UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 1-4085
POLAROID CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 04-1734655
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
549 Technology Square,
Cambridge, Mass. 02139
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code: (617) 386-2000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------------------ ------------------------
Common Stock, par value $1 per New York Stock Exchange
share Pacific Stock Exchange
Rights to Purchase Series A New York Stock Exchange
Participating Cumulative Pacific Stock Exchange
Preferred Stock
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this 10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates as of
March 15, 1996: $1,916,831,280
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Common Stock outstanding as of March 15, 1996: 45,638,840 shares
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Documents incorporated by reference:
Polaroid Corporation Annual Report to Stockholders for 1995 --
Parts I, II and IV
Polaroid Corporation 1996 Proxy Statement, dated March 21, 1996 --
Part III
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Part I
Item 1. Business
General
Polaroid Corporation, a Delaware corporation founded in 1937, and its
subsidiaries (the "Company") comprise a worldwide enterprise with 1995
sales of $2.2 billion. The Company designs, manufactures and markets a
variety of products primarily in instant image recording fields. The
Company's products are used in amateur and professional photography,
industry, graphic arts, science, medicine, government, and education.
Products
The Company designs, manufactures and markets worldwide a variety of
products, including more than 50 different types of film and over 100
types of photographic equipment including cameras, camera backs, film
holders and specialized equipment designed for a broad range of
applications in photographic imaging. These include instant
photographic cameras and films, videotapes, conventional films, and
light polarizing filters and lenses. Major instant camera lines
consist of the Polaroid Spectra and OneStep cameras. Instant films
include both integral and peel-apart films. In 1995, the Company
decided to limit its production of Captiva cameras to completion of
work-in-process. The Company will continue to market Captiva cameras
and film for the foreseeable future, as well as provide service.
In addition, the Company is continuing to develop digital imaging
products. Digital imaging products primarily include digital dry-
process laser imaging products for medical, graphic arts and other
business applications. Digital imaging products also include products
for consumer digital imaging and desktop publishing. The future
prospects of the Company's new digital businesses are uncertain and
they are likely to continue to affect the Company's results adversely
for a few years. With regard to its medical imaging business, the
Company has made very substantial expenditures to develop its Helios
Laser Imaging System as a substitute for conventional transparency
films used for x-ray and other medical applications and to build a new
multi-use film manufacturing plant in which to manufacture Helios type
transparency films, as well as graphics imaging films. Despite
certain technical advantages of digital radiology and the Helios
product, its ongoing costs exceed revenues. The Company is exploring
the feasibility of a variety of business relationships to improve the
results of its medical imaging business.
Distribution
Worldwide sales of imaging products are made by the Company to
photographic stores, retail, food, drug, discount and department
stores, wholesalers, hospitals, original equipment manufacturers,
independent agents and distributors. The Company's distributors
include unrelated distributors and subsidiaries of the Company.
Competition
The worldwide market for imaging products is highly competitive in
price, quality, service and product performance. The Company has
competitors worldwide, ranging from large corporations to smaller and
more specialized companies.
Raw Materials and Supplies
Sufficient raw materials and supplies were available in 1995 to
maintain operations of all manufacturing plants.
Research, Engineering and Development
The Company continues to place emphasis on research, engineering and
development. The amount expended for research, engineering and
development included in marketing, research, engineering and
administrative expenses was $165.5 million during 1995, compared with
$165.7 million in 1994 and $160.8 million in 1993.
Patents and Trademarks
The Company continued to obtain patents in 1995. In the judgment of
the Company, its patents are important to its business. The Company
also owns a number of valuable trademarks, including "Polaroid", which
are important to its business.
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Environmental Compliance
Approximately 8% of the Company's capital spending in 1996 will be for
environmental compliance projects.
The Company, together with other parties, is currently designated a
Potentially Responsible Party ("PRP") by the United States
Environmental Protection Agency (the "EPA") and certain state agencies
with respect to the response costs for environmental remediation at
several sites. The Company believes that its potential liability with
respect to any site and with respect to all sites in the aggregate
will not have a materially adverse effect on the financial condition
or operating results of the Company.
Due to a wide range of estimates with regard to response costs at
those sites and various other uncertainties, the Company cannot firmly
establish its ultimate liability concerning those sites. In each case
in which the Company is able to determine the likely exposure, such
amount has been included in the Company's reserve for environmental
liabilities. Where a range of comparably likely exposures exists, the
Company has included in its reserve the minimum amount of the range.
The Company's aggregate reserve for these liabilities as of December
31, 1995 was $5.2 million, the majority of which the Company currently
expects to be payable over the next two to three years. The Company's
analysis of data which underlies its establishment of this reserve is
undertaken on a quarterly basis. The reserve for such liability does
not provide for associated litigation costs, which, if any, are
expected to be inconsequential in comparison with the amount of the
reserve. The Company will continue to accrue in its reserve
appropriate amounts from time to time as circumstances warrant. This
reserve does not take into account potential recoveries from third
parties.
On December 4, 1994, the Company entered into a consent agreement with
the EPA to resolve alleged violations of the Toxic Substances Control
Act ("TSCA"). Under this agreement, the Company paid a civil penalty
of $80,000 and agreed to conduct an internal audit of certain TSCA
practices. This audit was recently completed and revealed an
additional potential liability, although not yet confirmed by the EPA,
estimated to be in the range between $64,000 and $89,000.
The Company reviews its recurring internal expenditures on
environmental matters, as well as capital expenditures related to
environmental compliance, on a monthly basis, and reviews its third-
party expenditures on environmental matters on a quarterly basis. The
Company believes that these expenditures have not had and will not
have a materially adverse effect on the financial condition or
operating results of the Company.
Federal law provides that PRPs may be held jointly and severally
liable for response costs. Based on current estimates of those costs
and after consideration of the potential estimated liabilities of
other PRPs with respect to those sites and their respective estimated
levels of financial responsibility, the Company does not believe its
potential liability will be materially enlarged by the fact that
liability is joint and several.
Employees
The Company had 11,662 and 12,104 employees at December 31, 1995 and
1994, respectively. These figures included approximately 160 worldwide
temporary employees in 1995 and approximately 380 in 1994. In
addition, the Company had non-employee temporary workers in the U.S.
of approximately 800 and 1,000 at December 31, 1995 and 1994,
respectively. The Company's December 1995 early retirement and
severance programs are expected to result in the elimination of a
total of approximately 1,600 positions worldwide in 1996.
Information About Foreign and Domestic Operations and Significant
Customers
Please see note 13, "Business", on pages 44 and 45 of the Polaroid
Corporation Annual Report to Stockholders for 1995 (the "Annual
Report"). During 1995, 1994 and 1993, sales to one customer, Wal-Mart
Stores, Inc., amounted to 10.9% , 13.7% and 11.6%, respectively, of
the Company's total sales. Sales in Russia accounted for 8.8%, 6.7%
and 1.1% of total sales in the 1995, 1994, and 1993, respectively.
While the Company believes that emerging markets present particularly
attractive opportunities, such markets tend to be considerably less
stable than more established markets. There can be no assurance that
emerging markets will continue to produce favorable results.
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Factors That May Affect Future Results
From time to time, information and statements provided by the Company
may contain "forward-looking statements" as defined by the Private
Securities Litigation Reform Act of 1995 (the "Act"). The Company
desires to take advantage of the "safe harbor" provisions of the Act.
The Company therefore cautions shareholders and investors that actual
results may differ materially from those projected or suggested in any
forward-looking statement as the result of a wide variety of factors,
which include but are not limited to the factors and conditions set
forth below. Many of the important factors below have been discussed
in prior Securities and Exchange Commission filings by the Company.
The Company sells and markets its products worldwide. The worldwide
market for imaging products, particularly products in electronic and
medical imaging, is highly competitive in price, quality, service and
product performance. The Company has competitors worldwide, ranging
from large corporations to smaller and more specialized companies.
The impact of these factors can cause varied results.
The Company is affected by retail demand for its products,
particularly in the United States and Europe. Additional factors
including fluctuation of foreign exchange rates, economic factors,
political activity, changes in laws and regulations, particularly in
the environmental arena, could affect the Company's results from
operations. The Company believes the emerging markets present
particularly attractive opportunities. However, such markets tend to
be considerably less stable than more established markets and there
can be no assurance that emerging markets will continue to produce
favorable results for the Company.
The Company is continuing to develop digital imaging products for
medical, graphic arts and other applications. The profits of the
Company's basic instant photography business have been higher than the
Company's total profit from operations due to the operating losses of
these digital imaging businesses. Included in the digital imaging
losses are costs associated with the Company's new coating facility
which was brought on-line in 1994 and is operating at low levels of
production capacity. The Company is consolidating its coating
facilities, shifting capacity from some of its oldest to its newer,
more efficient facilities. The timing and impact of this
consolidation are uncertain. The future prospects of the Company's
digital imaging businesses are uncertain and they are likely to
continue to affect the Company's financial results adversely for the
next few years. The Company's ability to reduce its digital imaging
losses is also dependent on its ability to develop new products in a
timely manner and to market them effectively. The Company continues
to study the different areas of its businesses, including their cost
structures, and is exploring prospects for aligning itself in various
business relationships to improve financial results.
Item 2. Properties
The Company's worldwide corporate headquarters is located in
Cambridge, Massachusetts, along with administrative offices,
marketing, research and engineering functions. The Cambridge
properties consist of approximately 1,162,000 square feet of space,
which includes space owned in fee (450,000 square feet) and leased
premises (712,000 square feet), under leases expiring between 1996 and
2003.* Approximately 62% of the Company's leased premises in
Cambridge, Massachusetts is related to a lease which expires in June
1999. The Company is currently reviewing its alternatives.
* All lease expiration dates are at the end of the current term for
leases not containing a renewal option and the end of the last
renewal term for leases containing renewal options.
Over 90% of the Company's other space in the United States is located
in Eastern Massachusetts (Waltham, Norwood, New Bedford, Needham,
Newton, Freetown and Bedford). These communities contain sites which
house essentially all of the Company's principal U.S. manufacturing
facilities plus additional research and engineering functions and
warehousing operations. Following is a summary description of such
facilities:
Approximate Space
Location (Square Feet)
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Waltham 1,652,000
Norwood 788,000
New Bedford 739,000
Needham 548,000
Newton 165,000
Freetown 137,000
Bedford 125,000
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4,154,000
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Approximately 92% of these U.S. manufacturing and warehousing
facilities and the land they occupy are owned by the Company. The
Newton and Bedford facilities are 100% leased and 40,000 square feet
of the Waltham site is leased.
The Company also currently maintains a network of three marketing and
distribution centers (Atlanta, Chicago and Santa Ana) and twenty-three
regional sales offices in other locations throughout the U.S.
Principal manufacturing facilities outside the U.S. are located in
Enschede, The Netherlands; Dumbarton, Scotland and Queretaro, Mexico.
Following is a summary description of such facilities:
Approximate Space
Location (Square Feet)
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The Netherlands 518,000
Scotland 438,000
Mexico 253,000
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1,209,000
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Approximately 91% of these facilities are owned by the Company. This
space also houses certain administrative and marketing activities. In
addition, the Company's joint ventures in China and Russia assemble
cameras and printed circuit boards for cameras.
Marketing subsidiaries or sales offices are located in England,
France, Germany, Italy, Spain, Russia and other European countries.
Additional marketing and distribution facilities are established in
four other regions in the Canada, Latin and South America regions
(Brazil, Canada, Mexico and Puerto Rico) and in numerous locations in
the Asia Pacific region (Japan, Australia, Hong Kong, China, Korea and
Malaysia).
During 1995, manufacturing facilities operated at reasonable levels of
production capacity, with the exception of the Company's new coating
facility which was brought on line in 1994 and is operating at low
levels of production capacity. The Company is consolidating its
coating facilities, shifting capacity from some of its oldest to its
newer, more efficient facilities. The capacity of the facilities is
sufficient to meet current demand for the Company's products.
All the Company's premises are in good repair and its machinery and
equipment are maintained in good operating condition. The facilities
are suitable for the production of the Company's products.
The Company does not anticipate any difficulty in renewing outstanding
leases or in finding satisfactory alternative premises.
Item 3. Legal Proceedings
Please see "Environmental Compliance" under Item 1. Business, above
and note 14, "Contingencies", on page 46 of the Annual Report.
Item 4. Submission of Matters to a Vote of Security Holders
None in the fourth quarter of 1995.
Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
Please see the table entitled "Quarterly Financial Data" on page 47 of
the Annual Report.
Item 6. Selected Financial Data
Please see the table entitled "Ten Year Financial Summary" on pages 48
to 49, inclusive, of the Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Please see the section entitled "Management's Discussion and Analysis
of Operations" on pages 21 to 28, inclusive, of the Annual Report.
In December 1995, the Company suspended its stock repuchase program.
In March 1996, the Company resumed making stock repurchases.
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Item 8. Financial Statements and Supplementary Data
Please see the section entitled "Independent Auditors' Report" on page
29, the sections entitled "Financial Statements" and "Notes to
Consolidated Financial Statements" on pages 30 to 46, inclusive, and
the section entitled "Supplementary Financial Information" on pages 46
to 49, inclusive, of the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
a) Directors - Please see the section entitled "Election of
Directors" on pages 3 to 6, inclusive, of the Polaroid
Corporation 1996 Proxy Statement (the "Proxy Statement").
b) Executive Officers of the Registrant - Listed below are the
executive officers of the Company. Officers are elected annually
by the Board of Directors. No family relationship exists between
any of the officers.
Name Office Age
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Gary T. DiCamillo Chairman of the Board and Chief 45
Executive Officer
Enrico I. Ancona Executive Vice President 50
William J. O'Neill, Jr. Executive Vice President and Chief 53
Financial Officer
Carole J. Uhrich Executive Vice President 52
Satish C. Agrawal Group Vice President 52
Robert M. Delahunt Senior Vice President 61
Graham M. Brown, Jr. Vice President and Treasurer 60
Richard F. deLima Vice President, Secretary and 65
General Counsel
Carl L. Lueders Vice President and Controller 45
Ralph M. Norwood Vice President 52
Joseph G. Parham, Jr. Vice President 46
Mr. DiCamillo became chairman and chief executive officer of the
Company, effective December 1, 1995. Prior to joining the Company, he
was employed at Black & Decker Corporation since 1986, when he joined
as vice president of marketing for its U.S. Power Tools Division. He
was named president of the division in 1988, and in early 1993 he was
given the added responsibility for the entire North American Power
Tool and Accessories businesses. Six months later, he was named to the
position of group vice president of Black & Decker Corporation and
president of its Power Tools and Accessories business.
Mr. Ancona joined the Company in 1994 as Executive Vice President.
Prior to joining the Company, he had spent 21 years at Digital
Equipment Corporation, the last eight years as a vice president.
Mr. O'Neill joined the Company in 1969. He was elected Corporate
Controller in 1980, Vice President and Controller in 1982, Group Vice
President in 1984, Group Vice President and Chief Financial Officer in
1990, and to his present position as Executive Vice President and
Chief Financial Officer in 1992.
Ms. Uhrich joined the Company in 1966. She was elected Vice President
in 1987 and to her present position as Executive Vice President in
March 1996.
Mr. Agrawal joined the Company in 1971. He was elected Vice President
in 1992 and to his present position as Group Vice President in March
1995.
Mr. Delahunt joined the Company in 1959. He was elected Assistant
Vice President in 1975, Vice President in 1980, and to his present
position as Senior Vice President in 1992.
Mr. Brown joined the Company in 1969. He was elected Corporate
Controller in 1984, Vice President and Controller in 1985, and to his
present position as Vice President and Treasurer in 1989. He intends
to retire in 1996.
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Mr. deLima joined the Company as Secretary and Chief Resident Counsel
in 1972. He was elected Vice President and Secretary in 1975, and to
his present positions as Vice President, Secretary and General Counsel
in 1989. He intends to retire in 1996.
Mr. Lueders joined the Company in 1979. He was elected to his present
position as Vice President and Controller in January 1996.
Mr. Norwood joined the Company in 1976. He was elected Assistant
Treasurer in 1987, Vice President and Treasurer in 1988, Vice
President and Controller in 1989. Upon Mr. Brown's retirement, he
will assume the responsibilities of Vice President and Treasurer.
Mr. Parham joined the Company in 1973. He was elected to his present
position as Vice President in 1994.
Item 11. Executive Compensation
Please see the section entitled "Executive Compensation" on pages 10
to 16, inclusive, of the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Please see the section entitled "Beneficial Ownership of Shares" on
pages 6 to 8, inclusive and the section entitled "Election of
Directors" on pages 3 to 6, inclusive, of the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Please see the section entitled "Election of Directors" on pages 3 to
6, inclusive, of the Proxy Statement.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Page
Reports on Form 8-K No.
a) 1. Financial Statements
Independent Auditors' Report 29*
Consolidated Statement of Earnings
for the years ended December 31, 1995, 1994 and 1993 30*
Consolidated Balance Sheet - December 31, 1995 and 1994 31*
Consolidated Statement of Cash Flows
for the years ended December 31, 1995, 1994 and 1993 32*
Consolidated Statement of Changes in Common
Stockholders' Equity
for the years ended December 31, 1995, 1994 and 1993 33*
Notes to Consolidated Financial Statements 34-46*
Supplementary Financial Information (Unaudited) 46-49*
a) 2. Financial Statement Schedule
Independent Auditors' Report 13
Schedule II - Valuation and Qualifying Accounts 14
All other schedules are omitted inasmuch as they are either not
required or not applicable.
* Page references are to the Annual Report, which pages are
incorporated herein by reference. Except for such pages and
other information in the Annual Report specifically
incorporated in this report by reference, the Annual Report is
not to be deemed filed as part of this report.
a) 3. Exhibits
3.1(a) Restated Certificate of Incorporation of Polaroid
Corporation as of August 20, 1973. (The Restated Certificate of
Incorporation included as Exhibit 3.2(a) to Polaroid Corporation
Form 10-K for the year ended December 31, 1988 as filed on March
31, 1989 is hereby incorporated herein by reference.)
3.1(b) Amendments to the Restated Certificate of Incorporation of
Polaroid Corporation as of May 12, 1987. (The Amendments to the
Restated Certificate of Incorporation included as Exhibit 3.1 to
Polaroid Corporation Form 10-Q for the quarter ended June 28,
1987 as filed on August 12, 1987 are hereby incorporated herein
by reference.)
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3.1(c) Amendments to Polaroid Corporation Restated Certificate of
Incorporation (Certificates of Designation of Series B Cumulative
Convertible Preferred Stock and Series C Cumulative Convertible
Pay-in-Kind Preferred Stock) as of January 30, 1989. (The
Amendments to the Restated Certificate of Incorporation included
as Exhibit 3.2(c) to Polaroid Corporation Form 10-K for the year
ended December 31, 1988 as filed on March 31, 1989 are hereby
incorporated herein by reference.)
3.1(d) Amendment to Polaroid Corporation Restated Certificate of
Incorporation as of June 2, 1989. (The Amendment to the Restated
Certificate of Incorporation included as Exhibit 3.1 to Polaroid
Corporation Form 10-Q for the quarter ended July 2, 1989 as filed
on August 13, 1989 is hereby incorporated herein by reference.)
3.1(e) Amendment to Polaroid Corporation Restated Certificate of
Incorporation (Certificate of Designation of Series D Cumulative
Convertible Preferred Stock) as of October 31, 1991. (The
Amendment to the Restated Certificate of Incorporation included
as Exhibit 3.2(e) to Polaroid Corporation Form 10-K for the year
ended December 31, 1991 as filed on March 27, 1992 is hereby
incorporated herein by reference.)
3.1(f) Amendment to Polaroid Corporation Restated Certificate of
Incorporation (Certificates of Elimination of Series B Cumulative
Convertible Preferred Stock and Series C Cumulative Convertible
Pay-In-Kind Preferred Stock) as of October 31, 1991. (The
Amendment to the Restated Certificate of Incorporation included
as Exhibit 3.2(f) to Polaroid Corporation Form 10-K for the year
ended December 31, 1991 as filed on March 27, 1992 is hereby
incorporated herein by reference.)
3.2 By-Laws of Polaroid Corporation amended and restated as of
February 1, 1994. (The By-Laws amended and restated included as
Exhibit 3.1 to Polaroid Corporation Form 10-K for the year ended
December 31, 1993 as filed on March 30, 1994 are hereby
incorporated herein by reference.)
4.1 Rights Agreement dated as of September 9, 1986 between
Polaroid Corporation and Morgan Shareholder Services Trust
Company, as Rights Agent. (The Rights Agreement included as
Exhibit 1 to Polaroid Corporation Form 8-A as filed on September
15, 1986 is hereby incorporated herein by reference.)
4.2 First Amendment dated as of August 16, 1988 to Rights
Agreement dated as of September 9, 1986 between Polaroid
Corporation and Morgan Shareholder Services Trust Company, as
Rights Agent. (The First Amendment included as Exhibit 4 to
Polaroid Corporation Form 8 (Amendment No. 1 to Form 8-A filed on
September 15, 1986) as filed on August 18, 1988 is hereby
incorporated herein by reference.)
4.3 Second Amendment dated as of September 14, 1988 to Rights
Agreement dated as of September 9, 1986 between Polaroid
Corporation and Morgan Shareholder Services Trust Company, as
Rights Agent. (The Second Amendment included as Exhibit 5 to
Polaroid Corporation Form 8 (Amendment No. 2 to the Form 8-A
filed on September 15, 1986) as filed on September 15, 1988 is
hereby incorporated herein by reference.)
4.4 Supplemental Rights Agreement and Third Amendment dated as
of January 30, 1989 to Rights Agreement dated as of September 9,
1986 between Polaroid Corporation and Morgan Shareholder Services
Trust Company, as Rights Agent. (The Supplemental Rights
Agreement and Third Amendment included as Exhibit 6 to Polaroid
Corporation Form 8 (Amendment No. 3 to the Form 8-A filed on
September 15, 1986) as filed on January 30, 1989 is hereby
incorporated herein by reference.)
4.5 Fourth Amendment dated as of February 21, 1989 to Rights
Agreement dated as of September 9, 1986 between Polaroid
Corporation and Morgan Shareholder Services Trust Company, as
Rights Agent. (The Fourth Amendment included as Exhibit 7 to
Polaroid Corporation Form 8 (Amendment No. 4 to the Form 8-A
filed on September 15, 1986) as filed on February 21, 1989 is
hereby incorporated herein by reference.)
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4.6 Supplemental Rights Agreement and Fifth Amendment dated as
of October 7, 1991 to the Rights Agreement dated as of September
9, 1986 between Polaroid Corporation and First Chicago Trust
Company (as successor to Morgan Shareholder Services Trust
Company), as Rights Agent. (The Supplemental Rights Agreement and
Fifth Amendment included as Exhibit 8 to Polaroid Corporation
Form 8 (Amendment No. 5 to the Form 8-A filed on September 15,
1986) as filed on October 21, 1991 is hereby incorporated herein
by reference.)
4.7 Sixth Amendment (previously designated as the Fifth
Amendment) dated as of March 23, 1993 to the Rights Agreement
dated as of September 9, 1986 between Polaroid Corporation and
First Chicago Trust Company, as Rights Agent. (The Sixth
Amendment (previously designated as the Fifth Amendment) included
as Exhibit 9 (previously designated as Exhibit 8) to Polaroid
Corporation's Form 8 (Amendment No. 6 (previously designated as
Amendment No. 5) to the Form 8-A filed on September 15, 1986) as
filed on July 2, 1993 is hereby incorporated herein by
reference.)
4.8 Amendment dated as of June 30, 1993 to the Fifth Amendment
dated as of March 23, 1993 to the Rights Agreement dated as of
September 9, 1986 between Polaroid Corporation and First Chicago
Trust Company, as Rights Agent. (The Amendment to the Sixth
Amendment included as Exhibit 10 to Polaroid Corporation's Form 8
(Supplement to Amendment No.5 and redesignation thereof as
Amendment No. 6 to the Form 8-A filed on September 15, 1986) as
filed on July 2, 1993 is hereby incorporated herein by
reference.)
4.9 Indenture dated as of December 15, 1991 between Polaroid
Corporation and The First National Bank of Boston, as Trustee,
including form of Note. (The Indenture included as Exhibit 4.8 to
Polaroid Corporation Form 10-K for the year ended December 31,
1991 as filed on March 27, 1992 is hereby incorporated herein by
reference.)
10.1 Stock Purchase Agreement dated July 12, 1988 between
Polaroid Corporation and Boston Safe Deposit and Trust Company,
as Trustee under the Polaroid Stock Equity Plan. (The Stock
Purchase Agreement included as Exhibit 10(c) to Polaroid
Corporation Form 8-K as filed on July 22, 1988 is hereby
incorporated herein by reference.)
10.2 Credit Agreement (Working Capital) dated as of August 24,
1994 among Polaroid Corporation, Morgan Guaranty Trust Company of
New York, as Agent, and Banks listed therein. (The Agreement
included as Exhibit 10.2 to Polaroid Corporation Form 10-K for
the year ended December 31, 1994 as filed on March 30, 1995 is
hereby incorporated herein by reference.)
10.3 Credit Agreement (ESOP Loan) as of June 30, 1992 among
Polaroid Corporation, Morgan Guaranty Trust Company of New York,
as Agent, and the Co-Agent and Banks named therein. (The
Agreement included as Exhibit 10.3 to Polaroid Corporation Form
10-K for the year ended December 31, 1992 as filed on March 23,
1993 is hereby incorporated by reference.)
10.4 Amendment No. 1 dated as of December 18, 1992 to the Credit
Agreement (ESOP Loan) dated as of June 30, 1992. (The Amendment
included as Exhibit 10.4 to Polaroid Corporation Form 10-K for
the year ended December 31, 1992 as filed on March 23, 1993 is
hereby incorporated by reference.)
10.5 Amended and Restated Credit Agreement (ESOP Loan) dated as
of November 29, 1994 among Polaroid Corporation, Morgan Guaranty
Trust Company of New York, as Agent, ABN AMRO Bank N.V. as Co-
Agent and Banks listed therein. (The Agreement included as
Exhibit 10.5 to Polaroid Corporation Form 10-K for the year ended
December 31, 1994 as filed on March 30, 1995 is hereby
incorporated herein by reference.)
10.6* Amendment and Waiver dated as of December 31, 1995 with
respect to $150,000,000 Credit Agreement, dated as of August 24,
1994.
10.7* Amendment and Waiver dated as of December 31, 1995 with
respect to $130,022,336 Amended and Restated Credit Agreement,
dated as of November 29, 1994.
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10.8* Polaroid Executive Incentive Compensation Plan, effective
January 1, 1995, as amended June 16, 1995.
10.9 Polaroid Executive Equalization Retirement Plan, effective
January 1, 1984, as amended December 21, 1994. (The Plan included
as Exhibit 10.8 to Polaroid Corporation Form 10-K for the year
ended December 31, 1994 as filed on March 30, 1995 is hereby
incorporated herein by reference.)
10.10 Polaroid Officer's Compensation Exchange Plan, effective
January 1, 1994, as amended December 21, 1994. (The Plan included
as Exhibit 10.9 to Polaroid Corporation Form 10-K for the year
ended December 31, 1994 as filed on March 30, 1995 is hereby
incorporated herein by reference.)
10.11 Polaroid Stock Incentive Plan, effective January 1, 1992, as
amended October 19, 1992. (The Plan included as Exhibit 10.10 to
Polaroid Corporation Form 10-K for the year ended December 31,
1992 as filed on March 23, 1993 is hereby incorporated by
reference.)
