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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, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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: (205) 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
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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, 1995, there were 45,652,929 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
$417,584,000 based on the closing sale price of such stock as reported by NASDAQ
on January 31, 1995, 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
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Portions of the Annual Report to Shareholders
for the year ended December 31, 1994 Part II, Part IV
Portions of the Proxy Statement for the
May 18, 1995 Annual Shareholders' Meeting Part III
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PART I
ITEM 1. BUSINESS
Intergraph Corporation was founded in 1969, and is organized as a Delaware
corporation. Unless the context of this discussion dictates otherwise,
references to the "Company" or "Intergraph" include Intergraph Corporation and
subsidiaries.
Intergraph's business is principally in the single industry segment of
interactive computer graphics systems. With an emphasis on technical
disciplines, Intergraph systems combine graphics workstations, servers, and
peripheral hardware with operating system and application-specific software
programs authored by Intergraph and third party software developers to perform
such functions as design, drafting, mapping, modeling, analysis, and
documentation. These systems are developed, manufactured, sold, and serviced by
the Company. Consulting, support, and training services are also provided.
Intergraph systems support the creation, analysis, display, output, and
maintenance of virtually every type of design, model, drawing, map, and other
graphic representation, while simultaneously providing capabilities to manage a
database of non-graphic descriptive information associated with the graphics
data. Systems hardware consists of:
o Workstations and servers based on Intel Corporation (Intel) or Intergraph
microprocessors
o A variety of Intergraph and third-party peripheral devices
o Industry-standard networking
Software includes applications for computer-aided design, manufacturing, and
engineering (CAD/CAM/CAE), mapping and geographic information systems,
electronic publishing, and technical information management.
INTERGRAPH SYSTEMS
Intergraph systems include hardware and/or application software developed by
the Company and others. These products can be configured to address the needs
of any size organization. The Company provides point solutions as well as
solutions which are integrated -- workstations, servers, peripherals, and
software configured by the Company to work together and satisfy each customer's
requirements.
All Intergraph workstations and servers are based on Intel microprocessors
with the Windows/DOS or Windows NT operating system or the Company's
microprocessor with a UNIX operating system. In addition, the Company has
developed interoperability products that allow Windows NT and UNIX applications
to work together in a mixed environment.
In November 1992, the Company announced its decision to port its technical
software applications to Microsoft Corporation's new Windows NT operating
system. Microsoft's standard Windows system has been widely accepted in the
personal computing (PC) market, and Windows NT is Microsoft's operating system
for high-end computing. The effect of this decision has been to expand the
availability of the Company's workstations and software applications to
Windows-based computing environments not previously addressed by the Company,
including the availability of Intergraph software applications that operate
across a variety of hardware architectures, including those of other hardware
vendors that use the Windows NT operating system. Prior to this decision, the
Company's software applications operated principally on Intergraph hardware
platforms. At the same time, the Company has continued to develop and maintain
products in the UNIX operating system environment, the foundation for its
software applications prior to Windows NT, thereby offering existing and
potential customers a choice of UNIX or Windows NT operating systems as well as
a path to the Windows NT system if and when the customer chooses. Limited
shipments of Windows NT-based software began in the fourth quarter of 1993.
Sales of Windows based software represented 48% of software revenues in 1994
(60% for fourth quarter 1994). As of the end of 1994, the Company has
completed the port of its applications software to Windows NT for all
applications scheduled for conversion.
While the Company believes that Windows NT will become the dominant operating
system in the markets it serves, adoption of any new operating system requires
considerable effort on the part of customers, and the timing of such
conversions is unpredictable. In addition, competing operating systems are
available in the market, and several competitors of the Company offer or are
adopting the Windows NT operating system for their products.
The Company believes that Intel Corporation's hardware architecture has an
important role in the computing markets it serves. During the last half of
1993, the Company began to offer a hardware platform (in addition to its own)
based on Intel microprocessors. Previously, the Company's hardware platform
offering had been based on its own microprocessor. The Company ceased design
of its own microprocessor at the end of 1993. Intel-based systems represented
approximately 30% of hardware unit sales in 1993 and approximately 74% in 1994
(85% in the fourth quarter of 1994).
The Company supports industry standards for operating systems, windowing,
graphics, peripherals, and communication networks, allowing its systems to
operate in computing environments with products from other vendors who support
the same industry standards.
Systems currently sold by the Company either individually or in combination
are as follows:
(1) Workstations manufactured by the Company that offer user-selectable
main memory capacity and performance levels. This flexibility allows
customers to match hardware capabilities with their production
requirements. Intergraph workstations are general-purpose computer
systems that can run Intergraph and third-party application, data
management, data processing, and personal productivity and office
automation software packages.
(2) Intel- and RISC-based servers that function as plot, file, compute,
and database nodes. The servers off-load these functions from
standalone workstations and enable workstation users to share data
and system resources in a distributed network. Intergraph's servers
offer user-selectable configurations and performance levels.
