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 March 29, 1998
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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 ____________
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 (I.R.S. Employer
incorporation or organization) Identification No.)
549 TECHNOLOGY SQUARE, CAMBRIDGE, MASSACHUSETTS 02139
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 386-2000
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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 May 4, 1998: 44,347,188 shares
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This document contains 16 pages.
Exhibit index appears on page 15
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statement of Earnings (Unaudited)
Periods ended MARCH 29, 1998 and MARCH 30, 1997
(In millions, except per share data)
<TABLE>
<CAPTION>
First Quarter
1998 1997
---- ----
<S> <C> <C>
Net sales:
United States $180.8 $189.3
International 209.8 268.2
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Total net sales 390.6 457.5
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Cost of sales 243.8 259.8
Marketing, research, engineering and administrative expenses 159.8 178.5
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Total costs 403.6 438.3
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Profit/(loss) from operations (13.0) 19.2
Other income/(expense) (1.6) 17.3
Interest expense 12.1 11.4
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Earnings/(loss) before income taxes (26.7) 25.1
Federal, state and foreign income tax expense/(benefit) (9.3) 9.3
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Net earnings/(loss) ($17.4) $15.8
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Basic earnings/(loss) per common share ($0.39) $0.35
Diluted earnings/(loss) per common share ($0.39) $0.35
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Cash dividends per common share $0.15 $0.15
=========================================================================================
</TABLE>
2
<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Balance Sheet
(In millions)
<TABLE>
<CAPTION>
(Unaudited)
March 29, December 31,
Assets 1998 1997
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<S> <C> <C>
Current assets
Cash and cash equivalents $42.3 $68.0
Short-term investments 12.3 11.0
Receivables 497.1 545.1
Inventories:
Raw materials 103.8 91.0
Work-in-process 185.4 192.4
Finished goods 225.9 222.7
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Total inventories 515.1 506.1
Prepaid expenses and other assets 299.3 289.1
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Total current assets 1,366.1 1,419.3
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Property, plant and equipment
Gross property, plant and equipment 1,854.0 1,936.3
Less accumulated depreciation 1,361.8 1,423.8
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Net property, plant and equipment 492.2 512.5
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Deferred tax assets 124.7 124.7
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Other assets 85.5 76.2
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Total assets $2,068.5 $2,132.7
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Liabilities and stockholders' equity
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Current liabilities
Short-term debt $199.4 $241.6
Current portion of long-term debt 199.7 --
Payables and accruals 317.8 277.3
Compensation and benefits 293.6 310.9
Federal, state and foreign income taxes 17.0 32.9
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Total current liabilities 1,027.5 862.7
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Long-term debt 297.1 496.6
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Accrued postretirement benefits 246.4 246.5
Accrued postemployment benefits 43.1 42.5
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Common stockholders' equity
Common stock, $1 par value 75.4 75.4
Additional paid-in capital 423.6 425.2
Retained earnings 1,280.1 1,304.1
Accumulated other comprehensive income (41.9) (39.8)
Less: Treasury stock, at cost 1,281.9 1,279.4
Deferred compensation 0.9 1.1
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Total common stockholders' equity 454.4 484.4
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Total liabilities and stockholders' equity $2,068.5 $2,132.7
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</TABLE>
3
<PAGE>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
Condensed Consolidated Statement of Cash Flows (Unaudited)
Periods Ended March 29, 1998 and March 30, 1997
(In millions)
<TABLE>
<CAPTION>
Cash flows from operating activities 1998 1997
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<S> <C> <C>
Net earnings/(loss) ($17.4) $15.8
Depreciation of property, plant and equipment 25.6 31.0
Decrease in receivables 47.6 5.1
Increase in inventories (4.3) (1.7)
Increase in prepaids and other assets (11.0) (16.6)
Increase/(decrease) in payables and accruals 34.3 (44.5)
Decrease in compensation and benefits (12.0) (27.4)
Increase/(decrease) in federal, state and foreign income taxes payable (14.2) 7.9
Other non cash items (40.4) (15.5)
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Net cash provided/(used) by operating activities 8.2 (45.9)
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Cash flows from investing activities
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Increase in short-term investments (1.3) --
Increase in other assets (9.3) (1.0)
Additions to property, plant and equipment (34.9) (28.0)
Proceeds from sale of property, plant and equipment 60.7 --
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Net cash provided/(used) by investing activities 15.2 (29.0)
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Cash flows from financing activities
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Net increase/(decrease) in short-term debt (maturities 90 days or less) (41.0) 36.2
Short-term debt having (maturities over 90 days):
Proceeds 24.3 8.0
Payments (25.5) (8.3)
Proceeds from issuances of long-term debt -- 295.6
Repayments of long-term debt -- (290.4)
Cash dividends paid -- (6.7)
Proceeds from issuance of shares in connection with stock incentive plan 3.3 3.2
Purchase of treasury stock (11.4) (4.4)
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Net cash provided/(used) by financing activities (50.3) 33.2
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Effect of exchange rate changes on cash 1.2 (1.6)
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Net decrease in cash and cash equivalents (25.7) (43.3)
Cash and equivalents at beginning of period 68.0 72.8
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Cash and cash equivalents at end of period $42.3 $29.5
====================================================================================================
</TABLE>
4
<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. Certain prior year
amounts have been reclassified to conform to the current year's presentation.
New Accounting Standards
- ------------------------
Effective January 1, 1998, the Company adopted Financial Accounting Standards
Board Statement No. 130, "Reporting Comprehensive Income" (FAS 130) which
establishes standards for reporting and display of comprehensive income and its
components in a full set of financial statements. For the Company, comprehensive
income includes net earnings and unrealized gains and losses from currency
translation. Prior periods presented for comparative purposes have been
formatted to comply with the requirements of FAS 130.
Effective January 1, 1998, the Company adopted American Institute of Certified
Public Accountants' Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" (SOP 98-1) which
establishes guidelines for the accounting for the costs of all computer software
developed or obtained for internal use. SOP 98-1 must be applied on a
prospective basis as of the adoption date. Under SOP 98-1, certain payroll and
related costs for Company employees working on the application of development
stage projects as defined in the SOP for internal use computer software must be
capitalized and amortized over the expected useful life of the software.
Previously, the Company had expensed these costs as incurred. The adoption of
SOP 98-1 did not have a material impact on the Company's results of operations
in the first quarter of 1998 or financial position at March 29, 1998.
Foreign Currency Translation
- ----------------------------
Effective January 1, 1997, the Company 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.
Earnings Per Common Share
- -------------------------
In December 1997, the Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings Per Share" (FAS 128). All previously reported
earnings per share information presented has been restated to reflect the impact
of adopting FAS 128.
Under FAS 128, basic earnings/(loss) per common share are computed by dividing
net earnings/(loss) available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings/(loss) per
common share reflect the maximum dilution that would have resulted from the
assumed exercise and share repurchase related to dilutive stock options and from
performance shares and are computed by dividing net earnings/(loss) by the
weighted average number of common shares and all dilutive securities
outstanding.