10.12 The 1993 Polaroid Stock Incentive Plan, effective May 11,
1993, as amended June 1, 1993. (The Plan included as Exhibit
10.10 to Polaroid Corporation Form 10-K for the year ended
December 31, 1993 as filed on March 30, 1994 is hereby
incorporated herein by reference.)
10.13* Polaroid Board of Directors Stock Option Plan, as amended
December 18, 1995. The amended Plan shall become effective as of
July 25, 1995 subject to stockholder approval at the Company's
Annual Meeting on May 14, 1996.
10.14 Polaroid Board of Directors Retirement Plan, effective
January 1, 1991 as amended June 13, 1991. (The Plan included as
Exhibit 10.11 to Polaroid Corporation Form 10-K for the year
ended December 31, 1991 as filed on March 27, 1992 is hereby
incorporated herein by reference.)
10.15* Deferred Compensation Plan Trust Agreement dated May 17,
1995 between Polaroid Corporation and NationsBank.
10.16 Exchange Agreement dated as of October 7, 1991 between
Polaroid Corporation and Corporate Partners, L.P., Corporate
Offshore Partners, L.P., and State Board of Administration of
Florida. (This Agreement included as Exhibit 2 to Polaroid
Corporation Form 8-K as filed on October 21, 1991 is hereby
incorporated herein by reference.)
10.17 Amendment dated October 31, 1991 between Polaroid
Corporation and Corporate Partners, L.P., Corporate Offshore
Partners, L.P., and State Board of Administration of Florida, to
an Exchange Agreement dated as of October 7, 1991, between the
same parties. (The Amendment included as Exhibit 1 to Polaroid
Corporation Form 8-K as filed on November 7, 1991 is hereby
incorporated herein by reference.)
10.18 Employment Agreement dated May 6, 1994 with Enrico I.
Ancona. (The Agreement included as Exhibit 10.16 to Polaroid
Corporation Form 10-K for the year ended December 31, 1994 as
filed on March 30, 1995 is hereby incorporated herein by
reference.)
10.19 Employment Agreement dated October 20, 1995 between Gary T.
DiCamillo and Polaroid Corporation. (The Agreement included as
Exhibit 10.1 to Polaroid Corporation Form 8-K as filed on January
16, 1996 is hereby incorporated herein by reference.)
10.20 Amendment of Employment Agreement dated as of December 21,
1995 between Gary T. DiCamillo and Polaroid Corporation. (The
Amendment included as Exhibit 10.2 to Polaroid Corporation Form
8-K as filed on January 16, 1996 is hereby incorporated herein by
reference.)
10.21 Severance and retirement agreement dated November 10, 1995
between I. M. Booth and the Company. (The Agreement included as
Exhibit 10.3 to Polaroid Corporation Form 8-K as filed on January
16, 1996 is hereby incorporated herein by reference.)
10.22* Severance and retirement agreement dated January 25, 1996
between Joseph R. Oldfield and the Company.
11* Computation of earnings per share.
10
<PAGE>
13* Annual Report to Stockholders for 1995. (The Annual Report
to Stockholders for 1995, except for the portions thereof which
are specifically incorporated by reference in this report on Form
10-K, is furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed" as part of
this report on Form 10-K.)
21* Subsidiaries.
23* Consent of KPMG Peat Marwick LLP.
27* Financial Data Schedule.
_________________
* Filed herewith.
Exhibits are not included in copies of this Form 10-K except those
copies filed with the Securities and Exchange Commission. A copy of
these exhibits will be furnished to stockholders upon written
request.
b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended
December 31, 1995.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
POLAROID CORPORATION
(Registrant)
By /s/ Gary T. DiCamillo
--------------------------
Gary T. DiCamillo
Chairman of the Board and Chief Executive
Officer
March 19, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Chairman of the Board and
and Chief Executive Officer;
/s/ GARY T. DICAMILLO Director March 19, 1996
- ---------------------------
GARY T. DICAMILLO
Executive Vice President
/s/ WILLIAM J. O'NEILL, JR. and Chief Financial Officer March 19, 1996
- ---------------------------
WILLIAM J. O'NEILL, JR.
Vice President
/s/ CARL L. LUEDERS and Controller March 19, 1996
- ---------------------------
CARL L. LUEDERS
/s/ RALPH E. GOMORY Director March 19, 1996
- ----------------------------
RALPH E. GOMORY
/s/ FRANK S. JONES Director March 19, 1996
- ----------------------------
FRANK S. JONES
/s/ JOHN W. LOOSE Director March 19, 1996
- ----------------------------
JOHN W. LOOSE
/s/ ALBIN F. MOSCHNER Director March 19, 1996
- ---------------------------
ALBIN F. MOSCHNER
/s/ KENNETH H. OLSEN Director March 19, 1996
- ---------------------------
KENNETH H. OLSEN
/s/ LESTER POLLACK Director March 19, 1996
- ---------------------------
LESTER POLLACK
/s/ RALPH Z. SORENSON Director March 19, 1996
- ---------------------------
RALPH Z. SORENSON
/s/ DELBERT C. STALEY Director March 19, 1996
- ---------------------------
DELBERT C. STALEY
/s/ ALFRED M. ZEIEN Director March 19, 1996
- ---------------------------
ALFRED M. ZEIEN
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
POLAROID CORPORATION:
Under the date of January 30, 1996, we reported on the consolidated
balance sheet of Polaroid Corporation and subsidiary companies as of
December 31, 1995 and 1994, and the related consolidated statements of
earnings, cash flows, and changes in common stockholders' equity for
each of the years in the three-year period ended December 31, 1995, as
contained in the 1995 annual report to stockholders. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for the
year 1995. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related
financial statement schedule as listed in Item 14(a)2 of this Report.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set
forth therein.
As discussed in Notes 4 and 11 in the consolidated financial
statements, in 1993 the Company changed its method of accounting for
income taxes and for certain postretirement and postemployment
benefits
/s/ KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 30, 1996
13
<PAGE>
Polaroid Corporation and Subsidiary Companies
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
(In millions)
Additions
Balance at Charged to Charged to Deductions Balance at
Description Beginning Costs and Other Charged to End of
of period Expenses Accounts Reserves Period
- ------------------------------------------------------------------------------
1995
Doubtful
accounts $16.8 $11.0 $ -- $ (7.6) $20.2
Cash
discounts 7.7 -- 28.0 (27.9) 7.8
==============================================================================
1994
Doubtful
accounts $15.7 $ 8.6 $ -- $ (7.5) $16.8
Cash
discounts 7.6 -- 30.0 (29.9) 7.7
==============================================================================
1993
Doubtful
accounts $11.6 $11.7 $ -- $ (7.6) $15.7
Cash
discounts 6.6 -- 29.5 (28.5) 7.6
==============================================================================
14
Exhibit 10.6
AMENDMENT NO. 2 AND WAIVER TO CREDIT AGREEMENT
AMENDMENT AND WAIVER dated as of December 31, 1995 to the
$150,000,000 Credit Agreement dated as of August 24, 1994, as heretofore
amended (the "Credit Agreement") among POLAROID CORPORATION (the
"Company"), the BANKS party thereto (the "Banks") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent (the "Agent").
WHEREAS, in the fourth quarter of 1995 and the first quarter of
1996 the Company is taking special charges related to severance and early
retirement programs and the write-off of certain assembly equipment, fixed
assets and inventory; and
WHEREAS, the parties hereto desire to amend the Credit Agreement
(i) to mitigate the effects of such special charges under the covenants
relating to the Company's Interest Coverage Ratio, Leverage Ratio and
Minimum Consolidated Adjusted Net Worth and (ii) to eliminate certain
adjustments for the effects of the Company's adoption of Statement of
Financial Accounting Standards No. 106;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions, References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof," "hereunder," "herein," and "hereby"
and each other similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit Agreement shall, after
this Amendment and Waiver becomes effective, refer to the Credit Agreement
as amended hereby.
SECTION 2. Amendment of Definitions. The definitions in Section
1.01 of the Credit Agreement are amended as follows:
(a) The definition of "Adjusted Consolidated Net Income" is
deleted.
(b) The following new definition is added immediately after the
definition of "Federal Funds Rate":
"First Quarter 1996 Charge" means the after-tax amount
(not exceeding $70,000,000) of the provision made by the Company
during the first Fiscal Quarter of 1996 for the cost of severance
and early retirement programs.
<PAGE>
(c) The definition of "Consolidated Adjusted Net Worth" is
amended to read as follows:
"Consolidated Adjusted Net Worth" means, at any date, the
sum of (i) Consolidated Stockholders' Equity as of such date, plus
(ii) the First Quarter 1996 Charge, minus (iii) all write-ups (other
than write-ups resulting from foreign currency translations) after
December 31, 1995 in the book value of any asset owned by the
Company or a Consolidated Subsidiary, minus (iv) the carrying value
of all Investments in Unconsolidated Joint Ventures carried as
assets on the Company's consolidated balance sheet as of such date,
to the extent that the carrying value of such Investments as of such
date exceeds $25,000,000, minus (v) an amount equal to the
cumulative net increase (or plus an amount equal to the
cumulative net decrease) in Consolidated Net Income after
December 31, 1995 attributable to the tax effect of foreign
currency translations.
(d) The definition of "Consolidated EBIT" is amended to read as
follows:
"Consolidated EBIT" means, for any period, the sum of
(i) Consolidated Net Income for such period (excluding any
extraordinary item of gain or loss and any gain or loss
attributable to the tax impact of foreign currency translations),
plus (ii) to the extent deducted in determining Consolidated Net
Income for such period, interest expense and federal, state and
foreign income taxes, plus (iii) if such period includes the
first Fiscal Quarter of 1995, the amount (not exceeding
$77,000,000) of the pre-tax provision made by the Company during
the first Fiscal Quarter of 1995 for the cost of an early
retirement and severance program, plus (iv) if such period
includes the fourth Fiscal Quarter of 1995, the amount (not
exceeding $170,000,000) of the pre-tax provision made by the
Company during the fourth Fiscal Quarter of 1995 for the cost of
severance and early retirement programs and the write-off of
certain assembly equipment, fixed assets and inventory, plus (v)
if such period includes the first Fiscal Quarter of 1996, the
amount (not exceeding $100,000,000) of the pre-tax provision made
by the Company during the first Fiscal Quarter of 1996 for the
cost of severance and early retirement programs.
2
<PAGE>
SECTION 3. Interest Coverage Ratio. Section 5.07 of the Credit
Agreement is amended to read as follows:
SECTION 5.07. Interest Coverage Ratio. At the end of each
Fiscal Quarter, the ratio of (i) Consolidated EBIT to (ii)
Consolidated Interest Expense, in each case for the four consecutive
Fiscal Quarters then ended, will not be less than:
(w) at the end of the fourth Fiscal Quarter of 1995 and at the
end of the first Fiscal Quarter of 1996, 1.80 to 1;
(x) at the end of the second Fiscal Quarter of 1996, 2.00 to 1;
(y) at the end of the third Fiscal Quarter of 1996, 2.50 to 1;
and
(z) at the end of the fourth Fiscal Quarter of 1996 and each
Fiscal Quarter thereafter, 3.00 to 1.
SECTION 4. Minimum Consolidated Adjusted Net Worth. Section
5.09 of the Credit Agreement is amended to read as follows:
SECTION 5.09. Minimum Consolidated Adjusted Net Worth. (a) At
no time will Consolidated Adjusted Net Worth be less than Minimum
Consolidated Adjusted Net Worth. "Minimum Consolidated Adjusted Net
Worth" means $650,000,000 as such amount is adjusted from time to time
pursuant to subsection (b) of this Section.
(b) Minimum Consolidated Adjusted Net Worth shall be adjusted
from time to time as follows:
(i) at the end of each Fiscal Quarter ending after
December 31, 1995, permanently increased (but not decreased) by
the amount (if any) necessary so that cumulative increases
pursuant to this clause (i) equal 50% of Consolidated Net Income
(adjusted by adding back the First Quarter 1996 Charge) for the
period beginning on January 1, 1996 and ending at the end of such
Fiscal Quarter; and
(ii) permanently increased, on the date of any issuance
of Additional Equity after December 31, 1995, by an amount equal
to 50% of any increase in Consolidated Adjusted Net Worth
attributable to such issuance of Additional Equity.
3
<PAGE>
SECTION 5. Waiver. The undersigned Banks waive any Default or
Event of Default arising from any failure by the Company to comply with the
provisions of Sections 5.07, 5.09 and 5.01(e) of the Credit Agreement, to
the extent (and only to the extent) that such failure would have been
avoided if this Amendment and Waiver had become effective prior to December
31, 1995.
SECTION 6. Governing Law. This Amendment and Waiver shall be
governed by and construed in accordance with the laws of the State of New
York.
SECTION 7. Counterparts; Effectiveness. This Amendment and
Waiver may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Amendment and Waiver shall become
effective when the Agent shall have received
(i) from each of the Company and the Required Banks either a
counterpart hereof signed by such party or telegraphic, telex,
facsimile or other written confirmation that such party has signed a
counterpart hereof, and
(ii) from the Company for the account of each Bank a
participation fee in the amount equal to .05% of such Bank's
Commitment under the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
and Waiver to be duly executed by their
respective authorized officers as of the day and year first above written.
POLAROID CORPORATION
By /s/ Graham M. Brown, Jr.
-----------------------------------
Title: Vice President & Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Deborah A. Brodheim
----------------------------------
Title: Vice President
4
<PAGE>
ABN AMRO BANK N.V.
By /s/ R.E. James Hunter
----------------------------------
Title: Group Vice President & Director
By /s/ Carol A. Levine
----------------------------------
Title: Senior Vice President &
Managing Director
THE FIRST NATIONAL BANK
OF BOSTON
By /s/ Carol A. Lovell
----------------------------------
Title: Director
THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ Daniel J. Lenckos
----------------------------------
Title: Vice President
THE MITSUBISHI BANK, LIMITED
(acting through its New York Branch)
By /s/ David A. Kelson
----------------------------------
Title: Vice President
NATIONSBANK OF NORTH CAROLINA,
N.A.
By /s/ Eric C. Stephenson
----------------------------------
Title: Vice President
5
<PAGE>
WACHOVIA BANK OF GEORGIA,N.A.
By /s/ Terence A. Snellings
----------------------------------
Title: Senior Vice President
6
Exhibit 10.7
AMENDMENT NO. 2 AND WAIVER TO CREDIT AGREEMENT
AMENDMENT AND WAIVER dated as of December 31, 1995 to the
$130,022,336 Amended and Restated Credit Agreement dated as of November 29,
1994, as heretofore amended (the "Credit Agreement") among POLAROID
CORPORATION (the "Company"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Agent (the "Agent"), ABN AMRO Bank N.V., as Co-Agent and the BANKS party
thereto (the "Banks").
WHEREAS, in the fourth quarter of 1995 and the first quarter of
1996 the Company is taking special charges related to severance and early
retirement programs and the write-off of certain assembly equipment, fixed
assets and inventory; and
WHEREAS, the parties hereto desire to amend the Credit Agreement
(i) to mitigate the effects of such special charges under the covenants
relating to the Company's Interest Coverage Ratio, Leverage Ratio and
Minimum Consolidated Adjusted Net Worth and (ii) to eliminate certain
adjustments for the effects of the Company's adoption of Statement of
Financial Accounting Standards No. 106;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions, References. Unless otherwise
specifically defined herein, each term used herein which is defined in the
Credit Agreement has the meaning assigned to such term in the Credit
Agreement. Each reference to "hereof," "hereunder," "herein," and "hereby"
and each other similar reference and each reference to "this Agreement" and
each other similar reference contained in the Credit Agreement shall, after
this Amendment and Waiver becomes effective, refer to the Credit Agreement
as amended hereby.
<PAGE>
SECTION 2. Amendment of Definitions. The definitions in Section
1.01 of the Credit Agreement are amended as follows:
(a) The definition of "Adjusted Consolidated Net Income" is
deleted.
(b) The following new definition is added immediately after the
definition of "Federal Funds Rate":
"First Quarter 1996 Charge" means the after-tax amount
(not exceeding $70,000,000) of the provision made by the Company
during the first Fiscal Quarter of 1996 for the cost of severance
and early retirement programs.
(c) The definition of "Consolidated Adjusted Net Worth" is
amended to read as follows:
"Consolidated Adjusted Net Worth" means, at any date,
the sum of (i) Consolidated Stockholders' Equity as of such date,
plus (ii) the First Quarter 1996 Charge, minus (iii) all write-
ups (other than write-ups resulting from foreign currency
translations) after December 31, 1995 in the book value of any
asset owned by the Company or a Consolidated Subsidiary, minus
(iv) the carrying value of all Investments in Unconsolidated
Joint Ventures carried as assets on the Company's consolidated
balance sheet as of such date, to the extent that the carrying
value of such Investments as of such date exceeds $25,000,000,
minus (v) an amount equal to the cumulative net increase (or plus
an amount equal to the cumulative net decrease) in Consolidated
Net Income after December 31, 1995 attributable to the tax effect
of foreign currency translations.
(d) The definition of "Consolidated EBIT" is amended to read as
follows:
"Consolidated EBIT" means, for any period, the sum of
(i) Consolidated Net Income for such period (excluding any
extraordinary item of gain or loss and any gain or loss
attributable to the tax impact of foreign currency translations),
plus (ii) to the extent deducted in determining Consolidated Net
Income for such period, interest expense and federal, state and
foreign income taxes, plus (iii) if such period includes the
first Fiscal Quarter of 1995, the amount (not exceeding
$77,000,000) of the pre-tax provision made by the Company during
the first Fiscal Quarter of 1995 for the cost of an early
retirement and severance program, plus (iv) if such period
includes the fourth Fiscal Quarter of 1995, the amount (not
exceeding $170,000,000) of the pre-tax provision made by the
Company during the fourth Fiscal Quarter of 1995 for the cost of
severance and early retirement programs and the write-off of
certain assembly equipment, fixed assets and inventory, plus (v)
if such period includes the first Fiscal Quarter of 1996, the
amount (not exceeding $100,000,000) of the pre-tax provision made
by the Company during the first Fiscal Quarter of 1996 for the
cost of severance and early retirement programs.
2
<PAGE>
SECTION 3. Interest Coverage Ratio. Section 5.07 of the Credit
Agreement is amended to read as follows:
SECTION 5.07. Interest Coverage Ratio. At the end of each
Fiscal Quarter, the ratio of (i) Consolidated EBIT to (ii)
Consolidated Interest Expense, in each case for the four consecutive
Fiscal Quarters then ended, will not be less than:
(w) at the end of the fourth Fiscal Quarter of 1995 and at the
end of the first Fiscal Quarter of 1996, 1.80 to 1;
(x) at the end of the second Fiscal Quarter of 1996, 2.00 to 1;
(y) at the end of the third Fiscal Quarter of 1996, 2.50 to 1;
and
(z) at the end of the fourth Fiscal Quarter of 1996 and each
Fiscal Quarter thereafter, 3.00 to 1.
SECTION 4. Minimum Consolidated Adjusted Net Worth. Section
5.09 of the Credit Agreement is amended to read as follows:
SECTION 5.09. Minimum Consolidated Adjusted Net Worth. (a) At
no time will Consolidated Adjusted Net Worth be less than Minimum
Consolidated Adjusted Net Worth. "Minimum Consolidated Adjusted Net
Worth" means $650,000,000 as such amount is adjusted from time to time
pursuant to subsection (b) of this Section.
(b) Minimum Consolidated Adjusted Net Worth shall be adjusted
from time to time as follows:
(i) at the end of each Fiscal Quarter ending after
December 31, 1995, permanently increased (but not decreased) by
the amount (if any) necessary so that cumulative increases
pursuant to this clause (i) equal 50% of Consolidated Net Income
(adjusted by adding back the First Quarter 1996 Charge) for the
period beginning on January 1, 1996 and ending at the end of such
Fiscal Quarter; and
(ii) permanently increased, on the date of any issuance
of Additional Equity after December 31, 1995, by an amount equal
to 50% of any increase in Consolidated Adjusted Net Worth
attributable to such issuance of Additional Equity.
3
<PAGE>
SECTION 5. Waiver. The undersigned Banks waive any Default or
Event of Default arising from any failure by the Company to comply with the
provisions of Sections 5.07, 5.09 and 5.01(e) of the Credit Agreement, to
the extent (and only to the extent) that such failure would have been
avoided if this Amendment and Waiver had become effective prior to December
31, 1995.
SECTION 6. Governing Law. This Amendment and Waiver shall be
governed by and construed in accordance with the laws of the State of New
York.
SECTION 7. Counterparts; Effectiveness. This Amendment and
Waiver may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Amendment and Waiver shall become
effective when the Agent shall have received
(i) from each of the Company and the Required Banks either a
counterpart hereof signed by such party or telegraphic, telex,
facsimile or other written confirmation that such party has signed a
counterpart hereof, and
(ii) from the Company for the account of each Bank a
participation fee in the amount equal to .05% of the aggregate
principal amount of such Bank's Loans outstanding under the Credit
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
and Waiver to be duly executed by their respective authorized officers as
of the day and year first above written.
POLAROID CORPORATION
By /s/ Graham M. Brown
-----------------------------------
Title: Vice President & Treasurer
4
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Deborah A. Brodheim
-----------------------------------
Title: Vice President
ABN AMRO BANK N.V.
By /s/ R.E. James Hunter
-----------------------------------
Title: Group Vice President &
Director
By /s/ Carol A. Levine
-----------------------------------
Title: Senior Vice President &
Managing Director
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Jacques Yves Mulliez
-----------------------------------
Title: Senior Vice President
CREDIT SUISSE
By /s/ Anne Schultheiss-Jensen
-----------------------------------
Title: Associate
By /s/ Kristina Catlin
-----------------------------------
Title: Associate
PNC BANK, NATIONAL ASSOCIATION
By /s/ Kwan L. Grays
-----------------------------------
Title: Assistant Vice President
THE TORONTO DOMINION BANK
By /s/ Kimberly Burleson
-----------------------------------
Title: Manager - Credit Administration
5
<PAGE>
WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By /s/ Robert G. Brookby
-----------------------------------
Title: Executive Vice President
DEUTSCHE BANK AG, NEW YORK BRANCH
By /s/ Iain Stewart
-----------------------------------
Title: Assistant Vice President
By /s/ Stephan A. Wiedemann
-----------------------------------
Title: Vice President
DEUTSCHE BANK AG, CAYMAN ISLANDS BRANCH
By /s/ Iain Stewart
-----------------------------------
Title: Assistant Vice President
By /s/ Stephan A. Wiedemann
-----------------------------------
Title: Vice President
FLEET BANK OF MASSACHUSETTS, N.A.
By /s/ Roger C. Boucher
-----------------------------------
Title: Vice President
6
Exhibit 10.8
Document Control No.: EXEC #6
POLAROID EXECUTIVE INCENTIVE COMPENSATION PLAN
------------------------------------------------
POLAROID CORPORATION
Cambridge, Massachusetts
Effective January 1, 1995
<PAGE>
POLAROID EXECUTIVE INCENTIVE COMPENSATION PLAN
---------------------------------------------
TABLE OF CONTENTS
-----------------
ARTICLE I DEFINITIONS
- --------- -----------
1.01 Award - 1 -
1.02 Board of Directors - 1 -
1.03 Code - 2 -
1.04 Committee - 2 -
1.05 Company - 2 -
1.06 Company Contributions - 2 -
1.07 Compensation - 2 -
1.08 EBIT - 4 -
1.09 EBIT Target - 4 -
1.10 Employee - 4 -
1.11 EVA - 4 -
1.12 EVA Target - 5 -
1.13 Human Resources Committee - 5 -
1.14 Option - 5 -
1.15 Participant - 5 -
1.16 Plan - 5 -
1.17 Plan Year - 5 -
1.18 Stock - 6 -
1.19 Subsidiary - 6 -
ARTICLE II ELIGIBILITY
- ---------- -----------
2.01 Eligibility to Participate - 6 -
ARTICLE III ANNUAL EXECUTIVE BONUS
- ----------- ----------------------
3.01 Participation - 6 -
3.02 Award - 7 -
3.03 Actions of the
Human Resources Committee - 7 -
3.04 Personal Performance Component - 8 -
3.05 Corporate Component - 8 -
3.06 Business Unit Component - 8 -
3.07 Extraordinary Distributions - 9 -
3.08 Participant Payment - 9 -
3.09 Terminated Participant's Payments - 10 -
3.10 Form of Payment - 10 -
3.11 Payments to Beneficiaries - 10 -
ARTICLE IV DIVIDEND EQUIVALENT AWARD
- ---------- -------------------------
4.01 Dividend Equivalent
Award Participation - 11 -
4.02 Dividend Equivalent Award - 11 -
4.03 Timing of Distributions - 11 -
ARTICLE V FINANCING
- --------- ---------
5.01 Financing - 12 -
5.02 Unsecured Interest - 12 -
(i)
<PAGE>
ARTICLE VI ADMINISTRATION
- ---------- --------------
6.01 Administrator - 12 -
6.02 Duties of Administrator - 13 -
6.03 Decisions of the Committee - 13 -
ARTICLE VII MISCELLANEOUS PROVISIONS
- ----------- ------------------------
7.01 Applicable Law - 14 -
7.02 Expenses - 14 -
7.03 Gender and Number - 14 -
7.04 llegality of a
Particular Provision - 14 -
7.05 Indemnification - 14 -
7.06 Limitation of Rights - 15 -
7.07 Non-Assignability - 16 -
7.08 Nontransferability - 16 -
7.09 Taxes - 16 -
ARTICLE VIII EFFECTIVE DATE AND RIGHT TO AMEND, MODIFY OR TERMINATE
- ------------ ------------------------------------------------------
8.01 Effective Date - 17 -
8.02 Right to Amend,
Modify or Terminate - 17 -
(i)
<PAGE>
POLAROID EXECUTIVE INCENTIVE COMPENSATION PLAN
----------------------------------------------
PURPOSE
- -------
The Polaroid Executive Incentive Compensation Plan is established by
Polaroid Corporation to motivate present executives and other key employees
whose judgement, initiative, leadership and continued effort contribute to
the success of the Company and its Subsidiaries and to attract highly
competent individuals.
This Plan provides an incentive for executives and other key employees
of the Company and its Subsidiaries to maximize the Company's operational
performance. It also provides cash awards which correspond to the
dividends granted shareholders of common stock to those who hold options
under the Polaroid Stock Incentive Plan. By providing periodic reminders
of their outstanding options, the Company believes that this Plan provides
an incentive to executives and other key employees to increase revenues and
profits.
ARTICLE I
DEFINITIONS
-----------
1.01 Award. Award shall have the meaning as provided in Section
3.02 hereof.
1.02 Board of Directors. Board of Directors shall mean the Board
of Directors of the Company.
-1-
<PAGE>
1.03 Code. Code shall mean the Internal Revenue Code of 1986
("Code"), as amended, and its implementing regulations, unless
otherwise specifically provided herein.
1.04 Committee. Committee shall mean the Committee designated to
administer this Plan pursuant to Article VI hereof.
1.05 Company. Company shall mean Polaroid Corporation, a
Delaware corporation.
1.06 Company Contributions. Company Contributions shall mean the
aggregate amount subject to distribution under the Award formula
for all Participants.