(3) Special-purpose peripherals, including scanners, scanner/plotters,
photoplotters, electrostatic and pen plotters, color and monochrome
hardcopy devices, magnetic and optical disk technology, a variety of
disk and tape drives, alphanumeric terminals, line printers, and
other devices available from the Company, either manufactured
in-house or as original equipment from third parties.
(4) A broad range of application software for the Windows/DOS, Windows
NT, and UNIX operating systems. See "Intergraph Applications
Software" below.
(5) MicroStation core graphics software from Bentley Systems, Inc., an
Intergraph affiliate, for various operating systems and hardware
platforms.
(6) An open network architecture that ties Intergraph hardware and
software products together and provides access to other systems and
processes.
INTERGRAPH SYSTEMS SOFTWARE
At the systems software level, Intergraph develops software to provide
graphics and database management capabilities on Intergraph systems, advanced
compilers for Intergraph systems, and utilities to enable interoperability with
systems from other vendors.
The graphics software foundation for many Intergraph Windows-, Windows NT-,
and UNIX-based software applications is MicroStation, a graphics software
product owned by Bentley Systems, Inc., an Intergraph affiliate. MicroStation
provides fundamental graphics element creation, maintenance, and display
functions for Intergraph's UNIX and Intel-based workstations. MicroStation is
also available on Apple Macintosh, Sun SPARCstations, and Hewlett-Packard HP700
workstations. A Japanese language version of MicroStation runs on the NEC
personal computer.
Intergraph supports relational database management systems for attribute
(non-graphic) data management on its own workstations and servers, as well as
on systems from other vendors. Currently supported are Ingres, Oracle,
Informix, DB2/MVS, DB2/400, Rdb, Microsoft SQL Server, and SyBase systems.
Intergraph's Relational Interface System (RIS) is a middleware product that
provides database-independent access to data stored in supported databases.
To facilitate the use of Intergraph systems with those of other vendors, the
Company develops software for translating data into Intergraph formats,
inputting large volumes of text into graphics and attribute files, and
communicating with other computer systems. Additionally, Intergraph provides
interfaces to various models of electrostatic and pen plotters (both online and
offline), online typesetters, units producing computer output microfilm, and
other output devices such as those used in the graphic arts industry.
INTERGRAPH APPLICATIONS SOFTWARE
Intergraph offers a broad suite of graphics and data management applications
software. The architecture, engineering, and construction (AEC),
mapping/geographic information systems (GIS), and mechanical design,
engineering, and manufacturing (MDEM) product applications have dominated the
Company's product mix over the last three years, with no other single
application representing more than 10% of systems revenue. The relative
contributions of these product families to total systems revenue for both 1994
and 1993 were AEC 34%, GIS 42%, MDEM 16%, and all other applications 8%.
The following is a brief description of the Company's major product
application areas. Each product organization is led by a senior executive
responsible for product development, marketing, training, support, and
documentation.
Architecture/Engineering/Construction. Intergraph's architectural, facility
management, and engineering product line automates the project design and
management process. With this software, users can develop and model building
concepts, produce construction documents, and manage space and assets in a
finished facility. The system serves the needs of architecture/engineering
firms and corporate or governmental facility management offices. Included
are capabilities for producing three-dimensional models of design concepts,
architectural drawings, reports, engineering plans, and construction
drawings. Packages are also offered for space planning, facility layout,
maintenance management, lease management and asset tracking.
Intergraph's civil engineering software includes capabilities for
coordinate geometry and for site, water resources, bridge, structural,
geotechnical and transportation engineering. Structural engineering software
is used to create two- and three-dimensional structural models that serve as
the basis for frame and finite element-based structural design and analysis
of steel and concrete structures. For construction needs, the products
support traditional drafting and report requirements. The Company's highway,
rail, site, and hydraulic/hydrologic engineering products link traditional
workflow activities from data collection to plan and profile production to
the generation of construction drawings.
The Company's plant design software addresses the needs of process and
power plant design efforts. The Plant Design System (PDS) product supports
process flow diagrams, piping and instrumentation diagrams (P&ID),
instrumentation data management, piping, equipment, heating/ventilation/air
conditioning, electrical, structural, and other design aspects of a plant.
Three-dimensional modeling capabilities are also provided. The system
performs interference-checking and provides reports, materials lists, and
drawings. A supporting product provides "walk-throughs" of three-dimensional
plant models.
Mapping and Geographic Information Systems. Intergraph offers a range of
mapping and GIS solutions to assist businesses, governments, and academic
institutions in solving geography-based problems. Intergraph's mapping/GIS
software tools address the life cycle of mapping/GIS projects, from project
and data management through data collection and integration, spatial query
and analysis, output and map production.