5
<PAGE>
EPS Reconciliation
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The reconciliation of the numerators and denominators of the basic and diluted
earnings/(loss) per common share computations for the Company's reported net
earnings/(loss) is as follows: (in millions except per share amounts)
Per
Share
Earnings/(Loss) Shares Amount
--------------- ------ ------
Period ended March 29, 1998
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Basic loss per share $ (17.4) 44.5 $(.39)
======= ==== =====
Diluted loss per share $ (17.4) 44.5* $(.39)
======= ==== =====
Period ended March 30, 1997
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Basic earnings per share $ 15.8 44.8 $ .35
======= ==== =====
Diluted earnings per share $ 15.8 45.3* $ .35
======= ==== =====
* At March 29, 1998 and March 30, 1997, stock options for shares of common
stock totaling 4.2 million and 1.0 million, respectively, were outstanding
but were not included in the calculations of diluted earnings/(loss) per
share because the effects were anti-dilutive. In addition, the effect of .2
million outstanding performance shares at March 29, 1998 were not included
since the effect was antidilutive. At March 30, 1997, the effect of .1
million outstanding performance shares was not included since the
performance criteria were not met.
The total number of common shares outstanding were 44.5 million and 44.8 million
as of March 29, 1998 and March 30, 1997, respectively.
Comprehensive Income
- --------------------
The Company's total of comprehensive income/(loss) was as follows: (in millions)
Period ended
March 29, 1998 March 30, 1997
-------------- --------------
Net earnings/(loss) $(17.4) $ 15.8
Other comprehensive income:
Currency translation adjustment (2.1) (29.7)
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Total comprehensive income/(loss) $(19.5) $(13.9)
====== ======
6
<PAGE>
Restructuring Charge
- --------------------
As part of the restructuring charge recognized in the fourth quarter of 1997,
the Company recorded a charge of approximately $142.0 million related to
payments to be made under an involuntary severance program under which
approximately 1,800 employees will leave the Company (approximately 40% from
manufacturing and 60% from non-manufacturing jobs) over approximately 18 months.
As of March 29, 1998, approximately 340 employees were terminated under this
program. Through March 29, 1998, the Company has incurred approximately $15.0
million of the amount accrued, in costs related to this program.
Legal Proceedings
- -----------------
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 March 29, 1998 and March 30, 1997 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.
7
<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 March 29, 1998 and the related
condensed consolidated statements of earnings and cash flows for the three-month
periods ended March 29, 1998 and March 30, 1997. 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 subsidiary
companies as of December 31, 1997, 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 27, 1998, 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, 1997, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
KPMG Peat Marwick LLP
Boston, Massachusetts
April 8, 1998
8
<PAGE>
Item 2. Management's Discussion and Analysis
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of Financial Condition and Results of Operations
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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.
First Quarter Results
- ---------------------
Worldwide sales of Polaroid Corporation and its subsidiaries were $390.6 million
in the first quarter of 1998 compared to $457.5 million in the first quarter of
1997. The principal reasons for this decrease were lower sales of instant film
and, to a lesser degree, a stronger U.S. dollar. On a unit basis, worldwide
shipments of cameras decreased significantly and worldwide shipments of instant
film decreased substantially. Conventional film shipments declined moderately
while shipments of videotapes increased moderately as compared to the same
period in the prior year.
Sales in the United States during the first quarter of 1998 totaled $180.8
million versus $189.3 million recorded in the first quarter of 1997. The
decrease was primarily due to lower sales of instant film, which was adversely
influenced by adjustments in dealer inventory levels. On a unit basis, the
Company's shipments of instant cameras decreased significantly and shipments of
instant film decreased moderately. At the retail level, unit volumes of instant
cameras were flat versus the first quarter last year and integral film was down
less than 5%. Shipments of conventional film increased moderately and shipments
of videotapes increased significantly.
International sales declined from $268.2 million in the first quarter of 1997 to
$209.8 million in the first quarter of 1998. The major reasons for this
reduction were a decline in instant film sales and, to a lesser degree, the
strengthening of the U.S. dollar. The decline was also partly attributable to
weaknesses in developing markets in Asia. On a unit basis, shipments of instant
cameras were down significantly and shipments of instant film declined
substantially.
Gross margin, as a percent of sales, decreased to 38% in the first quarter of
1998 from 43% in the first quarter of 1997. The decrease was primarily due to
lower sales of instant film and the adverse impact of a stronger U.S. dollar.
Marketing, research, engineering and administrative expenses were reduced from
$178.5 million in the first quarter of 1997 to $159.8 million in the first
quarter of 1998. This overhead decrease of $18.7 million was due to lower
variable selling, marketing and administrative expenses, and a stronger U.S.
dollar.
The loss from operations for the first quarter of 1998 was $13.0 million
compared to an operating profit of $19.2 million in the first quarter of 1997.
The decrease was largely due to lower sales of instant film and, to a lesser
degree, the adverse impact of foreign exchange. These adverse factors were
offset in part by decreased overhead expenses and reductions in losses in the
Company's digital imaging business.
In the first quarter of 1998, the net of other income and expense was an expense
of $1.6 million compared to income of $17.3 million in 1997. The first quarter
1997 other income included a $15.8 million gain 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.
9
<PAGE>
First Quarter Results (continued)
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The income tax benefit was $9.3 million in the first quarter of 1998 compared to
a tax expense of $9.3 million in the same period a year ago. The effective
income tax rate was 35% for the first quarter of 1998 compared to 37% in the
same period last year.
The net loss for the first quarter of 1998 was $17.4 million, or $.39 basic loss
per common share, compared to net earnings of $15.8 million, or $.35 basic
earnings per common share for the first quarter of 1997. Excluding the net
after-tax foreign currency exchange gain primarily attributable to the change in
the Company's method of applying FAS 52, basic earnings per common share were
$.13 in the first quarter of 1997. Diluted loss per common share and diluted
earnings per common share were the same as basic loss per common share and basic
earnings per common share in both the first quarter of 1998 and 1997,
respectively.
Financial Liquidity and Capital Resources
- -----------------------------------------
As of March 29, 1998, the Company's cash and cash equivalents and short-term
investments amounted to $54.6 million, compared to $79.0 million at December 31,
1997. The primary sources of cash in the first quarter of 1998 were cash flows
provided by investing and operating activities. These sources were more than
offset by cash used by financing activities. In addition, working capital
decreased to $338.6 million at March 29, 1998 from $556.6 at December 31, 1997.
This decrease was primarily a result of reclassifying $199.7 million of 8%
Notes, due March 15, 1999, from long-term to short-term debt.
In the first quarter of 1998, capital spending totaled $34.9 million and
depreciation expense was $25.6 million. This compares with capital expenditures
of $28.0 million and depreciation expense of $31.0 million during the first
quarter of 1997. Capital spending in both years is a combination of on-going
capital programs and spending related to new products.
During the first quarter of 1998, the Company also expended cash to reduce
short-term borrowings by $42.2 million and to make payments relating to the 1997
involuntary severance program.
As part of the Company's December 1997 restructuring program, the Company sold
its underutilized chemical manufacturing facility in Freetown, Mass. for $55
million in the first quarter of 1998.
In March 1997, the Company executed a $350.0 million credit agreement which
provides committed funds for general corporate purposes. This agreement expires
at the end of 2001 and is subject to certain debt covenants which limit the
Company's borrowing capacity. At the end of the first quarter of 1998, there
were no borrowings under this facility. Gross borrowings from the Company's
international uncommitted lines of credit were $142.2 million at the end of the
first quarter of 1998. Cash balances of $9.5 million at March 29, 1998 were
required to support international borrowings. Additional available,
international uncommitted lines of credit were $106.4 million at March 29, 1998.
