SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-4085
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POLAROID CORPORATION
____________________________________________________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 04-1734655
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(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
549 TECHNOLOGY SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (6l7) 386-2000
____________________________________________________________________________
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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Shares of Common Stock, $1 par value,
outstanding as of August 1, 1997: 45,559,641 shares
__________________________________________________________________________
This document contains 18 pages.
Exhibit index appears on page 17.
______________________________________________________________________________
<PAGE>
Part 1. FINANCIAL INFORMATION
Item 1. Financial Statements
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statement of Earnings (Unaudited)
Periods ended JUNE 29, 1997 and JUNE 30, 1996
(In millions, except per share data)
Second Quarter Six Months
1997 1996 1997 1996
---- ---- ---- ----
Net sales:
United States $294.0 $277.3 $483.3 $455.3
International 270.9 304.3 539.1 587.4
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Total net sales 564.9 581.6 1,022.4 1,042.7
- ------------------------------------------------------------------------------
Cost of sales 304.9 321.7 565.0 602.6
Marketing, research, engineering and
administrative expenses 195.8 203.8 373.9 379.5
Restructuring and other - - - 110.0
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Total costs 500.7 525.5 938.9 1,092.1
- ------------------------------------------------------------------------------
Profit/(loss) from operations 64.2 56.1 83.5 (49.4)
Other income / (expense) (0.3) 4.3 16.9 21.9
Interest expense 11.5 11.7 22.9 23.3
- ------------------------------------------------------------------------------
Earnings/(loss)
before income taxes 52.4 48.7 77.5 (50.8)
Federal, state and foreign income
tax expense/(benefit) 17.8 20.2 27.1 (18.6)
- ------------------------------------------------------------------------------
Earnings/(loss) before
extraordinary item 34.6 28.5 50.4 (32.2)
Extraordinary Item - (54.5) - (54.5)
- ------------------------------------------------------------------------------
Net earnings/(loss) $34.6 ($26.0) $50.4 ($86.7)
==============================================================================
Primary earnings/(loss) per common share:
Earnings/(loss) before extrao $0.76 $0.63 $1.11 ($0.70)
Extraordinary Item - ($1.20) - ($1.20)
- ------------------------------------------------------------------------------
Net earnings/(loss) $0.76 ($0.57) $1.11 ($1.90)
Fully diluted earnings
per common share $0.75 * $1.10 *
Cash dividends
per common share $0.15 $0.15 $0.30 $0.30
Weighted average common shares used for primary
earnings/(loss) per share calculation
(in thousands) ** 45,687 45,498 45,547 45,535
Common shares outstanding at end
of period (in thousands) 45,251 45,543 45,251 45,543
==============================================================================
* Fully diluted earnings per share are not stated because they are greater
than or equal to primary earnings per common share.
** The weighted average shares used to calculate primary earnings per common
share include the dilutive effect of stock options
outstanding.
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<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Balance Sheet
(In millions)
(Unaudited) (Unaudited)
June 29, December 31, June 30,
Assets 1997 1996 1996
- ------------------------------------------------------------------------------
Current assets
Cash and cash equivalents $66.0 $72.8 $39.3
Short-term investments 8.2 5.5 5.5
Receivables 554.4 535.2 512.9
Inventories:
Raw materials 99.9 104.7 123.8
Work-in-process 221.8 225.3 253.9
Finished goods 239.8 218.8 273.5
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Total inventories 561.5 548.8 651.2
Prepaid expenses and other assets 253.7 224.1 213.9
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Total current assets 1,443.8 1,386.4 1,422.8
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Property, plant and equipment
Gross property, plant and equipment 1,982.1 2,163.6 2,165.6
Less accumulated depreciation 1,326.2 1,497.4 1,499.0
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Net property, plant and equipment 655.9 666.2 666.6
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Deferred tax assets 96.7 98.8 112.9
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Other assets 61.6 50.2 7.6
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Total assets $2,258.0 $2,201.6 $2,209.9
==============================================================================
Liabilities and stockholders' equity
- ------------------------------------------------------------------------------
Current liabilities
Short-term debt $217.5 $124.9 $201.5
Current portion of long-term debt - 37.7 208.1
Payables and accruals 307.9 310.5 247.2
Compensation and benefits 184.4 238.4 254.5
Federal, state and foreign income taxes 59.0 51.6 31.1
- ------------------------------------------------------------------------------
Total current liabilities 768.8 763.1 942.4
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Long-term debt 496.3 489.9 339.8
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Accrued postretirement benefits 248.4 248.5 250.8
Accrued postemployment benefits 42.5 41.9 41.5
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Common stockholders' equity
Common stock, $1 par value 75.4 75.4 75.4
Additional paid-in capital 423.1 409.4 407.6
Retained earnings 1,494.8 1,457.8 1,425.6
Cumulative translation adjustments (28.1) - -
Less: Treasury stock, at cost 1,243.3 1,244.8 1,212.6
Deferred compensation 19.9 39.6 60.6
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Total common stockholders' equity 702.0 658.2 635.4