Intergraph's mapping/GIS solutions help companies address workflows in
several major industries. These products support solutions for all levels of
government including infrastructure management, planning, growth management,
economic development, land information management, public safety and
security, public works, redistricting, tactical and strategic defense
applications (such as land-based command and control operations), and
hydrographic and aeronautical charting systems. Transportation industry
applications range from decision support activities such as policy, planning,
and programming to the creation of operations systems that support day-
to-day tasks. Utility companies utilize Intergraph's mapping/GIS products
to automate management and analysis applications such as market analyses,
long-range planning and forecasting, corridor evaluation and selection,
right-of-way analysis, and environmental impact studies for siting,
permitting, contaminant studies, and risk evaluation. Environmental and
natural resource management applications include monitoring, evaluating and
managing, conservation and remediation of the environment. Energy
exploration and production products assist geoscientists in geological
analysis related to energy exploration and production and mineral extraction.
Intergraph also provides solutions for end-to-end digital map and chart
publishing, digital image processing, orthophoto production, and digital
photogrammetry.
Mechanical Design, Engineering and Manufacturing. For the mechanical
design and manufacturing market, Intergraph offers software to automate the
product development cycle from design through analysis, manufacturing, and
documentation. Customers use the system to design mechanical parts and
assemblies, utilizing solid modeling software. Detailing, dimensioning, and
drafting capabilities are included for the production of engineering
drawings.
Engineering software evaluates product designs for functional and
structural integrity, predicting behavior under service or test conditions.
Finite element modeling and analysis software evaluates designs by simulating
stresses encountered in end use. Intergraph's manufacturing products assist
in optimizing material usage and cutting cycles for metalworking and
fabrication. In addition, a data management system organizes shared product
databases for coordination and management of product cycle phases.
PRODUCT DEVELOPMENT
The Company believes a strong commitment to ongoing product development is
critical to success in the interactive computer graphics industry. Significant
resources are devoted to development of Intergraph products, and the Company
believes its product offerings are responsive to market and competitive demands.
Product development expenditures include all costs related to designing new
or improving existing equipment and software. During the year ended December
31, 1994, the Company spent $137.2 million (13.2% of revenues) for product
development activities compared to $160.3 million (15.3% of revenues) in 1993,
and $150.2 million (12.8% of revenues) in 1992.
Over the past several years the industry in which the Company competes has
been characterized by a rapid move to higher performance, lower priced product
offerings, by intense price and performance competition, by shorter product
cycles, and by development and support of software standards that result in
less specific hardware dependency by customers. The Company believes the life
cycle of its products to be less than two years, and it is therefore engaged in
continuous product development activity. The operating results of the Company
and others in the industry will continue to depend on the ability to accurately
anticipate customer requirements and technological trends and to rapidly and
continuously develop and deliver new hardware and software products that are
competitively priced, offer enhanced performance, and meet customers'
requirements for standardization and interoperability.
MANUFACTURING AND SOURCES OF SUPPLY
The Company's primary manufacturing activities consist of the manufacture of
printed circuit boards used in the Company's workstations and servers and the
assembly and testing of components and subassemblies manufactured by the
Company and others.
As described under "Intergraph Systems" above, the Company ceased design of
its own microprocessor at the end of 1993. Substantially all of the Company's
microprocessor needs are currently supplied by Intel Corporation. The Company
does not have a fixed quantity commitment for microprocessors in its agreements
with Intel, but believes it has a good relationship with Intel and is unaware
of any reason that Intel might encounter difficulties in meeting the Company's
microprocessor needs. An inability to obtain a sufficient supply of Intel
microprocessors would adversely affect the Company's results of operations. The
Company is not dependent on any other sole source supplier of purchased parts,
components, or peripherals used in the systems manufactured by the Company.
In late November, 1994 it was disclosed that a rare problem may exist with
Intel's Pentium microprocessor, which is used in many of the Company's
workstations and servers. The problem relates to an unlikely sequence of
operations that can produce a round-off error when dividing certain numbers and
carrying the answer to several decimal places. Intel has said the error is
likely to occur only once in every nine billion random division operations. The
Company has shipped several thousand Pentium processor-based workstations and
servers to date.
The Company has not experienced any reports of this problem from a customer
site, and has not experienced the problem during internal development.
Accordingly, the Company has no reason to believe that current or future
customers are likely to encounter the problem. However, the Company has
committed to a plan of replacement of all such processors in its customer base.
Intel has announced that it will warrant the processor on this issue, and the
Company's business arrangements with Intel provide warranty coverage of the
Pentium microprocessor by Intel. Neither the discovery of the Pentium problem
or the replacement of the affected units significantly affected the Company's
results of operations or cash flows in 1994, and the Company expects no impact
on its 1995 results of operations or cash flows. All shipments of the Company's
workstations and servers since January 1, 1995 have contained the corrected
version of the Pentium processor.
The Company is not required to carry extraordinary amounts of inventory to
meet customer demands or to ensure allotment of parts from its suppliers.
SALES AND SUPPORT
Sales. The Company's systems are sold through a combination of direct and
indirect channels worldwide. Direct channel sales, which represent the majority
of the Company's systems revenues, are generated by the Company's direct sales
force through sales offices in over 50 countries worldwide. The efforts of the
direct sales force are augmented by sales through indirect channels, including
dealers, value-added-resellers, distributors, and system integrators. The
Company believes that indirect channel sales are a key to future growth in
sales volume and profitability, and expects that indirect channel sales will
increase as a percentage of total systems revenue.
