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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, 2002
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 Identification No.)
incorporation or organization)
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. ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes X No
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 28, 2002, the last business day of the
registrant's most recently completed second fiscal quarter, was
approximately $807,554,000. The market value calculation was determined
using a per share price of $17.44.
As of January 31, 2003, there were 46,227,249 shares of Intergraph
Corporation Common Stock $0.10 par value outstanding. The aggregate market
value of the voting stock held by non-affiliates of the registrant was
approximately $791,963,000 based on the closing sale price of such stock as
reported by The Nasdaq Stock Market on January 31, 2003, 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 may individually
disclaim.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
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Portions of the Annual Report to Shareholders
for the year ended December 31, 2002 Part I, Part II
Portions of the Proxy Statement for the May 15,
2003, Annual Meeting of Shareholders Part III
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PART I
ITEM 1. BUSINESS
Overview
Intergraph Corporation (the "Company" or "Intergraph"), 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 public safety; process,
power, and offshore; and mapping and geographic information systems
("GIS"), utilities, communications, and earth imaging. In addition,
Intergraph's intellectual property division manages the Company's portfolio
of intellectual property, including patents, copyrights, and trademarks.
The Company's business segments offer software solutions based on the
Microsoft Corporation ("Microsoft") 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 ("IT") needs. Products and services
are sold through industry-focused direct and indirect channels worldwide,
with the United States and Europe representing approximately 83% of total
revenues for 2002.
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, including Intergraph's Clipper workstations, running
the UNIX operating system. 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. 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 or about 1996, a dispute arose between the Company and Intel concerning
the Company's assertion of certain patents against several of the Company's
competitors in the computer industry. Unable to acquire technical
information from Intel crucial to the Company's 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
behavior, infringement of certain microprocessor and system-level Clipper
cache memory management patents ("Clipper patents"), and antitrust
violations. The antitrust portion of the case was dismissed. The
remaining elements of the case (including the claims pertaining to the
Clipper patents) were settled in April 2002 for $300 million, which the
Company received from Intel in May 2002. The Company believes that the
$300 million settlement payment from Intel confirms the validity and value
of its Clipper patents. As part of the settlement of the Clipper patents
lawsuit, Intel also agreed to pay the Company $150 million if Intel lost
the Texas lawsuit described below.
In July 2001, the Company filed a separate lawsuit in Texas, charging Intel
with infringement of two Intergraph patents pertaining to parallel
instruction computing ("PIC"). The complaint alleged that Intel's IA-64
EPIC(TM) (explicitly parallel instruction computing) architecture, infringes
the Company's two PIC patents. In October 2002, the Court ruled that
Intergraph's PIC patents were valid and enforceable, and were infringed by
Intel's Itanium and Itanium 2 products. The Court also granted the Company
an injunction on Intel's Itanium and Itanium 2 processors. In accordance
with the terms of the parties' settlement agreement, Intel paid $150
million to the Company in November 2002. This amount is non-refundable,
regardless of any outcome on appeal. In December 2002, Intel appealed the
ruling in the PIC case to the Federal Circuit Court of Appeals, and the
Company believes a decision likely will take ten to twelve months. As part
of the parties' settlement, Intel agreed to pay to the Company an
additional $100 million if the appeals court affirms the trial court's
decision.
In 1997, the Company placed a number of computer system vendors on notice
that it believed their products infringed the Clipper patents. The Company
continued to offer to negotiate a patent license with these system vendors,
but such discussions were suspended as a result of the Company's litigation
against Intel. The settlement agreement with Intel in April 2002 did not
include a grant of licenses for Intel's customers (the system vendors who
combined an Intel processor with certain other non-Intel components).
Rather, the Intel settlement agreement expressly excludes any license
regarding the system vendors' sale of infringing computer systems and
specifically records the Company's intention to seek payment for patent
licenses from the system vendors.
The Company is actively engaged in licensing discussions with several
companies and has initiated patent infringement lawsuits against certain
companies whose products the Company believes infringe on certain Clipper
and PIC patents. The Company understands the costs and uncertainties
associated with patent litigation but believes that such litigation is
necessary to maximize the value of its intellectual property. See Item 3,
Legal Proceedings, following, and Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") contained in the
Company's 2002 Annual Report for detailed discussion of the Company's
patent litigation and its effect on the Company's business and consolidated
operating results.
Over the past five 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 third quarter 2000 it exited the
development and design of most of its remaining hardware products. The
Company returned to profitability in 2001 and was profitable again in 2002.
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 that
have greater financial resources in each of the markets it serves. Further
improvement in the Company's operating results depends on increased 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.
