PRICING SUPPLEMENT No. 015-dated March 26, 2003
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(TO PROSPECTUS DATED JULY 10, 2002 AND RULE 424(b)(2)
PROSPECTUS SUPPLEMENT DATED AUGUST 23, 2002) FILE NO. 333-86336
$83,000,000
THE GILLETTE COMPANY
FLOATING RATE NOTES DUE 2043
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We are offering $83,000,000 aggregate principal amount of Floating Rate
Notes due 2043 (the "notes") pursuant to this pricing supplement. The notes will
be issued as part of a previously established series of senior debt securities
designated as CoreNotesSM under an indenture dated as of April 11, 2002, as
amended or supplemented from time to time (the "indenture"), between us and Bank
One, N.A. Accordingly, the notes will be general unsecured obligations and will
rank equally with all of our other unsecured and unsubordinated indebtedness
outstanding from time to time.
We will pay interest on the notes quarterly on January 2, April 2, July
2 and October 2 of each year, beginning on July 2, 2003. Interest on the notes
will accrue from April 2, 2003 at a floating rate per annum equal to Three-Month
LIBOR, reset quarterly on each interest payment date, minus 0.30%. We will issue
the notes only in denominations of $1,000 and integral multiples of $1,000.
The notes will mature on April 2, 2043. However, we have the option to
redeem the notes, in whole or in part, on or after April 2, 2033, at the
redemption prices listed in this pricing supplement plus unpaid interest accrued
thereon to the redemption date.
Beginning on April 2, 2004, the holders of the notes have the option to
require us to repay the notes, in whole or in part, on April 2 of every year
from 2004 through 2014 and on April 2 of every third year thereafter (i.e.
beginning on April 2, 2017) at the repayment prices listed in this pricing
supplement plus unpaid interest accrued thereon to the repayment date.
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PER NOTE TOTAL
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Public offering price (1)............................. 100% $83,000,000
Underwriting discount................................. 1% $830,000
Proceeds (before expenses) to The Gillette Company.... 99% $82,170,000
(1) Plus accrued interest from April 2, 2003 if settlement occurs after
that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this pricing supplement or the accompanying prospectus
and prospectus supplement. Any representation to the contrary is a criminal
offense.
We expect that the notes will be ready for delivery in book-entry form
only through The Depository Trust Company on or about April 2, 2003.
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MERRILL LYNCH & CO. MORGAN STANLEY UBS WARBURG
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The date of this pricing supplement is March 26, 2003.
TABLE OF CONTENTS
PRICING SUPPLEMENT
About This Pricing Supplement......................................... PS-3
Risk Factors.......................................................... PS-3
Description of the Notes.............................................. PS-3
Material United States Federal Income Tax Considerations.............. PS-7
Supplemental Plan of Distribution..................................... PS-7
PROSPECTUS SUPPLEMENT
About This Prospectus Supplement, The Accompanying
Prospectus and Pricing Supplements.............................. S-4
Summary............................................................... S-5
Risk Factors.......................................................... S-7
Description of the Notes.............................................. S-9
Material United States Federal Income Tax Considerations.............. S-16
Supplemental Plan of Distribution..................................... S-24
Legal Matters......................................................... S-25
Annex A............................................................... A-1
PROSPECTUS
About This Prospectus................................................. ii
Note Regarding Forward-Looking Statements............................. ii
Where You Can Find More Information................................... iii
Incorporation of Certain Documents by References...................... iii
The Company........................................................... 1
Ratio of Earnings to Fixed Charges.................................... 6
Use of Proceeds....................................................... 7
Description of Debt Securities........................................ 7
Global Securities..................................................... 13
Plan of Distribution.................................................. 16
Validity of Securities................................................ 17
Experts............................................................... 17
PS-2
ABOUT THIS PRICING SUPPLEMENT
This pricing supplement describes the specific terms of the notes that
we are offering and supplements the accompanying prospectus and prospectus
supplement. Accordingly, this pricing supplement modifies the accompanying
prospectus and prospectus supplement to the extent that it contains information
that is different from or additional to the information contained therein.
It is important for you to read and consider all information contained
in this pricing supplement and the accompanying prospectus and prospectus
supplement in making your decision to invest in the notes. You should also read
and consider the information contained in the documents incorporated by
reference into this pricing supplement and the accompanying prospectus and
prospectus supplement. See "Where You Can Find More Information" and
"Incorporation of Certain Documents by Reference" in the accompanying
prospectus.
You should only rely on the information contained or incorporated by
reference in this pricing supplement and the accompanying prospectus and
prospectus supplement. We have not authorized anyone to provide you with
information different than the information in this pricing supplement or the
accompanying prospectus or prospectus supplement. Neither we nor the
underwriters are making an offer to sell the notes in any jurisdiction where the
offer or sale of the notes is not permitted. You should assume that the
information contained or incorporated by reference in this pricing supplement
and the accompanying prospectus and prospectus supplement is accurate only as of
its date or as of the date specified.