1.07 Compensation. Compensation includes and is limited to:
(a) Primary salary or wages;
(b) Amounts elected as or deemed to be cash, property
or other taxable benefits under any plan established by the
Company under Code Section 125 as now or hereafter in
effect;
(c) Amounts elected as non-taxable benefits under any
plan established by the Company under Code Section 125 as
now or hereafter in effect;
(d) Amounts, other than the Company's matched deferral
contributions, elected as or deemed to be payments to the
Participant directly in cash under any cash or deferral
arrangement established by the Company and qualified under
Code Section 401(k) as now or hereafter in effect;
-2-
<PAGE>
(e) Amounts, other than the Company's matched deferral
contribution, elected as or deemed to be payments as
contributions to a trust under a profit sharing or stock
bonus plan under any cash or deferral arrangement
established by the Company and qualified under Code Section
401(k) as now or hereafter in effect; and,
(f) Payments made directly or indirectly under the
Company's short-term disability program, as it shall exist
from time to time, including payments made thereunder in
lieu of payments by the Company regardless of their source
(provided, however, that the total of all such payments to a
disabled Employee shall not be in excess of the basic salary
or wages that would have been payable to him had he not been
disabled), earned by and paid to a Participant by the
Company in a Plan Year during which he was a Participant.
All compensation or allocations, other than those described
in (a) through (f) above, are excluded from Compensation, such as
but not limited to, overtime pay, shift premiums, schedule change
premiums, special day premiums, tuition refunds, relocation
payments, suggestion or special awards, commissions, fixed and
other bonuses, payments pursuant to any incentive compensation or
profit sharing plan contributions (including the Company's
matched deferral contributions), allocations or benefits pursuant
to any retirement, pension, survivor's benefit, death benefit,
long-term disability, insurance or other plan, severance pay and
premiums, adjustments and allowances on account of foreign
service.
-3-
<PAGE>
1.08 EBIT. EBIT for any Plan Year shall mean the profit from
operations as shown in the Company's financial statements
contained in the Company's annual report to stockholders and
adding back expenses for Company contributions to this Plan or
any other bonus or incentive compensation plan (excluding sales
bonus plans).
Notwithstanding the foregoing, any unusual and significant
expenses incurred or unusual and significant revenues
received by the Company may be excluded if approved by the Board
of Directors.
1.09 EBIT Target. EBIT Target shall mean the goal for EBIT which
the Company hopes to obtain in the Plan Year. This EBIT Target
shall be set by the Human Resources Committee in the first
quarter of each Plan Year.
1.10 Employee. Employee shall mean any "Full-Time Permanent"
employee and any "Part-Time Permanent" employee of Polaroid, as
defined by the Company in a uniform and non-discriminatory
manner.
1.11 EVA. Economic Value Added ("EVA") for any Plan Year shall
mean the EBIT minus charge for Capital employed for the operation
of either the Corporation or the Business Unit, as applicable.
For purposes of this definition Capital is defined as the working
capital, such as inventory, receivables and fixed assets
(equipment and buildings) utilized in the respective Component.
-4-
<PAGE>
1.12 EVA Target. EVA Target shall mean the goal for EVA which
the Company hopes to obtain in the Plan Year. This EVA Target
shall be set by the Human Resources Committee in the first
quarter of each Plan Year.
1.13 Human Resources Committee. The Human Resources Committee
shall mean the Human Resources Committee of the Board of
Directors.
1.14 Option. Option shall mean the number of shares in an Option
granted after January 1, 1994, under the 1993 Polaroid Stock
Incentive Plan.
1.15 Participant. Participant shall mean an Employee selected to
participate in the Plan in accordance with Article II hereof.
1.16 Plan. Plan shall mean this Polaroid Executive Incentive
Compensation Plan as in effect from time to time.
1.17 Plan Year. Plan Year shall mean a calendar year.
-5-
<PAGE>
1.18 Stock. Stock shall mean common stock, par value $1 per
share, issued by the Company.
1.19 Subsidiary. Subsidiary shall mean any corporation of which
more than fifty percent (50%) of the outstanding shares of voting
stock are beneficially owned directly or indirectly by the
Company.
ARTICLE II
ELIGIBILITY
------------
2.01 Eligibility to Participate. Officers of the Company or any
Subsidiary, whether or not directors of the Company, and
non-officer Employees or employees of any Subsidiary who are
employed in positions of administrative, technical, or managerial
responsibility shall be eligible to participate in the Plan.
ARTICLE III
ANNUAL EXECUTIVE BONUS
-----------------------
3.01 Participation. Non-officer Employees or non-officer
employees of a Subsidiary eligible to participate under Section
2.01 shall become Participants if selected by the Committee.
Officers of the Company or any Subsidiary shall become
Participants if selected by the Human Resources Committee.
-6-
<PAGE>
3.02 Award. An Award under this Plan shall have three
components, a Personal Performance Component, a Corporate
Component and a Business Unit Component. Each Participant who
achieves their Personal Performance Component shall receive an
Award equal to the benefit derived under the Corporate Component
and the Business Unit Component. This Award shall be determined
given the Participant's:
(a) percentage of achievement of the individual's
Personal Performance Component;
(b) level or range of participation in the Plan
(expressed as a percentage of the Participant's
Compensation); and,
(c) the ratio of the Corporate Component to his
Business Unit Component as established by the Human
Resources Committee pursuant to Section 3.03 below.
Participants who are not in a unit with a Business Unit
Component shall receive an Award based on the method as
established by the Human Resources Committee pursuant to Section
3.03 below.
3.03 Actions of the Human Resources Committee. Prior to the end
of the first quarter in a Plan Year, the Human Resources
Committee shall establish:
(a) the categories of Participants;
(b) the level or range at which each category of
Participants will participate in this Plan expressed as a
percentage of Compensation;
-7-
<PAGE>
(c) the ratio on which each category of Participant
Awards will be based will be returns from Corporate
Component performance versus Business Unit Component
performance as described below;
(d) the method by which Participants who are not in a
unit with a Business Unit Component shall have their Award
calculated;
(e) the EBIT Target level for the Corporate Component;
(f) the EVA Target level for the Corporate Component;
and,
(g) the maximum and minimum percentages of the EBIT
Target and EVA Target which will be paid under the Corporate
Component.
3.04 Personal Performance Component. The Personal Performance
Component are performance goals set for the Participant for the
Plan Year.
3.05 Corporate Component. The Corporate Component is expressed as a
percentage of either the EBIT Target or the EVA Target. There will be
no distribution under the Corporate Component if the minimum
percentage for the EBIT Target is not reached.
3.06 Business Unit Component. Each Business Unit Component is expressed as
a percentage of either the EBIT Target or the EVA Target for the
particular unit. Prior to the end of the first quarter in a Plan
Year, the Committee shall establish the EBIT Target level and the EVA
Target level, and the maximum and minimum percentages of the EBIT
Target and the EVA Target for each major business unit. There will be
no distribution under a Business Unit Component if the minimum
percentage for the EBIT Target for the specific unit is not reached.
-8-
<PAGE>
3.07 Extraordinary Distributions. If the minimum percentage for the EBIT
Target is not achieved in a Plan Year in either the Corporate
Component or the Participant's Business Unit Component for a
classification(s) of Participants:
(a) (1) The Human Resources Committee,
in its sole discretion, may grant extraordinary
distributions to any officer for his significant
individual contribution; and
(2) The Committee, in its sole discretion,
may grant extraordinary distributions to any non-
officer for his significant individual contribution.
(b) The aggregate amount of funds available
for all such extraordinary distributions in a Plan Year
shall be determined by the Human Resources Committee.
In no event, shall such aggregate amount exceed 20% of
what the Company Contributions would have been had the
actual EBIT Target been reached in the Corporate
Component.
3.08 Participant Payment. Each Participant who is employed by the Company
on the last day of a Plan Year shall be entitled to an incentive
payment under this Plan if the minimum EBIT Target in either the
Corporate Component or the Participant's Business Unit Component for
the Plan Year is met.
-9-
<PAGE>
3.09 Terminated Participant's Payments. A Participant who has terminated
during a Plan Year by:
(a) Death;
(b) Retirement;
(c) Layoff;
(d) Long-Term Disability;
(e) Leave of absence (including military leave);
(f) Transfer to a Subsidiary; or,
(g) Any other reason that the Committee, in its sole
discretion determines to be exceptional cause,
shall be entitled to a proportionate incentive payment based
upon the Compensation paid him or her during the Plan Year up to
the date of cessation of participation. A Participant who
terminates during any given Plan Year for any other reason shall
not be entitled to an incentive payment under this Plan.
3.10 Form of Payment. Each Participant shall be paid in a lump
sum cash payment.
3.11 Payments to Beneficiaries. If a Participant dies prior to
his receipt of payments under this Plan, the payment shall be
made:
(a) To the deceased Participant's spouse;
(b) If there is no living spouse, to the Participant's
children, divided equally; or,
(c) If there are no children, to the deceased
Participant's estate.
-10-
<PAGE>
ARTICLE IV
DIVIDEND EQUIVALENT AWARD
-------------------------
4.01 Dividend Equivalent Award Participation. Only Employees and
former Employees who satisfy Section 2.01 or have satisfied
Section 2.01 prior to termination or retirement and who hold
Options granted under the 1993 Polaroid Stock Incentive Plan are
eligible to participate in this Section.
4.02 Dividend Equivalent Award. A Dividend Equivalent Award
shall equal the number of shares on which each Participant has an
Option granted subsequent to January 1, 1994 multiplied by $0.15.
Notwithstanding the foregoing, this Award will not be paid on
Stock which is part of an Option that has been exercised,
terminated or lapsed.
4.03 Timing of Distributions. The Dividend Equivalent Awards
shall be payable at such time as the dividends are issued to the
Company's shareholders of common stock. Notwithstanding the
foregoing, a Dividend Equivalent Award shall be paid only for the
portion of the Option held on the record date for the issuance of
dividends to the Company's shareholders of common stock. An
Award will not be paid on any portion of the Option which has
been exercised, terminated or lapsed.
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<PAGE>
ARTICLE V
FINANCING
---------
5.01 Financing. The benefits under this Plan shall be paid out
of the general assets of the Company.
5.02 Unsecured Interest. No Participant hereunder shall have any
interest whatsoever in any specific asset of the Company. To the
extent that any person acquires a right to receive payments under
this Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
ARTICLE VI
ADMINISTRATION
---------------
6.01 Administrator. The Plan shall be administered by the
Committee designated by the Chief Executive Officer of the
Company and shall consist of not less than three officers of the
Company. Members of the Committee shall not be entitled to any
compensation for services hereunder.
-12-
<PAGE>
6.02 Duties of Administrator. The Committee shall:
(a) administer the Plan in accordance with its terms;
(b) have the exclusive discretionary authority to
interpret the Plan for any questions which may arise,
including without limitation, questions relating to
eligibility for or the amount of benefits;
(c) make final judgment on appeals by Employees;
(d) maintain records of its actions; and
(e) engage and consult with counsel, accountants,
specialists and other persons as the Committee deems
necessary and desirable.
6.03 Decisions of the Committee. Committee decisions must be
approved by a majority of the members and may be made by either a
vote at a meeting, or in writing (without a meeting). Any member
of the Committee who is a Participant under the Plan shall not
vote on any question relating exclusively to himself. The
Compensation Committee shall approve any award, decision, rule,
or interpretation which relates exclusively to any Participant
who is a member of the Committee. Any determination by the
Committee or Human Resources Committee shall be conclusive and
binding except as otherwise provided in this Plan or prohibited
by law.
-13-
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
-------------------------
7.01 Applicable Law. This instrument shall be construed in
accordance with and governed by the laws of the Commonwealth of
Massachusetts to the extent not superseded by the laws of the
United States.
7.02 Expenses. The cost of benefit payments from this Plan and
the expenses of administering the Plan shall be borne by the
Company.
7.03 Gender and Number. Unless the context clearly requires
otherwise, the masculine pronoun whenever used shall include the
feminine and neuter pronoun, the singular shall include the
plural, and vice versa.
7.04 Illegality of a Particular Provision. The illegality of any
particular provision of this document shall not affect the other
provisions, and the document shall be construed in all respects
as if such invalid provision were omitted.
7.05 Indemnification. No member of the Board of Directors or
the Committee shall be liable for any action or determination
taken or made in good faith with respect to this Plan, any Awards
granted or any award distributions under this Plan. Each member
of the Board of Directors and the Committee shall be indemnified
by the Company against any losses incurred in such administration
of the Plan, unless his action constitutes serious and willful
misconduct.
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<PAGE>
7.06 Limitation of Rights. Neither the adoption and maintenance
of the Plan nor anything contained herein shall with respect to
any present or former Participant, or other officer or employee
of the Company or any Subsidiary be deemed to:
(a) limit the right of the Company or any Subsidiary
to discharge or discipline any such person, or otherwise
terminate or modify the terms of his employment, or
(b) create any contract or other right or interest
under the Plan or in any funds hereunder other than as
specifically provided herein.
7.07 Non-Assignability. A Participant's interest under this Plan
shall not be subject at any time or in any manner to alienation,
sale, transfer, assignment, pledge, attachment, garnishment or
encumbrance of any kind and any attempt to deliver, sell,
transfer, assign, pledge, attach, garnish or otherwise encumber
such interest shall be void and any interest so encumbered will
terminate.
7.08 Nontransferability. In no event shall the Company make any
payment under this Plan to any assignee or creditor of a
Participant or of a Beneficiary, except as otherwise required by
law. Prior to the time of a payment hereunder, a Participant or
a Beneficiary shall have no rights by way of anticipation or
otherwise to assign or otherwise dispose of any interest under
this Plan, nor shall rights be assigned or transferred by
operation of law.
-15-
<PAGE>
7.09 Taxes. The Company shall have the right to deduct from the
award distributions any federal, state or local taxes required by
law to be withheld with respect to such distribution.
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<PAGE>
ARTICLE VIII
EFFECTIVE DATE AND RIGHT TO
AMEND, MODIFY OR TERMINATE
8.01 Effective Date. This Plan, originally adopted by the Board
of Directors on February 18, 1986, effective as of January 1,
1986, is hereby amended effective January 1, 1995.
8.02 Right to Amend, Modify or Terminate. The Company reserves
the right to amend, modify or terminate the Plan or payments
thereunder at any time by action of the Board of Directors and
does not intend to submit any amendments or modifications to the
Plan to stockholders of the Company for their approval. However,
without the consent of any Participant or his Beneficiary, if
applicable, no such amendment or termination shall reduce or
diminish such person's right to receive any benefit accrued
hereunder prior to the date of such amendment or termination.
Notwithstanding the foregoing, the Chief Executive Officer of the
Company may adopt any amendments to the Plan that do not
materially and adversely affect the benefits to a Participant
accrued under the Plan and may adopt any amendments to the Plan
that do not materially affect the cost to the Company (excluding
any amendment that relates exclusively to himself).
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed this 16th day of June, 1995, effective January 1, 1995.
Attest: POLAROID CORPORATION
/s/ Richard F. deLima By /s/ I. M. Booth
- --------------------- --------------------------
Secretary Chief Executive Officer
-17-
Exhibit 10.13
Document Control No.: BOARD-OPTION #2
THE POLAROID BOARD OF DIRECTORS
______________________________
STOCK OPTION PLAN
_________________
POLAROID CORPORATION
--------------------
Cambridge, Massachusetts
Effective as of July 25, 1995
<PAGE>
THE POLAROID BOARD OF DIRECTORS STOCK OPTION PLAN
_________________________________________________
TABLE OF CONTENTS
-----------------
Article Section Page
- ---------------- ----
I Definitions
___________
1.01 Board or Board of Directors 1
1.02 Code 1
1.03 Committee 1
1.04 Company 1
1.05 Exchange Act 1
1.06 Fair Market Value 2
1.07 Option 2
1.08 Option Price 2
1.09 Participant 2
1.10 Plan 2
1.11 Registration Statement 2
1.12 Securities Act 2
1.13 Stock 2
II Participation
-------------
2.01 Participation 3
III Shares of Stock subject to Plan
------------------------------
3.01 Limitations 3
3.02 Options Granted Under Plan 3
3.03 Adjustments 3
IV Options
-------
4.01 Option Grant 4
4.02 Exercise of Option while on Board 4
4.03 Exercise of Option upon Termination 5
4.04 Nontransferability of the Option 5
4.05 Procedure for Exercising Option 6
4.06 Information or Assurances 7
i
<PAGE>
V Stock Certificates
------------------
5.01 Stock Certificates 8
VI Dividends
---------
6.01 Dividends 8
6.02 Notices of Dividends
and Other Distributions 8
VII Plan Administration
-------------------
7.01 Plan Administration 9
7.02 Disqualification 9
VIII Miscellaneous Provisions
------------------------
8.01 Applicable Law 9
8.02 Change of Control 10
8.03 Expenses 10
8.04 Gender and Number 10
8.05 Headings not Part of Plan 10
8.06 Indemnification 10
8.07 Non-Assignability 10
8.08 Plan Binding on Successors 11
8.09 Non-Contravention of Securities Laws 11
8.10 Unenforceability of a
Particular Provision 11
IX Permanency of the Plan and Plan Termination
-------------------------------------------
9.01 Effective Date 11
9.02 Termination, Amendment,
and Modification of Plan 11
ii
<PAGE>
THE POLAROID BOARD OF DIRECTORS STOCK OPTION PLAN
The purpose of the Plan is to advance the interests of the Company
and its shareholders by affording non-employee members of the Company's
Board of Directors an opportunity to increase their proprietary interest
in the Company by the grant of Options to them under the terms set forth
herein. The Company believes that this Plan can give an incentive to
these members of the Board to increase revenues and profits.
ARTICLE I
DEFINITIONS
___________
1.01 Board or Board of Directors. Board or Board of Directors shall mean
the board of directors of the Company.
1.02 Code. Code shall mean the Internal Revenue Code of 1986, as
amended, unless otherwise specifically provided herein.
1.03 Committee. Committee shall mean the Compensation Committee of the
Board of Directors, comprised of three or more Board members, to
administer the Plan and exercise all or any part of the authority
herein conferred upon the Board of Directors.
1.04 Company. Company shall mean Polaroid Corporation, a Delaware
corporation, and any successor thereof.
1.05 Exchange Act. Exchange Act shall mean the Securities and Exchange
Act of 1934, as amended.
1
<PAGE>
1.06 Fair Market Value. Fair Market Value of the Stock shall mean the
last sale price at which Stock is traded on any given date or, if no
Stock is traded on such date, the most recent date on which Stock
was traded, as reflected in the New York Stock Exchange Composite
Transactions Index.
1.07 Option. Option shall mean an option to purchase Stock granted by
the Company pursuant to the provisions of this Plan and the
Agreement executed pursuant hereto. No Option granted under this
Plan shall be an Incentive Stock Option within the meaning of
Section 422 of the Code.
1.08 Option Price. Option Price shall be the Fair Market Value of the
Stock on the day the Option is granted.
1.09 Participant. Participant shall mean a non-employee member of the
Board of Directors.
1.10 Plan. Plan shall mean the Polaroid Board of Directors Stock
Option Plan.
1.11 Registration Statement. Registration Statement shall mean any
registration statement required by the provisions of the Securities
Act or the Exchange Act.
1.12 Securities Act. Securities Act shall mean the Securities Act of
1933, as amended.
1.13 Stock. Stock shall mean common stock, par value $1 per share,
issued by the Company.
2
<PAGE>
ARTICLE II
PARTICIPATION
_____________
2.01 Participation. Each non-employee member of the Board of Directors
shall be a Participant in this Plan.
ARTICLE III
SHARES OF STOCK SUBJECT TO PLAN
_______________________________
3.01 Limitations. Subject to adjustment pursuant to the provisions of
Section 3.03 hereof, the number of shares of Stock which may be
issued and sold hereunder under this Plan shall not exceed 100,000
shares. Such shares will be authorized and unissued shares of Stock
or treasury stock.
3.02 Options Granted Under Plan. Once an Option for shares of Stock has
been granted, such Option or parts thereof that have been exercised,
lapsed, or otherwise terminated shall not again be available under
this Plan.
3.03 Adjustments. In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by
reason of merger, consolidation, other reorganization,
recapitalization, reclassification, combination of shares, stock
split-up, or stock dividend, the Committee shall make such
corresponding adjustments, if any, as deemed appropriate in its sole
discretion. The Committee may adjust the number and kind of shares
which may be granted under the Plan, the maximum number and kind of
shares which may be granted to any one eligible Participant, and the
number, the Option Price, and the kind of shares or property subject
to each outstanding Option. Notwithstanding the foregoing, no
dilution or enhancement of any Participant's Options, or the shares
covered thereby, shall result from any such adjustments. If any
such adjustment shall be made, the Company shall give the
Participants a brief written summary of such events and the effect
thereof upon the number and kind of shares or property purchasable
under the Plan and the price payable therefor. No fractional shares
of stock shall be issued under the Plan resulting from such
adjustment.
3
<PAGE>
ARTICLE IV
OPTIONS
_______
4.01 Option Grant. Each Participant:
a) who is a participant shall be granted an Option of three
thousand (3,000) shares of Stock on the fifth business day
following the date the first quarter earnings for 1990 are
announced at the Option Price. Notwithstanding the foregoing,
this grant is subject to shareholder approval at the Annual
Meeting of Shareholders, May 8, 1990.
b) who joins the Board of Directors after such date shall be
granted an Option for three thousand (3,000) shares of Stock
on the date he becomes a member of the Board of Directors at
the Option Price on that date. The grant is effective the
date an individual joins the Board.
c) who is a non-employee member of the Board of Directors on
July 25, 1995 shall receive an option of two thousand (2,000)
shares of stock on such date at the Option Price.
Notwithstanding the foregoing, this grant is subject to
shareholder approval at the Annual Meeting of Shareholders,
May 14, 1996.
No Option shall be granted under this Plan after March
31, 2000.
4.02 Exercise of Option while on Board. If the Participant remains a
member of the Board of Directors, the Option may be exercised in whole or
in part with respect to whole shares of Stock based on the following
schedule, regardless of the date of grant:
a) 25% of the Option may be exercised one year after a
Participant joins the Board;
b) 50% of the Option may be exercised two years after a
Participant joins the Board;
c) 75% of the Option may be exercised three years after a
Participant joins the Board; and
d) 100% of the Option may be exercised four years after a
Participant joins the Board.
Upon becoming exercisable, the Option shall remain exercisable until
the date which is ten (10) years from the date the Option was
granted.
4
<PAGE>
4.03 Exercise of Option Upon Termination. If a Participant resigns from
the Board of Directors for any reason, all further vesting of this
Option ceases. Any portion of the Option which, at the time of
separation from service could have been exercised, shall remain
exercisable until the earlier of:
a) the date which is ten (10) years from the date the Option
was granted; or
b) three (3) years from the date the Participant terminates
from service as a member of the Board of Directors for any
reason;
provided, however, that in the event of any separation from service
for any of the reasons described in the foregoing clauses, shares of
Stock issuable upon the exercise of any Option granted under this
Plan shall not be delivered to the Participant on a date earlier
than six (6) months from the mailing of the notice referred to in
Article 4.05.
4.04 Nontransferability of the Option. A Participant shall have no right
to assign, transfer, or otherwise dispose of any Option, nor shall
such rights be assigned or transferred by operation of law or
otherwise for any reason other than by will or the laws of descent
and distribution. During the lifetime of a Participant, the Option
shall be exercisable only by the Participant.
5
<PAGE>
4.05 Procedure for Exercising Option. Subject to Federal and State
securities laws then applicable, for an Option to be exercised the
following procedure must be followed:
a) The Participant must provide a written notice to the Company
of his intent to exercise the Option. The notice must specify
the whole shares of Stock to be purchased and the Option Price
to be paid pursuant to the terms of this Agreement (Note: A
form notice of intent is available from the Compensation
Director of the Company);
b) The notice of intent to exercise the Option must be
accompanied by one or a combination of any of the following:
i) full payment of the Option Price by check or
money order made payable in United States funds to
"Polaroid Corporation";
ii) shares of Stock owned by the Participant, having
an aggregate Fair Market Value on the last trading day
immediately preceding the day the notice of intent was
mailed, equal to the Option Price, together with a duly
executed stock power therefor; or,
iii) a copy of irrevocable instructions to a broker
to deliver to the Company promptly the Option Price either
by cash, a check or money order made payable in United
States funds to "Polaroid Corporation", provided, however,
that the payment option in (iii) above is subject to
compliance with such procedures and such agreements of
indemnity as the Company may prescribe from time to time
as a condition of such payment option.
c) The Participant must provide a written notice to the Company
of his intent to exercise the Option. This notice must be sent to
the following address:
Douglas F. Mitchell
Treasury Services
Polaroid Corporation
575 Technology Square - 5T
Cambridge, Massachusetts 02139
6
<PAGE>
d) The notice of intent and payment or instructions regarding
payments as set forth above, MUST BE SENT BY FACSIMILE,
REGISTERED OR CERTIFIED MAIL. The date the Option is
exercised, in full or in part, shall be the date of the
registration of the written notice of intent sent by facsimile,
registered or certified mail.
4.06 Information or Assurances. Upon or prior to the exercise of all or
any portion of any Option, the Participant shall furnish to the
Company in writing such information or assurances as, in the
Company's opinion, may be necessary to enable it to comply fully
with the Securities Act and the Exchange Act and the rules and
regulations thereunder and any other applicable Federal or State
statutes, rules, and regulations.
Without limiting the foregoing, if a Registration Statement is not
in effect under the Securities Act with respect to the shares of
Stock to be issued upon exercise of the Option, the Company shall
have the right to require, as a condition to the exercise of the
Option, that the Participant represent to the Company in writing
that the shares of Stock to be received upon exercise of the Option
will be acquired by the Participant for investment and not with a
view to distribution within the meaning of the applicable provisions
of either the Securities Act or the Exchange Act. Further, the
Company may require that the Participant agree in writing that such
shares will not be disposed of except pursuant to an effective
Registration Statement,
unless the Company shall have received an opinion of counsel
reasonably acceptable to it to the effect that such disposition is
exempt from the registration requirements of the Securities Act.
The Company shall have the right to endorse on certificates
representing shares of Stock issued upon exercise of the Option such
legends referring to the foregoing representations and restrictions
or any other applicable restrictions on resale or disposition as the
Company, in its discretion, shall deem appropriate.
7
<PAGE>
ARTICLE V
STOCK CERTIFICATES
__________________
5.01 Stock Certificates. The Company shall not be required to issue or
deliver any certificate for shares of Stock purchased upon the
exercise of any Option granted under this Plan or of any portion
thereof prior to fulfillment of all of the following conditions:
a) The admission of such shares to listing on all stock
exchanges on which the Stock is then listed, if any;
b) The completion of any registration or other qualification of
such shares under any federal or state law or under the rulings
or regulations of the Securities and Exchange Commission or any
other governmental regulatory agency, which the Company shall
in its sole discretion determine to be necessary or advisable;
c) The obtaining of any approval or other clearance from any
federal or state governmental agency which the Company shall
in its sole discretion determine to be necessary or
advisable; and
d) The lapse of such reasonable period of time following the
exercise of the Option as the Company from time to time may
establish for reasons of administrative convenience.
ARTICLE VI
DIVIDENDS
_________
6.01 Dividends. Dividend equivalents shall not be provided under this
Plan as a matter of course.
8
<PAGE>
6.02 Notices of Dividends and Other Distributions. In the event the
Company proposes to declare a cash dividend on Stock payable other
than out of earned surplus, or a dividend payable in property other
than cash or Stock, or shall distribute subscription rights to its
shareholders or the Company offers to purchase Stock from
shareholders in a tender offer (within the meaning of the Exchange
Act), then the Company shall notify the Participant or the person
who shall have duly acquired the Option by written notice mailed at
least ten (10) days before the proposed record date for the
determination of holders of Stock entitled to participate in such
offer to purchase or distribution or receive such dividend or such
subscription rights, which notice shall specify such proposed record
date.