Business Segments
The Company's operations are divided into four separate business segments
along with an intellectual property division and a corporate oversight
function. These four business segments are focused on markets in which the
Company considers itself to be a leader or sees the potential to lead. The
Company's 2002 business segments are Intergraph Process, Power & Offshore
("PPO"); Intergraph Mapping and Geospatial Solutions ("IMGS"); Intergraph
Solutions Group ("ISG"); and Intergraph Public Safety, Inc. ("IPS"). Each
is discussed in further detail below. For additional information regarding
the Company's business segments, including financial information for 2002,
see MD&A and Note 15 of Notes to Consolidated Financial Statements
contained in the Company's 2002 Annual Report ("Notes to Consolidated
Financial Statements").
Intergraph Process, Power & Offshore PPO supplies software and services to
the process, power, offshore petroleum, and marine industries, including
shipbuilding. The segment focuses on integrated lifecycle engineering
software and services 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 24 years, engineering, procurement, and construction
contractors and facility owner/operators have used the division'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 most prominent brands include PDS(TM) (Plant Design System),
SmartPlant(R), MARIAN(R), and INtools(R). SmartPlant Electrical was brought to
market in 2002.
Intergraph Mapping and Geospatial Solutions IMGS 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, utilities,
communications, and enterprise-wide mapping and GIS. IMGS products and
industry-specific solutions support local, state, federal, and national
governments; transportation agencies; mapping agencies; electric, gas,
pipeline, and water/wastewater utilities; communications companies;
commercial remote sensing and photogrammetry; the military; civil aviation
authorities; and educational institutions.
In October 2002, IMGS broadened its technology and solutions portfolio to
include mapping and geospatial solutions targeted toward many horizontal
industries. Intergraph purchased the remaining 40% ownership interest of
Z/I Imaging Corporation ("Z/I Imaging") from Carl Zeiss B.V. At the
completion of the transaction, Z/I Imaging became an Intergraph wholly
owned subsidiary and was combined with IMGS. In addition, in a corporate
restructuring, the Utilities and Communications business was moved from IPS
and combined with IMGS. IMGS provides their customers with total
geospatial solutions in selected markets in industries such as national
governments, local and regional governments, transportation, engineering,
utilities, defense, and intelligence.
Intergraph Solutions Group ISG is a professional services and solutions
company that provides management consulting, technology, and integrated
solutions in the commercial and government sectors. ISG partners with
clients to achieve their vision, mission, and goals through intelligent
deployment of best practices and information technology. ISG combines
experience in dozens of technical fields with offerings covering a breadth
of services capabilities and products: IT integration, systems and
networking, installation management, management consulting, IT-managed
services, multi-vendor maintenance/field support, ruggedized hardware
solutions, video analysis systems and services, logistics systems, and
Integrated Ship Design and Production software.
During 2002, ISG changed its name from Intergraph Government Solutions to
Intergraph Solutions Group to reflect the increasing importance of its
commercial services business in key growth areas such as IT-managed
services and health care. However, the majority of ISG business is within
the U.S. Department of Defense, primarily the U.S. Air Force and U.S. Navy.
Intergraph Public Safety In January 1997, IPS was established as a wholly
owned subsidiary of the Company. IPS provides complete, integrated
solutions for command and control, deployment, tracking, information
gathering, analysis, and records management. IPS systems are designed for
public safety agencies (law enforcement, fire, and emergency medical
services), commercial fleet operations, and airport, military, and
commercial security forces.
IPS products provide a complete solution for public safety agencies. IPS
was the first vendor to offer map-based computer-aided dispatching, and it
expanded its 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.
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, 2002,
the Company expensed $50.7 million (10% of revenues) for product
development activities compared to $53.9 million (10% of revenues) in 2001,
and $56.3 million (8% of revenues) in 2000. 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
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 worldwide. Most of the Company's revenues are generated
by the Company's direct sales force through sales offices in approximately
30 countries. 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. 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. Maintenance and support 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
States represented approximately 43% and 47% of total revenues in 2002 and
2001, respectively. European and Asia Pacific revenues represented
approximately 26% and 10%, respectively, of total revenues in 2002,
compared to 28% and 9%, respectively, in 2001. 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, worldwide political conditions, currency exchange
fluctuations, and other factors.
Outside the United States, the Company's products are sold and supported
through a combination of subsidiaries and distributorships. At December
31, 2002, the Company had approximately 770 employees in Europe, 310
employees in the Asia Pacific region, and 460 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 many 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 2002, local currencies were the
functional currencies for the Company's European and Canadian subsidiaries.
The U.S. dollar was the functional currency for all other international
subsidiaries in 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.