Gross borrowings from uncommitted lines of credit for U.S. operations were $57.2
million at the end of the first quarter of 1998. As of March 29, 1998,
additional available, uncommitted lines of credit for U.S operations were $125.0
million. In the first quarter of 1998, the Company reclassified $199.7 million
of 8% Notes, due March 15, 1999, from long-term to short-term debt. The Company
plans to refinance this debt on a long term basis upon maturity.
The Company also has available for issuance $200 million of debt securities
under a shelf registration statement filed with the Securities and Exchange
Commission.
10
<PAGE>
Financial Liquidity and Capital Resources (continued)
- -----------------------------------------------------
In October 1997, the Company's Board of Directors authorized as many as 5
million shares to be repurchased over three years. During the first quarter of
1998, the Company repurchased 253,000 shares of its common stock at a cost of
$11.4 million. As of March 29, 1998, up to 3.7 million shares remain to be
purchased under the current program. It is the Company's policy to repurchase
its common stock on the open market, in privately negotiated transactions or
otherwise (which may include transactions 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 (including payment of the 8% Notes refered to above), to fund
planned capital expenditures, to make payments associated with the December 1997
restructuring program, to pursue future growth opportunities and to fund other
corporate requirements.
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 in local markets.
Effective January 1, 1997, the Company 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 net assets
denominated in currencies other than the relevant functional currency
(nonfunctional currencies), the Company may engage in nonfunctional
currency-denominated borrowings. The Company determines the aggregate amount of
such borrowings based on forecasts of each entity's nonfunctional net asset
position and the relative strength of the functional currencies compared to the
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 March 29, 1998, the amount of the Company's outstanding short-term
debt incurred for hedging purposes was approximately $142 million.
11
<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 foreign 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. The aggregate notional value of the Company's short-term foreign
exchange swap contracts was $31 million at March 29, 1998.
Since the Company has limited flexibility to increase prices in local currency
to offset the adverse impact of foreign exchange, the Company may 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 typically does not buy call
options which can be exercised prior to the expiration date, nor does it
typically write options or purchase call options for trading purposes. The
Company amortizes premiums over the term of the option and defers any gains for
its call options activity until the option exercise date. At March 29, 1998,
option contracts with a notional value of $254 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 regular
reports to the Company's management detailing the foreign currency activities.
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 June 1997, the Financial Accounting Standards Board (FASB) issued Financial
Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (FAS 131) that requires companies to determine reportable
segments based on how management makes decisions about allocating resources to
the segments and measures their performance. Disclosures for segments are
similar to those required under current standards. However, certain new
information and quarterly disclosures will be required. In addition, new
entity-wide disclosures will be required about products and services and the
countries in which material assets are located and that report material
revenues. Prior period information disclosed will be restated to comply with FAS
131. The Company will be adopting FAS 131 in 1998 and it will be applicable for
the Company's year end disclosures. The disclosure requirements under FAS 131
for interim quarters will be applicable for the Company's first quarter
disclosures in 1999. The Company is still evaluating the effect of this
statement on its reported segment information.
12
<PAGE>
New Accounting Standards (continued)
- ------------------------------------
In February 1998, the FASB issued Financial Accounting Standard No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits" (FAS
132). The implementation of FAS 132 will revise certain footnote disclosure
requirements and add certain new disclosures related to pension and other
retiree benefit plans. However, it does not change the measurement or
recognition requirements for those plans. Implementation of FAS 132 is required
for year end 1998 disclosures.
Year 2000 Date Conversion
- -------------------------
The Year 2000 problem is the result of computer programs being written with two
digits instead of four digits to define the applicable year. Without
modifications and conversions, the Year 2000 problem could have a material
impact on the operations of the Company. However, the Company's management has
initiated a company-wide program to prepare the Company's computer systems for
the Year 2000. A comprehensive review of the Company's computer systems and
software has been conducted to identify the systems and software that could be
affected by this issue. A plan to resolve this issue is currently being
developed and implemented. The Company presently believes that with
modifications to existing systems and software and converting to new systems and
software as part of the Company's effort to streamline its operations, the Year
2000 problem, as it applies to the Company's own systems and software, should
not pose a significant operational problem to the Company. The Company expects
the Year 2000 related modifications and conversions to be substantially
completed by the middle of 1999. The cost to modify existing software is
expected to be approximately $10 to $15 million, a small portion of which has
been expended through March 29, 1998. The Company is also reviewing the possible
impact of the Year 2000 problem on its customers and suppliers. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be converted on a timely basis or that a failure to convert by another
company, or a conversion that is incompatible with the Company's systems, would
not have a material adverse effect on the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
Not applicable.
13
<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. The Company's aggregate reserve
for these liabilities as of March 29, 1998 was $2.0 million. The Company
currently estimates that the majority of the $2.0 million amount reserved for
environmental liabilities on March 29, 1998 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 Company will continue to
accrue in its reserve such amounts as management believes appropriate from time
to time as circumstances warrant.
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.
Item 2. Changes in Securities and Use of Proceeds
- -------------------------------------------------
None.
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
None in the first quarter of 1998.
Item 5. Other Information
- -------------------------
Not applicable.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits:
(10.1) Employment Agreement dated as of March 19, 1998 between Polaroid
Corporation and Judith G. Boynton
(10.2) Change in Control Severance Agreement dated as of April 13, 1998
between Polaroid Corporation and Judith G. Boynton
(10.3) Promissory Note dated as of April 3, 1998 between Polaroid
Corporation and Joseph G. Parham, Jr.
(12) Ratio of Earnings to Fixed Charges
(15) Letter from KPMG Peat Marwick LLP re unaudited interim financial
information.
(27) Financial Data Schedule
(27.1) Restated Financial Data Schedule
(b) Reports on Form 8-K:
During the first quarter of 1998, the Company did not file any
reports on Form 8-K.
15
<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)
May 7, 1998 Judith G. Boynton
-----------------
Judith G. Boynton
Executive Vice President and
Chief Financial Officer
16
March 19, 1998
Ms. Judith Boynton
1200 North Lake Shore Drive
Apartment 602
Chicago, IL 60610
Dear Judith:
We are delighted to offer you a position as Executive Vice President and Chief
Financial Officer with Polaroid Corporation with an anticipated start date of
April 13, 1998. This letter will serve to confirm our agreements and the
arrangements under which you will be joining us.
You will report to me, the Chairman and Chief Executive Officer, and your
starting salary will be $350,000 per year ($29,166 per month, paid bi-weekly).
Additional terms and conditions of the offer are set forth below:
Sign-On Bonus. You will receive $100,000 as a sign-on bonus. This bonus will be
paid upon commencement of your employment.
Executive Bonus. You will be entitled to participate in the Company's annual
bonus program for executives as it may exist from time to time. For 1998, you
will be immediately enrolled in the Polaroid Incentive Plan for Executives. This
plan pays a percentage of salary as a bonus opportunity target if the Company
achieves its financial plan. Your bonus opportunity target will be 55% of your
earnings based on 100% attainment of the financial plan. Your bonus for the year
1998, payable in February 1999, will be guaranteed at a minimum $125,000.