- ------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $2,258.0 $2,201.6 $2,209.9
==============================================================================
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<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statement of Cash Flows (Unaudited)
Periods Ended June 29, 1997 and June 30, 1996
(In millions)
Cash flows from operating activities 1997 1996
- ------------------------------------------------------------------------------
Net earnings/(loss) $50.4 ($86.7)
Depreciation of property, plant and equipment 62.1 62.4
(Increase)/decrease in receivables (53.3) 28.9
Increase in inventories (19.4) (35.7)
Increase in prepaids and other assets (31.6) (15.8)
Increase/(decrease) in payables and accruals 14.3 (21.1)
Increase/(decrease) in compensation and benefi (58.0) 0.7
Increase/(decrease) in federal, state and
foreign income taxes payable 13.4 (13.9)
Gain on sale of real estate - (19.7)
Other non cash items 25.1 76.2
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Net cash provided/(used) by operating activiti 3.0 (24.7)
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Cash flows from investing activities
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(Increase)/decrease in short-term investments (2.7) 4.3
Increase in other assets (11.4) -
Additions to property, plant and equipment (55.8) (48.2)
Proceeds from sale of fixed assets 0.1 28.2
- ------------------------------------------------------------------------------
Net cash used by investing activities (69.8) (15.7)
Cash flows from financing activities
- ------------------------------------------------------------------------------
Net increase in short-term
debt (maturities 90 days or less) 91.9 45.8
Short-term debt having maturities more than 90 days
Proceeds 20.3 -
Payments (17.1) -
Proceeds from issuances of long-term debt 296.5 -
Repayments of long-term debt (327.8) (19.6)
Cash dividends paid (13.5) (13.7)
Stock options exercised 17.2 7.1
Purchase of treasury stock (5.4) (10.4)
- ------------------------------------------------------------------------------
Net cash provided by financing activities 62.1 9.2
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Effect of exchange rate changes on cash (2.1) (2.8)
- ------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (6.8) (34.0)
Cash and equivalents at beginning of period 72.8 73.3
- ------------------------------------------------------------------------------
Cash and cash equivalents at end of period $66.0 $39.3
==============================================================================
-4-
<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statement of Changes in Common Stockholders' Equity
Periods Ended June 29, 1997 and June 30, 1996 (Unaudited)
(In millions)
Second Quarter Six Months
1997 1996 1997 1996
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Common stock
Balance at the beginning
of the period $75.4 $75.4 $75.4 $75.4
------- ------- ------- -------
Balance at the end of the period 75.4 75.4 75.4 75.4
- ------------------------------------------------------------------------------
Additional paid-in capital
Balance at the beginning
of the period 411.8 404.7 409.4 401.9
Stock options exercised - tax 3.0 0.6 3.5 1.1
Issuance of shares in connection
with stock incentive plan 8.3 2.3 10.2 4.6
------- ------- ------- -------
Balance at the end of the period 423.1 407.6 423.1 407.6
- ------------------------------------------------------------------------------
Retained earnings
Balance at the beginning
of the period 1,466.9 1,458.4 1,457.8 1,525.8
Net earnings/(loss) 34.6 (26.0) 50.4 (86.7)
Dividends declared-common stock (6.8) (6.9) (13.5) (13.7)
ESOP dividend tax
benefit received 0.1 0.1 0.1 0.2
------- ------- ------- -------
Balance at the end of the period 1,494.8 1,425.6 1,494.8 1,425.6
- ------------------------------------------------------------------------------
Cumulative translation adjustment
Balance at the beginning
of the period (29.7) - - -
Currency translation adjustment 1.6 - (28.1) -
------- ------- ------- -------
Balance at the end of the period (28.1) - (28.1) -
- ------------------------------------------------------------------------------
Less:
Treasury stock
Balance at the beginning
of the period 1,247.8 1,209.4 1,244.8 1,205.4
Repurchase of common shares 1.0 4.9 5.4 10.4
Issuance of shares in connection
with stock incentive plan (5.5) (1.7) (6.9) (3.2)
------- ------- ------- -------
Balance at the end of the period 1,243.3 1,212.6 1,243.3 1,212.6
- ------------------------------------------------------------------------------
Deferred compensation
Balance at the beginning
of the period 39.2 80.3 39.6 80.0
Stock options - 1993 (0.3) (0.2) (0.6) (0.5)
Restricted stock (0.1) (0.1) (0.2) 0.5
ESOP Trust (18.9) (19.4) (18.9) (19.4)
------- ------- ------- -------
Balance at the end of the period 19.9 60.6 19.9 60.6
- ------------------------------------------------------------------------------
Total common stockholders' equity $702.0 $635.4 $702.0 $635.4
==============================================================================
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<PAGE>
Polaroid Corporation and Subsidiary Companies
Notes to Condensed Consolidated Financial Statements (Unaudited)
Basis of Presentation
- ---------------------
The condensed 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. This is an interim unaudited report, subject to year end audit and
adjustments. The information furnished, however, reflects all adjustments
(consisting of normal recurring accruals) which, in the opinion of management,
are necessary for a fair presentation of the results of the interim period.
Foreign Currency Translation
- ----------------------------
Effective January 1, 1997, the Company has determined that the local currency
is the functional currency for most of its subsidiaries outside of the U.S. The
U.S. dollar will continue to be the functional currency for subsidiaries in
highly inflationary economies. This change did not have a material impact on
the Company's statement of financial position as of January 1, 1997.