For further discussion of the Company's international operations, see MD&A
and Note 15 of Notes to Consolidated Financial Statements.
U.S. Government Business
Total revenue from the U.S. government was approximately $136.9 million in
2002, $143 million in 2001, and $132.4 million in 2000, representing
approximately 27% of total revenue in 2002, and 27% and 19% of revenue in
2001 and 2000, respectively. The majority of these revenues are attributed
to the ISG 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 80% of the Company's 2002 federal
government revenue was earned under long-term contracts. The Company
believes its relationship with the federal government to be good. While it
is anticipated that these contracts will remain in effect through their
stated 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 ISG 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, 2002, and 2001, accounts receivable from the U.S. government
totaled approximately $26.7 million and $27.7 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, 2002, and 2001, was $193.8 million and
$231.1 million, respectively. Substantially all of the December 2002
backlog of orders is expected to be earned and recognized as revenue in
2003. The Company does not ordinarily provide return of merchandise or
extended payment terms to its customers.
The Company does not consider its business to be seasonal.
Competition
The markets in which the Company competes continue to be characterized by
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. Company management believes that competition will
remain intense, particularly in product pricing.
The Company's competition varies among its business segments. PPO competes
with the software products and services of AVEVA (formerly Cadcentre);
Bentley Systems, Inc. ("BSI") (an approximately 34%-owned affiliate of the
Company) which in 2002 completed its acquisition of Rebis Industrial
Workgroup Software, another competitor in this market; Dassault Systemes;
Tribon (shipbuilding); and several smaller companies. In 2002, PPO
retained its tenth year of market revenue leadership as estimated from
available industry information. PPO ranked first in the overall plant
design software and services market and the overall plant design-specific
applications market. Positive factors potentially affecting competition in
2003 include continuing acceptance of SmartPlant software, continuing
software lease revenue (particularly for PDS), and strong demand for
commercial off-the-shelf software for instrumentation engineering and
materials and procurement management. Potential negative factors include
worldwide economic uncertainty or downturns affecting funding of customers'
capital projects as well as fluctuations in oil, gas, and chemical prices.
IMGS competes in, and is a leader in, the GIS and earth imaging markets.
According to available industry information, IMGS is a market leader in
certain GIS market segments and geographies, with ESRI being the overall
market leader. In the Utilities and Communications sector, one of the
major competitors on a global scale is GE Network Solutions. IMGS is a
market leader in the earth imaging market with its Z/I Imaging company
believed to lead the photogrammetric industry. Z/I Imaging's largest
competitor is Leica Geosystems ("Leica"). Z/I Imaging and Leica offer end-
to-end solutions and together provide solutions to over 60% of the market.
Although no industry reports are available for the photogrammetry market,
IMGS determines its market placement by comparing overall market revenues
to revenues reported by Leica, Z/I Imaging, and other competitors.
ISG competes in the U.S. federal government, state and local government,
and commercial IT services markets. INPUT, a Virginia-based government IT
market research firm, estimates there are more than 3,000 companies
conducting more than $100,000 of IT business with the U.S. government.
According to Gartner Dataquest, a Connecticut-based technology research and
advisory firm, more than 15,000 companies compete in the commercial IT
services market. In 2002, "VARBusiness" ranked Intergraph as one of the top
100 North American IT solutions providers, and "Washington Technology" placed
Intergraph as the 67th largest federal prime contractor.
IPS competes in a three-tiered market based on customer size. IPS competes
primarily in Tier One, comprised of the largest customers, and estimates
its ranking at first or second. Other competitors in Tier One include
Motorola/Printrak International, Inc., Northrop Grumman, CompuDyne, and
TriTech Software Systems.
Several companies with greater financial resources than the Company are
active in the markets it serves, particularly those served by its ISG and
IPS business segments. 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.
In 2002, the Company established an intellectual property division that is
responsible for protecting and licensing the Company's intellectual
property. During 2002, this division retained a consulting firm to help
develop a licensing program and strategies for engaging companies using the
Company's patented technologies.
In January 2003, the Company entered into a cross-licensing agreement with
International Business Machines Corporation ("IBM") that will extend for
ten years. The agreement settled all patent infringement claims between
IBM and the Company. Under the agreement, IBM will transfer ownership of
various IBM patents to the Company. IBM will also make a balancing payment
of $10 million during 2003.
As industry standards proliferate, there is a possibility that the patents
of others may become a significant factor in the Company's business.
Computer software technology is increasingly being protected by patents,
and many companies, including the Company, 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
licenses, 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, Cautionary Note Regarding Forward-Looking
Statements, for further discussion of these risks and uncertainties.
Employees
At December 31, 2002, the Company had approximately 3,800 employees. Of
these, approximately 1,540 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.