Long Term Incentives. You will be a participant in the Company's long term
incentive program, as it may exist from time to time. Currently, the Company's
long term incentives are provided in three parts, as follows, and are subject to
the terms of separate agreements.
I. Stock Options. For 1998 you will receive a Signing Grant of 15,000
stock options. You also receive annual grants, which for 1998 will be a
total of 20,000 options. These Grants will be priced as of your date of
hire. Attachment A is a sample of an agreement.
II. Restricted Stock. You will receive 10,000 shares of restricted stock
that will vest at the rate of 2,500 shares per year as long as you
remain employed by Polaroid.
III. Performance Share Awards. For the three years commencing in 1998 you
will receive a Performance Award of 4,000 shares a year at target based
upon sales growth criteria and Return on Net Assets (RONA) which must
be achieved by the year 2000. The value of the award depends on the
price of Common Stock at the time of the Award and the ability to meet
the performance
<PAGE>
Judith Boynton
March 19, 1998
factors set forth in the Award. It is anticipated that a new three-year
Performance Share Grant will be awarded each year as part of our
long-term executive compensation program. Attachment B is a sample of
an agreement.
Retirement Plans. You are immediately eligible to make 401(K) and voluntary
after-tax contributions through our Polaroid Retirement Savings Plan. The
Company also contributes three percent (3%) of your base pay to the 3%
Retirement Savings Fund. You will be able to invest these contributions in any
of the fifteen investment choices in the Plan. The Company will also contribute
semi-annually five percent (5%) of your base pay into the ESOP Stock Fund. These
ESOP stock contributions are eligible for diversification when you are age 55
and have participated in the Plan for at least ten years. All contributions made
to your account are immediately vested.
You are also eligible to participate in the Polaroid Pension Plan, which is a
cash balance plan with a five-year vesting period. Initially, the Company will
contribute four and one-half percent (4.5%) of your base pay and annual bonus
into the pension plan on your behalf. Amounts contributed in excess of the
statutory limits are placed in the supplemental executive retirement plan.
In addition to the pension benefit set forth above, the Company shall
I. provide a retirement crediting rate equal to three years of credited
benefit accrual for each year of credited benefit accrual earned, for a
period of up to seven years;
II. an opening account balance equal to $350,000; and
III. vest the Retirement Benefit and enhancements set forth in this
Agreement upon completion of three (3) years of credited vested service.
This additional benefit is designed to produce an annuity value approximately
equal to a projected pension benefit from your current employer. Attachment C
provides a estimated summary. This benefit shall be provided through a
supplemental retirement benefit plan.
Polaroid also offers a non-qualified elective deferred compensation plan. This
plan allows you to defer up to fifty percent (50%) of your base salary or annual
bonus until a specific date or until you terminate. More material will be
provided when you join the Company.
Vacation and Benefits. You will be entitled to four (4) weeks vacation annually,
which will be administered under the guidelines of our vacation policy.
You will participate, of course, in all other health, medical, dental, life and
disability benefit programs and receive employment perquisites on a basis
consistent with other Polaroid Executive Officers. Information regarding your
health and welfare benefits will be mailed to you by Fidelity Institutional
Retirement Services, Inc., our administrator for health and welfare benefits.
This package will contain information, forms and instructions to assist you in
making your benefits decisions. You will have thirty (30) days from your date of
hire to make your benefit decisions. It is strongly recommended that you decide
as soon as possible after receiving the package. You will, however, have
coverage from your date of hire in Major Medical, our default plan, until you
make your elections. If you do not make your elections within 30 days of your
hire date, you will remain in the default plan until our annual open enrollment
period. In order to ensure coverage from your date of hire, we need to know if
you are choosing Individual, Family or no coverage, your date of birth and your
spouse's date of birth.
Relocation. You are eligible for our Officer Relocation Assistance Package.
Reasonable and customary expenses incurred in your family's relocation to the
Boston area will be paid, including temporary living
Page 2 of 4
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Judith Boynton
March 19, 1998
expenses. Attachment D is a summary of this policy. We will also pay you one
month's salary ($29,166) as a settling-in allowance after your move.
Change in Control. You will be provided with a Change in Control Agreement.
Attachment E is a sample of this agreement.
Termination of Employment. If a Change in Control has not occurred and your
employment is terminated by Polaroid for any reason other than Cause (as defined
in the Change in Control Agreement), or at your initiative within twenty-four
(24) months of your hiring date due to a reassignment by Polaroid to a position
of significantly lesser responsibility or relocation outside of the Boston
metropolitan area without your consent, you will receive a lump sum severance
payment of twenty-four (24) months' pay upon the signing of a full and complete
release of claims. This severance payment will be based upon your monthly base
pay rate on the Termination Date. Additionally, the Company will provide
medical, dental and life insurance coverage for two (2) years at current
employee group rates.
Notwithstanding the forgoing, if your employment is terminated for Cause, you
will not be entitled to receive such severance and all long term incentive
awards shall be forfeited.
Ownership Guidelines. The Company believes strongly that its officers and
executives should be shareholders of Polaroid Corporation. Similar to other
Senior Officers, you will be expected to accumulate and hold three (3) times
your annual base pay in Polaroid Common stock within five years of your date of
hire. Common Stock acquired through the Company's executive stock ownership plan
and other benefit or incentive plans will be counted toward meeting this goal.
Non-Competition. During the period in which you are employed by the Company or
any of its Subsidiaries and for a period of not less than twelve (12) months
following a termination of employment, you shall not engage in any activity or
become associated with any entity or venture, whether as a principal, partner,
executive, consultant, shareholder, director (other than as a holder of not in
excess of one percent (1%) of the outstanding voting shares of any publicly
traded company) or otherwise, that is in competition in any geographic area with
the business of the Company in which it is actively engaged on your Termination
Date nor any entity with which you have been actively engaged in negotiations.
The intent of this section is not to prevent you from working, but to protect
the Company and give the Company the opportunity to evaluate situations in
certain potentially sensitive areas. Accordingly, the foregoing limitation on
your activities shall not apply to the extent the Company consents to such
activities. The Company agrees to provide a written response within thirty (30)
days of your written request to engage in such activity.
Non-Solicitation Of Customers. During the period in which you are employed by
the Company or any of its Subsidiaries and for a period of not less than twelve
(12) months following a termination of your employment, you shall not solicit
customers of the Company.
Confidentiality. Without the prior written consent of the Company, except to the
extent required by an order of a court having competent jurisdiction or under
subpoena from an appropriate government agency, you shall comply with the
Confidentiality Agreement you execute when you are hired and shall not disclose
any trade secrets, customer lists, drawings, designs, information regarding
product development, marketing plans, sales plans, manufacturing plans,
management organization information (including data and other information
relating to members of the Board and management), operating policies or manuals,
business plans, financial records or other financial, commercial, business or
technical information relating to the Company or information designated as
confidential or proprietary that the Company may receive belonging to suppliers,
customers or others who do business with any of its subsidiaries (collectively,
"Confidential Information") to any third person unless such Confidential
Information has been previously disclosed to the
Page 3 of 4
<PAGE>
Judith Boynton
March 19, 1998
public by the Company; is in the public domain (other than by reason of your
breach of this Agreement); or has been disclosed to you prior to the date hereof
from sources not breaching any agreement with the Company.
