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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.
INTERGRAPH CORPORATION AND SUBSIDIARIES
EXHIBIT 11 ---- COMPUTATION OF EARNINGS (LOSS) PER SHARE
YEAR ENDED DECEMBER 31, 1994 1993 1992
------------- -------------- ------------
Primary:
Weighted average common shares
outstanding 44,860,000 46,199,000 47,616,000
Net common shares issuable on
exercise of certain stock
options (1) --- --- 404,000
------------- -------------- -----------
Average common and equivalent
common shares outstanding 44,860,000 46,199,000 48,020,000
============= ============== ============
Income (loss) before cumulative
effect of change in accounting
for income taxes $(70,220,000) $(118,542,000) $8,442,000
Cumulative effect of change in
accounting for income taxes --- 2,500,000 ---
------------- -------------- -----------
Net income (loss) $(70,220,000) $(116,042,000) $8,442,000
============= ============== ===========
Earnings (loss) per share:
Income (loss) before
cumulative effect of change in
accounting for income taxes $(1.56) $(2.56) $.18
Cumulative effect of change in
accounting for income taxes --- .05 ---
------------- -------------- ------------
Net income (loss) per share $(1.56) $(2.51) $.18
============= ============== ============
Fully diluted:
Weighted average common shares
outstanding 44,860,000 46,199,000 47,616,000
Net common shares issuable on
exercise of certain stock
options (1) --- --- 404,000
------------- -------------- ------------
Average common and equivalent
common shares outstanding 44,860,000 46,199,000 48,020,000
============= ============== ============
Income (loss) before cumulative
effect of change in accounting
for income taxes ($70,220,000) $(118,542,000) $8,442,000
Cumulative effect of change in
accounting for income taxes --- 2,500,000 ---
------------- -------------- -------------
Net income (loss) ($70,220,000) $(116,042,000) $8,442,000
============= ============== ============
Earnings (loss) per share:
Income (loss) before cumulative
effect of change in accounting
for income taxes $(1.56) $(2.56) $.18
Cumulative effect of change in
accounting for income taxes --- .05 ---
------------- -------------- ------------
Net income (loss) per share ($1.56) $(2.51) $.18
============= ============== ============
(1) Net common shares issuable on exercise of certain stock options is
calculated based on the treasury stock method using the average market
price for the primary calculation and the ending market price, if
higher than the average, for the fully diluted calculation.
INTERGRAPH CORPORATION AND SUBSIDIARIES
EXHIBIT 21 ---- SUBSIDIARIES OF REGISTRANT
PERCENTAGE
OF VOTING
STATE OR OTHER SECURITIES
JURISDICTION OF OWNED BY
NAME INCORPORATION PARENT
- -------------------------------------------------- --------------- ----------
Bentley Systems, Inc. Delaware 50
Bestinfo, Inc. Delaware 100
Intergraph China, Inc. Delaware 100
Intergraph European Manufacturing, L.L.C. Delaware 100
Intergraph (Italy), L.L.C. Delaware 100
Intergraph (Middle East), L.L.C. Delaware 100
Quintus Corporation Delaware 100
Intergraph Benelux B.V. The Netherlands 100
Intergraph CAD/CAM (Danmark) A/S Denmark 100
Intergraph CR spol.s.r.o. Czech Republic 100
Intergraph (Deutschland) GmbH Germany 100
Intergraph Espana, S.A. Spain 100
Intergraph Europe (Polska) S.p.z.o.o. Poland 100
Intergraph Finland Oy Finland 100
Intergraph (France) SA France 100
Intergraph GmbH (Osterreich) Austria 100
Intergraph Graphic Systems Russia 100
Intergraph (Hellas) S.A. Greece 100
Intergraph Hungary, Ltd. Hungary 100
Intergraph Ireland, Ltd. Ireland 100
Intergraph Norge A/S Norway 100
Intergraph (Portugal)-Sistemas de Portugal 100
Computacao Grafica, S.A.