Available Information
The Company files reports with the Securities and Exchange Commission
("SEC"), including annual reports on Form 10-K, quarterly reports on Form
10-Q, and other reports from time to time. The public may read and copy
any materials filed with the SEC at the SEC's Public Reference Room at 450
Fifth Street, NW, Washington, DC 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. The Company is an electronic filer and the SEC maintains an
Internet site at http://www.sec.gov that contains the reports, proxy and
information statements, and other information filed electronically. The
Company's website address is www.intergraph.com. Please note that this
website address is provided as an inactive textual reference only. The
Company makes available free of charge through its website the Annual
Report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or furnished
to the SEC. The information provided on the Company's website is not part
of this report, and is therefore not incorporated by reference unless such
information is otherwise specifically referenced elsewhere in this report.
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 are utilized for
product development, sales, and administration. The remaining 400,000
square feet are 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
Intel Litigation As further described in the Company's Annual Report on
Form 10-K for the year ended December 31, 2001, the Company has had ongoing
litigation with Intel since 1997. In April 2002, the Company and Intel
reached an agreement during the course of court-ordered mediation that
settled the litigation involving the Company's Clipper patents. Under the
terms of this settlement agreement, Intel paid $300 million to the Company
in May 2002, the lawsuit pending in Alabama was dismissed, the companies
signed a highly restricted cross-license agreement, and the Company
assigned certain unrelated patents to Intel. The settlement does not
require the Company to take any further actions or make any future
payments, and specifically reserves the Company's right to enforce its
Clipper patents against computer system companies, including customers of
Intel. Any patents issued in the future will automatically be licensed to
Intel. Any costs associated with any future obligations of the Company are
inconsequential. The settlement also established a range of damages for
the then pending patent infringement suit in Texas.
The Texas trial was held in July 2002 with final closing arguments in
August 2002. On October 10, 2002, the Court ruled that Intergraph's PIC
patents were valid, enforceable, and infringed by Intel's Itanium and
Itanium 2 products. The Court also ruled that the Company was entitled to
an injunction on the sale, manufacture, and use of Intel's Itanium and
Itanium 2 processors. On October 18, 2002, Intel filed a combined Motion
to Reconsider and Motion for a New Trial, which was denied. On October 30,
2002, the Court entered a "Final Judgment and Permanent Injunction" against
Intel. Based on this Final Judgment and pursuant to the terms of the
parties' settlement agreement, Intel paid $150 million to the Company in
November 2002. Although Intel appealed this ruling in December 2002, the
$150 million payment is non-refundable, regardless of the outcome on
appeal. Intel will be required to pay an additional $100 million in
damages to the Company if the trial court's decision is affirmed on appeal.
The Company believes the appeal process likely will take between ten to
twelve months.
The Company recorded the $300 million settlement and the $150 million award
(net of applicable legal fees and other associated litigation costs) as a
separate line item in the other income (expense) section of the 2002
consolidated statement of income.
In 1997, the Company placed a number of computer system vendors on notice
that it believed their products infringed the Clipper patents. The Company
continued to offer to negotiate a patent license with these system vendors,
but such discussions were suspended as a result of the Company's litigation
against Intel. The Company's lawsuit against Intel was filed in 1997 and
settled in April 2002; however, the Intel settlement agreement did not
include licenses for Intel's customers (the system vendors who combined an
Intel processor with certain other non-Intel components). Rather, the
Intel settlement agreement expressly excludes any license regarding the
system vendors' sale of infringing computer systems and specifically
records the Company's intention to seek payment for patent licenses from
the system vendors.
Original Equipment Manufacturers ("OEM") Litigation On December 16, 2002,
the Company filed a patent infringement action against Dell Computer
Corporation(TM), Gateway Inc.(TM), and Hewlett-Packard Co.(TM) (including the
former Compaq Computer Corporation(TM)) in the U.S. District Court for the
Eastern District of Texas ("OEM case") claiming that products from these
computer vendors infringe three Clipper patents owned by the Company (U.S.
Patent Numbers 4,899,275, 4,933,835, and 5,091,846). These patents relate to
memory management technology.
The OEM case seeks unspecified damages for past infringement (including
enhanced damages), a statutory patent injunction, prejudgment interest,
costs, and attorneys' fees. The defendants have not yet been served the
summons and complaint. The Company is using the time between filing the
lawsuit and serving the complaint to pursue licensing discussions with the
defendants. As a result, the Court has not yet set the trial schedule.
The Company cannot speculate as to the timing or outcome of its discussions
with the defendants or the setting of a trial schedule. The Company also
has not ruled out the possibility of adding additional defendants to the
pending OEM case.
