Filed by The
Gillette Company
Pursuant to Rule 425 under the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of
the Securities
Exchange Act of 1934
Subject Company: The Gillette Company
Commission File
No.: 1-00922
The following was presented by A.G. Lafley, Chairman of the Board, President
and Chief Executive Officer of The Procter & Gamble Company, at the Consumer Analysts Group of New
York Annual Conference on February 24, 2005:
P&G The
Gillette
Company
CAGNY Conference
February 24, 2005
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2
P&G AG Lafley
Chairman, President
and Chief Executive
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Agenda
o P&G Business Update
o Gillette Business Update
o P&G the Best Partner for Gillette
o The Growth Opportunity
o Q&A
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4
Forward Looking Statement
All statements, other than statements of historical fact included in this
presentation, are forward-looking statements, as that term is defined in the
Private Securities Litigation Reform Act of 1995. In addition to the risks and
uncertainties noted in this release, there are certain factors that could cause
actual results to differ materially from those anticipated by some of the
statements made. These include: (1) the ability to achieve business plans,
including with respect to lower income consumers and growing existing sales and
volume profitably despite high levels of competitive activity, especially with
respect to the product categories and geographical markets (including developing
markets) in which the Company has chosen to focus; (2) successfully completing,
executing, managing and integrating key acquisitions (including the Domination
and Profit Transfer Agreement with Wella and the Company's agreement to acquire
The Gillette Company and obtaining the related required shareholder and
regulatory
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Regulation G Disclosure
o Sales excluding foreign exchange
o Organic sales
o Core earnings
o Free cash flow productivity
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Strategies are Working
o Focus on core business
o Faster growing, higher margin, more asset-efficient health and beauty care
businesses
o Developing markets and lower income consumers
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Business Update - Volume
Volume Growth
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Business Update - Sales
Sales Growth, ex. FX
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Balance
o Business portfolio
o Customer portfolio
o Geographic portfolio
Ahold
TESCO
METRO
TARGET
WAL MART
Carrefour
COSTCO
Kroger
Albertsons
K Mart
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Leadership
o Market leader in two thirds of total sales
o #1 innovator (IRI pacesetter report)
o Indispensable brands for retailers
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Growth Focus Areas are Delivering
Leading Billion Dollar Brands
o Portfolio is growing volume double digits
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Growth Focus Areas are Delivering
Big Customers
o Top 10 customers are growing volume 7%
Ahold
TESCO
METRO
TARGET
WAL MART
Carrefour
COSTCO
Kroger
Albertsons
K Mart
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Growth Focus Areas are Delivering
o Top 16 countries are growing volume 8%
Canada
U.S.
Mexico
Brazil
UK
Germany
France
Poland
Spain
Italy
Turkey
Saudi Arabia
Russia
China
Japan
Philippines
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Growth Focus Areas are Delivering
o Mid single digit organic volume growth
North America
Western Europe
Northeast Asia
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Growth Focus Areas are Delivering
o 8 of top 16 countries are in developing markets
o 6 consecutive quarters of mid to high teens growth
Mexico
Brazil
Poland
Turkey
Saudi Arabia
Russia
China
Philippines
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Growth Focus Areas are Delivering
Health Care & Beauty Care
Sales Growth ex. FX
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Growth Focus Areas are Delivering
$ Sales
FY '98 FY '05 e With Gillette
36% 47% 50%
+11% pts +14% pts
Health & Beauty Care
Balance of Company
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Integration
o Plug & play capability
Beaurty Care
Household Care
Health, Baby & Family Care
Market Development Organizations
Global Business Services
Corporate Functions
Core Business Resources
Razors
Braun
Duracell
Oral Care
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18
Growth Focus Areas are Delivering
Fabric & Home Care, Snacks & Coffee,
Baby & Family Care
Sales Growth ex. FX
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20
Balance and Leadership
o Sustainable growth
o Consistent shareholder returns
Ahold
TESCO
METRO
TARGET
WAL MART
Carrefour
COSTCO
Kroger
Albertsons
K Mart
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21
Sustainable Growth, Consistent Returns
Historical P&G x What's different = Sustainable
Strenghts today Performance
Innovation x Connect & = Faster Pace of
Develop Globally Innovation
Scale x Cost & Cash = Winning Value Consistent
Discipline Equation Shareholder
Returns
Unique
Go-to-Market x Organization = Excellence in
Structure Execution
Launch &
Branding x Leverage Holistic = Initiative
Marketing Success
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Business Update - EPS
EPS Growth
Gain from Juice Divestiture
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Guidance Update - Jan. 28, 2005
Sales growth estimate:
March '05: high single digits
Fiscal '05: high single digits
EPS estimate:
March '05: $0.60 - $0.62 (+ 9-13%)
Fiscal '05: $2.61 - $2.64 (+13-14%)
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AG Lafley
Chairman, President
and Chief Executive
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Strategic Rationale
