing business opportunities. "1 spent 18 years in tim Gfilette shaving and Paper Mate peu businesses, and the last five )'ears in Oral-B," be explains. "The experience bas been enbghtening- fi'om a mar- ket leadership position in shaving to a highly competi6ve s~tuation in oral care." ]II,L'[ 11,11 I~ ~[I,I JJ~ -,,'\INCI iv]l,,. ,.'t.J II1.111.1.'.'.L'1 x ,1l I.' (,11~,' ( ]J ( ,IJJvllt"s ~'.1,1111. I~c'.s.'.lllJ I1! I')X ~ [,, p:.x I',Jc .I slL'.IL~\ '.IIL'.1111 ~l t~-~Jd. \h,~c IJ1.111 I ~(I II1C11 ,111d OL' !t'~.c'11! ,U,l',ldll,l|L', '~,lslljlls,I hod, I1()~,v ,111 ,TsSl'-,l;1111 T tt E GII. L E T 1' E C OM PA NY AND SUBSIDIA I~.Y COM P A NIES MAN A G EMENT'S DISCUSSION RESULTS OF OPERATIONS In 1995, tire Company achieved record levels of net sales, profit from operanons, net income and net income per COIlllllOn sJlare. SALES Net sales in 1995 climhed 12% to $6.79 bdhon, com- pared with $6.07 billion in 1994. Tile growth was due toaa 8% increase froill volume aod new products and a 4'7,. gain from the combined effect of selhng prices and exchange rates. In 1994, these factors affected sales by an 11% iucrease and a 1% gain, respectively. W~lhout Parker Pen, 1994 sales increased 9%. Sales m the Urnted States advanced 6% ~n 1995, after an 11% gain in 1994. Foreign sales rose 15% m 1995, following a 13% gain m 1994. Sales of opera- tions outside the United States accounted for 70% of sales in 1995 and 68% m 1994. An analysis of sales by business segment follows. Blades &: Razl~r.% . llnlelrle:, ~ OraI.B Products . OIhcr ....... IMdhons of dollars} % Increase 95 94 93 95~94 94~93 .52,635 $2,351 5,2,118 12 II 1.236 13 62 I,O47 6 II 862 807 633 7 27 1,621 1,348 1,249 20 8 440 402 363 9 1 I $6,795 $6,070 $5,411 12 12 tbmugb I q Sales of the Company's blade and razor products were s~gmficantly highc~ dmn those of the prior year. Tins increase was attributable to geograptnc expan- stun, the continued growth of the (bileitc Sensor, Seasod~xcel aod Sensor for Women shaving systems, tl~e CustomPlus disposable razor and the improving Em opean cm'rencles and ecOBolllic condihons. In 1994, the (hllette Sensor fi'anchise was the primary co~tr~J~lttor to sales growth. 'lbfietnes and cosme,cs sales were above those of the year before. The increase was due Io the confnmng inter- n,monal rollout of the Gdlette Series male grooming line, the strong growth of clear gel deodoranffant~persplrant products m the Urnted States and tl~e favorable accep- tance uf Satin Care for Women shaving gel. Sales m 1995 were unfavorably impacted by the adverse economic condmons m ,Mexico Mfectmg Jafra. In 1994, sales were apprecmbly higher, due to the strength of the Gillette Series line and other deodorant/antiperspn'ant brands, reflecting the favorable response to clear gel technology. Sales of sta6onery products surpassed those of the prior year, paced by gains m the United States, Europe and Asm-Paofic. Sales increased substantially in 1994, due primardytothc full-year inclusion of Parker Pen. In 1995, sales of Braun products increased sub- stantially over those of 1994, particularly m the malor markets of Europe and Japan. The success of new products, including the Flex Integral shaver, aod the coutmumg groxvth of the Braun Oral-B plaque remover and the Supervolume hmr dryer contributed to tins sales increase. Sales m 1994 were well above those of the prior year, due to increases in the Urnted States and Japan. Oral-B sales increased appreciably over those of the previous year, as the success of new products con- tabuted to s~gmficant gains m international markets. In 1994, sales advanced in all malor geograpluc regmns, aided by new products. (; RObS I'ROFIT Gross profit ~ncreased 5,406 mdli(m m 1995 and S482 mllhon in 1994. As a percent of sales, gross profit was 62.6% m 1995, as coinpared with 63.4% and 62.2% in 1094 and 1993, respecnvely. ]'he decrease in 1995 was attributable to higher costs in Brazil, caused by the lower devaluauou of ~ts currency. Hmvever, tins was offset by lower exchauge losses m nonoperating charges. SEI. I. ING, (;ENERAI. AND AI) MINISI'RATIVE kX I'I~NSFS Selhng, general and admimstrative expenses arnotinted to 42.4% ofsales, comparedwith43.2%~n 1994 and 42.1% m 1993. In absolute terms, these expenses increased 10% m 1995, 15% m 1994and5% ut 1993. These increases reflected the higher level of market- mg support g~ven to malor brands, particularly the Gilleue Sensor franchise, the Gdlette Series line and new Biauu products. In 1995, $614 mallion was spent on advertising, including samphng, and $597 nullion on sales promorion, for a total of $1,211 mdhon, an increase of 12% over 1994. Tins compares xvlth 1994 amouuts of $545 million, $533 milhon and $1,078 nulhon, respet- re'ely. lu 1993, these were $428 mdhon, $450 mdhon and $878 million, respectively. The spending in 1995 and 1994 represented 17.8% of sales, compared wah TIlE G] LI. ETTE COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION 16.2 % in 1993. Spending for research and development grew 12%in 1995,compatedxvith 3% and 8% m 1994 and 1993, respectively. Other marketing and administra- tive expenses rose 8% m 1995, 11% in 1994 and 6% m 1993. PROFIT FROM OPERATIONS Profit from operanons ,,','as $1,371 million, compared with $1,227 milltun m 1994 and $825 milhon m 1993, after a realignment provision of $263 rodhon. Compared wttb 1994, profit from operations in 1 995 increased 12%, representing 20.2% of sales, compared with 20.2% m 1994 and 20.1% m 1993, before reahgnment expense. Within the United States, profit from operations rose 3%,compared with 16% m 1994 and 10% in 1993.1n 1995, profit growth in the Urnted States was limited by h ~gher market mg expenses in support of new product introductions and by expenses to implement cost reduc- tion programs. Outside the Uoited States, it increased 16%,compared with gains of 12% in 1994 and 13% m 1 993. An analysis of profit from operatioos hy bt, smess segment follows. Blades & Rators 'lbficmcs & Products . Braun Products O~aI-B Plodu~ts % Increase/ (M dhons of dollars) (Decrease1 95 94 m93 a"93 95194 94J9:l"" $ 960 $ 878 5692 $ 797 9 10 7.5 79 (61 .58 (6} 36 109 9.5 27 64 15 47 2.55 200 146 167 27 20 33 25 17 4.5 31 (451 1,432 1,277 8'% 1,131 12 13 (61) (50) {511 (44) $1,371 S1,227 $825 $1,087 tal afie~ cbaLees h,~ wahgmnent tb) befi,w cbacgc_~ [o~ wahgmne,~t .5cc Notes to Consohdatcd }-manoal Statemo~ts [o~ gcograpb~c area Profits for the blade and razor segment were consid- erably h~ghcr m 1995 and 1994, due to sales growth and m~proved product m~x. In 1995, gains were led by strong growth m most mternat~onal markets. In 1995, tbe rodetries and cosinenos segment reported lower profits, as substanual gains m most markets &d not offset the unfaw)rable mlpact of the adverse economic conditions oo Jafra Mexico. In 1994, the strong gain m profits was due to domestic sales growth, which offset costs associated with new products. Profits for the stationery segment were sharply h~gher m 1995, dae to sales growth and lower product costs. In 1994, profits were substantially higher, reflect- mg the full-year inclusiou of Parker Pen. In 1995 and 1994, profits for the Braun segment were substantially higher, dne to increased sales of prodncts with higher profit margins. Oral-B profits rose strongly in 1995, primarily in tile United States. Profits m 1994 dechned, due to higher costs associated with oew products. NONOPEP, ATING CHARGES/INCOME Net interest expense (interest expense less interest mcomel amouoted to $49 million m 1995, $42 million m 1994 and $33 milhon in 1993. The increase m 1995 was dne to lower interest income. lillerest expense was shghfiy lower than m 1994, as lower average borrow- ing offset lugher average interest rates. Net exchange losses of $17 million, compared w~th tile 1994 and 1993 totals of $77 naillion and $10,5 lion, respectively, were attributable primardy to subsid- iaries in highly ~nfianonary countries. The decrease m 1995 and 1994 reflected tile continued favorable impact of the econonnc recover),' plan ~mplemented m Brazil in mid- 1994. Translation adjustments resulting from cur- rency fluctuations ~n non-highly inflationary countries are accumulated in a separate section of stockholders' eqtnty, as noted oll page 32. Ill 1995, the negative adlustment xvas $100 million, due principally to the weakening of the Mexican peso against the U.S. dollar, compared with a favorable adjustment of $38 million in 1994 and a nega- tive adjustment of $150 million m 1993. '1 A X E S A N D NET INC O.1I-2 In 1995, tile effective tax rate on income was 36.5%, compared with rates of 36.8% aud 37.5% ~n 1994 and 1993, respectweb'. Net income for 1995 was $824 milhon, compared with $698 milhon m 1994 and $288 millioil m 1993. Net income per common share m 1995 was $1.85, compared w~th $1.57 and $.64 m 1994 and 1993, respectively. In 1993, net income and net income per common share were redriced by $139 milhon and $.32, a25~. THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION respectively, for the cumulative one-time effect of adopting mandated accounting changes for income taxes, postretirement benefits other than pensions and postemployment benefits. Compared with 1993, before the charges for realignment and the cumulative effect of adopting accounting changes, both 1994 net income and net income per common share increased 18%. FINANCIAL CONDITION Tire Company's financial condition contmued to be strong in 1995. While net debt increased $236 milhou, th~s reflected spending for tire acquisition of businesses m the Company's core business categories. Net debt (total debt, net of associated swaps, less cash and short-term investments) at December 31, 1995, atnounted to $1.28 billioo, compared w~th $1.04 bfiliooin 1994 and $1.26 Nilion in 1993. The market value of Gillette eqmty was over $23 billion at the end of 1995. The Company's book equity posmon amounted to $2.51 billion at the end of 1995, compared with $2.02 billion at the end of 1994 and $1.48 billion at the end of 1993. Net cash provided by operating activities in 1995 ~vas $821 million, compared w~tb $806 million in 1994 and $732 million in 1993. Requirements for net xvorking capital increased in all three years, reflecting tbe growth of the bnsiness. The Company's current rauo for 1995 was 1.46, compared with ratios of 1.56 and 1.44 for 1994 and 1993, respectively. Capital spending in 1995 amounted to $471 million, compared with $400 million and $352 mdlion m 1994 and 1993, respectively. Spending in all three years was principally for the Sensor system franchise, other twm blade shaviog products and Braun products. At year-end 1995, there was $373 million outstand- ing under the U.S. commercial paper program and no borrowings under the Company's $400 million revolving credit agreements. At year-end 1994 and 1993, there was $292 million and $154 million, respectively, in debt out- standing tinder the commercial paper program. At year- end 1994 and 1993, there was no debt outstanding under the