Texas Instruments Litigation On January 30, 2003, the Company filed a
patent infringement action against Texas Instruments(TM) ("TI") in the U.S.
District Court for the Eastern District of Texas ("TI case"). The TI case
pertains to the Company's PIC patents, United States Patent Numbers
5,560,028, 5,794,003, and 6,360,313 B1, and states that such patents are
infringed by TI's family of Digital Signal Processors marketed under the
name TMS320C6000(TM). These devices are used as high-performance embedded
controllers in consumer products. Their applications include audio and
video encoders and decoders, broadband solutions, optical networking,
telephony, voice processing, and wireless communications. The Company
believes that publicly available documents for the TMS320C6000 product
family confirm that the processors employ the same PIC technology described
by the Company's PIC patents. These same patents have already been found
to be valid and enforceable by the U.S. District Court for the Eastern
District of Texas and were also licensed from the Company by Fujitsu in
September 2002. As with the OEM case, the Company intends to use the time
between filing and serving the complaint to pursue licensing discussions
with TI. As a result, the Company cannot speculate as to the timing or
outcome of its discussions with TI or the setting of a trial schedule.
BSI Litigation In December 2002, the Company filed a declaratory judgment
action in Madison County, Alabama, against BSI. The action requests the
Court to interpret the parties' asset purchase agreement and promissory
note, and require BSI to specifically perform the repayment of the same.
The asset purchase agreement and note were executed in conjunction with the
sale of the Company's civil, plotting, and raster software product lines to
BSI in 2000. BSI subsequently filed a summons, but no complaint, against
the Company in Philadelphia, Pennsylvania, and thereafter, in January 2003,
filed a summons and complaint against the Company in Delaware. The
Delaware complaint alleges that the Company breached certain terms of the
asset purchase agreement. BSI did not specify an amount of damages in its
Delaware actions, and the Company does not believe that such claims are
likely to be of a size or nature that would impact the operations of the
Company. The Company intends to vigorously pursue its claims against BSI,
and defend the claims asserted by BSI.
Other Litigation 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 SECURITY HOLDERS
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. 58 Chief Executive Officer and
Chairman of the Board 1977
Larry J. Laster 51 Executive Vice President, Chief
Financial Officer, and Director 1987*
Roger O. Coupland 56 President, IPS 1991
Preetha R. Pulusani 43 President, IMGS 1997
Gerhard Sallinger 50 President, PPO 2001
William E. Salter 61 President, ISG 1984
Graeme J. Farrell 60 Executive Vice President,
Asia Pacific 1994
Edward A. Wilkinson 69 Executive Vice President 1987
Jack C. Ickes 43 Vice President of Corporate Services 2000
David Vance Lucas 41 Vice President and General Counsel 2000
Larry T. Miles 42 Vice President of Finance 2001
Charlotte S. Shaw 41 Vice President and Chief Accounting
Officer 2002
Eugene H. Wrobel 60 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 was named President of 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. In October 2002, Mr. Taylor
announced his intention to retire as the Company's Chief Executive Officer.
He will continue to serve as Chief Exective Officer until a successor is named.
Larry J. 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 IPS. In September 2001, Mr. Laster
was elected 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 IPS. 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
IMGS in November 2001. As of October 2002, this business segment includes
the Mapping and GIS, Utilities and Communications, and Z/I Imaging
divisions. 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 PPO in 1999 and
Executive Vice President Sales and Marketing of PPO worldwide in 2001. Mr.
Sallinger was appointed 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 ISG. 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 of the Company 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 Vice President of Intergraph Computer Systems in July 1999 and
Vice President of the Company in December 2000. Mr. Ickes currently serves
as Vice President of Corporate Services. He holds a Bachelor of Science
degree in electrical engineering.
David Vance Lucas joined the Company in 1994 as staff attorney responsible
for corporate, commercial, and intellectual property representation. He
was promoted to Senior Counsel in 1997, elected Vice President and General
Counsel in 2000, and elected Secretary in 2002. Mr. Lucas continues to
represent the Company in the areas noted above, in addition to 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.
Charlotte S. Shaw joined the Company in March 2001 as Chief Financial
Officer of PPO and was appointed Vice President and Chief Accounting
Officer of the Company in November 2002. Before joining Intergraph, Ms.
Shaw held various Controller and other finance and accounting positions
with several companies, and prior to that, she worked in public accounting
for eight years. She holds a master's degree in business administration
and a bachelor's degree in accounting. Ms. Shaw is a certified public
accountant, certified management accountant, and certified internal
auditor.
Eugene H. Wrobel joined the Company in 1982 as Finance Director for Europe.