o Combine 2 best-in-class CPG companies with
great momentum
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Strategic Rationale
o Combine 2 best-in-class CPG companies with
great momentum
o Strengthen the portfolio - 21 billion dollar brands and #1 market position
in categories representing about two thirds of total sales
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Strategic Rationale
o Combine 2 best-in-class CPG companies with
great momentum
o Strengthen the portfolio - 21 billion dollar brands and #1 market position
in categories representing about two thirds of total sales
o Strengthen combined retail relationships
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Strategic Rationale
o Combine 2 best-in-class CPG companies with
great momentum
o Strengthen the portfolio - 21 billion dollar brands and #1 market position
in categories representing about two thirds of total sales
o Strengthen combined retail relationships
o Leverage our strengths of branding, innovation, scale and go-to-market
capability to realize our full potential and accelerate growth
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Two Best-In-Class Companies
Getting Stronger
o Four core strengths
- Branding
- Innovation
- Scale
- Go-to-market capability
o Complementing and amplifying strengths with Gillette
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Multiplying Innovative Capability
Historical P&G x What's different today = Sustainable
Strengths Performance
Innovation x Connect & Develop Globally = Faster Pace of Innovation
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Complementary Innovation Platforms
o Brands
o Technologies
o Design
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Complementary Innovation Platforms
o Women's hair removal
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Complementary Innovation Platforms
o Male grooming
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Complementary Innovation Platforms
o Design
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Multiplying Innovative Capability
Historical P&G x What's different today = Sustainable
Strengths Performance
Innovation x Connect & Develop Globally = Faster Pace of Innovation
Scale x Cash & Cost Discipline = Winning Value Equation |
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Winning the Value Equation
o $1 to 1.2 billion in cost synergies
o Constant turnaround mentality
Eliminating
SG&A overlap
Generating Leveraging scale in
efficiencies in purchasing,
marketing and manufacturing,
retail selling logistics
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Multiplying Innovative Capability
Historical P&G x What's different today = Sustainable
Strengths Performance
Innovation x Connect & Develop Globally = Faster Pace of Innovation
Scale x Cash & Cost Discipline = Winning Value Equation
Go-to-Market x Unique Organization = Excellence in Execution
Structure
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Developing Markets
Developing Market Sales
The Gillette Company ~$2.2bn
P&G ~$11bn
* Euromonitor and Company estimates, constant prices and FX
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Developing Markets Potential
Average P&G Category Weekly
Consumption Index Shaving
(Volume per capita) Frequency
~ 240 ~5
~ 70
~3x ~2
Developing China, India, Turkey
Developed USA
Source: ACNielsen, company estimates
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China
o P&G covering more than 30% of China's population
- in more than 2000 cities and more than 11000 towns
o Gillette covering about 10% of China's population
- focus on top 4 cities distributed in about 60 cities
Store PG Hair Razors
Front Care & Blades
PuyangCity, supermarket with about 2,000sqm
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Improving Sub-scale Market Positions
Top 8
developing
market
scale countries
incl. China
8 subscale countries incl. India, Brazil
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Multiplying Innovative Capability
Historical P&G x What's different today = Sustainable
Strengths Performance
Innovation x Connect & Develop Globally = Faster Pace of Innovation
Scale x Cash & Cost Discipline = Winning Value Equation
Go-to-Market x Unique Organization = Excellence in Execution
Structure
Branding x Launch & Leverage = Initiative Success
Holistic Marketing
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Advantaged Categories
o Trade-up marketing
o In-store execution
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Multiplying Innovative Capability
Historical P&G x What's different today = Sustainable
Strengths Performance
Innovation x Connect & Develop Globally = Faster Pace of Innovation
Scale x Cash & Cost Discipline = Winning Value Equation
Go-to-Market x Unique Organization = Excellence in Execution
Structure
Branding x Launch & Leverage = Initiative Success
Holistic Marketing
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Upside To Sustainable Growth Model Through The End Of The Decade
Sales Growth |
+5%to +7% |
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| Double Digit
|>> EPS Growth
| Upside
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2010 |
Operating Margin |
of 24 - 25% |
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Q&A
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On February 24, 2005, A.G. Lafley, Chairman of the Board, President and Chief Executive of Procter & Gamble, gave a presentation at the Consumer Analysts Group of New York Annual Conference. The presentation included some measures
that are not defined under accounting principles generally accepted in the United States of America (U.S. GAAP). The following provides definitions of the non-GAAP measures used in the presentation and the reconciliation to the most closely related
GAAP measure. Note: Sales growth percentages presented are approximations based on quantitative formulas consistently applied.