ARTICLE VII
PLAN ADMINISTRATION
___________________
7.01 Plan Administration. This Plan shall be administered by the
Committee. The Committee shall have the full authority and absolute
discretion:
a) To construe and interpret the Plan; and
b) To make all determinations and take all other actions
necessary or advisable for the proper administration of the
Plan.
All such actions and determinations shall be conclusively
binding upon all persons for all purposes.
7.02 Disqualification. If any deliberation of the Committee shall
exclusively affect a member(s) of the Committee, the member(s) so
affected shall not participate in such deliberation.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
_________________________
8.01 Applicable Law. To the extent that state law shall not have been
preempted by any laws of the United States, the Plan shall be
construed, regulated, interpreted and administered according to the
laws of the State of Delaware.
9
<PAGE>
8.02 Change of Control. Upon the occurrence of a Trigger Date as defined
in the Polaroid Extended Severance Plan adopted by the Company on
December 17, 1987 and as amended from time to time, each Option
shall automatically become fully exercisable unless the Committee
shall otherwise expressly provide at the time of the grant.
8.03 Expenses. The cost of benefit payments from this Plan and the
expenses of administering this Plan shall be borne by the Company,
including such costs as those associated with the registration of
the Stock.
8.04 Gender and Number. Unless the context clearly requires otherwise,
the masculine pronoun whenever used shall include the feminine and
neuter pronoun, the singular shall include the plural, and vice
versa.
8.05 Headings Not Part of Plan. Headings of Articles and Sections are
inserted for convenience and reference; they constitute no part of
this Plan.
8.06 Indemnification. No member of the Board of Directors or the
Committee shall be liable for any action or determination taken or
made in good faith with respect to this Plan nor shall any member of
the Board of Directors or the Committee be liable for any Options
granted under it. Each member of the Board of Directors and the
Committee shall be indemnified by the Company against any losses
incurred in such administration of the Plan, unless his action
constitutes serious and willful misconduct.
8.07 Non-Assignability. A Participant's interest under this Plan shall
not be subject at any time or in any manner to alienation, sale,
transfer, assignment, pledge, attachment, garnishment or encumbrance
of any kind and any attempt to deliver, sell, transfer, assign,
pledge, attach, garnish or otherwise encumber such interest shall be
void and any interest so encumbered will terminate.
10
<PAGE>
8.08 Plan Binding on Successors. This Plan shall be binding upon the
successors and assigns of the Company.
8.09 Non-Contravention of Securities Laws. Notwithstanding anything to
the contrary expressed in this Plan, any provisions hereof that vary
from or conflict with any applicable Federal or State securities
laws (including any regulations promulgated thereunder) shall be
deemed to be modified to conform to and comply with such laws.
8.10 Unenforceability of a Particular Provision. The unenforceability of
any particular provision of this document shall not affect the other
provisions, and the document shall be construed in all respects as
if such unenforceable provision were omitted.
ARTICLE IX
PERMANENCY OF THE PLAN AND PLAN TERMINATION
___________________________________________
9.01 Effective Date. This Plan shall become effective as of April 1,
1990 upon a resolution by the Board of Directors for its adoption,
to be presented at the Annual Meeting of Shareholders of the
Company on May 8, 1990 or any adjournment thereof, receiving the
affirmative vote of a majority of the votes cast by the holders of
the Common Stock, Series B Preferred Stock and Series C Preferred
Stock voting together and not separately. Notwithstanding the
foregoing, for the Plan to become effective, it must be approved by
the shareholders prior to August 6, 1990.
11
<PAGE>
9.02 Termination, Amendment, and Modification of Plan. The Board of
Directors may at any time terminate or suspend, and may at any time
and from time to time and in any respect amend or modify, the Plan;
provided, however, that no such action of the Board of Directors
without approval of the shareholders of the Company may:
(a) Increase the total number of shares of Stock subject to
the Plan except as contemplated in Section 3.03 hereof;
(b) Decrease the minimum Option Price except as contemplated
in Section 3.03 hereof;
(c) Alter the class of persons eligible to receive Options
under the Plan;
(d) Extend the termination date of the Plan or the period
during which the Option may be exercised;
or
(e) Materially alter the Plan in any other respect in a manner
then requiring shareholder approval under the Securities Act or
the Exchange Act.
No termination, amendment, or modification of the Plan shall in any
manner adversely affect any Option granted hereunder without the
written consent of the affected Participant.
IN WITNESS WHEREOF, Polaroid has caused this instrument to be
executed this 18th day of December, 1996, effective as of July 25, 1995.
Attest: POLAROID CORPORATION
/s/ Richard F. deLima By: /s/ Gary T. DiCamillo
________________________________ _______________________
Secretary Chief Executive Officer
12
Exhibit 10.15
DEFERRED COMPENSATION PLAN
TRUST AGREEMENT
BETWEEN
POLAROID CORPORATION AND NATIONSBANK
AGREEMENT made this 17th day of May, 1995, by and among POLAROID
CORPORATION, a Delaware corporation (the "Company"), and NATIONSBANK,
a corporation organized and existing under the laws of the state of
Delaware (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has adopted the non-qualified deferred
compensation Plans listed in Appendix A; and
WHEREAS, the Company has incurred or expects to incur liability
under the terms of such Plans with respect to the individuals
participating in such Plans; and
WHEREAS, the Company wishes to establish a trust ("Trust") and to
contribute to such Trust assets that shall be held therein, subject to
the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to the Plan participants and
their beneficiaries in such manner and at such times as specified in
the Plans; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of
the Plans as unfunded plans maintained for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee
Retirement Income Security Act of 1974; and
<PAGE>
WHEREAS, it is the intention of the Company to make contributions
to the Trust to provide itself with a source of funds to assist it in
the meeting of its liabilities under the Plans.
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as
follows:
SECTION 1. ESTABLISHMENT OF TRUST.
(a) The Company hereby initially deposits with Trustee in trust
the sum of five million, one hundred thousand dollars ($5,100,000.00)
which shall become the principal of the Trust, to be held,
administered and disposed of by Trustee as provided in this Agreement.
(b) The Trust hereby established shall be irrevocable.
(c) The Trust is intended to be a grantor trust, of which the
Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall
be held separate and apart from other funds of the Company and shall
be used exclusively for the uses and purposes of the Plan participants
and the general creditors of the Company as herein set forth. Plan
participants and their beneficiaries shall have no preferred claim on,
or any beneficial ownership interest in, any assets of the Trust. Any
rights created under the Plans and this Trust Agreement shall be mere
unsecured contractual rights of Plan participants and their
beneficiaries against the Company. Any assets held by the Trust will
be subject to the claims of Company's general creditors under federal
and state law in the event of Insolvency, as defined in Section 3(a)
herein.
2
<PAGE>
(e) The Company, in its sole discretion, may at any time, or
from time to time, make additional deposits of cash or other property
in trust with Trustee to augment the principal to be held,
administered and disposed of by Trustee as provided in this Trust
Agreement. Neither Trustee nor any Plan participant or beneficiary
shall have any right to compel such additional deposits.
(f) Ten days prior to a Change of Control, as defined herein,
the Company shall make an irrevocable contribution to the Trust in an
amount that is sufficient to pay each Plan participant or beneficiary
an amount to which Plan participants or their beneficiaries would be
entitled pursuant to the terms of the Plans.
SECTION 2. PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES.
(a) The Company shall deliver to Trustee a schedule (the
"Payment Schedule") that indicates the amounts payable in respect of
each Participant (and his or her beneficiaries), that provides a
formula or other instructions acceptable to Trustee for determining
the amounts so payable, the form in which such amount is to be paid
(as provided for or available under the Plans), and the time of
commencement for payment of such amounts. Except as otherwise
provided herein, Trustee shall make payments to Plan participants and
their beneficiaries in accordance with such Payment Schedule. The
Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the Plans
and shall pay amounts withheld to the appropriate taxing authorities
or determine that such amounts have been reported, withheld and paid
by the Company.
3
<PAGE>
(b) The entitlement of a Plan participant or his or her
beneficiaries to benefits under the Plans shall be determined by the
Company or such party as they shall designate under the Plans, and any
claim for such benefits shall be considered and reviewed under the
procedures set out in the Plans.
(c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms
of the Plans. The Company shall notify Trustee of the Company's
decision to make payments of benefits directly prior to the time such
amounts are payable to the Plan participants or their beneficiaries.
In addition, if the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in accordance with the
terms of the Plans, the Company shall make the balance of each such
payment as it falls due. Trustee shall notify the Company when
principal and earnings are not sufficient.
SECTION 3. TRUSTEE RESPONSIBILITY REGARDING
PAYMENTS TO TRUST BENEFICIARY WHEN COMPANY IS
INSOLVENT.
(a) Trustee shall cease payment of benefits to Plan participants
and their beneficiaries if the Company is Insolvent. Company shall be
considered "Insolvent" for the purposes of this Trust Agreement if (i)
Company is unable to pay its debts as they become due, or (ii) Company
is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
4
<PAGE>
(b) At all times during the continuance of this Trust as
provided in Section 1(d) hereof, the principal and income of the Trust
shall be subject to claims of general creditors of the Company under
federal and state law as follows:
(i) The Board of Directors of the Company and the
Chief Executive Officer of the Company shall have the
duty to inform Trustee in writing of Company's
Insolvency. If a person claiming to be a creditor of
the Company alleges in writing to Trustee that the
Company has become Insolvent, Trustee shall determine
whether the Company is Insolvent and, pending such
determination, Trustee shall discontinue payment of
benefits to Plan participants and their beneficiaries.
(ii) Unless Trustee has actual knowledge of
Company's Insolvency, or has received notice from the
Company or a person claiming to be a creditor alleging
that the Company is Insolvent, Trustee shall have no
duty to inquire whether the Company is Insolvent.
Trustee may in all events rely on such evidence
concerning the Company's solvency as may be furnished
to Trustee and that provides Trustee with a reasonable
basis for making a determination concerning the
Company's solvency.
(iii) If at any time Trustee has determined
that the Company is Insolvent, Trustee shall
discontinue payments to Plan participants and their
beneficiaries and shall hold the assets of the Trust
for the benefit of the Company's general creditors.
Nothing in this Agreement shall in any way diminish any
rights of Plan participants and their beneficiaries to
pursue their rights as general creditors of the Company
with respect to benefits due under the Plans or
otherwise.
5
<PAGE>
(iv) Trustee shall resume the payment of benefits
to Plan participants and their beneficiaries in
accordance with Section 2 of this Agreement only after
Trustee has determined that the Company is not
Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3(b) hereof and subsequently resumes such payments, the first
payment following such discontinuance shall include the aggregate
amount of all payments due to Plan participants and their
beneficiaries under the terms of the Plans for the period of such
discontinuance, less the aggregate amount of any payments made to Plan
participants and their beneficiaries by the Company in lieu of the
payments provided for hereunder during any such period of
discontinuance.
SECTION 4. PAYMENTS TO COMPANY. Company shall have no right
or power to direct Trustee to return to the Company or to divert to
others any of the Trust assets before all payment of benefits have
been made to Plan participants and their beneficiaries pursuant to the
terms of the Plans.
6
<PAGE>
SECTION 5. INVESTMENT AUTHORITY.
(a) Trustee shall invest the principal of the Trust and any
earnings thereon in accordance with written directions from the
Company. Such directions shall provide Trustee with the investment
discretion to invest the above-referenced amounts within broad
guidelines established by Trustee and the Company and set forth
therein.
(b) Subject to Subsection (a), Trustee may
(i) invest and reinvest the amounts
described in Subsection (a) in any form of
property not prohibited by law, including, without
limitation on the amount which may be invested
therein, any mutual funds, money market funds,
certificates of deposit, life insurance policies,
annuity contracts, and other deposits yielding a
reasonable rate of interest; and
(ii) hold cash uninvested in an amount
considered necessary and prudent for proper
administration of the Trust, or deposit the same
with any banking, savings or similar financial
institution supervised by the United States or any
State, including Trustee's own banking department.
(c) Trustee may invest in securities (including stock or rights
to acquire stock) or obligations issued by the Company only to the
extent set forth in Appendix A. All rights associated with assets of
the Trust shall be exercised by Trustee or the person designated by
Trustee, and shall in no event be exercisable by or rest with the Plan
participants or beneficiaries.
7
<PAGE>
(d) The Company shall have the right, at any time, and from time
to time in its sole discretion, to substitute assets of equal fair
market value for any asset held by the Trust. This right is
exercisable by Company in a non-fiduciary capacity without the
approval or consent of any person in a fiduciary capacity.
SECTION 6. DISPOSITION OF INCOME. During the term of this
Trust, all income received by the Trust, net of expenses and taxes,
shall be accumulated and reinvested.
SECTION 7. ACCOUNTING BY TRUSTEE. Trustee shall keep
accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing
between the Company and Trustee. Within sixty (60) days following the
close of each calendar year and within sixty (60) days after its
removal or resignation, Trustee shall deliver to the Company a written
account of its administration of the Trust during such year or during
the period from the close of the last preceding year to the date of
such removal or resignation, setting forth all investments, receipts,
disbursements and other transactions effected by it, including a
description of all securities and investments purchased and sold, with
the cost or net proceeds of such purchases or sales (accrued interest
paid or receivable being shown separately), and showing all cash,
securities and other property held in the Trust at the end of such
year or as of the date of such removal or resignation, as the case may
be.
8
<PAGE>
SECTION 8. RESPONSIBILITY OF TRUSTEE.
(a) Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent
person acting in a like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like
aims; provided, however, that Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or
approval given by the Company which is contemplated by, and in
conformity with, the terms of the Plans or this Trust Agreement and is
given in writing by the Company. In the event of a dispute between
the Company and a party, Trustee may apply to a court of competent
jurisdiction to resolve the dispute.
(b) If Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify Trustee
against Trustee's costs, expenses and liabilities (including, without
limitation, attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments. If Company does not pay such
costs, expenses and liabilities in a reasonably timely manner, Trustee
may obtain payment from the Trust.
(c) Trustee may consult with legal counsel (who may also be
counsel for the Company generally) with respect to any of its duties
or obligations hereunder.
(d) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
9
<PAGE>
(e) Notwithstanding any powers granted to Trustee pursuant to
this Trust Agreement or to applicable law, Trustee shall not have any
power that could give this Trust the objective of carrying on a
business and dividing the gains therefrom, within the meaning of
Section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.
SECTION 9. COMPENSATION AND EXPENSES OF TRUSTEE. The Trust
fees and expenses shall be paid from the income from Trust assets. If
not so paid, the Company shall pay the administrative and Trustee's
fees and expenses.
SECTION 10. RESIGNATION AND REMOVAL OF TRUSTEE.
(a) Trustee may resign at any time by written notice to the
Company which shall be effective sixty (60) days after receipt of such
notice unless the Company and Trustee agree otherwise.
(b) Trustee may be removed by the Company on sixty (60) days'
written notice or upon shorter notice accepted by Trustee.
(c) Upon a Change of Control, as defined herein, Trustee may not
be removed by the Company for two (2) years.
(d) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the
successor Trustee. The transfer shall be completed within sixty (60)
days after receipt of notice of resignation, removal or transfer,
unless the Company extends the time limit.
10
<PAGE>
(e) If Trustee resigns or is removed, a successor shall be
appointed, in accordance with Section 11 hereof, by the effective date
of such resignation or removal under paragraphs (a) or (b),
respectively, of this Section. If no such appointment has been made,
Trustee may apply to a court of competent jurisdiction for appointment
of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative
expenses of the Trust.
SECTION 11. APPOINTMENT OF SUCCESSOR.
(a) If Trustee resigns or is removed in accordance with Section
10(a) or (b) hereof, respectively, the Company may appoint any third
party, such as a bank trust department or other party that may be
granted corporate trustee powers under state law, as a successor to
replace Trustee upon such resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee,
including ownership rights in the Trust assets. The former Trustee
shall execute any instrument necessary or reasonably requested by the
Company or the successor Trustee to evidence the transfer.
(b) The successor Trustee need not examine the records and acts
of any prior Trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor Trustee
shall not be responsible for, and the Company shall indemnify and
defend the successor Trustee from, any claim or liability resulting
from any action or inaction of any prior Trustee or from any other
past event or any condition existing at the time it becomes successor
Trustee.
11
<PAGE>
SECTION 12. AMENDMENT OR TERMINATION.
(a) This Trust may be amended only by written agreement executed
by the Company. Notwithstanding the foregoing, no amendment shall
conflict with the terms of the Plans or shall make the Trust revocable
after it has become irrevocable in accordance with Section 1(b)
hereof.
(b) Except as provided in paragraph (c) of this Section 12, the
Trust shall not terminate until the date on which Plan participants
and beneficiaries are no longer entitled to benefits pursuant to the
terms of the Plans. Upon termination of the Trust, any assets
remaining in the Trust shall be returned to Company.
(c) Upon written approval of participants or beneficiaries
entitled to payment of benefits pursuant to the terms of the Plans,
the Company may terminate this Trust prior to the time all benefit
payments under the Plans have been made. All assets in the Trust at
termination shall be returned to the Company.
12
<PAGE>
(d) Sections 1, 10 and 12 of this Trust Agreement may not be
amended by the Company for two (2) years following a Change of
Control, as defined below:
Change of Control shall mean:
(i) the date on which a change in control of the
Company occurs of a nature that would be required to be
reported (assuming that the Company's Common Stock was
registered under the Exchange Act) in response to an
item (currently Item 6(e)) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act or an
item (currently Item 1(a)) of Form 8-K under the
Exchange Act;
(ii) the date on which there is an Acquiring
Person and change in the composition of the Board of
Directors of the Company within two (2) years after the
Share Acquisition Date with respect to such Acquiring
Person that results in the Disinterested Directors not
constituting a majority of the Board of Directors;
(iii) any day on or after the Share
Acquisition Date when, directly or indirectly, any of
the transactions specified in the following clauses
shall occur:
(A) the Company shall consolidate with,
or merge with and into, any other Person;
(B) any Person shall merge with and
into the Company; or
(C) the Company shall sell, lease,
exchange or otherwise transfer or dispose of (or
one or more of its Subsidiaries shall sell, lease,
exchange or otherwise transfer or dispose of), in
one or more transactions, the major part of the
assets of the Company and its Subsidiaries (taken
as a whole) to any other Person or Persons; or
(iv) the date when a Person (other than the
Company, any subsidiary of the Company, any employee
benefit plan of the Company or any of its Subsidiaries
or any Person holding Common Shares for or pursuant to
the terms of any such employee benefit plan) alone or
together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 30% or more of
the Common Shares then outstanding.
13
<PAGE>
Definitions used for purpose of this Definition are as follows:
Acquiring Person. Acquiring Person shall mean any Person who or
which, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of 20% or more of the Common
Shares then outstanding, but does not include any subsidiary of
the Company, any employee benefit plan of the Company or of any
of its Subsidiaries or any Person holding Common Shares for or
pursuant to the terms of any such employee benefit plan.
Affiliate and Associate. Affiliate and Associate, when used with
reference to any Person, shall have the meaning given to such
terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
14
<PAGE>
Beneficial Owner. A Beneficial Owner shall mean a Person deemed
to "beneficially own", any securities which:
(a) such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly; or
(b) such Person or any of such Person's Affiliates or
Associates has:
(i) the right to acquire (whether such right is
exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or
understanding (written or oral), or upon the exercise
of conversion rights, exchange rights, warrants or
options, or otherwise; provided, however, that a Person
shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a
tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or Associates
until such tendered securities are accepted for
purchase or exchange thereunder;
(ii) the right to vote pursuant to any agreement,
arrangement or understanding (written or oral);
provided, however, that a Person shall not be deemed
the Beneficial Owner of, or to beneficially own, any
security if the agreement, arrangement or understanding
(written or oral) to vote such security (A) arises
solely from a revocable proxy given to such Person in
response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable
rules and regulations under the Exchange Act and (B) is
not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report);
or
15
<PAGE>
(iii)which are beneficially owned, directly or
indirectly, by any Person with which such Person or any
of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (written or
oral), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in
subsection (ii) above) or disposing of any securities
of the Company.
Board of Directors. Board of Directors shall mean the
Board of Directors of the Company.
Company. Company shall mean Polaroid Corporation, a
Delaware corporation.
Disinterested Director. A Disinterested Director shall
mean a member of the Board of Directors as of the Share
Acquisition Date who is not an employee of the Company.
Exchange Act. Exchange Act shall mean the Securities
Exchange Act of 1934, as in effect on the date in question,
unless otherwise specifically provided in this Trust
Agreement.
Share Acquisition Date. Share Acquisition Date shall
mean the first date any Person shall become an Acquiring
Person.
16
<PAGE>
SECTION 13. MISCELLANEOUS.
(a) Any provision of this Trust Agreement prohibited by law
shall be ineffective to the extent of any such prohibition, without
invalidating the remaining provisions hereof.
(b) Benefits payable to Plan participants or beneficiaries under
this Trust Agreement may not be anticipated, assigned (either at law
or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable
process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the date first above written.
POLAROID CORPORATION
By: /s/ Graham M. Brown, Jr.
---------------------------
Graham M. Brown, Jr.
Vice President and
Treasurer
TRUSTEE
By: /s/ T. Stuart Gaston
-------------------------
Name : T. Stuart Gaston
Title: Vice President
<PAGE>
APPENDIX A
THE POLAROID OFFICER'S COMPENSATION EXCHANGE PLAN
- -------------------------------------------------
- - THIS IS A DEFINED COMPENSATION TYPE PLAN
- - FORMULA:
* PART A:
THE NUMBER OF UNITS NOT PROVIDED EMPLOYEES IN THE
POLAROID STOCK EQUITY PLAN DUE TO THE LIMIT ON COMPENSATION
IMPOSED BY SECTION 401(A)(17) OF THE CODE
* PART B:
50% OF THE NUMBER OF UNITS ALLOCATED TO EMPLOYEES DURING
EACH ALLOCATION PERIOD IN THE POLAROID STOCK EQUITY PLAN
WITHOUT CONSIDERATION OF ANY LIMITATION IMPOSED BY THE CODE
- - THE TRUST WILL HOLD POLAROID COMMON STOCK TO FUND THE BENEFITS
UNDER THIS PLAN.
THE POLAROID RETIREMENT PARITY PLAN
- -----------------------------------
- - THIS IS A DEFINED BENEFIT TYPE PLAN
- - FORMULA
* EXCESS BENEFIT PLAN FOR THE COMBINED 415 LIMITATIONS
- - THE TRUST WILL HOLD CASH, EQUITY AND FIXED INSTRUMENTS, BUT IN NO
EVENT SHALL HOLD POLAROID CORPORATION SECURITIES.
THE POLAROID EXECUTIVE EQUALIZATION RETIREMENT PLAN
- ---------------------------------------------------
- - THIS IS A DEFINED BENEFIT TYPE PLAN
- - FORMULA
* TOP HAT PLAN FOR INDIVIDUALS WHO EXCEED THE IRS LIMITATIONS
ON COMPENSATION
- - THE TRUST WILL HOLD CASH, EQUITY AND FIXED INSTRUMENTS, BUT IN NO
EVENT SHALL HOLD POLAROID CORPORATION SECURITIES.
THE POLAROID SUPPLEMENTAL BENEFIT PLAN
- --------------------------------------
- - THE TRUST WILL HOLD CASH, EQUITY AND FIXED INSTRUMENTS, BUT IN NO
EVENT SHALL HOLD POLAROID CORPORATION SECURITIES.
Exhibit 10.22
Gary T. DiCamillo
Chairman and
Chief Executive Officer
Polaroid Corporation
549 Technology Square
Cambridge, Massachusetts 02139
617 386 3211 Fax: 617 386 3263
January 29, 1996
Joseph R. Oldfield
Polaroid Corporation
549 Technology Square
Cambridge, Massachusetts 02139
Dear Joe:
This will confirm the terms of your severance and retirement
agreement with Polaroid Corporation. As we discussed, you have
agreed to retire from the Company on March 31, 1996, and you will
receive the following benefits:
Severance Payment: You will receive a severance payment of
$518,881. This payment was calculated using the terms and
conditions set forth in the 1996 special severance plan. Under
the terms of the severance program you will receive this payment
in monthly installments beginning the month following your
termination.
Retirement Enhancement: You will receive your pension benefit
calculated as of March 31, 1996 as though you had thirty years of
service and attained age 65. This benefit will be paid through
the Polaroid Pension Plan and non-qualified supplemental plans.
An enhancement of approximately $2,400 per month paid solely
through the non-qualified plan will be added to the pension you
will receive under the 1996 Enhanced Pension Program. Your
pension will begin effective April 1996.
Annual Bonus: You will not be eligible to participate in the
annual executive bonus plan for 1996.
ESOP and OCEP Plans: You will be eligible to continue to
participate in the ESOP and OCEP until your termination date.
You will receive a distribution from the OCEP based on
participation until March 31, 1996. This distribution will be
made in August 1996.
Stock Options: All options which have been granted to you as of
the date of your retirement will be fully vested. You will have
three years from the date of your termination within which to
exercise your options. However, your entitlement to the award of
additional options under the Polaroid Stock Incentive Plan shall
cease upon your retirement.
<PAGE>
Medical and Life Insurance Coverage: As a bona-fide retiree,
you will be entitled to participate in the Company's retiree
medical and life insurance plans in the same manner as any other
retiree. As you are aware, retiree programs are not lifetime
guarantees and are subject to change from time to time.
Dental Insurance: You may also continue coverage in the
Polaroid Dental Plan receiving dental insurance coverage for
yourself , your spouse, and dependent children for three years.
Non-Compete Agreement
Finally, Polaroid will pay you $81,127 for a non-compete
agreement. Under the terms of this agreement you agree to
refrain from accepting employment with or consulting for any
competitor of Polaroid on a worldwide basis for a period of
twenty-four (24) months following your termination. For that
period of time you agree not to hire away any Polaroid employee
without prior approval of the Vice President of Human Resources
and to keep Polaroid apprised of your employment status. Should
you intend to enter into any employment relationship during the
twenty-four (24) month period following your termination, whether
or not with a competitor, you agree to contact Polaroid's Patent
Counsel. Should you intend to enter into any consulting
relationship which may even remotely be competitive, you also
further agree to contact Polaroid's Patent Counsel.
Consulting Agreement
Finally, Polaroid will pay you $100,000 to be available to
consult and act as a liaison, as needed, for nine months with
ongoing business relationships.
Joe, I appreciate your support and cooperation during this period
of transition.
Sincerely,
/s/ Gary T. DiCamillo
-----------------
Gary T. DiCamillo
Chairman and
Chief Executive Officer
/s/ Joseph R. Oldfield
- ----------------------
Joseph R. Oldfield
Agreed and Accepted
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1995
PRIMARY COMPUTATION
- -------------------
Net loss per statement of earnings $(111.0)
========
Weighted average number of common
shares outstanding 45.5
Weighted average number of common
stock equivalents --
-------
Weighted average number of common
shares, as adjusted 45.5
========
Primary loss per common share $ (2.44)
========
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1995
FULLY DILUTED COMPUTATION
- -------------------------
Net loss per statement of earnings $(111.0)
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 1.7
--------
Net loss, as adjusted $(109.3)
========
Weighted average number of common
shares outstanding used for primary computation 45.5
Weighted average number of common
stock equivalents 1.2
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
--------
Weighted average number of common
shares, as adjusted 51.0
========
Fully diluted loss per common share $ (2.14) (B)
========
(A) Assumes conversion of $140 million 8% convertible debentures at a
price of approximately $32.50 per common share in accordance with the
convertible debenture exchange agreement.
