<PAGE>
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 October 1, 2000
--------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended __________ to _________________
Commission File Number 1-4085
POLAROID CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 04-1734655
--------------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
784 Memorial Drive, Cambridge, Massachusetts 02139
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(Address of principal executive offices)(Zip Code)
781-386-2000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 and 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 [ ]
Shares of Common Stock, $1 par value,
outstanding at November 3, 2000: 45,186,643
This document contains 39 pages.
Exhibit Index appears on page 36.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Periods ended September 26, 1999 and October 1, 2000
<TABLE>
<CAPTION>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES Third Quarter Nine Months
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 2000 1999 2000
--------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET SALES $ 463.0 $ 458.2 $1,328.8 $1,349.4
Cost of goods sold 268.3 246.5 786.5 732.1
Marketing, research, engineering and administrative
expenses 182.9 163.2 496.5 508.9
----------------------------------------------------
TOTAL COSTS 451.2 409.7 1,283.0 1,241.0
PROFIT FROM OPERATIONS 11.8 48.5 45.8 108.4
Other income/(expense) 2.3 1.3 (19.2) 21.5
Interest expense 19.8 21.6 57.0 62.8
----------------------------------------------------
PROFIT/(LOSS) BEFORE INCOME TAX EXPENSE/(BENEFIT) (5.7) 28.2 (30.4) 67.1
Federal, state and foreign income tax expense/(benefit) (1.9) 9.8 (10.6) 23.5
----------------------------------------------------
NET EARNINGS/(LOSS) $ (3.8) $ 18.4 $ (19.8) $ 43.6
====================================================
BASIC EARNINGS/(LOSS) PER COMMON SHARE $ (0.09) $ 0.41 $ (0.45) $ 0.97
DILUTED EARNINGS/(LOSS) PER COMMON SHARE $ (0.09) $ 0.40 $ (0.45) $ 0.96
CASH DIVIDENDS PER COMMON SHARE $0.15 $ 0.15 $ 0.45 $ 0.45
Weighted average common shares used for basic earnings/(loss)
per common share calculation (in thousands) 44,382 45,062 44,227 44,882
Weighted average common shares used for diluted
earnings/(loss) per common share calculation (in thousands) 44,382 45,933 44,227 45,409
Common shares outstanding at end of period (in thousands) 44,450 45,187 44,450 45,187
See accompanying notes to condensed consolidated financial statements
</TABLE>
1
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES December 31, October 1,
(IN MILLIONS) 1999 2000
-----------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 92.0 $ 61.0
Receivables 489.7 441.6
Inventories:
Raw materials 84.3 87.8
Work-in-process 135.8 182.7
Finished goods 175.5 223.8
----------------------------------
Total inventories 395.6 494.3
Prepaid expenses and other current assets 139.6 148.2
----------------------------------
TOTAL CURRENT ASSETS 1,116.9 1,145.1
PROPERTY, PLANT AND EQUIPMENT:
Total property, plant and equipment 2,023.0 1,971.3
Less accumulated depreciation 1,423.8 1,398.0
----------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 599.2 573.3
DEFERRED TAX ASSETS 243.7 243.7
OTHER ASSETS 80.2 76.2
----------------------------------
TOTAL ASSETS $2,040.0 $2,038.3
==================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 259.4 $ 346.3
Payables and accruals 338.0 305.9
Compensation and benefits 138.1 91.1
Federal, state and foreign income taxes 14.7 21.7
----------------------------------
TOTAL CURRENT LIABILITIES 750.2 765.0
LONG-TERM DEBT 573.0 573.4
ACCRUED POSTRETIREMENT BENEFITS 234.8 233.7
OTHER LONG-TERM LIABILITIES 111.5 82.0
COMMON STOCKHOLDERS' EQUITY:
Common stock, $1 par value 75.4 75.4
Additional paid-in capital 395.2 377.6
Retained earnings 1,208.8 1,232.2
Accumulated other comprehensive income (48.9) (69.9)
Less: Treasury stock, at cost 1,259.7 1,231.1
Deferred compensation .3 -
----------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY 370.5 384.2
----------------------------------
TOTAL LIABILITIES AND COMMON STOCKHOLDERS' EQUITY $2,040.0 $2,038.3
==================================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
2
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine month period ended September 26, 1999 and October 1, 2000
<TABLE>
<CAPTION>
POLAROID CORPORATION AND SUBSIDIARY COMPANIES Nine Months
(IN MILLIONS) 1999 2000
-----------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings/(loss) $ (19.8) $ 43.6
Depreciation of property, plant and equipment 74.9 82.3
Gain on the sale of real estate (12.0) (12.9)
Other non-cash items 78.3 23.3
Decrease in receivables 4.0 34.1
Decrease/(increase) in inventories 38.5 (111.0)
Increase in prepaids and other assets (28.7) (11.1)
Decrease in payables and accruals (49.0) (25.2)
Decrease in compensation and benefits (41.5) (75.5)
Increase/(decrease) in federal, state and foreign income taxes
payable (24.3) 7.2
----------------------------------
Net cash provided/(used) by operating activities 20.4 (45.2)
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in other assets 25.8 4.2
Additions to property, plant and equipment (131.8) (98.3)
Proceeds from the sale of property, plant and equipment 30.3 45.3
----------------------------------
Net cash used by investing activities (75.7) (48.8)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase/(decrease) in short-term debt (maturities of 90 days
or less) (29.5) 90.5
Short-term debt (maturities of more than 90 days)
Proceeds 41.8 -
Payments (24.9) -
Proceeds from issuance of long-term debt 268.2 -
Repayment of long-term debt (200.0) -
Proceeds from issuance of stock incentives .2 .1
Cash dividends paid (19.9) (20.2)
----------------------------------
Net cash provided by financing activities 35.9 70.4
EFFECT OF EXCHANGE RATE CHANGES ON CASH 2.4 (7.4)
----------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (17.0) (31.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 105.0 92.0
----------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 88.0 $ 61.0
==================================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine Months Ended September 26, 1999 and October 1, 2000
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include the
accounts of Polaroid Corporation and its domestic and foreign subsidiaries, all
of which are either wholly owned or majority owned (collectively, "the
Company"). Intercompany transactions have been eliminated. This is an interim
unaudited report that is subject to year-end audit 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. The information included in
the interim financial statements and notes in this Form 10-Q should be read in
conjunction with the audited consolidated financial statements and notes thereto
included in the Company's 1999 Annual Report on Form 10-K which was filed with
the Securities and Exchange Commission on March 28, 2000.
Certain prior year information has been reclassified to conform with the current
year presentation.
