U.S.

Polaroid Files For Chapter 11

By CBSNews.com staff CBSNews.com staff

October 12, 2001 / 3:31 PM EDT / CBS

Polaroid Corp., known to generations of consumers for its instant cameras and film but buried beneath a mountain of debt, filed for Chapter 11 bankruptcy protection Friday.

The widely expected move comes three months after Polaroid, founded by Edwin Land in 1937, said it would miss payments to bondholders and explore strategic options - including a sale of the company - as it negotiated with creditors.

Waylaid by one-hour film developing shops and a debt load approaching $1 billion, the Cambridge, Massachusetts-based firm suffered from the rise of digital cameras while it was late to roll out its own digital products. Polaroid sold 13.1 million instant cameras last year, but business still deteriorated and stop-gap measures such as selling buildings and cutting jobs failed to spur operations.

No buyer stepped forward and business slowed further after the Sept. 11 terrorist attacks, forcing the company into reorganization.

The company could be sold off in its entirety or essentially stripped for parts under the supervision of a bankruptcy court.

A Chapter 11 reorganization would make Polaroid and its parts more attractive to potential buyers, analysts said. Buyers could acquire equity for free and possibly get a discount on Polaroid debt if the purchase came out of bankruptcy proceedings.

Polaroid has been trying to restructure $950 million in debt, and lost $109.9 million in the quarter ending July 2.

It has laid off at least 2,950 employees - 35 percent of its work force - and been in negotiations with bondholders since missing interest payments in July.

But it still has valuable assets, including a well-known name and new printing technology, called Opal and Onyx, which is expected to debut next year. Analysts have said they were impressed with the technology, though they doubted Polaroid could develop it quickly enough to save the company from bankruptcy.

Trading in Polaroid shares, which had reached $60 per share in 1997, has been halted since early Wednesday at 28 cents per share on the New York Stock Exchange.

Polaroid has obtained a commitment of $50 million from a bank group led by J.P. Morgan Chase & Co. to continue operating during the restructuring.

In a statement, Polaroid said it would "accelerate and intensify its exploration of a possible sale of all or parts of the company."

Employees will continue to be paid and their benefits will be unchanged, the company said.

Before Friday's filing in U.S. Bankruptcy Court in Delaware, Polaroid spokesman Skip Colcord acknowledged that business has slowed since the World Trade Center attacks.

Last month, the company told employees its pension plan had only enough to pay 90 percent of all benefits accrued by employees. It has been trying to unload real estate in the Boston area and in May sold its office park in Waltham for $70 million.

In partnership with George Wheelwright, a Harvard physics instructor, Edwin Land in 1937 founded Polaroid, whee he adapted polarized materials for desk lamps, sunglasses, 3-D movies and military devices. The company racked up $141,935 in sales during its first year.

Land became interested in the properties and manipulation of polarized light before dropping out of Harvard University in 1932.

A pivotal moment in the company's history came Feb. 21, 1947, when Land wowed an Optical Society of America meeting in New York City with his demonstration of a single-step photographic process that enabled pictures to be developed in 60 seconds. That process would later be reduced to less than 10 seconds.

The next year Polaroid sold the first instant camera and film to the public at the Jordan Marsh department store in Boston. The Polaroid Model 95 Land Camera sold for $89.50.

In recent years, Polaroid enjoyed a bit of a rejuvenation with its I-Zone and JoyCam cameras that appealed to teenagers from New York to Tokyo. Analysts, however, worried that those sales might be too faddish and eventually would wane.

Polaroid isn't the only photographic company hit hard by the economic slowdown. Eastman Kodak Co. recently cut its third-quarter earnings outlook by 38 percent and is also cutting an unspecified number of jobs.