(B) This computation is submitted as an exhibit to the Company's Form 10-K
in accordance with Regulation S-K item 601(b)(11), although presenting
the computation is not in accord with paragraph 40 of APB Opinion 15
because the computation produces an antidilutive result.
2
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1995
PRIMARY COMPUTATION
- -------------------
Net loss per statement of earnings $(140.2)
========
Weighted average number of common
shares outstanding 45.4
Weighted average number of common
stock equivalents --
--------
Weighted average number of common
shares, as adjusted 45.4
========
Primary loss per common share $ (3.09)
========
3
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1995
FULLY DILUTED COMPUTATION
- -------------------------
Net loss per statement of earnings $(140.2)
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 6.8
--------
Net loss, as adjusted $(133.4)
========
Weighted average number of common
shares outstanding used for primary computation 45.4
Weighted average number of common
stock equivalents 1.4
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
--------
Weighted average number of common
shares, as adjusted 51.1
=========
Fully diluted loss per common share $ (2.61) (B)
=========
(A) Assumes conversion of $140 million 8% convertible debentures at a
price of approximately $32.50 per common share in accordance with the
convertible debenture exchange agreement.
(B) This computation is submitted as an exhibit to the Company's Form 10-K
in accordance with Regulation S-K item 601(b)(11), although presenting
the computation is not in accord with paragraph 40 of APB Opinion 15
because the computation produces an antidilutive result.
4
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1994
PRIMARY COMPUTATION
- -------------------
Net earnings per statement of earnings $ 57.3
======
Weighted average number of common
shares outstanding 46.2
Weighted average number of common
stock equivalents .4
------
Weighted average number of common
shares, as adjusted 46.6
======
Primary earnings per common share $ 1.23
======
5
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
FOURTH QUARTER, 1994
FULLY DILUTED COMPUTATION
- -------------------------
Net earnings per statement of earnings $ 57.3
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 1.7
------
Net earnings, as adjusted $ 59.0
======
Weighted average number of common
shares outstanding used for primary computation 46.2
Weighted average number of common
stock equivalents .4
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
------
Weighted average number of common
shares, as adjusted 50.9
======
Fully diluted earnings per common share $ 1.16
======
(A) Assumes conversion of $140 million 8% convertible debentures at a
price of approximately $32.50 per common share in accordance with the
convertible debenture exchange agreement.
6
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1994
PRIMARY COMPUTATION
- -------------------
Net earnings per statement of earnings $ 117.2
=======
Weighted average number of common
shares outstanding 46.6
Weighted average number of common
stock equivalents .4
-------
Weighted average number of common
shares, as adjusted 47.0
=======
Primary earnings per common share $ 2.49
=======
7
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1994
FULLY DILUTED COMPUTATION
- -------------------------
Net earnings per statement of earnings $ 117.2
Add: effect of elimination of after-tax interest expense
on $140 million 8% convertible debentures 6.8
--------
Net earnings, as adjusted $ 124.0
========
Weighted average number of common
shares outstanding used for primary computation 46.6
Weighted average number of common
stock equivalents .4
Add: effect of converting $140 million
8% debentures into common stock 4.3 (A)
--------
Weighted average number of common
shares, as adjusted 51.3
========
Fully diluted earnings per common share $ 2.42
========
(A) Assumes conversion of $140 million 8% convertible debentures at a
price of approximately $32.50 per common share in accordance with the
convertible debenture exchange agreement.
8
<PAGE>
Financial Review
Polaroid Corporation and Subsidiary Companies
21 Management's Discussion and Analysis of Operations
29 Independent Auditors' Report
29 Management's Report
Financial Statements:
30 Consolidated Statement of Earnings
31 Consolidated Balance Sheet
32 Consolidated Statement of Cash Flow
33 Consolidated Statement of Changes in
Common Stockholders' Equity
Notes to Consolidated Financial Statements:
34 1. Summary of Significant Accounting Policies
35 2. Supplemental Information
36 3. Financial Instruments
37 4. Income Taxes
39 5. Inventories
39 6. Short-term Debt
39 7. Payables and Accruals
39 8. Long-term Debt
40 9. Common Stockholders' Equity
40 10. Incentive Compensation and Stock Incentive Plans
42 11. Benefit Plans
44 12. Rental Expense and Lease Commitments
44 13. Business
46 14. Contingencies
46 15. Supplementary Financial Information
Supplementary Financial Information:
47 Quarterly Financial Data
48 Ten-Year Financial Summary
20
<PAGE>
Management's Discussion and Analysis of Operations
The following table summarizes the relation to net sales of income and
expense items included in the Consolidated Statement of Earnings for 1995,
1994 and 1993 and the changes in those items from the respective prior years.
<TABLE>
<CAPTION>
Income and Expense Items
as a Percent of Net Sales PercentIncrease/(Decrease)
_________________________ __________________________
1994 1993 1992
to to to
1995 1994 1993 Income and Expense Items 1995 1994 1993
________________________________________________________________________________
<C> <C> <C> <S> <C> <C> <C>
Net Sales:
46% 50% 53% United States (12)% (2)% 3%
54 50 47 International 6 8 6
________________________________________________________________________________
100 100 100 Total net sales (3) 3 4
58 57 58 Cost of goods sold (2) 2 10
Marketing, research, engineering
38 34 34 and administrative expenses 8 3 --
11 -- 2 Restructuring and other expenses 100 (100) 100
________________________________________________________________________________
(7) 9 6 Profit/(loss) from operations NM 42 (34)
________________________________________________________________________________
-- -- 1 Other income 21 (15) 5
2 2 2 Interest expense 12 (3) (18)
________________________________________________________________________________
Earnings/(loss) before income tax
expense/(benefit) and cumulative
(9) 7 5 effect of changes in accounting principle NM 58 (38)
Federal, state and foreign income
(3) 2 2 tax expense/(benefit) NM 29 (47)
________________________________________________________________________________
Earnings/(loss) before cumulative effect
(6)% 5% 3% of changes in accounting principle NM 73% (31)%
________________________________________________________________________________
</TABLE>
NM--not meaningful because of fluctuation from a positive amount to a negative
amount
21
<PAGE>
The Company often uses the following qualitative descriptors to explain its
results of operations: "flat" indicates fluctuations of zero-to-one percent;
"slight" is in the two-to-three percent range; "moderate" means four-to-ten
percent; "significant" is in the eleven-to-twenty percent range; and
"substantial" represents fluctuations greater than twenty percent.
1995 Worldwide Results Compared with 1994
Worldwide sales of Polaroid Corporation and its subsidiaries decreased 3% to
$2.24 billion in 1995 compared with $2.31 billion in 1994. In 1995, the
Company sold 5.4 million cameras compared with 6.4 million cameras in 1994,
a decline of 16%, in part due to lower sales of Captiva. In 1995, the Company
decided to limit its production of Captiva cameras to the completion of work-in-
progress. The Company will continue to market Captiva cameras and film for
the forseeable future, as well as provide service. Instant film shipments
decreased slightly for the full year 1995 compared to 1994. Over the past few
years, growth in instant camera and film shipments has shifted from mature
markets in the United States, Western Europe and Japan to new markets such as
Russia and China.
Sales in the United States were $1.02 billion in 1995, a decrease of 12%
compared with $1.16 billion in 1994. In 1995, U.S. shipments of instant
cameras and film decreased significantly compared to 1994, primarily reflecting
the impact of the dealer inventory adjustment program. In addition, instant
cameras and film were transshipped by U.S. dealers to Russia in 1994. U.S.
sales in 1995 were also impacted by consumer promotional pricing on instant
film and lower sales of videotapes and conventional film.
International sales increased 6% from $1.15 billion in 1994 to $1.22 billion in
1995. In 1995, as a result of increased sales in Russia, sales in the European
region increased 5% to $739 million compared with $705 million in 1994. The
Company's sales in Russia were $196 million in 1995, a 27% increase
compared with $154 million in 1994. Sales in 1995 in Western Europe were flat
compared to 1994, in part reflecting the dealer inventory adjustment program.
In 1995, sales in the Asia Pacific, Canada, Latin and South America regions
increased 7% to $479 million compared with $448 million in 1994. The
increase is primarily a result of higher sales in China and other emerging
markets. While the Company believes that emerging markets present
particularly attractive opportunities, such markets tend to be considerably
less stable than more established markets. There can be no assurance that
emerging markets will continue to produce favorable results.
Gross margins as a percent of sales were 42% for 1995 and 43% for 1994. The
decline in gross margin in 1995 is primarily attributable to lower instant film
sales, more instant film price promotions for consumers and unfavorable
production costs associated with lower production levels.
Marketing, research, engineering and administrative expenses in 1995 were
$849 million compared with $788 million in 1994. Included in these expenses
were research and engineering expenses of $166 million in both 1995 and 1994.
The 8% increase in marketing, research, engineering and administrative
expenses in 1995 reflects an increase in international marketing expenses for
emerging markets, an increase in worldwide consumer promotional expenses
and infrastructure costs associated with the Company's switch in 1995 from
third-party distribution to direct distribution to dealers in Japan. In 1995,
pre-tax special charges for restructuring and other expenses totaled $247
million of which $77 million was recorded in the first quarter and $170 million
was recorded in the fourth quarter, as more fully described below.
22
<PAGE>
In the first quarter of 1995, the Company implemented a restructuring plan
which resulted in a pre-tax charge of $77 million. The Company offered an
early retirement program to certain qualified employees and a voluntary
severance program to all employees, both of which were open from February
13, 1995 to March 31, 1995. As a result of these programs, approximately 930
employees (approximately 560 from manufacturing and 370 from marketing,
research, engineering and administrative functions) terminated their
employment in 1995. The pre-tax costs related to the voluntary severance
program were $56 million, of which $47 million of cash severance payments
were made in 1995. The remaining cash severance payments of approximately
$9 million are expected to be paid in the first quarter of 1996. Additionally,
$18 million represents enhanced retirement benefits provided under the early
retirement program that will be funded from the Company's pension plans, and
therefore has been reflected as a non-cash item on the Company's statement of
cash flows. The savings from this severance and early retirement program are
expected to be approximately $46 million on an annualized basis, with $25
million expected to be realized in 1996. The remainder of the charge consisted
of a pre-tax charge of approximately $3 million for exit costs related to the
shutdown of certain facilities.
In December 1995, the Company announced a plan to make fundamental
changes in its operating structure. The restructuring plan features three
principal components -- program reductions in certain product, research and
manufacturing areas; strategic refocusing of the Company's digital imaging
businesses for the medical diagnostic and graphic arts markets; and a reduction
in corporate overhead expenses. The special charge for this program is expected
to total approximately $260 to $270 million. Of that amount, $170 million was
recorded in the fourth quarter of 1995 and an estimated $90 million to $100
million will be charged in the first quarter of 1996. Annualized savings are
expected to be more than $110 million from this program, with $75 million
expected to be realized in 1996. The December 1995 early retirement and
severance programs are expected to result in the elimination of a total of
approximately 1,600 positions worldwide.
The 1995 fourth quarter pre-tax special charge of $170 million included $85
million to write off certain assembly equipment and fixed assets and $30 million
to write-off inventory and accrue other costs, all of which were primarily
related to the Captiva product line. The remaining $55 million of the special
charge was related to the estimated cost of involuntary severance benefits for
approximately 1,300 domestic employees (approximately 570 from
manufacturing and 730 from marketing, research, engineering and
administrative functions) who were expected to terminate in 1996. This amount
does not include any incremental voluntary severance benefits and pension
enhancement benefits. The cost of these benefits, along with severence costs
for approximately 300 international employees (approximately $90 million to
$100 million) will be recognized in the first quarter of 1996 when more
precise information becomes available regarding the individuals accepting
voluntary termination under this program. No cash severance payments were
made in 1995 under this program.
The loss from operations for the full year 1995 was $158 million, compared to
an operating profit of $200 million in 1994. Excluding the special charge for
restructuring and other expenses of $247 million, operating profit for 1995
would have been $89 million, a reduction of $111 million compared to 1994.
This reduction is attributable to a combination of factors, primarily to a
decline in domestic instant film sales, an increase in worldwide promotional
expenses, an increase in international marketing expenses for emerging markets
and higher losses for the Company's digital imaging businesses.
23
<PAGE>
The Company's new digital imaging businesses which are in the early stages of
revenue generation incurred total losses of approximately $190 million in 1995
compared to approximately $180 million in 1994. The 1995 losses were
principally attributable to medical imaging and to graphics imaging with a
lesser proportion attributable to electronic imaging. The 1994 losses were
principally attributable to medical imaging with a smaller proportion
attributable to each of graphics imaging and electronic imaging. Included in the
losses attributable to medical imaging and graphics imaging in both 1995 and
1994, are significant costs associated with the Company's new coating facility
which was brought on line in 1994 and is operating at low levels of production
capacity. Shipments of the new graphics imaging product, Dry Tech Imagesetting
Film, began in October 1995, and the Company plans to ship a number of new
products for the graphic arts market in 1996. Shipments of Helios medical
imaging systems doubled in 1995 compared to the low base amount in 1994.
Other income was $9 million in 1995 compared with $7 million in 1994.
Included in other income were foreign currency losses resulting from balance
sheet translation amounting to $3 million in 1995 and $8 million in 1994.
Interest expense increased to $52 million in 1995 from $47 million in 1994
primarily as a result of lower amounts of interest capitalized on qualifying
assets and increased short-term borrowings.
For the full year 1995, the effective tax rate was 30%, compared with 27% for
1994. For purposes of determining the after-tax special charges, the Company
assumed a statutory tax rate of 35% to calculate the tax benefit. The net after-
tax foreign currency exchange loss from balance sheet translation for the full
year 1995 amounted to $.03 per common share, compared with a $.02 loss for
1994.
The net loss for the full year 1995 was $140 million, or $3.09 primary loss per
common share, compared with earnings of $117 million for the full year 1994,
or $2.49 primary earnings per common share. The full year 1995 results include
special pre-tax charges totaling $247 million for the two early retirement and
severance programs and other expenses. Excluding the pre-tax special charges
and the related tax effect, the full year 1995 primary earnings per common
share would have been approximately $.45 per share.
1995 Fourth Quarter Results
Worldwide sales for the fourth quarter of 1995 were $675 million, a 2% percent
decrease compared with sales of $686 million in the fourth quarter of 1994.
U.S. sales decreased 5% in the fourth quarter of 1995 to $329 million compared
with $347 million in the same period last year, due primarily to the consumer
price promotions offered on instant integral film. Consumer price promotions
were also offered in Europe. International sales were $346 million in the fourth
quarter of 1995, a 2% increase compared with $339 million for the fourth
quarter of 1994.
Gross margins as a percent of sales were 41% for the fourth quarter of 1995 and
43% for the fourth quarter of 1994. The gross margin in the fourth quarter of
1995 was impacted primarily by consumer price promotions offered on instant
integral film in the United States and Europe. Marketing, research, engineering
and administrative expenses were $245 million in the 1995 fourth quarter
compared with $214 million in the 1994 fourth quarter. The increase reflects
primarily increased marketing expenses in international markets. As discussed
in the section "1995 Worldwide Results Compared with 1994" above, the
Company recorded a special charge of $170 million for restructuring and other
expenses in the fourth quarter of 1995.
Operating profit for the fourth quarter of 1995, excluding the special charge,
was $29 million, compared to $84 million for the fourth quarter of 1994. This
decrease was due to less-than-expected revenues, particularly in the United
States, and higher overhead expenses, including significant instant film
consumer marketing promotions and increased spending in the Company's new
digital imaging businesses. Including the special charge, the loss from
operations for the fourth quarter of 1995 was $141 million.
The 1995 fourth quarter included other expenses of $1 million compared to
other income of $2 million in the 1994 fourth quarter. Included in other income
and expenses are foreign currency losses of $2 million and $5 million in the
fourth quarters of 1995 and 1994, respectively, resulting from balance sheet
translations. The 1994 fourth quarter also reflects more interest income earned
on higher cash balances. Interest expense was $13 million in the fourth quarter
of both 1995 and 1994.
The worldwide effective tax rate for the fourth quarter was 28% in 1995 and
21% in 1994. The lower effective tax rate in 1994 was primarily a result of the
beneficial effect of the weakening dollar on the international tax rate. For
purposes of determining the after-tax special charges, the Company assumed a
statutory tax rate of 35% to calculate the tax benefit. The net after-tax
foreign currency exchange loss from balance sheet translation for the 1995
fourth quarter amounted to $.04 per common share, compared with a $.09 loss for
the same period last year.
24
<PAGE>
The net loss for the fourth quarter of 1995 was $111 million, or $2.44 primary
loss per common share, compared to net earnings of $57 million, or $1.23
primary earnings per common share, in the fourth quarter of 1994. Excluding
the pre-tax special charge for restructuring and other expenses of $170 million
and the related tax effect, the primary loss per common share for the fourth
quarter of 1995 would have been approximately $.01.
1994 Worldwide Results Compared with 1993
Worldwide sales of Polaroid Corporation and its subsidiaries increased 3% to
$2.31 billion in 1994 compared with $2.24 billion in 1993. In 1994, sales in
the United States were $1.16 billion, a decrease of 2% compared with 1993 and
international sales were $1.15 billion, an increase of 8% compared with 1993.
In 1994, the Company sold 6.4 million cameras compared with 4.9 million
cameras in 1993, a 31% increase. Instant film shipments rose modestly for the
full year 1994 compared to 1993. This increase reflects healthy growth in
integral film sales, partly offset by an expected decline in peel-apart
products primarily as a result of the completion of the Mexican voter
registration program which had contributed to 1993 sales. The growth in
instant film shipments was largely due to the substantial growth in the
Russian market, offset by a decline in Western European markets and a
relatively flat U.S. market. Worldwide shipments of conventional film and
video cassettes in 1994 were significantly lower than in 1993. Helios
Medical Imaging System shipments in 1994 were substantially higher than
shipments in 1993.
In 1994, sales in the European region increased 18% to $705 million compared
with $598 million in 1993 as a result of increased sales in Russia. Sales in
Russia accounted for 13% of total international sales in 1994 compared to 2%
in 1993. While the Company believes that emerging markets present
particularly attractive opportunities, as evidenced by the remarkable growth in
the market for instant photographic products in Russia, such markets tend to be
significantly less stable than more established markets. There can be no
assurance that emerging markets will continue to produce favorable results. In
1994, sales in the Asia Pacific, Canada, Latin and South America regions
decreased 4% to $448 million compared with $468 million in 1993. Increased
sales in the Asia Pacific region were more than offset by a decrease in sales
in the Canada, Latin and South America regions, resulting from the completion
of the Mexican voter registration program in 1993.
Gross margins as a percent of sales were 43% for 1994 and 42% for 1993. The
increase in gross margin in 1994 was attributable to a reduction in
manufacturing costs for new products, substantial growth in sales of high
margin instant film in Russia, and the positive effects of foreign currency
translation. In addition, 1994 gross margin was negatively impacted by costs
associated with ramping up the capacity of the Company's new coating facility.
Marketing, research, engineering and administrative expenses in 1994 were
$788 million compared with $763 million in 1993. Included in these expenses
were research and engineering expenses of $166 million in 1994 and $161
million in 1993. In 1994, approximately two-thirds of the $166 million spent by
the Company on research and engineering was allocated to digital imaging
products. Digital imaging products primarily include digital dry-process laser
imaging products for medical, graphic arts and other business applications.
Digital imaging products also include products for consumer digital imaging
and desktop publishing. Marketing and administrative expenses related to
digital imaging products increased substantially in 1994 compared with 1993.
Profit from operations for 1994 was $200 million, an increase of 8% compared
with $185 million in 1993, which excludes the special charge for the early
retirement and severance program and the write down of certain non-strategic
assets. Operating profit for 1993 including these special items was $141
million.
Other income was $7 million in 1994 compared with $8 million in 1993.
Included in other income were foreign currency exchange losses resulting from
balance sheet translation amounting to $8 million in 1994 and $3 million in
1993. Interest expense decreased to $47 million in 1994 from $48 million in
1993. This decrease reflected lower overall interest costs offset by lower
amounts of interest capitalized on certain qualifying assets. Lower interest
costs in 1994 were primarily attributable to lower interest rates on short-term
borrowings and a reduction in short-term borrowings.
Income tax expense in 1994 was $44 million compared with $34 million in
1993. The worldwide effective tax rate was 27% in 1994 and 33% in 1993. The
decrease in the effective tax rate was primarily a result of the beneficial
effect of the weakening U.S. dollar on the international tax rate. The net
after-tax foreign currency exchange loss from balance sheet translation in both
1994 and 1993 amounted to $1 million.
25
<PAGE>
Net earnings for 1994 were $117 million, or $2.49 primary earnings per
common share compared with a loss of $51 million for 1993, or $1.10 primary
loss per common share. The 1993 full year results included a special charge for
an early retirement and severance program, the write down of certain non-
strategic assets, and the cumulative effect of changes in accounting principle
required by the Financial Accounting Standards Board. Excluding these items,
1993 primary earnings per common share would have been approximately $2.00
per share. Fully diluted earnings per common share were $2.42 for the full year
1994, and were not reported for the full year 1993 because they were greater
than primary earnings per common share.
Financial Liquidity and Capital Resources
At December 31, 1995, the Company's cash and cash equivalents and short-
term investments amounted to $83 million, compared to $229 million at
December 31, 1994. In addition, working capital decreased to $739 million at
December 31, 1995 from $887 million at December 31, 1994. The primary
source for cash in 1995 was a decrease in short-term investments, net cash
provided by operating activities and an increase in short-term debt. The
primary source of cash for 1994 was profitable operations, which more than
offset cash used in investing and financing activities. Capital spending
during 1995 was $168 million and depreciation expense was $133 million.
Capital spending during 1994 was $147 million and depreciation expense was
$118 million. Capital expenditures in both 1995 and 1994 were primarily
related to ongoing capital programs, environmental improvements and the
Company's new coating facility. In 1995, capital expenditures were also
incurred to increase the capacity for manufacturing batteries for instant
films. Capital expenditures in 1996 are expected to be approximately $120
million. The Company intends to sell approximately $50 million of real
estate in the next twelve to eighteen months. During 1995, the Company
expended cash to reduce borrowings, to make cash payments of $47
million under the 1995 first quarter severance program, to purchase
$40 million of the Company's common stock, and to pay $27 million of
dividends to common stockholders. During 1994, the Company expended cash
to reduce borrowings, to purchase $31 million of the Company's
common stock, and to pay $28 million of dividends to common stockholders.
The Company maintains a five year $150 million working capital line of credit
for general corporate purposes which expires in 1999. As of December 31, 1995
and 1994, there were no borrowings under this facility. The Company also has a
long-term loan related to the Polaroid Stock Equity Plan (the ESOP loan). The
outstanding balance of the ESOP loan at December 31, 1995 was $77 million.
As a result of the plan announced in December 1995 to make fundamental
changes in the Company's operating structure, the Company's $150 million
working capital line of credit and the ESOP loan were amended as of December
29, 1995 to provide a waiver with respect to financial covenants as to which
the Company was not in compliance by reason of its 1995 results. The Company
and the banks who are parties to these bank financing agreements amended the
terms of the agreements effective December 31, 1995 to provide greater leeway
with respect to the financial covenants.
As of December 31, 1995, gross borrowings from the Company's international
uncommitted lines of credit were $160 million. There were no borrowings from
the Company's U.S. uncommitted lines of credit at December 31, 1995.
Additional available, uncommitted lines of credit for U.S. and international
operations were $160 million and $135 million, respectively, at December 31,
1995. As of December 31, 1994, gross borrowings from international
uncommitted lines of credit were $117 million. Additional available,
uncommitted lines of credit for international operations were $161 million at
December 31, 1994. There were no additional available, uncommitted lines of
credit for U.S. operation and no such borrowings at December 31, 1994. The
Company is reviewing its plan for payment of $150 million of 7-1/4% Notes
due January 15, 1997, which may not be redeemed prior to maturity. The
Company's total borrowing capacity is limited by certain debt covenants.
26
<PAGE>
During 1995, the Company repurchased 1.2 million shares for $40 million. The
Company did not repurchase any shares in the fourth quarter of 1995. In 1994,
.9 million shares were repurchased for $31 million. As of December 31, 1995,
the unexpended balance under the Company's $100 million common stock
repurchase program, which was approved by the Board of Directors in January
1995, was $85 million. In December 1995, the Company suspended its stock
repurchase program. The timing and amounts of any future purchases under this
program depend upon many factors, including market conditions as well as the
Company's business and financial condition.
The Company believes that its borrowing capacity and other existing corporate
resources are adequate for at least the next twelve months to meet working
capital needs, to fund planned capital expenditures, to pursue future growth
opportunities, and to fund other corporate requirements, including cash
severance payments for the 1995 restructuring programs.
Foreign Currency Exchange
The Company generates a substantial portion of its revenues in international
markets, which subjects its operations to the exposure of foreign currency
fluctuations. The impact of currency fluctuations can be positive or negative
in any given period. The Company's ability to counteract foreign currency
exchange movement is primarily dependent on pricing.
To minimize the adverse impact of foreign currency fluctuations on its foreign
currency-denominated net assets, the Company may engage in foreign currency-
denominated borrowings. The Company determines the aggregate amount of
such borrowings based on its forecast of the Company's net asset position and
the relative strength of the U.S. dollar as compared to foreign currencies.
These borrowings create foreign currency-denominated liabilities that hedge the
Company's foreign currency-denominated net assets. Upon receipt of the
borrowed foreign currency-denominated funds, the Company converts those
funds to U.S. dollars at the spot exchange rate. Exchange gains and losses on
the foreign currency-denominated borrowings are recognized in earnings as
incurred. At Dec-ember 31, 1995 and 1994, the amount of the Company's
outstanding short-term foreign currency-denominated borrowings were $140
million and $117 million, respectively.
From time to time, the Company may use over-the-counter foreign exchange
swaps to reduce the interest expense incurred through the borrowings described
above and to replace the hedge created by those borrowings. When a foreign
exchange swap is used to replace a hedge, the currency received by the
Company in the spot market component of the foreign exchange swap is used to
close out the borrowings and, simultaneously, the hedge is reinstituted through
a forward contract (not exceeding six months). The net interest value of the
foreign exchange swap contract is amortized to earnings over the life of the
contract. Exchange gains or losses on the foreign currency obligation
component of the forward contract are recognized in earnings as incurred in
each accounting period. The Company does not enter into foreign exchange
swaps for trading purposes. The aggregate notional value of these short-term
foreign exchange swap contracts outstanding at December 31, 1995 and 1994
was $16 million and $22 million, respectively.
When the Company may not have sufficient flexibility to change prices, the
Company may, from time to time, also purchase U.S. dollar call options. The
term of these call options typically does not exceed one year. The Company's
purchase of call options allows it to protect a portion of its expected foreign
currency-denominated revenues from adverse foreign currency exchange
movement. The Company does not buy call options which can be exercised
prior to the expiration date, nor does it write options or purchase call
options for trading purposes. The Company defers premiums and any gains
for its call options activity until the option exercise date.
No option contracts were outstanding at December 31, 1995.
At December 31, 1994, option contracts with a notional value of
$177 million were outstanding.
