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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-9722
INTERGRAPH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 63-0573222
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Intergraph Corporation
Huntsville, Alabama 35894-0001
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (256) 730-2000
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ( )
As of January 31, 2002, there were 49,919,242 shares of Intergraph
Corporation Common Stock $0.10 par value outstanding. The aggregate
market value of the voting stock held by nonaffiliates of the
registrant was approximately $706,614,000 based on the closing sale
price of such stock as reported by The Nasdaq Stock Market on
January 31, 2002, assuming that all shares beneficially held by
executive officers and members of the registrant's Board of
Directors are shares owned by "affiliates," a status which each of
the executive officers and directors individually disclaims.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
- --------- -------------------
Portions of the Annual Report to
Shareholders for the year ended
December 31, 2001 Part I, Part II, Part IV
PART I
ITEM 1. BUSINESS
Overview
Intergraph Corporation (the "Company"), founded in 1969, is a
worldwide provider of end-to-end technical solutions and systems
integration services. The Company's industry-focused business
segments develop, market, and support software and services for
local and national governments, and for global industries,
including process, power, and offshore; utilities and
communications; mapping and geographic information systems
("GIS"); earth imaging; and public safety.
The Company's business segments offer software solutions based
on Microsoft Corporation's Windows operating systems. This open
technology foundation enables the Company's software products to
interoperate with thousands of third-party Windows-based
technical and business applications. The Company's business
segments also offer related professional services to satisfy
engineering, design, modeling, analysis, mapping, and information
technology needs. Products and services are sold through
industry-focused direct and indirect channels worldwide, with
United States and European revenues representing approximately
81% of total revenues for 2001.
Background
Until the mid-1990s, high-end technical computing required
tremendous processing and graphics capabilities that were
available only from mainframes, minicomputers, and reduced
instruction set computing ("RISC")-based workstations, running
the UNIX operating system, including Intergraph's Clipper
workstations. However, in 1992, the Company began evaluating a
transition from its Clipper RISC microprocessor to Intel
Corporation ("Intel") microprocessors, and from UNIX to
Microsoft's Windows NT operating system. In late 1992, based on
commitments from Intel, the Company concluded that systems with
Intel microprocessors and Windows operating systems would become
capable of supporting high-end computing and other enterprise-
wide computing environments. The Company, therefore, chose to
migrate products from its own Clipper microprocessor to Intel
microprocessors, and from the UNIX operating system to Microsoft
Windows NT.
The Company ceased development of the Clipper RISC
microprocessor at the end of 1993 and made a substantial
investment in the redesign of its hardware platform for
utilization of Intel's microprocessors. The Company chose to use
only Intel microprocessors and to focus its efforts and branding
on its core capabilities, specifically very high-performance
computational and 3D graphics capabilities. The Company's
transition from its proprietary hardware to Intel-based systems
was substantially completed during 1994. From then until the
Company exited the high-end workstation market in 2000,
substantially all of the Company's hardware sales were of Intel-
based systems. In the mid-1990s, the Company also completed
the development effort to port its technical software
applications to the Windows NT operating system, and made Windows
NT available on all its workstations.
In 1996, a dispute disrupted relations between the Company and
Intel, causing significant delays in the Company's hardware
development and manufacturing cycles. Unable to acquire
technical information crucial to its product development, the
Company could not introduce new hardware lines on a timetable
competitive with other hardware vendors. As a consequence, the
Company was unable to compete favorably in the high-performance
Intel processor-powered workstation markets. In November 1997,
the Company filed suit against Intel for illegal coercive
actions, patent infringement, and antitrust violations. The
antitrust portion of the case was dismissed, and a trial date of
January 2003 has been set in the U.S. District Court, Birmingham,
Alabama, for the patent infringement and state tort claims. On
July 30, 2001, the Company filed a separate lawsuit in U.S.
District Court, the Eastern District of Texas, charging Intel
with infringement of two Intergraph patents pertaining to
parallel instruction computing ("PIC"). The complaint alleges
that Intel's IA-64 EPIC(TM) (explicitly parallel instruction
computing) architecture, infringes the Company's two PIC patents.
This lawsuit is scheduled to go to trial in July 2002. See Item
3, Legal Proceedings, following, and Management's Discussion and
Analysis of Financial Condition and Results of Operations
contained in the Company's 2001 Annual Report, portions of which
are incorporated by reference in this Form 10-K Annual Report
("MD&A"), for further discussion of the Company's dispute with
Intel and its effects on the Company's business and consolidated
operating results.
Over the past four years, the Company has taken significant
measures to reduce its losses and return to profitability,
including extensive reductions in its workforce and the sale of
several non-core business units and assets. In October 1999,
having suffered irreparable damage as a result of the dispute
with Intel, the Company exited the personal computer and generic
server businesses, and in the third quarter 2000 it exited the
development and design of most of its hardware products. The
Company returned to profitability in 2001. Each of the five core
businesses, and the Company as a whole, were profitable in every
quarter of 2001. For further information regarding these
actions, see MD&A.
The Company believes that its software applications strategy is
the best available choice for its customers; however, other
software applications are available in the market, and the
Company competes with companies with greater financial resources
in each of the markets it serves. Further improvement in the
Company's operating results depends on further market penetration
through its ability to accurately anticipate customer
requirements and technological trends and to rapidly and
continuously develop and deliver new products that are
competitively priced, offer enhanced performance, and meet
customers' requirements for standardization and interoperability.
Success will also depend on the Company's ability to successfully
implement its strategic direction, which includes the operation
of independent vertical business segments. In addition, the
Company continues to face high legal expenses of unknown duration
because of its dispute with Intel.
Discontinued Operation
On October 31, 1999, the Company sold its VeriBest, Inc.
operating segment. For further information regarding the sale of
VeriBest, see MD&A.
Business Segments
Effective for 2001, the Company's operations are divided into
five separate business segments. These business segments are
focused on specific vertical markets in which the Company
considers itself to be a leader or sees the potential to lead.
The Company's 2001 business segments are Intergraph Government
Solutions; Intergraph Mapping and GIS Solutions; Intergraph
Process, Power & Offshore; Intergraph Public Safety (which
includes Public Safety and Utilities and Communications); and Z/I
Imaging. Each is discussed in further detail below. For
additional information regarding the Company's business segments,
including financial information for 2001, see MD&A and Note 12 of
Notes to Consolidated Financial Statements contained in the
Company's 2001 Annual Report, which are incorporated herein by
reference ("Notes to Consolidated Financial Statements").
Intergraph Government Solutions ("IGS")
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Intergraph Government Solutions is a professional services and
solutions company that provides management consulting,
technology, and integrated solutions in the commercial and
government sectors. IGS partners with clients to achieve their
vision, mission, and goals through intelligent deployment of best
practices and information technology ("IT"). IGS combines
experience in dozens of technical fields with offerings covering
the gamut of services capabilities and products: IT integration,
systems and networking, installation management, management
consulting, help desk services, multi-vendor maintenance/field
support, ruggedized hardware solutions, video analysis systems
and services, and Integrated Ship Design and Production software.
IGS operates two divisions, the Government Solutions Division
("GSD") and the Federal Hardware Solutions Division ("FHS").
These divisions encompass four business units that serve focused
markets or industries. Three of the four business units are
organized under GSD. The Department of Defense ("DOD") business
unit serves the U.S. Air Force, Joint Operations, U.S. Naval Air
Systems Command, the U.S. Army, and NASA. With long-term
contract vehicles such as CAD-2 and GSA, the DOD business unit
remains the largest within IGS. The Marine and Life Cycle
Solutions business unit provides integrated data environments for
the U.S. Naval Sea Systems Command, the U.S. Coast Guard, and
commercial shipyards in the United States and around the world.
The Commercial/State and Local Government business unit serves
three distinct markets. First, the unit delivers integrated
information management systems to federal and state departments
of transportation, state and local government agencies, and
transportation organizations. Second, the unit supplies product
data management and collaborative product commerce services to
consumer product, medical device, and discrete manufacturing
industries. Third, the unit provides local and wide area network
planning and implementation, electronic-business, IT outsourcing,
and help desk solutions to commercial markets. The fourth
business unit, organized under FHS, develops, implements, and
supports ruggedized hardware for use in harsh operating
environments, and video analysis products and services for the
DOD and federal, state, and local law enforcement agencies.
Intergraph Mapping and GIS Solutions ("IMGS")
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Intergraph Mapping and GIS Solutions has been a leading
provider of mapping, GIS, and cartographic software and solutions
for more than twenty-five years. IMGS, an acknowledged pioneer
in the industry, provides products and services, open technology
and data integration, and partners and people to help customers
implement successful solutions.
IMGS serves government agencies and commercial enterprises
with end-to-end geospatial solutions for cartography and map
production and enterprise-wide mapping and GIS. IMGS products
and industry-specific solutions support government agencies and
commercial enterprises worldwide, including local, state,
federal, and national governments; transportation agencies;
mapping agencies; the military; civil aviation authorities; and
educational institutions.
IMGS solutions include the GeoMedia(R), Modula(R) GIS
Environment ("MGE"), and Digital Cartographic Studio ("DCS")
platforms. The GeoMedia product suite integrates geospatial
information throughout the enterprise, while providing the
necessary tools to develop business-to-business and custom client
applications. MGE provides production-ready capabilities for
automating, managing, analyzing, and presenting GIS data, and is
interoperable with GeoMedia. DCS provides a suite of cartographic
tools to produce aesthetically pleasing, clear, and concise maps
and charts. DCS tools may also be used to support production
and revision of topologically clean databases for mapping.
The IMGS professional services team provides clients with
quality consulting services to implement state-of-the-art mapping
and GIS technologies and tools. The team offers a broad range of
services from consulting and project management to Web
development and training.
IntelliWhere(TM), a division of IMGS, addresses the emerging
technologies of wireless Internet and location-based services
("LBS"). This division's products leverage GeoMedia technology
to provide LBS solutions that are device and data independent.
IntelliWhere focuses on enterprises with mobile workforces in
markets such as transportation, state and local government,
telecommunications, utilities, the military, and emergency
response.
Intergraph Process, Power & Offshore ("PP&O")
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Intergraph Process, Power & Offshore supplies software and
services to the process, power, and offshore petroleum
industries. The segment focuses on integrated life cycle
engineering solutions for design and information management, with
emphasis on engineering information as well as materials and
procurement management, and on the linkage of engineering and
business systems.