Intergraph SSR sro Slovac Republic 100
Intergraph (Sverige) AB Sweden 100
Intergraph (Switzerland) A.G. Switzerland 100
Intergraph (UK), Ltd. United Kingdom 100
Intergraph Corporation (Malaysia) Sdn Bhd Malaysia 100
Intergraph Corporation (N.Z.) Limited New Zealand 100
Intergraph Corporation Pty., Ltd. Australia 100
Intergraph Corporation Taiwan Taiwan, R.O.C. 100
Intergraph Graphics Systems Asia Pacific Limited Hong Kong 100
Intergraph Graphics Systems Hong Kong Limited Hong Kong 100
Intergraph Japan K.K. Japan 100
Intergraph Korea, Ltd. Korea 100
Intergraph Systems Singapore Pte. Ltd. Singapore 100
Intergraph Wholesale Pty., Ltd. Australia 100
Intergraph Computer Services Industry & Trade A.S. Turkey 97
Intergraph Saudi Arabia Ltd. Saudi Arabia 75
Intergraph Canada, Ltd. Canada 100
Intergraph de Mexico, S.A. de C.V. Mexico 100
Intergraph Servicios de Venezuela C.A. Venezuela 100
Intergraph (India) Pvt. Ltd. India 100
Intergraph Electronics Ltd. Israel 100
EXHIBIT 23 ---- CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Intergraph Corporation and subsidiaries of our report dated
January 31, 1995, included in the 1994 Annual Report to Shareholders of
Intergraph Corporation.
Our audits also included the financial statement schedule of Intergraph
Corporation listed in Item 14(a)(2). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth herein.
We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-10614) pertaining to the Intergraph Corporation
Amended and Restated 1987 Employee Stock Purchase Plan dated December 31, 1992;
in the Registration Statement (Form S-3 No. 33-25880) pertaining to the Stock
Bonus Plan dated December 22, 1988; in the Registration Statement (Form S-8 No.
33-35846) pertaining to the 1990 Employee Stock Option Plan dated July 12,
1990; in the Registration Statement (Form S-8 No. 33-53849) pertaining to the
Intergraph Corporation 1992 Stock Option Plan dated May 27, 1994; in the
Registration Statement (Amendment No. 3 to Form S-4 No. 33-85740) pertaining to
the acquisition of InterCAP Graphics Systems, Inc. dated December 8, 1994; in
the Registration Statement (Form S-8 No. 33-57211) pertaining to the Assumption
of Options under InterCAP Graphics Systems, Inc. 1989 Stock Option Plan and
1994 Nonqualified Stock Option Program dated January 10, 1995; and in the
related Prospectuses, of our report dated January 31, 1995, with respect to the
consolidated financial statements and schedule of Intergraph Corporation and
subsidiaries included or incorporated by reference in the Annual Report (Form
10-K) for the year ended December 31, 1994.
/s/ Ernst & Young LLP
Birmingham, Alabama
March 20, 1995
[INTERGRAPH LETTERHEAD]
11-008
CONTRACT OF EMPLOYMENT
EXECUTIVE VICE PRESIDENT SALES AND SUPPORT
The undersigned:
Intergraph Corporation
whose registered office is at:
CORPORATE HEADQUARTERS
HUNTSVILLE, ALABAMA 35894
referred to hereafter as Intergraph, and
Dr. Manfred Wittler
referred to hereafter as Mr. Wittler
HAVE AGREED AS FOLLOWS
- ----------------------
1. APPOINTMENTS
------------
As from October 1, 1994 Intergraph engages Mr. Wittler
in the position of Executive Vice President Sales and
Support for the Americas for the part of his time not
covered under the agreements between Mr. Wittler and
Intergraph European Manufacturing LLC, Intergraph
(Deutschland) GmbH and Intergraph France S.A. under
the conditions hereinafter set out.
Mr. Wittler declares to be free of any engagement to
another employer with the exception of the three (3)
mentioned above.
2. FUNCTIONS
---------
The functions of Mr. Wittler will include:
That he carries out the expected role related to
the above in a professional manner reflecting the
responsibility of the post, and that he acts as the
surveyor of the Region and Country Management ensuring
Intergraph meets its statutory obligations and such
management complies with the policies and directives
established by Intergraph Corporation of Huntsville.
Mr. Wittler reports directly to the Chief
Executive Officer of Intergraph Corporation.
3. PLACE OF WORK
-------------
Mr. Wittler will work at the Intergraph office in
Huntsville and where ever it may be necessary in the
assigned territory.
4. TERRITORY
---------
The area assigned to Mr. Wittler includes:
North, Central and South America.
5. REMUNERATION
------------
Intergraph will pay Mr. Wittler a gross annual
salary in the amount of two hundred thousand Deutsch
Marks (200,000 DM ($133,640)) to be paid in a lump sum
at the beginning of each calendar year. Payment of
the remuneration shall satisfy all claims for overtime
and extra hours and includes a fixed amount for
commissions on Intergraph sales in the Americas of
60,000 DM ($40,090).
6. EXPENSES
--------
Intergraph will reimburse Mr. Wittler for
reasonable and actual business expenses incurred in
the execution of his position, in accordance with
Intergraph policies and procedures. All claims must
be substantiated and properly recorded.