2. EARNINGS PER SHARE
<TABLE>
<CAPTION>
NET WEIGHTED AVERAGE
EARNINGS/ OF NUMBER PER SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (LOSS) COMMON SHARES AMOUNT
------------------------------------------ ------------- -------------------- ------------
<S> <C> <C> <C>
Quarter ended September 26, 1999
Basic earnings per share $(3.8) 44.4 $(.09)
============= ==================== ============
Diluted earnings per share $(3.8) 44.4 $(.09)
============= ==================== ============
QUARTER ENDED OCTOBER 1, 2000
BASIC EARNINGS PER SHARE $18.4 45.1 $ .41
============= ==================== ============
DILUTED EARNINGS PER SHARE $18.4 45.9 $ .40
============= ==================== ============
</TABLE>
4
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. EARNINGS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
NET WEIGHTED AVERAGE
EARNINGS/ OF NUMBER PER SHARE
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) (LOSS) COMMON SHARES AMOUNT
------------------------------------------ ------------- -------------------- ------------
<S> <C> <C> <C>
Nine months ended September 26, 1999
Basic loss per share $(19.8) 44.2 $(.45)
============= ==================== ============
Diluted loss per share $(19.8) 44.2 $(.45)
============= ==================== ============
NINE MONTHS ENDED OCTOBER 1, 2000
BASIC EARNINGS PER SHARE $43.6 44.9 $ .97
============= ==================== ============
DILUTED EARNINGS PER SHARE $43.6 45.4 $ .96
============= ==================== ============
</TABLE>
The weighted average number of common shares outstanding for diluted earnings
per share for the three and nine month periods ended October 1, 2000 included
the effect of certain stock awards granted during 2000 for which shares have not
been issued. Stock options for shares of the Company's common stock were
outstanding but were not included in the calculations of diluted earnings per
share because the effects were anti-dilutive. In addition, performance shares
were outstanding but not included in the calculations of diluted earnings per
share because all of the necessary performance conditions had not been
satisfied. The stock options and performance shares not included in the
calculation of diluted earnings per share were as follows:
<TABLE>
<CAPTION>
STOCK PERFORMANCE
(IN MILLIONS) OPTIONS SHARES
-------------------------------------- ------- ------------
<S> <C> <C>
Quarter ended September 26, 1999 6.5 .3
QUARTER ENDED OCTOBER 1, 2000 5.6 .4
Nine months ended September 26, 1999 5.9 .3
NINE MONTHS ENDED OCTOBER 1, 2000 5.8 .4
</TABLE>
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. COMPREHENSIVE INCOME
The Company's total comprehensive income/(loss) was as follows:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTH PERIOD ENDED
SEPTEMBER 26, OCTOBER 1, SEPTEMBER 26, OCTOBER 1,
(IN MILLIONS) 1999 2000 1999 2000
-------------------------------------- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net earnings/(loss) $(3.8) $18.4 $(19.8) $ 43.6
Other comprehensive income:
Currency translation
adjustment 8.4 (5.5) (12.7) (20.8)
Unrealized gain/(loss) on
available-for-sale securities, net
of tax .2 .3 (.1) (.2)
----------------- -------------- ---------------- --------------
Total comprehensive income/(loss) $ 4.8 $13.2 $(32.6) $ 22.6
================= ============== ================ ==============
</TABLE>
4. SEGMENTS
The following is a summary of information related to the Company's segments:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTH PERIOD ENDED
SEPTEMBER 26, OCTOBER 1, SEPTEMBER 26, OCTOBER 1,
(IN MILLIONS) 1999 2000 1999 2000
-------------------------------------- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net sales to customers:
Americas Region $284.8 $303.1 $ 813.1 $ 855.2
European Region 92.6 77.4 286.5 263.3
Asia Pacific Region 85.6 77.7 229.2 230.9
Global Operations -- -- -- --
Research and Development -- -- -- --
----------------- -------------- ---------------- --------------
Segment net sales to customers 463.0 458.2 1,328.8 1,349.4
Corporate -- -- -- --
----------------- -------------- ---------------- --------------
Total net sales to customers $463.0 $458.2 $1,328.8 $1,349.4
================= ============== ================ ==============
</TABLE>
6
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. SEGMENTS (CONTINUED)
The following is a summary of information related to the Company's segments:
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTH PERIOD ENDED
SEPTEMBER 26, OCTOBER 1, SEPTEMBER 26, OCTOBER 1,
(IN MILLIONS) 1999 2000 1999 2000
-------------------------------------- ----------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Profit/(loss) from operations:
Americas Region $ 83.6 $ 92.3 $ 233.3 $ 251.4
European Region 17.7 9.6 56.1 34.8
Asia Pacific Region 21.3 21.9 56.3 63.4
Global Operations (36.2) (14.9) (118.2) (65.2)
Research and Development (20.5) (21.3) (64.3) (61.3)
----------------- -------------- ---------------- --------------
Segment profit from operations 65.9 87.6 163.2 223.1
Corporate (54.1) (39.1) (117.4) (114.7)
----------------- -------------- ---------------- --------------
Total profit from operations $ 11.8 $ 48.5 $ 45.8 $ 108.4
================= ============== ================ ==============
</TABLE>
5. RESTRUCTURING AND OTHER CHARGES
In 1997, the Company recorded restructuring and other charges of $340 million
which consisted of severance costs, impairment losses on certain long-lived
assets, other asset write-downs and exit costs associated with certain
businesses. Of this amount, approximately $17 million represented inventory
write-downs which were included in cost of goods sold. In 1998, the Company
recorded a $50 million restructuring charge related to an expansion of the
severance component of the 1997 program. These charges (collectively, the "1997
Program") were allocated to the non-segment Corporate category and were
undertaken as the result of management's assessment of the Company's
infrastructure, to strengthen its competitive cost position, to streamline
operations and to improve profitability by consolidating and selling
manufacturing facilities and reducing corporate overhead. The strategic
objective of the 1997 Program was to reduce the cost of developing,
manufacturing, selling and distributing the Company's products; to change and
improve business processes; to deliver new products more efficiently; to improve
financial performance; and to fundamentally alter how the Company conducts
business globally.
7
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. RESTRUCTURING AND OTHER CHARGES (CONTINUED)
The balance of reserves established for the 1997 Program and related charges are
as follows:
<TABLE>
<CAPTION>
PENSION
(IN MILLIONS) SEVERANCE ENHANCEMENTS EXIT COSTS TOTAL
-------------------------------------------------- --------------- -------------------- -------------- ---------------
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $ 142.4 $ -- $ 9.5 $ 151.9
Restructuring and other 47.4 2.6 -- 50.0
Reclassification of pension
enhancements (2.4) 2.4 -- --
Cash charges (69.2) -- (7.1) (76.3)
Non-cash charges -- (5.0) -- (5.0)
--------------- -------------------- -------------- ---------------
Balance at December 31, 1998 118.2 -- 2.4 120.6
Reclassification of pension
enhancements (.7) .7 -- --
Cash charges (68.9) -- (.2) (69.1)
Non-cash charges -- (.7) -- (.7)
--------------- -------------------- -------------- ---------------
Balance at December 31, 1999 48.6 -- 2.2 50.8
Cash charges (15.0) -- (.5) (15.5)
--------------- -------------------- -------------- ---------------
Balance at April 2, 2000 33.6 -- 1.7 35.3
Cash charges (12.2) -- (.9) (13.1)
--------------- -------------------- -------------- ---------------
Balance at July 2, 2000 21.4 -- .8 22.2
CASH CHARGES (5.4) -- -- (5.4)
--------------- -------------------- -------------- ---------------
BALANCE AT OCTOBER 1, 2000 $ 16.0 $ -- $ .8 $ 16.8
=============== ==================== ============== ===============
</TABLE>
8
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. RESTRUCTURING AND OTHER CHARGES (CONTINUED)
Approximately $150 million of the charges recorded in 1997 for the 1997
Program related to an involuntary severance program under which approximately
1,800 employees were expected to leave the Company. The 1998 extension to
this involuntary severance program added approximately 1,000 additional
employees. Approximately 2,700 of the 2,800 terminations under the 1997
Program occurred by October 1, 2000. In addition, approximately $170.7
million of cash payments related to the severance component of the 1997
Program had been made at October 1, 2000.
Restructuring and Other Charges are discussed in Part I, Item 2 of this filing
on Form 10-Q. Refer to the section "Restructuring and Other Charges" within
Management's Discussion and Analysis of Financial Condition and Results of
Operations for additional information.
6. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standards Board Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), that establishes accounting and
reporting requirements for derivative instruments and for hedging activities.
FAS 133 requires companies to recognize all derivatives as either assets or
liabilities in the statement of financial position at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge of
the exposures to changes in fair value of recognized assets or liabilities or
unrecognized firm commitments, a hedge of the exposure to variable cash flows of
a forecasted transaction, or a hedge of the foreign currency exposure of a net
investment in a foreign operation, unrecognized firm commitments, an
available-for-sale security or a foreign-currency denominated forecasted
transaction. The accounting for changes in fair value under FAS 133 depends on
the intended use of the derivative and the resulting designation.
In June 1999, the FASB issued FAS 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133," which delayed the effective date of FAS 133 by one year to fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued FAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of FASB Statement No. 133" ("FAS 138"), which will be adopted
concurrently with FAS 133. FAS 138 amends the accounting and reporting standards
of FAS 133 for certain derivative instruments and hedging activities and
incorporates conclusions reached by the FASB related to the Derivatives
Implementation Group process. The Company is currently evaluating the effect of
FAS 133 and FAS 138 on its results of operations and financial position.