This pricing supplement and the accompanying prospectus and prospectus
supplement contain forward-looking statements. For a description of these
statements and a discussion of the factors that may cause our actual results to
different materially from these statements, see "Note Regarding Forward-Looking
Statements" in the accompanying prospectus and our annual report on Form 10-K
filed with the Securities and Exchange Commission on March 5, 2003.
Unless otherwise indicated or unless the context requires otherwise,
all references in this pricing supplement to "Gillette," the "Company," "we,"
"us," "our" or similar references mean The Gillette Company.
RISK FACTORS
Your investment in the notes involves risk. In consultation with your
own financial and legal advisers, you should carefully consider the following
risks and the other information included or incorporated by reference in this
pricing supplement and the accompanying prospectus and prospectus supplement,
including the information under "Risk Factors" in the accompanying prospectus
supplement and "Notes Regarding Forward-Looking Statements" in the accompanying
prospectus and in our annual report on Form 10-K filed with the Securities and
Exchange Commission on March 5, 2003, before deciding that an investment in the
notes is suitable for you. You should not purchase the notes unless you
understand and can bear the investment risks of the notes.
RISKS ASSOCIATED WITH NOTES INDEXED TO INTEREST RATE INDICES
Because the notes are indexed to Three-Month LIBOR (as defined on page
PS-4 under "Description of the Notes-Interest"), there will be significant risks
not associated with a conventional fixed rate debt security, including the risk
that the yield on the notes will decline as a result of decreases in prevailing
interest rates. In recent years, interest rates have been declining, thereby
having an adverse effect on the value of floating rate debt obligations
generally. Furthermore, values of certain interest rate indices have been
volatile, and volatility in those and other interest rate indices may be
expected in the future.
DESCRIPTION OF THE NOTES
The following description of the terms of the notes supplements the
general terms and provisions of the debt securities contained in the
accompanying prospectus and prospectus supplement. If there are any
inconsistencies between the information in this section and the information in
the accompanying prospectus or prospectus supplement, the information in this
section shall control.
PS-3
INTEREST
Interest on the notes will accrue from April 2, 2003 or the most recent
interest payment date (as defined below) to which interest has been paid or duly
made available for payment, as the case may be, at a floating rate per annum
equal to Three-Month LIBOR (as defined below), as determined on the
determination date (as defined below) for the applicable interest period (as
defined below), minus 0.30%; provided, however, that interest on the notes for
any interest period may not exceed the highest rate then permitted under New
York law, as the same may be modified by United States law of general
application. We will be required to pay interest on the notes quarterly in
arrears on January 2, April 2, July 2 and October 2 of each year, beginning on
July 2, 2003 (each, an "interest payment date"), to the holders of the notes on
the 15th calendar day, whether or not a business day (as defined below)
preceding the applicable interest payment date. However, if any interest payment
date, other than the maturity date, any redemption date or any repayment date
(as each such term is defined below), falls on a day that is not a business day,
then such interest payment date will be postponed to the next business day,
unless such next business day falls in the next month, in which case such
interest payment date will be accelerated to the preceding business day. As used
herein, "interest period" means the period from, and including, the preceding
interest payment date (or, in the case of the initial interest period, April 2,
2003) to, but excluding, the applicable interest payment date, maturity date,
redemption date or repayment date, as the case may be. Interest on the notes
will be computed on the basis of the actual number of days elapsed in the
applicable interest period and a 360-day year.
As used herein, "business day" means any day (i) other than a Saturday,
Sunday, legal holiday or other day on which commercial banks are authorized or
required by law, regulation or executive order to close in The City of New York
and (ii) that is a "London banking day", which is defined as a day on which
commercial banks are open for business (including dealings in U.S. dollars) in
London.
"Three-Month LIBOR" means, with respect to any interest period, the
rate for deposits in U.S. dollars for a three-month period, commencing on the
first day of such interest period, that appears on Telerate Page 3750 (as
defined below) at approximately 11:00 a.m., London time, on the determination
date for such interest period. If this rate does not so appear on Telerate Page
3750, the calculation agent will determine the rate on the basis of the rates at
which deposits in U.S. dollars are offered by four major banks in the London
interbank market (selected by the calculation agent) at approximately 11:00
a.m., London time, on such determination date to prime banks in the London
interbank market for a period of three months, commencing on the first day of
such interest period and in a principal amount equal to an amount not less than
$1,000,000 that is representative for a single transaction in such market at
such time. In such case, the calculation agent will request the principal London
office of each of the aforesaid major banks to provide a quotation of such rate.