Organic Sales. Organic sales growth is a non-GAAP measure of reported sales growth excluding the estimated impacts of acquisitions and divestitures and foreign exchange from
year-over-year comparisons. The Company believes this provides investors with a more complete understanding of underlying results and trends of the base businesses by providing sales on a consistent basis. The reconciliation of reported sales growth
to organic sales growth for Procter & Gamble:
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FY02 |
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FY03 |
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FY04 |
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Six Months
Ended Dec04 |
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Reported Sales Growth
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3
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%
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8
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%
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19
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%
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11
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%
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Acquisitions & Divestitures Impact
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3
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%
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0
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%
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7
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%
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2
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%
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FX Impact
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-1
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%
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2
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%
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4
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%
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3
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%
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Organic Sales (Ex: A&D, FX)
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1
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%
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6
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%
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8
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%
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6
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%
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A specific reference was made to organic sales growth for Procter & Gamble’s combined Health Care and Beauty Care businesses:
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FY02 |
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FY03 |
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FY04 |
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JAS04 |
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OND04 |
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Reported Sales Growth
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9
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%
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15
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%
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34
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%
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19
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%
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|
10
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%
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Acquisitions & Divestitures Impact
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5
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%
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4
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%
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18
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%
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11
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%
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0
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%
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FX Impact
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-2
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%
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3
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%
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4
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%
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3
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%
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3
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%
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Organic Sales (Ex: A&D, FX)
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6
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%
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8
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%
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12
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%
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5
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%
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7
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%
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Sales Growth Excluding Foreign Exchange. The presentation includes a discussion of segment sales growth excluding the impact of foreign exchange from year-over-year comparisons. The Company believes
this provides investors with a more complete understanding of the underlying trends of sales growth. The “Foundation Businesses” include the combined results of Procter & Gamble’s Fabric & Home Care, Baby & Family Care,
and Snacks & Coffee businesses.
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FY02 |
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FY03 |
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FY04 |
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JAS04 |
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OND04 |
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Foundation Businesses – Reported Growth
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-1
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%
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7
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%
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9
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%
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10
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%
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10
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%
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FX Impact
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-2
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%
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|
2
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%
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3
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%
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3
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%
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|
2
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%
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Core Diluted Net Earnings Per Share Growth. Core diluted net earnings per share referenced in this presentation exclude restructuring charges from reported diluted net earnings per share. The table
below provides a reconciliation of Procter & Gamble’s reported diluted net earnings per share to core diluted net earnings per share. In JAS04, Procter & Gamble completed the sales of the Juice Business. The year-over-year impact to
diluted net earnings per share was $0.02, or 3%.