For more than 23 years, engineering, procurement, and
construction ("EPC") contractors and facility owner/operators
have used the segment's software and services to design,
construct, operate, and maintain facilities for petrochemical,
chemical, pharmaceutical, food and beverage, oil and gas, power
generation, pulp and paper, and mining industries. The segment's
engineering and information management solutions increase the
value of plant data by facilitating capture and re-use of
information throughout the life cycle of a plant, resulting in
significant productivity gains and operational efficiencies.
The segment's most prominent brands include PDS(TM) (Plant
Design System), SmartPlant(R), MARIAN(TM), and INtools(TM).
PDS is a comprehensive, intelligent engineering and design
application that consists of integrated 2D and 3D modules which
correspond to tasks in the plant and rig design workflow.
SmartPlant software includes SmartPlant Foundation (formerly
Notia) for engineering information management, SmartPlant P&ID
for intelligent piping and instrumentation diagrams, SmartPlant
Review for 3D visualization, SmartPlant Explorer for enterprise
information access and reports, and SmartSketch for 2D CAD.
MARIAN and the Web-enabled eMARIAN comprise an integrated
materials, procurement, and supply chain management system.
INtools is an integrated instrumentation engineering package.
The segment continues its development of The Engineering
Framework (a collaborative engineering workflow management and
standards-based integration architecture for design engineering
tools) and an advanced, next-generation shipbuilding software
product for the design of commercial and military vessels.
To better reflect the industries it serves, the segment changed
its name from Intergraph Process & Building Solutions to
Intergraph Process, Power & Offshore in January 2002.
Intergraph Public Safety ("IPS")
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In January 1997, Intergraph Public Safety, Inc. was established
as a wholly owned subsidiary of the Company. Intergraph
Utilities & Communications was combined with the Public Safety
business in January 1999. The Public Safety division provides
total public safety solutions and is recognized worldwide as a
leading supplier of public safety systems.
Public Safety develops, markets, implements, and supports
software solutions for law enforcement organizations, fire and
emergency medical services, airports, military and commercial
security forces, and automobile clubs for roadside assistance.
Public Safety products provide a complete solution for public
safety agencies. IPS was the first vendor to offer map-based
computer-aided dispatching, and it expanded the product offering
to include records and jail management systems, mobile solutions,
and Web-enabled products that help disseminate information from
the central communications server. Together, these products
represent an integrated solution for dealing with the life cycle
of public safety information. IPS' dispatch technology is a
complementary application to the mainstream geospatial products,
such as FRAMME and the new G/Solutions products.
Intergraph Utilities & Communications solutions assist
electric, gas, pipeline, water/wastewater, and communications
companies in the automated management of their facility network.
For utilities, these solutions contain all the information
necessary for distributing energy services to customers, tracking
distribution, and managing service disruptions. For
communications companies, these solutions automate network
facility mapping, planning, design, and maintenance activities.
Geospatial Resource Management solutions spatially enable this
information by integrating GIS with operational support systems
(such as outage analysis and mobile workforce/work management).
They also provide real-time information for customer service,
thereby increasing operational efficiency enterprise-wide.
Dedicated to streamlining the entire workflow, the InService
suite of products addresses outage management, workforce
management, crew dispatch, and mobile data needs.
Z/I Imaging, Inc. ("Z/I Imaging")
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Z/I Imaging, a 60%-owned subsidiary of the Company, was formed
in October 1999 to develop, market, and sell Windows-based
imaging solutions for earth imaging. Z/I Imaging's solutions
include aerial cameras; photogrammetric scanners; stereo
workstations; and image management, processing, and distribution
software. The imaging software includes enterprise solutions
that combine the power of a client/server image management and
distribution system with a high-performance imaging engine to
quickly provide the information needed.
Using TerraShare(TM) as the foundation of the enterprise
system, Z/I Imaging provides a modular client/server system that
manages geoimaging data (images, digital terrain models, and
digitized raster graphics) from acquisition to exploitation to
storage to distribution. TerraShare is a family of products that
offers individual modules for photogrammetric production,
managing orthophotos on the users' GIS and CAD desktops,
collaborative production, Internet distribution and more.
TerraShare addresses the image management and distribution
needs of geoimaging producers and distributors. Because it is
fully integrated in Microsoft Windows Explorer, users can
immediately use familiar tools. The modular approach makes it
easy to customize systems to meet specific workflows leading
to a more productive environment and positive return on
investment.
Z/I Imaging offers nonproprietary solutions, enabling industry
and government professionals to use them as a front-end to
mapping, GIS, and civil engineering software from a variety of
leading vendors. The segment is investing in the earth-imaging
industry with extensive research and development efforts to
create new digital products for photogrammetry, airborne
reconnaissance, aerial mapping, and image distribution.
Product Development
The Company believes a strong commitment to ongoing product
development is critical to success in the markets in which it
competes.
Product development expenditures include all costs related to
designing new or improving existing products. During the year
ended December 31, 2001, the Company expensed $53.9 million
(10.1% of revenues) for the product development activities of its
continuing operations compared to $56.3 million (8.2% of
revenues) in 2000, and $62.6 million (6.8% of revenues) in 1999.
See MD&A for further discussion of product development expenses,
including portions capitalized and their recoverability.
The markets in which the Company's business units compete
continue to be characterized by rapid technological change,
resulting in shorter product cycles, higher-performance and lower-
priced product offerings, intense price and performance
competition, and development and support of software standards
that result in less specific hardware and software dependencies
by customers. The operating results of the Company and its
competitors will continue to depend on the ability to accurately
anticipate customer requirements and technological trends, and to
rapidly and continuously develop and deliver new products that
are competitively priced, offer enhanced performance, and meet
customers' requirements for standardization and interoperability.
Manufacturing and Sources of Supply
In fourth quarter 1998, the Company sold substantially all of
its U.S. manufacturing inventory and assets to SCI Technology
Inc. ("SCI"), a wholly owned subsidiary of SCI Systems, Inc., and
outsourced to SCI the responsibility for manufacturing
substantially all of the Company's hardware products. In
November 2001, the Company's three-year manufacturing
agreement with SCI expired, completing its manufacturing
obligations associated with the closure of the Intergraph
Computer Systems business unit. For a complete description of
these transactions and their impact on the Company's operating
results and cash flows, including exposures associated with the
SCI contract, see Note 15 of Notes to Consolidated Financial
Statements.
The Company maintains inventories to meet its hardware warranty
and service obligations, and two of the Company's business
segments continue light manufacturing and assembly operations.
All other business segments purchase hardware from third parties
for resale to customers. The Company is not required to carry
extraordinary amounts of inventory to meet customer demands.
Sales and Support
Sales. The Company's products are sold through a combination of
direct and indirect channels in approximately 56 countries
worldwide. Direct channel sales, which provide most of the
Company's revenues, are generated by the Company's direct sales
force through sales offices in approximately 43 countries
worldwide. The efforts of the direct sales force are augmented
by sales through indirect channels, including dealers, value-
added resellers, distributors, and systems integrators.
Each of the Company's business units maintains its own sales
force. Selling efforts are organized along key industry lines
for their major product applications. The Company believes an
industry focus better enables it to meet the specialized needs of
customers. In general, the direct sales forces are compensated
through a combination of base salary and commission. Sales
quotas are established along with certain incentives for
exceeding quota. Additional specific incentive programs may be
established periodically.
Customer Support. The Company believes that a high level of
customer support is important to the sale of its technical
solutions and integration services. Customer support includes
pre-installation guidance, customer training, on-site
installation, project management, hardware preventive
maintenance, repair services, software help desk, and technical
support services in addition to consultative professional
services. The Company employs engineers and technical
specialists to provide customer assistance, maintenance, and
training. Maintenance and repair of systems are covered by
standard warranties and by maintenance agreements to which most
users subscribe. The Company believes that its hardware
maintenance revenue will continue to decline as a result of its
exit from the hardware business; however, the decline in
maintenance revenues may be partially offset by growth in the
Company's professional services business. The Company is
endeavoring to grow its services business, but revenues from
these services typically fluctuate significantly from quarter to
quarter and produce lower gross margins than systems or software
maintenance revenues.
International Operations
International markets, particularly Europe and Asia, continue
in importance to each of the Company's operating segments. Sales
outside the United State represented approximately 47% and 52% of
total revenues in 2001 and 2000, respectively. European and
Asia Pacific revenues represented approximately 28% and 9%,
respectively, of total revenues in 2001, compared to 27% and 12%,
respectively, in 2000. The Company's operations are subject to
and may be adversely affected by a variety of risks inherent in
doing business internationally, such as government policies or
restrictions, currency exchange fluctuations, and other factors.
There are currently wholly owned sales and support subsidiaries
of the Company located across Europe. European subsidiaries are
supported by service and technical assistance operations located
in The Netherlands. Outside of Europe, the Company's products
are sold and supported through a combination of subsidiaries and
distributorships. At December 31, 2001, the Company had
approximately 780 employees in Europe, 580 employees in the Asia
Pacific region, and 480 employees in other international
locations.
Fluctuations in the value of the U.S. dollar in international
markets can have a significant impact on the Company's results of
operations. The Company conducts business in all major markets
outside the United States, but the most significant of these
operations with respect to currency risk are located in Europe
and Asia. During 2001, local currencies were the functional
currencies for the Company's European subsidiaries. The U.S.
dollar was the functional currency for all other international
subsidiaries in 2001; however, the Company's Canadian subsidiary
changed its functional currency from the U.S. dollar to its local
currency in January 2002. See Note 1 of Notes to Consolidated
Financial Statements for a description of the Company's policy
for managing the currency risks associated with its international
operations.
The Company has historically experienced slower collection
periods for its international accounts receivable than for
similar sales to customers in the United States. The Company
continues to experience slow collections throughout the Middle
East region, particularly in Saudi Arabia, which was sold
effective July 2001. Total accounts receivable from Middle
Eastern customers was approximately $13 million at December 31,
2001, and $18 million at December 31, 2000. This number will
continue to decrease as a result of the 2001 conversion of
several of the Company's Middle East subsidiaries into
distributorships.
For further discussion of the Company's international
operations, see MD&A and Notes 1, 5, and 12 of Notes to
Consolidated Financial Statements.
U.S. Government Business
Total revenue from the U.S. government was approximately
$143 million in 2001, $132 million in 2000, and $149 million
in 1999, representing approximately 27% of total revenue in 2001,
and 19% and 16% of revenue in 2000 and 1999, respectively. The
majority of these revenues are attributed to the IGS business
segment.