The Company's selling efforts are organized along key industry lines
(transportation and local government, utilities, building and process,
manufacturing, vehicle design, defense, electronics, etc.). The Company
believes an industry focus better enables it to meet the specialized needs of
customers. In general, the Company's direct sales force is compensated on a
combined base salary and commission basis. Sales quotas are established along
with certain incentives for exceeding those quotas. 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 interactive graphics systems. Customer support
includes pre-installation guidance, education services, customer training,
onsite installation, hardware preventive maintenance, repair service, 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.
INTERNATIONAL OPERATIONS
International markets, particularly Europe, continue in importance to the
industry and to the Company. Sales outside the U.S. represented 49% of total
revenues in 1994 and 51% in 1993. European revenues were 33% of total revenues
in 1994 and 35% in 1993.
There are currently wholly-owned sales and support subsidiaries of the Company
located in every major European country. European subsidiaries are supported by
service and technical assistance operations located in The Netherlands. Outside
of Europe, Intergraph systems are sold and supported through a combination of
subsidiaries and distributorships. At December 31, 1994, the Company had
approximately 1,600 employees in Europe and 1,100 employees in other
international locations.
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.
The Company has certain foreign currency related asset and liability exposures
related to its international operations against which certain measures,
primarily hedging, are taken to reduce currency risk. With respect to those
exposures, the Company seeks to protect against financial statement volatility
arising from changes in exchange rates with respect to amounts denominated for
balance sheet purposes in currencies other than the functional currency of the
local entity, and therefore enters into forward exchange contracts related to
certain balance sheet items, primarily intercompany receivables, payables, and
debt. Periodic changes in the value of these contracts offset exchange rate-
related changes in the financial statement value of these balance sheet items.
Forward exchange contracts are purchased only in amounts sufficient to offset
possible rate-related changes in the recorded values of balance sheet items.
The Company does not speculate or otherwise trade in foreign currencies.
The Company has historically experienced slower collection periods for its
international accounts receivable than for similar sales to customers in the
United States. Slower collection periods adversely affect liquidity. In
addition, in 1994 the Company wrote-off a receivable from a Middle Eastern
customer in the amount of $5.5 million, and is experiencing slow collection
periods throughout that region, particularly in Saudi Arabia. Total accounts
receivable from Middle Eastern customers as of the end of 1994 was $18 million.
Based on its prior experience with product transitions and knowledge of the
international regions in which it conducts its business, the Company believes
that customer acceptance of its new products based on the Windows NT operating
system and Intel microprocessors may lag the pace of acceptance in the United
States, particularly in Europe. This lag may temporarily increase the operating
losses incurred in international regions. In addition, the Company conducts
business in certain international regions that it considers to be emerging
business areas, particularly parts of the Asia Pacific and Middle East regions.
In these regions, operating costs tend to be higher as a percentage of revenue
than in the Company's more mature business regions.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations and Notes 1, 4, and 11 of Notes to Consolidated Financial Statements
contained in the Company's 1994 Annual Report, portions of which are
incorporated by reference in this Form 10-K Annual Report, for further
discussion of the Company's international operations.
U.S. GOVERNMENT BUSINESS
Total revenues from the United States government were approximately $167
million in both 1994 and 1993 and $186 million in 1992, representing 16% of
total revenue in each of the three years. The Company sells to the U.S.
government under long-term contract arrangements, primarily indefinite
delivery, indefinite quantity and cost-plus award fee contracts, and through
commercial sales of products not covered by long-term contracts. Approximately
40% of total federal government revenues are 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 (with
damages paid to the Company) at the election of the government. Any loss of a
significant government contract would have an adverse impact on the results of
operations of the Company. No other customer exceeds 10% of the total revenue
of the Company.
The Company has historically experienced slower collection periods for its
U.S. government accounts receivable than for its commercial customers, which
adversely affects liquidity. At December 31, 1994, accounts receivable from the
U.S. government was $49 million.
BACKLOG
An order is entered into backlog only when the Company receives a firm
purchase commitment from a customer. The Company's backlog of unfilled systems
orders at December 31, 1994, was $207 million. At December 31, 1993, backlog
was $232 million. Substantially all of the December 1994 backlog of orders is
expected to be shipped during 1995.
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 industry in which the Company competes continues to be characterized by
price and performance competition. To compete successfully, the Company and
others in the industry must accurately anticipate customer requirements and
technological trends and continuously develop products with enhanced
performance that can be offered at competitive prices. The Company, along with
other companies in the industry, engages in the practice of price discounting
to meet competitive industry conditions. Other important competitive factors
include quality, reliability, and customer service, support, and training.
Management of the Company believes that competition will remain intense,
particularly in product pricing.