revolving credit agreements. During 1995, the Company replaced its $500 md- lion revolving credit agreements with new revolving facilities provtded by a syndicate of 14 banks for $100 million, expiring June 20, 1996, and $300 rodlion, expiring June 20, 2000. The Company generally borrows through the commercial paper market, and these facilities primardy provide back-up to that program. Both Moody's and Standard & Poor's roamrained the Company's long-term credit ratings in 1995. Moody's rates the Company's long-term debt Aa3, while tile Standard & Poor's ratmg is AA-. The com- meroal paper rating is AI+ by Standard & Poor's and PI by Moody's. In 1995, the Conrpany spent $278 million for acqmsitions in its core businesses, conrpared with $26 million in 1994. In 1993, the Company spent $481 million tot acquisitious, primarily for Parkel' Pen. In 1995 and 1994~ no loug-term debt xvas issned. hr 1993, the Company issued $.500 mdhon in long- term notes. Thts indebtedness was primarily, used to repay short-tern~ debt used for the Parker Pen acquisi- non and maturing long-term debt. Gfilene continues to have access to substantial sources of capital m world financial markets. The Com- pany's abfiity to generate funds internally, its substanttal unused lines of credit and its access to worldxvtde credit markets are ample to covet' all autic~pated needs. FORWAP, D-I. OOKING INFORMATION Managenrent is unaware of any trends or conditions that could have a material adverse effect on the Company's cousohdated financtal position, futnre resuhs of opera- nons or liquidity'. However, tnvestors should also be aware of factors winch could have a negattve impact on prospects and the consistency of progress. These include political, economic or other factors such as currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regolations and laws affecting tbe worldwide business in each of the Company's markets; cornpen- tire product, advertising, promotional and pricing activity; dependence on tire rate of development and degree of acceptance of new product introductions in the marketplace; and the difficulty of forecasting sales at certain times in certain markets. THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES RESPONSIBILITY FOR FINANCIAL STATEMENTS The Company is responsible for the oblectivity and integrity of the accompanying consolidated financial statements, which have been prepaied in conformity with generally accepted accounting principles. The financial statements of necessity include the Company's estimates and judgments relating to matters not con- cluded by year-end. Financial information contained elsewhere in the Annual Report ~s consistent with that included in the financial statements. The Company maintains a system of internal accounting controls that includes careful selection and development of employees, division of duties, and written accounting and operating policies and procedures aug- mented by a continuing internal audit program. Although there are inherent limitations to the effective- hess of any system of accounting controls, the Company believes that its system provides reasonable, but not abso- lute, assurance that its assets are safeguarded from unau- thorized use or disposition and that its acconntmg records are sufficiently reliable to permit the preparation of financial statements that conform in all material respects with generally accepted accounting principles. KPMG Peat Marwick LLP, independent auditors, are engaged to render an independent opinion regarding the fair presentation in the financial state- ments of the Company's financial condition and oper- ating results. Their report appears below. Their examination was made in accordance with generally accepted auditing standards and included a review of the system of internal accounting controls to the extent they considered necessary to determine the audit proce- dures required to support their opinion. The Audit Committee of the Board of Directors is composed solely of directors who are not employees of the Company. The Committee meets periodically and privately with the independent auditors, with the internal auditors and with the financial officers of the Company to review matters relating to the quality of the financial reporting of the Company, the internal accounting controls and the scope and results of audit examinations. The Committee also reviews com- phance with the Company's statement of policy as to the conduct of its business, mdudmg proper account- ing and deahng with ao&tors. In addition, it is responsible for recommending the appointment of the Company's independent auditors, subleer to stockholder approval. INDEPENDENT AUDITORS' REPORT Peat Marwick LLP THE STOCKHOLDt-]RS AND BOARD OF I) IRECTORS OF TFIE GILLETI'E COMPANY We have audited the accompanying consolidated bal- ance sheet of The Gillette Company and subsidiary companies as of December 31, 1995 and 1994, and the related consolidated statements of income and earn,rigs reinvested in the business and cash flows for each of the years m the three-year period ended December 31, 1995. These consolidated finanoal statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consoh- dated financial statements based on our audits. We conducted our audits in accordance with gener- ally accepted auditing standards. Those standards reqmre that we plan and perform the audit to obtain reasonable assurance about whether the financial state- ments are free of material misstatement. An audit includes examining, on a test basis, evidence support- ing the amounts and disclosures in the financial state- ments. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financml statement presentation. We believe that our audits pro- vide a reasonable basis for our opinion. In our opinion, the consolidated financial state- ments referred to above present fairly, in all material respects, the financial position of The Gillette Com- pany and subsidiary companies at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity xvith gener- ally accepted accounting principles. In 1993, the Company changed its methods of accounting for income taxes, postretirement medical benefits and postemployment benefits. Boston, Massachusetts January 23, 1996 ~27~ THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME AND EARNINGS REINVESTED IN THE BUSINESS {Mfihons of dollars, except per share amounts} Yea rs Ended Decem her 31, 1995, 1994 and 1993 1995 1994 1993 Net Sales ............................ S6,794.7 $6,070.2 $5,410.8 Cost of Sales .......................... 2,540.2 2,221.9 2,044.3 Gross Profit .......................... 4,254.5 3,848.3 3,366.5 Selhng, General and Adntinistrative Expenses ........... 2,883.2 2,621.6 2,279.2 Realignment Expense ...................... -- _ 262.6 Profit from Operations ...................... Nonoperating Charges (Income} lnterest income ........................ Interest expense ........................ Ot her charges - net ...................... Income before Income Taxes and Cumulative Effect of Accounting Changes ................. Income Taxes .......................... Income before Cumulative Effect of Accounting Changes ..................... Cunmlanve Effect of Accounting Changes ............. Net Income ........................... Preferred Stock dividends, net of tax benefit ............ Net Income Available to Common Stockholders .......... Earnings Reinvested in the Business at beginning of year ....... Common Stock dividends declared ................ 1,371.3 1,226.7 824.7 (9.9) (19.0} {27.3) 59.0 61.1 .59.8 25.3 80.5 109.5 74.4 122.6 142.0 1,296.9 1,104.1 682.7 473.4 405.8 255.8 823.5 698.3 426.9 -- -- (138.6} 823.5 698.3 288.3 4.7 4.7 4.7 818.8 693.6 283.6 2,830.2 2,357.9 2,259.6 3,649.0 3,051.5 2,543.2 266.3 221.3 185.3 $2,830.2 $2,357.9 F. arning~ Reinvested in the Bnsmess at end of )'ear ......... S3,382.7 Income per Common Share before Cumulative Effect of Accounting Changes ................. S 1.85 Cumulative F. ffect of Accounting Changes ............. -- Net Income per Common Share .................. S 1.85 $ 1.57 $ .96 -- L32} $ 1.57 $ .64 D~videuds declared per common share ............... $ .60 \%~ghted average number of common shares outstanding (nullions}.. 443.5 See accompanying Notes to Consohdated Fmanoal $tatelllents. $ .50 $ .42 442.3 440.9 'FILE GILLETTE CO.MI'AN Y AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (Mithons of dollarsl December 31, 1995 and 1994 1995 Assets Current Assets Cash and casb equivalents .......................... S47.9 Short-tern~ investments, at cost, which approximates market value ........ 1.6 Receivables, less allowances: 1995 - $59.2; 1994 - $52.1 ............ 1,659.5 inventories ................................. 1,035.1 Deferred income taxes ............................ 220.2 Prepaid expenses .............................. 140.2 Total Current Assets ........................... 3,104.5 Property, Plant and Equipment, at cost less accunmlated depreciation ....... 1,636.9 Intangible Assets, less accumulated amortization ................. 1,221.4 Other Assets ................................. 377.5 S6,340.3 Liabilities and Stockholders' Equity Current Liabilities Loans payable ............................... $ 576.2 Current portion of long-term debt ...................... 26.5 Accounts payable and accrued liabilities .................... 1,273.3 Income taxes ................................ 248.0 Total Current Liabilities .......................... 2,124.0 Long-Term Debt ............................... 691.1 Deferred Income Taxes ............................ 72.7 Other Long-Term Liabilities .......................... 919.2 Minority Interest ............................... 20.0 Stockholders' Equity 8.0% Cunmlativc Series C ESOP Convertible Preferred, w~thout par value, Issued: 1995 - 160,701 shares; 1994- 162,928 shares ............ 96.9 Unearned ESOP compensation ........................ (34.31 Common stock, par value $1 per share Authorized 1,160,000,000 shares Issued: 1995 - 559,718,438 sitares; 1994 - 558,242,410 shares ........ 559.7 Additional paid4n capital .......................... 31.1 Earntugs reinvested in the business ...................... 3,382.7 Cmrmlat~vc foreign cmrency trauslation adjustments .............. (477.0) ']'reasury stock, at cost: 1995 - 115,254,353 shares; 1994 - 115,343,404 shares ........... {1,045.81 Total Stockholders' Equity ......................... 2,513.3 S6,340.3 See accompan) mg Notes io Coosohdated Financml §latemerits. 1994 $ 43.8 2.3 1,379.5 941.2 220.6 113.0 2,700.4 1,411.0 887.4 314.6 $5,313.4 $ 344.4 28.1 1,178.2 185.5 1,736.2 715.1 53.1 774.3 17.4 98.2 (44.2) 558.2 (1.4) 2,830.2 (377.1) {1,046.61 2,017.3 $5,313.4 ~29~ TIlE GILLETTE COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (/vhllioas of dollars} Years Ended December 31, 1995, 1994 and 1993 1995 1994 1993 Operating Activities Net income .......................... S823.5 $698.3 $288.3 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of accounting changes ........... -- -- 138.6 Provision for reabgnment expense .............. -- -- 164.1 Depreciation and amortization ................ 