If at least two such quotations are so provided, Three-Month LIBOR for such
interest period will be the arithmetic mean of such quotations, and, if fewer
than two such quotations are so provided, Three-Month LIBOR for such interest
period will be the arithmetic mean of the rates quoted by major banks in The
City of New York, selected by the calculation agent, at approximately 11:00
a.m., New York City time, on such determination date for loans in U.S. dollars
to leading European banks for a period of three-months, commencing on the first
day of such interest period and in a principal amount equal to an amount not
less than $1,000,000 that is representative for a single transaction in such
market at such time.
As used herein, "determination date" means the second London banking
day preceding the first day of the applicable interest period.
"Telerate Page 3750" means the display on Moneyline Telerate (or any
successor service) on page 3750 (or any other page as may replace such page on
such service) for the purpose of displaying London interbank offered rates of
major banks.
The calculation agent will, upon the request of the holder of any note,
provide the interest rate then in effect. The calculation agent is Bank One,
N.A. until such time as we appoint a successor calculation agent. All
calculations made by the calculation agent in the absence of manifest error
shall be conclusive for all purposes and binding on us and the holders of the
notes.
All percentages resulting from any calculation of the interest rate
with respect to the notes will be rounded, if necessary, to the nearest
one-hundred thousandth of a percentage point, with five one-millionths of a
percentage point rounded upwards (e.g., 9.876545% being rounded to 9.87655%
PS-4
and 9.876544% being rounded to 9.87654%) and all dollar amounts in or resulting
from any such calculation will be rounded to the nearest cent (with one-half
cent being rounded upwards).
MATURITY
The notes will mature and be payable on April 2, 2043 (the "maturity
date").
If the maturity date, any redemption date or any repayment date falls
on a day that is not a business day, then the applicable payment will be made on
the next business day, and no additional interest will accrue in respect of such
payment made on such next business day.
OPTIONAL REDEMPTION
We may, at our option, redeem the notes, in whole or in part (in
integral multiples of $1,000), at any time and from time to time on or after
April 2, 2033 at the following redemption prices (in each case expressed as a
percentage of the principal amount), if redeemed during the 12-month period
beginning on April 2 of any of the following years:
YEAR REDEMPTION PRICE
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2033........................................................ 105.0%
2034........................................................ 104.5%
2035........................................................ 104.0%
2036........................................................ 103.5%
2037........................................................ 103.0%
2038........................................................ 102.5%
2039........................................................ 102.0%
2040........................................................ 101.5%
2041........................................................ 101.0%
2042 and thereafter to, but excluding, maturity............. 100.5%
in each case, together with unpaid interest, if any, accrued thereon to the
redemption date; provided, however, that we will be obligated to pay the
interest installment due on any interest payment date occurring on or before a
redemption date to the holders of the notes on the record date preceding such
interest payment date.
We must mail notice of any redemption at least 30 days but not more
than 60 days before the redemption date to each holder of notes to be redeemed.
Unless we default in payment of the redemption price, on and after the
redemption date, interest will cease to accrue on the notes or portions thereof
called for redemption.
In the event of any redemption of less than all the outstanding notes,
the particular notes (or portions thereof in integral multiples of $1,000) to be
redeemed shall be selected by the trustee by such method as the trustee
considers fair and appropriate.
REPAYMENT AT OPTION OF HOLDER
The notes will be repayable at the option of the holders thereof, in
whole or in part, on the repayment dates and at the repayment prices (in each
case expressed as a percentage of the principal amount) set forth in the
following table:
PS-5
DATE REPAYMENT PRICE
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April 2, 2004................................................ 98%
April 2, 2005................................................ 98%
April 2, 2006................................................ 98%
April 2, 2007................................................ 98%
April 2, 2008................................................ 98%
April 2, 2009................................................ 99%
April 2, 2010................................................ 99%
April 2, 2011................................................ 99%
April 2, 2012................................................ 99%
April 2, 2013................................................ 99%
April 2, 2014 and April 2 of every third year thereafter..... 100%
in each case together with unpaid interest, if any, accrued thereon to the
repayment date; provided, however, that we will be required to pay the interest
installment due on any interest payment date occurring on or before a repayment
date to the holders of the notes on the record date preceding such interest
payment date.
In order for a note to be repaid, the paying agent must receive, at
least 30 days but not more than 60 days prior to the repayment date, (1) such
note with the form entitled "Option to Elect Repayment" on the reverse thereof
duly completed or (2) a telegram, facsimile transmission or a letter from a
member of a national securities exchange or a member of the National Association
of Securities Dealers, Inc. or a commercial bank or trust company in the United
States setting forth:
- the name of the holder of such note;
- the principal amount of such note;
- the principal amount of such note to be repaid;
- the certificate number or a description of the tenor and terms of
such note;
- a statement that the option to elect repayment is being exercised
thereby; and
- a guarantee that such note to be repaid will be transferred to the
DTC account of the paying agent not later than the fifth business
day after the date of such telegram, facsimile transmission or
letter.