The Company sells to the U.S. government under long-term
contractual arrangements, primarily indefinite delivery,
indefinite quantity, and cost-based contracts, and through sales
of commercial products not covered by long-term contracts.
Approximately 69% of the Company's 2001 federal government
revenues was earned under long-term contracts. The Company
believes its relationship with the federal government to be good.
While it is fully anticipated that these contracts will remain in
effect through their expiration, the contracts are subject to
termination at the election of the government. Any loss of a
significant government contract would have an adverse impact on
the results of operations of IGS and the Company as a whole.
The Company has historically experienced slower collection
periods for its U.S. government accounts receivable than for its
commercial customers. At December 31, 2001, and 2000, accounts
receivable from the U.S. government totaled approximately $27.7
million and $28 million, respectively.
Backlog
An order is entered into backlog only when the Company receives
a purchase order or a signed contract from a customer. The
Company's backlog of unfilled orders at December 31, 2001, and
2000, was $231 million and $268 million, respectively.
Substantially all of the December 2001 backlog of orders is
expected to be earned and recognized as revenue in 2002.
The Company does not consider its business to be seasonal,
though typically fourth quarter orders and revenues exceed those
of other quarters.
The Company does not ordinarily provide return of merchandise
or extended payment terms to its customers.
Competition
The markets in which the Company competes continue to be
characterized by intense price and performance competition. To
compete successfully, the Company and others serving these
markets must accurately anticipate customer requirements and
technological trends, and rapidly and continuously develop
products with enhanced performance that can be offered at
competitive prices. The Company and its competitors engage in
the practice of price discounting to meet competitive industry
conditions. Other important competitive factors include quality,
reliability, customer service and support, and training.
Management of the Company believes that competition will remain
intense, particularly in product pricing.
The Company's competition varies among its business segments.
IGS offers a wide range of service-oriented solutions to
government and commercial entities. The primary competitors in
this diverse market are considered to be Computer Sciences
Corporation ("CSC"), Science Applications International
Corporation ("SAIC"), International Business Machines Corporation
("IBM"), Electronic Data Systems ("EDS"), CACI International, and
Perot Systems.
The primary competitors of IMGS are ESRI, Autodesk Inc., and
MapInfo Corporation.
Process, Power & Offshore competes with the software products
and services of Aveva (including Cadcentre), Bentley Systems,
Inc. ("BSI") (an approximately 31%-owned affiliate of the
Company), Rebis Industrial Workgroup Software, Dassault,
Systemes, and several smaller companies.
IPS considers its primary competitors to be Motorola/Printrak
International, Inc., Litton PRC, CompuDyne, and TriTech Software
Systems in the Public Safety market, and ESRI and GE/Smallworld
in the Utilities and Communications GIS markets. In the Outage
and Workforce Management market, key competitors are CES, M3i,
GE/Smallworld, and MDSI.
The primary competitor of Z/I Imaging is LH Systems, LLC, a
wholly owned subsidiary of Leica Geosystems GIS and Mapping
Division. Other competitors in the reconnaissance and
photogrammetry businesses include Recon/Optical, Inc., DAT/EM
Systems International, ISM, INPHO, Autometric Incorporated (a
subsidiary of The Boeing Company), and ERDAS, a wholly owned
subsidiary of Leica Geosystems.
Several companies with greater financial resources than the
Company are active in the markets it serves, particularly those
served by its IGS business segment. The Company believes that
its experience and ability to provide total solutions and
services gives it an advantage over vendors who provide only
software, hardware, or services.
Environmental Affairs
The Company's facilities are subject to numerous laws and
regulations designed to protect the environment. In the opinion
of the Company, compliance with these laws and regulations has
not had, and should not have, a material effect on the capital
expenditures, earnings, or competitive position of the Company.
Licenses, Copyrights, Trademarks, Patents, and Proprietary
Information
The Company owns and maintains a number of registered patents
and registered and unregistered copyrights, trademarks, and
service marks. The patents and copyrights held by the Company
are the principal means by which the Company preserves and
protects the intellectual property rights embodied in the
Company's products. Similarly, trademark rights held by the
Company are used to preserve and protect the reputation of the
Company's registered and unregistered trademarks.
As industry standards proliferate, there is a possibility that
the patents of others may become a significant factor in the
Company's business. Personal computer technology, which was used
in the Company's workstation and server products, is widely
available, and many companies, including Intergraph, have
developed and continue to develop patent positions concerning
technological improvements related to personal computers,
workstations, and servers. It does not appear that the Company
will be prevented from using the technology necessary to support
existing products, since patented technology is typically
available in the industry under royalty-bearing licenses or
patent cross licenses, or the technology can be purchased on the
open market.
In addition, computer software technology is increasingly being
protected by patents, and many companies, including Intergraph,
are developing patent positions for software innovations. It is
unknown at the present time whether various patented software
technology will be made generally available under license, or
whether specific innovations will be held by their inventors and
not made available to others. In many cases, it may be possible
to employ software techniques that avoid the patents of others,
but the possibility exists that some features needed to compete
successfully in a particular segment of the software market may
be unavailable or may require an unacceptably high cost via
royalty arrangements. Patented software techniques that become
de facto industry standards are among those that may raise costs
or may prevent the Company from competing successfully in
particular markets.
An inability to protect the Company's copyrights, trademarks,
and patents, or to obtain current technical information or any
required patent rights of others through licensing or purchase,
all of which are important to success in the markets in which the
Company competes, could significantly reduce the Company's
revenues and adversely affect its results of operations.
Risks and Uncertainties
In addition to those described above and in Item 3, Legal
Proceedings, the Company has risks and uncertainties related to
its business and operating environment. See MD&A and Note 2 of
Notes to Consolidated Financial Statements for further discussion
of these risks and uncertainties.
Employees
At December 31, 2001, the Company had approximately 4,300
employees. Of these, approximately 1,840 were employed outside
the United States. The Company's employees are not subject to
collective bargaining agreements, and there have been no work
stoppages due to labor difficulties. Management of the Company
believes its relations with employees to be good.
ITEM 2. PROPERTIES
The Company's corporate offices and primary development centers
are located in Huntsville, Alabama. All of the Company's
business segments have headquarters located within the Huntsville
facilities. The business segments also maintain sales and
support facilities throughout the world.
The Company owns approximately 1,400,000 square feet of space
in Huntsville, of which approximately 1,000,000 square feet is
utilized for product development, sales, and administration. The
remaining 400,000 square feet is leased or available for lease.
The Company also owns approximately 600 acres of unoccupied land
adjacent to its Huntsville facilities. The Company maintains
sales and support locations in major U.S. cities outside of
Huntsville through operating leases.
Outside the United States, the Company owns 90,000 square feet
of office space, primarily in the United Kingdom. Sales and
support facilities are leased in the Company's other
international locations.
The Company considers its facilities to be in excess of its
requirements, and efforts are underway to lease or sell excess
facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company filed a legal action on November 17, 1997, in U.S.
District Court for the Northern District of Alabama, Northeastern
Division (the "Alabama Court"), charging Intel Corporation with
unlawful anti-competitive business practices. Intergraph alleges
that Intel attempted to coerce the Company into relinquishing
certain computer hardware patents to Intel through a series of
wrongful acts, including interference with business and
contractual relations, interference with technical assistance
from third-party vendors, breach of contract, negligence,
misappropriation of trade secrets, and fraud based upon Intel's
failure to promptly notify the Company of defects in Intel's
products and timely correction of such defects, and further
alleging that Intel infringed upon the Company's patents. The
Company's patents (the "Clipper Patents") define the architecture
of the cache memory of Intergraph's Clipper microprocessor. The
Company believes this architecture is at the core of Intel's
Pentium line of microprocessors and systems. Intel's Pentium 4
processor was not commercially available at the time of the
filing of the lawsuit; however, the Company has reason to believe
that Intel's Pentium 4 processor infringes the Company's Clipper
patents. On December 3, 1997, the Company amended its complaint
to include a count alleging violations of federal antitrust laws.
Intergraph asserted claims for compensatory and treble damages
resulting from Intel's wrongful conduct and infringing acts, and
punitive damages in an amount sufficient to punish and deter
Intel's wrongful conduct. Additionally, the Company requested
that Intel be enjoined from continuing the alleged wrongful
conduct which is anticompetitive and/or violates federal
antitrust laws, so as to permit Intergraph uninterrupted
development and sale of Intel-based products.
On November 21, 1997, the Company filed a motion in the
Alabama Court to enjoin Intel from disrupting or delaying its
supply of products and product information pending resolution of
Intergraph's legal action. On April 10, 1998, the Alabama Court
ruled in favor of Intergraph and enjoined Intel from any action
adversely affecting Intel's business relationship with Intergraph
or Intergraph's ability to design, develop, produce, manufacture,
market, or sell products incorporating, or based upon, Intel
products or information. On April 16, 1998, Intel appealed to
the United States Court of Appeals for the Federal Circuit (the
"Appeals Court"), and on November 5, 1999, the Appeals Court
vacated the preliminary injunction that had been entered by the
Alabama Court. This ruling by the Appeals Court did not impact
the Company's operations due to an Agreement and Consent Order
which Intel entered into with the Federal Trade Commission
("FTC") on March 17, 1999, not to restrict sales or take coercive
actions such as those alleged by the Company in its lawsuit
against Intel.
On June 17, 1998, Intel filed its answer in the Alabama case,
which included counterclaims against Intergraph, including claims
that Intergraph had infringed seven patents of Intel. On July 8,
1998, the Company filed its answer to the Intel counterclaims,
among other things denying any liability under the patents
asserted by Intel. On January 11, 2002, Intel stipulated to the
dismissal of one of the alleged counterclaim patents. The
Company continues to vigorously defend the remaining
counterclaims. The Company does not believe that Intel's
remaining counter-claims, including Intel patent counterclaims,
will result in a material adverse consequence for the Company.