Company Property. Promptly following your termination of employment, you shall
return to the Company all property of the Company and all copies of confidential
information in your possession or under your control.
Non-Solicitation Of Executives. During the period in which you are employed by
Polaroid and any of its Subsidiaries and for a period of not less than twelve
(12) months following a termination of your employment, you shall not directly
or indirectly induce any executive of the Company, specifically employees under
your direct supervision, to terminate employment with such entity and shall not
directly or indirectly, either individually or as owner, agent, consultant,
director, officer, shareholder or otherwise, employ or offer employment to any
person who is employed by the Company.
Company Policies and Dispute Resolution. You recognize and agree that you shall
be bound by all written policies established by the Company and by any written
personnel manual or written policy statement even though such policy may be
unilaterally amended, terminated or modified at the sole discretion of the
Company. You further agree that should any dispute arise under the terms of this
offer, or in any manner directly or indirectly resulting from your employment
with the Company, to resolve your dispute by first exhausting any applicable
internal remedies. If a dispute should remain, you agree to submit your claim to
binding arbitration pursuant to the rules of the American Arbitration
Association. Such action will take place in the Commonwealth Massachusetts.
Physical Examination. Maintaining a safe and healthy work environment is an
important priority at Polaroid. Because it is Company policy not to hire
applicants who use unauthorized controlled substances or illegal drugs, a drug
screening test is required. After you are on board, we will schedule a physical
examination for you with Polaroid's Medical Department.
Judith, we are extremely impressed with you personally and professionally and
feel confident that you will be a valuable addition to Polaroid Corporation.
Sincerely,
Gary T. DiCamillo
Gary T. DiCamillo
Enclosures: Attachments (A, B, C, D, E)
I have accepted the terms and conditions as outlined in this letter.
Judith Boynton March 31, 1998
- --------------------------------- ----------------------------
Judith Boynton Date
Page 4 of 4
CHANGE IN CONTROL SEVERANCE AGREEMENT
AGREEMENT made as of April 13, 1998, between Polaroid Corporation
("Polaroid" or "Company") and Judith Boynton (the "Executive").
Executive is a skilled and dedicated employee who has important management
responsibilities and talents which benefit Polaroid. Polaroid believes that its
best interests will be served if Executive is encouraged to remain with
Polaroid. Polaroid has determined that Executive's ability to perform
Executive's responsibilities and utilize Executive's talents for the benefit of
Polaroid, and Polaroid's ability to retain Executive as an employee, will be
significantly enhanced if Executive is provided with fair and reasonable
protection from the risks of a change in ownership or control of Polaroid.
Accordingly, Polaroid and Executive agree as follows:
1. Defined Terms.
(a) "Annual Bonus" shall mean the Executive's annual bonus paid pursuant to
the Company's annual bonus plan in effect at the time (currently the
Polaroid Incentive Plan for Executives). Unless otherwise specifically
provided, the Annual Bonus shall be calculated assuming the Corporate
target is reached and no additional factors are considered to decrease
the Executive's award under the Plan.
(b) "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 Stock 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 Stock for or pursuant
to the terms of any such employee benefit plan.
(c) "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.
(d) "Base Salary" shall mean the annual rate of base salary (disregarding
any reduction in such rate that constitutes Constructive Termination)
as increased by the Board from time to time.
(e) "Beneficial Owner" shall be a Person deemed to "beneficially own," any
securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such Person or any of such Person's Affiliates or Associates
has:
(A) 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
<PAGE>
Judith Boynton
April 13, 1998
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; or
(B) 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 (1)
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 (2) is not also then
reportable on Schedule 13D (or any comparable or successor
report) under the Exchange Act; or,
(C) 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 above) or disposing of any securities of the
Company.
(f) "Board" shall mean the Board of Directors of the Company.
(g) "Bonus" means the amount payable to the Executive under any plan, or
agreement offered by Polaroid.
(h) "Cause" means either of the following:
(i) Executive's willful malfeasance having a material adverse effect
on Polaroid; or
(ii) Executive's conviction of a felony;
provided, that any action or refusal by Executive shall not constitute
Cause if, in good faith, Executive believed such action or refusal to
be in, or not opposed to, the best interests of Polaroid, or if
Executive shall be entitled, under applicable law or under an
applicable Polaroid Certificate of Incorporation or the Polaroid
By-Laws, as they may be amended or restated from time to time, to be
indemnified with respect to such action or refusal.
(i) "Change in 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 Stock was registered under the Exchange Act) in
response to an item (currently item
Page 2 of 11
<PAGE>
Judith Boynton
April 13, 1998
6(e)) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act or an item (currently Item l(a)) of Form 8-K under
the Exchange Act;
(ii) the date on which there is an Acquiring Person and a change in
the composition of the Board of the Company within two years
after the Share Acquisition Date such that the individuals who
constitute the Board prior to the Share Acquisition Date shall
cease for any reason to constitute at least a majority of the
Board;
(iii) any day on or after the Share Acquisition Date when directly or
indirectly, any of the transactions specified in the following
clauses occurs:
(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;
(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 Stock 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 Stock then outstanding;
(v) the date on which the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation
other than:
(A) a merger or consolidation which would result in voting
securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such
merger or consolidation, or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person acquires 50% or more of the combined voting
power of the Company's then outstanding securities; or
(vi) the date stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
Page 3 of 11
<PAGE>
Judith Boynton
April 13, 1998
(j) "Code" means the Internal Revenue Code of 1986, as amended.
(k) "Confidential Information" means non-public information relating to the
business plans, marketing plans, customers or employees of Polaroid
other than information the disclosure of which cannot reasonably be
expected to adversely affect the business of Polaroid.
(l) "Constructive Termination" shall occur when the Executive voluntarily
terminates his employment with the Company or retires after the
occurrence of one or more of the following events on or after the
Change in Control:
(i) a reduction in Base Salary from the amount of Base Salary on the
day immediately preceding the Change in Control;
(ii) the elimination of or reduction of any benefit under any bonus,
incentive or other employee benefit plan in effect on the day
immediately preceding the Change in Control, without an
economically equivalent replacement, if Executive was a
participant or member of such plan on the day immediately
preceding the Change in Control;
(iii) the discontinuation of or any reduction in Executive's
participation or membership in any bonus, incentive or other
benefit plan in which Executive was a participant or member on
the day immediately preceding the Change in Control, without an
economically equivalent replacement;
(iv) the reassignment of Executive without Executive's consent from
Executive's regular shift or regular duties as they existed on
the day immediately preceding the Change in Control;
(v) the reassignment of Executive without Executive's consent to a
location more than thirty (30) miles from Executive's regular
workplace on the day immediately preceding the Change in
Control;
(vi) the reduction in Executive's job title or level in effect on the
day immediately preceding the Change in Control;
(vii) the provision of significantly less favorable working conditions
than those provided on the day immediately preceding the Change
in Control; or
(viii) a significant diminution in duties or responsibilities or the
reassignment of Executive to duties which represent a position
of lesser responsibility than Executive's duties as they existed
on the day immediately preceding the Change in Control.