248.4 215.4 218.5 Other .......................... (3.1) 15.1 51.8 Changes in assets and liabilities, net of effects from acquisition of businesses: Accounts receivable .................... (286.1) (147.41 (101.8) Inventories ........................ (94.1) (66.71 (56.0) Accounts payable and accrued habflitics .......... 67.0 93.7 10.8 Other working capital items ................ 60.7 37.4 (30.7) Other noncurrent assets and liabilities ........... 4.2 (40.3} 48.1 Net cash provided by operating activities ......... 820.5 805.5 731.7 Investing Activities Additions to property, plant and eqnipment ........... (471.1) (399.8} (352.0) D~sposals of property, plaut and eqmpment ........... 30.0 24.9 10.2 Acqtnsition of businesses, less cash acquired ........... (276.7} (25.6) (452.9) Other ............................ 12.1 16.9 (35.6) Net cash used in investing activmcs ........... (705.7) (383.6} (830.3) Financing Activities Proceeds from exercise of stock option and purchase plans ..................... 31.6 18.4 24.5 Proceeds fx'orn long-term debt ................. -- -- 500.0 Reduction of long-term debt .................. (19.6} (200.7} (414.81 Increase (decrease} in loans payable ............... 133.6 (12.9} 177.5 Dividends paid ........................ (259.7} (217.1} (183.3} Net cash provided by (used inl financing activities ..... (1 14.1) (412.3} 103.9 Effect of Exchange Rate Changes on Cash ............. 3.4 (2.9} (3.5} Increase in Cash and Cash Equivalents .............. 4.1 6.7 1.8 Cash and Cash Equivalents at Beginning of Year .......... 43.8 37.1 35.3 Cash and Cash Equivalents at End of Year ............ $ 47.9 $ 43.8 $ 37.1 Supplemental disclosure of cash paid for: Inte,'est .......................... $ 62.4 $ 61.6 $ 72.5 Income taxes ........................ $289.1 $240.6 $180.9 Noncash rovesting and financing activmes: Acqnisition of bnsinesses Fair value of assets acqnired ................ $394.9 $ 19.0 $705.8 Cash paid ........................ 278.3 25.6 481.1 Liabilities assumed ................... $116.6 $ (6.6) $224.7 See ac<ompal~ymg Notes to Coasohdated Financial Statements. ~30~' 1It E GI L I. ETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NA-IURE OF OPERA'FIONS The Gillette Company is a global consumer products firm with mannfacturing operations conducted at 50 facilities io 24 cormtries and products distributed throogh whole- salers, retailers and agents in over 200 countries and ter- ritories. Tile Company is the world leader in male grooming products, a category that includes blades and razors, shaving preparations and electric shavers, and also m selected female grooming prodnets, such as wet shaving products and hair epilation appliances. Tile Cornparty ts the world's top seller of writing instruments and correction products and is the world leader in tooth- brushes and oral care appliances. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION The preparation of consolidated financial statements in couformity with generally accepted accounting principles rcqmres management to make estimates and assumptions that affect the reported amounts of assets and haNhties and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of reveuues and expenses. Actual results could differ from those estimates. The consolidated financial statements include the accounts of the Company and its snbsidiaries. Inter- company accounts and transactions are eliminated. Accounts of subsidiaries outside the United States and Canada are included on tile basis of fiscal years gen- erally ending November 30, except for the Braun group of compames, whose fiscal )'ear ends Septemher 30. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash, ume deposits aod all highly hquid debt instruments with an original matra'try of three months or less. INVENTORIES Inventories are stated at the lower of cost or market. In geaeral, cost ~s currently adjusted standard cost, which approximates acthal cost oil a first-m, first-out basis. DEPRECIATION Depreciation is computed primarily on a straight-line basis over the esnmated nseful lives of assets. ADVEP, TISING Advertising costs are expensed m the year incurred. INTANGIBLE ASSETS Intangible assets principally consist of goodwall, which is amortized on tile straight-line method, generally over a period of 40 years. Other intangible assets are amor- tized on the straight-line method over a period of from 13 to 40 years. The carrying amounts of intangible assets are assessed for impairment when operating profit from the applicable related business indicates that the carrying amount of the assets may not be recoverable. NET INCOME PER COMMON SHARE Net income per common share is calcolated by dividing net income less d~vidends on preferred stock, net of tax benefits, by the weighted average number of common shares outstandiog. The calcnlation of fully diluted net income per com- mon share assumes conversion of the preferred stock iuto common stock, and also adjusts net income for the ESOP debt service expense dne to the assumed replacement of the preferred stock dividends w~tb common stock divi- dends. The dilntive effect is uot significant. INCOME 'FAXES The Company reinvests unremitted earnings of foreign operanons and, accordingly, does not provide for Federal income taxes that could result from the remmance of such earnings. These antemitted earnings amoonted to $2.43 billiou at l)ecember 31, 1995. Beginning in 1993, deferred taxes are provided for rising the asset and liability inethod for temporary dif- ferences between financial and tax reporting. RECLASSIFICATI ON OF PRIOR YEARS Prior year financial statements have been reclassified to conform to 1995 presentations. ACQUISITIONS AND I) IVEST1T UR ES In 1995, the Company acquired businesses in the blade and razm; Brann and Oral-B segments and completed payments on a prior acquisition for an aggregate amount of $278 million. These acquisinons have been accounted for by the purchase method of accotinting. Their results of operations, which have been included m the Company's consolidated financial statements, have not materially affected the consolidated financial position or results of operations. In 1994, the Company increased ~ts interest in sev- eral bnsmesses at a total cost of $26 million. a31 ~ TIlE GII. I. ETTIi CO M PA NY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAl. STATEMENTS FOREIGN CURRENCY TRANSLATION Net exchange gaius or losses reshiring front the transla- tion of assets and liabilities of foreign subsidiaries, except those iu highly inflalionary economies, are accumulated m a separate section of stockholders' equity titled, "Cumulative foreign currency translation adjustments." Also included are the effects of exchaoge rate chaoges on intercompany transactions of a long-term iovestment oalure and transactioos designated as hedges of net for- elgn nlvestments. Ao analysis of this acconnt follows. (Mdhons of dollm s) 1995 1994 ] 993 Balance at begmoingof year . . . $(377.1) $(415.0) $1Z6~.2) Traaslation adlustments, includiug the effect of hedging ..... (120.4} 43.0 {154.2} Related income tax effect .... 20.5 {5. l } 4.4 Balance at end of 5'ear ..... $(477.0} ${377.1 } ${415.0) Included io Other charges are net exchange losses of $17.0 milhon, $77.4 nrilhon and $105.4 million for 1995, 1994 and 1993, respectively, primarily relating to subsidiaries in highly inflationary countries, princi- pally Brazil. INVENTORIES (Millions of dollars) Raw matehals and soppbes \Vork m process ...... Funshed goods ...... l)ecember 31, Deccanbet 31, 1995 1994 S 231.8 S 207.3 127.3 95.0 676.0 638.9 $1,035.1 $ 941.2 P R O P E R T Y, P L A N T A N I) E Q u I P M E N T Bu,ldmgs ........ Machinery and cqmpment . Less accumulated depteoatlon $ 37.4 $ 36.9 509.9 465.8 2,714.2 2,3995 3,261.5 2,902.2 1,624.6 1,491.2 $1,636.9 $1,411.0 IN'FANGIBLE ASSETS Goodxull (S43.8 rodlion not sublcct m amortizanon) . Other intangible assets $1,229.4 $ 905.0 187.4 148.1 1,416.8 1,053.1 195.4 165.7 $1,221.4 $ 887.4 ACCOUNTS PAYA BI.E A N D ACCRUED LIABILITIES December 31, December 31, IMdlions of dollars) Accounts payable . . . Advemsmg and sales promotion ....... Payroll and payroll taxes . . Other taxes ....... Interest payable ...... D~vidends payable on common stock .... Reahgmnent expense .... M~scellaneous ...... 1995 1994 S 400.3 $ 334.6 227.5 218.0 221.3 197.8 71.1 45.5 8.8 12.2 66.7 55.4 30.2 107.3 247.4 207.4 51,273.3 $1,178.2 OTH E R I. ON G -TERM LIABILITIES Pensruns ........ S 449.6 S 368.4 l'ostretsrement medical . . . 209.1 193.1 lncennvc plans ...... 131.6 116.6 Realignment expense .... (l 1.0) 15.0 Miscellaneous ...... 139.9 81.2 $ 919.2 $ 774.3 D E B 'F Loans payable at December 31, 1995 and 1994, included $223 million and $142 in)Ilion, respectively, of commer- ctal paper. The Company's commercial paper prograin is supported by its revolving credit facilities. l.ong-term debt is summarized as follows. Decembc~ 31, l)cccmbc~ 31, {Mall)ohs of dollars) Commeroal paper ..... 5.75% Notes due 2005 . . 6.25% Notes due 2003 . 4.75% Notes due 1996 . 8.03% Guaranteed ESOP notes due through 2000 Other, pnmardy forogn currency borrowings Total Iong-te~m den .... 1995 1994 S 150.0 $ 150.0 200.0 200.0 150.0 150.0 150.0 150.0 41.2 51.5 26.4 41.7 717.6 743.2 26.5 28.1 S 691.1 $ 715.1 '~32~ THE GII. I. ETT E COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS At December 31, 1995 and 1994, the Company had swap agreements that converted $500 million m U.S. dollar-denominated long-term fixed rate debt securities into mulu-currency principal and floating interest rate obligations over the term of the respective issues. As of December 31, 1995, the $150 million notes due 1996 were swapped into floating interest rate U.S. dollar obli- gauons, the $150 million notes due 2003 and the $200 million notes due 2005 were swapped to Deutschmark principal and floating interest rate obligations, resuhmg in an aggregate principal amount of $533 million at a weighted average interest rate of 4.7%. At December 31, 1994, the aggregate principal amounted to $500 raftlion, with a weighted average interest rate of 5.6%. In addition, at December 31, 1995, the Company had a forward exchange contract, mathring m 1996, that established a $42 million Yen principal, .5% interest obligation with respect to $43 milhon of U.S. dollar com- mercial paper debt included in Long-Term Debt. At December 31, 1994, the Company had forward exchange contracts that established Deutschmark and Yen pfinctpal and interest obliganons with respect to $119 rodlion of U.S. dollar conunercial paper debt included m Long-Term Debt, with a weighted average mterest rate of 3.7%. Exchange rate movements gtve rise to changes m the values of these agreements that offset changes in tile val- ties of tbe underlying exposure./unonnts associated with these agreements were liabilities of $32.6 mfibon at I)ecember 31, 