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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, 1995
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: (205) 730-2000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. ( )
As of January 31, 1996, there were 46,889,138 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 $792,182,000 based on the closing sale
price of such stock as reported by NASDAQ on January 31, 1996,
assuming that all shares beneficially held by executive officers
and members of the registrant's Board of Directors are shares owned
by "affiliates," a status which each of the executive officers
and directors individually disclaims.
DOCUMENTS INCORPORATED BY REFERENCE
Documents Form 10-K Reference
- --------- -------------------
Portions of the Annual Report to Shareholders
for the year ended December 31, 1995 Part II, Part IV
Portions of the Proxy Statement for the
May 16, 1996 Annual Shareholders' Meeting Part III
==========================================================================
PART I
ITEM 1. BUSINESS
Overview
Intergraph Corporation, founded in 1969, is a vendor of
software, hardware, and services for technical computing
professionals who require automated systems for functions such as
design, drafting, mapping, modeling, analysis, and creation of
documentation. These users, from a variety of industries and from
government, are involved in a range of technical disciplines,
including computer-aided design, manufacturing, and engineering,
mapping and geographic information services, electronic publishing
and technical information management, in technical fields such as
utilities, facilities management, architecture, engineering,
construction, mechanical and electronics design, mapping and
geographic information systems, and public safety. The Company's
products are sold worldwide, with United States and European
revenues representing approximately 82% of the total for 1995.
In support of users in these disciplines, Intergraph offers
software applications and tools, workstations and servers, and a
range of services. Graphics workstations, servers, and peripheral
hardware manufactured by the Company and others are combined with
operating systems developed by others and application specific
software programs developed by the Company and third party
applications software developers. Depending on user requirements,
Intergraph provides point solutions as well as integrated
solutions that include all necessary software, hardware, and
services.
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 (see "Intergraph Hardware" regarding the Company's
microprocessor). In addition, the Company offers interoperability
products that allow Windows NT and UNIX applications to work
together in a mixed environment.
Intergraph Hardware
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 microprocessor at the end of 1993, and Intel-
based systems grew to represent 74% of hardware unit sales in 1994
and 95% in 1995. See "Manufacturing and Sources of Supply" below.
The Company offers workstation products for a range of technical
users. Intel Pentium processor-based TD Series personal
workstations are designed for computer-aided-design professionals
operating Windows NT, Windows 95, or Windows/DOS. Intergraph TDZ
three dimensional graphics workstations offer high-end,industry-standard
graphics and computing power on price competitive Intel Pentium
Pro-based systems running Windows NT. All Intergraph workstations
offer numerous options that permit customers to order systems that
meet their unique needs, including a selection of display
monitors, upgradeable memory, and specialized peripherals.
Intergraph workstations are general purpose computer systems that
can run Intergraph and third party applications, and data
management, data processing, personal productivity, and office
automation software packages.
Intergraph offers a range of symmetric multiprocessing servers
for use by workgroups, departments, or an entire company.
InterServe systems are equipped with two to six Intel
microprocessors and support the Windows NT Server and UNIX
operating environments. Intergraph's servers offer user
selectable configurations and performance levels.
The Company offers other systems for specialized needs.
Intergraph's Intel microprocessor/Windows NT-based Web Servers are
systems that include hardware as well as software to establish and
manage a customer's site on the World Wide Web. The newly formed
Digital Media Division of the Company has announced a product
offering aimed at computer generated image animators and video
content creators in the entertainment and broadcast markets. The
Company also offers large format production scanners, imaging
systems for scanning and plotting images, and laser imagesetters
for electronic publishing. Additional special purpose peripherals
such as disk and tape drivers, printers, and other devices may be
manufactured in house or sold as original equipment from third
parties.
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.
Intergraph Systems Software
In November 1992, the Company announced its decision to port its
technical software applications to Microsoft Corporation's Windows
NT operating system, and to make Windows NT available on
Intergraph workstations. Microsoft's standard Windows system has
been widely accepted in the personal computing 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 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 enhance
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. As
of the end of 1994, the Company had completed the port of its
applications software to Windows NT for all applications scheduled
for conversion, and sales of Windows-based software grew to
represent 48% of software revenues in 1994 and 70% in 1995.