9
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
6. NEW ACCOUNTING STANDARDS (CONTINUED)
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements" ("SAB 101"), that expresses the views of the SEC staff regarding the
application of generally accepted accounting principles to certain revenue
recognition issues. In June 2000, the SEC issued SAB No. 101B, "Second
Amendment: Revenue Recognition in Financial Statements," which delayed the
effective date of SAB 101 to periods no later than the fourth quarter of fiscal
years beginning after December 15, 1999. The Company will adopt SAB 101 at the
beginning of the fourth quarter of 2000 and does not believe that the adoption
will have a material impact on its results of operations or financial position.
In May 2000, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-14, "Accounting for Certain Sales Incentives," which is effective
for periods no later than the fourth quarter of fiscal years beginning after
December 15, 1999. This accounting applies to the recognition, measurement and
income statement classification of sales incentives offered to customers such as
discounts, coupons, rebates and free products or services. The Company will
adopt EITF Issue No. 00-14 at the beginning of the fourth quarter of 2000 and
does not believe that the adoption will have a material impact on its results of
operations or financial position but it will require amounts previously recorded
as marketing expenses to be reclassified as a reduction of net sales.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB Opinion No.
25" ("FIN 44"), which must be applied prospectively to new stock option awards,
exchanges of awards in a business combination, modifications to outstanding
awards and changes in grantee status that occur on or after July 1, 2000. The
adoption of FIN 44 did not have a material impact on the Company's results of
operations or financial position.
In March 2000, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-2, "Accounting for Web Site Development Costs" which is effective
for fiscal quarters beginning after June 30, 2000. This accounting applies to
the cost of developing a web site and applies to web sites used to promote or
advertise products or services, supplant manual processes or services, sell
products (including software) or services, or to do a combination of all three.
The adoption of EITF Issue No. 00-2 did not have a material effect on the
Company's results of operations or financial position.
10
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
7. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings and claims arising in the
ordinary course of business. The Company believes that the disposition of these
matters will not have a materially adverse effect on its results of operations
or financial condition. Certain legal proceedings to which the Company is a
party are discussed in Part II, Item 1 of this filing.
8. INDEPENDENT AUDITORS' REPORT
The September 26, 1999 and October 1, 2000 condensed consolidated financial
statements included in this filing on Form 10-Q have been reviewed by KPMG LLP,
independent certified public accountants, in accordance with established
professional standards and procedures for such review. The report by KPMG LLP
commenting upon their review of the condensed consolidated financial statements
appears on the following page.
11
<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 October 1, 2000 and the related
condensed consolidated statements of earnings for the three and nine month
periods ended September 26, 1999 and October 1, 2000, and the cash flows for the
nine 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 subsidiary
companies as of December 31, 1999, 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 24, 2000,
except for Note 8 for which the date is February 14, 2000, 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, 1999 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
/S/ KPMG LLP
Boston, Massachusetts
October 13, 2000
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Polaroid Corporation and subsidiary companies ("the Company") is managed in five
primary segments: the Americas Region; the European Region; the Asia Pacific
Region; Global Operations; and Research and Development. The Americas Region is
comprised of all the countries in North and South America. The European Region
includes all the countries of continental Europe, the United Kingdom, Russia,
the middle-eastern countries and the African continent. The Asia Pacific Region
includes Japan, Australia and the Asian continent, excluding Russia. Each of
these regions consist of sales and marketing operations. Global Operations
consists of worldwide activities associated with manufacturing, distribution,
logistics, developing manufacturing processes for new products and inventory
management. Research and Development is comprised of corporate research and
engineering activities.
Additionally, the Company has one category called Corporate, which it does not
consider to be a segment. This category includes central marketing, centralized
information systems, general and administrative functions and certain other
corporate functions. Corporate also includes costs related to worldwide
restructuring activities and certain other non-operating items.
The Company evaluates the performance of its segments based on profit from
operations with consideration of assets employed. In the regional sales and
marketing segments, profit from operations is based on standard product costs
excluding intercompany margins and therefore reflects contribution to worldwide
Company profits from third party sales. Non-standard manufacturing costs along
with the cost of developing manufacturing processes for new products and
regional warehousing and distribution costs are reported as incurred in the
Global Operations segment. Costs related to research and engineering activities
are reported as incurred in the Research and Development segment.
The Company discusses sales and profit from operations in terms of its core
instant business, other core products and non-core businesses. The core instant
business consists of instant cameras and film. Other core products consist of
digital cameras and other digital products, unique ID products, conventional
35mm cameras and film, videotapes, medical imaging products and sunglasses.
Non-core businesses consist of businesses exited by the Company and include
graphics which was contributed to a joint venture in 1999 and polarizer and
holography which had been exited by the end of the first quarter of 2000.
The Company has reclassified certain prior year information to conform with the
current year presentation.
13
<PAGE>
2000 THIRD QUARTER RESULTS
SALES
Worldwide net sales to customers decreased 1% to $458 million in the third
quarter of 2000 compared with $463 million in the third quarter of 1999. The
decrease was due to lower sales of other core products excluding digital
cameras, the absence of sales from non-core businesses that the Company exited
and, to a lesser degree, the unfavorable impact of foreign exchange. The
decreases were offset, in part, by higher sales of instant and digital cameras
and, to a lesser degree, higher sales of instant film.
Worldwide net sales to customers for the third quarter of 2000 included
approximately $100 million related primarily to new instant cameras and film,
digital cameras and other commercial imaging products introduced in the last
three years. These new products include the I-Zone Instant Pocket Camera and
film, the JoyCam Instant Camera and film, the PhotoMAX line of digital cameras
and the SP-350 retail document photo system. New instant camera and film
products are priced to appeal to a broader range of customers and, in general,
carry lower average selling prices than the traditional camera and film
products.
In the third quarter of 2000, on a unit basis, worldwide shipments to customers
of instant cameras increased approximately 41% to 3.2 million units from 2.3
million units for the same period in 1999 while unit shipments to customers of
instant film increased by approximately 10% compared with the third quarter of
1999. In addition, worldwide shipments to customers of digital cameras, most of
which occurred in the United States, increased to approximately .3 million units
in the third quarter of 2000, an increase of approximately four-fold over the
same period of 1999.
Sales in the Americas Region increased 6% to $303 million in the third quarter
of 2000 compared with $285 million in the third quarter of 1999. The increase
was due to higher sales of instant film, instant cameras and digital cameras
sold in the Unites States. The increases were offset, in part, by lower sales of
other core products excluding digital cameras and the absence of sales from
non-core businesses that the Company exited. The increases in sales of instant
cameras and film in the Region were impacted by changes in the product mix of
new and traditional formats as higher unit sales were offset, in part, by the
impact of the lower average selling prices of the newer products.
In the Americas Region, on a unit basis, shipments to customers of instant
cameras increased approximately 106% while unit shipments to customers of
instant film increased by approximately 15% in the third quarter of 2000
compared with the third quarter of 1999.
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Sales in the European Region decreased 16% to $77 million in the third quarter
of 2000 compared with $92 million in the third quarter of 1999. The decrease was
due to the unfavorable impact of foreign exchange, lower sales of instant film
and, to a lesser degree, the absence of sales from non-core businesses that the
Company exited. The decreases were offset, in part, by higher sales of instant
cameras. Instant camera and film sales in the Region were impacted by changes in
the product mix of new and traditional formats as higher unit sales were offset
by the impact of the lower average selling prices of the newer products.
In the European Region, on a unit basis, shipments to customers of instant
cameras increased approximately 98% while unit shipments to customers of instant
film increased by approximately 3% in the third quarter of 2000 compared with
the third quarter of 1999.
Sales in the Asia Pacific Region decreased 9% to $78 million in the third
quarter of 2000 compared with $86 million in the third quarter of 1999. The
decrease was due to lower sales of instant cameras and film offset, in part, by
the favorable impact of foreign exchange. The decrease in sales of instant
cameras was due primarily to a product transition in Japan from the original
Xiao and JoyCam cameras to the next generation of I-Zone and JoyCam cameras and,
to a lesser degree, changes in the product mix of instant cameras sold. The
Company began the product transition in the second quarter, but the bulk of the
transition occurred in the third quarter of 2000. Instant film sales in the
Region decreased due to changes in the product mix of new and traditional film
formats as higher unit sales were more than offset by the impact of the lower
average selling prices of the newer film products.
In the Asia Pacific Region, on a unit basis, shipments to customers of instant
cameras decreased approximately 37% while unit shipments to customers of instant
film increased by approximately 2% in the third quarter of 2000 compared with
the third quarter of 1999.