1995, and were nil at December 3 I, 1994. Tile weighted average interest rate on Loans payable was 5.8% at December 31, 1995, and 6.5 % at Decem- bet 31, 1994. The weighted average interest rate on total Irmg-term debt, including associated swaps and excluding the guaranteed ESOP notes, was 4.7% at December 31, 1995, compared with 5.3% at December 31, 1994. The Company has a $100 raftlion revolving bank credit agreement that exptres in June 1996 and a $300 mfihon revolving bank credit agreement expiring in June 2000, both of which may be nsed for general corporate pnrposes. Under the agreements, the Company has tile opnon to borrow at vanons interest rates, mdndmg tile prime rate, and ts reqmred to pay a weighted average facility fee of .065% per annnm. At year-end 1995 and 1994, there were no borrowings tinder these agreements. Based on the Company's nltelmon and abthty to maintain tts $300 millton revolving credit agreement beyond 1996, $150 milhon of commercial paper borrowings and tile S 150 million notes dne 1996 xvere classified as long-term debt at December 31, 1995. As of December 31, 1994, $150 mtlhon of commeroal paper borrowings was so classified. Aggregate maturines of total long-term debt for the five years subsequent to December 31, 1995, are $176.5 million, $15.1 million, $10.7 million, $8.8 ntillion and $5.1 mdlion, respecnvely. Unused hnes of credit, including the revolving credit facilittes, amounted to $1.02 billion at December 31, 1995. FINANCIAl. INSTRUMENTS The Company uses financial instruments, principally swaps, forward contracts aitd options, to manage for- eign currency and interest rate expostires and to hedge certain employee benefit costs. These coutracts hedge transactions and balances for perrods consistent with its committed exposures and do not consmute illvest- meres lodependent of these exposnres. Tile Company does not hold or issue financial instruments for trading purposes, nor ts it a party to any leveraged contracts. Realized and unrealized foreign exchange gatns aod losses on financial nlstruments are recogmzed and offset foreign exchange gains and losses on the underlying exposures. The interest differential paid or received on swap and forward agreements is recognized as an adjust- merit to interest expense. In December 1995, the Company purchased an out- of-the-money, foreign currency weighted-average basket put opuon that partrally protects 1996 U.S. dollar results of foreign operations in selected currencies. The strike price ~s $847 milhon, xvitb a cost of $4.7 million. The option, xvNch matures m ! 996, is marked to market and included within profit from operauons. At December 31, 1994, similar contracts, which expn'ed unexerc~sed in 1995, had a strike price of $520 mllhon and a cost of $5.7 railhon. The Company has also hedged certain employee beoefit expenses linked to ~ts stock price by entering ~nto eqmty swap and option contracts that mature m 1998 and 2002, respectively. At December 31, 1995, tile nottonal principal amount of such coiltracts was $33 million, with a cost of $2.8 million. The cost ~s amortized over the duranon of tile contracts, and gains or losses are recognized as adjustments to tile carrying amount of the underlying habdities. The above amounts exclude the sxvap and forward agreements described in the Debt note. 433~. THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Several major international financial institutions are counterparties to the Company's financial iristruments. It is Company practice to mouitor the financial standing of tile counterparties and to limit the amount of exposure w~th arty one institution. The Company may be exposed to credit loss m the event of nonperformance by the counterparties to these contracts, but does not anticipate such nonperformance. With respect to trade receivables, concentration of credit risk is limited, due to the diverse geographic areas covered by Company operations. Any probable bad debt loss has been provided for m the allowance for doubtful accounts. The estimated fair' values of the Company's finan- cral instruments are summarized as follows. (Mfilions of dollars) December 31, 1995 Long-term investments .... $ 86.7 Total long-term debt ..... (717.6} Foreign currency and interest rate contracts ....... { 19.6) Equity contracts ....... 3.2 December 31, 1994 Long-term mvesnnents .... $ 63.8 Total tong-term debt ..... {743.2} Fore~gu corrency and interest rate contracts ....... Carrying Estimated Amount Fair Value 89.3 {722.2} (25.9) 3.3 $ 63.8 (685.3} 10.3 {53.6} The carrying amounts for cash, short-term invest- ments, receivables, accotints payable and accrued liabili- ties, and loans payable approximate fair value because of the short maim'try of these instruments. The fair value of long-term investments is estimated based on quoted mar- ket pnces. Tile fair value of long-term debt, including the cnn'ent portion, is estimated based on current rales offered to tbe Company for debt of the same remaining maturities. 'File fair values of foreign curreucy, interest rate and equity contracts are estimated based on dealer quotes. These values represent the estimated amount tile Company would receive or pay to terminate agreements, taking into consideration current market rates and the current creditworthiness of tbe couuterpartles. REALIGNMENT PLAN In the fourth quarter of 1993, the Company estab- lished a reserve for a realignment plan reshiring in a 1993 fourth quarter charge to profit from operations of $262.6 million ($164.1 million after taxes, or $.37 per share}. The realignment reserve included costs Ihat are classified illto two major categories as follows: 1. Costs associated w~th the closure and disposal of major manufacturing facilities in all business seg- ments, due principally to excess manufacturing capacity caused by falling global trade barriers. Through December 31, 1995, $68.1 million has been charged agaiust the original reserve of $72.0 million. 2. Costs associated ~vitb orgauizational reabgnment and related work force reductions to improve the Company's competitive posrtiomng of its business and adaptation to the continning tteud of more open world trade. As of December 31, 1995, $175.3 million was charged against the original reserve of $190.6 million. Through December 31, 1995, cash expenditures, after income tax effects, amounted to $43.3 milbon, noncasb costs amounted to $108.8 million and 2,208 positions were eliminated. All realignment projects have been implemented, and activities are ongoing in 1996. LEASE COMMITMENTS Minimum rental commitments under noncancellable leases, pnmarily for office and warehouse facdities, are $43.3 million in 1996, $34.8 milhon in 1997, $27.2 mdlion in 1998, $21.3 milhon in 1999, $16.3 million in 2000 and $12.6 million for years thereafter. Rental expense amounted to $68.2 million in 1995, $63.2 million in 1994 and $60.5 milhon iu 1993. RESEARCH AND DEVELOPMENT Research and development costs, ~ncluded in selling, general and admimstrative expenses, amounted to $153.0 million in 1995, $136.9 million m 1994 and $133.1 million in 1993. TIlE G I I.I. ET'[ E CO M PANY AND SUBSIDIARY COM PA NIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS INCOME TAXES Deferred income taxes are recognized for the expected tax consequences of temporary differences by applying enacted statntory tax rates, applicable to future years, to differences between the financial reporting basis and tax basis of assets and liabilities. Income before income taxes slid income tax expense are snmmarized below. (Mallions ot do}larsl 1995 1994 1993 hleOlrle before illcome taxes Urnted States ...... $ 452.4 $ 426.6 5,271.7 Foretgn ........ 844.5 677.5 411.0 Total income before income taxes ...... $1,296.9 5,1,104.1 $682.7 Current tax expense Federal ........ l:ore[gn ........ State ......... Deferled tax expensc Federal ........ Foreign ........ .State ......... Total income lax expeuse 193.5 S 81.6 S 88.7 218.9 208.2 222.7 41.0 27.4 37.1 116.1) 42.4 {15.8} 42.2 39.2 173 9) {6.1) 7.0 {3.0) 473.4 $ 405.8 5,,255.8 An analysis of deferred tax expense/{benefitl follows. lMdhons of dollars} 1995 1994 1993 l)eprecmt~on ....... S 26.4 5' 6.2 $ 2.6 Benefit plans ....... 130.2} 16.4 {5.6} Realignment program .... 38.7 52.6 I98.5} Other .......... (14.9) 13.4 8.8 Total dcferred lax expense (benefit} ..... .5, 20.0 $88.6 ${92.7} A reconcibatton of tbe statutory Federal income tax rates to the Company's effecuve tax rate follows. {Percent} 1995 1994 1993 The components of deferred tax assets and deferred tax liabdities are sbown below. 1995 1994 De/erred Defined Deterred Deftfred Tax Tax Tax Tax {Milhoas of dollars} Assets l,~abdntes Assets l,tabflmes Current Reahgnment program .... 5, 7.2 5, -- $ 40.3 5' -- Benefit plans . . . 49.7 -- 38.6 -- Advernsing and sales promonou . I 1.4 -- 15.4 -- Inventory reserves . 12.1 -- 17.6 -- M~sc. reserves & accruals .... 24.6 -- 13.4 -- All other . . . . 115.2 -- 95.3 -- Total Current . . 220.2 -- 220.6 -- Noncurrent Beliefit plaits . . . 80.3 -- 61.2 -- Propell}; plant and eqmpment . -- 137.6 -- 111.2 Reahgmnent program .... -- -- 5.6 -- All other .... -- 15 4 -- 8.7 Total Noncurrent 80.3 153.0 66.8 119.9 NetNoncurtent. . . $ 72.7 S 53.1 Net Deferred Fax Assets ..... 5,147.5 5167.5 CONTINGENCIES The Company ts subject to legal proceedings and claims arising out of ~ts business that cover a wide range of matters, inclndmg antttrust and trade regula- tion, contracts, environmental issues, product liability, patent and trademark matters and taxes. Management, after review and consultation wtth counsel, constders that any liability from all of these pending lawsuits and claims xvould not materially Statntory Federal tax rate 35.0% 35.0% Rate d~ffcrentml on tore~gn income ..... { 1.8} 1.0 Effect of foreign curreac~. t~anslatmn ........ 5 (.1} State taxes (net of Federal tax beaefits} 1.8 2.0 Other differences .... 1.0 11 .I } Effectn'e tax rate ..... 36.5% 36.8% 35.0% affect tbe consohdated financial posttion, results of operations or liquidity of the Company. 13.4} 4.1 3.2 0.4} 37 5% n35~. THE GILI. ETTE COMPANY AND SUBSIDI A RY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PENSION PLANS The Company has nonconttibntory deftned benefit pension plans m effect for substantially all of its domesue employees. Bette{its are based on age, years of service and the level of compensation during the final years of employment. The funding policy of the Com- pany for these plans is to contribute annually the amotmt necessary to meet the minimnm funding stan* dards established by the Employee Retirement Income Secority Act. In addition, the Company has various 1995 (Millions of dollars} Domestic Defined Benefit Plans Service cost--benefits earned ........ $ 15.2 lntercst cost on proleered beuefit obhganon . . Actual 0'eturnl loss on plan assets ...... Net amortization and defer ral ....... foreign reurement programs, including defined benefit, defined contribution and other plans, covering the majority of foreign employees. In German)', onder common local practice and enabling tax lax~; pensitm costs are accrned but unfnnded. Total pension expense for 1995 was $86.0 million, compared with $69.6 tnillion and $57.0 million in 1994 and 1993, respectively. The components of net pension expense follow. 1994 1993 Foreign Domeshe Foreign l)omesnc Foreign $ 27.5 $ 15.0 S 25.2 S 123 $ 20.1 50.4 47.0 42.0 40.1 38.1 35.5 (149.3) (37.1} 1.7 {28.3} 146.3} 164.5) 113.6 28.9 (37.8} 3.2 9.9 46.0 29.9 46.3 20.9 40.2 14.0 37 1 Other Pension Costs Dcfiued contnbunou plans ......... -- 3.6 -- 3.0 -- 1.7 Fore:gn plans not on SFAS 87 ........ -- 6.2 -- 5.5 -- 4.2 Total Penssou Expense .......... $ 29.9 $ 56.1 S 20.9 S 48.7 S 14.0 $ '13.0 Tbe funded status of the Company's principal defined benefit plans and the amonnts recogmzed in the balance sheet at December 31 follow. (Mallions of dollars) Vested benefit ............. $554.9 $ 569.2 $428.5 $ 480.7 $431.I $ 438.8 Nonvested benefit ............. 82.5 30.1 78.9 25.1 70.4 22.0 Accumulated benefit obhgauon ........ 637.4 599.3 507.4 ,505.8 501.5 460.8 Benefit obhgatmn related to future compensatzon levels ........... 147.8 81.4 99.6 78.7 108.8 66.4 Proleered benefit obhgation ......... 785.2 680.7 607.0 384.5 610.3 527.2 Fmr value o{ pl~u assets, rovested pnmaril} m equines and debt securities ........ 641.3 324 5 491..5 291.9 489.4 268.1 Plan assets less than pt Olected benefit obligation {143.9} (356.2} {115.,5} {292.61 {120.9} (259.11 Um ecogmzed transnion obhgation {asset} ..... 3 12. I . I 1 1.0 {2.31 10.8 Unrecognu~ed prior service cost ........ 21-0 9.9 24.6 11.3 27.4 9.5 Unrecognized uct loss ......... 158.0 43.5 124.3 37.6 117. I 44 3 Mmm~um habflity adlustment ....... {23.3~ ( 16.8} (2.4) {8.21 {8.9~ {15 4} Net prepaid lacerued} pensum cost included mconsohdatedbalaucesbeet ........ $ 12.1 $(307.5} S 31.3 ${240.9} $ 12.4 $(209.9} ]'he primary assumptiotts used m determining related obligations of the plans are shown beloxv. (l'erccm) D~scountrate ............. 6~ 6 - 9 8% 5 - 9 Increase in tompensanon levels ....... 5 3 %- 6 5 3 %- 6% I,ong-term rate of return oll as',ets ...... 9 6 -10'/~ 9 5 -I 0 7 5 -9 31/2- 9 5 -10 THE GII. LETTE COMPANY AND SUBSIDIARY COM PAN[ ES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS O TH E R POSTRETIREMENT BENEFITS The Company and ~ts subsidiartes also provide certain health care and life insurance benefits to eligible retired employees, principally in the United States. Substantially all of the Company's domestic employees and some employees m foreign countries become eligible for these benefits npon retirement. Domestic participants retiring after January 1, 1992, are required to pay some portion of such medical costs if hired before July 1, 1990, or all of sucb costs it bired after that date. The Company's employee stock ownership plan (ESOP} was established to assist in financing retiree medical costs. Effective January 1, 1993, the Company adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," for U.S. operanons and recogmzed immediately the aftertax transmortal obligatton of $109 million as a cumulative effect of an accounting change. For foreign operations, adop- tion ~vas made m 1995, xvitb immatertal effect to the financial position and results of operations. Tbis stan- dard requires that the cost of these benefits be recog- nized in tile financial statements during employees' active xvorking lives. The other postretirement benefit expense for 1 995, 1994 and 1993 was $15.1 million, $12.1 million and $9.2 nrillion, respectively. The components of tile net expense follow. {Mdhons of dollars} 1995 Interest cost .......... $ 19.1 1994 1993 $ 15.7 $ 14.7 Service cost incrune ....... (2.9) 14.4) (5.2} Actual return on assets ..... (3.4) -- (.4) Net amomzanon and expense. . 2.3 .8 .1 Oilier posn'entement benefit expense .......... $ 15.1 $ 12.1 $ 9.2 'I'he status of the Company's prtnc~pal plans and the amonnts recognized m the balance sheet follow. (Mdhons of dollars} 1995 1994 1993 P, cnrees .......... $171.1 $146.8 $113.0 Fully eltg~ble active employees . . . 20.7 25.5 32.8 Other a,_tlve employees .... 26.5 45.7 65.4 benefit obliganon ....... 218.3 218.0 211.2 Fan' ,.aluc of plan assets ..... {17.4} (10.31 (7.2} Unrccogmzcdnctgam(lossl . . . 8.2 {14.6} {10.1} Accrued postretirement habdity . . $209.1 $193.1 $193.9 The accnmulated postretirement benefit obhgation in tile United States was determined using an assumed discount rate of 6.75%, 8.5% and 7% in 1995, 1994 and 1993, respectively. The assumed health care cost trend rate was 13% in 1993, 12% m 1994 and 11% ~n 1995, decreasing to 5% by the year 2001. A one per- centage point increase in the trend rate would have increased the accumulated postretirement benefit obli- gation by 14%, and interest and servtce cost by 11%, in 1995. Outside the United States, the asstnnptions used xvere consistent with, but not identical to, those used domestically. ESOP shares allocated to participants reduce Corn- pan)' obligations over the period of allocation. The account balance ~s assumed to have an annual yteld of 12%. In addition, the Company estabhshed a retiree health benefits account within its domestic pension plan that xvill be used to partially fund health care ben- efits for futnre retirees. EMPLOYEE STOCK OWNERSHIP PLAN In 1990, the Company sold to the ESOP 165,872 sbares of a new issue of 8% cumulative Series C con- vertible preferred stock for $100 million, or $602.875 per share. Each share of Series Cstock is entitled to vote as tf tt were converted to commol't stock and is convertible into 40 common shares at $15.07188 per share. At December 31, 1995, 160,701 Series C shares were out- standing, of which 103,860 shares were allocated to employees and tile remaining 56,841 shares were held m tile ESOP trust for futnre allocations. Tile 160,701 Series C shares are equivalent to 6,428,054 shares of common stock, about 1.4% of the Company's out- standing voting stock. 'Fbe Series C stock ~s redeemable upon the occnr- renee of certain changes in control or other events, at tile optton of the Company or tile holder, depending on the event, at varying prices not less than the purchase price pins accrued dividends. The ESOP purchased tile Series C shares witlr bor- rowed funds guaranteed by tile Company. The ESOP loan principal and interest ~s being repaid on a semi- annual basis over a 1 O-year period by Company contri- bntions to the ESOP and by tile dividends paid on the Series C shares. q37~' TIlE GII. E ETT E COMPANY AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As tile ESOP loan is repaid, a corresponding amount of Series C stock held m the trust is released to participant accotorts. Allocations are made quarterly to the accounts of eligible employees, generally on the basis of an equal amount per parncipant. In general, regular U.S. employees participate in the ESOP after completing one year of service with the Company. The tlnpaid balance of this loan is reported as a hability of the Company. All unearned ESOP compen- sation amount is reported as an offset to tile Series C share amount in the equity section. Plan costs and activity for this plan follow. (Mflhons ot~ dollars) 199.5 1994 1993 Compensation expense ..... $ 6.0 $ 6.4 $ 8-5 Cash conmbutitms and d~v~dends paid ........ 14.2 13.9 15.8 Principal payments ....... 10.3 9.2 10.3 huerest payments ....... 3.9 4.7 5.5 PREFERRED STOCK PURCHASE RIGttTS At December 31, 1995, the Company had 56,361,517 preferred stock pro'chase rigbts outstanding as folloxvs: one-eighth of a right for each outstanding share of common stock and a total of 803,507 rights for the outstanding Series C preferred stock. Each right may be exercised to purchase one two-hundredth of a share of jumor participating preferred stock fol $160. The rights only become exercisable, or separately transfer- able, 10 days after a person acquires 20% or more, or 10 business days after a tender offer commences that conld result m ownersNpof more than 30%,of the Company's common stock. lfany person acquires 30% or more of the com- mon stock (except in an offer for all cottanon stock that has been approved by the Board of Directors}, or in the event of certaio mergers or other transactions involving a 20% or more stockholder, each right not owned by that person o,' related parues will enable its holder to purchase, at tile right's exercise price, com- nlon stock (or a combinauon of common stock and other assets} having double that value. In the event of certain merger or asset sale transactions with another part)', similar terms would apply to the purchase of that party's common stock. The rights, xvh~ch have no voting power, expire on December 9, 1996. Upon approval by the Boai'd of Directors, tile rights may be redeemed for $.01 each under certain conditions, which may change after any person becomes a 20% stockholder. At December 31, 1995, there were authorized 5,000,000 shares of preferred stock w~thout par value, of which 161,701 Series C shares were issued and out- standing and 400,000 Series A shares were reserved for ~ssuance upon exercise of the rights. Pnrsoant to action by the Board of Directors on December 14, 1995, effective with tile expiration or ear- lier termination of the existing rights, one new right for each share of common stock outstanding and 40 new rights for each share of Series C preferred stock ontstand- mg will be issned. Each new right will initially represent the right to purchase one ten-thousandth of a share of jnmor participating preferred stock for $225. ]'he new rights will only become exercisable, or separately trans- ferable, on the earlier of the tenth business day after the Company aimounces that a person has acquired 15 % or more, or the tenth business day after a tender offer com- mences that could result in ownerslnp of more tban 15 %, of the Company's common stock. If any person acqmres 15% or more of the com- mon stock {except m an offer for all commou stock that bas been approved by tbe Board of Directors}, or in the event of certain mergers or other trailsactions involving a 13% or more stockholder, each new right not owned by that person or related parties wfil enable its holder to purchase, at the new nght's exercise price, common stock (or a combinauon of common stock and other assets) hav,ng double that value. In the event of certain merger or asset sale transactions with another part5', similar terms would apply to the purchase of that party's common stock. The new rights, which have no voting power, expire on December 14, 2005, subject to extension. Upon approval by the Board of Directors, tile rights may be redeemed for $.01 each under certain con&- tions, which may chaoge after any person becomes a 15% stockholder. THE GII, 1. ETT E COMPANY AND SUBSIDIARY CO MPANI ES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS COMMON In April 199,5, stockholders voted to iucrease the authorized $1 par value common stock from 580 million shares to 1.16 billion shares. Accordingly, as previously authorized by the Boai'd of D~rectors, the S'I'O C K A N D ADDITIONAL PAI D - IN CA PITA I, 100% cornmoo stock dividend to stockholders of record Jnne 1, 1995, having the effect of a two-for-one split, became effective. All share information has been adjusted for this stock split. Balance ai December 31, 1992 ....... 