27
<PAGE>
The Company maintains a Monetary Control Center (the MCC), which operates
under written policies and procedures defining day-to-day operating guidelines,
including exposure limits, to contract for the foreign currency-denominated
borrowings, foreign exchange swaps and call options described above. The
MCC is subject to random independent audits and reports to a supervisory
committee comprised of members of the Company's management. The MCC
publishes monthly reports to the Company's management detailing the foreign
currency activities it has engaged in for the prior month.
Impact of Inflation
Inflation continues to be a factor in many countries in which the Company does
business. The Company's pricing strategy has offset to a considerable degree
inflation and normal cost increases. The overall inflationary impact
on earnings has been immaterial.
Other Matters
The Company, together with other parties, is currently designated a Potentially
Responsible Party by the United States Environmental Protection Agency
("EPA") and certain state agencies with respect to the costs of investigation
and remediation of pollution at several sites. In each case in which
the Company is able to determine its likely exposure, such amount has
been included in the Company's reserve. Where a range of comparably
likely exposures exists, the Company has included in its reserve the
minimum amount of the range. The Company's aggregate reserve for
these liabilities was $5 million and $6 million as of December 31,
1995 and 1994, respectively. The Company currently
estimates that the majority of the $5 million amount reserved for environmental
liabilities at December 31, 1995 will be payable over the next two to three
years.
On December 4, 1994, the Company entered into a consent agreement with the
EPA to resolve alleged violations of the Toxic Substances Control Act
("TSCA"). Under this agreement, the Company paid a civil penalty of $80,000
and agreed to conduct an internal audit of certain TSCA practices. This audit
was recently completed and revealed an additional potential liability, although
not yet confirmed by the EPA, estimated to be in the range between $64,000
and $89,000.
The Company reviews its recurring internal expenditures on environmental
matters, as well as capital expenditures related to
environmental compliance, on a monthly basis, and
reviews its third-party expenditures on environmental
matters on a quarterly basis. The Company believes that these expenditures
have not had and will not have a materially adverse effect on the financial
condition or operating results of the Company.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (FAS 121), which becomes effective for fiscal years
beginning after December 15, 1995. This standard establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of. The
Company will adopt FAS 121 for fiscal 1996 and believes that adoption of this
standard will not have a material impact on the financial
condition or operating results of the Company.
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation" (FAS 123), which
becomes effective for fiscal years beginning after December 15, 1995. Under
FAS 123, companies can elect to adopt the new accounting method, which
accounts for stock-based compensation based on the fair value at the date of
grant. Companies that choose not to adopt FAS 123 would continue to follow
the provisions of Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". In addition, those companies who choose not to
adopt the new accounting method prescribed by FAS 123 would be required to
provide proforma disclosures of net income and earnings per share, assuming
FAS 123 had been adopted. The Company currently does not expect to adopt
the new accounting method prescribed by FAS 123.
28
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Polaroid Corporation:
We have audited the accompanying consolidated balance sheet of Polaroid
Corporation and subsidiary companies as of December 31, 1995 and 1994, and
the related consolidated statements of earnings, cash flows and changes in
common stockholders' equity for each of the years in the three-year period
ended December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Polaroid
Corporation and subsidiary companies at December 31, 1995
and 1994, and the results of their operations and cash
flows for each of the years in the three-year period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Notes 4 and 11 to the consolidated financial
statements, in 1993 the Company changed its method of
accounting for income taxes and for certain postretirement
and postemployment benefits.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Boston, Massachusetts
January 30, 1996
Management's Report
Financial Reporting and Controls
The financial statements presented in this report were prepared in accordance
with generally accepted accounting principles. The Company maintains a
number of measures to assure the accuracy of its financial information. To that
end, a system of internal accounting controls and procedures has been
developed to provide reasonable assurance that assets are safeguarded and that
transactions are recorded and reported properly. The Company also maintains
financial policies and procedures, and a program of internal audits, management
reviews and careful selection and training of qualified personnel.
The Audit Committee is composed entirely of outside directors.
As such, it is in a position to provide additional,
independent reviews of the adequacy of internal controls
and the quality of financial reporting.
/s/ Gary T. DiCamillo
Gary T. DiCamillo
Chairman and
Chief Executive Officer
/s/ William J. O'Neill, Jr.
William J. O'Neill, Jr.
Executive Vice President and
Chief Financial Officer
29
<PAGE>
Financial Statements
Consolidated Statement of Earnings
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Years ended December 31,
(In millions, except per share data) 1995 1994 1993
__________________________________________________________________________________________
<S> <C> <C> <C>
Net sales
United States $1,019.0 $1,160.3 $1,178.8
International 1,217.9 1,152.2 1,066.1
_______ _______ _________
Total net sales 2,236.9 2,312.5 2,244.9
_______ _______ _________
Cost of goods sold 1,298.6 1,324.2 1,296.5
Marketing, research, engineering and
administrative expenses (Note 2 ) 849.1 788.0 763.0
Restructuring and other (Note 2) 247.0 -- 44.0
_______ _______ _________
Total costs 2,394.7 2,112.2 2,103.5
_______ _______ _________
Profit/(loss) from operations (157.8) 200.3 141.4
Other income/(expense):
Interest income 8.7 9.7 7.7
Other (.2) (2.7) .5
_______ _______ _________
Total other income 8.5 7.0 8.2
Interest expense 52.1 46.6 47.9
_______ _______ _________
Earnings/(loss) before income tax
expense/(benefit) and cumulative effect
of changes in accounting principle (201.4) 160.7 101.7
Federal, state and foreign income tax
expense/(benefit) (Note 4) (61.2) 43.5 33.8
_______ _______ _________
Earnings/(loss) before cumulative effect
of changes in accounting principle (140.2) 117.2 67.9
Cumulative effect to January 1, 1993 of changes
in accounting principle for:
Postretirement benefits other than pensions,
net of taxes of $85.0 (Note 11) -- -- (132.9)
Income taxes (Note 4) -- -- 33.6
Postemployment benefits, net of taxes of
$12.7 (Note 11) -- -- (19.9)
__________ _________ __________
Net earnings/(loss) $ (140.2) $ 117.2 $ (51.3)
=========== ========= ==========
Primary earnings/(loss) per common share: (Note 1)
Earnings/(loss) before cumulative effect
of changes in accounting principle $ (3.09) $ 2.49 $ 1.45
Cumulative effect to January 1, 1993
of changes in accounting principle for:
Postretirement benefits other than pensions -- -- (2.84)
Income taxes -- -- 0.72
Postemployment benefits -- -- (0.43)
__________ _________ __________
Net earnings/(loss) $ (3.09) $ 2.49 $ (1.10)
Fully diluted earnings per common share (Note 1) $ -- $ 2.42 $ --
Cash dividends per common share $ .60 $ .60 $ .60
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
Consolidated Balance Sheet
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
December 31,
(In millions) 1995 1994
________________________________________________________________________________________
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 73.3 $ 143.3
Short-term investments (Note 1) 9.8 85.6
Receivables, less allowances of $28.0 in 1995
and $24.5 in 1994 550.4 541.0
Inventories (Note 5) 615.5 577.4
Prepaid expenses and other assets (Note 4) 208.5 141.4
________ ________
Total current assets 1,457.5 1,488.7
________ ________
Property, plant and equipment
Land 35.9 34.7
Buildings 355.1 332.3
Machinery and equipment 1,649.3 1,561.7
Construction in process 124.1 114.7
________ ________
Total property, plant and equipment 2,164.4 2,043.4
Less accumulated depreciation 1,473.4 1,296.1
________ ________
Net property, plant and equipment 691.0 747.3
Prepaid taxes -- non-current (Note 4) 113.3 80.7
________ ________
Total assets $2,261.8 2,316.7
======== ========
________________________________________________________________________________________
Liabilities and stockholders' equity
Current liabilities
Short-term debt (Note 6) $160.4 $117.1
Current portion of long-term debt (Note 8) 39.7 35.9
Payables and accruals (Note 7) 274.9 275.7
Compensation and benefits (Notes 10 and 11) 197.4 121.4
Federal, state and foreign income taxes (Note 4) 46.6 51.8
________ ________
Total current liabilities 719.0 601.9
________ ________
Long-term debt (Note 8) 526.7 566.0
Accrued postretirement benefits (Note 11) 257.2 247.2
Accrued postemployment benefits (Note 11) 41.2 37.2
________ ________
Total liabilities 1,544.1 1,452.3
________ ________
Preferred stock, Series A and Series D, $1 par value,
authorized 20,000,000 shares; all shares unissued -- --
________ ________
Common stockholders' equity (Note 9)
Common stock, $1 par value,
authorized 150,000,000 shares 75.4 75.4
Additional paid-in capital 401.9 387.2
Retained earnings 1,525.8 1,692.1
Less: Treasury stock, at cost 1,205.4 1,174.5
Deferred compensation 80.0 115.8
________ ________
Total common stockholders' equity 717.7 864.4
________ ________
Total liabilities and stockholders' equity $2,261.8 2,316.7
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
Consolidated Statement of Cash Flows
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Years ended December 31,
(In millions) 1995 1994 1993
________________________________________________________________________________________
Cash flows from operating activities
<S> <C> <C> <C>
Net earnings/(loss) $(140.2) $117.2 $(51.3)
Cumulative effect of changes in accounting principle -- -- 119.2
Depreciation of property, plant and equipment 132.7 118.2 100.3
(Increase)/decrease in receivables (.1) 30.5 (83.6)
(Increase)/decrease in inventories (68.1) .8 8.0
Increase in prepaids and other assets (67.7) (1.5) (2.8)
Increase/(decrease) in payables and accruals (6.3) 22.4 15.3
Increase/(decrease)in compensation and benefits 44.2 (8.2) 2.1
Increase/(decrease)in federal, state and
foreign income taxes payable (1.6) (28.2) 27.4
Other non-cash items 168.8 71.4 46.0
_______ ______ _______
Net cash provided by operating activities 61.7 322.6 180.6
_______ ______ _______
Cash flows from investing activities
(Increase)/decrease in short-term investments 75.7 (60.5) 55.3
Additions to property, plant and equipment (167.9) (146.7) (165.6)
Proceeds from sale of fixed assets 4.8 .2 1.4
_______ ______ _______
Net cash used by investing activities (87.4) (207.0) (108.9)
_______ ______ _______
Cash flows from financing activities
Net increase/(decrease) in short-term debt
(maturities 90 days or less) 42.5 1.4 (8.7)
Short-term debt (maturities over 90 days):
Proceeds -- 8.9 --
Payments -- (8.9) --
Repayments of long-term debt (34.3) (31.2) (26.8)
Cash dividends paid (27.3) (27.9) (28.0)
Purchases of treasury stock (40.2) (30.6) --
Proceeds from issuance of shares in connection
with stock incentive plan 19.5 3.2 3.3
_______ ______ _______
Net cash used by financing activities (39.8) (85.1) (60.2)
_______ ______ _______
Effect of exchange rate changes on cash (4.5) (1.6) (6.2)
_______ ______ _______
Net increase/(decrease) in cash and cash equivalents (70.0) 28.9 5.3
Cash and cash equivalents at beginning of year 143.3 114.4 109.1
_______ ______ _______
Cash and cash equivalents at end of year $ 73.3 $ 143.3 $ 114.4
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE>
Consolidated Statement of Changes in Common Stockholders' Equity
Polaroid Corporation and Subsidiary Companies
<TABLE>
<CAPTION>
Years ended December 31,
(In millions, except number of shares) 1995 1994 1993
________________________________________________________________________________________
<S> <C> <C> <C>
Common stock
Balance at January 1 (75,427,550 shares
in 1995, 1994 and 1993) $ 75.4 $ 75.4 $ 75.4
_______ ______ _______
Balance at December 31 75.4 75.4 75.4
_______ ______ _______
Additional paid-in capital
Balance at January 1 387.2 385.6 379.5
Stock options - 1993 (Note 10) -- -- 4.1
Issuance of shares in connection
with stock incentive plan (Note 10) 11.3 1.6 1.7
Stock options exercised-tax benefit 3.4 -- .3
_______ ______ _______
Balance at December 31 401.9 387.2 385.6
_______ ______ _______
Retained earnings
Balance at January 1 1,692.1 1,602.0 1,680.3
Net earnings/(loss) (140.2) 117.2 (51.3)
Dividends declared-common stock (27.3) (27.9) (28.0)
ESOP dividend tax benefit received
on unallocated shares 1.2 .8 1.0
_______ ______ _______
Balance at December 31 1,525.8 1,692.1 1,602.0
_______ ______ _______
Less:
Treasury stock
Balance at January 1 (29,429,928 shares in 1995,
28,621,405 shares in 1994,
and 28,759,335 shares in 1993) 1,174.5 1,145.5 1,147.1
Repurchase of shares (1,217,561 shares in 1995
and 941,300 shares in 1994) 40.2 30.6 --
Issuance of shares in connection with
stock incentive plan (752,765 shares in 1995,
132,777 shares in 1994, and 137,930 shares in 1993) (9.3) (1.6) (1.6)
_______ ______ _______
Balance at December 31 (29,894,724 shares in 1995,
29,429,928 shares in 1994,
and 28,621,405 shares in 1993) 1,205.4 1,174.5 1,145.5
_______ ______ _______
Deferred compensation
Balance at January 1 115.8 150.2 179.2
Stock options - 1993 (Note 10) (1.0) (1.0) 3.5
Loan repayments from ESOP Trust (35.9) (33.4) (32.5)
Restricted stock (Note 10) 1.1 -- --
_______ ______ _______
Balance at December 31 80.0 115.8 150.2
_______ ______ _______
Total common stockholders' equity $ 717.7 $ 864.4 $ 767.3
======= ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
33
<PAGE>
Notes to Consolidated Financial Statements
Polaroid Corporation and Subsidiary Companies
1. Summary of Significant Accounting Policies
Principles of Consolidation:
The consolidated financial statements include the accounts of the
Company's domestic and foreign subsidiaries, all of which are either
wholly owned or majority owned. Intercompany accounts and
transactions are eliminated.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents:
The Company considers all highly liquid debt instruments with
maturities of three months or less when purchased to be cash
equivalents.
Short-term Investments:
Short-term investments consist primarily of commercial paper and
some bank time deposits. The Company adopted Financial
Accounting Standards Board Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (FAS 115) as of
January 1, 1994 and it had no impact on the Company's financial
position or results of operations. Under FAS 115, the Company
classifies its securities as held-to-maturity. Held-to-maturity
securities are those investments which the Company has the ability
and intent to hold until maturity. Held-to-maturity securities are
recorded at amortized cost, adjusted for the amortization of
premiums and discounts which approximates market value. As of
December 31, 1995, the average remaining maturity dates of the
Company's short-term investments in bank time deposits were less
than six months. As of December 31, 1994, the average remaining
maturity dates of the Company's short-term investments in
commercial paper and bank time deposits were less than two months
and less than eight months, respectively.
Derivatives:
Gains on the Company's purchase of call options related to qualifying
hedges of anticipated transactions are deferred and are recognized in
income when the hedged transaction occurs.
Inventories:
Inventories are valued on a first-in, first-out basis at the lower of cost
or market value. Market value is determined by replacement cost or
net realizable value.
Income Taxes:
Amounts in the financial statements related to income taxes are
calculated using the principles of Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes" (FAS
109). Under FAS 109, prepaid and deferred taxes reflect the impact
of temporary differences between the amounts of assets and
liabilities recognized for financial reporting purposes and the
amounts recognized for tax purposes as well as tax credit
carryforwards and loss carryforwards. These deferred taxes are
measured by applying currently enacted tax rates. A valuation
allowance reduces deferred tax assets when it is "more likely than
not" that some portion or all of the deferred tax assets will not be
recognized.
Provision for U.S. income taxes on the undistributed earnings of
foreign subsidiaries is made only on those amounts in excess of the
funds considered to be permanently reinvested.
Property, Plant and Equipment:
The cost of buildings, machinery and equipment is depreciated,
primarily by accelerated depreciation methods, over the estimated
useful lives of such assets as follows: buildings, 20-40 years;
machinery and equipment, 3-15 years.
Foreign Currency Translation:
The Company's foreign operations are measured by reflecting
financial results of these operations as if they had taken place within
a U.S. dollar based economic environment. Inventory, property, plant
and equipment, cost of goods sold and depreciation are remeasured
from foreign currencies to U.S. dollars at historical exchange rates.
All other accounts are translated at current exchange rates. Gains and
losses resulting from remeasurement are included in income.
Patents and Trademarks:
Patents and trademarks are valued at $1.
Product Warranty:
Estimated product warranty costs are accrued at the time the
products are sold.
Advertising Costs:
The Company expenses the cost of advertising as incurred or the first
time the advertising takes place.
Earnings Per Common Share:
Primary earnings/(loss) per common share are computed by dividing
net earnings/(loss) available to common stockholders by the weighted
average number of common shares and, as appropriate, dilutive
common stock equivalents outstanding for the period. All shares held
in the Polaroid Stock Equity Plan (ESOP) Trust (see Note 9) are
considered outstanding for both primary and fully diluted earnings
per share calculations. Stock options are considered to be common
stock equivalents. The number of shares used to compute primary
earnings/(loss) per common share were (in thousands) 45,404 in
1995, 46,992 in 1994, and 46,737 in 1993.
34
<PAGE>
Fully diluted earnings per common share reflect the maximum
dilution that would have resulted from the exercise of stock options
and the convertible debentures (see Note 8). Fully diluted earnings
per common share are computed by dividing net income, after adding
back the after-tax interest on the convertible debentures, by the
weighted average number of common shares and all dilutive
securities. The number of shares used to compute fully diluted
earnings per common share were (in thousands) 51,299 in 1994.
Fully diluted earnings per common share were not reported in 1995
and 1993 because they were greater than primary earnings per
common share.
2. Supplemental Information
<TABLE>
(In millions) 1995 1994 1993
_________________________________________________________________
<S> <C> <C> <C>
Research, engineering and development $165.5 $165.7 $160.8
</TABLE>
Manufacturing Development Costs:
In addition to the research, engineering and development costs
included in marketing, research, engineering and administrative
expenses, there were planned manufacturing development costs for
major new products included in costs of sales of approximately $35
million in 1995 and $30 million in both 1994 and 1993.
Advertising Costs:
Effective for fiscal 1995, the Company became subject to Statement
of Position 93-7, "Reporting on Advertising Costs" (SOP 93-7),
issued by the American Institute of Certified Public Accountants.
SOP 93-7 had no impact on how the Company accounts for
advertising costs. Prior to 1995, certain costs were considered to be
promotional expenses and were included in marketing overhead.
Under the provision of SOP 93-7, these promotional expenses are
considered to be advertising costs and accordingly, amounts for 1994
and 1993 have been restated to conform with current year
presentation. Advertising costs were:
<TABLE>
(In millions) 1995 1994 1993
_________________________________________________________________
<S> <C> <C> <C>
Advertising costs $124.1 $121.2 $132.8
</TABLE>
At December 31, 1995, 1994 and 1993, no advertising costs were
reported as assets.
Interest Capitalization:
The Company has capitalized interest costs relating to certain
qualifying assets. In 1995, 1994 and 1993, the amounts of interest
costs capitalized were $4.8 million, $9.7 million and $12.6 million,
respectively.
Cash Flow Information:
<TABLE>
Cash payments for interest and income taxes were:
(In millions) 1995 1994 1993
_________________________________________________________________
<S> <C> <C> <C>
Interest $55.6 $53.9 $58.0
Income taxes 29.0 78.0 52.0
</TABLE>
In 1995, the Company recorded as other non-cash items $85.0
million for certain assembly equipment and fixed asset write-offs and
$30.0 million for inventory write-offs and other costs, all of which
were related to the Company's plan to make fundamental changes in
its operating structure announced in December 1995. Also included
in other non-cash items for 1995 is $18.0 million related to enhanced
pension benefits provided under the Company's early retirement
program, offered in the first quarter of 1995, that will be funded from
the Company's pension plans.
Restructuring Charges and Other:
In the first quarter of 1995, the Company implemented a
restructuring plan which resulted in a pre-tax charge of $77.0 million.
The Company offered an early retirement program to certain
qualified employees and a voluntary severance program to all
employees, both of which were open from February 13, 1995 to
March 31, 1995. As a result of these programs, approximately 930
employees (approximately 560 from manufacturing and 370 from
marketing, research, engineering, and administrative functions)
terminated their employment in 1995. The pre-tax costs related to the
voluntary severance program were $56.0 million, of which $47.0
million of cash severance payments were made in 1995. The
remaining cash severance payments of approximately $9.0 million
are expected to be paid in the first quarter of 1996. Additionally,
$18.0 million represents enhanced retirement benefits provided under
the early retirement program that will be funded from the Company's
pension plans. The savings from this severance and early retirement
program are expected to be approximately $46.0 million on an
annualized basis, with $25.0 million expected to be realized in 1996.
The remainder of the charge consisted of a pre-tax charge of
approximately $3.0 million for exit costs related to the shutdown of
certain facilities.
In December 1995, the Company announced a plan to make
fundamental changes in its operating structure. The restructuring
plan features three principal components - program reductions in
certain product, research and manufacturing areas; strategic
refocusing of the Company's digital imaging businesses for the
medical diagnostic and graphic arts markets; and a reduction in
corporate overhead expenses. The special charge for this program is
expected to total approximately $260.0 to $270.0 million. Of that
amount, $170.0 million was recorded in the fourth quarter of 1995
and an estimated $90.0 million to $100.0 million will be charged in
the first quarter of 1996. Annualized savings are expected to be more
than $110.0 million from this program, with $75.0 million expected
to be realized in 1996. The December 1995 early retirement and
severance programs are expected to result in the elimination of a
total of approximately 1,600 positions worldwide.
35
<PAGE>
The 1995 fourth quarter pre-tax special charge of $170.0 million
included $85.0 million to write off certain assembly equipment and
fixed assets and $30.0 million to write off inventory and accrue other
costs, all of which were primarily related to the Captiva product line.
The remaining $55.0 million of the special charge was related to the
estimated cost of involuntary severance benefits for approximately
1,300 domestic employees (approximately 570 from manufacturing
and 730 from marketing, research, engineering and administrative
functions) who were expected to terminate in 1996. This amount
does not include any incremental voluntary severance benefits and
pension enhancement benefits. The cost of these benefits, along with
severence costs for approximately 300 international employees
(approximately $90.0 million to $100.0 million) will be recognized in
the first quarter of 1996 when more precise information becomes
available regarding the individuals accepting voluntary termination
under this program. No cash severance payments were made in 1995
under this program.
In 1993, the Company offered an early retirement program and a
severance program to employees. The programs resulted in the
departure of approximately 450 employees at a cost to the Company
of $40.0 million, which was recorded in 1993. In 1993, the Company
also recorded a charge of $4.0 million for the write down of certain
non-strategic assets.
Certain prior year information has been reclassified to conform with
current year presentation of data.
3. Financial Instruments
Foreign Exchange Risk Management:
The Company generates a substantial portion of its revenues in
international markets, which subjects its operations to the exposure
of foreign currency fluctuations. The impact of currency fluctuations
can be positive or negative in any given period. The Company's
ability to counteract foreign currency exchange movement is
primarily dependent on pricing.
To minimize the adverse impact of foreign currency fluctuations on
its foreign currency-denominated net assets, the Company may
engage in foreign currency-denominated borrowings (see Note 6).
The Company determines the aggregate amount of such borrowings
based on its forecast of the Company's net asset position and the
relative strength of the U.S. dollar as compared to foreign currencies.
These borrowings create foreign currency-denominated liabilities
that hedge the Company's foreign currency-denominated net assets.
Upon receipt of the borrowed foreign currency-denominated funds,
the Company converts those funds to U.S. dollars at the spot
exchange rate. Exchange gains and losses on the foreign currency-
denominated borrowings are recognized in earnings as incurred. At
December 31, 1995 and 1994, the amount of the Company's
outstanding short-term foreign currency-denominated borrowings
were $140.4 million and $117.1 million, respectively.
From time to time, the Company may use over-the-counter foreign
exchange swaps to reduce the interest expense incurred through the
borrowings described above and to replace the hedge created by
those borrowings. When a foreign exchange swap is used to replace a
hedge, the currency received by the Company in the spot market
component of the foreign exchange swap is used to close out the
borrowings and, simultaneously, the hedge is reinstituted through a
forward contract (not exceeding six months). The net interest value
of the foreign exchange swap contract is amortized to earnings over
the life of the contract. Exchange gains or losses on the foreign
currency obligation component of the forward contract are
recognized in earnings as incurred in each accounting period. The
Company does not enter into foreign exchange swaps for trading
purposes. The aggregate notional value of these short-term foreign
exchange swap contracts outstanding at December 31, 1995 and
1994 was $16.2 million and $21.8 million, respectively.
When the Company may not have sufficient flexibility to change
prices, the Company may, from time to time, also purchase U.S.
dollar call options. The term of these call options typically does not
exceed one year. The Company's purchase of call options allows it to
protect a portion of its expected foreign currency-denominated
revenues from adverse foreign currency exchange movement. The
Company does not buy call options which can be exercised prior to
the expiration date, nor does it write options or purchase call options
for trading purposes. The Company defers premiums and any gains
for its call options activity until the option exercise date. No option
contracts were outstanding at December 31, 1995. At December 31,
1994, option contracts with a notional value of $176.7 million were
outstanding.
The Company maintains a Monetary Control Center (the MCC),
which operates under written policies and procedures defining day-
to-day operating guidelines, including exposure limits, to contract for
the foreign currency-denominated borrowings, foreign exchange
swaps and call options described above. The MCC is subject to
random independent audits and reports to a supervisory committee
comprised of members of the Company's management. The MCC
publishes monthly reports to the Company's management detailing
the foreign currency activities it has engaged in for the prior month.
36
<PAGE>
Fair Value:
The carrying amounts of cash, cash equivalents, short-term
investments, trade receivables, short-term debt and trade payables
approximate fair value because of the short maturity of these
financial instruments and are, therefore, not included in the
information presented below. The estimated carrying amounts
included in the consolidated balance sheet and fair value of the
Company's financial instruments as of December 31 were as follows:
<TABLE>
(In millions) 1995 1994
__________________________________________________________________
Carrying Fair Carrying Fair
Amount Value Amount Value
_____________________________________
<S> <C> <C> <C> <C>
Other assets:
Call options $ -- $ -- $ -- $ .4
Foreign exchange swaps $ -- $ -- $ -- $ --
Long-term debt $566.4 $647.0 $ 601.9 $625.8
</TABLE>
The estimated fair value of the Company's call options and foreign
exchange swaps generally reflects the estimated amounts the
Company would receive or pay to terminate the contracts at the
reporting dates, thereby taking into account the current unrealized
gains or losses on open contracts. Dealer quotes are available for the
Company's call options and foreign exchange swaps. The fair value
of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect estimates.
Concentration of Credit Risk:
The Company places its temporary cash investments in highly rated
financial instruments and financial institutions and by policy, limits
the amount of credit exposure to any one financial institution. The
Company's investment policy limits its exposure to concentrations of
credit risk.
The Company would be exposed to credit risk if a counterparty to a
call option contract or the forward component of a foreign exchange
swap contract were to fail to meet its contractual obligation, in which
situation the Company would be required to replace the contract at
market rate. The Company believes that the risk of financial loss due
to the inability of counterparties to meet their obligation is remote
and that any such loss would not be material to the results of
operations of the Company. The Company minimizes its risk
exposure from foreign exchange swaps and purchased call options by
limiting counterparties to carefully selected major financial
institutions.