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FY02 |
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FY03 |
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FY04 |
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JAS04 |
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OND04 |
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Diluted Net Earnings Per Share
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$1.54
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$1.85
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$2.32
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$0.73
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$0.74
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Percent Change v. Year Ago
|
50
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%
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20
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%
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25
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%
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|
16
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%
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|
14
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%
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|
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Core Diluted Net Earnings Per Share
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$1.80
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$2.04
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$2.32
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$0.73
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$0.74
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Percent Change v. Year Ago
|
10
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%
|
|
13
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%
|
|
14
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%
|
|
16
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%
|
|
14
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%
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The restructuring program began in 1999 as part of the Company’s Organization 2005 initiative and was substantially completed at the end of fiscal year 2003. Restructuring program charges include separation related costs, asset
write-downs, accelerated depreciation and other costs directly associated with the Company’s reorganization. Restructuring program charges are not included in business segment results, but instead are reported in corporate. The Company believes
investors gain additional perspective of underlying business trends and results by providing a measure of earnings excluding restructuring program charges – particularly now that the program is completed. This is consistent with the
Company’s business segment reporting and internal management goal-setting, and is a factor used in determining at-risk compensation levels. A historical reconciliation of reported-to-core financials during the Organization 2005 initiative is
available on the Company’s website at www.pg.com/investor. The Company continues to conduct projects consistent with the focus of productivity improvement and margin expansion. Beginning with fiscal year 2004, charges associated with these
projects are absorbed in normal operating costs.
* * *
FORWARD-LOOKING STATEMENTS
This document includes “forward-looking
statements” within the meaning of the “safe harbor” provisions of the United States
Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by
the use of words such as “anticipate,” “believe,” “expect,” “estimate,” “plan,” “outlook,” and “project” and
other similar expressions that predict or indicate future events or trends or that are not statements
of historical matters. Investors are cautioned that such forward-looking statements with respect
to revenues, earnings, performance, strategies, prospects and other aspects of the businesses of
The Gillette Company (“Gillette”), The Procter & Gamble Company (“P&G”)
and the combined company after completion of the proposed transaction are based on current expectations
that are subject to risks and uncertainties. A number of factors could cause actual results or outcomes
to differ materially from those indicated by such forward-looking statements. These factors include,
but are not limited to, the following risks and uncertainties: those set forth in Gillette’s
and P&G’s filings with the Securities and Exchange Commission (“SEC”), the failure
to obtain and retain expected synergies from the proposed transaction, failure of Gillette and P&G
stockholders to approve the transaction, delays in obtaining, or adverse conditions contained in,
any required regulatory approvals, failure to consummate or delay in consummating the transaction
for other reasons, changes in laws or regulations and other similar factors. Readers are referred
to Gillette’s and P&G’s most recent reports filed with the SEC. Gillette and P&G
are under no obligation to (and expressly disclaim any such obligation to) update or alter their
forward-looking statements whether as a result of new information, future events or otherwise.
Additional Information and Where to Find It
This filing may be deemed to be solicitation material in respect of the
proposed merger of Gillette and P&G. In connection with the proposed transaction, a registration
statement on Form S-4 will be filed with the SEC. SHAREHOLDERS OF GILLETTE AND SHAREHOLDERS OF P&G
ARE URGED TO READ THE REGISTRATION STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING THE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE REGISTRATION
STATEMENT, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The final
joint proxy statement/prospectus will be mailed to shareholders of Gillette and shareholders of P&G.
Investors and security holders may obtain a free copy of the disclosure documents (when they are
available) and other documents filed by Gillette and P&G with the Commission at the Commission’s
website at www.sec.gov, from The Gillette Company, Prudential Tower, Boston, Massachusetts,
02199-8004, Attention: Office of the Secretary, or from The Procter & Gamble Company, Investor
Relations, P.O. Box 599, Cincinnati, OH 45201-0599.
Participants in the Solicitation
Gillette, P&G and their respective directors and executive officers
and other members of management and employees may be deemed to be participants in the solicitation
of proxies from their respective shareholders in respect of the proposed transactions. Information
regarding Gillette’s directors and executive officers is available in Gillette’s proxy
statement for its 2004 annual meeting of shareholders, which was filed with the SEC on April 12,
2004, and information regarding P&G’s directors and executive officers is available in P&G’s
proxy statement for its 2004 annual meeting of shareholders, which was filed with the SEC on August
27, 2004. Additional information regarding the interests of such potential participants will be included
in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when
they become available.