555,748 Conversion of Set,es C ESOP Preferred Stock . -- Stock optioo and purchase plans ....... 1,427 Balaocc at Decembe~ 31, 1993 557,175 Convosioo of Series C ESOP Preferred Stock -- Stock optran aad purchase plans ....... 1,067 Balance ai December 3 I, 1994 ....... 558,242 Conversmn of Series C ESOP Preferred Stock . -- Stock opnon and prochase plans ....... 1,476 Balance at I)ecember 31, 1995 ....... 559,718 (Mfihons of dollarsl (Thousands of sharesJ Comnron Stock Addmonal - Common Pmd-m 'l'reasurv Issued 1, Treasury Outstanding Stock Capital Stock' {115,410} 440,338 ,5555.8 5{41.0} $(I,047.2} 14 14 -- .I .1 -- 1.427 1.4 21.7 -- {115,396} 441,779 5572 (19.2} {1,047.1} 53 53 -- .3 .5 -- 1,067 1.0 17.5 -- {115,343} 442,899 558.2 {1.41 O,046.61 89 89 -- .5 .8 -- 1,476 1.5 32 0 -- (I 15,254} 444,464 S559.7 $ 31.1 5(I,045.,q) STOCK OPTION AND STOCK EQU 1995 Per Share {Thousaod~ of shares) Shares Olmon Price Outstandmg at begnmmg of year . ..... ll,190 $23.41 (hahted ............... 3,964 41.86 Exercised .............. {1,7351 19.39 Cancelled .............. {62} 38.61 Out~,iandmg ai end of )'car ........ 13,357 29.33 Shares reserved for future grants. ...... 8,963 Tire Stock Opnoo Plan aothor~zes the granting of opnons oil shares of the Company's common stock to selected key employees, including those who also may be officers, a,d to nonemployee du'ectors, at not less thao the fair market value of the stock ou the date of graot. All outstanding opuons have 10-year terms and are exercisable one year from tile date of grant, pro- vlded tile employee optrenee ~s still employed or the &rector continues to serve. The plan also pertmrs pay- merit for opnons exercised in shares of the Company's cornmoo stock aud the granting of incentive stock opti(ms. The Stock Purchase Plan provides for tile sale at fair market value of the Company's commou stock to selected key employees, excluding officers and direc- tors. At December 31, 1995, 232,138 shares were reserved for ~ssuance uoder the plan. The Stock Eqmvalent Unit Plan provides for awards of basic stock traits to key employees, although awards IVALENT UNIT PLANS 19 94 1993 Average Average Per Sha~c Per Share Shares Opuon P.ce Shares Optran Price 9,084 518.59 8,694 516.42 3,294 34.00 1,964 24.20 { I, 154) 15.44 { 1,530} I 3.46 {34! 30.57 {44} 19.94 t 1,190 23.41 9,084 18.59 12,864 124 have not been made to execotive officers since 1990. Each umt is treated as eqmvale~lt to ooe share of tile Co,lpany's common stock. However, the employee only recewes appreciation, if an)', m the otarket value of the stock and dMdeud equivalent tinits as dwidends are prod. Appreciation on basic stock units ~s limited to 100% of the original market value. Bettefits accrue over seven years and vesting commences m the third )'ear. Plan expense amounted to $26.7 millioo io 1995, $19.1 miJhon m 1994 and $14.5 million m 1993. In 1995, the Financial Accoatmng Standards Board ~ssued SFAS No. 123, "Accotinting for Stock-Based Com- pensanon," which permits either recording file estimated value of stock-hased compensanon over the applicable vesting period or disclosing the unrecorded cost and the related effect oil earnings per share in the Notes to the Fman- oal Statements. The Company wdl apply current account- mg rules and will comply with tile &sclosm-e provision. '~39 · TIlE GILLE'I TE C O M PANY AND SUBSIDIA RY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F I N A N CIA L I N FOR iVl ATI ON BY BUS IN E S S S EG M EN T (Mallions of dolIars} Blades & Tofiemes & Stanonery Braun Oral-B 1995 Razors Costaeries Products Products Products Other Co[porate Total Net sales ...... $2,634.7 SI,236.2 S 862.2 51,621.1 $440.0 S .5 $ -- 56,794.7 Profit from operanons 960.7 74.9 108.7 254.9 32.9 {.41 {60.4) 1,371.3 Idenhfiable assets . . 2,123.0 695.3 1,171.2 1,483.1 523.6 3.3 340.8 6,340.3 Capital expendm~res . . 219.5 54.4 43.5 110.5 39.6 .1 3.5 471.1 Deprecmnon ..... 84.6 28.4 19.1 69.8 11.6 .4 3.6 217.5 1994 Net sales ...... 52,350.7 .$1,162.0 S 806.7 51,348.2 .5401.9 S .7 $ -- S6,070.2 lhofii from operanons 878.2 79.3 94.9 200.4 25.0 (.5) (50.6) 1,226.7 ldetmfiable assets . . . 1,833.6 615.2 1,103.4 1,089.9 347 5 3.0 320.8 5,313.4 Capital expendm~res 181.1 33.0 30.4 110.0 38.2 .4 6.7 399 8 l)eprec~ahon ..... 72.5 20.2 23.8 57.3 8.0 .4 1.9 184.1 1993 Netsales ...... 52,117.6 .$$1,047.1 S 633.1 51,248.8 5363.1 $1.1 5- $5,410.8 Profit irronl operations* 692.2 {6.2} 27.0 146.4 16.9 (.61 (51.01 824.7 Identifiable assets . . 1,629.5 619.3 1,063.0 955.0 306.6 1.2 384.6 4359.2 Capital expenditures 161.7 40.5 23.7 90.5 27.7 1 7.8 352.0 Deprecianon ..... 73.0 20.5 19.8 64.4 8.2 3 2.8 189.0 "After reahgnlnenl expense of ..... 104.3 64.6 37.5 20.9 28.7 -- 6.6 262.6 FINANCIAL (Mdhons of dollars} 1995 Net sales ...... Profit from operanons ldeonfiable assets 1994 Net sales . . . Profit frOill operailons ldenhfiablc assets . . 199~ Net sales ...... Profit tro~ll operatrans' . Iden.fiable assets - . 'After icahgllmeln expense of .... INFORMATION BY GEOGRAPHIC AREA \'(k'ster u Latin Total Urnted Europe America Other Forogn States Corporate Total $2,470.2 $877.9 $1,381.8 54,729.9 $2,064.8 $ -- $6,794.7 540.6 203.8 290.7 1,035.1 396.6 {60.4} 1,371.3 2,872.0 691.3 722.4 4,285.7 1,713.8 340.8 6,340.3 52,119.3 5859.8 51,146.6 $4,125.7 $1,944.5 $ -- 56,070.2 438.3 228.9 225.0 892.2 385.1 (50.6) 1,226.7 2,380.8 629 7 645.1 t,655.6 1,337.0 320.8 5,313.4 $1,948.9 $761.7 S 940.7 53,651.3 $1,7595 $- $3,410.8 316.0 177.6 125.8 619.4 256 3 (51.0) 824.7 2,191.8 626.4 502.0 3,320.2 1,254.4 384.6 4,959.2 109.8 39.6 30.6 180.0 76.0 6.6 262.6 SEGMENT Prtlfit from operations is net sales less cost of sales and selhng, general and adminlstlatlve expenses, but is not affected either by nonoperating charges/laconic or by income taxes. Nonoperatnlg charges/income COilSiSIs principally of net lorerest expense and exchange losses. In calculatnlg profit from operations for individual business segments, substantial expenses incurred at the operating level which are common to more than one seg- ment are allocated on a net sales bas~s. Certain headquar- ters expenses of an operational nature also are allocated AND AREA COMMENTARY to business segments and geographic areas. The principal products mchlded in eacb of the Company's major business segments are described ,n the review of operations, which appears earlier. All intercolnpany transactions have been elilm- hated, and transfers of finished goods between geo- graphic areas are not significant. Assets in the Corporate colmBll ll~clude deferred income tax assets, preprod and intangible pension assets, oil and gas ~nvestments, and nonqualified benefit trusts. THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES OTHER FINANCIAL INFORMATION BUSINESS SEGMENTS Tlte percentages of consolidated net sales and segment profit from operations, before corporate expenses, Blades & Razors Net Segment %at Sales Profit 1995 ...... 39% 67% 1994 ...... 39% 69% 1993~ ..... 39% 70% 1992 ..... 38% 66% 1991 ...... 37% 62% during the last five years for each of the Company's major business segments are set forth below. Toilemes e~ Stationery Braun Oral-B Cosinetics Products Products Products Net Segment Net Segment Net Segment Net Segment Sales Profit Sales Profit Sales Profit Sales Profit 18% 5% 13% 8% 24% 18% 6% 2% 19% 6% 13% 7% 22% 16% 7% 2% 19% 5% 12% 6% 23% 15% 7% 4% 19% 9% 10% 5% 26% 16% 7% 4% 20% 13% 10% 5% 26% 16% 7% 4% 'Segment profit percentages are before reahgnment expense. QUARTERLY FINANCIAL INF (~hlhons of dollars, except per share a mounts} ° 1995 March 31 Net sales .............. Sl,536.0 Gross profit ............. 968.5 Profit from operations ......... 329.1 Income before taxes .......... 308.9 Net income ............. 196.1 Net iil¢olne per common share ....... 44 Dnqdcndsdeclared per connlronshare . . . -- Stock p,ce range: (composite basis} H~gh ............... 42s/s Low . .............. 3 $ ~/~, ORMAT1ON 'H~rec Months Ended June 30 September 30 December 31 Total Year $1,601.0 $1,669.8 $1,987.9 $6,794.7 1,026.2 1,057.3 1,202.5 4,254.5 321.9 338.1 382.2 1,371.3 304.0 318.5 365.5 1,296.9 193.1 202.2 232.1 823.5 .43 .46 .52 1.85 .15 .15 .30 .60 451/, 48V,, $5Vs 39:/8 401/~ 471/s 1994 Net sales .............. $1,361.1 Gross profit ............. 862.5 Profit froin operations ......... 297. ] hlcoale betore income taxes ....... 259.3 Net income ............. 164.0 Net income per colnmon share ....... 37 D~vldends declared per common share . . Stock price range: (composite bas~sl H~gh ............... Lom,¥ . .............. $1,406.5 $1503.4 $1,799.2 $6,070.2 906.1 957.2 1,122.5 3,848.3 293.0 297.7 338.9 1,226.7 256.5 272.2 316.1 1,104.1 162.2 172.2 199.9 698.3 .36 .39 .45 1.57 .12Vz .12% .25 .50 33% 34% 36% 38% 28% 31V~ 32~ 34~A ~'Pel coinre,on share amounts and stock prices have been restated to reflect a r, vo-for-one stock spht m 1995. 'FILE GILLETTE COMPANY AND SUBSIDIARY COMPANIES HISTORICAL FINANCIAL SUMMARY fin nnllions, except per share arnoants, stock price and employees) Profit Income Net Deprecianon Net from before Net interest and Total Caphal Year sales operations taxes ~ncome expense amortization assets expenditures 1995 $6,795 $1,371 Sl,297 S824 $ 49 $248 S6,340 $471 1994 6,070 1,227 1,104 698 42 215 5,313 400 1993' 5,411 825 683 288 33 219 4,959 352 1992 5,163 967 830 513 56 211 4,190 321 1991 4,684 862 694 427 94 193 3,887 286 1990 4,345 773 593 368 120 177 3,671 255 1989 3,819 664 474 285 115 149 3,114 223 1988 3,581 614 449 269 101 141 2,868 189 1987 3,167 523 392 230 82 126 2,731 147 1986~"' 2,818 229 58 16 47 108 2,540 199 1985 2,400 371 272 160 48 88 2,425 157 and 1995. qn 1993, charges for realignmeat expense reduced profit from operations and income before ~ncome taxes by S263 mdhon, net incrune by 5,164 rodlion and net income per common share by 5,.37. In addmon, m 1993, the cumulanve effec~ of adopting maodated changes in the methods of accoontmg for income taxes, postrenrement benefits and postemploymeot benefits reduced net income by $139 mdhon and net income per common share by $.32. shares outstanding and stock prices have been restated to reflect v. vo-fovone stock sphts m 1986, 1987, 1991 ' '~ In 1986, spcoal charges for restructuring expense redneed profit from opcrauons by $179 mdhon and, along wah tender offer response costs and a change in accoummg for od and gas investments, reduced income before taxes by 5,243 mdhon, net income by ,5165 rodlion and net income per common share by 5,.32. SOURCE OF I 995 SALES PERCENT BY BUSINESS SEGMENT PERCENT BY GEOGRAPHIC AREA 39% ' - 30% · ; - BI.ADI'.S & RAZORS TOILI;I RII5 & COSMETICS L__.J$TA'I'IONLRY PROI )UC1S BIGhUN PRODUCTS ORAL.B PROI)UCTS \K'I.S'[ t,R N kUROPI' UNI 11:D STATF~, L_ ~,[ I AT1N AMI RICA O'IIIER S I,¢, ~- S 6Ol $2,:, I ~; SI.X~ $.