Competition in the interactive computer graphics industry varies among the
different product application areas. The Company considers its principal
competitors in the interactive computer graphics market to be IBM,
Computervision Corp., Hewlett-Packard Corp., Digital Equipment Corporation
(DEC), Sun MicroSystems, Inc., Unigraphics (a division of Electronic Data
Systems, Inc.), Silicon Graphics, Inc., and Mentor Graphics, Inc. In the
low-end graphics market, Intergraph competes with the software products
of Autodesk, Inc., Computervision, and several smaller companies. Several
companies with greater financial resources than the Company, including IBM,
DEC, and Hewlett-Packard are active in the industry.
The Company provides point solutions and solutions which are integrated --
workstations, servers, peripherals, and software configured by the Company to
work together and satisfy each customer's requirements. By delivering such
integration, the Company believes it has an advantage over other vendors who
provide only hardware or software, leaving system integration to the customer.
In addition, the Company believes that its experience and extensive worldwide
customer service and support infrastructure represent a competitive advantage.
ENVIRONMENTAL AFFAIRS
The Company's manufacturing facilities are subject to numerous laws and
regulations designed to protect the environment, particularly from plant wastes
and emissions. 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, AND PATENTS
The Company develops its own graphics, data management, and applications
software as part of its continuing product development activities. The Company
has standard license agreements with UNIX Systems Laboratories for use and
distribution of the UNIX operating system, and with Microsoft Corporation for
use and distribution of the Windows NT operating system. The license agreements
are perpetual and allow the Company to sublicense the operating systems
software upon payment of required sublicensing fees.
Through December 31, 1994, the Company had an exclusive license agreement with
Bentley Systems, Inc. (BSI), a 50%-owned affiliate of the Company, under which
the Company distributed MicroStation, a software product developed and
maintained by BSI and utilized in many of the Company's software applications.
The exclusivity of the Company's distribution license was the subject of
arbitration and litigation between the two companies and the other 50%
shareholders of BSI during 1993 and 1994. In May, 1994, this dispute was
settled and all related arbitration and litigation was terminated. As a result,
effective January 1, 1995, both the Company and BSI will distribute
MicroStation. The Company has a nonexclusive license to sell MicroStation via
its direct sales force and to sell MicroStation via its indirect sales channels
if MicroStation is sold with other Intergraph products. See Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the Company's 1994 Annual Report, portions of which are
incorporated by reference in this Form 10-K Annual Report, for further
discussion of the settlement with BSI and its effects on the Company.
The Company has an extensive program for the licensing of third-party
application and general utility software for use on systems and workstations.
The Company owns and maintains a number of registered patents and registered
and unregistered copyrights, trademarks, and servicemarks. 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 hardware and software products. Similarly, trademark rights held by
the Company are used to preserve and protect the goodwill represented by the
Company's registered and unregistered trademarks, such as the federally
registered trademark "Intergraph".
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, for example, is widely available, and many companies,
including Intergraph, are attempting to develop patent positions concerning
technological improvements related to PCs and workstations.
At present, it does not appear that Intergraph will be prevented from using
the technology necessary to compete successfully 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. Any
increase in royalty payments or purchase costs would increase the Company's
costs of manufacture, however, and it is possible, though not anticipated, that
some key improvement necessary to compete successfully in some markets served
by the Company may not be available.
The Company is actively engaged in a program to protect via patents the
technology it is developing.
The Company believes its success depends less on its ability to obtain and
defend copyrights, trademarks, and patents than on its ability to offer higher-
performance products for specific solutions at competitive prices.
EMPLOYEES
At December 31, 1994, the Company had approximately 9,200 employees. Of
these, approximately 2,700 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 manufacturing facility are
located in Huntsville, Alabama. Sales and support facilities are maintained
throughout the world.
In January, 1994 the Company announced its decision to close its European
manufacturing and distribution facility (IEM) located in Nijmegen, The
Netherlands over the course of 1994 and transfer related activities to its
Huntsville manufacturing facility. The phased closure of IEM was completed
during the third quarter of 1994. In the fourth quarter of 1994, the Company
determined that it will utilize a portion of this facility as a distribution
center for Europe beginning in early 1995. Excess space will be placed for
lease. All manufacturing activity will continue to be performed in the U.S.
The Company owns over 2,000,000 square feet of space in Huntsville that is
utilized for manufacturing, product development, sales and administration. The
Huntsville facilities also include over 500 acres of unoccupied land that can
be used for future expansion. The Company maintains subsidiary company
facilities and sales and support locations in major U.S. cities outside of
Huntsville, primarily through operating leases.
Outside the U.S., the Company owns approximately 500,000 square feet of
space, primarily its Nijmegen distribution center and European headquarters
facility. Sales and support facilities are leased in most major international
locations.
The Company considers its facilities to be adequate for the immediate future.
ITEM 3. LEGAL PROCEEDINGS
None.
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.