Restructuring Charges and Other
- -------------------------------
In December 1995, the Company announced a plan to make fundamental changes in
its operating structure. This 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 total pre-tax charge for restructuring and other
expenses related to this plan was $280.0 million. Of that amount, $110.0
million was recorded in the first quarter of 1996 and $170.0 million was
recorded in the fourth quarter of 1995. The December 1995 early retirement and
severance programs are expected to result in the elimination of a total of
approximately 1,570 positions worldwide (approximately 810 from manufacturing
and 760 from marketing, research, engineering and administrative functions).
The 1996 first quarter pre-tax charge of $110.0 million represents the balance
of severance and pension enhancement costs and inventory write downs related to
the December 1995 program. In the first quarter of 1996, the pre-tax costs
related to the severance program were approximately $55.4 million.
Additionally, approximately $44.6 million represents enhanced retirement
benefits provided under the early retirement program that will be funded from
the Company's pension plans.
Total cash severance payments related to the December 1995 program will be
approximately $110.4 million. As of June 29, 1997, 1,516 of these terminations
and $91.6 million of related cash severance payments were made. The remaining
balance of cash severance payments of approximately $18.8 million is expected
to be paid in the second half of 1997.
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<PAGE>
Legal Proceedings
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Certain legal proceedings to which the Company is a party are discussed in Part
II, Item 1 of this filing on Form 10-Q.
Independent Auditors' Report
- ----------------------------
The June 29, 1997 and June 30, 1996 condensed consolidated financial statements
included in this filing on Form 10-Q have been reviewed by KPMG Peat Marwick
LLP, independent certified public accountants, in accordance with established
professional standards and procedures for such review. The report by KPMG Peat
Marwick LLP commenting upon their review of the condensed consolidated
financial statements appears on the following page.
New Accounting Standards
- ------------------------
In February 1997, the Financial Accounting Standards Board (FASB) issued
Financial Accounting Standards No. 128, "Earning Per Share" (FAS 128). FAS 128
supersedes Accounting Principle Board Opinion No.15 and specifies the
computation, presentation and disclosure requirements for earnings per share.
FAS 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997 and early application is not permitted.
Accordingly, the Company will apply FAS 128 for the quarter and year ended
December 31, 1997 and restate prior period information as required under the
statement. The Company does not expect the adoption of FAS 128 to have a
material impact on reported earnings per share.
In June 1997, the FASB issued Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which are effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
effects of these new standards.
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<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Polaroid Corporation:
We have reviewed the condensed consolidated balance sheet of Polaroid
Corporation and subsidiary companies as of June 29, 1997 and June 30, 1996, and
the related condensed consolidated statements of earnings for the three and six-
month periods then ended and cash flows and changes in common stockholders'
equity for the six-month periods then ended. These condensed consolidated
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Polaroid Corporation and
subsidiaries as of December 31, 1996, and the related consolidated statements
of earnings, cash flows and changes in common stockholders' equity for the year
then ended (not presented herein); and in our report dated January 28, 1997, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
July 16, 1997
-8-
<PAGE>
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Second Quarter Results
- ----------------------
Worldwide sales of Polaroid Corporation and its subsidiaries were $564.9
million in the second quarter of 1997 compared with sales of $581.6 million in
the second quarter of 1996. In the second quarter of 1997, worldwide shipments
of instant film decreased moderately while worldwide shipments of instant
cameras increased moderately compared with the same period last year.
Worldwide shipments of conventional film were moderately higher and worldwide
shipments of videotapes were significantly lower in the second quarter of 1997
than in the second quarter of 1996.
In the second quarter of 1997, sales in the United States were $294.0 million,
an increase of 6% compared with $277.3 million in the second quarter of 1996.
U.S. shipments of instant film were flat in the second quarter of 1997 compared
to the same period a year ago. However, shipments of instant cameras were up
substantially in the second quarter of 1997 compared to the second quarter of
1996.
International sales decreased to $270.9 million in the second quarter of 1997
from $304.3 million in the same period a year ago. These sales were adversely
affected by the U.S. dollar, which strengthened approximately 13% against the
Japanese yen and the German mark, compared to the second quarter of 1996. Also,
international sales were negatively affected by sales in Russia, which were
substantially lower than in the second quarter of 1996. However, the majority
of developing markets continued to show growth and the mature markets,
particularly Japan, also experienced healthy revenue growth in local
currencies. While the Company believes that developing markets in total present
particularly attractive opportunities, such markets tend to be significantly
less stable than more established markets. There can be no assurance that
developing markets will continue to produce favorable results.
Gross margins as a percent of sales increased to 46% for the second quarter of
1997 from 45% for the second quarter of 1996. Marketing, research, engineering
and administrative expenses in the second quarter of 1997 and 1996 were $195.8
million and $203.8 million, respectively.
Profit from operations increased 14% to $64.2 million in the second quarter of
1997 from $56.1 million in the second quarter of 1996. The increase in
operating profit is primarily attributable to lower overhead costs, reduced
manufacturing costs from restructuring and continued improvement in reducing
losses in the Company's digital imaging businesses.
In the second quarter of 1997, other expense was $.3 million compared to other
income of $4.3 million in the second quarter of 1996. Other income in the
second quarter of 1996 includes a $4.2 million gain on the sale of real estate.
Interest expense was $11.5 million and $11.7 million in the second quarter of
1997 and 1996, respectively.
Income tax expense was $17.8 million in the 1997 second quarter compared to
$20.2 million in the 1996 second quarter. The effective tax rate decreased to
34% in the second quarter of 1997 from 41% in the second quarter of 1996 due to
changes in the Company's financial and operational structure.