PROFIT/(LOSS) FROM OPERATIONS
Worldwide profit from operations in the third quarter of 2000 was $49 million
compared with a profit from operations of $12 million in the third quarter of
1999. The increase was due to the absence of a $40 million charge related to the
Company's graphics arts business that was recorded in the third quarter of 1999.
To a lesser degree, lower manufacturing costs, including savings from
restructuring and other efficiencies, also contributed to the increase in profit
from operations. The increases were offset, in part, by higher corporate costs
related to centralized information systems and central marketing, higher costs
related to promotional activities, the impact of changes in product mix on
instant film and the impact of lower sales of other core products excluding
digital cameras.
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In the third quarter of 1999, the Company agreed to contribute the net assets of
its graphic arts business to a joint venture in exchange for a redeemable
preferred equity interest and an equity interest of less than 20% in the joint
venture. In connection with the transaction, the Company recorded an impairment
loss of $17 million based on its evaluation of the estimated fair value of its
investment in the joint venture. In addition, the Company recorded $16 million
of charges to increase reserves primarily related to trade accounts receivables
and inventories, $4 million for liabilities associated with the disposition of
the business and $3 million of severance costs associated with employees that
were terminated as a result of the agreement. Of the total $40 million, the
Company recorded approximately $25 million in cost of goods sold and the
remainder in marketing and administrative expenses. On a segment basis, the
Company allocated $5 million to the Americas Region, $3 million to the European
Region, $11 million to Global Operations and $21 million to the non-segment
Corporate category.
Profit from operations in the Americas Region was $92 million in the third
quarter of 2000 compared with $84 million in the third quarter of 1999. The
increase was due to both higher unit sales and improved margins on sales of
instant film and, to a lesser degree, the absence of the charge related to the
graphic arts business described above and the impact of higher sales of instant
cameras. The increases were offset, in part, by the impact of lower sales of
other core products excluding digital cameras and higher costs related to
promotional activities.
Profit from operations in the European Region was $10 million in the third
quarter of 2000 compared with $18 million in the third quarter of 1999. The
decrease was due to the unfavorable impact of foreign exchange and, to a lesser
degree, the impact of changes in product mix on instant film and an increase in
planned spending on advertising and promotional activities supporting new
products. The decreases were offset, in part, by the absence of the charge
related to the graphic arts business described above.
Profit from operations in the Asia Pacific Region was essentially unchanged at
$22 million in the third quarter of 2000 compared with $21 million for the same
period of 1999. In the third quarter of 2000, profit from operations included
the favorable impact of foreign exchange offset by the impact of changes in
product mix on instant film.
Global Operations costs were $15 million in the third quarter of 2000 compared
with $36 million in the third quarter of 1999. The decrease was due to the
absence of the charge related to the graphic arts business described above and
continued cost savings and manufacturing efficiencies. These reductions were a
significant component of the Company's improvement in gross margin as a
percentage of net sales which increased to 46% in the third quarter of 2000
compared with 42% for the same period of 1999.
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Research and Development costs were $21 million in both the third quarter of
2000 and the third quarter of 1999. In the third quarter of 2000, the Company
increased spending on research and engineering activities related to its instant
and digital imaging products. The increase was offset by the absence of costs
for research and engineering activities associated with non-core businesses that
the Company exited.
Corporate costs were $39 million in the third quarter of 2000 compared with $54
million in the third quarter of 1999. The decrease was due to the absence of the
charge related to the graphic arts business described above offset, in part, by
higher expenses, including depreciation, for centralized information systems and
a planned increase in spending for central marketing activities primarily in
support of the Company's new products.
The net of other income and expense was income of $1 million in the third
quarter of 2000 compared with income of $2 million in the same period of 1999.
Interest expense increased to $22 million in the third quarter of 2000 compared
with $20 million for the same period in 1999. The increase was due to a higher
average interest rate on the amounts of debt outstanding and, to a lesser
degree, higher average amounts of debt outstanding during the third quarter of
2000.
Income tax expense in the third quarter of 2000 was $10 million or 35% of
reported profit before income taxes compared with an income tax benefit of $2
million or 35% of the reported loss before income taxes in the third quarter of
1999.
In the third quarter of 2000, the Company recorded net earnings of $18 million,
or $.41 basic earnings per common share compared with a net loss of $4 million,
or $.09 basic loss per common share in the third quarter of 1999. Diluted
earnings/loss per common share was $.40 diluted earnings per common share in the
third quarter of 2000 compared with $.09 diluted loss per common share in the
third quarter of 1999.
2000 NINE MONTH RESULTS
SALES
Worldwide net sales to customers increased 2% to $1,349 million in the first
nine months of 2000 compared with $1,329 million in the first nine months of
1999. The increase was due to higher sales of instant and digital cameras. The
increases were offset by the absence of sales from non-core businesses that the
Company exited, lower sales of other core products excluding digital cameras
and, to a lesser degree, the unfavorable impact of foreign exchange. Worldwide
sales of instant film were essentially the same in the first nine months of 2000
compared with the same period of 1999.
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Worldwide net sales to customers for the first nine months of 2000 included
approximately $280 million related primarily to new instant cameras and film,
digital cameras and other commercial imaging products introduced in the last
three years. These new products include the I-Zone Instant Pocket Camera and
film, the JoyCam Instant Camera and film, the PhotoMAX line of digital cameras
and the SP-350 retail document photo system. New instant camera and film
products are priced to appeal to a broader range of customers and, in general,
carry lower average selling prices than the traditional camera and film
products.
In the first nine months of 2000, on a unit basis, worldwide shipments to
customers of instant cameras increased approximately 60% to 8.3 million units
from 5.2 million units for the same period in 1999 while unit shipments to
customers of instant film increased by approximately 11% compared with the
first nine months of 1999. In addition, worldwide shipments to customers of
digital cameras, most of which occurred in the United States, increased to
approximately .7 million units in the first nine months of 2000, an increase
of approximately six-fold over the same period of 1999.
Sales in the Americas Region increased 5% to $855 million in the first nine
months of 2000 compared with $813 million in the first nine months of 1999.
The increase was due to higher sales of instant and digital cameras and, to a
lesser degree, instant film. The increases were offset by the absence of sales
from non-core businesses that the Company exited and lower sales of other core
products excluding digital cameras. Instant camera and film sales were
impacted by changes in the product mix of new and traditional formats as
higher unit sales were offset by the impact of the lower average selling
prices of the newer products.
In the Americas Region, on a unit basis, shipments to customers of instant
cameras increased approximately 117% while unit shipments to customers of
instant film increased by approximately 13% in the first nine months of 2000
compared with first nine months of 1999.
Sales in the European Region decreased 8% to $263 million in the first nine
months of 2000 compared with $287 million in the first nine months of 1999.
The decrease was due to the unfavorable impact of foreign exchange, and to
lesser a degree, the absence of sales from non-core businesses that the
Company exited and lower sales of instant film. The decreases were offset, in
part, by higher sales of instant cameras. Instant camera and film sales in the
Region were impacted by changes in the product mix of new and traditional
formats as higher unit sales were more than offset by the impact of the lower
average selling prices of the newer film products.
In the European Region, on a unit basis, shipments to customers of instant
cameras increased approximately 137% while unit shipments to customers of
instant film increased by approximately 8% in the first nine months of 2000
compared with the first nine months of 1999.
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Sales in the Asia Pacific Region increased 1% to $231 million in the first
nine months of 2000 compared with $229 million in the first nine months of
1999. The increase was due to the favorable impact of foreign exchange and, to
a lesser degree, higher sales of instant film. The increases were offset, in
part, by the absence of sales from non-core businesses that the Company exited
and lower sales of instant cameras. The decrease in sales of instant cameras
was due to a change in the product mix of new and traditional cameras sold in
the Region and the product transition in Japan described above. Instant film
sales in the Region were also impacted by changes in the product mix of new
and traditional film formats as higher unit sales were offset by the impact of
the lower selling prices of the newer film products.
In the Asia Pacific Region, on a unit basis, shipments to customers of instant
cameras decreased approximately 17% while unit shipments to customers of
instant film increased by approximately 10% in the first nine months of 2000
compared with the first nine months of 1999.