The Company markets a substantial portion of its products to
customers in the retail industry, a market in which a number of
companies are highly leveraged. The Company continually evaluates
the credit risk of these customers and believes that its allowances for
doubtful accounts relative to its customer receivables are adequate.
4. Income Taxes
As of January 1, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
(FAS 109). The favorable cumulative adjustment of $33.6 million in
1993 was the result of recognizing the tax benefit of future
deductions based upon a "more likely than not criterion," instead of
the more stringent criteria of Financial Accounting Standards Board
Statement No. 96 "Accounting for Income Taxes", the Company's
previous standard of accounting for income taxes.
<TABLE>
An analysis of income tax expense/(benefit) follows:
(In millions)
<S> <C> <C> <C>
1995 Current Deferred Total
__________________________________________________________________
Federal $ .9 $(68.4) $(67.5)
State .3 (7.5) (7.2)
Foreign 17.7 (4.2) 13.5
______ ______ ______
Total $18.9 $(80.1) $(61.2)
====== ====== =======
1994
__________________________________________________________________
Federal $ 3.3 $ 2.6 $ 5.9
State 1.7 .5 2.2
Foreign 35.6 (.2) 35.4
______ ______ ______
Total $40.6 $ 2.9 $ 43.5
====== ====== ======
1993
__________________________________________________________________
Federal $(6.0) $(7.6) $(13.6)
Statutory Rate Change -- (3.3) (3.3)
State .9 (2.6) (1.7)
Foreign 58.2 (5.8) 52.4
______ ______ ______
Total $53.1 $(19.3) $ 33.8
====== ====== ======
</TABLE>
Prepaid income taxes and deferred income taxes result from future
tax benefits and expenses related to the difference between the tax
basis of assets and liabilities and the amounts reported in the
financial statements. These differences predominately relate to U.S.
operations. Carryforwards, tax overpayments and refunds due are
also included in prepaid income taxes. The net of deferred income
tax assets and deferred income tax liabilities reflected on the
consolidated balance sheet was a net asset of $249.2 million and
$156.6 million as of December 31, 1995 and 1994, respectively.
Significant components of those amounts shown on the balance sheet
as of December 31 were as follows:
37
<PAGE>
<TABLE>
(In millions) 1995 1994
____________________________________________________________________
<S> <C> <C>
Deferred tax assets:
Property, plant and equipment
and trademarks $(11.3) $(35.1)
Inventory 53.1 43.0
Compensation and benefits 52.7 23.2
Postretirement and
postemployment benefits 125.4 119.8
Loss and credit carryforwards 40.1 9.0
All other 21.5 10.1
______ ______
Subtotal 281.5 170.0
Valuation allowance (23.2) (7.5)
______ ______
Total deferred tax assets $ 258.3 $ 162.5
====== =======
Deferred tax liabilities:
Property, plant and equipment
and trademarks $3.4 $2.7
Compensation and benefits 4.7 1.4
All other 1.0 1.8
______ ______
Total deferred tax liability 9.1 5.9
______ ______
Net deferred tax asset $ 249.2 $ 156.6
====== ======
</TABLE>
Valuation allowances of $23.2 million and $7.5 million as of
December 31, 1995 and 1994, respectively, were established for the
prepaid taxes related to foreign tax credits and to capital losses.
Foreign tax credits may be used to offset the U.S. income taxes due
on income earned from foreign sources. However, the credit is
limited by the total income included on the U.S. income tax return as
well as the ratio of foreign source income to total income. Excess
foreign tax credits may be carried back two years and forward five
years. As of December 31, 1995, the Company did not believe it was
more likely than not that it would generate sufficient U.S. sourced
income within the appropriate period to utilize all the foreign tax
credits.
Capital losses may be used only to offset capital gains. Capital losses
may be carried back three years and forward five years. Historically,
the Company has generated limited capital gains. Therefore, as of
December 31, 1995, the Company did not believe it was more likely
than not that it would generate sufficient capital gains within the
appropriate time period to offset those capital losses. However, the
Company intends to sell approximately $50 million of real estate in
the next twelve to eighteen months. Therefore, if sufficient gains are
realized from those sales, a significant portion of the benefit related
to the capital loss carryforward may be realized within the
carryforward period. Those temporary differences which most likely
will produce capital losses upon reversal also have been treated as
capital losses.
Management believes the Company will obtain the full benefit of
other deferred tax assets on the basis of its evaluation of the
Company's anticipated profitability over the period of years that the
temporary differences are expected to become tax deductions. It
believes that sufficient book and taxable income will be generated to
realize the benefit of these tax assets. This assessment of profitability
takes into account the Company's present and anticipated split of
domestic and international earnings and the fact that the temporary
differences related to postretirement and other postemployment
benefits are deductible over a period of 30 to 40 years.
Management considered that as of December 31, 1995, the Company
elected to carry forward the current net operating loss of $35.2
million in the U.S. The Company has a foreign tax credit
carryforward of $16.4 million (against which, there is a full valuation
allowance) and an alternative minimum tax credit carryforward of
$3.2 million as of December 31, 1995. The net operating loss expires
in 2010; the foreign tax credit expires in 2000. The alternative
minimum tax credit does not expire. Management also considered
that historically the Company has not had net operating losses in the
U.S. Of course, there can be no assurance that the Company will
generate any specific level of continuing earnings or where earnings
will be generated.
For alternative minimum tax purposes, the Company had a foreign
tax credit carryforward as of December 31, 1995 of $53.4 million;
$3.9 million expires in 1996, $6.6 million expires in 1997, $21.5
million expires in 1998, $6.1 million expires in 1999, and $15.3
million expires in 2000.
An analysis of earnings/(loss) before income tax expense/ (benefit)
and cumulative effect of changes in accounting principle follows:
<TABLE>
(In millions) 1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
Domestic $(236.8) $44.6 $11.2
Foreign 35.4 116.1 90.5
_______ ______ ______
Total $(201.4) $160.7 $101.7
======= ====== ======
</TABLE>
A reconciliation of differences between the statutory U.S. federal
income tax rate and the Company's effective tax rate follows:
<TABLE>
1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
U.S. statutory rate 35.0% 35.0% 35.0%
State taxes 2.3 .4 .5
Impact of statutory rate change
on deferred taxes -- -- (3.3)
Valuation allowance change (7.8) (.5) (1.6)
Tax effect resulting from
foreign activities .5 (4.8) 3.9
Other .4 (3.0) (1.2)
_______ ______ ______
Effective tax rate 30.4% 27.1% 33.3%
======= ====== ======
</TABLE>
38
<PAGE>
The tax effect resulting from foreign activities includes the effect of
remeasuring foreign currency. The impact on the tax rate for 1995
was an increase of 2.1 percentage points, a decrease of 5.2
percentage points for 1994, and an increase of 7.9 percentage points
for 1993.
Undistributed earnings of foreign subsidiaries held for reinvestment
in overseas operations amounted to $436.3 million at December 31,
1995. Additional U.S. income taxes may be due upon remittance of
those earnings (net of foreign tax reductions because of the
distribution), but it is impractical to determine the amount of any
such additional taxes. If all those earnings were distributed as
dividends, foreign withholding taxes of approximately $22.9 million
would be payable.
Federal income tax returns of the Company for all years through
1988 have been closed and all matters have been resolved. The
Federal income tax returns for 1989 through 1991 have been audited.
Certain proposed adjustments have been appealed by the Company.
Regardless of the outcome of the appeal, it will not have a material
adverse impact upon the financial statements of the Company.
5. Inventories
<TABLE>
The classification of inventories at December 31 follows:
(In millions) 1995 1994
____________________________________________________________________
<S> <C> <C>
Raw materials $137.2 $112.4
Work-in-process 233.7 231.2
Finished goods 244.6 233.8
______ ______
Total $615.5 $577.4
====== ======
</TABLE>
6. Short-term Debt
The Company maintains a five year $150 million working capital line
of credit for general corporate purposes which expires in 1999. As of
December 31, 1995 and 1994, there were no borrowings under this
facility.
As of December 31, 1995, gross borrowings from international
uncommitted lines of credit were $160.4 million. There were no such
borrowing from U.S. uncommitted lines of credit at December 31,
1995. Additional available, uncommitted lines of credit for U.S. and
international operations were $160.0 million and $135.0 million,
respectively, at December 31, 1995. As of December 31, 1994, gross
borrowings from international uncommitted lines of credit were
$117.1 million. Additional available, uncommitted lines of credit for
international operations were $161.1 million at December 31, 1994.
There were no additional available, uncommitted lines of credit for
U.S. operation and no such borrowings at December 31, 1994.
Borrowings from international uncommitted lines of credit were
incurred by the Company's foreign subsidiaries primarily to manage
its foreign currency balance sheet exposure (see Note 3). The
weighted average interest rate on international short-term debt
outstanding as of December 31, 1995 and 1994 was 5.5% and 5.9%,
respectively. The Company's total borrowing capacity is limited by
certain debt covenants.
Interest expense on international short-term borrowings was $10.9
million in 1995, $8.5 million in 1994 and $12.0 million in 1993. The
average interest rates ranged from 4.0% to 7.1% in 1995, 5.0% to
6.6% in 1994, and from 7.5% to 10.3% in 1993. In 1995, interest
expense on U.S. short-term borrowings was $.6 million at an average
interest rate of 6.1%.
7. Payables and Accruals
<TABLE>
The following items are included in payables and accruals at
December 31:
(In millions) 1995 1994
____________________________________________________________________
<S> <C> <C>
Trade accounts payable $150.4 $155.8
Reserve for marketing programs 43.7 50.8
Other accrued expenses and
current liabilities 80.8 69.1
______ ______
Total $274.9 $275.7
====== ======
</TABLE>
8. Long-term Debt
<TABLE>
Principal amounts of long-term debt outstanding as of December 31
are as follows:
(In millions)
<S> <C> <C> <C>
1995 Long-term Current Total
____________________________________________________________________
ESOP loan $ 37.7 $39.7 $ 77.4
7-1/4% Notes 149.8 -- 149.8
8% Notes 199.1 -- 199.1
8% Subordinated Convertible
Debentures 140.0 -- 140.0
Other .1 -- .1
________ _______ ________
Total $526.7 $39.7 $566.4
======== ======= ========
1994 Long-term Current Total
____________________________________________________________________
ESOP loan $ 77.4 $35.9 $ 113.3
7-1/4% Notes 149.6 -- 149.6
8% Notes 198.9 -- 198.9
8% Subordinated Convertible
Debentures 140.0 -- 140.0
Other .1 -- .1
________ _______ ________
Total $566.0 $35.9 $601.9
======== ======== ========
</TABLE>
39
<PAGE>
At December 31, 1995 and 1994, the Company had a working capital
line of credit (see Note 6), and a long-term ESOP loan. Borrowing
costs under the related credit agreements are tied to the Company's
long-term public debt ratings. The interest rates on the loans are
based on various alternative interest indices at the Company's option
and will fluctuate over time. The agreements contain various
restrictions, including the ability of the Company to incur or
guarantee debt. The Company is required to maintain a certain net
worth and to meet certain leverage and interest coverage ratios. As a
result of the plan announced in December 1995 to make fundamental
changes in the Company's operating structure, the $150 million
working capital line of credit and the long-term ESOP loan were
amended as of December 29, 1995 to provide a waiver with respect
to financial covenants as to which the Company was not in
compliance by reason of its 1995 results. The Company and the
banks who are parties to these bank financing agreements amended
the terms of the agreements effective December 31, 1995 to provide
greater leeway with respect to the financial covenants.
Under the ESOP loan, which was used to finance the leveraged
Polaroid ESOP (see Note 9 and 11), scheduled principal payments
will be made semi-annually in gradually increasing amounts through
1997 when a final payment of $37.7 million is due. Interest expense
on the ESOP loan was $5.4 million in 1995, $6.0 million in 1994 and
$6.2 million in 1993. The weighted average interest rate on the loan
was 5.2%, 4.4% and 3.6% during 1995, 1994 and 1993, respectively.
The $140 million Subordinated Convertible Debentures (the
Debentures) due in 2001 carry an annual interest rate of 8% and are
convertible to common stock at approximately $32.50 per share. The
Debentures are redeemable by the Company after September 30,
1998, and sooner if the current market price per share of common
stock is greater than or equal to $48.75 (appropriately adjusted for
stock splits, combinations, dividends or similar events) for at least 20
of 30 consecutive trading days, at which time the Company has the
right to redeem the Debentures, in whole or part, at the end of the 30-
day period. The Debentures are redeemable by the Company and by
the holder under certain circumstances. The Debentures are
subordinated in right of payment to all existing debt of the Company.
The $150 million 7-1/4% Notes (the 7-1/4% Notes) due January 15,
1997 were issued with a discount, at a price of 99.30% of par with a
yield of 7.42%, and may not be redeemed prior to maturity. The $200
million 8% Notes (the 8% Notes) due March 15, 1999 were issued
with a discount, at a price of 99.054% of par with a yield of 8.18%,
and may not be redeemed prior to maturity.
The aggregate scheduled repayments on the Company's long-term
debt outstanding at December 31, 1995 are as follows:
<TABLE>
____________________________________________________________________
<S> <C>
1996 $ 39.7 million
1997 $187.8 million
1998 $ 0
1999 $200.0 million
2000 $ 0
2001 and thereafter $140.0 million
</TABLE>
9. Common Stockholders' Equity
During 1995, the Company repurchased 1.2 million shares for $40.2
million and during 1994, .9 million shares were repurchased for
$30.6 million. As of December 31, 1995, the unexpended balance
under the Company's $100 million common stock repurchase
program, which was approved by the Board of Directors in January
1995, was $85.2 million. In December 1995, the Company suspended
its stock repurchase program. The timing and amounts of any future
purchases under these programs depend upon many factors,
including market conditions as well as the Company's business and
financial condition.
Deferred Compensation was $80.0 million and $115.8 million at
December 31, 1995 and 1994, respectively. Deferred compensation
included $77.4 million in 1995 and $113.3 million in 1994 for the
ESOP (see Notes 8 and 11) covering substantially all domestic
employees. These amounts which were recorded as deductions from
common stockholders' equity, represent amounts receivable in the
future from the ESOP Trust. Shares held by the Company's ESOP
Trust at December 31 were as follows:
<TABLE>
(In thousands) 1995 1994
____________________________________________________________________
<S> <C> <C>
Allocated 6,792 6,574
Suspense (unallocated) 1,993 2,994
_____ _____
Total 8,785 9,568
===== =====
</TABLE>
Through 1993, common stock dividends paid to the plan trustee for
ESOP-held shares were used to repay the principal amount
outstanding. In 1993, dividends on shares held by the ESOP Trust
used to repay the ESOP loan amounted to $5.7 million. In 1995 and
1994, $1.6 million and $2.3 million, respectively, in dividends paid
on unallocated ESOP shares were used to repay the ESOP loan. The
remaining dividends for allocated shares held by the Trust were paid
to ESOP participants. Deferred compensation also included $2.6
million and $2.5 million at December 31, 1995 and 1994,
respectively, related to the 1993 Polaroid Stock Incentive Plan (See
Note 10).
10. Incentive Compensation and Stock Incentive Plans
The Company maintains annual cash incentive plans covering
substantially all domestic employees (Employee Incentive
Compensation Plan), employees of manufacturing subsidiaries in the
United Kingdom and the Netherlands (International Manufacturing
Plans) and substantially all executives (Executive Incentive
Compensation Plan).
40
<PAGE>
<TABLE>
Amounts charged to operations for incentive compensation plans
were as follows:
(In millions) 1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
Employee Incentive Compensation Plan $2.1 $6.9 $6.2
International Manufacturing Plans 1.2 1.1 .9
Executive Incentive Compensation Plan 1.5 .5 .3
</TABLE>
In 1990, the Company adopted the Polaroid Stock Incentive Plan (the
1990 Plan) under which officers and other key employees may be
granted stock options, stock appreciation rights and restricted stock
as incentives to increase revenues and profits. Stock options granted
may be either non-qualified or incentive stock options. Up to
3,000,000 shares of the Company's common stock have been
authorized for use under the 1990 Plan.
In May 1993, the Company adopted the 1993 Polaroid Stock
Incentive Plan (the 1993 Plan) under which officers and other key
employees may be granted awards in the form of stock options, stock
appreciation rights, restricted stock, and any other form determined
by the Board of Directors to be consistent with the 1993 Plan, as
incentives to increase revenues and profits. Stock options granted
may be either non-qualified or incentive stock options. A maximum
of 3,000,000 shares of the Company's common stock have been
authorized for use under the 1993 Plan, plus the unissued shares
from the 1990 Plan.
On June 15, 1993, the non-employee members of the Board approved
the issuance of 848,122 options at an option price of $32.25 per
share. This reflected the fair market value of the Company's common
stock on April 26, 1993 which was the fifth business day after the
first quarter earnings release. That date corresponds to the date on
which options have been granted historically. Since the fair market
value on June 15, 1993 was $37.00 per share, $4.1 million was
recorded as deferred compensation, and is being amortized to
compensation expense over the options' four year vesting period.
During 1995, 1994 and 1993, compensation expense related to this
stock option grant was $1.0 million, $1.0 million and $.6 million,
respectively.
A committee of non-employee members of the Board of Directors is
the administrator for the 1990 Plan and the 1993 Plan and, as such,
can at the time of the grant determine the vesting period, the period
the option shall remain exercisable (or a stock shall remain
restricted), and may designate if a dividend equivalent payment (or a
dividend for restricted stock) will be paid on the grant equal to the
dividend payment made on a share of the Company's common stock.
The administrator for the 1990 Plan and the 1993 Plan may waive or
amend conditions of the option grant, such as accelerating vesting
terms during an early retirement and severance program. Data related
to stock options issued under the 1990 Plan and the 1993 Plan is
summarized below:
<TABLE>
Number of Exercise Price
Options per Option
____________________________________________________________________
<S> <C> <C>
Outstanding at
December 31, 1992 2,290,295 $24.375-$43.75
1993 Activity:
Granted 848,122 $32.25
Canceled (54,697) $24.375-$43.75
Exercised (137,930) $24.375-$26.25
_________
Outstanding at
December 31, 1993 2,945,790 $24.375-$43.75
1994 Activity:
Granted 781,365 $31.125-$32.375
Canceled (47,041) $24.375-$43.75
Exercised (132,777) $24.375-$32.25
_________
Outstanding at
December 31, 1994 3,547,337 $24.375-$43.75
1995 Activity:
Granted 1,005,305 $33.875-$45.75
Canceled (27,835) $24.375-$43.75
Exercised (727,765) $24.375-$43.75
_________
Outstanding at
December 31, 1995 3,797,042 $24.375-$45.75
=========
Exercisable at
December 31, 1995 1,778,927 $24.375-$43.75
=========
</TABLE>
Dividend equivalent payments on outstanding stock options of $2.1
million, $1.9 million and $1.7 million were made in 1995, 1994 and
1993, respectively. The number of common shares reserved for
granting of future options was 1,152,591, 2,138,074 and 2,902,035 at
December 31, 1995, 1994 and 1993, respectively.
The options awarded under the 1990 Plan and the 1993 Plan vest
ratably each year over approximately a four year period and are
exercisable for approximately a ten year period from the date of
grant, if the holder remains in the employ of the Company. If the
option holder's employment terminates for reasons other than change
of control or retirement, no further vesting can occur. When an
option holder's employment terminates for any reason other than
retirement, death or disability, all vested options must be exercised
within three months from the termination date or approximately ten
years from the date of the grant, whichever is earlier.
41
<PAGE>
In December 1995, the Company awarded 25,000 shares of restricted
stock at $46.50 per share under the 1993 Plan, which vest ratably
each year over a five year period. The value of the restricted stock
issuance was recorded as deferred compensation and is being
amortized to compensation expense ratably over a five year period.
In 1990, the Company adopted the Polaroid Board of Directors'
Stock Option Plan (the Directors' Plan), which granted each non-
employee director an option to purchase 3,000 shares of the
Company's common stock. For a new non-employee director, the
date of the grant is the date the director joins the Board.
Under the Directors' Plan, options vest ratably each year over a four
year period from the date the director joins the Board and are
exercisable for a ten year period from the date of grant. Vesting
ceases when an individual terminates as a director, and a former
director must exercise his or her vested options within three years
from the date of termination or ten years from the date of grant,
whichever is earlier. Up to 100,000 shares of the Company's
authorized common stock may be issued under the Directors' Plan.
As of December 31, 1995, a cumulative total of 48,000 options have
been granted at prices ranging from $33.125 to $43.75 under the
Directors' Plan. At December 31 of 1995, 1994 and 1993, 34,500,
36,750, and 39,000 of the options granted were exercisable,
respectively. Of the options granted to date, none have been
exercised and 7,500 have been canceled.
On July 25, 1995, the Company's Board of Directors approved an
amendment to the Director's Plan, subject to shareholder approval at
the Company's 1996 annual meeting, to award each non-employee
director as of that date a one-time grant of an option to purchase
2,000 shares of the Company's common stock at $42.625 per share.
Vesting of this option grant will conform with the terms outlined in
the Directors' Plan. Including this option grant, which is subject to
shareholder approval, a cumulative total of 72,000 options have been
granted at prices ranging from $33.125 to $43.75 under the Directors'
Plan as of December 31, 1995. Assuming shareholder approval of the
July 1995 grant, a total of 28,000 shares of the Company's authorized
common stock, were reserved for possible future grants under the
Directors' Plan as of December 31, 1995.
11. Benefit Plans
The Company maintains a qualified noncontributory trusteed pension
plan covering substantially all domestic employees. The benefits are
based on years of service and final average compensation at
retirement. The Company's general policy is to fund the domestic
pension trust to the extent such contributions would be deductible
under the funding standards established under the Internal Revenue
Code. Plan assets consist primarily of high quality corporate and U.S.
government bonds, asset-backed securities and common stocks.
Employees of Polaroid's manufacturing subsidiaries in the United
Kingdom and the Netherlands are covered by trusteed, contributory
pension plans. Amounts are funded in accordance with local laws and
economic conditions. Employees of most other foreign subsidiaries
are covered by insured plans. Related expenses, obligations and
assets of these other plans are not material and therefore are not
included in the information below.
<TABLE>
Components of the Company's net periodic pension cost/ (credit) are
as follows:
(In millions) 1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
Service cost $ 26.5 $29.2 $ 25.4
Interest cost 65.9 62.5 56.1
Actual return on assets (191.3) (5.8) (90.9)
Net amortization and deferral 99.2 (84.6) 5.2
______ _____ _______
Net periodic pension cost/(credit) $ .3 $ 1.3 $ (4.2)
====== ===== =======
</TABLE>
<TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheet at December
31:
(In millions) 1995 1994
____________________________________________________________________
<S> <C> <C>
Actuarial present value
of benefit obligations:
Vested benefit obligation $ 851.1 $647.4
Nonvested benefit obligation 51.6 42.5
_________ ______
Accumulated benefit obligation 902.7 689.9
Effect of projected pay increases 125.6 114.1
_________ ______
Projected benefit obligation $ 1,028.3 804.0
Plan assets at fair market value 1,066.2 907.4
_________ ______
Plan assets in excess of
projected obligations 37.9 103.4
Unrecognized prior service cost 21.0 25.7
Unrecognized net gain (7.6) (50.8)
Unrecognized net assets at transition,
net of amortization (72.0) (82.4)
_________ ______
Net pension liability $ (20.7) $ (4.1)
========= ======
</TABLE>
42
<PAGE>
<TABLE>
The assumptions used by the Company which have a significant
effect on the amounts reported for pension accounting as of
December 31 were as follows:
1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
Weighted average discount rate 7.1% 8.4% 7.5%
Weighted average rate of increase
in compensation levels 5.0% 5.4% 5.4%
Expected long-term rate of
return on assets 8.8% 9.3% 9.3%
</TABLE>
In 1988, the Company's Board of Directors approved the Polaroid
ESOP primarily for the benefit of its domestic employees (see Notes
8 and 9). The number of shares available for allocation to individual
accounts in any period is based on principal and interest payments
made on the ESOP loan. Amounts charged to expense represent the
amount of principal repayment on the ESOP loan less dividends paid
for the period on all ESOP held shares through 1993 and less
dividends on unallocated shares beginning in 1994. Amounts charged
to expense for this plan were $34.3 million, $31.2 million and $26.9
million in 1995, 1994, and 1993, respectively.
The Company currently provides certain health and life insurance
benefits to eligible retired employees. Substantially all domestic
employees who retire from the Company, and meet the minimum age
and service requirements of 55 and 10 years, respectively, become
eligible for these benefits. The plans are currently unfunded and may
be modified in accordance with the terms of the plan documents. The
Company funds these benefits on a pay-as-you-go basis. Eligible
retirees under age 65 are required to contribute to the cost of their
health care benefits. Upon reaching age 65, eligible retirees' health
care benefit coverage is coordinated with Medicare. In 1995, the
Company established an amount it would contribute toward the cost
of the retirees' selected medical plan coverage. The Company intends
to annually review the amount it contributes toward this coverage
and will, at its option, make adjustments to this amount based on
several considerations including financial factors, inflation of
medical costs and other relevant factors. Eligible retirees are not
required to contribute to the cost of their life insurance benefits.
Employees of most of the Company's subsidiaries outside of the
United States are covered by government programs.
As of January 1, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" (FAS 106). This
standard requires the expensing, on an accrual basis, of all medical
and life insurance benefits the Company provides to its retirees and
their dependents. The Company elected immediate recognition of the
accumulated liability at adoption. This resulted in a one-time, after-
tax charge of $132.9 million (net of income taxes of $85.0 million).
There was no cash flow impact associated with the adoption of FAS
106. After recognition of the cumulative liability at adoption, the
effect of FAS 106 on 1993 operating results was a pre-tax expense of
$28.8 million, approximately $20 million more than the previous
pay-as-you-go method of accounting. Prior to 1993, the cost of
retiree health care and life insurance benefits was recognized as an
expense as claims were paid.
<TABLE>
Components of the Company's net periodic postretirement benefit
cost are as follows:
(In millions) 1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
Service cost $ 8.7 $ 13.1 $ 11.2
Interest cost 17.6 18.3 17.6
Amortization (6.1) (.6) -
_______ ______ ______
Net periodic postretirement
benefit cost $ 20.2 $ 30.8 $ 28.8
======= ====== ======
</TABLE>
<TABLE>
The following table sets forth the status of the plan and amounts
recognized in the Company's consolidated balance sheet at December
31:
(In millions) 1995 1994
____________________________________________________________________
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ 90.4 $ 104.6
Fully eligible active plan participants 68.9 69.7
Other active plan participants 47.0 61.7
________ _________
Total accumulated postretirement
benefit obligation 206.3 236.0
Plan assets at fair market value -- --
________ _________
Accumulated obligation in excess
of plan assets (206.3) (236.0)
Unrecognized net gain (11.6) (18.0)
Unrecognized prior service cost (50.8) (5.2)
________ _________
Net postretirement benefit liability $(268.7) $(259.2)
======== =========
</TABLE>
The Accumulated Postretirement Benefit Obligation (APBO) at
December 31, 1995 and 1994 was determined using a discount rate
of 7.0% and 8.5 %, respectively. The assumed health care cost trend
rate used in measuring the APBO at December 31, 1995 and 1994
was 11% and 12%, respectively, declining gradually to an ultimate
rate of 6% in 2003. These trend rates reflect the Company's current
experience and expectation that future rates will decline. The
assumptions used above have a significant effect on the amounts
reported. If the health care cost trend rate assumptions were
increased by 1% each year, the APBO as of December 31, 1995 and
1994 would increase by approximately $4.1 million and $34.7
million, respectively. The effect of a 1% increase on the aggregate of
service and interest cost for 1995 and 1994 would have been an
increase of approximately $4.5 million and $5.5 million, respectively.