While the Company believes Windows NT will become the dominant
operating system in the markets it serves, acceptance of this
system by customers has been slower than anticipated, and adoption
of any new operating system requires considerable effort by
customers, the timing of which is unpredictable. Competing
operating systems are available in the market, and several
competitors of the Company offer or are adopting Windows NT
operating systems for their products. There can be no assurance
that the Windows NT operating system will become dominant in the
markets served by the Company or that the Company's new operating
system and hardware architecture strategies will restore
profitability.
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. See Management's
Discussion and Analysis of Financial Condition and Results of
Operations and Note 11 of Notes to Consolidated Financial
Statements contained in the Company's 1995 Annual Report, portions
of which are incorporated by reference in this Form 10-K Annual
Report, for further discussion of the Company's affiliation with
Bentley Systems, Inc.
In 1995, the Company introduced its Jupiter technology, a
Windows-based component software architecture that will be the
foundation of new computer-aided-design/computer-aided-
manufacturing/computer-aided-engineering (CAD/CAM/CAE) and
geographic information systems applications. This technology
creates a Windows-native environment where information from
competing CAD systems comes together without translation to form
unified design models and drawings. Several new software products
based on this technology were introduced in 1995, including a 32-
bit two dimensional technical drawing and concept tool and a three
dimensional system for mechanical assembly and part modeling.
Other Jupiter-based software applications will be introduced in
1996.
To facilitate the use of Intergraph systems with those of other
vendors, the Company develops software for translating data into
Intergraph formats, imputing 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
electronic publishing industry.
Intergraph Applications Software
Intergraph offers a broad suite of graphics and data management
applications software. In terms of broad market segments, the
Company's mapping/geographic information systems (GIS),
architecture/engineering/construction, and mechanical design,
engineering, and manufacturing product applications continue to
dominate the Company's product mix at approximately 43%, 34%,
and 14%, respectively, of total systems sales in 1995, representing
only a slight change in mix from the prior two years.
Following is a brief description of these major product
application areas.
Mapping and GIS. Intergraph offers a range of mapping and
GIS solutions to assist businesses, government, 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 government and 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.
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 product supports process flow diagrams, piping and
instrumentation diagrams, 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.
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, 1995, the Company spent $111.6
million (10.2% of revenues) for product development activities
compared to $137.2 million (13.2% of revenues) in 1994, and $160.3
million (15.3% of revenues) in 1993. See Management's Discussion
and Analysis of Financial Condition and Results of Operations
contained in the Company's 1995 Annual Report, portions of which
are incorporated by reference in this Form 10-K Annual Report, for
further discussion of product development expenses, including
portions capitalized and their recoverability.
Over the past several years the industry in which the Company
competes has been characterized by rapidly changing technology, a
move to higher performance, lower priced product offerings,
intense price and performance competition, 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 Hardware" above, the Company has
ceased design and production of its microprocessor. 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. Other microprocessors are
available in the market, but a change by the Company from Intel to
another microprocessor would significantly disrupt the Company's
development and manufacturing activities and result in delayed or
lost sales, which could have a significant adverse effect on the
Company's results of operations and financial position.
In late November 1994, it was disclosed that a rare problem
existed with Intel's Pentium microprocessor, which is used in many
of the Company's workstations and servers. The problem related to
an unlikely sequence of operations that could produce a round-off
error when dividing certain numbers and carrying the answer to
several decimal places. The Company had shipped several thousand
Pentium processor-based workstations and servers at that date.
Although the Company had no reason to believe that its customers
would experience this problem, the Company in 1994 committed to a
plan of replacement of all such processors in its customer base.
That plan is at present approximately 80% completed. The
Company's business arrangement with Intel provides 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 or 1995, and no significant
effects are expected through completion of the replacement plan in
1996. All shipments of the Company's workstations and servers
since January 1, 1995 have contained the corrected versions 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 40 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, process and
building, manufacturing, federal government, 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 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 interactive graphics
systems. Customer support includes pre-installation guidance,
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 54% of total revenues in 1995 and 49% in 1994.
European revenues were 36% of total revenues in 1995 and 33% in
1994. The Company's operations are subject to and may be adversely
affected by a variety of risks inherent in doing business
internationally, such as government policies or restrictions,
currency exchange fluctuations, and other factors.
There are currently wholly-owned sales and support subsidiaries
of the Company located 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, 1995, the
Company had approximately 1,500 employees in Europe and 1,300
employees in other international locations.