He returned to the United States 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 Vice President and Controller for DYATRON, a
publicly traded 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 REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information appearing under "Dividend Policy" and "Price Range of
Common Stock" on page 60 of the Intergraph Corporation 2002 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, 2002,
appearing under "Five-Year Financial Summary" on the inside front cover of
the Intergraph Corporation 2002 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 21 to 34 of the Intergraph Corporation 2002
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
"Liquidity and Capital Resources" and "Impact of Currency Fluctuations and
Currency Risk Management" in Management's Discussion and Analysis of
Financial Condition and Results of Operations appearing on pages 30 to 34
of the Intergraph Corporation 2002 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 35 to 60 of the Intergraph Corporation 2002 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 REGISTRANT
The information appearing under "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" on pages 4 to 7 of the
Intergraph Corporation proxy statement relative to the annual meeting of
shareholders to be held May 15, 2003, is incorporated by reference in this
Form 10-K Annual Report. Directors are elected for terms of one year at
the annual meeting of the Company's shareholders.
Information relating to the executive officers of the Company appearing
under "Executive Officers of the Company" on pages 9 to 11 in this Form 10-K
Annual Report is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Executive Compensation" on pages 7 to 12
of the Intergraph Corporation proxy statement relative to the annual
meeting of shareholders to be held May 15, 2003, is incorporated by
reference in this Form 10-K Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The information appearing under "Common Stock Outstanding and Principal
Shareholders" on pages 3 to 4 of the Intergraph Corporation proxy statement
relative to the annual meeting of shareholders to be held May 15, 2003, is
incorporated by reference in this Form 10-K Annual Report.
Equity Compensation Plan Information
Information regarding the Company's equity compensation plans approved by
shareholders as of December 31, 2002, is summarized below. The Company has
no equity compensation plans not previously approved by shareholders.
Number of securities
Number of securities remaining available for
to be issued upon Weighted-average future issuance under
exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column(a))
------------- ------------------- ------------------- ----------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders 3,727,385 $6.88 2,115,000
Equity compensation
plans not approved
by security holders --- --- ---
--------- ---------
Total 3,727,385 2,115,000
========= =========
For additional information regarding the Company's equity compensation
plans, see Note 12 of Notes to Consolidated Financial Statements.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in
Rules 13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act"), that are designed to ensure that information
required to be disclosed in the reports that the Company files or submits
under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in the Securities and Exchange
Commission's rules and forms and that such information is accumulated and
communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Within the 90 days prior to the
date of this report, the Chief Executive Officer and Chief Financial
Officer of the Company carried out an evaluation of the effectiveness of
the design and operation of the Company's disclosure controls and
procedures. Based on the evaluation of these disclosure controls and
procedures, the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures were
effective. It should be noted that any system of controls, however well
designed and operated, can provide only reasonable, and not absolute,
assurance that the objectives of the system are met. In addition, the
design of any control system is based in part upon certain assumptions
about the likelihood of future events. Because of these and other inherent
limitations of control systems, there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions, regardless of how remote.
Changes in Internal Controls
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls
subsequent to the date of their evaluation. There were no significant
deficiencies or material weaknesses and, therefore, no corrective actions
were taken.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, 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 2002 Annual Report to shareholders:
Consolidated Balance Sheets at December 31, 2002,
and 2001 35
Consolidated Statements of Income for the three
years ended December 31, 2002 36
Consolidated Statements of Cash Flows for the three
years ended December 31, 2002 37
Consolidated Statements of Shareholders' Equity for
the three years ended December 31, 2002 38
Notes to Consolidated Financial Statements 39-59
Report of Independent Auditors 60
* Incorporated by reference from the indicated pages of the 2002 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, 2002 20
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
Number Description
------ -----------
3(a) Electronically Restated Certificate of Incorporation (1)
3(b) Amended and Restated Bylaws (2)
4 Amended and Restated Rights Agreement, dated March 5, 2002,
between Intergraph Corporation and Computershare Investor
Services, LLC (3)
10(a) Settlement, Sale of Technology and License Agreement, dated
April 4, 2002, by and among Intergraph Corporation, Intergraph
Hardware Corporation and Intel Corporation (4)
10(b) Amended and Restated Loan and Security Agreement, by and
between Intergraph Corporation and Foothill Capital
Corporation, dated November 30, 1999, (5) and amendment dated
August 1, 2001 (6)
10(b)(i) Termination Agreement and Release, by and between Intergraph
Corporation and Foothill Capital Corporation, dated August 31,
2002 (7)
10(c) * Intergraph Corporation 1997 Stock Option Plan (8) and amendment
dated January 11, 1999 (9)
10(d) Form of Indemnification Agreement between Intergraph
Corporation and each executive officer and each member of the
Board of Directors of the Company (2)
10(e) * Intergraph Corporation Nonemployee Director Stock Option Plan
(10)
10(h) * Employment Contract of Graeme J. Farrell dated March 26, 1997
(11)
10(l) * Intergraph Corporation Amended and Restated 2002 Stock Option
Plan (12)
10(m) * Employment Contract dated October 24, 1985, of Gerhard
Sallinger (6)
10(n) * Employment Agreement of Dr. Terry Keating dated October 1,
2002 (7)
10(o)(i) Agreement to Resolve Patent Infringement Claims by and between
Intergraph Corporation and International Business Machines
Corporation dated January 30, 2003
10(o)(ii)Patent Cross License Agreement by and between Intergraph
Corporation and International Business Machines Corporation
dated January 30, 2003 (13)