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<PAGE>
Second Quarter Results (continued)
- ----------------------------------
Second quarter 1997 net earnings were $34.6 million, or $.76 primary earnings
per common share, a 33% increase versus the comparable second quarter 1996
earnings of $26.0 million, or $.57 primary earnings per common share. The
second quarter 1996 comparable earnings exclude an extraordinary loss of $54.5
million, or $1.20 primary loss per common share and a pre-tax $4.2 million gain
on the sale of real estate, or $.06 per common share and its related tax
effect. With the extraordinary loss and gain on the sale of real estate, the
net loss for the second quarter of 1996 was $26.0 million, or a $.57 primary
loss per common share.
In second quarter of 1996, the Company purchased the conversion rights for
$53.8 million and redeemed $.5 million of principal of the 8% Subordinated
Convertible Debentures due 2001 (the Debentures.) The transaction was
determined to be a substantive modification of the terms of the Debentures and
was accounted for as an extinguishment of debt and the issuance of new debt.
The cost of the conversion rights and the amount of the fair value of the new
debt over the carrying value of the extinguished debt was recorded as an
extraordinary loss of $54.5 million, net of a tax benefit of $.4 million. The
remaining principal balance of the Debentures were repurchased in the fourth
quarter of 1996.
Fully diluted earnings per common share for the second quarter of 1997 was $.75
and were not reported for the second quarter of 1996 because they were greater
than primary earnings per common share.
Six Month Review
- ----------------
Worldwide sales for the first six months of 1997 decreased 2% to $1.02 billion
from $1.04 billion for the first six months of 1996. In the first half of 1997,
worldwide shipments of instant film decreased slightly while worldwide
shipments of instant cameras were flat compared with the same period last year.
Worldwide shipments of conventional film were significantly higher while
worldwide shipments of videotapes were moderately lower in the first half of
1997 than in the first half of 1996.
U.S. sales increased 6% to $483.3 million for the first six months of 1997
compared to $455.3 million for the same period in 1996. In the first half of
1997, instant film shipments in the U.S. were flat and instant camera shipments
in the U.S. were substantially higher than in the first half of 1996.
International sales decreased 8% to $539.1 million for the first six months of
1997 compared to $587.4 million for the same period in 1996, due to the adverse
impact of foreign currency translation and a substantial decline in sales in
Russia. International shipments of instant cameras decreased significantly and
instant film decreased moderately during the first half of 1997 compared to the
same period last year.
Gross margin as a percent of sales was 45% for the first six months of 1997 and
42% for the first six months of 1996. The increase in gross margin reflects the
impact of savings from restructuring and favorable pricing on instant film.
Marketing, research, engineering and administrative expenses for the first six
months of 1997 decreased to $373.9 million from $379.5 million in the first six
months of 1996.
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<PAGE>
Six Month Review (continued)
- ----------------------------
In December 1995, the Company announced a plan to make fundamental changes in
its operating structure. This 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 total pre-tax charge for restructuring and other
expenses related to this plan was $280.0 million. Of that amount, $110.0
million was recorded in the first quarter of 1996 and $170.0 million was
recorded in the fourth quarter of 1995. The December 1995 early retirement and
severance programs are expected to result in the elimination of a total of
approximately 1,570 positions worldwide (approximately 810 from manufacturing
and 760 from marketing, research, engineering and administrative functions).
The 1996 first quarter pre-tax charge of $110.0 million represents the balance
of severance and pension enhancement costs and inventory write downs related to
the December 1995 program. In the first quarter of 1996, the pre-tax costs
related to the severance program were approximately $55.4 million.
Additionally, approximately $44.6 million represents enhanced retirement
benefits provided under the early retirement program that will be funded from
the Company's pension plans.
Profit from operations was $83.5 million in the first six months of 1997
compared to $60.6 million, excluding restructuring and other expenses of $110.0
million, in the first six months of 1996. The increase in operating profit is
primarily due to higher U.S. sales, reduced manufacturing costs and continued
improvement in reducing losses in the Company's digital imaging businesses.
Including the restructuring and other expenses, the loss from operations was
$49.4 million in the first half of 1996.
Other income for the first six months of 1997 was $16.9 million compared to
$21.9 million for the first six months of 1996. In the first half of 1997,
other income includes $15.8 million primarily attributable to the change in the
Company's method of applying Financial Accounting Standards Board Statement No.
52, "Foreign Currency Translation" (FAS 52) for translating the financial
results of most of its foreign subsidiaries from dollar functional to local
currency functional. The change was adopted because of the Company's new
operational and financial structure in Europe and the increased globalization
of the Company's manufacturing since the initial adoption of FAS 52 in 1981.
Other income in the first half of 1996 includes a $19.7 million gain on the
sale of real estate. Interest expense was $22.9 million and $23.3 million in
the first six months of 1997 and 1996, respectively.
Income tax expense was $27.1 million in the first half of 1997 compared to a
tax benefit of $18.6 million in the same period a year ago. For the first half
of 1997, the effective tax rate was 35%, compared to 37% for the first half of
1996.
For the first half of 1997, net earnings were $50.4 million compared to a loss
before extraordinary item for the first half of 1996 of $32.2 million. As
discussed in the section above "Second Quarter Results", the Company recorded
an extraordinary loss of $54.5 million in the first half of 1996. In the first
half of 1996, the net loss was $86.7 million.