On June 17, 1998, Intel filed a motion before the Alabama
Court requesting a determination that Intel is licensed to use
the Clipper Patents. This "license defense" was based on Intel's
interpretation of the Company's acquisition of the Advanced
Processor Division of Fairchild Semiconductor Corporation in
1987. On September 15, 1998, the Company filed a cross motion
with the Alabama Court requesting summary adjudication of the
"license defense" in favor of the Company. On November 13, 1998,
the Company amended its complaint to include two additional
counts of patent infringement against Intel. The Company
requested the court to issue a permanent injunction enjoining
Intel from further infringement and to order that the financial
impact of the infringement be calculated and awarded in treble to
Intergraph. On December 6, 1999, in order to obtain protection
under the aforementioned FTC Consent Order, the Company withdrew
its request for a patent injunction against Intel's P5 and P6
families of microprocessors. (Intel's P5 and P6 processor
families include the Pentium, Pentium Pro, Pentium II, and
Pentium III microprocessors, but specifically exclude Intel's
Pentium 4, Pentium 4 Xeon, and Itanium families of
microprocessors.) On June 4, 1999, the Alabama Court granted the
Company's September 15, 1998, motion and ruled that Intel had no
license to use the Company's Clipper Patents; however, on October
12, 1999, the Alabama Court reversed its June 4, 1999, order and
dismissed the Company's patent claims against Intel based upon
Intel's "license defense." The Company appealed the Alabama
Court's October 12, 1999, order to the United States Court of
Appeals for the Federal Circuit. On March 1, 2001, the Appeals
Court reversed the October 12, 1999, decision of the Alabama
Court, specifically holding that Intel was never licensed under
the Company's Clipper patents. On March 15, 2001, Intel filed a
petition for rehearing with the Appeals Court, requesting that it
reconsider its March 1, 2001, decision. The Appeals Court
subsequently denied Intel's motion for reconsideration on April
9, 2001. Intel has no further recourse with regard to the
assertion of the "license defense." The Company believes that
the Federal Circuit's March 1, 2001, patent license decision is
well supported by law and fact, and the Company will continue to
aggressively pursue its patent case for the payment of royalties
by Intel for their use of the Company's Clipper technology in
Intel's Pentium line of products.
On March 10, 2000, the Alabama Court entered an order
dismissing the antitrust claims of the Company. This dismissal
was based in part upon a February 17, 2000, decision by the
Appeals Court in another case (CSU v. Xerox). On April 26, 2000,
the Company appealed this dismissal to the United States Court of
Appeals for the Federal Circuit. The oral argument for this
appeal was heard on March 5, 2001. The Appeals Court
subsequently denied the Company's appeal on June 8, 2001. The
Company does not believe that the dismissal of the antitrust
appeal will materially affect the Company's remaining claims or
the value of the overall lawsuit.
On March 17, 2000, Intel filed a series of motions in the
Alabama Court to dismiss certain Alabama state law claims of the
Company. The Company filed its responses to Intel's motions on
July 17, 2000, together with its own motions to dismiss certain
Intel counterclaims. Intel's responses were filed on November 3,
2000. The Alabama Court has taken the motions under submission.
No oral argument has been scheduled, and no decision has been
entered by the Alabama Court.
The trial date for this case, previously scheduled for June
2000, has been continued until on or after January 1, 2003. Even
though the parties have not been required by the Alabama Court to
participate in any court-ordered dispute resolution procedures,
the parties have agreed to include the Alabama claims in the
court-ordered mediation in the Texas case (see the discussion on
court-ordered mediation in the following section on the Texas
litigation).
On July 30, 2001, the Company filed a patent infringement
lawsuit against Intel in the United States District Court, in the
Eastern District of Texas. The Company has asserted allegations
that two patents relating to PIC are infringed by Intel's IA-64
EPIC (explicitly parallel instruction computing) processors,
including but not limited to Intel's Itanium and McKinley
processors. The Company is seeking to prohibit Intel's use of
the Company's patented PIC technology through the enforcement of
a patent injunction. The case is set for trial on July 1, 2002.
Pursuant to local court rules, and the scheduling order of the
Texas Court, the case is set for court-ordered mediation, with a
court-appointed mediator on April 3, 2002. The parties have
agreed that the mediation will address all pending litigation
matters between the parties, which currently include the
Company's Alabama Clipper claims and Alabama state law claims,
the Texas PIC claims and a patent inference action pending in the
U.S. Patent & Trademark Office.
During the course of the Intel litigation, the Company has
employed a variety of experts to prepare estimates of the damages
suffered by the Company under various claims of injury brought by
the Company. The following supplemental damage estimates were
provided to Intel in August 2001 in due course of the litigation
process: estimated damages for injury covered under non-patent
claims of $194 million in lost profits, and estimated additional
damages for injury covered under non-patent claims for the loss
of the Company's hardware operations of $160 million, and/or
approximately $150 million in direct out-of-pocket expenses.
Patent claims damages are calculated on a percentage of
infringing sales, together with a possible multiplier for willful
infringement damages. The Company's supplemental patent royalty
damage reports provided to Intel in August 2001 in due course of
the litigation process estimate that a reasonable royalty rate
for infringed patents could range between 1.75 and 4.75 percent.
Intel disputes the Company's damage conclusions, and in the
September/October 2001 time frame submitted its own damage
reports in the due course of the litigation which differ from the
Company's damage reports. The Company's damage reports are
estimates only and any recovery of damages in this litigation
could be substantially less than these estimates or substantially
greater than these estimates depending on a variety of factors
that cannot be determined at this time. Factors that could lead
to recovery of substantially less than these estimates include,
but are not limited to, the failure of the Alabama Court or the
Appeals Court to sustain the legal basis for one or more of the
Company's claims, the failure of the jury to award amounts
consistent with these estimates, the failure of the Alabama Court
or the Appeals Court to sustain any jury award in amounts
consistent with these estimates, the settlement by the Company of
the Intel litigation in an amount inconsistent with these
estimates, and the failure of the Company to successfully defend
itself against Intel's patent counterclaims in the Alabama Court
and in the Appeals Court and a consequential recovery by Intel
for damages and/or a permanent injunction against the Company.
Factors that could lead to recovery of substantially greater than
these estimates include, but are not limited to, success by the
Company in recovering punitive damages on one or more of its
patent and/or non-patent claims. The Company believes that
current and potential legal proceedings relating to the Company's
Clipper and PIC patents may have a significant impact on current
litigants as well as others in the computer industry. As a
result, the Company is mindful that Intel or other potential
litigants of the Company may, without intending to obtain control
of the corporation, use the threat of an unfriendly takeover bid
as a means to force the Company to settle to avert the threat of
a takeover.
The Company believes it was necessary to take legal action
against Intel in order to defend its former workstation business,
its intellectual property, and the investments of its
shareholders. The Company is vigorously prosecuting its
positions and defending against Intel's claims and believes it
will prevail in these matters, but at present is unable to
predict an outcome. The Company does expect, however, that it
will continue to incur substantial legal and administrative
expenses in connection with the lawsuit.
The Company has other ongoing litigation, none of which is
considered to represent a material contingency for the Company at
this time; however, any unanticipated unfavorable ruling in any
of these proceedings could have an adverse impact on the
Company's results of operations and cash flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
Certain information with respect to the executive officers of
the Company is set forth below. Officers serve at the discretion
of the Board of Directors.
Name Age Position Officer Since
- ----- --- -------- -------------
James F. Taylor Jr. 57 Chief Executive Officer
and Chairman of the Board 1977
Larry J. Laster 50 Executive Vice President,
Chief Financial Officer and
Director 1987*
Roger O. Coupland 55 President, Intergraph Public
Safety, Inc. 1991
Preetha R. Pulusani 41 President, Mapping and
GIS Solutions 1997
Gerhard Sallinger 49 President, Process, Power
& Offshore 2001
William E. Salter 60 President, Intergraph Government
Solutions 1984
Graeme J. Farrell 59 Executive Vice President, Asia
Pacific Operations 1994
Edward A. Wilkinson 68 Executive Vice President 1987
Jack C. Ickes 42 Vice President of Corporate
Services 2000
David Vance Lucas 40 Vice President and General
Counsel 2000
Larry T. Miles 41 Vice President of Finance 2001
Eugene H. Wrobel 59 Vice President and Treasurer 1998
* Except for the period from February 1998 through August 2001
James F. Taylor Jr. joined the Company in July 1969, shortly
after its formation, and is considered a founder. He has served
as a Director since 1973. Mr. Taylor was responsible for the
design and development of the Company's first commercial
computer-aided design products and for many application specific
products. He was elected Vice President in 1977 and
Executive Vice President in 1982. He assumed management
responsibility for the Company's Public Safety division in 1995.
Effective March 2, 2000, he was elected Chief Executive Officer
of Intergraph Corporation. Mr. Taylor was elected Chairman of
the Board of Directors effective May 17, 2001. Mr. Taylor holds
degrees in mathematics and physics.
Mr. Laster joined the Company in 1981 and served as Executive
Vice President and Chief Financial Officer from February 1987
through February 1998, at which time he resigned from the Company
to serve as Chief Operating Officer of a privately owned company
specializing in the development, sale and support of business
systems for the petroleum distribution and convenience store
industries. He rejoined the Company in June 1998 as Chief
Financial Officer of Intergraph Public Safety, Inc., a wholly
owned subsidiary of the Company. Effective September 10, 2001,
Mr. Laster accepted the position of Executive Vice President and
Chief Financial Officer of Intergraph Corporation. Mr. Laster
holds a bachelor's degree in accounting and is a certified public
accountant.
Dr. Roger O. Coupland joined the Company in 1983 as project
manager for the Australian Army AUTOMAP 2 project. Since that
time, he has served as manager of the Company's Mapping and
Utilities division and subsequently, as the Company's Federal
Sales Director. Dr. Coupland was elected Vice President of
Intergraph Corporation in 1991, with responsibility for the
Company's Dispatch Management division. In January 2001, he was
elected Executive Vice President of Intergraph Corporation. He
currently serves as President of the Company's Intergraph Public
Safety business segment. Dr. Coupland holds a First Class Honors
degree in Physics and a Ph.D. in Theoretical Physics from The
University of Nottingham, England.
Preetha R. Pulusani joined the Company in 1980 as a software
engineer, and since that time has held several positions in the
areas of marketing and development of mapping technology for the
Company. She was elected Vice President in 1997 and has served
as Executive Vice President, with responsibility for the Mapping
and Geographic Information Systems business of Intergraph, since
August 1998. Ms. Pulusani was appointed President of Mapping and
Geographic Information Systems in November 2001. Ms. Pulusani
holds a master's degree in computer science.
Gerhard Sallinger joined the Company in 1985 as a district
sales manager in Germany and since then held several positions in
the area of sales management. He was elected Vice President
Europe of Process, Power & Offshore ("PPO") in 1999 and Executive
Vice President Sales and Marketing of PPO worldwide in 2001. Mr.
Sallinger was appointed as President of PPO in October 2001. Mr.
Sallinger holds a degree in chemical engineering.