7. VACATION ENTITLEMENT
--------------------
In addition to the public holidays Mr. Wittler
will be entitled to 25 days paid leave per annum as
mentioned in the agreement between Mr. Wittler and
Intergraph European Manufacturing LLC.
8. CONFIDENTIALITY
---------------
Both during and after the currency of this
Agreement, Mr. Wittler shall treat as confidential all
information with respect to the business and the
interests of Intergraph and/or its affiliates, and its
parent company, which has come to his knowledge during
the performance of his duties. He will make
restitution to Intergraph of all documents concerning
Intergraph in his possession at the end of his
employment with Intergraph.
9. COMPETITION
-----------
In the event of the termination of this Agreement
by either party, Mr. Wittler agrees not to associate
himself in any manner, whether direct or indirect,
with any company or organization or self-employment
operating in direct competition with Intergraph
Corporation or its subsidiaries for a period of six
(6) months following that termination provided that
Intergraph compensates Mr. Wittler in accordance with
article 5 of this agreement for those six (6) months.
10. STOCKHOLDING
------------
Mr. Wittler is required to declare all existing
and future stockholding by himself, or immediate
family, on any company or organization operating in
direct competition with Intergraph or its affiliates.
11. OTHER EMPLOYMENT
----------------
Mr. Wittler is not permitted to enter into any
form of additional employment whilst this contract is
in force without the express written permission of the
Chief Executive Officer of Intergraph.
12. CURRENCY AND TERMINATION
------------------------
This Agreement may be terminated by either party
per the end of a month with six (6) months written
notification. Upon involuntary termination on the
part of Intergraph, Intergraph will provide six (6)
months severance pay.
13. ILLNESS OR ACCIDENT
-------------------
If, because of illness or accident, Mr. Wittler
is not able to perform his duties he must so inform
Intergraph as soon as possible.
During the first 12 months of Mr. Wittler's
incapacity of work Mr. Wittler shall receive his
monthly fixed remuneration in the amount of US$ 11,140
(eleven thousand one hundred forty dollars).
Intergraph is not bound to make any further payment.
If and in so far with regard to illness or an
accident of which Mr. Wittler is a victim Mr. Wittler
has a claim against one or more thirds for damage for
lost wages, Intergraph shall not be under an
obligation to make payment to Mr. Wittler. In that
case, Intergraph is bound to make these payments to
Mr. Wittler by way of advance payment of damages. Mr.
Wittler is to assign unto Intergraph his claim of
damages to the amount of advance payments. Intergraph
shall deduct the amount of the advance payments from
the damages.
14. ASSISTANCE
----------
Mr. Wittler acknowledges his responsibility to
ensure that he remains socially insured in Germany,
also for income earned from non German Intergraph
subsidiaries. In this respect Mr. Wittler can expect
guidance from both Ernst & Young in Alabama and the
Intergraph Corporate Tax Department in Huntsville, but
Intergraph can not accept any liability for Mr.
Wittler's non compliance with any legal requirement in
this respect.
15. GENERAL
-------
This contract of employment supersedes any
previous agreement, oral or written between Mr.
Wittler and Intergraph Corporation or any of its
subsidiaries in respect matter here of except the
agreement between Intergraph European Manufacturing
LLC and Mr. Wittler, Intergraph (Deutschland) GmbH and
Mr. Wittler as well as the agreement between
Intergraph (France) S.A. and Mr. Wittler.
No change of the provisions of this Agreement
shall be binding unless in writing and signed by both
parties.
16. PENSION/SOCIAL SECURITY
-----------------------
Mr. Wittler has joined both the company pension
plans of Intergraph (Deutschland) GmbH and the German
social security system as outlined in the agreement
between Intergraph (Deutschland) GmbH and Mr. Wittler
and therefore Mr. Wittler has no pension rights under
this Agreement.
17. GOVERNING LAWS
--------------
This Agreement will be subject to United States
of America Law and Regulations of Employment
For and on behalf of
Intergraph Corporation
/s/ Larry Laster
- ---------------------------- ------------------------
Mr. Larry Laster Dr. Manfred Wittler
Executive Vice President Executive Vice President
Date: 10/1/94 Date:
----------------------- -------------------
- ----------------------------------------------------------------------------
3
INTERGRAPH
- ---------- Confidential
Office of the Vice President Memorandum
- ----------------------------------------------------------------------------
Ref.: 03-034
Date: May 27, 1994
To: Manfred Wittler
Copy: Jim Meadlock Manfred Wittler Personnel File
From: Jeff Heath
Subject: Extension Of Your Netherlands Contract
- ---------------------------------------------------------------------------
With reference to the Contract between yourself and Intergraph
European Manufacturing BV, effective November 1, 1989, and
subsequently assigned to Intergraph European Manufacturing LLC,
the aforementioned contract is hereby extended from November 1,
1994 until October 31, 1997, under the same terms and conditions
as the original contract with the following changes:
1. Your new title is "Executive Vice President Sales and
Support Americas and Europe.