~,0 444 1,4 I I -I ~ 2.(11- I.~- .ql 442 ~-;- ~2.~(1(I '~ ;I -42 I.I ~- '~- .; I 4~; 2x ~ 1.2,m --Iq I { -I I -~ ..$ .2-i ;x- 12' ~ ;ll.41111 199 ~, 1994 I'~'~1 l '' $2,047 (dill ill till t I Ill Iql \ PRINCIPAL DIVISIONS AND SUBSIDIARIES NORTH ATLANTIC GROUP The North Atlantic Group ntanufactures and markets the Company's traditional shaving and personal care products m North America and Western Europe. Sales rose notabl}; and profits regrstered a sizable gain. INTERNATIONAl. GROUP The International Gronp produces and sells the Company's traditional shaving, petsonal care and stationer}' prodoers throughout the world, except for North America and Western Europe. Sales increased s~gnificantl); and profits were appreciably h~gher than in the prior year. DIVERSIFIED GROUP The Diversified Group cous~sts of Braun, Oral-B and Jafra, each orgamzed on a worldwide product line basis, aod the Stationery Products Group, which makes and markets the Company's stanonery products in North America and Western Europe. Sales were consrdetably above those of 1994, and profits ohmbed subsrant rally. NORTH ATLANTIC GROUP President and Ctnef Operating Officer, Michael C. Hawley Vice Presrdents: Sharon E. Keith, Marketing Research Herbert W. Vollet, Finance and Strategic Planning Richard W. Monaghan, Hmnao Resources Busincss Management Senior Vrce Pres~dem, Peter K. Hoffnrm~ V~ce Presidents: Peter M. Cla); Gfilette Tofietr,es 1obn M. Darman, Blades and Razors Carole E. Johnson, Personal Care Manufacturing and Technical Operations Semot V~ce President, Edward E DeGraan Vice Presrdems: Dr. Rrchard J. Bertozzi, Toiletvies Technology Laboratory Ralpb J. Chesnauskas, Engineering and hnplememat~on Charles E Deebaa, Program and Materials Managemere Thomas L. Gallcram, Straying Technology Laboratory Detlef-J. Schaeht, Manufacturing European Division President, Allan G. Boath General Maoagers: Franco Btgontina, Southeast Europe Alam Calviera, Western Europe Lms Gigliam, Southwest Europe Robert Ft. Leger, Northern Europe Helmut Lezuo, Central Europe North American Division President, Ronald J. Rossi Gillette U.S.A. V~ce President and General Mmtager, Bruce Swinsky Gillette Canada President, Donald N. MacDuff INTERNATIONAL GROtJP Execunve V~ce Pres~deut, Robert G. King V~ce Presidents: Donald Gaiter, Technical Operations Edoardo V. Kello, Business Management Frank O'Connell, Human Resources Cland~o E. Roben, Finance and Administration Latin American Group Gronp Vice President, Norman M. Roberts General lvlanagers: Carlos Daireaux, Brazd Alberto Duehas, Venezuela Hans Eben, Andean Region Milton C. } lenrique, Colontbia FaNo Marulanda, Stationer}' Group Jorge M~cozzi, Argentina Prfixedes M. Rivera-Fetter, Caribbean Regmn Kenneth Rule, Mexico Africa, Middle East and Eastern Europe Group Group Vrce President, Jos~ Lms R~bera General Managers: Per Benemac, Former Soviet Union Robert A. Crespl, Turkey Gurbrmder S. Gill, Eastern Region Silvlo R. Peri, Operanons Group DavidJ \Valdron, Stationery Group Asia-Pacific Group Group V<e President, lan E. Jackson Area General Managers: G. Brace Dean, Aostrnlia, New Zealand and South Pacific R,chard I.. Gudfoile, Japan Yatg Meng Lai, China, Hong Kong and Korea Marcel A. Rcrd, Sratimtcry Groop Chin Yong Teh, Sontbeast Asm PRINCIPAL DIVISIONS AND SUBSIDIARIES DIVERSIFIED GROUP Execuuve Vice President, Jacques Lagarde Finance, Planning and Admimstration Vice President, Mark D. Cutler Braun AG Board of Management Archie L~v~s, Chairman Frederik van den Bergh, Business Management aud GeograpMc Operations Norbert Gehrke, Personnel Bernhard Wdd, Technical Operations Hcadquarters 1)~eter Bach, Legal Patrick Cagmonclc, Group Contlolle~ Karl H. Hellbusch, Corporate Accounting and Treasury Dr. Lotbar Heuwinkel, Corporate Qualit)' Albrecht Jestadt, Research and Developmere Udo Milntzk~, Central Engineering D~eter Rams, Corporate ldcntity Affairs Peter Scbneidcr, Design Manufacturing Operanons Gilbert Greaves, Shaving Products, Clocks and Hmr Care Michael tlansen, Household Products Alex Resly, Oral Care Group Sales - North Atlantic Execuuve D~rector, Robert L. \Vagar G~oup General Managers: A. Bruce Cleverly, North America Josef Vamcek, Central Europe Group Sales - International Affiliated Markets Executwe D~rcctor, Phihp Huug Group Geue~al Managers: Kok Lmug Choong, Australia, China, East Asm Carlos G. F~dalgo, Jr., l.atm America Group Sales - Japan G~oup General Manager, Hans Th. Pauh Stationery Products Group President, Robert R Hanafee, Jn Manufacturing and Techmcal Operanons Senior %ce President, Michael T. Cowbig V,ce Presidents: Howard N. Agranat, Marketing Research Robert C. St raskulic, Finauce Robert H. Terranova, Fluman Resources Presidents of Geographic Divisions: Donald W. Hoeder, Europe Brian E. McFarland, North America Presidents of Strategic Business Units: Peter J. Bentley~ Parker Pen Peter J. Siddall, Paper Mate and L~quid Paper Jean Y. VeilIon, Waterman Oral-B Laboratories President, Jorgen Wedel Semor Vice P~es~dents: Edward D. Blanchard, tiuman Resources Kerry J. Gleeson, Marketing J. Ross McMullin, Finance Jan:es P. McNulty, New Business Development Gerald J. Wroblewskl, Technical Operations Area Vtcc Presidents: John H. Bower, Westeru Europe Eng Seng Dieu, As~a-Pacific Mario O. Marmsch, Laun America Robert E McCusker, M~ddle East, Eastern Europe, \Vest Asm and Africa Edward D. Shirley, North America Jafra Cosmetics International President, Letiota Na~ afro V<e Presidents: Cynthia K. Beesemyer, Marketing Wdliam H. Harris, Human Resources Arthnr K~erstead, 'l~chmcal Operations Michelle E. Viotty, Finance Area General Managers: Rautee Marcus, Developing Operations Alfredo Munda, Mexico E Guy \'4talker, North America Helmut P. Weste, Central Europe DIRECTORS AND OFFICERS ,{ 'l DIRECTORS \Vatten E. Bufferr, Chmrman and Chief Executive Officer, Berkshire Hathaway lnc. \Vilbur H. Gantz, President and Chief Executive Officer, PathoGenes~s Corporation A4ichacl B. Gifford, Managing Director and Chief Execunve, The Rank O~ganisauon PIc Carol R. Goldberg, President, The Avcar Group, ktd. Michael C. Hawley, President Herbert H. Jacobi, Chairman of the Managing Partners, Trinkaas & Burkhardt Joseph E. Mullaney, %ce Chairman of the Board Richard R. Pivirotto, President, R~chard R. Pivirotto Co., htc. Juan M. Steta, Of Counsel, Santamarina y Steta Alexander B. Trowbridge, President, Trowbudge Partners luc. Joseph E Turley, Retired Presideut, The Gillette Company Alfred M. Zeien, Chainnan of the Board Committees of the Board: Audit Committee Juan M. Steta, Chartman M<hael B. Gifford Carol R. Goldberg Joseph E Turley Executive Committee \Varten E. Buffeft, Chairman Carol R. Goldberg Juan M. Steta .Joseph E Turley Alfred M. Zelen Finance Committee l-lerbett l-t. Jacob~, Chanman \Vflbur H. (;antz Michael B. Gifford Richard R. P~v~rotto Alexander B. Trov,'brldgc Persomtel Committee Richard R. Piv~rotto, Chairman \Viibur ] t. Gantz Herbert H- Jacobi Alexander B. Trowbridge OFFICERS Chairman of the Board and Chief Exccunve Officer Alfred M. Zelen President and Chief Operating Officer Michael C. Hawley Vice Chairman of the Board Joseph E Mullanew; Legal Executive Vice Presidents Robert G. King, International Group Jacques Lagarde, Diversified Group Senior Vice Presidents Joel P. Davis, Corporate Planning and Development Robert E. DiCcnso, Persom~el and Admioistrauon Thomas E Skclly, Finance Vice Presidents Allan G. Boath, North Atlantic Group John B. Bush, Jr., Research and Development Charles \V. Cramb, Coilt roller Edward E DeGraan, North Atlantic Group David A. Fausch, Corporate Pubhc Relations A. Wallace tiayes, Corporate Product Integrity Everett R. Howe, Investor Relatmns Robert A Izzo, Corporate Planning David B. Jasie, Global Business Process Integration Kenneth E Kames, New Business Development Archie L]vis, Braun AG John M. McGowan, Taxation Herbert W. Moller, North Atlantic Group Ronald J. Rossi, North Ariahue Group Lloyd B. Swami, Treasorer Patrick J. Zflv~tis, Corporate Information Technology CORPORATE Research and Development V~cc Pres~dem, Dr. John B. Bush, Jr. Gillette Research lnsntotc President, Dr. John McShefferty U.K. Research aod Developntent Laboratory Ducctor, Dr. John C. Terry Boston Research and Development Laboratory D~rector, Dr. Stan S. Weeford Resources Development Director, Christopher H. Savage lntema} Auditor Rolaud L. Loper Patent and Trademark Counsel Donal B. '{bNn Secretaq' Jill C. R~chardson Senior Assistant Treasurer G~an U. Camuzzi Assistant Treasurer Wahcr B. Ochynski Assistant Controller Christopher H. Savage Deputy General Counsels James P. Connolb' keonard A. Spalding Assistant General Counsels Leland J. Adams, Jr. Dieter Bach Carol S. Fischman Product Integrity %ce President, Dr. A. \Vailace Hayes Gdlette Medical Evaluation kaboratones President, Dr. Henry P. Ciuchta Envsronmental Affairs D~rector, Robert C. Healey Quabty Assurance Director, Ralph I. Levine New Business Development %ce Prestdent, Kenneth E Kames Human Resources D~rector, Wdham D. Donoran ~47l~ CORPORATE AND STOCKHOLDER INFORMATION ANNUAl. MEETING The Annual Meeting of stockholders *.rill take place on Thursday, April 18, 1996, at the John E Kem~edy 1.ibrary and Museum, Colombm Point, Boston, Massachusetts. ]'he meeting xvill convene at 10 a.m. CORPORATE HF.A DQUARTERS Prudential Toxver Building Boston, Massachusetts 02199 (617) 421-7000 INCORPORATED State of Delaware COMMON STOCK Major stock exchanges: New York, Boston, Midwest, Pacific, Londoo, Frankfurt, Zurich New York Stock Exchange Symbol: G At year-end, stockholders nun~bered 36,700, IMng in all 50 states and more than 30 countries abroad. TRANSFER AGENT AND REGISTRAR The First Natiooal Bank of Boston C/o Boston EqmServe P.O. Box 644 Mail Stop 45-02-09 Boston, Massachusetts 02102-0644 (617) 575-3170 'lbll free: 1800) 730-4001 t tearing impaired: (800) 952-9245 (TYY£FDD) Via Interact: http://wwxv. EQUISERVE.com AUDITORS KPMG Peat Marwick FORM 10-K The Company's 1995 Aonual Report on Form 10-K, filed with the Securities and Exchange Commission, is avail- able without charge from the office of the Secretary by written request, or by calling toll-free (800) 291-7615. DIVIDEND REINVESTMEN~ AND STOCK PUI{.CttASF. PI. AN Stockholders of record of at least one share of Gillette common stock are invited to participate in the Dividend Reinvestment and Stock Purchase Plan. The p!an provides a convenient, economical and systematic means of acquir- ing additional shares of the Company's common stock through the reinvestment of cash d~vidends. Participaots also may iovcst additional cash amounts in the purchase o[ shares as frequently as once each month. Interested stockholders can obtain a descriptive brochure and enrollment card from: The F~rst National Bank of Boston C/o Boston EquiServe P.O. Box 1681 Mail Stop 45-01-06 Boston, Massachusetts 02105- 1681 (617) 575-3170 Toll free: (800) 730-4001 Hearing impaired: (800} 