PROFIT/(LOSS) FROM OPERATIONS
Worldwide profit from operations in the first nine months of 2000 was $108
million compared with a profit from operations of $46 million in the first
nine months of 1999. The increase was due to lower manufacturing costs,
including savings from restructuring and other efficiencies, the absence of
the $40 million charge related to the graphics arts business described above
and, to a lesser degree, the impact of higher sales of instant cameras. The
increases were offset, in part, by a planned increase in spending on
advertising and promotional activities primarily in support of new products
and higher corporate costs related to centralized information systems and
central marketing activities.
Profit from operations in the Americas Region was $251 million in the first
nine months of 2000 compared with $233 million in the first nine months of
1999. The increase was due to both higher unit sales and improved margins on
sales of instant film and, to a lesser degree, the impact of higher sales of
instant cameras and the absence of losses incurred by non-core businesses that
the Company exited. The increases were offset, in part, by a planned increase
in spending on advertising and promotional activities supporting new products.
Profit from operations in the European Region was $35 million in the first
nine months of 2000 compared with $56 million in the first nine months of
1999. The decrease was due to the unfavorable impact of foreign exchange and
an increase in planned spending on advertising and promotional activities
supporting new products. The decreases were offset, in part, by the impact of
higher sales of instant cameras.
Profit from operations in the Asia Pacific Region was $63 million in the first
nine months of 2000 compared with $56 million in the first nine months of
1999. The increase was due primarily to the favorable impact of foreign
exchange.
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Global Operations costs were $65 million in the first nine months of 2000
compared with $118 million in the first nine months of 1999. The decrease was
due to continued cost savings and manufacturing efficiencies and the absence
of the charge related to the graphic arts business described above. These
reductions were a significant component of the Company's improvement in gross
margin as a percentage of net sales which increased to 46% in the first nine
months of 2000 compared with 41% for the same period of 1999.
Research and Development costs were $61 million in the first nine months of
2000 compared with $64 million in the first nine months of 1999. The decrease
was due to the absence of costs for research and engineering activities
associated with non-core businesses that the Company exited offset, in part,
by increased spending on research and engineering activities related to its
instant and digital imaging products.
Corporate costs were $115 million in the first nine months of 2000 compared
with $117 million in the first nine months of 1999. The decrease was due to
the absence of the charge related to the graphic arts business described above
offset, in part, by higher expenses, including depreciation, for centralized
information systems and a planned increase in spending for central marketing
activities primarily in support of the Company's new products.
The net of other income and expense was income of $22 million in the first
nine months of 2000 compared with expense of $19 million in the same period of
1999. Other income in the nine months of 2000 included $13 million of gains on
the sale of real estate and, to a lesser degree, gains on the sale of
investments. In the first nine months of 1999, other expense included a
non-cash charge of $35 million to write-off the carrying value of the
Company's preferred stock investment in Sterling Dry Imaging Systems, Inc.
offset, in part, by approximately $12 million of gains on the sale of real
estate.
Interest expense increased to $63 million in the first nine months of 2000
compared with $57 million for the same period in 1999. The increase was due to
a higher average interest rate on the amounts of debt outstanding during the
first nine months of 2000. The average amounts of debt outstanding during the
first nine months of 2000 was essentially the same as the average amounts of
debt outstanding for the same period of 1999.
Income tax expense in the first nine months of 2000 was $24 million or 35% of
reported profit before income taxes compared with an income tax benefit of $11
million or 35% of the reported loss before income taxes in the first nine
months of 1999.
In the first nine months of 2000, the Company recorded net earnings of $44
million, or $.97 basic earnings per common share compared with a net loss of
$20 million, or $.45 basic loss per common share in the third quarter of 1999.
Diluted earnings/loss per common share was $.96 diluted earnings per common
share in the third quarter of 2000 compared with $.45 diluted loss per common
share in the third quarter of 1999.
20
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RESTRUCTURING AND OTHER CHARGES
In 1997, the Company recorded restructuring and other charges of $340 million
which consisted of severance costs, impairment losses on certain long-lived
assets, other asset write-downs and exit costs associated with certain
businesses. Of this amount, approximately $17 million represented inventory
write-downs which were included in cost of goods sold. In 1998, the Company
recorded a $50 million restructuring charge related to an expansion of the
severance component of the 1997 program. These charges (collectively, the
"1997 Program") were allocated to the non-segment Corporate category and were
undertaken as the result of management's assessment of the Company's
infrastructure, to strengthen its competitive cost position, to streamline
operations and to improve profitability by consolidating and selling
manufacturing facilities and reducing corporate overhead. The strategic
objective of the 1997 Program was to reduce the cost of developing,
manufacturing, selling and distributing the Company's products; to change and
improve business processes; to deliver new products more efficiently; to
improve financial performance; and to fundamentally alter how the Company
conducts business globally.
Approximately $150 million of the charges recorded in 1997 for the 1997
Program related to an involuntary severance program under which approximately
1,800 employees (consisting of sales and marketing employees in the regional
segments: Americas - 16%; Europe - 24%; Asia Pacific - 9%; primarily
manufacturing employees in Global Operations - 36%; research and engineering
employees in Research and Development - 5%; and administrative employees in
the non-segment Corporate category - 10%) were expected to leave the Company.
The 1998 extension to this involuntary severance program added approximately
1,000 additional employees (consisting of sales and marketing employees in
the regional segments: Americas - 7%; Europe - 14%; Asia Pacific - 3%;
primarily manufacturing employees in Global Operations - 65%; research and
engineering employees in Research and Development - 10%; and administrative
employees in the non-segment Corporate category - 1%). Approximately 2,700 of
the 2,800 terminations under the 1997 Program occurred by October 1, 2000,
with most of the terminations expected to occur by the end of 2000.
Approximately $171 million of cash payments related to the severance
component of the 1997 Program had been made at October 1, 2000 with the
remaining severance payments of approximately $16 million expected to be
substantially completed by the end of 2000. Of the total amount provided for
severance, approximately $10 million related to pension curtailment costs and
$5 million related to pension enhancement costs incurred primarily for
certain non-U.S. employees expected to be terminated under this program.
In the Americas, European and Asia Pacific segments, the major impact of the
1997 Program consists of reducing the number of employees associated with
sales and marketing activities. The impact of the 1997 Program in the European
segment also consists of consolidating back office activities in a centralized
location.
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The impact of the 1997 Program in Global Operations consists of reducing the
number of direct and indirect employees located at manufacturing facilities in
both the United States and Europe that are associated with the manufacture of
instant film and, to a lesser degree, instant hardware, along with employees
required to procure goods and services and distribute finished products. The
1997 Program in Global Operations also included employees at the Company's
chemical manufacturing facility in Freetown, Massachusetts that the Company
sold in February 1998.
The impact of the 1997 Program in the Research and Development segment
consists of reducing the number of employees associated with research and
engineering activities in the United States and to focus the Company's
research and development activities on its core imaging business.
The 1997 Program affects the non-segment Corporate category by reducing the
number of employees in the United States that support functions such as
central marketing, finance, legal, information management, administration,
human resources and facilities support.
In addition to severance, the asset impairment portion of the 1997 Program
amounted to approximately $163 million. Of the $163 million, approximately
$106 million was related to the write-down of the Company's underutilized New
Bedford coating facility to an independently determined fair value of
approximately $18 million. The New Bedford coating facility was designed and
specially built to manufacture large volumes of high quality media for the
Company's graphics and medical diagnostic imaging businesses. However, growth
of these businesses did not materialize as planned and, as a result, the
Company continues to pursue several strategic options for the future use of
this facility, including outright sale. Approximately $22 million of the asset
impairment related to the write-off of battery assembly equipment that was not
required to support anticipated production requirements. This equipment was
initially constructed in anticipation of significant growth in instant film
sales in the emerging markets of Russia and Asia. During 1997, it became clear
that these volume assumptions were no longer valid based on weakness in demand
and an unfavorable outlook in those emerging markets. In 1997, the Company
abandoned this special-purpose equipment in place because it believed that it
had no future use or salvage value and sale to a third party was not likely.