2. You report to the Chief Executive Officer.
3. Your remuneration is as defined in the yearly Compensation
Package approved by the Chief Executive Officer.
Approved on May 24, 1994, Hoofddorp, The Netherlands
/s/ Jeffrey P. Heath /s/ Manfred Wittler 5/27/94
- ----------------------------- -------------------- --------
Jeffrey P. Heath Manfred Wittler Date
Vice President Business Operations Executive Vice President
and Finance, Europe and Mid-World Sales and Support
Managing Director Intergraph Europe Americas and Europe
LLC
[INTERGRAPH LETTERHEAD]
GREEN MOUNTAIN INC.
CONSULTING CONTRACT
AMENDMENT NUMBER FOUR
The consulting contract between Intergraph Corporation and Green Mountain, Inc.
dated January 17th 1990 is hereby extended through December 31, 1994.
Green Mountain, Inc. Intergraph Corporation
By: /s/ Gerald F. Donovan By: /s/ Larry Laster
---------------------- ------------------------
Title: President Title: Executive Vice President
[INTERGRAPH LETTERHEAD]
GREEN MOUNTAIN INC.
CONSULTING CONTRACT
AMENDMENT NUMBER FIVE
The consulting contract between Intergraph Corporation and Green Mountain, Inc.
dated January 17th 1990 is hereby extended through December 31, 1995.
Green Mountain, Inc. Intergraph Corporation
By: /s/ Gerald F. Donovan By: /s/ Larry Laster
----------------------- -------------------
Title: President Title: Executive Vice President
INTERGRAPH Interoffice Memorandum
- ----------
- -----------------------------------------------------------------------
Office of the CEO
Date: January 24, 1994
To: Damian Walters - Vice President
From: Jim Meadlock
Subject: Employment Agreement
- -----------------------------------------------------------------------
I am pleased to confirm to you the following employment agreement:
Appointment
- -----------
Beginning with January 1, 1994 you will be Executive Vice
President, Asia-Pacific Region. You will report to Jim
Meadlock, CEO of Intergraph Corporation.
Responsibility
- --------------
As Executive Vice President, your responsibility will include
the management of sales, marketing, and customer support
services of the products offered by Intergraph Corporation.
Your assigned territory will be the Asia-Pacific Region to
include Singapore, Taiwan, Korea, China, Japan, Australia, New
Zealand, Hong Kong and other Southeast Asia countries.
Remuneration
- ------------
Your base salary will be US$17,000 per month. A housing
allowance of HK$67,500 per month will be paid. You will also be
paid a quarterly bonus of 1/15th of 1% of all bookings received
in your region during 1994.
Other Employment Confidentiality
- --------------------------------
While employed by Intergraph, you are not permitted to enter
employment with another firm, organization or company without
written permission of the CEO of Intergraph Corporation.
If you terminate from Intergraph Corporation, voluntarily or
involuntarily, you agree to treat as confidential all
information pertaining to the business and interest of
Intergraph Corporation.
Benefits
- --------
You will be covered under and eligible to participate in the
benefit plans in effect for Hong Kong according to the terms and
conditions of the plans. Upon approval by the CEO, membership
fees for an appropriate club will be reimbursed.
You will be provided a company automobile to be used in the
performance of your duties.
You will be entitled to twenty (20) days vacation per calendar
year. While on vacation, the company will reimburse the
equivalent expenses for return airline passage for you and your
family from Hong Kong to Australia. Vacation time should be
approved by the CEO of Intergraph Corporation. Whenever
possible, vacation time should be scheduled with a planned business trip.
Termination
- -----------
Your employment may be terminated by yourself or Intergraph
Corporation at any time for any reason. Upon termination, two
(2) months' written notice prior to termination is required.
Upon termination by Intergraph, you will also receive severance
pay equal to one (1) month base salary and housing allowance
(less applicable taxes) for each full calendar year of service.
Bonus payments for orders will be determined as of the last day
of work.
General
- -------
Intergraph Corporation reserves the right to amend or modify
this agreement as business conditions may dictate. Amendments
or modifications to this Agreement must be in writing and signed
by yourself and the CEO of Intergraph Corporation.