The repayment option may be exercised by the holder of a note for less
than the entire principal amount of such note but, in that event, the principal
amount of such note remaining outstanding after repayment must be an integral
multiple of $1,000.
The notes are not otherwise subject to repayment at the option of
holders.
NOTES USED AS QUALIFIED REPLACEMENT PROPERTY
Prospective investors seeking to treat the notes as "qualified
replacement property" for purposes of section 1042 of the Internal Revenue Code
of 1986, as amended (the "Code"), should be aware that section 1042 requires the
issuer to meet certain requirements in order for the notes to constitute
qualified replacement property. In general, qualified replacement property means
any security issued by a domestic operating corporation which did not, for the
taxable year preceding the taxable year in which such security was purchased,
have "passive investment income" in excess of 25 percent of the gross receipts
of such corporation for such preceding taxable year (the "passive income test").
For purposes of the passive income test, where the issuing corporation is in
control of one or more corporations, all such corporations are treated as one
corporation (the "affiliated group") for the purposes of computing the amount of
passive investment income under section 1042.
We believe that less than 25 percent of the gross receipts of our
"affiliated group" is "passive investment income" for the taxable year ended
December 31, 2002. In making this determination, we have made certain
assumptions and used procedures which we believe are reasonable. We cannot give
any assurance as to whether we
PS-6
will continue to meet the passive income test. It is, in addition, possible that
the IRS may disagree with the manner in which we have calculated our affiliated
group's gross receipts (including the characterization thereof) and passive
investment income and the conclusions reached herein. Prospective purchasers of
the notes should consult with their own tax advisors with respect to these and
other tax matters relating to the notes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The notes provide for stated interest at a single qualified floating
rate (namely, Three-Month LIBOR minus 0.30%) and have an issue price equal to
the total noncontingent principal payments due. Thus, for tax purposes, the
notes are considered variable rate debt instruments. Under the variable rate
debt instrument rules, because the notes provide for stated interest at a single
qualified floating rate payable at least annually, all the interest on the notes
will be qualified stated interest and the notes will not be treated as having
original issue discount (as described in the accompanying prospectus
supplement). In particular, the amount of qualified stated interest that accrues
with respect to a note during any interest accrual period will be determined
under the rules applicable to fixed rate debt instruments by assuming that the
single qualified floating rate (namely, Three-Month LIBOR minus 0.30%) is a
fixed rate equal to the value of the single qualified floating rate (namely,
Three-Month LIBOR minus 0.30%) as of the original issue date of such note. The
qualified stated interest allocable to an accrual period will be increased (or
decreased) if the interest actually paid during an accrual period exceeds (or is
less than) the interest assumed to be paid during the accrual period pursuant to
the foregoing rules. You are required to include qualified stated interest
payments in income as interest either when you accrue or receive those payments,
depending on your accounting method for tax purposes.
The notes give us the unconditional right to redeem the notes at a
premium (as described under "Description of the Notes-Optional Redemption"). If
we were to redeem the notes, the yield on the notes would be greater than it
would otherwise be. Thus, under special rules governing this type of
unconditional option, for tax purposes, we will be deemed not to have exercised
our right to redeem, and the possibility of this redemption premium will not
affect the amount of income you recognize in advance of your receipt of any such
redemption premium.
Prospective investors should consult the summary describing the
material U.S. federal income tax consequences of ownership and disposition of
the notes contained under "Material United States Income Tax Considerations" in
the accompanying prospectus supplement.
SUPPLEMENTAL PLAN OF DISTRIBUTION
We have entered into a distribution agreement and a terms agreement
with respect to the notes with the underwriters listed below. Subject to certain
conditions, the underwriters have severally agreed to purchase from us as
principal the principal amount of notes opposite their names indicated in the
following table:
UNDERWRITER PRINCIPAL AMOUNT OF NOTES
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................... $25,000,000
Morgan Stanley & Co. Incorporated .................. $33,000,000
UBS Warburg LLC .................................... $25,000,000
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Total.................................. $83,000,000
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Notes sold by the underwriters to the public will initially be offered
at the initial public offering price set forth on the cover of this pricing
supplement. After the initial public offering of the notes, the underwriters may
change the offering price and other selling terms.
We have agreed to indemnify the underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the underwriters may be required to make in respect
thereof.
In the ordinary course of their businesses, the underwriters and their
respective affiliates have engaged, and may in the future engage, in investment
and commercial banking transactions with us and with certain of our affiliates.
PS-7
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$83,000,000
THE GILLETTE COMPANY
FLOATING RATE NOTES DUE 2043
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PRICING SUPPLEMENT
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MERRILL LYNCH & Co.
MORGAN STANLEY
UBS WARBURG
MARCH 26, 2003
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