OFFICER
NAME AGE POSITION SINCE
- ----------------------- --- ------------------------------ --------
James W. Meadlock 61 Chairman of the Board and
Chief Executive Officer 1969
Larry J. Laster 43 Executive Vice President,
Chief Financial Officer,
and Director 1986
Nancy B. Meadlock 56 Executive Vice President and
Director 1969
James F. Taylor, Jr. 50 Executive Vice President and
Director 1977
Robert E. Thurber 54 Executive Vice President and
Director 1977
Lawrence F. Ayers, Jr. 62 Executive Vice President 1987
Richard S. Buchheim 49 Executive Vice President 1993
Penman R. Gilliam 57 Executive Vice President 1994
Neil E. Keith 49 Executive Vice President 1985
Stephen J. Phillips 53 Executive Vice President 1987
William E. Salter 53 Executive Vice President 1984
Tommy D. Steele 54 Executive Vice President 1992
Herman E. Thomason 69 Executive Vice President 1991
John M. Thorington, Jr. 51 Executive Vice President 1980
Edward A. Wilkinson 61 Executive Vice President 1987
Allan B. Wilson 46 Executive Vice President 1982
Manfred Wittler 54 Executive Vice President 1989
James W. Meadlock is a founder of the Company, has served as Chairman of the
Board of Directors since the Company's inception in 1969, and is Chief Executive
Officer. Mr. Meadlock and Nancy B. Meadlock are husband and wife.
Larry J. Laster joined the Company in June 1981. Since that time, he has held
several managerial positions in the Company's Finance Department and Federal
Systems Division. He was elected Vice President in December 1986, named Chief
Financial Officer in February 1987, elected to the Board of Directors in April
1987, and is currently Executive Vice President. Mr. Laster is a certified
public accountant.
Nancy B. Meadlock is a founder of the Company and has been a Director since
1969, excluding the period from February 1970 to February 1972. Mrs. Meadlock
served as Secretary for 10 years, was elected Vice President in 1979, and is
currently Executive Vice President and Director. She holds a master's degree
in business administration. Mrs. Meadlock and James W. Meadlock are wife and
husband.
James F. Taylor, Jr., joined the Company in July 1969, shortly after its
formation, and is considered to be a founder. Mr. Taylor has served as a
Director since 1973. He was responsible for the design and development of the
Company's first commercial computer-aided design products and for many of the
Company's other application-specific products. Mr. Taylor was elected Vice
President in 1977 and was an Executive Vice President at his retirement in
1992. Mr. Taylor returned to full-time employment with the Company in January
1995 and is currently an Executive Vice President of the Company and President
of the Intergraph Public Safety Business Unit. Mr. Taylor holds a bachelor of
science degree in mathematics.
Robert E. Thurber is a founder of the Company and has been a Director since
1972. He is responsible for developing requirements and strategic directions
for application solutions. In June 1977, Mr. Thurber was elected Vice President
and is currently Executive Vice President and Chief Engineer. Mr. Thurber holds
a master's degree in engineering.
Lawrence F. Ayers, Jr., joined the Company in September 1987 after 32 years
in federal government mapping where he became the Civilian Director of the
Defense Mapping Agency. He served as Vice President for International Federal
Marketing until February 1993 and is currently Executive Vice President with
responsibility for commercial mapping and utility products. Mr. Ayers holds a
bachelor's degree in civil engineering and a master's degree in public
administration.
Richard S. Buchheim joined the Company in July 1992. He was elected Vice
President in September 1993 and Executive Vice President in November 1994 and
currently has responsibility for the Company's Information Management and
Solutions Engineering Division. Mr. Buchheim came to Intergraph from the Camex
subsidiary of DuPont Electronic Imaging Systems where he was Senior Vice
President of Engineering. In his 18 year tenure at DuPont and Camex, Mr.
Buchheim led teams of over 100 software engineers in the development of
document management and publishing systems for major metropolitan newspapers,
including the New York Times, New York Daily News, Toronto Star, and Orlando
Sentinel, and for retail advertisers such as May Company, Osco Drug, Service
Merchandise and Home Depot.
Penman R. Gilliam joined the Company in April 1994 as Executive Vice
President responsible for Federal Programs. Mr. Gilliam came to Intergraph
from Hughes Aircraft Company where he was Vice President in charge of Hughes
Communications and Data Systems Division. From late 1987 through early 1993,
Mr. Gilliam served as Deputy Director of the Defense Mapping Agency (DMA), the
senior civilian responsible for overall production, operations, and research.
Mr. Gilliam also held a number of other positions with the DMA including
production management positions at DMA facilities in St. Louis and Washington
D.C. and a Program Director position for DMA's Digital Production System.
Neil E. Keith joined the Company in December 1981. He was elected Vice
President in September 1985 and is currently Executive Vice President. He has
extensive experience in manufacturing management and is responsible for the
Company's manufacturing operations.
Stephen J. Phillips joined the Company as Vice President and General Counsel
in November 1987 when Intergraph purchased the Advanced Processor Division of
Fairchild Semiconductor, where Mr. Phillips was General Patent Counsel. He was
elected Executive Vice President in August 1992. Mr. Phillips holds a master's
degree in electrical engineering and a juris doctor in law.