952-9245 (TTY/TDD} QUAR'fEP, LY 1~. EPOR'FS Currently, the Cotnpany mails quarterly ~cports only to registered holders of Gillette common stock. If )'our shares are regislered in the name of a broker or other nom,~ee, and you would like to receive the quarterly reports, the Company will gladly mail them directly to you. You may add )'our name m our mailing list by writing to the office of the Secretary, or by calhng toll-free (8001 291-7615. P~uden~al lower Building Boslon. Massachuse~ls 0,2199 Prepared by: Dennis Gannon. Asst. Civil Engr., 410 E. Washington St., Iowa City, IA 52240 (319) 356-5142 RESOLUTION NO. 96-307 RESOLUTION AUTHORIZING THE ACQUISITION OF TEMPORARY CONSTRUC- TION EASEMENTS FOR THE CONSTRUCTION OF THE MELROSE AVENUE RECONSTRUCTION PROJECT, PHASE II. WHEREAS, the City of Iowa City has undertaken a project to reconstruct the Melrose Avenue pavement located between Hawkins Drive and Byington Road, which project is known as the Melrose Avenue Reconstruction Project, Phase II; and WHEREAS, the City of Iowa City will receive Surface Transportation Program funding in the amount of $442,000 relative to the construction of said project; and WHEREAS, the project includes the removal and replacement of the existing Melrose Avenue pavement with a 48' wide pavement section between Hawkins Drive and South Grand Avenue, and a 33' wide pavement section between South Grand Avenue and Byington Road, along with the removal and replacement of sidewalk and the installation of a new water main. WHEREAS, the City Council has been advise. d and has determined that the acquisition of temporary construction easements is necessary for construction of the improvements included in the project; and WHEREAS, the City consultant, NNW, Inc. of Iowa City, has determined the location of the necessary temporary construction easements; and WHEREAS, City staff should be authorized to acquire said easements at the best overall price and cost to the City. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA, THAT: It is in the public interest to acquire temporary construction easements for the construction of the improvements included in the Melrose Avenue Reconstruction Project, Phase II and acquisition of said easements constitutes a valid public purpose. The City Manager or his designee is hereby authorized and directed to negotiate the purchase of temporary construction easements for the construction of the improve- ments included in the Melrose Avenue Reconstruction Project, Phase II. In the event negotiation is successful, the Mayor and City Clerk are hereby authorized to execute Temporary Construction Easement Agreements for recording in the Johnson County Recorder's Office at the City's expense. The City Attorney is hereby directed to take all necessary actions to complete said transactions, as required by law. Resolution No, 96-307 Page 2 In the event temporary construction easements cannot be acquired by negotiation, the City Attorney is hereby authorized and directed to initiate condemnation proceedings for the acquisition of such easements. Passed and approved this 4th day of November , 1996. MAYOR ATTEST: ~~_~ CITY CLERK City Attorney's Office It was moved by Norton and seconded by adopted, and upon roll call there were: Thornberry the Resolution be AYES: NAYS: ABSENT: X X X X X Baker Kubby Lehman Norton Novick Thornberry Vanderhoef Council Member Thnrnh~rry __ introduced the following Resolution entitled "RESOLUTION DECLARING AN OFFICIAL INTENT UNDER TREASURY REGULATION 1.150-2 TO ISSUE DEBT TO REIMBURSE THE CITY FOR CERTAIN ORIGINAL EXPENDITURES PAID IN CONNECTION WITH SPECIFIED PROJECTS" and moved that it be adopted. Council Member Va n de rh oe f seconded the motion to adopt, and the roll being called thereon, the vote was as follows: AYES: Lehman, Norton, Novick, Thornberry, Vanderhoef. Baker. Kubby NAYS: None Whereupon, the Mayor declared said Resolution duly adopted as follows: Resolution No. 96-308 RESOLUTION DECLARING AN OFFICLA~ INTENT UNDER TREASURY REGULATION 1.150-2 TO ISSUE DEBT TO REIMBURSE THE CITY FOR CERTAIN ORIGINAL EXPENDITURES PAID IN CONNECTION WITH SPECIFIED PROJECTS WHEREAS, the City anticipates making cash expenditures for one or more capital improvement projects, generally described below (which shall hereinafter be referred to as a "Project"); and WHEREAS, the City reasonably expects to issue debt to reimburse the costs of a Project; and WHEREAS, the Council believes it is consistent with the City's budgetary and financial circumstances to issue this declaration of official intent. NOW, THEREFORE, BE 1T RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA: Section 1. That this Resolution be and does hereby serve as a declaration of official intent under Treasm3t Regulation 1.150-2. -2- Section 2. That it is reasonably expected that capital expenditures will be made in respect of the foregoing Project, f~om time to time and in such amounts as this Council determines to be necessary or desirable under the circumstances then and there existing. Section 3. That the City reasonably expects to reimburse all or a portion of the foregoing expenditures with the proceeds of bonds, notes or other indebtedness to be issued or incurred by the City in the future. Section 4. That the total eslimatcd costs of the Project, the maximum principal amount of the bonds, notes or other indcbtcdiless to bc issued for the foregoing Project and the estimated dates of completion of the Project are reasonably expected to be as follows: Project Fund from which original expen- ditures are to be Advanced Mekose Landfill Reserve Avenue Fund Bridge Total Amount of Estimated Estimated Borrowing Date of Cost* Anticipated Completion $2,252,225 $1,000,000 March, 1997 *It is intended to seek grants and other contributions to reduce the amount of borrowing required for the Project: $850,000 Federal Grant $402,225 Road Use Tax If such grants are not received, it is intended that the costs to be financed will be increased accordingly. Section 5. That the City reasonably expects to reimburse the above-mentioned Project costs not later than the later of eighteen months after the capital expenditures are paid or eighteen months after the property is placed in service. Section 6. That this Resolution be maintained by the City Clerk in an Official Intent File maintained in the office of the Clerk and available at all times for public inspection, subject to such revisions as may be necessary. -3- PASSED AND APPROVED this 4th day of ~tovember 1996. ATTEST: POOODRIC~52213HH0714000 CIG-3 9/91 CERTIFICATE STATE OF IOWA ) ) ss COUNTY OF JOHNSON ) I, the undersigned City Clerk of Iowa City, Iowa, do hereby certify that attached is a true and complete copy of the portion of the corporate records of said Municipality showing proceedings of the Council, and the same is a true and complete copy of the action taken by said Council with respect to said matter at the meeting held on the date indicated in the attachment, which proceedings remain in full force and effect, and have not been amended or rescinded in any way; that meeting and all action thereat was duly and publicly held in accordance with a notice of meeting and tentative agenda, a copy of which was timely served on each member of the Council and posted on a bulletin board or other prominent place easily accessible to the public and clearly designated for that purpose at the principal office of the Council (a copy of the face sheet of said agenda being attached hereto) pursuant to the local rules of the Council and the provisions of Chapter 21, Code of Iowa, upon reasonable advance notice to the public and media at least twenty-four hours prior to the commencement of the meeting as required by said law and with members of the public present in attendance; I further certify that the individuals named therein were on the date thereof duly and lawfully possessed of thek respective city offices as indicated therein, that no Council vacancy existed except as may be stated in said proceedings, and that no controversy or litigation is pending, prayed or threatened involving the incorporation, organization, existence or boundaries of the City or the right of the individuals named therein as officers to their respective positions. WITNESS my hand and the seal of said Municipality hereto affixed this 4th day of November , 1996. City~'lerk, Iowa Iowa City, SEAL PGOODP3CX62215x B 10714000 Prepared by: Linda Newman Woito, City Attorney; 410 E. Washington St,; Iowa City, IA 52240; {319) 356-5030 RESOLUTION NO. 96-309 RESOLUTION RATIFYING SETTLEMENT OF PENDING LITIGATION WHEREAS, the City Council authorized the City Attorney to acquire, via negotiation and/or condemnation, land and easements necessary for the Wastewater Treatment Connection Project (South River Corridor Sanitary Sewer Project); and WHEREAS, on April 23, 1996, the City of Iowa City condemned a 12,626 square foot permanent sanitary sewer easement and a 23,375 square foot temporary construction easement from Diane Dreusicke Riley with the condemnation commission awarding to Diane Dreusicke Riley the amount of $42,830 in "just compensation," with the City final offer being $10,000.00; and WHEREAS, on May 21, 1996, the City filed a condemnation appeal to the District Court, challenging the amount of Diane Dreusicke Riley's damage award, Johnson County Docket No. 57235; and WHEREAS, the City and Diane Dreusicke Riley now wish to settle their differences without any further litigation as a reasonable means of avoiding additional costs and possible delays attendant thereto, as previously authorized by the City Council in executive session; and WHEREAS, Chapter 21, Code of Iowa (1996) concerning the open meetings law, requires the ratification of said settlement. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA, THAT: In consideration of the compensation commission award to Diane Dreusicke Riley for her interests in the 12,626 square foot permanent sanitary sewer easement and the 23,375 square foot temporary construction easement, the City of Iowa City will pay to Diane Dreusicke Riley the amount of $26,250. Diane Dreusicke Riley shall execute all necessary releases requested by the City Attorney, and the City of Iowa City shall file a dismissal with prejudice of its condemnation appeal against Diane Dreusicke Riley, Johnson County Docket No. 57235. The parties agree that this settlement is in the best interest of the City in order to proceed with the Wastewater Treatment Connection Project (South River Corridor Sanitary Sewer Project) without further litigation and without the additional costs and possible delays attendant thereto. Resolution No... 96-309 Page 2 Passed and approved this 4th day of November , 1996. ATTEST: /~_,~,~ ~ ~',~ CITY CLERK Approved by City Attorney's Office It was moved by Lehman and seconded by adopted, and upon roll call there were: Vanderhoef the Resolution be AYES: NAYS: ABSENT: X X X X --X X Baker Kubby Lehman Norton Novick Thornberry Vanderhoef Inw~riley,res