On a primary basis, earnings per common share were $1.11 in the first six
months of 1997 compared to a $.70 loss before extraordinary item in the same
period a year ago. In the first half of 1996, the extraordinary item was a
$1.20 loss per common share. The net loss in the first half of 1996 was $1.90
per common share. Fully diluted earnings per common share were $1.10 per share
for the first half of 1997 and were not reported for the first half of 1996
because they were greater than primary earnings per common share.
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<PAGE>
Financial Liquidity and Capital Resources
- -----------------------------------------
As of June 29, 1997, the Company's cash and cash equivalents and short-term
investments amounted to $74.2 million, compared to $78.3 million at December
31, 1996. In addition, working capital increased to $675.0 million at June 29,
1997 from $623.3 at December 31, 1996. The primary source for cash in the first
half of 1997 was net cash provided by financing activities. Capital spending
during the first half of 1997 of $55.8 million was less than depreciation
expense of $62.1 million. Total capital expenditures in 1997 are expected to
be approximately $120.0 million.
During the first half of 1997, the Company also expended cash to make severance
payments of approximately $24.2 million under the December 1995 severance
program, to purchase $5.4 million of the Company's common stock and to pay
$13.5 million of dividends to common stockholders. Total cash severance
payments related to the December 1995 program will be approximately $110.4
million. The remaining balance of cash severance payments of approximately
$18.8 million is expected to be paid in the second half of 1997.
As of June 30, 1996, cash and cash equivalents and short-term investments were
$44.8 million and working capital was $480.4 million. During the period from
June 30, 1996 to June 29, 1997, net cash provided by operating activities more
than offset cash used by investing and financing activities. Capital spending
during the period from June 30, 1996 to June 29, 1997 was $129.4 million, which
exceeded depreciation expense of $118.0 million. The Company expended cash
during the twelve month period from June 30, 1996 to June 29, 1997 to make cash
severance payments under the 1995 first quarter and the December 1995 severance
programs, to purchase the conversion rights of the Company's $140.0 million
Subordinated Convertible Debentures, to purchase treasury stock, and to pay
dividends to common stockholders.
In the first quarter of 1997, the Company replaced its $150.0 million committed
line of credit with a $350.0 million committed line of credit. The line of
credit is available for general corporate purposes and expires in 2001. At the
end of the second quarter of 1997 and 1996, there were no borrowings under
these committed facilities. Gross borrowings from uncommitted lines of credit
for international operations were $184.5 million and $146.5 million at the end
of the second quarter of 1997 and 1996, respectively. Cash balances of $22.6
million at June 29, 1997 were required to support international borrowings and
no such balances were required at June 30, 1996. Additional available,
uncommitted lines of credit for international operations were $60.1 million and
$145.9 million at June 29, 1997 and June 30, 1996, respectively. Gross
borrowings from uncommitted lines of credit for U.S. operations were $33.0
million and $55.0 million at the end of the second quarter of 1997 and 1996,
respectively. As of June 29, 1997 and June 30, 1996, additional available,
uncommitted lines of credit for U.S operations were $157.0 million and $105.0
million, respectively.
In January 1997, the Company issued $300.0 million of debt securities
consisting of $150.0 million 7-1/4% Notes due January 15, 2007 and $150 million
6-3/4% Notes due January 15, 2002. The net proceeds from the sale of the Notes
were used primarily for the payment of $150.0 million principal amount of
7-1/4% Notes due January 15, 1997 and to exercise its right to repurchase the
remaining principal amount of $139.5 million Debentures. The Company also has
available $200.0 million of unsold debt securities remaining from its existing
shelf registration available for general corporate purposes. The Company's
available borrowing capacity is limited by certain debt covenants.
-12-
<PAGE>
Financial Liquidity and Capital Resources (continued)
- -----------------------------------------------------
During the second quarter of 1997, the Company repurchased 27,500 shares of its
common stock for $1.0 million. In the second quarter of 1996, the Company
repurchased 109,765 shares of its common stock for $4.9 million. As of June 29,
1997, the unexpended balance under the Company's $100.0 million common stock
repurchase program, which was approved by the Board of Directors in January
1995, was $36.2 million. The Company may repurchase its common stock on the
open market, in privately negotiated transactions or otherwise (which may
include transactions with Polaroid stock option holders and with Polaroid
retirement plans, including the employee stock ownership plan). 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 December 1995 restructuring program.
Foreign Currency Exchange
- -------------------------
The Company generates a substantial portion of its revenues in international
markets, which subjects its operations to the exposure of currency exchange
fluctuations. The impact of currency fluctuations can be positive or negative
in any given period. The Company's ability to counteract currency exchange
movement is primarily dependent on pricing.
Effective January 1, 1997, the Company has determined that the local currency
is the functional currency for most of its subsidiaries outside of the U.S. The
U.S. dollar will continue to be the functional currency for subsidiaries in
highly inflationary economies.
To minimize the adverse impact of currency fluctuations on its net assets
denominated in a currency other than its functional currency (nonfunctional),
the Company may engage in nonfunctional currency-denominated borrowings. The
Company determines the aggregate amount of such borrowings based on its
forecast of the Company's nonfunctional net asset position and the relative
strength of the functional currency as compared to nonfunctional currencies.