13 Portions of the Intergraph Corporation 2002 Annual Report to
Shareholders incorporated by reference in this Form 10-K
Annual Report
21 Subsidiaries of the Company
23 Consent of Ernst & Young LLP, Independent Auditors
99.1 Certification pursuant to 18 U.S.C. Section 1350 by James F.
Taylor, Jr. dated March 27, 2003
99.2 Certification pursuant to 18 U.S.C. Section 1350 by Larry J.
Laster dated March 27, 2003
* 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
Form 8-A/A filed on October 29, 2002, under the Securities Exchange
Act of 1934, File No. 0-9722.
(2) Incorporated by reference to exhibits filed with the Company's
Current Report on Form 8-K dated April 8, 2002, under the
Securities Exchange Act of 1934, File No. 0-9722.
(3) Incorporated by reference to exhibits filed with the Company's
Current Report on Form 8-K dated March 8, 2002, 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/A dated April 30, 2002, 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 10-K for the year ended December 31, 1999,
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, 2001,
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 September 30,
2002, 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, 1996,
under the Securities Exchange Act of 1934, File No. 0-9722.
(9) 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.
(10)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.
(11)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.
(12)Incorporated by reference to exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2002,
under the Securities Exchange Act of 1934, File No. 0-9722.
(13)Certain information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
(b) Reports on Form 8-K:
o Form 8-K dated April 14, 2002, reporting the Company's Board of
Directors' amendment and restatement of the Company's Bylaws and
adoption of a form of indemnification agreement to be entered into
between the Company and each executive officer and member of the Board
of Directors.
o Form 8-K dated April 29, 2002, (amended April 30, 2002), reporting the
settlement of the Alabama Intel lawsuit.
o Form 8-K dated October 10, 2002, reporting a favorable ruling on the
PIC patent infringement Texas lawsuit against Intel.
o Form 8-K dated October 15, 2002, reporting Jim Taylor's intention to
retire as the Company's Chief Executive Officer.
(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 2002 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 13, 2003
----------------------------
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, Chief
- ------------------------ Executive Officer and Director March 13, 2003
James F. Taylor, Jr.
/s/ Larry J. Laster Executive Vice President, Chief March 13, 2003
- ------------------------ Financial Officer, and Director
Larry J. Laster (Principal Financial and Accounting
Officer)
/s/ Lawrence R. Greenwood Director March 13,2003
- -------------------------
Lawrence R. Greenwood
/s/ Thomas J. Lee Director March 13,2003
- -------------------------
Thomas J. Lee
/s/ Sidney L. McDonald Director March 13, 2003
- -------------------------
Sidney L. McDonald
/s/ Joseph C. Moquin Director March 13, 2003
- -------------------------
Joseph C. Moquin
/s/ Linda L. Green Director March 13, 2003
- -------------------------
Linda L. Green
/s/ Richard W. Cardin Director March 13, 2003
- -------------------------
Richard W. Cardin
CERTIFICATION
I, James F. Taylor, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of Intergraph
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 27, 2003
By: /s/ JAMES F. TAYLOR, JR.
-----------------------------
James F. Taylor, Jr.