(m) "Disability" shall mean the Executive's disability within the meaning
of the Polaroid Long Term Disability Plan.
(n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect on the date in question.
Page 4 of 11
<PAGE>
Judith Boynton
April 13, 1998
(o) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, un-incorporated organization or other
entity.
(p) "Share Acquisition Date" shall mean the first date any Person shall
become an Acquiring Person.
(q) "Stock" shall mean the outstanding shares of Common Stock of the
Company and, for purposes of the Change in Control provision, any other
shares of capital stock of the Company into which the Common Stock
shall be reclassified or changed.
(r) "Subsidiary" of the Company shall mean any corporation of which the
Company owns, directly or indirectly, more than 50% of the Voting
Stock.
(s) "Terminated" shall mean:
(i) termination by Polaroid without Cause at any time within the two
(2) years following a Change in Control;
(ii) Executive's termination due to a Constructive Termination at any
time within the two (2) years following a Change in Control; or
(iii) termination within three (3) months prior to a Change of Control
at the request of any individual or entity acquiring ownership
and control of Polaroid. If Executive's employment with Polaroid
is terminated prior to a Change in Control at the request of
Acquiring Person, this Agreement shall become effective upon the
subsequent occurrence of a Change in Control involving such
Acquiring Person. In such situation the Executive's Termination
Date shall be deemed to have occurred immediately following the
Change in Control, and therefore Executive shall be entitled to
the benefits provided in this Agreement.
(t) "Termination Date" shall mean the date on which Executive is
terminated.
(u) "Voting Stock" shall mean capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
2. Effective Date; Term. This Agreement shall be effective immediately prior
to a Change in Control (the "Effective Date") and shall remain in effect
for two (2) years following such Change in Control, and such additional
time as may be necessary to give effect to the terms of the Agreement.
3. Change in Control Benefits. If Executive's employment with Polaroid is
Terminated, Executive shall be entitled to the following benefits:
(a) Severance Benefits. Within ten (10) business days after the Termination
Date, Polaroid shall pay Executive a lump sum amount, in cash, equal to
the greater of the severance benefit Executive would otherwise be
entitled to receive under the Extended Severance Plan or:
(i) two (2) times the sum of:
Page 5 of 11
<PAGE>
Judith Boynton
April 13, 1998
(A) Executive's Base Salary; and
(B) Executive's Annual Bonus; and
(ii) Executive's Annual Bonus multiplied by a fraction, the numerator
of which shall equal the number of days Executive was employed by
Polaroid in the calendar year in which the Termination Date
occurs and the denominator of which shall equal 365.
(b) Continued Welfare Benefits. Until the second anniversary of the
Termination Date, Executive shall be entitled to participate in the
Company's medical, dental, and life insurance plans, at the highest
level provided to Executive during the period beginning immediately
prior to the Change in Control and ending on the Termination Date and
at no greater cost than the cost Executive was paying immediately prior
to Change in Control; provided, however, that if Executive becomes
employed by a new employer, Executive's coverage under the applicable
Polaroid plans shall continue, but Executive's coverage thereunder
shall be secondary to (i.e., reduced by) any benefits provided under
like plans of such new employer.
(c) Payment of Accrued But Unpaid Amounts. Within ten (10) business days
after the Termination Date, Polaroid shall pay Executive:
(i) earned but unpaid compensation, including, without limitation,
any unpaid portion of Executive's Bonus accrued with respect to
the full calendar year ended prior to the Termination Date; and
(ii) all compensation previously deferred by Executive on a
non-qualified basis but not yet paid.
(d) Retiree-Medical Benefits. If Executive is or would become fifty-five
(55) or older and Executive's age and service equal sixty-five (65) and
Executive has at least five (5) years of service with the Company
within two (2) years of Change in Control, Executive is eligible for
retiree medical benefits (as such are determined immediately prior to
Change in Control). Executive is eligible to commence receiving such
retiree medical benefits based on the terms and conditions of the
applicable plans in effect immediately prior to the Change in Control.
(e) Supplemental Retirement and Profit Sharing Benefits.
(i) On the Termination Date, Executive shall become vested in the
benefits provided under Polaroid's non-qualified defined benefit
pension plans or any successor plans (the "Supplemental Plans").
(ii) Within ten (10) business days after the Termination Date,
Polaroid shall pay Executive a lump sum cash amount equal to the
present value of Executive's accrued benefit under the
Supplemental Plans. For purposes of computing the lump sum
present value of Executive's accrued benefit under the
Supplemental Plans,
Page 6 of 11
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Judith Boynton
April 13, 1998
(A) Polaroid shall credit Executive with two (2) years of plan
participation and service and two (2) years of age for all
purposes (including additional accruals and eligibility for
early retirement) over Executive's actual years and
fractional years of plan participation and service and age
credited to Executive on the Termination Date; and
(B) Polaroid shall apply the present value (and any other
actuarial adjustments required by this Agreement) using the
applicable actuarial assumptions set forth in the Pension
Plan. In determining Executive's benefits under this
paragraph (e)(B), the terms of the Supplemental Plans as in
effect immediately prior to the Change in Control, except as
expressly modified in this paragraph (e), shall govern.
(f) Effect on Existing Plans. All Change in Control provisions applicable
to Executive and contained in any plan, program, agreement or
arrangement maintained as of the date this Agreement is signed
(including, but not limited to, any stock option, restricted stock or
pension plan) shall remain in effect through the date of a Change in
Control, and for such period thereafter as is necessary to carry out
such provisions and provide the benefits payable thereunder, and may
not be altered in a manner which adversely affects Executive without
Executive's prior written approval. This means that all awards of
options, performance shares or such other awards as may be granted
shall upon Change in Control be fully vested consistent with the terms
of these Agreements. Notwithstanding the foregoing, no benefits shall
be paid to Executive, however, under the Polaroid Extended Severance
Plan or any other severance plan maintained generally for the employees
of Polaroid if Executive is eligible to receive severance benefits
under this Agreement.
(g) Outplacement Counseling. Outplacement services will be provided
consistent with Polaroid's outplacement practices in effect prior to
the Change in Control.
4. Mitigation. Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, and compensation earned from such employment or
otherwise shall not reduce the amounts otherwise payable under this
Agreement. No amounts payable under this Agreement shall be subject to
reduction or offset in respect of any claims which Polaroid (or any other
person or entity) may have against Executive unless specifically referenced
herein.
5. Gross-up.
(a) In the event it shall be determined that any payment, benefit or
distribution (or combination thereof) by Polaroid, or one or more
trusts established by Polaroid for the benefit of its employees, to or
for the benefit of Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement, or otherwise) (a
"Payment") would be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties, hereinafter collectively referred to as the
"Excise Tax"), Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by
Executive of all taxes (including any
Page 7 of 11
<PAGE>
Judith Boynton
April 13, 1998
interest or penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and the Excise Tax imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5(c), all determinations required
to be made under this Section 5, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be
made by a nationally recognized certified public accounting firm as may
be designated by Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to Polaroid and Executive within
fifteen (15) business days of the receipt of notice from Executive that
there has been a Payment, or such earlier time as is requested by
Polaroid. In the event that the Accounting Firm is serving as
accountant or auditor for an individual, entity or group effecting the
change in ownership or effective control (within the meaning of Section
280G of the Code), Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by Polaroid. Any Gross-Up Payment, as
determined pursuant to this Section 5, shall be paid by Polaroid to
Executive within five (5) business days after the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that
no Excise Tax is payable by Executive, it shall so indicate to
Executive in writing. Any determination by the Accounting Firm shall be
binding upon Polaroid and Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by Polaroid should have
been made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that Polaroid exhausts its remedies
pursuant to Section 5(c) and Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by Polaroid to or for the benefit of Executive.