22
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The $163 million also included a loss of approximately $22 million on the sale
of the Company's underutilized chemical manufacturing facility in Freetown,
Massachusetts. The Freetown facility was used to manufacture certain chemical
components of the Company's instant film. Because of competitive changes in
the specialty chemical industry and the fact that the Company's expectation of
future sales of instant film in certain emerging markets did not materialize,
the Company sought the outright sale of the Freetown facility. The write-down
of the Freetown facility was based on the terms of a purchase and sale
agreement and the terms of a long-term supply agreement under which the
Company agreed to purchase certain chemicals used to manufacture its instant
film. The Company entered the purchase and sale agreement and the long-term
supply agreement in the fourth quarter of 1997. The sale of the Freetown
facility was completed in the first quarter of 1998. Additionally, the asset
impairment portion of the 1997 Program included approximately $13 million
related to other fixed assets which were not individually material. The
write-down of these fixed assets occurred because the assets were no longer
required in its U.S. manufacturing operations due primarily to the
consolidation of certain manufacturing operations. The assets related to the
asset impairment portion of the 1997 Program were primarily located in Global
Operations. The Company also recorded approximately $4 million for exit costs
and, to a lesser degree, severance liabilities related to the sale of the
Freetown facility.
In addition to the severance and asset write-downs, the balance of the 1997
Program consisted of approximately $17 million of inventory write-downs and
approximately $6 million of exit costs. The inventory write-downs consisted of
reserves for chemical inventories made obsolete by the sale of the Freetown
facility, lower of cost or market provisions on inventories of a first
generation digital camera and, to lesser degree, inventory reserves related to
the Company's decision to exit a portion of its holography business. The exit
costs related primarily to lease and contract terminations and other costs
directly related to restructuring.
Under the 1997 Program, the Company realized benefits of approximately $115
million through the end of 1999 and expects to further benefit by
approximately $25 million in 2000 bringing the estimated total benefit from
the 1997 Program to $140 million on an annualized basis after the benefits are
fully realized.
23
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FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $61 million at October 1, 2000
and $92 million at December 31, 1999. Net cash used by operating activities in
the first nine months of 2000 was $45 million. Net earnings, adjusted for
non-cash items (i.e., depreciation, gains on the sale of real estate and other
non-cash items), provided $136 million to cash flow from operating activities
and a decrease in receivables provided an additional $34 million. The
increases, however, were more than offset by an increase in inventories of
$111 million and a decrease in payables and accruals and liabilities for
compensation and benefits of $100 million. The increase in inventories was the
result of lower than anticipated shipments in the third quarter of 2000
combined with a planned build-up of inventories, particularly digital cameras,
in anticipation of the fourth quarter holiday season. The decrease in payables
and accruals and liabilities for compensation and benefits included $33
million of severance payments made under the 1997 Program and changes in the
timing of payments for various operating expenses.
Net cash used by investing activities was $49 million for the first nine
months of 2000 and consisted primarily of $98 million of additions to
property, plant and equipment offset, in part, by $45 million of proceeds
related primarily to the sale of real estate and the Company's technical
polarizer and display film business. Net cash provided by financing activities
was $70 million for the first nine months of 2000 and related to an increase
in short-term debt of $91 million offset, in part, by $20 million of dividend
payments to stockholders.
Working capital, defined as current assets less current liabilities, was $380
million at October 1, 2000 compared with $367 million at December 31, 1999.
The increase in working capital is the result of the increase in inventory and
the decrease in payables and accruals and liabilities for compensation and
benefits described above. The increases in working capital were offset, in
part, by an increase in short-term debt and decreases in receivables and cash
and cash equivalents which were also noted above.
In the first nine months of 2000, capital spending totaled $98 million
compared with $132 million in the nine months of 1999. The decrease in capital
spending was the result of lower spending on the Company's enterprise-wide
software system, new products (consistent with the Company's new product
launch schedule) and capital improvements related to the consolidation of the
Company's real estate holdings. The decreases were offset, in part, by higher
spending on the Company's Internet initiatives and its identification systems
business. The Company expects total capital spending to be $140 million in
2000.
24
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The Company has financed its operations with the following sources of debt:
the Amended Credit Agreement (defined below); the U.K. Credit Agreement
(defined below); short-term lines of credit; and the Company's outstanding 6
3/4% Notes due 2002 (the "2002 Notes"), 7 1/4% Notes due 2007 (the "2007
Notes") and 11 1/2% Notes due 2006 (the "2006 Notes").
At October 1, 2000, the Company had $346 million outstanding in short-term
debt. The amounts outstanding were comprised of $335 million under the Amended
Credit Agreement and $11 million under uncommitted short-term lines of credit.
There were no amounts outstanding under the U.K. Credit Agreement at the end
of the third quarter of 2000.
In December 1998, the Company entered into a credit agreement for a maximum
commitment of $350 million on a revolving basis through December 31, 2001. The
credit agreement provides the lenders the right to incorporate covenants given
to the holders of notes or other securities of the Company which, in the
lenders judgment, are more restrictive. The lenders exercised their rights to
incorporate certain covenants of the 2006 Notes in Amendment No. 1, dated
March 31, 1999, to the credit agreement (hereinafter collectively referred to
as the "Amended Credit Agreement").
Funds borrowed under the Amended Credit Agreement bear interest, at the
Company's option, at either the prime rate of Morgan Guaranty Trust Company
("Prime") plus a margin or LIBOR on euro-dollar loans plus a margin. The
margins range from 0.085% to 2.0% for Prime-based loans and from 0.275% to
3.0% for euro-dollar loans based on the Company's credit rating. In addition,
the Company pays the lenders a commitment fee on unused commitments ranging
from 0% to 0.025% on an annual basis depending on the Company's credit rating
and a fee to the administrative agent. The weighted average interest rate on
amounts outstanding under the Amended Credit Agreement was 8.6% at October 1,
2000.
In connection with the Amended Credit Agreement, the Company entered into a
collateral agreement and certain related documents that granted the lenders a
first security interest in certain of the Company's domestic inventories and
trade accounts receivable. Under the collateral agreement, the security will
be released if the Company's credit rating is BBB- or higher by Standard and
Poor's ("S&P") and Baa3 or higher by Moody's Investor's Services, Inc.
("Moody's"). Currently, the Company's credit ratings are BB by S&P and Fitch
IBCA, Duff & Phelps ("Fitch") and Ba2 by Moody's. The Company's long-term debt
is rated BB-by S&P, BB by Fitch and Ba3 by Moody's. In October 2000, S&P
placed the Company's credit rating and long-term debt rating on CreditWatch
with negative implications.
25
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In August 1999, the Company's wholly-owned subsidiary, Polaroid (U.K.) Limited
("Polaroid U.K."), as borrower, and the Company, as guarantor, entered into a
new loan agreement for a maximum commitment of 72.5 million euros
(approximately $64 million at October 1, 2000) (the "U.K. Credit Agreement")
that is scheduled to mature on December 31, 2001. Several of the Company's
foreign subsidiaries granted the lenders under this facility a security
interest in certain foreign inventories and receivables. Borrowings under the
U.K. Credit Agreement bear a margin of approximately 25 basis points higher
than that paid under the Amended Credit Agreement.
The Amended Credit Agreement and the U.K. Credit Agreement require the Company
to maintain financial ratios related to the maximum level of debt to earnings
before interest, taxes, depreciation, and amortization and minimum interest
coverage. In addition to financial ratios, the Amended Credit Agreement and
the U.K. Credit Agreement restrict, among other things, the Company's ability
to do the following: make certain capital expenditures; make certain payments;
incur debt in addition to the 2006 Notes; incur certain liens; make certain
investments; enter into certain sale leaseback transactions; merge,
consolidate, sell or transfer all or substantially all of the Company's assets
subject to certain financial conditions; and to enter into certain
transactions with affiliates. The Company met all of the requirements of the
Amended Credit Agreement and the U.K. Credit Agreement through the first nine
months of 2000.
The Amended Credit Agreement and the U.K. Credit Agreement also restrict the
Company's ability to pay dividends and repurchase stock. The agreements limit
the payment of dividends and repurchase of Company stock to: $3.75 million per
quarter on an aggregate basis since December 31, 1998 plus; up to an
additional $3.75 million in the current quarter from the exercise of stock
options and the lesser of 6% of the Company's domestic payroll or the fair
value of the shares of the Company's stock issued to employee stock ownership
plans plus; the aggregate proceeds from the exercise of stock options and the
lesser of 6% of the Company's domestic payroll or the fair value of the shares
of the Company's stock issued to employee stock ownership plans, without
limitation, for all prior quarters since December 31, 1998. Based on
information currently available, the Company believes that this provision will
not prevent it from continuing the current dividend payment of $.60 per share
per annum.