William E. Salter joined the Company in April 1973. Since that time, he has
held several managerial positions in the Company's Federal Systems Division and
has served 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 the Intergraph Federal Systems Business Unit. He holds
a doctorate in electrical engineering.
Tommy D. Steele joined the Company in June 1992 and is responsible for
systems software, most applications software, and professional services. He
is currently an Executive Vice President of the Company and President of the
Intergraph Software Solutions Business Unit. Mr. Steele came to Intergraph
from IBM Corporation, where he was employed 28 1/2 years. During his first 18
years of service at IBM, he worked on the Saturn, Apollo, and Skylab programs,
the space shuttle, and a number of Department of Defense programs. Mr. Steele's
last ten years at IBM were spent in the PC software business managing products
for communications, databases, office automation, and operating systems with
the last four of those years spent managing PC Operating Systems (OS/2, DOS,
and AIX).
Herman E. Thomason joined the Company in 1985 and was involved in the
development of the Company's federal government business. In 1991, he was
elected Executive Vice President. He has responsibility for the Company's
scanning and plotting hardware and software, as well as for the MicroStation
suite of products. He holds a doctorate in electrical engineering.
John M. Thorington, Jr., joined the Company in August 1977 and was
responsible for the design, development, and manufacture of many of the
Company's commercial hardware products. In May 1980, Dr. Thorington was elected
Vice President, Graphics Engineering and is currently an Executive Vice
President of the Company and President of the Intergraph Computer Systems
Business Unit. He holds a doctorate in electrical engineering.
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 Intergraph, Mr. Wilkinson
served for 34 years in the U.S. Navy, retiring with the rank of Rear Admiral.
He holds a master's degree in mechanical engineering.
Allan B. Wilson joined the Company in 1980 and was responsible for the
development of international operations outside of Europe and North America. He
was elected Vice President in May 1982 and Executive Vice President in November
1982. Mr. Wilson has recently assumed responsibility for sales and support for
the Company's Asia Pacific region. He holds bachelor's and master's degrees in
electrical engineering.
Manfred Wittler joined the Company in 1989 as Vice President. In 1991, he was
elected Executive Vice President and is currently responsible for sales and
support for Europe and the Americas. From 1983 through 1989, Mr. Wittler held
several positions with Data General Corporation in Europe, including Division
Vice President. He holds a doctorate in engineering.
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 39 of the Intergraph Corporation 1994 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, 1994, appearing
under "Five-Year Financial Summary" on the inside front cover page of the
Intergraph Corporation 1994 Annual Report to Shareholders are 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 12 to 20 of the Intergraph Corporation 1994
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 appearing on pages 21 to 39 of the
Intergraph Corporation 1994 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
The information appearing under "Election of Directors", "Board Committees
and Attendance" and "Compliance with Section 16(a) of the Securities Exchange
Act of 1934" on pages 4 to 5 of the Intergraph Corporation Proxy Statement
relative to the Annual Meeting of Shareholders to be held May 18, 1995, 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 10 to 12 in this Form 10-K Annual
Report is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under "Executive Compensation" on pages 5 to 11 of
the Intergraph Corporation Proxy Statement relative to the Annual Meeting of
Shareholders to be held May 18, 1995, is incorporated by reference in this Form
10-K Annual Report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under "Common Stock Outstanding and Principal
Shareholders" on pages 2 to 3 of the Intergraph Corporation Proxy Statement
relative to the Annual Meeting of Shareholders to be held May 18, 1995, is
incorporated by reference in this Form 10-K Annual Report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under "Certain Relationships and Related
Transactions" on page 5 of the Intergraph Corporation Proxy Statement
relative to the Annual Meeting of Shareholders to be held May 18, 1995, is
incorporated by reference in this Form 10-K Annual Report.
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 1994 Annual
Report to Shareholders:
Consolidated Balance Sheets at December 31, 1994 and 1993 21
Consolidated Statements of Operations for the three years
ended December 31, 1994 22
Consolidated Statements of Cash Flows for the three years
ended December 31, 1994 23
Consolidated Statements of Shareholders' Equity for the three
years ended December 31, 1994 24
Notes to Consolidated Financial Statements 25-38
Report of Independent Auditors 39
PAGE IN
FORM 10-K
----------
2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts and
Reserves for the three years ended December 31, 1994 19
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 20%- to 50%-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.
* Incorporated by reference from the indicated pages of the 1994 Annual
Report to Shareholders.
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)
10(a)* 1990 Intergraph Corporation Employee Stock Option Plan. (5)
10(b)* Intergraph Corporation 1992 Stock Option Plan. (6)
10(c)* Employment contracts of Manfred Wittler, dated November 1,
1989 (7), April 18, 1991 (8), and October 1, 1994 and
amendment to the November 1,1989 contract, dated May 27, 1994.
10(d)* Consulting contract of Keith H. Schonrock, Jr., dated
January 17, 1990 (8) and amendments.