These borrowings create nonfunctional currency-denominated liabilities that
hedge the Company's nonfunctional currency-denominated net assets. Upon receipt
of the borrowed nonfunctional currency-denominated funds, the Company converts
those funds to the functional currency at the spot exchange rate. Exchange
gains and losses on the nonfunctional currency-denominated borrowings are
recognized in earnings as incurred. At June 29, 1997 and June 30, 1996, the
amount of the Company's outstanding short-term debt incurred for hedging
purposes was $166.6 million and $126.9 million, respectively.
-13-
<PAGE>
Foreign Currency Exchange (continued)
- -------------------------------------
From time to time, the Company may use over-the-counter currency exchange swaps
to reduce the interest expense incurred through the borrowings described above
and to replace the hedge created by those borrowings. When a currency exchange
swap is used to replace a hedge, the currency received by the Company in the
spot market component of the currency 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 currency
exchange swap contract is amortized to earnings over the life of the contract.
Exchange gains or losses on the currency obligation component of the forward
contract are recognized in earnings as incurred in each accounting period. The
Company does not enter into currency exchange swaps for trading purposes. There
were no currency exchange swap contracts outstanding at June 29, 1997. The
aggregate notional value of the Company's short-term foreign exchange swap
contracts was $6.6 million at June 30, 1996.
When the Company may not have sufficient flexibility to increase prices in the
local currency to reflect any appreciation of the U.S. dollar, the Company may,
from time to time, also purchase U.S. dollar call options. The term of these
call options typically does not exceed 18 months. 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. At June 29, 1997, option contracts
with a notional value of $229.0 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 nonfunctional 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.
New Accounting Standards
- ------------------------
In February 1997, the Financial Accounting Standards Board issued Financial
Accounting Standards No.128, "Earning Per Share" (FAS 128). FAS 128 supersedes
Accounting Principle Board Opinion No.15 and specifies the computation,
presentation and disclosure requirements for earnings per share. FAS 128 is
effective for financial statements for both interim and annual periods ending
after December 15, 1997 and early application is not permitted. Accordingly,
the Company will apply FAS 128 for the quarter and year ended December 31, 1997
and restate prior period information as required under the statement. The
Company does not expect the adoption of FAS 128 to have a material impact on
reported earnings per share.
In June 1997, the FASB issued Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which are effective for fiscal years
beginning after December 15, 1997. The Company is currently evaluating the
effects of these new standards.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 1. - Legal Proceedings
---------------------------
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 June 29, 1997 and June 30, 1996 was $4.0 million and $5.1 million,
respectively. The Company currently estimates that the majority of the $4.0
million amount reserved for environmental liabilities on June 29, 1997 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.
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-
<PAGE>
Item 4. Submission of Matters to Vote of Security Holders
On May 6, 1997 the Company held its annual meeting of stockholders. The owners
of 92% of the shares of common stock entitled to vote at this meeting were
present either in person or by proxy. The following are the voting results for
the meeting:
* the stockholders approved the Board of Directors Stock Plan with
33,873,143 votes in favor, 4,341,421 votes against, 387,972 abstentions and
broker nonvotes.
* the stockholders approved the amendments to the 1993 Stock Incentive Plan
with 26,889,867 votes in favor, 11,343,031 votes against, 355,038
abstentions and broker nonvotes.
* the stockholders ratified the appointment of KPMG Peat Marwick LLP,
Independent Public Accountants, as the Company's auditors for 1997 with
40,308,638 votes in favor, 610,822 votes against, 252,415 abstentions and
broker nonvotes.
* the stockholders elected the nominated slate of directors to hold office
until the next annual meeting with the following votes:
For Withheld
---------- ---------
Gary T. DiCamillo 39,710,852 1,416,023
Ralph E. Gomory 35,282,085 5,889,790
Frank S. Jones 39,553,213 1,618,662
John W. Loose 35,421,857 5,750,018
Albin F. Moschner 39,733,415 1,438,460
Kenneth H. Olsen 39,538,822 1,633,053
Ronald F. Olsen 39,699,668 1,472,207
Ralph Z. Sorenson 39,548,605 1,623,270
Delbert C. Staley 39,552,907 1,618,968
Bernee D.L. Strom 39,711,993 1,459,882
Alfred M. Zeien 39,593,161 1,578,714
-16-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits:
(10) Amendment No. 1 dated as of May 30, 1997 to the $350,000,000 Credit
Agreement dated as of March 19, 1997 among Polaroid Corporation,
Morgan Guaranty Trust Company of New York, as Agent, and Banks listed
therein.
(11) Computation of earnings per share.
(15) Letter from KPMG Peat Marwick LLP re unaudited interim financial
information.
(27) Financial Data Schedule
(b) Reports on Form 8-K:
During the second quarter of 1997, the Company did not file any
reports on Form 8-K.
-17-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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)
August 11, 1997 /s/ William J. O'Neill, Jr.
--------------- --------------------------------
William J. O'Neill, Jr.
Executive Vice President and
Chief Financial Officer
-18-
Exhibit 10
AMENDMENT NO. 1 TO CREDIT AGREEMENT
AMENDMENT dated as of May 30, 1997 to the $350,000,000
Credit Agreement dated as of March 19, 1997 (the "Credit
Agreement") among POLAROID CORPORATION (the "Company"), the BANKS
party thereto (the "Banks"), MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent (the "Agent") and THE FIRST NATIONAL BANK OF
BOSTON, as Co-Agent.