In addition to its short-term debt, the Company had $573 million outstanding
in long-term debt at October 1, 2000. The amounts outstanding were comprised
of $149 million of 2002 Notes, $149 million of 2007 Notes and $275 million of
2006 Notes.
26
<PAGE>
The indenture, pursuant to which the 2006 Notes were issued, contains certain
covenants that restrict, among other things, the Company's ability to do the
following: make certain restricted payments, including dividends on and the
purchase of the Company's common stock; incur additional debt and issue
preferred stock; incur certain liens; enter into sale leaseback transactions;
enter into certain transactions with affiliates; and enter into certain
mergers and consolidations or sell all or substantially all of the properties
or assets of the Company.
In the first quarter of 2000, the Company filed a shelf registration statement
with the Securities and Exchange Commission (SEC) to expand the type and
increase the amount of securities it may offer up to $500 million. The types
of securities that the Company could issue under the shelf registration are
debt securities, preferred stock, depositary shares, common stock, preferred
stock rights, stock purchase contracts, stock purchase units, warrants and
warrant units. The Company's ability to issue securities under the shelf
registration statement is subject to limitations imposed by the Amended Credit
Agreement, the U.K Credit Agreement and the 2006 Notes.
The Company continually evaluates its financing arrangements to ensure that it
has sufficient borrowing capacity at appropriate rates and terms. The Company
believes that the availability of funds under the Amended Credit Agreement,
the U.K. Credit Agreement, short-term lines of credit and funds generated from
operations will be adequate to meet working capital needs, fund spending for
growth and maintenance of existing operations and make severance payments
associated with the 1997 Program for at least the next twelve months.
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 exchange rate movement can be positive or
negative in any given period. The Company's ability to counteract currency
exchange rate movement is primarily dependent on pricing in local markets and,
to a lesser degree, in the short-term, on hedging through nonfunctional
currency denominated borrowings, forward exchange contracts and the purchase
of currency options.
The Company maintains a Monetary Control Center (the "MCC") which operates
under written policies and procedures that define its day-to-day operating
guidelines. In addition, the MCC is subject to random independent audits and
reports to a supervisory committee comprised of members of the Company's
senior management. The MCC publishes regular reports to the supervisory
committee detailing foreign currency activities. Exposure limits for
nonfunctional currency denominated borrowings and forward exchange contracts
are outlined in the MCC's policies and procedures. Currency option purchases
require approval from the Company's senior management.
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<PAGE>
To minimize the impact of currency fluctuations on net monetary assets
denominated in currencies other than the relevant functional currency
("nonfunctional currencies") the Company engages in nonfunctional currency
denominated borrowings. The Company determines the aggregate amount of such
borrowings based on forecasts of each entity's nonfunctional currency
denominated net monetary asset position and the relative strength of the
functional currencies compared with the nonfunctional currencies. These
borrowings create nonfunctional currency denominated liabilities that hedge
the Company's nonfunctional currency denominated net monetary 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. The amount of the Company's
outstanding short-term debt incurred for hedging purposes was $11 million at
October 1, 2000.
Alternatively, the Company may use forward exchange contracts to minimize the
impact of currency fluctuations on its net monetary assets denominated in
nonfunctional currencies. The term of these contracts typically does not
exceed six months and the Company does not enter into forward exchange
contracts for trading purposes. At October 1, 2000, the aggregate notional
value of the Company's outstanding forward exchange contracts was $171 million.
The Company has limited flexibility to increase prices in local currencies and
offset the adverse impact of foreign exchange. As a result, the Company
purchases U.S. dollar call/foreign currency put options which allows it to
protect a portion of its expected foreign currency denominated revenues from
adverse currency exchange movement. The term of purchased options typically
does not exceed 18 months and all of the option contracts outstanding at
October 1, 2000 expire in the first quarter of 2001. The Company does not
write options or purchase options for trading purposes. The notional value of
the Company's outstanding option contracts, all of which were denominated in
Japanese yen, was $70 million at October 1, 2000.
IMPACT OF INFLATION
Inflation continues to be a factor in many countries in which the Company does
business. The Company's pricing strategy and continuing efficiency
improvements have offset inflation and normal cost increases to a considerable
degree. The overall inflationary impact on the Company's earnings has not been
material.
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<PAGE>
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Financial
Accounting Standards Board Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), that establishes accounting and
reporting requirements for derivative instruments and for hedging activities.
FAS 133 requires companies to recognize all derivatives as either assets or
liabilities in the statement of financial position at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge of
the exposures to changes in fair value of recognized assets or liabilities or
unrecognized firm commitments, a hedge of the exposure to variable cash flows of
a forecasted transaction, or a hedge of the foreign currency exposure of a net
investment in a foreign operation, unrecognized firm commitments, an
available-for-sale security or a foreign-currency denominated forecasted
transaction. The accounting for changes in fair value under FAS 133 depends on
the intended use of the derivative and the resulting designation.
In June 1999, the FASB issued FAS 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133," which delayed the effective date of FAS 133 by one year to fiscal years
beginning after June 15, 2000. In June 2000, the FASB issued FAS 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
an amendment of FASB Statement No. 133" ("FAS 138"), which will be adopted
concurrently with FAS 133. FAS 138 amends the accounting and reporting standards
of FAS 133 for certain derivative instruments and hedging activities and
incorporates conclusions reached by the FASB related to the Derivatives
Implementation Group process. The Company is currently evaluating the effect of
FAS 133 and FAS 138 on its results of operations and financial position.
In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"), that expresses the
views of the SEC staff regarding the application of generally accepted
accounting principles to certain revenue recognition issues. In June 2000, the
SEC issued SAB No. 101B, "Second Amendment: Revenue Recognition in Financial
Statements," which delayed the effective date of SAB 101 to periods no later
than the fourth quarter of fiscal years beginning after December 15, 1999. The
Company will adopt SAB 101 at the beginning of the fourth quarter of 2000 and
does not believe that the adoption will have a material impact on its results of
operations or financial position.
29
<PAGE>
In May 2000, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-14, "Accounting for Certain Sales Incentives," which is effective
for periods no later than the fourth quarter of fiscal years beginning after
December 15, 1999. This accounting applies to the recognition, measurement and
income statement classification of sales incentives offered to customers such as
discounts, coupons, rebates and free products or services. The Company will
adopt EITF Issue No. 00-14 at the beginning of the fourth quarter of 2000 and
does not believe that the adoption will have a material impact on its results of
operations or financial position but it will require amounts previously recorded
as marketing expenses to be reclassified as a reduction of net sales.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation an Interpretation of APB Opinion No.
25" ("FIN 44"), which must be applied prospectively to new stock option awards,
exchanges of awards in a business combination, modifications to outstanding
awards and changes in grantee status that occur on or after July 1, 2000. The
adoption of FIN 44 did not have a material impact on the Company's results of
operations or financial position.
In March 2000, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 00-2, "Accounting for Web Site Development Costs" which is effective
for fiscal quarters beginning after June 30, 2000. This accounting applies to
the cost of developing a web site and applies to web sites used to promote or
advertise products or services, supplant manual processes or services, sell
products (including software) or services, or to do a combination of all three.
The adoption of EITF Issue No. 00-2 did not have a material effect on the
Company's results of operations or financial position.
EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing sovereign currencies
(the "legacy currencies") and one common currency (the "euro"). The
participating countries adopted the euro as their common currency on January 1,
1999. The euro is now traded on currency exchanges and may be used in business
transactions. On January 1, 2002, new euro-denominated bills and coins will be
issued by the participating countries. The legacy currencies will then be
withdrawn and will cease to be legal tender effective June 30, 2002. During the
period from January 1, 1999 to June 30, 2002, parties may use either the euro or
a participating country's legacy currency as legal tender.