Fluctuations in the value of the U.S. dollar in international
markets can have a significant impact on the Company's results of
operations. The Company conducts business in all major markets
outside the U.S., but the most significant of these operations
with respect to currency risk are located in Europe, specifically
Germany, U.K., The Netherlands, France and Spain. Primarily but
not exclusively in these locations, the Company has certain
currency related asset and liability exposures against which
certain measures, primarily hedging, are taken to reduce currency
risk. With respect to these exposures, the objective of the
Company is to protect against financial statement volatility
arising from changes in exchange rates with respect to amounts
denominated for balance sheet purposes in a currency other than
the functional currency of the local entity. The Company
therefore enters into forward exchange contracts primarily related
to these balance sheet items (intercompany receivables, payables,
and formalized intercompany 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 with maturities reflecting the
expected settlement dates of these balance sheet items (generally
three months or less), and only in amounts sufficient to offset
possible significant rate-related changes in the recorded values
of these balance sheet items, which represent a calculable
exposure for the Company from period to period. The Company does
not speculate or otherwise trade in foreign currencies or in
forward exchange contracts.
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 1995 was $21.5 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 more slowly develop in Europe than in other
regions in which the Company does business, although order
momentum was evident in Europe in the last half of 1995. Any
significant lag in acceptance of Windows NT and Intel-based
products in Europe would adversely affect the results of
operations of the Company.
See Management's Discussion and Analysis of Financial Condition
and Results of Operations and Notes 1, 3, and 10 of Notes to
Consolidated Financial Statements contained in the Company's 1995
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 revenue from the United States government was
approximately $159 million in 1995 (15% of total revenue) versus
approximately $167 million in both 1994 and 1993 (16% of total
revenue in both of these years). The Company sells to the U.S.
government under long-term contractual 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 45% 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.
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, 1995, accounts receivable from the U.S. government
was $54 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, 1995, was $197 million.
At December 31, 1994, backlog was $207 million. Substantially all
of the December 1995 backlog of orders is expected to be shipped
during 1996.
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., Silicon Graphics, Inc., and Mentor Graphics, Inc. In the
hardware market, Intergraph also competes with personal computer
vendors, such as Compaq Computer Corporation, who sell high-end
systems. In the low-end graphics market, Intergraph competes with
the software products of Autodesk, Inc., Computervision, Softdesk,
Inc., 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 customers'
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 graphics, data management, and applications
software as part of its continuing product development activities.
The Company has standard license agreements with Microsoft
Corporation for use and distribution of the Windows NT operating
system and with UNIX Systems Laboratories for use and distribution
of the UNIX operating system. The license agreements are
perpetual and allow the Company to sublicense the operating
systems software upon payment of required sublicensing fees. The
Company also has an extensive program for the licensing of third
party application and general utility software for use on systems
and workstations.
Through the end of 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, the
Company and BSI settled this dispute and terminated all related
arbitration and litigation then pending. As a result, effective
January 1, 1995, both BSI and the Company were permitted to
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 and
Note 11 of Notes to Consolidated Financial Statements contained in
the Company's 1995 Annual Report, portions of which are
incorporated by reference in this Form 10-K Annual Report, for
further discussion of the settlement and the Company's affiliation
with BSI.
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
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 is widely
available, and many companies are attempting to develop patent
positions concerning technological improvements related to
personal computers and workstations. At present, it does not
appear that the Company 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 that some key improvement
necessary to compete successfully in some markets served by the
Company may not be available.
An inability to retain significant third party license rights,
in particular the Microsoft license, to protect the Company's
copyrights, trademarks, and patents, or to obtain any required
patent rights of others through licensing or purchase could
significantly reduce the Company's revenues and adversely affect
its results of operations.
Employees
At December 31, 1995, the Company had approximately 8,400
employees. Of these, approximately 2,800 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.