(c) The Executive shall notify the Company in writing of any written claim
by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten (10) business
days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid (but the Executive's failure to
comply with this notice obligation shall not eliminate his rights under
this Section except to the extent Polaroid's defense against the
imposition of the Excise Tax is actually prejudiced by any such
failure). The Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he
gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive
shall:
(i) give Polaroid any information reasonably requested by Polaroid
relating to such claim;
Page 8 of 11
<PAGE>
(ii) take such action in connection with contesting such claim as
Polaroid shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
Polaroid;
(iii) cooperate with Polaroid in good faith in order to effectively
contest such claim; and
(iv) permit Polaroid to participate in any proceedings relating to
such claim;
provided, however, that Polaroid shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 5(c),
Polaroid shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as Polaroid shall determine; provided, however, that
if Polaroid directs Executive to pay such claim and sue for a refund,
Polaroid shall advance the amount of such payment to Executive, on an
interest-free basis, and shall indemnify and hold Executive harmless,
on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and provided, further, that if Executive is required to extend
the statute of limitations to enable Polaroid to contest such claim,
Executive may limit this extension solely to such contested amount.
Polaroid's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other
taxing authority.
(d) If, after the receipt by Executive of an amount advanced by Polaroid
pursuant to Section 5(c), Executive receives any refund with respect to
such claim, Executive shall (subject to Polaroid's complying with the
requirements of Section 5(c)) promptly pay to Polaroid the amount of
such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by Polaroid pursuant to Section 5(c), a determination
is made that Executive shall not be entitled to any refund with respect
to such claim and Polaroid does not notify Executive in writing of its
intent to contest such denial of refund prior to the expiration of
thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
6. Termination for Cause. Nothing in this Agreement shall be construed to
prevent Polaroid from terminating Executive's employment for Cause. If
Executive is terminated for Cause, Polaroid shall have no obligation to
make any payments under this Agreement, except for payments that
Page 9 of 11
<PAGE>
Judith Boynton
April 13, 1998
may otherwise be payable under then existing employee benefit plans,
programs and arrangements of Polaroid.
7. Indemnification; Director's and Officer's Liability Insurance. Executive
shall, after the Termination Date, retain all rights to indemnification
under applicable law or under Polaroid Certificate of Incorporation or the
Polaroid By-Laws, as they may be amended or restated from time to time. In
addition, Polaroid shall maintain Director's and Officer's liability
insurance on behalf of Executive at the better of the level in effect
immediately prior to the Change in Control or the Executive's Termination
Date, for the two (2) year period following the Termination Date, and
throughout the period of any applicable statute of limitations.
8. Confidentiality. Without the prior written consent of the Company, except
to the extent required by an order of a court having competent jurisdiction
or under subpoena from an appropriate government agency, the Executive
shall comply with the Confidentiality Agreement he executed when hired, and
shall not disclose any trade secrets, customer lists, drawings, designs,
information regarding product development, marketing plans, sales plans,
manufacturing plans, management organization information (including data
and other information relating to members of the Board and management),
operating policies or manuals, business plans, financial records or other
financial, commercial, business or technical information relating to the
Company or any of its subsidiaries or information designated as
confidential or proprietary that the Company or any of its Subsidiaries may
receive belonging to suppliers, customers or others who do business with
the Company or any of its subsidiaries (collectively, "Confidential
Information") to any third person unless such Confidential Information has
been previously disclosed to the public by the Company or is in the public
domain (other than by reason of Executive's breach of this Section 8).
9. Disputes. Any dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration in Boston,
Massachusetts, or, at the option of Executive, in the county where
Executive then resides, in accordance with the Rules of the American
Arbitration Association then in effect. Judgment may be entered on an
arbitrator's award relating to this Agreement in any court having
jurisdiction.
10. Costs of Proceedings. Polaroid shall pay all costs and expenses, including
attorneys' fees and disbursements, at least monthly, of Executive in
connection with any legal proceeding (including arbitration), whether or
not instituted by Polaroid or Executive, relating to the interpretation or
enforcement of any provision of this Agreement, except that if Executive
instituted the proceeding and the judge, arbitrator or other individual
presiding over the proceeding affirmatively finds that Executive instituted
the proceeding in bad faith, Executive shall pay all costs and expenses,
including attorneys' fees and disbursements, of Executive. Polaroid shall
pay pre-judgment interest on any money judgment obtained by Executive as a
result of such a proceeding, calculated at the prime rate of The Chase
Manhattan Bank (or its successors), as in effect from time to time, from
the date that payment should have been made to Executive under this
Agreement.
11. Assignment. Except as otherwise provided herein, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by Polaroid and
Executive and their respective heirs, legal representatives, successors and
assigns. If Polaroid shall be merged into or consolidated with another
entity, the provisions of this Agreement shall be binding upon and inure to
the benefit of the entity surviving such merger or resulting from such
consolidation. Polaroid will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of Polaroid, by agreement in
form and substance
Page 10 of 11
<PAGE>
Judith Boynton
April 13, 1998
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that Polaroid would be
required to perform it if no such succession had taken place. The
provisions of this Section 11 shall continue to apply to each subsequent
employer of Executive hereunder in the event of any subsequent merger,
consolidation or transfer of assets of such subsequent employer.
12. Payments in Event of Death. Should the Executive become eligible to receive
payments and benefits under this Agreement and die prior to receipt of all
such payments and benefits, the residual payments shall be made to the
beneficiaries identified on the Executive's beneficiary form for the
Executive Deferral Compensation Plan. Any residual family medical and
dental benefits which the Executive was receiving on the Executive's date
of death shall continue to the family members the Executive had covered in
such medical and dental plans on such date.
13. Withholding. Polaroid may, to the extent required by law, withhold
applicable federal, state and local income and other taxes from any
payments due to Executive hereunder.
14. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts made and to be performed therein.
15. Entire Agreement. This Agreement constitutes the entire agreement between
the parties and, except as expressly provided herein, supersedes all other
prior agreements concerning the effect of a Change in Control on the
relationship between Polaroid and Executive. This Agreement may be changed
only by a written agreement executed by Polaroid and Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on the 5th day of
May, 1998.
POLAROID CORPORATION
By Gary T. DiCamillo
-----------------
Gary T. DiCamillo
Judith Boynton
- --------------
Judith Boynton
Executive
Page 11 of 11
PROMISSORY NOTE
$200,000 April 3, 1998
Borrower: JOSEPH G. PARHAM, JR.
89 Glen Road, UC 5
Brookline, MA 02146
Lender: Polaroid Corporation (Polaroid)
549 Technology Square
Cambridge, MA 02139
Principal: $200,000
Interest Rate: Fixed interest rate of 7%.
Payment Schedule: Mr. Parham shall pay the full amount of this loan with
interest on the earlier of December 31, 2003, or six (6)
months after his date of termination of employment.