43
<PAGE>
The Company maintains the Polaroid Board of Directors' Retirement
Plan (the Directors' Retirement Plan) which is a non-qualified
deferred compensation plan under which fully vested (at least five
complete years of service on the Board) non-employee members of
the Board who retire receive annual lump sum payments equal to the
retainer amount they were paid in the last full year prior to
retirement. A participant or surviving spouse may receive payments
under the Directors' Retirement Plan for the lesser of twenty-five
years or the number of years that the person served as a non-
employee member of the Board prior to his or her seventy-third
birthday.
The estimated present value of future benefits under the Directors'
Retirement Plan is accrued annually based on credited service up to
the participants' actual retirement dates and is charged to expense.
For the years 1995, 1994 and 1993, $.2 million, $.3 million and $.1
million, respectively, was charged to expense for current years'
service.
In the fourth quarter of 1993, the Company adopted Financial
Accounting Standards Board Statement No. 112, "Employer's
Accounting for Postemployment Benefits" (FAS 112) retroactive to
January 1, 1993. This standard requires the expensing, on an accrual
basis, of all benefits provided to former or inactive employees, their
beneficiaries and covered dependents after employment but before
retirement. Before 1993, the Company recognized these disability
and survivor-related benefits on a pay-as-you-go basis. The
cumulative effect of this change in accounting for postemployment
benefits resulted in a one-time after-tax charge of $19.9 million (net
of income taxes of $12.7 million). The effect of FAS 112 on 1993
operating results was a pre-tax charge of $6.3 million, approximately
$3.8 million more than the previous pay-as-you-go method of
accounting. There was no cash flow impact associated with the
adoption of FAS 112. The pre-tax charge for FAS 112 was $7.4
million and $6.8 million in 1995 and 1994, respectively.
12. Rental Expense and Lease Commitments
<TABLE>
Minimum annual rental commitments at December 31, 1995, under
noncancelable leases, principally for real estate, are payable as
follows:
(In millions)
____________________________________________________________________
<S> <C>
1996 $15.0
1997 11.8
1998 8.6
1999 5.9
2000 2.5
2001 and thereafter 3.9
_____
Total minimum lease payments $47.7
=====
</TABLE>
Minimum payments have not been reduced by minimum sublease
rentals of $2.3 million due in the future under noncancelable
subleases.
Many of the leases contain renewal options and some contain
escalation clauses which require payments of additional rent to the
extent of increases in the related operating costs.
<TABLE>
Rental and lease expenses consisted of the following:
(In millions) 1995 1994 1993
____________________________________________________________________
<S> <C> <C> <C>
Minimum rentals $ 26.4 $25.6 $23.8
Contingent rentals 8.8 5.3 7.4
________ _____ _____
Total $35.2 $30.9 $31.2
======== ===== =====
</TABLE>
Sublease income amounted to $1.4 million in 1995, $1.8
million in 1994 and $1.5 million in 1993.
13. Business
Nature of Operations:
The Company is engaged primarily in one line of business, the
design, manufacture and sale of instant photographic imaging
products worldwide. Photographic products, which represent over 90
percent of the Company's total revenues, are marketed worldwide
through distributors and dealers for amateur and professional
photography, business, industry, science, medicine, government and
education. In addition, the Company is expanding its role in the
market for digital imaging products. The Company's digital imaging
products are marketed worldwide through distributors and directly to
customers primarily for medical, graphic art and other business
applications. Digital imaging products also include products for
consumer digital imaging and desktop publishing.
Segments of Business:
During 1995, 1994 and 1993 sales to one customer, Wal-Mart Stores,
Inc., amounted to 10.9%, 13.7%, and 11.6%, respectively, of the
Company's total sales. Sales in Russia accounted for 8.8%, 6.7% and
1.1% of total sales in the 1995, 1994, and 1993, respectively. While
the Company believes that emerging markets present particularly
attractive opportunities, such markets tend to be considerably less
stable than more established markets. There can be no assurance that
emerging markets will continue to produce favorable results.
Intercompany sales between geographic areas are accounted for at
prices representative of unaffiliated party transactions.
The following table shows certain financial information relating to
the Company's operations in various geographic areas:
44
<PAGE>
<TABLE>
<CAPTION>
Geographic Areas
Years ended December 31,
(In millions) 1995 1994 1993
_________________________________________________________________________________
<S> <C> <C> <C>
Sales
United States
Customers $1,019.0 $1,160.3 $1,178.8
Intercompany 479.4 496.3 511.28
________ ________ ________
1,498.4 1,656.6 1,690.6
________ ________ ________
Europe
Customers 738.8 704.6 597.9
Intercompany 368.1 347.1 347.3
________ ________ ________
1,106.9 1,051.7 945.2
________ ________ ________
Asia Pacific, Canada, Latin and South America
Customers 479.1 447.6 468.2
Intercompany 123.3 83.5 56.5
________ ________ ________
602.4 531.1 524.7
________ ________ ________
Eliminations (970.8) (926.9) (915.6)
________ ________ ________
Net sales $2,236.9 $2,312.5 $2,244.9
======== ======== ========
_________________________________________________________________________________
Profits
United States $ (179.4) $ 100.8 $ 44.1
Europe 20.6 81.8 43.7
Asia Pacific, Canada, Latin and South America 24.4 45.2 56.8
General corporate expense (19.4) (13.0) (12.4)
Eliminations (4.0) (14.5) 9.2
________ ________ ________
Profit/(loss) from operations (157.8) 200.3 141.4
Other expense (43.6) (39.6) (39.7)
________ ________ ________
Earnings/(loss) before income tax
expense/(benefit) $ (201.4) $ 160.7 $ 101.7
======== ======== ========
- ---------------------------------------------------------------------------------
Assets
United States $1,526.1 $1,480.5 $1,532.7
Europe 669.9 613.8 556.0
Asia Pacific, Canada, Latin and South America 258.4 248.1 216.9
Corporate assets (cash, cash equivalents
and short-term investments) 83.1 228.9 138.9
Eliminations (275.7) (254.6) (232.2)
________ ________ ________
Total assets $2,261.8 $2,316.7 $2,212.3
======== ======== ========
</TABLE>
45
<PAGE.
14.Contingencies
The Company, together with other parties, is currently designated a
Potentially Responsible Party (PRP) by the United States
Environmental Protection Agency and certain state agencies with
respect to the response costs for environmental remediation at
several sites. The Company believes that its potential liability with
respect to any site and with respect to all sites in the aggregate will
not have a materially adverse effect on the financial condition or
operating results of the Company.
Due to a wide range of estimates with regard to response costs at
these sites and various other uncertainties, the Company cannot
firmly establish its ultimate liability concerning these sites. In each
case in which the Company is able to determine its likely exposure,
such amount has been included in the Company's reserve for
environmental liabilities. Where a range of comparably likely
exposures exists, the Company has included in its reserve the
minimum amount of the range. The Company's aggregate reserve for
these liabilities as of December 31, 1995 and 1994 was $5.2 million
and $5.5 million, respectively. The Company currently estimates that
the majority of the $5.2 million amount reserved for environmental
liabilities on December 31, 1995 will be payable over the next two to
three years. The Company's analysis of data which underlies its
establishment of this reserve is undertaken on a quarterly basis. The
reserve for such liability does not provide for associated litigation
costs, which, if any, are expected to be inconsequential in
comparison with the amount of the reserve. The Company will
continue to accrue in its reserve such amounts as management
believes appropriate from time to time as circumstances warrant.
This reserve does not take into account potential recoveries from
third parties.
The Company reviews its recurring internal expenditures on
environmental matters, as well as capital expenditures related to
environmental compliance, on a monthly basis, and reviews its third-
party expenditures on environmental matters on a quarterly basis.
The Company believes that these expenditures have not had and will
not have a materially adverse effect on the financial condition or
operating results of the Company.
Federal law provides that PRPs may be held jointly and severally
liable for response costs. Based on current estimates of those costs
and after consideration of the potential estimated liabilities of other
PRPs with respect to those sites and their respective estimated levels
of financial responsibility, the Company does not believe its potential
liability will be materially enlarged by the fact that the liability is
joint and several.
In early 1994, the Company received a letter from Jerome H.
Lemelson alleging that a broad range of the Company's
manufacturing equipment and products infringe a number of patents.
The letter proposes that the Company enter into licensing
negotiations to pay substantial past and future royalties under those
patents. The Company has responded to the allegations.
The Company is involved in various other legal proceedings and
claims arising in the ordinary course of business. Management
believes that the disposition of these matters will not have a
materially adverse effect on the financial condition or results of
operations of the Company.
15. Supplementary Financial Information
The section on pages 47-49 entitled Supplementary Financial
Information has not been audited by the Company's independent
auditors. Those auditors have, however, made a limited review of the
1995 and 1994 quarterly data on page 47 in accordance with
standards established by the American Institute of Certified Public
Accountants and that information is incorporated herein by
reference. Since the Company's independent auditors did not audit
the Company's quarterly data for either year, they express no opinion
on such data.
46
<PAGE>
<TABLE>
Quarterly Financial Data (Unaudited)
Polaroid Corporation and Subsidiary Companies
(In millions, except per share and stock price data)
1995 First Second Third Fourth Year
________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net sales $409.6 $572.5 $580.0 $674.8 $2,236.9
Restructuring and other 77.0 -- -- 170.0 247.0
Profit/(loss) from operations (108.6) 41.1 50.3 (140.6) (157.8)
Net earnings/(loss) (75.8) 22.9 23.7 (111.0) (140.2)
Primary earnings/(loss) per common share (1.66) .50 .51 (2.44) (3.09)
Fully diluted earnings per common share * .49 .50 * *
Cash dividends per common share .15 .15 .15 .15 .60
Stock prices
High 35.25 43.88 44.88 49.25 49.25
Low 29.00 33.00 38.88 38.75 29.00
1994 First Second Third Fourth Year
________________________________________________________________________________________
Net sales $462.6 $587.3 $576.7 $685.9 $2,312.5
Profit from operations 6.9 56.8 52.7 83.9 200.3
Net earnings 1.4 29.2 29.3 57.3 117.2
Primary earnings per common share .03 .62 .62 1.23 2.49
Fully diluted earnings per common share * .60 .60 1.16 2.42
Cash dividends per common share .15 .15 .15 .15 .60
Stock prices**
High 35.75 34.38 35.13 36.38 36.38
Low 30.50 29.63 32.13 30.25 29.63
Stockholders of record as of February 2, 1996.......11,406
</TABLE>
* Fully diluted earnings per common share are not disclosed because they
are greater than primary earnings per common share.
** Recorded on the New York Stock Exchange Composite.
47
<PAGE>
<TABLE>
Ten Year Financial Summary (Unaudited)
Polaroid Corporation and Subsidiary Companies
Years ended December 31
(Dollars amounts in millions,
except per share data) 1995 1994 1993
________________________________________________________________________________________
Consolidated Statement of Earnings
<S> <C> <C> <C>
Net sales
United States $1,019.0 $1,160.3 $1,178.8
International 1,217.9 1,152.2 1,066.1
________ ________ ________
Total net sales 2,236.9 2,312.5 2,244.9
________ ________ ________
Cost of goods sold 1,298.6 1,324.2 1,296.5
Marketing, research,engineering and
administrative expenses 849.1 788.0 763.0
Restructuring and other 247.0 -- 44.0
________ ________ ________
Total costs 2,394.7 2,112.2 2,103.5
________ ________ ________
Profit/(loss) from operations (157.8) 200.3 141.4
________ ________ ________
Litigation settlement, net of
employee incentives -- -- --
Other income 8.5 7.0 8.2
Interest expense 52.1 46.6 47.9
________ ________ ________
Earnings/(loss) before income tax
expense/(benefit) (201.4) 160.7 101.7
Federal, state and foreign income tax
expense/(benefit) (61.2) 43.5 33.8
________ ________ ________
Earnings/(loss) before cumulative effect
of changes in accounting principle $ (140.2) $ 117.2 $ 67.9
======== ======== ========
Net earnings/(loss) $ (140.2) $ 117.2 $ (51.3)
======== ======== ========
Primary earning/(loss) per common share before
cumulative effect of changes
in accounting principle** $ (3.09) $ 2.49 $ 1.45
Primary earnings/(loss)per common share** $ (3.09) $ 2.49 $ (1.10)
Fully diluted earnings per common share *** $ -- $ 2.42 --
Cash dividends per common share ** $ .60 $ .60 $ .60
Common shares outstanding at end
of year (in thousands)** 45,533 45,998 46,806
Selected Balance Sheet Information
Working capital $ 738.5 $ 886.8 $ 833.6
Net property, plant and equipment 691.0 747.3 718.2
Total assets 2,261.8 2,316.7 2,212.3
Long-term debt 526.7 566.0 602.3
Redeemable preferred stock equity -- -- --
Common stockholders' equity 717.7 864.4 767.3
Other Statistical Data
Additions to property, plant and equipment $ 167.9 $ 146.7 $ 165.6
Depreciation $ 132.7 $ 118.2 $ 100.3
Payroll and benefits $ 709.3 $ 720.6 $ 699.2
Number of employees, end of year 11,662 12,104 12,048
Return on average common stockholder' equity**** (17.8)% 14.7% 9.3%
</TABLE>
* Restated for FAS 96.
** Amounts for years prior to 1987 have been restated to reflect the
1987 two-for-one stock split.
*** Fully diluted earnings per common share are not disclosed
for 1995, 1993 and years prior to 1991 because
they are either greater than primary earnings per
common share or they do not include dilutive securities.
**** 1993 is shown prior to the cumulative effects of FAS 106, 109 and 112.
48
<TABLE>
1992 1991 1990 1989 1988 1987* 1986*
_____________________________________________________________________________________________
<C> <C> <C> <C> <C> <C> <C>
$1,145.7 $1,113.6 $1,058.3 $1,091.8 $1,048.3 $1,009.3 $ 964.3
1,006.6 957.0 913.4 812.9 814.6 754.6 664.9
________ ________ ________ ________ ________ ________ _______
2,152.3 2,070.6 1,971.7 1,904.7 1.862.9 1,763.9 1,629.2
________ ________ ________ ________ ________ ________ _______
1,178.0 1,082.5 1,011.8 966.0 1,003.1 956.2 921.7
760.5 741.5 675.6 634.5 686.0 653.9 571.8
-- -- -- 40.5 151.9 -- --
________ ________ ________ ________ ________ ________ _______
1,938.5 1,824.0 1,687.4 1,641.0 1,841.0 1,610.1 1,493.5
________ ________ ________ ________ ________ ________ _______
213.8 246.6 284.3 263.7 21.9 153.8 135.7
-- 871.6 -- -- -- -- --
7.8 23.4 15.0 35.1 28.0 16.7 18.1
58.5 58.4 81.3 86.2 29.0 15.0 18.6
________ ________ ________ ________ ________ ________ _______
163.1 1,083.2 218.0 212.6 20.9 155.5 135.2
64.1 399.5 67.0 67.6 43.5 30.3 27.0
________ ________ ________ ________ ________ ________ _______
$ 99.0 $ 683.7 $ 151.0 $ 145.0 $ (22.6) $ 125.2 $ 108.2
======== ======== ======== ======== ======== ======== =======
$ 99.0 $ 683.7 $ 151.0 $ 145.0 $ (22.6) $ 125.2 $ 108.2
======== ======== ======== ======== ======== ======== =======
$ 2.06 $ 12.54 $ 2.20 $ 1.96 $ (.34) $ 2.02 $ 1.75
$ 2.06 $ 12.54 $ 2.20 $ 1.96 $ (.34) $ 2.02 $ 1.75
$ 2.02 $ 10.88 -- -- -- -- --
$ .60 $ .60 $ .60 $ .60 $ .60 $ .60 $ .50
46,668 48,919 50,070 52,110 71,635 61,918 61,918
$ 789.0 $ 695.3 $ 609.1 $ 642.0 $ 980.0 $ 652.6 $ 602.4
657.3 549.4 461.0 430.9 433.8 395.6 357.7
2,008.1 1,889.3 1,701.3 1,776.7 1,957.2 1.599.4 1,444.6
637.4 471.8 513.8 602.2 402.3 -- --
-- -- 348.6 321.9 -- -- --
808.9 772.9 207.7 148.8 1,011.5 1,048.2 960.1
$ 201.5 $ 175.8 $ 120.9 $ 94.5 $ 127.0 $ 116.6 $ 82.9
$ 89.1 $ 85.5 $ 87.2 $ 87.4 $ 81.9 $ 75.7 $ 71.2
$ 670.2 $ 690.6 $ 587.6 $ 546.7 $ 725.9 $ 585.0 $ 548.2
12,359 12,003 11,768 11,441 11,613 13,662 14,765
12.7% 148.6% 63.3% 33.5% (2.2)% 12.5% 11.7%
</TABLE>
49
<PAGE>
Directors
(as of March 19, 1996)
Gary T. DiCamillo 1
Chairman and
Chief Executive Officer
I. MacAllister Booth 6
Retired Chairman,
President and
Chief Executive Officer, Polaroid Corporation
Yen-Tsai Feng 2,5,6
Roy E. Larsen Librarian of Harvard College, Retired
Ralph E. Gomory 1,2,5
President, Alfred P. Sloan Foundation
Frank S. Jones 2,3,5
Ford Professor Urban Affairs, Emeritus,
Massachusetts Institute
of Technology
John W. Loose 3,5
Executive Vice President, Corning Inc. and
President and Chief Executive Officer,
Corning Consumer
Products Company
James D. Mahoney 6
Former Plant
Engineering Manager, Polaroid Corporation
Albin F. Moschner 2,5
President and Chief Operating Officer,
Zenith Electronics Corporation
Henry Necarsulmer 1,2,5
Consultant, Lehman Brothers Inc.
Kenneth H. Olsen 1,4,5
President Emeritus, Digital Equipment Corporation
Lester Pollack 3,4,5
Senior Managing Director, Corporate Advisors, L.P.
Charles P. Slichter 1,4,5
Center for Advanced
Study Professor of Physics and Chemistry,
University of Illinois
Ralph Z. Sorenson 2,3,5
Professor Emeritus and Former Dean,
College of Business and Administration,University
of Colorado at Boulder
Delbert C. Staley 2,3,5
Retired Chairman and
Chief Executive Officer,
Nynex Corporation
Alfred M. Zeien 3,4,5
Chairman and
Chief Executive Officer,
The Gillette Company
1 Member, Executive Committee
(Gary T. DiCamillo, Chairman)
2 Member, Audit Committee
(Henry Necarsulmer, Chairman)
3 Member, Human
Resources Committee
(Delbert C. Staley, Chairman)
4 Member, Committee
on Directors
(Alfred M. Zeien, Chairman)
5 Member, Committee of
Outside Directors
6 Will not be standing for
re-election to the Board of
Directors at the Company's
1996 annual meeting
Officers
(as of March 19, 1996)
Gary T. DiCamillo
Chairman and
Chief Executive Officer
Henry Ancona
Executive Vice President
Joseph R. Oldfield*
Executive Vice President
William J. O'Neill, Jr.
Executive Vice President and Chief Financial Officer
Carole J. Uhrich
Executive Vice President
Robert M. Delahunt
Senior Vice President
Peter O. Kliem
Senior Vice President
Satish C. Agrawal
Group Vice President
James R. Barron
Vice President
Graham M. Brown, Jr.*
Vice President and Treasurer
Roger C. Clapp*
Vice President and
Program Fellow
F. Richard Cottrell
Vice President and
Senior Engineering and Research Fellow
Richard F. deLima*
Vice President, Secretary
and General Counsel
Gerald R. Dicker*
Vice President and
Assistant Secretary
Fawwaz N. Habbal
Vice President and
Senior Engineering and
Research Fellow
Paul E. Lambert
Vice President
and Program Fellow
Michael J. LeBlanc
Vice President
Samuel H. Liggero
Vice President
and Program Fellow
Carl L. Lueders
Vice President and Controller
Ralph M. Norwood
Vice President
Joseph G. Parham, Jr.
Vice President
Marian J. Stanley
Vice President
*Intends to retire in 1996.
50
Stockholder Information
Annual Meeting
The Annual Meeting of Polaroid Corporation
stockholders will be held on Tuesday, May 14, 1996
at 3 p.m. at the Museum of Science, Cahners Theater,
Boston, Massachusetts.
Executive Office
549 Technology Square
Cambridge, Massachusetts 02139
(617) 386-2000
Investor Relations
575 Technology Square
Cambridge, Massachusetts 02139
(617) 386-6589
Independent Auditors
KPMG Peat Marwick LLP
99 High Street
Boston, Massachusetts 02110
Transfer Agent and Registrar for Common Stock
Bank of Boston
C/O Boston EquiServe
Shareholder Services
Mail Stop: 45-02-64
Post Office Box 644
Boston, MA 02102-0644
(617) 575-3170 or 1-800-730-4001
Stock Exchange Listings for Common Stock
New York Stock Exchange
Pacific Stock Exchange
Annual Report on Form 10-K
A copy of Polaroid's Annual Report on Form 10-K to the Securities and Exchange
Commission may be obtained without charge by calling the Investor Relations
Department of Boston EquiServe, at
(617) 575-3170 or 1-800-730-4001.
Dividend Reinvestment Plan
A Dividend Reinvestment Plan is available to stockholders of Polaroid
Corporation. For information or an authorization card write to: Bank of Boston,
c/o Boston EquiServe, Polaroid Dividend Reinvestment Plan, Mail Stop: 45-02-64,
P.O. Box 644, Boston, MA 02102-0644. All correspondence should refer to
Polaroid Corporation.
Internet Address
http://www.polaroid.com
Captiva, Dry Tech, DryJet, Dry Tech ExPRESS, Helios, Imagix, Macro 5, OneStep,
636, Phantagrams, PhotoPad, Polaroid, ProPalette, Polaview, Spectra,
SprintScan, Studio Express and XOOR are trademarks of Polaroid Corporation.
This Annual Report is printed on paper made from 50 percent recycled materials,
minimum 10 percent post-consumer waste content. Recycling efforts of Polaroid
Corporation employees produced a portion of the post-consumer material.
inside back cover
Appendix to Annual Report
(Graphic material ommitted electronic filing)
Page Description of information omitted
- ---- -----------------------------------
22 Pie charts showing "Percent of Worldwide Sales" by
Geographic Area
Percent of Worldwide Sales
--------------------------
Asia/Pacific,
Canada, Latin and
U.S. Europe South America
-------- -------- ---------------
1995 46% 33% 21%
1994 50% 31% 19%
23 Bar graph showing "Profit from Operations" from 1991-1995.
Year Profit from Operations
---- ----------------------
1991 $247
1992 $214
1993 $141 *
1994 $200
1995 $ 89 **
* Excludes impact of $44 million of charges related to
restructuring and other expenses.
* Excludes impact of $247 million of charges related to
restructuring and other expenses.
26 Two bar graphs showing "Cash and Cash
Equivalents and Short-Term Investments" and "Capital
Expenditures/Depreciation" from 1991-1995.
Cash and Cash Equivalents
Year and Short-Term Investments
---- -------------------------
1991 $245
1992 $190
1993 $139
1994 $229
1995 $ 83
Capital
Year Expenditures Depreciation
----- ------------- --------------
1991 $176 $ 86
1992 $202 $ 89
1993 $166 $100
1994 $147 $118
1995 $168 $133
Exhibit 21
Subsidiaries
Polaroid Corporation
Year ended December 31, 1995
Name of Subsidiary Place of Incorporation
- -------------------------------------------------------------------
Inner City, Inc. Delaware
Polint, Inc. Delaware
PMC, Inc. Massachusetts
Polaroid Caribbean Corporation Delaware
Polaroid Asia Pacific International Inc. Delaware
Polaroid Asia Pacific Limited Delaware
Polaroid of Shanghai Limited China
Polaroid Europe Limited United Kingdom
Polaroid Foundation Delaware
Polaroid Canada Inc. Canada
Polaroid Gesellschaft mit beschrankter Haftung Germany
Polaroid Australia Pty. Limited Australia
Polaroid Gesellschaft m.b.H. Austria
Polaroid Far East Limited Hong Kong
Nippon Polaroid Kabushiki Kaisha Japan
Polaroid (Norge) A/S Norway
Polaroid de Mexico S.A. de C.V. Mexico
Polaroid Aktiebolag Sweden
Polaroid A.G. Switzerland
Polaroid (U.K.) Limited United Kingdom
Polaroid A/S Denmark
Polaroid International B.V. Netherlands
Polaroid (Italia) S.p.A. Italy
Polaroid (France) S.A. France
Polaroid (Belgium) N.V. Belgium
Polaroid (Europa) B.V. Netherlands
Polaroid Nederland B.V. Netherlands
Svetozor Russia
Polaroid Graphics Imaging B.V. Netherlands
Polaroid do Brasil Ltda. Brazil
Polaroid Singapore Private Limited Singapore
Polaroid Oy Finland
Polaroid Espana, S.A. Spain
Polaroid Foreign Sales B.V. Netherlands
Polaroid India, Inc. Delaware
Polaroid Malaysia Limited Delaware
Polaroid India Private Limited India
Subsidiaries of subsidiary companies are indented and listed below
the respective companies through which they are controlled.
Exhibit 23
----------
Independent Auditors' Consent
-----------------------------
The Board of Directors
Polaroid Corporation:
We consent to incorporation by reference in the registration
statements No. 33-36384 on Form S-8, No. 33-44661 on Form S-
3, No.33-51173 on Form S-8, and No. 333-0791 on Form S-3 of
Polaroid Corporation of our reports dated January 30, 1996,
relating to the consolidated balance sheet of Polaroid
Corporation and subsidiary companies as of December 31,
1995, and 1994, and the related consolidated statements of
earnings, cash flows, and changes in common stockholders'
equity, and the related financial statement schedule for
each of the years in the three-year period ended December
31, 1995, which reports appear in the December 31, 1995,
annual report on Form 10-K of Polaroid Corporation.
Our reports dated January 30, 1996, contain an explanatory
paragraph that states that in 1993 the Company changed its
method of accounting for income taxes and for certain
postretirement and postemployment benefits.
/s/ KPMG PEAT MARWICK LLP
Boston Massachusetts
March 19, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted fron S.E.C.
Form 10-K for the year ended December 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 73,300
<SECURITIES> 9,800
<RECEIVABLES> 578,400
<ALLOWANCES> (28,000)
<INVENTORY> 615,500
<CURRENT-ASSETS> 1,457,500
<PP&E> 2,164,400
<DEPRECIATION> (1,473,400)
<TOTAL-ASSETS> 2,261,800
<CURRENT-LIABILITIES> 719,000
<BONDS> 526,700
0
0
<COMMON> 75,400
<OTHER-SE> 642,300
<TOTAL-LIABILITY-AND-EQUITY> 2,261,800
<SALES> 2,236,900
<TOTAL-REVENUES> 2,236,900
<CGS> 1,298,600
<TOTAL-COSTS> 2,394,700
<OTHER-EXPENSES> 200
<LOSS-PROVISION> 11,000
<INTEREST-EXPENSE> 52,100
<INCOME-PRETAX> (201,400)
<INCOME-TAX> (61,200)
<INCOME-CONTINUING> (140,200)
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<NET-INCOME> (140,200)
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<EPS-DILUTED> 0
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