Dr. William E. Salter joined the Company in April 1973. Since
that time, he has served in several managerial positions in the
Company's Federal Systems business and as Director of Marketing
Communications. Dr. Salter was elected Vice President in August
1984 and is currently an Executive Vice President of the Company
and President of Intergraph Government Solutions. He holds a
doctorate in electrical engineering.
Graeme J. Farrell joined the Company in February 1986 as the
Financial Controller for Intergraph's subsidiaries in Australia
and New Zealand. In 1987, the Company appointed him Finance
Director for its Asia Pacific region. He was elected Vice
President of Business Operations for Asia Pacific in 1994, and in
August 1999, he was elected Executive Vice President. Prior to
joining the Company, Mr. Farrell was involved in accounting
software development for five years, and prior to that he was
Finance Director of Dennison Manufacturing's (USA) Australian
operations for five years. Mr. Farrell is a Chartered Secretary
and qualified accountant holding a public practice certificate.
Edward A. Wilkinson joined the Company in 1985 as Director of
Government Relations. He was elected Vice President of Federal
Systems in 1987 and Executive Vice President in 1994. Prior to
joining the Company, Mr. Wilkinson served 34 years in the U.S.
Navy, retiring with the rank of Rear Admiral. He holds a
master's degree in mechanical engineering.
Jack C. Ickes joined the Company in January 1991. Since that
time, he has held several managerial positions in the Company's
hardware business. He was elected a Vice President of
Intergraph Computer Systems in July 1999 and a Vice President of
the Company in December 2000. Mr. Ickes currently serves as the
Vice President of Corporate Services. He holds a Bachelor of
Science degree in electrical engineering.
David Vance Lucas joined the Company in 1994 as a staff
attorney responsible for corporate, commercial, and intellectual
property representation. He was promoted to Senior Counsel in
1997 and elected Vice President and General Counsel in 2000. Mr.
Lucas continues to represent the Company in the areas noted
above, as well as managing the Company's litigation. Prior to
joining the Company, Mr. Lucas was a partner with the law firm of
Johnson, Johnson & Moore. He is admitted to practice before the
United States Supreme Court, United States Court of Appeals for
the Federal Circuit and the Eleventh Circuit, as well as the
Federal and State Courts within Alabama. Mr. Lucas holds a
bachelor's degree in corporate finance and economics and a juris
doctor in law.
Larry T. Miles joined the Company in 1988 as a tax accountant,
and since that time has held several positions in the finance and
accounting areas. He has served as the Company's Management
Reporting Manager since 1998 and was elected Vice President of
Finance in March 2001. Before joining Intergraph, Mr. Miles
worked in public accounting for six years. He holds a bachelor's
degree in accounting and is a certified public accountant.
Eugene H. Wrobel joined the Company in 1982 as Finance Director
for Europe. He returned to the U.S. in August 1985 as Director
of International Finance, and in January 1990 was appointed
Director of Business Operations for the Americas (the United
States, Canada, and Latin America). He transferred into the
Treasury Department in April 1998 and was elected Vice President
and Treasurer in November 1998. Before joining Intergraph, Mr.
Wrobel was the Vice President and Controller for DYATRON, a
public computer services company, and prior to that he worked in
public accounting for six years. He holds a bachelor's degree in
accounting and is a certified public accountant.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The information appearing under "Dividend Policy" and "Price
Range of Common Stock" on page 60 of the Intergraph Corporation
2001 Annual Report to shareholders is incorporated by reference
in this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31,
2001, appearing under "Five-Year Financial Summary" on the inside
front page of the Intergraph Corporation 2001 Annual Report to
shareholders is incorporated by reference in this Form 10-K
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing on pages 14 to 32 of the
Intergraph Corporation 2001 Annual Report to shareholders is
incorporated by reference in this Form 10-K Annual Report.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Information relating to the Company's market risks appearing
under "Impact of Currency Fluctuations and Currency Risk
Management" and "Liquidity and Capital Resources" in Management's
Discussion and Analysis of Financial Condition and Results of
Operations appearing on pages 26 to 30 of the Intergraph
Corporation 2001 Annual Report to shareholders is incorporated by
reference in this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and report of independent
auditors appearing on pages 33 to 60 of the Intergraph
Corporation 2001 Annual Report to shareholders are incorporated
by reference in this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
ELECTION OF DIRECTORS
The Board of Directors has fixed the number of members of
the Board at seven by resolution pursuant to the authority
granted by the Bylaws of the Company. There are seven directors
at present. The directors of the Company are currently elected
at each annual meeting of shareholders and serve for a term of
one year.
The Board of Directors proposes that the seven nominees listed
below be elected as directors to serve for a term of one year and
until their respective successors are duly elected and qualified,
subject to their prior death, resignation, retirement,
disqualification, or removal from office. Proxies may not be
voted for more than seven persons. In accordance with the
Company's Bylaws, Mr. Taylor was elected as Chairman of the Board
of Directors on May 17, 2001, at the meeting of the Board.
It is the intention of the persons named in the proxy to vote
the proxies for the election of the nominees listed below, all of
whom are presently directors of the Company. If any nominee
should become unavailable to serve as a director for any reason
(which is not anticipated), the persons named as proxies reserve
full discretion to vote for such other person or persons as may
be nominated.
The nominees for director, together with certain information
regarding them, are as follows:
Positions/Offices Director of the
Name and Age with the Company Company Since
- ------------ ----------------- ---------------
James F. Taylor Jr. (57) Chairman of the Board, 1973
Chief Executive Officer,
and Director
Larry J. Laster (50) Executive Vice President, 1987
Chief Financial Officer,
and Director
Sidney L. McDonald (63) Director 1997
Thomas J. Lee (66) Director 1997
Lawrence R. Greenwood (62) Director 2000
Joseph C. Moquin (77) Director 2000
Linda L. Green (50) Director 2001
Mr. Taylor joined the Company in July 1969, shortly after its
formation, and is considered a founder. Mr. Taylor was elected
Chief Executive Officer March 2, 2000. He served most recently
as Chief Executive Officer of Intergraph Public Safety, Inc., a
wholly owned subsidiary of the Company. Mr. Taylor was elected
Chairman of the Board of Directors on May 17, 2001.
Mr. Laster joined the Company in 1981 and served as Executive
Vice President and Chief Financial Officer from February 1987
through February 1998, at which time he resigned from the Company
to serve as Chief Operating Officer of a privately owned company
specializing in the development, sale, and support of business
systems for the petroleum distribution and convenience store
industries. He rejoined the Company in June 1998 as Chief
Financial Officer of Intergraph Public Safety, Inc., a wholly
owned subsidiary of the Company. In September 2001, Mr. Laster
was elected Executive Vice President and Chief Financial Officer
of Intergraph Corporation.
Mr. McDonald served as President of Brindlee Mountain Telephone
Company, a provider of local telephone services in north Alabama,
from 1961 until his retirement in July 2000. Mr. McDonald is a
founder of Deltacom Long Distance Services, Inc. and served as
its Chief Executive Officer from 1984 through 1996. He also
served as Chief Executive Officer of Marshall Cellular, a
cellular telephone service company, from 1988 through 1996, and
of Southern Interexchange Services, a fiber optic
telecommunications network, from 1990 through 1996. Mr. McDonald
has served in the Alabama Legislature and as Finance Director for
the State of Alabama.
Mr. Lee is a founder of Lee and Associates, an engineering
services firm specializing in guided missile systems, and has
served as its President since January 1997. He was employed for
thirty-six years by NASA, and was the Director of the George C.
Marshall Space Flight Center from June 1989 through January 1994.
Mr. Lee served as Special Assistant to the NASA Administrator for
Access to Space from January 1994 through March 1995. Mr. Lee is
a registered professional engineer and is a member of numerous
advisory boards and committees within his field.
Dr. Greenwood serves as Vice President of Research at the
University of Alabama in Huntsville and has served in that
capacity since August 1998. He spent fifteen years with NASA,
serving as Director of the Earth Observations Division in NASA
Headquarters and, most recently, as Manager of the Global
Hydrology and Climate Center in Huntsville from September 1994
through August 1998. He served as President of Nichols Research
Corporation, an information technology company specializing in
information solutions and services, from 1991 to 1994. He also
served as Vice President and General Manager of the General
Electric Astro Space Division from 1988 to 1991. Dr. Greenwood
is a member of the Alabama Aerospace Commission and is a
registered professional engineer and a certified financial
planner.
Mr. Moquin retired from Teledyne Brown Engineering, an
aerospace corporation specializing in ballistic missile defense
and space systems, in 1989 after thirty years of service. At the
time of his retirement, he was serving as Chairman and Chief
Executive Officer. He served as Interim President of the
University of Alabama in Huntsville from September 1990 through
July 1991. He served on the Board of Directors of SCI Systems,
Inc. ("SCI"), an international electronics manufacturing services
provider, from 1992 through 1997, and served as a Director
Emeritus, non-voting director, for SCI from 1997 to 2000. Mr.
Moquin is a registered professional engineer and has served on
numerous advisory boards and committees within his field.
Mrs. Green serves as Chief Executive Officer of the Northern
Region of Colonial Bank, the fiftieth largest bank in the United
States, and has served in that capacity since June 2000. From
July 1993 to June 2000, Mrs. Green served as President and Chief
Executive Officer of the Huntsville/Tennessee Region of Colonial
Bank. In January 2002, she was confirmed by the Alabama Senate
to serve on the State of Alabama's Ethics Commission. She also
serves on the University of Alabama in Huntsville Foundation.
Her past service includes Vice Chair and Chair of the Alabama
Space Science Commission, the Von Braun Center Board of Control,
the Alabama State Banking Board, 1998 Chair for the Huntsville
Madison County Chamber of Commerce, the Board of United Way and
numerous other civic and charitable organizations.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's officers, directors, and persons who own more than
ten percent of a registered class of the Company's equity
securities, if any, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC")
and, in the case of the Company, with The Nasdaq Stock Market.
Officers, directors, and greater than ten percent shareholders
are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such forms and any
amendments thereto furnished to the Company, or on written
representations that no forms were required, the Company believes
that during the year ended December 31, 2001, all Section 16(a)
filing requirements applicable to its officers, directors, and
greater than ten percent beneficial owners were met, except that
Preetha Pulusani, an Executive Vice President of the Company and
President of Intergraph Mapping and GIS Solutions, filed one late
report covering one transaction.