WHEREAS, the Company wishes (i) to amend the definition of
"Consolidated Adjusted Net Worth" to exclude therefrom the effect
of certain adjustments resulting from foreign currency
translations and (ii) to amend the definition of "Consolidated
EBIT" to eliminate certain adjustments for the effects of the
Company's revised application of Statement of Financial
Accounting Standard No. 52;
NOW, THEREFORE, the undersigned parties agree as follows:
SECTION 1. Defined Terms, 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 becomes effective, refer to the Credit Agreement
as amended hereby.
SECTION 2. Amendment of Definitions. (a) The definition of
"Consolidated Adjusted Net Worth" in Section 1.01 of the Credit
Agreement 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,
minus (ii) all write-ups after December 31, 1996 in the book
value of any asset owned by the Company or a Consolidated
Subsidiary, minus (iii) 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, plus (iv) without duplication, the
cumulative foreign currency translation adjustment at such
date if it reduced Consolidated Stockholders' Equity (or
minus the cumulative foreign currency translation adjustment
at such date if it increased Consolidated Stockholders'
Equity), but only to the extent that such cumulative
adjustment (whether positive or negative) does not exceed
$85,000,000.
<PAGE>
(b) The definition of "Consolidated EBIT" in Section 1.01 of
the Credit Agreement 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), plus (ii) to the extent
deducted in determining Consolidated Net Income for such period,
interest expense and federal, state and foreign income taxes,
minus (iii) if such period includes the first Fiscal Quarter of
1997, the exchange gain of $15.6 million during such Fiscal
Quarter caused by a currency exchange remeasurement resulting
from the Company's revised application of Statement of Financial
Accounting Standard No. 52.
SECTION 3. Governing Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of New York.
SECTION 4. Counterparts; Effectiveness. This Amendment 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 shall become
effective when the Agent shall have received from each of the Company
and the Required Banks either a counterpart hereof signed by such
party or facsimile or other written confirmation that such party has
signed a counterpart hereof.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have caused this
Amendment to be duly executed by their respective authorized officers
as of the day and year first above written.
POLAROID CORPORATION
By: /s/ Ralph M. Norwood
----------------------------------
Name: Ralph M. Norwood
Title: Vice President and Treasurer
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ Deborah A. Brodheim
----------------------------------
Name: Deborah A. Brodheim
Title: Vice President
ABN AMRO BANK N.V., BOSTON BRANCH
By: /s/ Carol A. Levine
----------------------------------
Name: Carol A. Levine
Title: Senior Vice President
By: /s/ James E. Davis
----------------------------------
Name: James E. Davis
Title: Group Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Grace A. Barnett
----------------------------------
Name: Grace A. Barnett
Title: Vice President
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Patrick D. Bonebrake
----------------------------------
Name: Patrick D. Bonebrake
Title: Assistant Vice President
-3-
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
----------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By: /s/ Stephen A. Wiedemann
----------------------------------
Name: Stephen A. Wiedemann
Title: Director
By: /s/ Thomas A. Foley
----------------------------------
Name: Thomas A. Foley
Title: Assistant Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Jeffrey Lubatkin
----------------------------------
Name: Jeffrey Lubatkin
Title: Assistant Vice President
ROYAL BANK OF CANADA
By: /s/ Sheryl L. Greenberg
----------------------------------
Name: Sheryl L. Greenberg
Title: Senior Manager
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By: /s/ Leo E. Pagarigan
----------------------------------
Name: Leo E. Pagarigan
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By: /s/ John P. Rafferty
----------------------------------
Name: John P. Rafferty
Title: Vice President
-4-
<PAGE>
FLEET NATIONAL BANK
By: /s/ Roger C. Boucher
----------------------------------
Name: Roger C. Boucher
Title: Vice President
MELLON BANK, N.A.
By: /s/ Joseph F. Bond, Jr.
----------------------------------
Name: Joseph F. Bond, Jr.
Title: Vice President
NATIONSBANK, N.A.