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 450,000 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 62 Chairman of the Board and
Chief Executive Officer 1969
Larry J. Laster 44 Executive Vice President, Chief
Financial Officer, and Director 1986
Nancy B. Meadlock 57 Executive Vice President and Director 1969
James F. Taylor, Jr. 51 Executive Vice President and Director 1977
Robert E. Thurber 55 Executive Vice President and Director 1977
Lawrence F. Ayers, Jr. 63 Executive Vice President 1987
Richard S. Buchheim 50 Executive Vice President 1993
Penman R. Gilliam 58 Executive Vice President 1994
Neil E. Keith 50 Executive Vice President 1985
Wade C. Patterson 34 Executive Vice President 1994
Stephen J. Phillips 54 Executive Vice President 1987
William E. Salter 54 Executive Vice President 1984
Tommy D. Steele 55 Executive Vice President 1992
Kenneth C. Sullivan 48 Executive Vice President 1994
Edward A. Wilkinson 62 Executive Vice President 1987
Allan B. Wilson 47 Executive Vice President 1982
Manfred Wittler 55 Executive Vice President 1989
James W. Meadlock, 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 and 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, a founder of the Company, 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. Mrs. Meadlock will not stand for reelection to the Board
of Directors. Her term of office as a Director will expire
effective May 16, 1996, the date of the next annual meeting of
shareholders of the Company.
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.
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's degree in mathematics.
Robert E. Thurber, a founder of the Company, has been a Director
since 1972. In June 1977, Mr. Thurber was elected Vice President
and is currently Executive Vice President and Chief Engineer. He
is responsible for developing requirements and strategic
directions for application solutions. 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. From 1993 to October 1995, he served as Executive Vice
President for the Utility and Mapping Sciences application group.
At present, he is serving on the Intergraph Software Solutions
business unit staff as Executive Vice President-at-large. 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, 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 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 DMA, including
production management positions in St. Louis and Washington D.C.
and a program director's 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.
Wade C. Patterson joined the Company in 1984 as a design
engineer developing UNIX and central processing unit (CPU)
subsystems for Intergraph workstation products. In 1992, Mr.
Patterson managed Windows NT workstation projects as the Company
made the transition from reduced instruction set computing CPUs to
Intel processor-based CPUs. Mr. Patterson has been responsible
for hardware development and marketing for Intergraph Computer
Systems, the Company's hardware business unit, since August 1994.
He was elected Vice President in August 1994 and is currently an
Executive Vice President of the Company and President of
Intergraph Computer Systems. He holds a bachelor's degree in
electrical engineering.
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 served in several managerial positions in the
Company's Federal Systems Division 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 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 for more than 28 years. During
his tenure at IBM, he worked on the Saturn, Apollo, Skylab and
space shuttle programs as well as a number of Department of
Defense programs. Mr. Steele's last ten years at IBM were spent
in the personal computer software business managing products for
communications, databases, office automation, and operating
systems. The last four of those years were spent managing
personal computer operating systems (OS/2, DOS, and AIX).
Kenneth C. Sullivan joined the Company in 1988 and was
responsible for several areas of major business development in
Intergraph Federal Systems, including the Navy CAD-2 procurement
and programs. He was elected Vice President in March 1994 with
responsibility for the Company's Customer Services Division. He
was elected Executive Vice President in December 1995 and assumed
responsibility for sales and support for the Huntsville
operations. He holds a bachelor's degree in industrial
management.
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 is
currently responsible 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 53 of the Intergraph Corporation
1995 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,
1995, appearing under "Five-Year Financial Summary" on page 2 of
the Intergraph Corporation 1995 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 16 to 28 of the
Intergraph Corporation 1995 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 29 to 52 of the Intergraph Corporation
1995 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 16, 1996, 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 6 to 12 of the Intergraph Corporation Proxy Statement
relative to the Annual Meeting of Shareholders to be held May 16,
1996, 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 1 to 3 of the Intergraph
Corporation Proxy Statement relative to the Annual Meeting of
Shareholders to be held May 16, 1996, 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 16, 1996, 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 1995 Annual Report to Shareholders:
Consolidated Balance Sheets at December 31, 1995 and 1994 29
Consolidated Statements of Operations for the three years
ended December 31, 1995 30
Consolidated Statements of Cash Flows for the three years
ended December 31, 1995 31
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1995 32
Notes to Consolidated Financial Statements 33 - 51
Report of Independent Auditors 52
Page in
Form 10-K
---------
2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts
and Reserves for the three years
ended December 31, 1995 18
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 1995
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)* Intergraph Corporation 1992 Stock Option Plan. (5)
10(b)* Employment contracts of Manfred Wittler, dated
November 1, 1989 (6), April 18, 1991 (7), and
October 1, 1994 (13) and amendment to the November 1,
1989 contract, dated May 27, 1994. (13)
10(c)* Consulting contract of Keith H. Schonrock, Jr., dated
January 17, 1990 and amendments. (7)
10(d)* Agreement between Intergraph Corporation and Green
Mountain, Inc., dated February 23, 1994 (7), and amendment.