Information relating to the executive officers of the Company
appearing under "Executive Officers of the Company" on pages 12
to 13 in this Form 10-K Annual Report is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to compensation of certain executive
officers of the Company, the policies and practices of the
Company relative to executive compensation, and the performance
of the Company's stock are presented in this section. This
information consists of a summary compensation table, information
on stock option grants, exercises, and year-end values, director
compensation, information on employment contracts, the Report of
the Compensation Committee, and a graph depicting the five-year
performance of the Company's stock against the performance of
peer companies and the Standard & Poor's 500 Stock Index.
Summary Compensation Table
The following table summarizes the compensation of James F.
Taylor Jr., Chairman of the Board and Chief Executive Officer of
the Company, and the four most highly compensated executive
officers of the Company who were serving as such at December 31,
2001.
Long-Term
Compensation
Annual Compensation Awards
----------------------------------- ------------
Other Securities
Name and Annual Underlying All Other
Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
- ------------------ ---- --------- -------- -------------- ---------- ---------------
(1)
James F. Taylor Jr., (2) 2001 300,000 --- --- --- 7,422
Chairman of the Board
and Chief Executive
Officer 2000 284,302 --- --- --- 8,189
William E. Salter, (3) 2001 260,000 195,000 --- 40,000 7,625
President, Intergraph 2000 196,800 --- --- --- 6,174
Government Solutions 1999 145,600 --- --- --- 5,346
Gerhard Sallinger,
President, Process, (4) 2001 194,166 72,078 --- 25,000 15,686
Power & Offshore
Graeme J. Farrell, (5) 2001 225,000 35,631 20,318 --- 38,432
Executive Vice
President, Asia 2000 204,789 --- 29,622 20,000 29,686
Pacific Operations 1999 190,000 --- 29,825 --- 28,964
Roger O. Coupland, (6) 2001 250,000 --- --- --- 7,572
President, Intergraph 2000 220,191 --- --- 30,000 6,694
Public Safety, Inc.
(1) "Other Annual Compensation" for each of the named executives
does not include the value of certain personal benefits, if
any, furnished by the Company or for which it reimburses the
named executives, unless the value of such benefits in total
exceeds the lesser of $50,000 or 10% of the total annual
salary and bonus reported in the above table for the named
executive.
(2) Mr. Taylor was elected Chief Executive Officer of the Company
on March 2, 2000. Effective on that date, Mr. Taylor's annual
salary was set at $300,000. Mr. Taylor was elected Chairman
of the Board of Directors effective May 17, 2001. "All Other
Compensation" for Mr. Taylor consists of the following:
2001 2000
------ ------
Retirement plan contribution $5,100 $6,464
Term life insurance * 2,322 1,725
------ ------
Total $7,422 $8,189
====== ======
(3) Dr. Salter first became an executive officer of the Company
in 1989. "All Other Compensation" for Dr. Salter consists of
the following:
2001 2000 1999
------ ------ ------
Retirement plan contribution $4,250 $4,920 $3,640
Term life insurance * 3,375 1,254 1,706
------ ------ ------
Total $7,625 $6,174 $5,346
====== ====== ======
(4) Mr. Sallinger first became an executive officer of the
Company in 2001. "All Other Compensation" for Mr. Sallinger
consists of the following:
2001
-------
Retirement plan contribution $ 7,767
Social security contribution 7,919
-------
Total $15,686
=======
Mr. Sallinger's compensation is paid in European currencies
that fluctuate in value against the U.S. dollar.
(5) Mr. Farrell first became an executive officer of the Company
in 1999. "Other Annual Compensation" for Mr. Farrell consists
of the following:
2001 2000 1999
------- ------- -------
Car allowance $10,575 $14,159 $15,093
Education assistance for
dependant 1,275 8,015 8,183
Supplemental health
insurance 8,205 7,448 6,549
Other 263 --- ---
======= ======= =======
Total $20,318 $29,622 $29,825
"All Other Compensation" for Mr. Farrell consists of the
following:
2001 2000 1999
------- ------- -------
Retirement plan contribution $22,818 $19,670 $19,463
Income protection insurance 3,147 2,552 2,518
Term life insurance * 12,467 7,464 6,983
------- ------- -------
Total $38,432 $29,686 $28,964
======= ======= =======
(6) Dr. Coupland first became an executive officer of the Company
in 2000. "All Other Compensation" for Dr. Coupland consists
of the following:
2001 2000
------ ------
Retirement plan contribution $5,250 $5,452
Term life insurance * 2,322 1,242
------ ------
Total $7,572 $6,694
====== ======
* Premium payments for term life insurance were not made to
split-dollar insurance arrangements.
Stock Option Grants, Exercises and Year-End Values
Grants. The Company from time to time awards stock options to
key employees, including executive officers and directors,
pursuant to stock option plans approved by the shareholders of
the Company. The following table sets forth information
concerning options granted under these plans to the Named
Executive Officers during the year ended December 31, 2001.
OPTION GRANTS (1)
- --------------------------------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Grant Date
Options Employees Exercise Expiration Present
Name Granted (#) in 2001 Price per Share Date Value (2)
- ------------ ----------- ------------ --------------- ---------- ----------
William E. Salter, 40,000 17% $11.88 8/13/2011 $280,185
President, Intergraph
Government Solutions
Gerhard Sallinger, 25,000 11% $10.89 10/30/2011 $158,754
President, Process,
Power & Offshore
(1) Options were granted at fair market value on the date of
grant. Fair market value is the closing sale price of the
Company's stock as reported on The Nasdaq Stock Market.
Options first become exercisable two years from the date of
grant and vest at a rate of 25% per year from that point, with
full vesting on the fifth anniversary of the grant date.
Options are granted for a term of ten years from the date of
grant.
(2) The grant date present value of the options was determined
using the Black-Scholes option-pricing model. Estimated values
determined using this model are based on the market value of
the stock on the date of grant, the exercise price of the
option, and on assumptions as to the risk-free rate of return,
volatility of the Company's stock price, and expected term of
the option. Dividend yield is excluded from the calculation
since it is the present policy of the Company to retain all
earnings to finance operations. Assumptions used in valuing
the grants included an expected volatility of 73% and an
expected option life of 1.09 years after vest date. Risk-
free rates of return were determined separately for each of
the serial vesting periods of the options and ranged from 3.32%
to 4.57%.
The actual value, if any, an executive may realize from the
exercise of a stock option will equal the excess of the stock
price over the exercise price on the date the option is
exercised. There is no assurance that the value realized by
an executive will be at or near the value estimated using the
Black-Scholes model, or that any value will be realized.
Exercises. There were no options exercised by any of the Named
Executive Officers during the year ended December 31, 2001.
Year-End Values. The following table sets forth the number of
securities underlying unexercised stock options held by the Named
Executive Officers at December 31, 2001.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Year End (#) Options at Year End ($)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- ------------- ----------- -------------
James F. Taylor Jr.,
Chairman of the Board
and Chief Executive
Officer 10,000 10,000 83,650 83,650
William E. Salter,
President, Intergraph
Government Solutions --- 40,000 --- 74,400
Gerhard Sallinger,
President, Process,
Power & Offshore 6,250 53,750 42,825 305,255
Graeme J. Farrell,
Executive Vice President,
Asia Pacific Operations 16,250 23,750 68,820 191,715
Roger O. Coupland,
President, Intergraph
Public Safety, Inc. 20,000 40,000 109,800 328,975
The value of unexercised in-the-money options is determined as
the excess of the closing sale price of the Company's Common
Stock as reported on The Nasdaq Stock Market on December 31,
2001, over the exercise prices of the options held by the Named
Executive Officers.
Compensation of Directors
Directors who are also employees of the Company do not receive
additional compensation for their service as directors. Non-
employee directors receive an annual retainer of $20,000, paid in
quarterly installments, plus $500 for each Board and committee
meeting attended. Other compensation includes mileage paid at
$.30 per mile for each member whose home is more than 25 miles
from Intergraph headquarters and $50 for each hour traveled,
computed round trip. In addition, any commercial travel expenses
are fully reimbursed. All directors received the full annual
retainer in 2001, except for Mrs. Green who received $10,000 for
her period of service after election to the Board of Directors in
May 2001.
The Intergraph Corporation Nonemployee Director Stock Option
Plan was approved at the 1998 Annual Shareholders' Meeting.
Under this plan, any new non-employee director is granted an
option to purchase 3,000 shares of the Company's Common Stock
upon his or her first election to the Board. At each annual
meeting of shareholders, each non-employee director re-elected to
the Board is granted an option to purchase an additional 1,500
shares of the Company's Common Stock. The exercise price of each
option granted is the fair market value of the Company's stock on
the date of grant. Options are granted for a term of ten years
from the date of grant. Options first become exercisable one
year from the date of grant and vest at a rate of 33% per year
from that point, with full vesting on the third anniversary of
the date of grant.
Employment Contracts
Mr. Farrell holds an employment agreement with the Company and
one of its Australian business entities that provides him a fixed
base salary, supplemental health insurance, supplemental defined
contribution pension and life insurance benefits, and expense
allowances for a vehicle and other personal expense items. The
contract is open-ended, but may be terminated by either party
with three months' written notification. The termination
provisions of his contract provide for severance benefits
calculated as a function of his length of service under the
agreement up to a maximum of two years' base salary.
Mr. Sallinger holds an employment agreement with one of the
Company's European business entities. The employment agreement
provides him a fixed base salary, a permanent advance for travel
expenses, and a vehicle. The contract is open-ended, but may be
terminated by either party giving a notice of six weeks prior to
the end of a quarter. A contract penalty equal to the last gross
monthly salary may apply if the employment relationship is
terminated prematurely.
Report of the Compensation Committee
The Compensation Committee of the Board of Directors is
composed of all non-employee directors. The following Committee
report reflects the Committee's activities in 2001 with regard to
executive compensation. The Committee held two meetings wherein
it made compensation decisions based upon recommendations by the
Company's Chief Executive Officer ("CEO"), as well as based upon
its own subjective evaluations. This report also describes the
basis for compensation recommendations for 2001, and the
objectives that the Committee followed in reviewing and
determining executive compensation for 2001, as well as for
future years.
Committee Charter and Objectives
In accordance with its Charter, the responsibilities of the
Committee include the oversight of the Company's executive
officer compensation policies and practices. In fulfilling these
responsibilities, the committee conducts an annual review of the
Company's executive compensation programs and policies in order
to attain the following objectives:
o offer fair and competitive base salaries consistent with the
Company's position in the markets in which it competes,
o reward executive officers for corporate and individual
performance through incentive bonus programs,
o encourage future performance through the use of long-term
incentives such as stock options, and
o encourage executive officers to acquire and retain ownership
of the Company's Common Stock.