By: /s/ Patricia G. McCormack
----------------------------------
Name: Patricia G. McCormack
Title: Senior Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Donald V. Davis
----------------------------------
Name: Donald V. Davis
Title: Vice President
-5-
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
-----------------------------------------------
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SECOND QUARTER, 1997
PRIMARY COMPUTATION
- -------------------
Net earnings per statement of earnings $ 34.6
========
Weighted average number of common
shares outstanding 45.0
Weighted average number of common
stock equivalents .7
--------
Weighted average number of common
shares, as adjusted 45.7
========
Primary earnings per common share $ .76
========
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SECOND QUARTER, 1997
FULLY DILUTED COMPUTATION
- -------------------------
Net earnings per statement of earnings $ 34.6
========
Weighted average number of common
shares outstanding used for primary computation 45.0
Weighted average number of common
stock equivalents .9
--------
Weighted average number of common
shares, as adjusted 45.9
========
Fully diluted earnings per common share $ .75
========
-2-
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SIX MONTHS ENDED JUNE 29, 1997
PRIMARY COMPUTATION
- -------------------
Net earnings per statement of earnings $ 50.4
========
Weighted average number of common
shares outstanding 44.9
Weighted average number of common
stock equivalents .6
--------
Weighted average number of common
shares, as adjusted 45.5
========
Primary earnings per common share $ 1.11
========
-3-
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SIX MONTHS ENDED JUNE 29, 1997
FULLY DILUTED COMPUTATION
- -------------------------
Net earnings per statement of earnings $ 50.4
========
Weighted average number of common
shares outstanding used for primary computation 44.9
Weighted average number of common
stock equivalents 1.0
--------
Weighted average number of common
shares, as adjusted 45.9
========
Fully diluted earnings per common share $ 1.10
========
-4-
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SECOND QUARTER, 1996
PRIMARY COMPUTATION
- -------------------
Earnings before extraordinary item per statement of earnings $ 28.5
Extraordinary item (54.5)
--------
Net loss $(26.0)
========
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 earnings/(loss) per common share:
Earnings before extraordinary item $ .63
Extraordinary item (1.20)
--------
Net loss $ (.57)
========
-5-
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SECOND QUARTER, 1996
FULLY DILUTED COMPUTATION
- -------------------------
Earnings before extraordinary item per statement of earnings $ 28.5
Add: effect of elimination of after-tax interest expense
on $139.5 million 8% convertible debentures 1.7
=========
Earnings before extraordinary item, as adjusted 30.2
Extraordinary item (54.5)
---------
Net loss, as adjusted $ (24.3)
=========
Weighted average number of common
shares outstanding used for primary computation 45.5
Weighted average number of common
stock equivalents 1.1
Add: effect of converting $139.5 million
8% convertible debentures into common stock 4.3 (A)
---------
Weighted average number of common shares
outstanding, as adjusted 50.9
=========
Fully diluted earnings/(loss) per common share:
Earnings before extraordinary item $ .59
Extraordinary item (1.07)
---------
Net loss $ (.48) (B)
=========
(A)Assumes conversion of $139.5 million 8% convertible debentures at a price
of approximately $32.50 per common share in accordance with the terms of
the convertible debentures.
(B)This computation is submitted as an exhibit to the Company's Form 10-Q 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.
-6-
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, 1996
PRIMARY COMPUTATION
- -------------------
Loss before extraordinary item per statement of earnings $ (32.2)
Extraordinary item (54.5)
--------
Net loss $(86.7)
========
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:
Loss before extraordinary item $ (.70)
Extraordinary item (1.20)
--------
Net loss $(1.90)
========
-7-
<PAGE>
POLAROID CORPORATION
COMPUTATION OF EARNINGS PER COMMON SHARE (Continued)
(IN MILLIONS, EXCEPT FOR PER SHARE DATA)
SIX MONTHS ENDED JUNE 30, 1996
FULLY DILUTED COMPUTATION
- -------------------------
Loss before extraordinary item per statement of earnings $(32.2)
Add: effect of elimination of after-tax interest expense
on $139.5 million 8% convertible debentures 3.4
--------
Loss before extraordinary item, as adjusted (28.8)
Extraordinary item (54.5)
--------
Net loss, as adjusted $ (83.3)
========
Weighted average number of common
shares outstanding used for primary computation 45.5
Weighted average number of common
stock equivalents 1.1
Add: effect of converting $140 million
8% convertible debentures into common stock 4.3 (A)
--------
Weighted average number of common shares
outstanding, as adjusted 50.9
========
Fully diluted loss per common share:
Loss before extraordinary item $ (.57)
Extraordinary item (1.07)
--------
Net loss $(1.64) (B)
========
(A)Assumes conversion of $139.5 million 8% convertible debentures at a price
of approximately $32.50 per common share in accordance with the terms of
the convertible debentures.
(B)This computation is submitted as an exhibit to the Company's Form 10-Q 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.
-8-
Exhibit 15
----------
The Board of Directors
Polaroid Corporation
Ladies and Gentlemen:
Re:Registration statements No. 33-36384 on Form S-8, No. 33-44661 on Form
S-3, No. 33-51173 on Form S-8, No. 333-0791 on Form S-3 No. 333-32279
on Form S-8, No. 333-32281 on Form S-8, No. 333-32283 on Form S-8, and
No. 333-32285 on Form S-8 of Polaroid Corporation.
With respect to the subject registration statements, we acknowledge our
awareness of the use therein of our report dated July 16, 1997, related to
our review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such report is
not considered part of a registration statement prepared or certified by an
accountant or a report prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ KPMG Peat Marwick LLP
Boston, Massachusetts
August 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Securities and Exchange Commission Form 10-Q for the quarter ended
June 29, 1997 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-29-1997
<CASH> 66,000
<SECURITIES> 8,200
<RECEIVABLES> 578,700
<ALLOWANCES> (24,300)
<INVENTORY> 561,500
<CURRENT-ASSETS> 1,443,800
<PP&E> 1,982,100
<DEPRECIATION> (1,326,200)
<TOTAL-ASSETS> 2,258,000
<CURRENT-LIABILITIES> 768,800
<BONDS> 496,300
0
0
<COMMON> 75,400
<OTHER-SE> 626,600
<TOTAL-LIABILITY-AND-EQUITY> 2,258,000
<SALES> 1,022,400
<TOTAL-REVENUES> 1,022,400
<CGS> 565,000
<TOTAL-COSTS> 938,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (900)
<INTEREST-EXPENSE> 22,900
<INCOME-PRETAX> 77,500
<INCOME-TAX> 27,100
<INCOME-CONTINUING> 50,400
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,400
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.10
</TABLE>