10(e) System OEM Upgrade Processor Trademark License
Agreement, dated April 30, 1993, between the Company
and Intel Corporation. (8)
10(f) Trademark License Agreement, dated May 1, 1993, between
the Company and Intel Corporation. (8)
10(g) OEM Market Development Program and Trademark License
Agreement, dated May 15, 1993, between the Company and
Intel Corporation. (8)
10(h) Software License Agreement as amended, dated April 17,
1987, between the Company and Bentley Systems, Inc. (9)
10(i) Settlement Agreement and Mutual General Release, dated
May 2, 1994, between the Company and Bentley Systems, Inc.(10)
10(j) Procurement Agreement, dated July 13, 1994, between the
Company and the U.S. Navy. (11)
10(k)* InterCAP Graphics Systems, Inc. 1989 Stock Option
Plan. (12)
10(l)* InterCAP Graphics Systems, Inc. 1994 Nonqualified
Stock Option Program. (12)
Page in
Number Description Form 10-K
------ ----------- ---------
10(m) Agreement between the Company and Bentley Systems,
Inc., dated December 16, 1994. (13)
10(n)* Loan program for executive officers of the Company as
amended, dated December 19, 1995.
10(o)* Employment contracts of Allan B. Wilson dated May 3,
1995.
10(p) $100,000,000 Credit Agreement, dated as of October 6, 1995,
among Intergraph Corporation, as Borrower, the Lenders
Party thereto, the Issuers Party thereto, and CitiCorp USA, Inc.
11 Computations of Loss Per Share 19
13 Portions of the Intergraph Corporation 1995 Annual
Report to Shareholders incorporated by reference in this
Form 10-K Annual Report
21 Subsidiaries of the Company 20
23 Consent of Independent Auditors 21
27 Financial Data Schedule
99 Consent of Director Nominee 22
*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 year ended December 31,
1991, 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,
1992, 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 year ended December 31,
1993, under the Securities Exchange Act of 1934, File
No. 0-9722.
(8) Incorporated by reference to exhibits filed with the Company's
Form 10-K/A, Amendment No. 1, for the 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. 2, for the 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-Q/A, Amendment No. 2, for the quarter ended March 31,
1994, 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. 1, for the quarter ended June 30,
1994, under the Securities Exchange Act of 1934, File No. 0-9722.
(12) 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.
(13) Incorporated by reference to exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31,
1994, under the Securities Exchange Act of 1934, File No. 0-9722.
- ------------
(b) No reports on Form 8-K were filed during the fourth quarter of
the fiscal year ended December 31, 1995.
(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, 1996
---------------------------
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, 1996
- ----------------------- Chairman of the Board
James W. Meadlock (Principal Executive Officer)
/s/ Larry J. Laster Executive Vice President, Chief March 21, 1996
- ----------------------- Financial Officer and Director
Larry J. Laster (Principal Financial Officer)
/s/ Nancy B. Meadlock Executive Vice President and Director March 21, 1996
- -----------------------
Nancy B. Meadlock
/s/ James F. Taylor, Jr. Executive Vice President and Director March 21, 1996
- -----------------------
James F. Taylor, Jr.
/s/ Robert E. Thurber Executive Vice President and Director March 21, 1996
- -----------------------
Robert E. Thurber
_______________________ Director March 21, 1996
Roland E. Brown
_______________________ Director March 21, 1996
Keith H. Schonrock, Jr.
/s/ John W. Wilhoite Vice President and Controller March 21, 1996
- ----------------------- (Principal Accounting Officer)
John W. Wilhoite
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
beginning costs and Balance at
Description of period expenses Deductions end of period
- ----------------------- ---------- ---------- ---------- -------------
Allowance for doubtful
accounts deducted from
accounts receivable in
the balance sheet
1995 $20,309,000 4,945,000 4,855,000(1) $20,399,000
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
Allowance for obsolete
inventory deducted
from inventories in
the balance sheet
1995 $31,033,000 17,455,000 14,047,000(2) $34,441,000
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
(1) Uncollectible accounts written off, net of recoveries.
(2) Obsolete inventory reduced to net realizable value.