Payment shall be made in a balloon payment upon maturity.
Maturity Date: December 31, 2003.
Prepayment Premium: None
Promise to Pay: FOR VALUE RECEIVED, Mr. Parham promises to pay to the
order of Polaroid (or to such other person or at such
other place as the Holder of this Note may designate in
writing) the Principal according to the designated Payment
Schedule until the entire Principal has been repaid or the
Maturity Date, whichever shall occur first.
Right of Prepayment: This Note may be prepaid in full or in part at any time
without penalty, but partial prepayment shall not defer
Mr. Parham's obligation.
Late Payment: If the loan is not repaid in full on or before December
31, 2003, or within six (6) months after his termination
of employment, whichever is earlier, Mr. Parham shall pay
an interest rate of late charge of 2% over Prime Lending
Rate per annum and calculated quarterly on the amount
overdue for time the that such due payment remains unpaid.
Failure to Repay: At Polaroid's election, this Note shall become immediately
due and payable without notice or demand (and
notwithstanding any prior waiver of any breach or default
or
<PAGE>
-2-
other indulgence), if a receiver of Parham's property
shall be a ppointed, or if a petition in bankruptcy or
other similar proceeding under any law for relief of
debtors shall be filed by or against Mr. Parham, and in
the case of involuntary proceedings an order for relief is
entered or the petition remains undismissed for 90 days.
Polaroid's Costs
and Expenses: Mr. Parham agrees to pay all costs and expenses incurred
by Polaroid in connection with this indebtedness,
including all reasonable attorneys' fees for collection
made under this Note.
Waivers and Assent: Mr. Parham: (a) waives presentment, demand, protest, and
all other defenses in the nature thereof; (b) waives any
defenses based upon, and specifically assents to, all
extensions and postponements of the time for payment,
changes in terms and conditions and all other indulgences
and forebearances which may be granted by Polaroid to Mr.
Parham under this Note.
Enforceability: The determination that one or more provisions of this Note
are invalid or unenforceable under law shall not affect
the validity or enforceability of the remaining provisions
of this Note.
Executed as a sealed instrument under Massachusetts Law.
Witness to Both:
JOSEPH G. PARHAM
- ------------------------------------------
JOSEPH G. PARHAM
FOR POLAROID:
by: GARY T. DICAMILLO
--------------------------------------
GARY T. DICAMILLO
Chief Executive Officer
EXHIBIT 12
POLAROID CORPORATION AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions Except Ratios)
<TABLE>
<CAPTION>
Three Months
Year Ended December 31 ended
------------------------------------------------------------ March 29,
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Earnings/(loss):
Earnings/(loss)
before income tax
expense/benefit
per consolidated
statement of earnings $101.7 $160.7 $(201.4) $ 31.2 $(191.9) $(26.7)
Add:
Interest expense 47.9 46.6 52.1 47.4 47.8 12.1
Portion of rent expense
representative
of an interest factor 10.4 10.3 11.7 9.3 10.7 2.7
------ ------ ------- ------ ------- -------
Adjusted earnings/(loss)
before income tax
expense/benefit $160.0 $217.6 $(137.6) $ 87.9 $(133.4) $ (11.9)
====== ====== ======== ====== ======= =======
Fixed charges:
Interest expense $ 47.9 $ 46.6 $ 52.1 $ 47.4 $ 47.8 $ 12.1
Portion of rent expense
representative
of an interest factor 10.4 10.3 11.7 9.3 10.7 2.7
Capitalized interest 12.6 9.7 4.8 5.1 2.6 .5
------ ------ ------- ------ ------- -------
Total fixed charges $ 70.9 $ 66.6 $ 68.6 $ 61.8 $ 61.1 $ 15.3
====== ====== ======= ====== ======= =======
Ratio of earnings of 2.3(a) 3.3 N/A(b) 1.4(c) N/A(d) N/A(e)
====== ====== ======= ====== ======= =======
fixed charges
</TABLE>
- --------------------------
(a) In 1993, the Company recorded a pre-tax expense for restructuring and other
charges of $44.0 million. Excluding the pre-tax restructuring and other
charges, the ratio to fixed charges was 2.9.
(b) Earnings were insufficient to cover fixed charges by $206.2 million after
giving effect to the pre-tax expense for restructuring and other charges of
$247.0 million. Excluding the pre-tax restructuring and other charges, the
ratio of earnings to fixed charges was 1.6.
(c) In 1996, the Company recorded a pre-tax expense for restructuring and other
special charges of $150.0 million ($7.0 million of which was recorded in
cost of goods sold). Excluding the pre-tax restructuring and other special
charges, the ratio of earnings to fixed charges was 3.8.
<PAGE>
(d) Earnings were insufficient to cover fixed charges by $194.5 million after
giving effect to the pre-tax expense for restructuring and other charges of
$340.0 million ($16.5 million of which was recorded in cost of goods sold).
Excluding the pre-tax restructuring and other charges, the ratio of
earnings to fixed charges was 3.4.
(e) Earnings were insufficient to cover fixed charges by $27.2 million.
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 April 8, 1998, 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,
KPMG Peat Marwick LLP
Boston, Massachusetts
May 7, 1998
<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 March 29, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-29-1998
<CASH> 42,300
<SECURITIES> 12,300
<RECEIVABLES> 522,100
<ALLOWANCES> (25,000)
<INVENTORY> 515,100
<CURRENT-ASSETS> 1,366,100
<PP&E> 1,854,000
<DEPRECIATION> (1,361,800)
<TOTAL-ASSETS> 2,068,500
<CURRENT-LIABILITIES> 1,027,500
<BONDS> 297,100
0
0
<COMMON> 75,400
<OTHER-SE> 379,000
<TOTAL-LIABILITY-AND-EQUITY> 2,068,500
<SALES> 390,600
<TOTAL-REVENUES> 390,600
<CGS> 243,800
<TOTAL-COSTS> 403,600
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,500
<INTEREST-EXPENSE> 12,100
<INCOME-PRETAX> (26,700)
<INCOME-TAX> (9,300)
<INCOME-CONTINUING> (17,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,400)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
<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 March 30, 1997 and is
qualified in its entirety by reference to such financial statements. This
schedule has been updated to reflect the adoption of Financial Accounting
Standards Board Statement No. 128, "Earnings Per Share".
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-30-1997
<CASH> 29,500
<SECURITIES> 5,600
<RECEIVABLES> 524,400
<ALLOWANCES> (22,100)
<INVENTORY> 548,800
<CURRENT-ASSETS> 1,324,500
<PP&E> 2,177,500
<DEPRECIATION> (1,517,600)
<TOTAL-ASSETS> 2,132,300
<CURRENT-LIABILITIES> 707,500
<BONDS> 497,000
0
0
<COMMON> 75,400
<OTHER-SE> 562,000
<TOTAL-LIABILITY-AND-EQUITY> 2,132,300
<SALES> 457,500
<TOTAL-REVENUES> 457,500
<CGS> 259,800
<TOTAL-COSTS> 438,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 500
<INTEREST-EXPENSE> 11,400
<INCOME-PRETAX> 25,100
<INCOME-TAX> 9,300
<INCOME-CONTINUING> 15,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,800
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