30
<PAGE>
In 1998, the Company formed an Economic and Monetary Union Steering Committee
and Project Team (the "EMU Committee"). The EMU Committee has analyzed the
impact of the euro conversion on the Company in a number of areas, including the
Company's information systems, product pricing, finance and banking resources,
foreign exchange management, contracts and accounting and tax departments. While
the Company is in the process of making certain adjustments to its business and
its operations to accommodate the euro conversion, the EMU Committee believes,
based on information available at this time and on several assumptions, that the
euro conversion process will not have a material adverse impact on the Company's
results of its operations or financial position.
OUTLOOK
The following is an overview of the Company's outlook for the future and
contains forward-looking statements. Actual results are dependent on a number of
factors that described under "Factors That May Affect Future Results." As a
result, actual results could differ materially from those outlined below.
The revenues reported by the Company in the fourth quarter of 2000 could be
impacted by a mix shift to its new film formats from its traditional film
formats, retailers reducing inventories in anticipation of a slow holiday season
and the decline of the euro. In an effort to counteract a portion of these
risks, the Company will skew more of its fourth quarter advertising and
promotion toward traditional camera and film formats and work closely with
distributors and retailers to avoid out-of-stocks while respecting shifts to
more conservative stocking policies.
The Company will continue to pursue its strategy of revitalizing its core
imaging business and linking its instant technology to the digital future.
Over the next several years, the Company expects its strategy could result in
net revenue growth based on a nominal growth rate for its core instant camera
and film products and a growth rate of 30 to 40% for its digital products.
Currently, digital products represent less than 10% of the Company's total
sales but could, over the next several years, grow to represent more than 15%
of total sales. The Company also expects that its strategy, and the related
sales growth, could translate into growth of operating profits over the next
several years. Currently, the Company's digital products carry lower profit
margins relative to its instant imaging products, but in the longer term, new
digital printing solutions will include media components that carry higher
margins than digital hardware.
31
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
Some statements in this report, including those under "Outlook" above, may be
forward looking in nature, or "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 (the "Act"). These statements
may be identified by the use of forward-looking words or phrases such as
"expect", "anticipate", "plan", "outlook", "intend", "will", "estimate" and
"potential" among others. The Company desires to take advantage of the "safe
harbor" provisions of the Act. Many of the important factors below have been
discussed in prior filings by the Company with the Securities and Exchange
Commission. The Company therefore cautions shareholders and investors that
actual results may differ materially from those projected in or implied by any
forward-looking statement as a result of a wide variety of factors which
include, but are not limited to the Company's ability:
- to market its core imaging products which requires, among other
things;
- introducing a number of new products each year;
- expanding certain profitable businesses;
- increasing revenues while managing the mix of new and traditional
products and retail buying patterns; and
- continuing to reduce costs through operating efficiencies,
including savings from restructuring;
- to penetrate new demographic markets such as children, teens and young
adults for its products and new technologies through product
innovations, marketing campaigns and expanded distribution;
- to develop and implement its digital imaging strategy which requires,
among other things:
- applying the Company's technology and expertise in instant
imaging to the developing market for digital imaging products;
- marketing of successful new digital imaging products;
- successfully developing partnerships and alliances with other
companies in the digital imaging market; and
- accurately anticipating and responding to trends in the rapidly
changing digital imaging market;
- to compete successfully in the instant imaging market against larger
and stronger competitors like Fuji Photo Film Co., Ltd. ("Fuji"), and
in the digital imaging market against competitors like Eastman Kodak
Company, Fuji, Hewlett-Packard Company, Cannon U.S.A., Inc. and Sony
Corporation;
- to avoid periods of net losses which could require the Company to find
additional sources of financing to fund operations, implement its
business strategy, meet anticipated capital expenditures, research and
development costs and financing commitments;
32
<PAGE>
- to manage or reduce its debt which would reduce the Company's
vulnerability to general adverse economic conditions; increase its
ability to compete with competitors that are less leveraged; increase
its ability to fund future working capital needs, capital
expenditures, acquisitions, research and development costs and other
general corporate requirements; and increase its flexibility to react
to changes in the businesses and industry in which it operates;
- to comply with the covenants in the Amended Credit Agreement, the U.K.
Credit Agreement, the indenture governing the 2006 Notes and certain
of the agreements governing short-term lines of credit the failure of
which could result in an event of default;
- to generate sufficient cash in order to make payments on and to
refinance its debt, to execute its business strategy, to make capital
expenditures and to fund research and development costs;
- to retain its top customers at essentially their current purchasing
levels;
- to sell and market its products worldwide particularly in light of the
major risks associated with worldwide operations such as various local
laws and customs;
- to manage fluctuation of foreign exchange rates, particularly the
Japanese yen and euro;
- to further reduce its cycle time in bringing new products to market;
- to retain certain sole source suppliers, or find timely alternatives,
for raw materials, supplies and finished goods necessary for the
manufacture and sale of its products, including chemicals, polyester
film base, specialty paper and certain components;
- to develop and continue to protect ownership of, and license as
appropriate, valuable intellectual property rights;
- to comply with the large number of federal, state and local
environmental laws and regulations that govern, among other things,
the discharge of hazardous materials into the air and water as well as
the handling, storage and disposal of such materials; and;
33
<PAGE>
- to retain a number of key senior managers and to be able to attract
and retain qualified senior managers who can implement the Company's
business strategy.
There can be no assurance that the Company will be successful in accomplishing
its objectives and meeting the challenges summarized above. If the Company is
not successful, the Company's business and results of operations could be
negatively impacted.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
The Company is currently involved in several lawsuits, the unfavorable
disposition of which could have a material adverse effect on the financial
condition or operating results of the Company.
A consolidated suit has been filed in United States District Court for the
District of Massachusetts against the Company and certain of its officers by
individuals claiming to have purchased stock in the Company and representing a
class of its shareholders in actions alleging violations of federal securities
law regarding public disclosure of information about the Company's business
during a time between April 16, 1997 and August 28, 1998. The Company believes
that these suits are without merit and intends to defend them vigorously.
In addition to the above, the Company is involved in various other legal
proceedings and claims arising in the ordinary course of business. The Company
believes that the disposition of these matters will not have a materially
adverse effect on the results of operations or financial condition of the
Company.
ENVIRONMENTAL COMPLIANCE
The Company owns and operates facilities that are subject to certain federal,
state and local laws and regulations relating to environmental protection,
including those governing the investigation and remediation of contamination
resulting from past or present releases of hazardous substances. Certain of
these laws and regulations may impose joint and several liability on the Company
for the costs of investigation or remediation of such contamination, regardless
of fault or the legality of original disposal.
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<PAGE>
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 those sites
and various other uncertainties, the Company cannot firmly establish its
ultimate liability concerning those sites. In each case in which the Company is
able to determine the likely exposure, such amount has been included in the
Company's reserve for environmental liabilities. Where a range of comparably
likely exposures exists, the Company has included in its reserve at least the
minimum amount of the range. The Company's aggregate reserve for these
liabilities as of October 1, 2000 was $1.4 million and the Company currently
estimates that the majority of the reserve will be payable over the next two to
three years. The Company reviews the analysis of the data that supports the
adequacy of this reserve on a quarterly basis. The reserve for such liability
does not provide for associated litigation costs, which, if any, are expected to
be inconsequential in comparison with the amount of the reserve. The Company
will continue to accrue in its reserve appropriate amounts from time to time as
circumstances warrant. This reserve does not take into account potential
recoveries from third parties.
Federal law provides that PRPs may be held jointly and severally liable for
response costs. Based on current estimates of those costs and after
consideration of the potential estimated liabilities of other PRPs with respect
to those sites and their respective estimated levels of financial
responsibility, the Company does not believe its potential liability will be
materially enlarged by the fact that liability is joint and several.
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.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
a) Not applicable.
b) Not applicable.
c) Not applicable.
d) Not applicable.
35
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<S> <C>
10.1 Employment Agreement dated August 18, 2000 between Polaroid
Corporation and Judith G. Boynton.
12 Ratio of Earnings to Fixed Charges.
15 Letter re Unaudited Interim Financial Information.
27 Financial Data Schedule.
</TABLE>
b) REPORTS ON FORM 8-K
The Company did not file a Current Report on Form 8-K in the third quarter
of 2000.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
POLAROID CORPORATION
(Registrant)
By /s/JUDITH G. BOYNTON
--------------------
Judith G. Boynton
Executive Vice President, Business
Development and Chief Financial Officer
37