The Company's executive compensation programs and policies are
intended to enable the Company to attract, retain, and motivate
the highest quality of management talent. To achieve this
objective, the Committee utilizes annual base salaries together
with annual and long-term incentives tied to corporate
performance and increases in shareholder value. As a result, the
Committee works closely with the Administrative Committee of the
Company's Employee Stock Option Plan ("the Administrative
Committee") in the provision of incentive stock options and non-
qualified stock options to executive officers and other key
employees of the Company. The Administrative Committee reviews
and determines the award of individual employee stock option
grants under the Company's Employee Stock Option Plan. See
"Compensation Committee Interlocks and Insider Participation"
following for a summary of the options granted to the Company's
executive officers and directors during 2001.
Executive Officer Compensation for 2001
For 2001, the CEO was responsible for formulating a
recommendation for the compensation of all other executive
officers of the Company based on the authority and discretion
granted the CEO by the Board of Directors. The CEO and the
Committee also reviewed and considered independent industry
survey results concerning the compensation practices of similarly
situated companies, including, where available, specific
regional, industry, and competitor compensation data (including
that of the peer companies in the performance graph following
this report). Based upon a review of the information received,
their own business experience, and the recommendations of the
CEO, the Committee approved the compensation recommendations of
the CEO.
Each of the Business Segment Presidents participates in a
formal bonus plan that is tied to the financial performance of
the segment. There is no bonus until the Executive reaches the
income from operations targets established in the segment's
Annual Operating Plan. As the Executive exceeds the planned
performance, bonuses are earned. The bonus is capped at twice
the Executives' annual salary. There is no formal cash bonus
plan for executive officers that are not responsible for a
segment or a geographic region, but exceptional individual
performance is occasionally rewarded by a cash bonus. Overall
corporate performance neither guarantees nor precludes the award
of bonuses, but may influence the amount of such bonuses. Sales
executives are paid a base salary that approximates 70% of the
executives' total potential annual compensation. The base salary
amount may be supplemented in amounts up to an additional 30% of
total potential compensation if certain order and revenue
objectives are met.
The granting of stock options to purchase shares of the
Company's stock over a ten-year period at a specified price is
the primary means of providing long-term incentive to executive
officers to perform in a manner that benefits themselves, the
Company, and the Company's shareholders. There were no standard
performance factors, applicable to either the individual and his
or her job performance or the financial performance of the
Company, considered by the Administrative Committee. Decisions
to award stock options were based upon subjective evaluations of
job performance and expected contribution to the Company. Stock
options have also been used to attract new employees. Previous
option awards are considered when awarding new options. With
respect to incentive stock options, such options may not exceed
the amounts permitted under applicable Internal Revenue Code
provisions. The Committee reviewed and approved the
recommendations of the CEO with regard to the award of stock
options, for both existing executive officers' compensation plans
as well as new executive officers retained during 2001.
In the past, the Company has on occasion entered into
employment agreements with key executives. Such agreements
specified the terms of employment, including duration, separation
benefits, and compensation. Under most circumstances, separation
amounts do not exceed the balance of compensation due for the
remaining unfulfilled term of the agreement. Executives without
employment agreements who are terminated through a workforce
reduction or job elimination receive severance pay based on
standard Company policy applicable to all employees. During
2001, the Committee assimilated all employment agreements
existing between the Company and individual employees. The
Committee obtained copies of all such employment agreements, in
order to determine which agreements remained in effect with
Company executive officers. At the end of 2001, only three such
employment agreements remained in existence between the Company
and executive officers. During 2001, one such agreement expired
in accordance with its terms, and a second was exercised when the
executive terminated employment with the Company. Additionally,
during 2001, an employee of Intergraph (Deutschland) GmbH was
promoted to President of the Company's PP&O segment, thereby
becoming an executive officer of the Company. Said employee had
a preexisting employment agreement with Intergraph (Deutschland)
GmbH at the time of his promotion, which will remain effective in
his present capacity. The agreement does not address the
executive officer's current employment with the Company as
President of PP&O. The CEO did not recommend, nor did the
Committee approve, any new employment agreements during 2001.
CEO Compensation
There was no change in the compensation of the CEO for 2001.
The Committee did not utilize any standard corporate or
individual performance factors in its determination of CEO
compensation for 2001. The Committee establishes the
compensation for the CEO solely on the subjective evaluation of
the performance of the CEO and the level of compensation paid to
similar executives.
Members of the Compensation Committee: Sidney L. McDonald, Chair
Linda L. Green
Lawrence R. Greenwood
Thomas J. Lee
Joseph C. Moquin
Compensation Committee Interlocks and Insider Participation
The Administrative Committee of the Company's stock option
plan, which is appointed by and comprised of all current members
of the Board of Directors, may award both incentive stock options
and non-qualified stock options to executive officers and other
key employees. Members of the Administrative Committee who are
also employees of the Company, including James F. Taylor Jr.,
Chairman of the Board and Chief Executive Officer, and Larry J.
Laster, Chief Financial Officer, are eligible to receive options
under the Plan. During the year ended December 31, 2001, the
Administrative Committee awarded options for a total of 239,000
shares of the Company's Common Stock. Of this total, options for
174,000 shares were awarded to directors and executive officers
of the Company, including 9,000 options granted under the
Nonemployee Director Stock Option Plan, 65,000 granted to the
Named Executive Officers, and 20,000 granted to Mr. Laster.
During the year ended December 31, 2001, no executive officer
of the Company served as a director or as a member of the
compensation committee, or committee performing equivalent
functions, of another business entity.
Performance Graph
The following graph sets forth, for the five-year period ended
December 31, 2001, a comparison of the cumulative total
shareholder return to the Company's shareholders with that of the
Software and Services Index, and that of the Standard & Poor's
500 Stock Index. The Company uses the Media General Computer
Software and Services Index as the best representation of the
companies with which its business segments compete. The
cumulative total return for this index was provided to the
Company by Media General Financial Services. Total shareholder
return for each was determined by adding a) the cumulative amount
of dividends for a given year, assuming dividend reinvestment,
and b) the difference between the share price at the beginning
and at the end of the year, the sum of which was then divided by
the share price at the beginning of such year. The graph assumes
$100 was invested on December 31, 1996.
Comparative Five-Year Total Returns
Software and Services Index,
Standard & Poor's 500 Stock Index, and Intergraph Corporation
1996 1997 1998 1999 2000 2001
Software and ---- ---- ---- ---- ---- ----
Services Index $100 $121 $180 $309 $186 $164
S&P 500 $100 $133 $171 $208 $189 $166
Intergraph $100 $ 98 $ 56 $ 46 $ 59 $134
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of January 31, 2002, there were outstanding 49,919,242
shares of the Company's common stock, $.10 par value (the "Common
Stock"). Holders of Common Stock are entitled to one vote per
share on all matters to be voted upon by shareholders.
The following table sets forth information as of January 31,
2002, as to:
(a) the only persons who were known by the Company to own
beneficially more than 5% of the outstanding Common Stock of
the Company,
(b) the shares of Common Stock beneficially owned by the
directors and nominees of the Company,
(c) the shares of Common Stock beneficially owned by James
F. Taylor Jr., Chairman of the Board and Chief Executive
Officer of the Company, who is also a director and nominee;
and the four most highly compensated executive officers
of the Company who were serving as such at December 31,
2001, (collectively, Mr. Taylor and the four most highly
compensated executive officers are the "Named Executive
Officers"), and
(d) the shares of Common Stock beneficially owned by all
directors, nominees, Named Executive Officers, and all other
executive officers of the Company as a single group.
Number of Percentage of Total
Shares Beneficially Common Stock
Name (1) Owned (2) Outstanding (3)
- -------------------------------- ------------------- -------------------
Intergraph Corporation Stock
Bonus Plan Trust 4,584,095 (4) 9.2%
Dimensional Fund Advisors, Inc. 2,628,600 (5) 5.3%
Gardner Lewis Asset Management,
L.P. 2,563,556 (6) 5.1%
Director Nominees
- -------------------
James F. Taylor Jr. 134,964 (7) *
Sidney L. McDonald 94,500 (8) *
Larry J. Laster 35,947 (9) *
Thomas J. Lee 7,500 (10) *
Joseph C. Moquin 2,000 (11) *
Lawrence R. Greenwood 1,200 (12) *
Linda L. Green 6,151 (13) *
Highest Compensated
Executive Officers
- --------------------
William E. Salter 265,135 (14) *
Gerhard Sallinger 16,250 (15) *
Graeme J. Farrell 17,587 (16) *
Roger O. Coupland 32,847 (17) *
All directors, nominees, and
executive officers as a group
(18 persons), including the
foregoing directors, nominees,
and Named Executive Officers 682,056 (18) 1.4%
- -------------------------------
* Less than 1%
(1) The address of the Stock Bonus Plan Trust is Mellon Bank,
c/o The Boston Company, 1 Boston Place, Boston, MA 02108. The
address of Dimensional Fund Advisors, Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401. The address of
Gardner Lewis Asset Management, L.P. is 285 Wilmington-West
Chester Pike, Chadds Ford, PA 19317.
(2) Unless otherwise noted, the indicated owner has sole
voting power and sole investment power.
(3) Shares issuable upon exercise of stock options that are
exercisable within 60 days of January 31, 2002, are
considered outstanding for the purpose of calculating the
percentage of total outstanding Common Stock owned by
directors, executive officers, and by directors, nominees,
and executive officers as a group. Such shares are not
considered outstanding for the purpose of calculating the
percentage of total outstanding Common Stock owned by any
other person or group.
(4) Voting rights of the Common Stock held by the Stock Bonus
Plan Trust are passed through to participants in the Stock
Bonus Plan, which is a Company-sponsored retirement plan
covering substantially all U.S. employees of the Company.
However, if Plan participants do not properly complete, sign,
and return their voting instructions to the Trustee of the
Plan, the Trustee votes their shares in accordance with the
instructions of a majority of the participants exercising
such voting rights. On December 5, 2000, the Company's Board
of Directors resolved to terminate the Stock Bonus Plan
effective December 31, 2000. The Plan was submitted to the
Internal Revenue Service ("IRS") and the SEC in April 2001,
for determination of the Plan's tax qualified status on
termination and for confirmation that the special stock buy-
back provisions comply with federal securities laws. In
November 2001, the Company was contacted by the IRS and the
SEC requesting additional information in order to complete
their reviews. The Company has responded to those requests.