Chairman of the Board and Chief Executive Officer
CERTIFICATION
I, Larry J. Laster, certify that:
1. I have reviewed this annual report on Form 10-K of Intergraph
Corporation;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal controls;
and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated
in this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: March 27, 2003
By: /s/ LARRY J. LASTER
----------------------------------
Larry J. Laster
Executive Vice President and
Chief Financial Officer
INTERGRAPH CORPORATION AND SUBSIDIARIES
SCHEDULE II ---- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions
Balance at charged to Balance
beginning costs and at end
Description of period expenses Deductions of period
- --------------------------------- ------- ---------- ----------- ----------
(in thousands)
Allowance for doubtful accounts 2002 $12,976 $ 3,851 $ 1,391 (1) $15,436
deducted from accounts receivable 2001 $18,169 $ 1,348 $ 6,541 (1) $12,976
in the balance sheet 2000 $16,066 $ 5,507 $ 3,404 (1) $18,169
Allowance for obsolete inventory 2002 $18,506 $ 1,224 $ 3,424 (2) $16,306
deducted from inventories 2001 $28,556 $ 2,375 $12,425 (2) $18,506
in the balance sheet 2000 $33,896 $16,089(3) $21,429 (2) $28,556
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventories 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.
INTERGRAPH CORPORATION AND SUBSIDIARIES
EXHIBIT 21 ---- SUBSIDIARIES OF REGISTRANT
State or Other Percentage of
Jurisdiction Voting Securities
Name of Incorporation Owned by Parent
- --------------------------------------------------------------------------
Intergraph Asia Pacific, Inc. Delaware 100
Intergraph European
Manufacturing, L.L.C Delaware 100
Intergraph (Italia), L.L.C. Delaware 100
Intergraph (Middle East), L.L.C. Delaware 20
Intergraph Public Safety, Inc. Delaware 100
Intergraph Benelux B.V. The Netherlands 100
Intergraph Danmark A/S Denmark 100
Intergraph CR spol. s r.o. Czech Republic 100
Intergraph (Deutschland) GmbH Germany 100
Intergraph Espana, S.A. Spain 100
Intergraph Europe (Polska) Sp. zo.o. Poland 100
Intergraph Finland Oy Finland 100
Intergraph (France)SA France 100
Intergraph GmbH (Osterreich) Austria 100
Intergraph (Hellas) S.A. Greece 20
Intergraph Norge A/S Norway 100
Intergraph (Portugal) Sistemas de
Computacao Grafica, S.A. Portugal 100
Intergraph (Sverige) AB Sweden 100
Intergraph (Switzerland) A.G. Switzerland 100
Intergraph (UK), Ltd. United Kingdom 100
Intergraph Public Safety Belgium S.A. Belgium 100
Intergraph Public Safety
Deutschland, GmbH Germany 100
Public Safety France, SA France 100
Intergraph Public Safety U.K.,Ltd. United Kingdom 100
Z/I Imaging Corporation Delaware 100
Intergraph Greater China, Ltd. Hong Kong 100
Intergraph BEST (Vic) Pty. Ltd. Australia 100
Intergraph Computer (Shenzhen) Co.Ltd. China 100
Intergraph Corporation (N.Z.)Limited New Zealand 100
Intergraph Corporation Pty. Ltd. Australia 100
Intergraph Corporation Taiwan Taiwan, R.O.C. 100
Intergraph Hong Kong Limited Hong Kong 100
Intergraph Japan K.K. Japan 100
Intergraph Korea, Ltd. Korea 100
Intergraph Process and Building
Solutions Pte Ltd. Singapore 100
Intergraph Public Safety (New
Zealand) Limited New Zealand 100
Intergraph Public Safety Pty. Ltd. Australia 100
Intergraph Wholesale Pty. Ltd Australia 100
Intergraph Finance Australia Pty. Ltd. Australia 100
International Public Safety Pty.Ltd. Australia 100
Intergraph Canada, Ltd. Canada 100
Intergraph de Mexico, S.A. de C.V. Mexico 100
Intergraph Israel Software Development
Center, Ltd. Israel 100
Intergraph Servicios de Venezuela C.A. Venezuela 100
Intergraph Saudi Arabia Ltd. Saudi Arabia 20
Exhibit 23
- ----------
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Intergraph Corporation and Subsidiaries of our report dated January 31, 2003,
included in the 2002 Annual Report to Shareholders of Intergraph Corporation.
Our audits also included the financial statement schedule of Intergraph
Corporation listed in Item 14(a)(2). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the registration
statements of Intergraph Corporation listed below of our report dated
January 31, 2003 with respect to the consolidated financial statements
incorporated herein by reference, and our report included in the preceding
paragraph with respect to the financial statement schedule included in this
Annual Report (Form 10-K) of Intergraph Corporation.
Form S-3 Registration Statement No. 33-25880
Form S-8 Registration Statement No. 33-53849
Form S-8 Registration Statement No. 33-57211
Form S-8 Registration Statement No. 33-59621
Form S-8 Registration Statement No. 333-79129
Form S-8 Registration Statement No. 333-79137
Form S-8 Registration Statement No. 333-100923
/s/ Ernst & Young
Birmingham, Alabama
March 24, 2003