10(e)* Agreement between Intergraph Corporation and Green Mountain,
Inc., dated February 23, 1994. (8)
10(f) System OEM Upgrade Processor Trademark License Agreement,
dated April 30, 1993, between the Company and Intel
Corporation.(9)
10(g) Trademark License Agreement, dated May 1, 1993, between
the Company and Intel Corporation. (9)
10(h) OEM Market Development Program and Trademark License
Agreement, dated May 15, 1993, between the Company and
Intel Corporation. (9)
10(i) Software License Agreement as amended, dated April 17, 1987,
between the Company and Bentley Systems, Inc. (10)
10(j) Settlement Agreement and Mutual General Release, dated May 2,
1994, between the Company and Bentley Systems, Inc. (11)
10(k) Procurement Agreement, dated July 13, 1994, between the
Company and the U.S. Navy. (12)
10(l)* Intercap Graphics Systems, Inc. 1989 Stock Option Plan. (13)
10(m)* Intercap Graphics Systems, Inc. 1994 Nonqualified Stock
Option Program. (13)
10(n)* Employment contract of Damian Walters, dated January 24, 1994.
10(o)* Loan program for executive officers of the Company as amended,
dated March 17, 1994.
10(p) Agreement between the Company and Bentley Systems, Inc.,
dated December 16, 1994.
11 Computation of Earnings (Loss) Per Share 20
13 Portions of the Intergraph Corporation 1994 Annual
Report to Shareholders incorporated by reference in
this Form 10-K Annual Report
21 Subsidiaries of the Company 21
23 Consent of Independent Auditors 22
27 Financial Data Schedule
* 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 10-K for the fiscal year ended December 31, 1989, 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 fiscal year ended December 31, 1991, under
the Securities Exchange Act of 1934, File No. 0-9722.
(7) Incorporated by reference to exhibits filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1992, 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 fiscal year ended December 31, 1993, under
the Securities Exchange Act of 1934, File No. 0-9722.
(9) Incorporated by reference to exhibits filed with the Company's Form
10-K/A, Amendment No. 1, for the fiscal year ended December 31, 1993,
under the Securities Exchange Act of 1934, File No. 0-9722.
(10) Incorporated by reference to exhibits filed with the Company's Form
10-K/A, Amendment No. 2, for the fiscal year ended December 31, 1993,
under the Securities Exchange Act of 1934, File No. 0-9722.
(11) Incorporated by reference to exhibits filed with the Company's Form
10-Q/A, Amendment No. 2, for the quarter ended March 31, 1994, under
the Securities Exchange Act of 1934, File No. 0-9722.
(12) Incorporated by reference to exhibits filed with the Company's Form
10-Q/A, Amendment No. 1, for the quarter ended June 30, 1994, under
the Securities Exchange Act of 1934, File No. 0-9722.
(13) Incorporated by reference to exhibits filed with the Company's
Registration Statement on Form S-8, Registration No. 33-57211, filed
January 10, 1995, under the Securities Act of 1933.
- ---------------
(b) No reports on Form 8-K were filed during the fourth quarter of the fiscal
year ended December 31, 1994.
(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.
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 W. Meadlock Date: March 21, 1995
------------------------
James W. Meadlock
Chief Executive Officer and
Chairman of the Board
(Principal Executive Officer)
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 W. Meadlock
_________________________ Chief Executive Officer and March 21, 1995
James W. Meadlock Chairman of the Board
(Principal Executive Officer)
/s/ Larry J. Laster
_________________________ Executive Vice President, Chief March 21, 1995
Larry J. Laster Financial Officer and Director
(Principal Financial Officer)
_________________________ Executive Vice President and
Nancy B. Meadlock Director March 21, 1995
/s/ James F. Taylor, Jr.
_________________________ Executive Vice President and
James F. Taylor, Jr. Director March 21, 1995
/s/ Robert E. Thurber
_________________________ Executive Vice President and
Robert E. Thurber Director March 21, 1995
/s/ Roland E. Brown
_________________________ Director March 21, 1995
Roland E. Brown
/s/ Keith H. Schonrock, Jr.
_________________________ Director March 21, 1995
Keith H. Schonrock, Jr.
/s/ John W. Wilhoite
_________________________ Vice President and Controller March 21, 1995
John W. Wilhoite (Principal Accounting Officer)
INTERGRAPH CORPORATION AND SUBSIDIARIES
SCHEDULE II ---- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ------------------------ ---------- ---------- -------------- ------------
Allowance for doubtful
accounts deducted from
accounts receivable in
the balance sheet 1994 $20,791,000 10,536,000 11,018,000 (1) $20,309,000
1993 $18,969,000 6,201,000 4,379,000 (1) $20,791,000
1992 $18,720,000 4,457,000 4,208,000 (1) $18,969,000
Allowance for obsolete
inventory deducted from
inventories in the
balance sheet 1994 $24,560,000 20,137,000 13,664,000 (2) $31,033,000
1993 $24,607,000 41,630,000 41,677,000 (2) $24,560,000
1992 $27,984,000 31,497,000 34,874,000 (2) $24,607,000
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory reduced to net realizable value.