As of January 31, 2002, the IRS examiner has reviewed and
approved the request. The Plan has now moved to senior
level review. Upon receipt of a favorable determination
letter from the IRS that the Plan is qualified at termination,
each Plan participant will be entitled to receive a lump sum
distribution of his or her account balance or to rollover the
account balance into an Individual Retirement Account or
other qualified plan, and the trust will be dissolved.
(5) As set forth on Schedule 13G/A filed with the Securities
and Exchange Commission on February 12, 2002.
(6) As set forth on Schedule 13G filed with the Securities and
Exchange Commission on February 14, 2002. Gardner Lewis Asset
Management, L.P. has sole voting power over 2,486,256 of
these shares.
(7) This figure includes 74,964 shares allocated to Mr. Taylor
under the Stock Bonus Plan and 10,000 shares over which Mr.
Taylor holds immediately exercisable stock options. This
figure excludes 100,000 shares owned by his wife as to which
Mr. Taylor expressly disclaims beneficial ownership.
(8) This figure includes 4,500 shares issuable upon the
exercise of stock options held by Mr. McDonald.
(9) This figure consists of 19,900 shares owned jointly by Mr.
Laster and his wife as to which voting and investment powers
are shared, 3,047 shares allocated to Mr. Laster under the
Stock Bonus Plan, and 13,000 shares issuable upon the
exercise of stock options held by Mr. Laster.
(10) This figure includes 4,500 shares issuable upon the
exercise of stock options held by Mr. Lee.
(11) This figure includes 1,000 shares issuable upon the
exercise of stock options held by Mr. Moquin and excludes
200 shares owned by Mr. Moquin's wife as to which Mr. Moquin
expressly disclaims beneficial ownership.
(12) This figure includes 1,000 shares issuable upon the
exercise of stock options held by Dr. Greenwood.
(13) This figure excludes 2,051 shares owned by Mrs. Green's
husband as to which Mrs. Green expressly disclaims
beneficial ownership.
(14) This figure consists of 147,200 shares owned jointly by
Dr. Salter and his wife as to which voting and investment
powers are shared and 117,935 shares allocated to Dr. Salter
under the Stock Bonus Plan.
(15) This figure includes 8,750 shares issuable upon the
exercise of stock options held by Mr. Sallinger.
(16) This figure includes 581 shares owned jointly by Mr.
Farrell and his wife as to which voting and investment
powers are shared and 16,250 shares issuable upon the
exercise of stock options held by Mr. Farrell.
(17) This figure includes 2,345 shares allocated to Dr.
Coupland under the Stock Bonus Plan and 20,000 shares
issuable upon the exercise of stock options held by Dr.
Coupland.
(18) This figure includes 204,891 shares allocated to such
persons under the Stock Bonus Plan and 105,875 shares
issuable upon the exercise of stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
Page in
Annual Report *
---------------
(a) 1) The following consolidated financial statements of
Intergraph Corporation and subsidiaries and the
report of independent auditors thereon are
incorporated by reference from the Intergraph
Corporation 2001 Annual Report to shareholders:
Consolidated Balance Sheets at December 31,
2001, and 2000 33
Consolidated Statements of Operations for the
three years ended December 31, 2001 34
Consolidated Statements of Cash Flows for the
three years ended December 31, 2001 35
Consolidated Statements of Shareholders' Equity
for the three years ended December 31, 2001 36
Notes to Consolidated Financial Statements 37-59
Report of Independent Auditors 60
* Incorporated by reference from the indicated pages of
the 2001 annual report to shareholders.
Page in
Form 10-K
---------
2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
and Reserves for the three years ended December 31,
2001 30
All other schedules are omitted because they are not
applicable or the required information is shown in the financial
statements or notes thereto.
Financial statements of 50%-or-less-owned companies have been
omitted because the registrant's proportionate share of income
before income taxes of the companies is less than 20% of
consolidated income before income taxes, and the investments in
and advances to the companies are less than 20% of consolidated
total assets.
3) Exhibits
Page in
Number Description Form 10-K
------ --------------------------------------------------- ---------
3(a) Certificate of Incorporation, Bylaws, and
Certificate of Merger (1)
3(b) Amendment to Certificate of Incorporation (2)
3(c) Restatement of Bylaws (3)
4 Shareholder Rights Plan, dated August 25,
1993 (4), and amendments dated March 16,
1999 (10) and March 5, 2002 (5)
10(b) Amended and Restated Loan and Security Agreement,
by and between Intergraph Corporation and
Foothill Capital Corporation, dated November 30,
1999 (12) and amendment dated August 1, 2001
10(c)* Intergraph Corporation 1997 Stock Option Plan (6)
and amendment dated January 11, 1999 (11)
10(d) Indemnification Agreement between Intergraph
Corporation and each member of the Board of
Directors of the Company dated June 3, 1997 (7)
10(e)* Intergraph Corporation Nonemployee Director
Stock Option Plan (8)
10(f) Asset Purchase Agreement by and among SCI
Technology Inc. as Buyer and Intergraph
Corporation as Seller dated November 13,
1998, with Exhibits and Schedule 1 (9)
10(h)* Employment Contract of Graeme J. Farrell dated
March 26, 1997 (13)
10(i)* Employment Contract of Lewis N. Graham, Jr.
dated February 6, 2001 (13)
10(j)* Z/I Imaging Corporation 1999 Stock Option Plan (13)
10(k)* Z/I Imaging Corporation 2000 Stock Option Plan (13)
10(l)* Intergraph Corporation 2002 Stock Option Plan
10(m)* Employment Contract dated October 24, 1985, of
Gerhard Sallinger
13 Portions of the Intergraph Corporation 2001 Annual
Report to Shareholders incorporated by reference
in this Form 10-K Annual Report
21 Subsidiaries of the Company 31
23 Consent of Ernst & Young LLP, Independent Auditors 32
* Denotes management contract or compensatory plan, contract, or
arrangement required to be filed as an Exhibit to this Form 10-K
(1) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1984, under the Securities Exchange Act
of 1934, File No. 0-9722.
(2) Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1987, under the Securities Exchange Act of 1934,
File No. 0-9722.
(3) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993, under the Securities Exchange Act of
1934, File No. 0-9722.
(4) Incorporated by reference to exhibits filed with the Company's
Current Report on Form 8-K dated August 25, 1993, under the
Securities Exchange Act of 1934, File No. 0-9722.
(5) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 8-K dated March 8, 2002, under the
Securities Exchange Act of 1934, File No. 0-9722.
(6) Incorporated by reference to exhibits filed with the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996, under the Securities Exchange Act of 1934,
File No. 0-9722.
(7) Incorporated by reference to exhibits filed with the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997, under the Securities Exchange Act of 1934, File
No. 0-9722.
(8) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1997, under the Securities Exchange Act of 1934, File No.
0-9722.
(9) Incorporated by reference to exhibits filed with the Company's
Current Report on Form 8-K dated November 13, 1998, under
the Securities Exchange Act of 1934, File No. 0-9722.
(10) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1998, under the Securities Exchange Act of 1934, File No.
0-9722.
(11) Incorporated by reference to exhibit filed with the Company's
Registration Statement on Form S-8 dated May 24, 1999, under
the Securities Exchange Act of 1933, File No. 333-79137.
(12) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1999,
under the Securities Exchange Act of 1934, File No. 0-9722.
(13) Incorporated by reference to exhibits filed with the
Company's Annual Report on Form 10-K for the year ended
December 31, 2000, under the Securities Exchange Act of 1934,
File No. 0-9722.
(b) Reports on Form 8-K - on March 8, 2002, the Company
filed a Current Report on Form 8-K, reporting a resolution
by the Company's Board of Directors to amend the Rights
Agreement.
(c) Exhibits - the response to this portion of Item 14
is submitted as a separate section of this report.
(d) Financial statement schedules - the response to this portion
of Item 14 is submitted as a separate section of this report.
Information contained in this Form 10-K Annual Report includes
statements that are forward looking as defined in Section 21E of
the Securities Exchange Act of 1934. Actual results could differ
materially from those projected in the forward-looking statements.
Information concerning factors that could cause actual results to
differ materially from those in the forward-looking statements is
contained in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the Company's 2001
Annual Report, portions of which are incorporated by reference in
this Form 10-K Annual Report.
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.
INTERGRAPH CORPORATION
By /s/ James F. Taylor Jr. Date: March 14, 2002
-----------------------
James F. Taylor Jr.
Chairman of the Board, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Date
------
/s/ James F. Taylor Jr. Chairman of the Board, March 14, 2002
- ----------------------- Chief Executive Officer
James F. Taylor Jr. and Director
/s/ Larry J. Laster Executive Vice President, March 14, 2002
- ----------------------- Chief Financial Officer,
Larry J. Laster and Director (Principal
Financial and Accounting
Officer)
/s/ Lawrence R. Greenwood Director March 14, 2002
- -------------------------
Lawrence R. Greenwood
/s/ Thomas J. Lee Director March 14, 2002
- --------------------
Thomas J. Lee
/s/ Sidney L. McDonald Director March 14, 2002
- -----------------------
Sidney L. McDonald
/s/ Joseph C. Moquin Director March 14, 2002
- ---------------------
Joseph C. Moquin
/s/ Linda L. Green Director March 14, 2002
- --------------------
Linda L. Green
INTERGRAPH CORPORATION AND SUBSIDIARIES
SCHEDULE II ---- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions
Balance at charged to
beginning costs and Balance at
Description of period expenses Deductions end of period
- ---------------- ---------------- ------------- ------------ --------------
Allowance for
doubtful accounts
deducted from
accounts receivable
in the balance
sheet 2001 $18,169,000 1,348,000 6,541,000(1) $12,976,000
2000 $16,066,000 5,507,000 3,404,000(1) $18,169,000
1999 $13,814,000 6,900,000 4,648,000(1) $16,066,000
Allowance for
obsolete inventory
deducted from
inventories in the
balance sheet 2001 $28,556,000 2,375,000 12,425,000(2) $18,506,000
2000 $33,896,000 16,089,000(3) 21,429,000(2) $28,556,000
1999 $31,249,000 23,187,000(4) 20,540,000(2) $33,896,000
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory reduced to net realizable value.
(3) Includes a $4.7 million inventory write-down resulting from
the Company's exit of the hardware development and design
business in third quarter 2000.
(4) Includes a $7 million inventory write-down resulting from the
Company's exit from the personal computer and generic server
businesses in third quarter 1999.