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Profit Leaders
A worker at T.J. Maxx sorts Clothing. A worker at T.J. Maxx sorts Clothing. (Globe File Photo)

Profit pedulum swings for Polaroid and Digital

By Richard Kindleberger,
Globe Staff

There are a lot of ups and downs in life. Just ask Polaroid Corp. and Digital Equipment Corp.

These Massachusetts companies, household names both, top the charts in this year's Globe 100 for showing the widest swings between profit and loss from one year to the next.

...continued


After cost-saving mergers, Fleet comes
up big

By Tina Cassidy, Globe Staff

A spate of mergers and acquisitions among local companies fattened the bottom line last year for some 800-pound gorillas.

The enlarged Fleet Financial Group Inc. tops the Globe 100's chart for greatest 1996 profit, while the Learning Co. turns up the biggest loser on the list of companies in the red.

Both companies are coming off a year greatly affected by corporate combinations.

In November 1995, Fleet closed its purchase of Shawmut National Corp. and in May 1996 it completed its merger with NatWest Bancorp. Together the deals have given Fleet, New England's largest banking company, with $85.5 billion in assets, a franchise stretching up and down the East Coast.

``It's truly amazing to think that Fleet Financial's net income produced over $1 billion,'' said Gerard Cassidy, an analyst at Tucker Anthony. ``I think it points out the sheer size of this organization.''

Cassidy said the bank's profitability can be attributed to three things: Fleet's success in cost-cutting programs made necessary by the mergers; continued improvements in net interest margins, which are the spread between loan yield and deposit costs; and an improvement in asset quality, or fewer problem loans.

However, Fleet's 87 percent increase in net income last year appears inflated because a one-time charge for the Shawmut deal depressed 1995 earnings.

``What people have learned to expect from us is buying a lot of banks,'' said Fleet chief executive Terrence Murray. ``That could be in the cards. But I think it will be a more targeted type of situation. I think our interest in non-banks is as high a priority as banks.''

Murray said he was referring to the possibility of buying processing businesses and financial product lines, and perhaps even negotiating a joint venture with an insurance company.

Meanwhile, TJX Cos. of Framingham, which had $214 million in profit from continuing operations before extraordinary items - up fourfold from a year earlier - can also attribute much of that ascendancy to a major acquisition.

TJX, the parent company of off-price retailer T.J. Maxx, paid $550 million in cash and stock for its chief rival: Melville Corp.'s Marshalls chain.

The merged operation has the sales potential of $6 billion a year, according to forecasters, and makes TJX nearly four times larger than its nearest off-price competitor, Ross Stores Inc. of California.

Overall, the roster of companies with the greatest profits didn't change much from last year. Eight of the 10 were repeats. The list is dominated, not surprisingly, by the behemoths of the Massachusetts business scene, companies like Gillette Co., Raytheon Co., Fleet, and BankBoston Corp. Only TJX and Thermo Electron Corp,. were new this year.

At the bottom of the profitability list is Cambridge-based Learning Co., which began a $1 billion buying spree in 1995 when software companies were selling at peak prices.

Originally called Softkey International Inc., the company paid $606 million to outbid Broderbund Software Inc. for the Learning Co. late in 1995 and later changed its name.

The company, which makes educational software such as Reader Rabbit, also bought Minnesota Educational Computing Corp. for $324 million in a stock swap, as well as Compton's Newmedia and Paris-based Edusoft SA.

As a result, the Learning Co.'s debt repayment schedule shaves about $120 million off the company's bottom line each quarter. Last year, the Learning Co. lost $406 million.

And troubled retailers are heavily represented on the list of big money losers. Bradlees Inc., a discount retailer, Grossman's Inc., a home-improvements chain, and J. Baker Inc., a footwear and apparel retailer, racked up big losses last year. Bradlees and Grossman's are in Chapter 11 bankruptcy reorganization.

This story ran in the Boston Globe on 05/20/97.
© Copyright 1997 Globe Newspaper Company.


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