If the terms of this Agreement are acceptable, please sign in
the space below:
/s/ Jim Meadlock 1-30-94
- ----------------------- -----------------
Jim Meadlock, CEO Date
Intergraph Corporation
/s/ Damian Walters 27 Jan 1994
- ---------------------------- -----------------
Damian Walters, Executive Vice President Date
Intergraph Asia Pacific
[INTERGRAPH LETTERHEAD]
EXECUTIVE OFFICER LOAN AGREEMENT
--------------------------------
This Agreement is between _________________________ (the Borrower) and
Intergraph Corporation. The Borrower hereby agrees to all of the terms and
conditions contained in this Agreement.
Establishment of the Program. The Board of Directors has established a loan
program for corporate officers who are required to report Intergraph stock
transactions to the SEC. The purpose of the loan program is to assist such
officers at such times that stock transactions would be prohibited, restricted,
or otherwise impractical. On March 17, 1994, the Board amended the program by
extending it for one year, as indicated in the following section.
Program Beginning/End. The program will commence on January 7, 1993. The
program will cease on the Program End Date, which is the earlier of May 1,
1995, or the date that the Intergraph common stock price reaches or exceeds $20
per share; provided, however, that such determination shall not be made during
a restricted trading period (as announced from time-to-time by the corporate
legal department). The Intergraph common stock price shall be based on the
reported closing price as listed in the "Wall Street Journal" (or similar
publication).
Repayment. All principal and interest outstanding under the program must be
repaid in full within fifteen (15) business days following the earlier of (i)
the date of employment termination with Intergraph, (ii) the date that the
Borrower sells any Intergraph stock or, (iii) the Program End Date. Full or
partial pre-payments of principal are permitted at any time. All interest shall
be paid with the final principal payment.
Interest Rate. Interest on the amounts outstanding hereunder shall accrue for
each calendar month or portion thereof at a rate equal to the Prime Rate as
published in the "Money Rates" section of the "Wall Street Journal" (or similar
publication) on the last business day of each calendar month (calculated on the
basis of a year of 365 (or 366 as the case may be) days and actual days
elapsed; provided, however, that if any amount shall not be paid when due (at
maturity, by acceleration or otherwise), such amount shall bear interest at the
rate stated above plus two percent (2%) from the date such amount was due and
payable until the date such amount is paid in full.
Promissory Note. Loans made under this Agreement shall be evidenced by a
promissory note (below). The Borrower's signature on the promissory note shall
indicate agreement with all terms and conditions of this Agreement.
I hereby certify that I am officer of Intergraph Corporation and that I am
required to report Intergraph stock transactions to the SEC. I further certify
that (i) I am the owner or beneficial owner of Intergraph common stock with a
current market value of at least the amount of any loans made under this
Agreement, and/or (ii) I have currently exercisable options to purchase
Intergraph common stock with a net value (current market price less exercise
price) of at least the amount of any loans made under this Agreement. I agree
to provide suitable evidence of the foregoing upon request. I request a loan in
the amount set forth in the promissory note shown below.
PROMISSORY NOTE
---------------
FOR VALUE RECEIVED, the Borrower promises to pay to the order of Intergraph
Corporation at any such place as Intergraph may designate, the sum of
___________________ together with interest thereon, in accordance with
the Agreement set forth above.
In the event that any payment due hereunder is not received when due, this Note
shall be deemed in default and the entire principal and interest due
hereunder shall be immediately due and payable. In the event of default
hereunder, the Borrower shall pay all costs of collection, including, without
limitation, reasonable attorney's fees and legal expenses incurred by
Intergraph in endeavoring to collect any amounts payable hereunder. The
Borrower hereby expressly waives presentment, demand for payment, dishonor,
notice of dishonor, protest and notice of protest.
IN WITNESS WHEREOF, the Borrower has caused this Note to be made, executed and
delivered as of the date and year written above.
----------------------------
Signature of the Borrower
Witness:_____________________
DECEMBER AGREEMENT
------------------
THIS AGREEMENT is entered into this 16th day of
December, 1994, by and between INTERGRAPH CORPORATION
("Intergraph"), a Delaware corporation having its principal
office and place of business at One Madison Industrial Park,
Huntsville, Alabama 35894, and BENTLEY SYSTEMS, INCORPORATED
("Bentley"), a Delaware corporation having its principal office
and place of business at 690 Pennsylvania Drive, Exton,
Pennsylvania 19431.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a series of
written agreements dated May 2, 1994;
WHEREAS, a number of issues relating to the subject
matter of those agreements have arisen between the parties,
including issues regarding the acquisition by Bentley of
certain foreign language translations of MicroStation and the
continuation of the OEM Software License Agreement, one of the
May 2 agreements; and
WHEREAS, the parties have resolved these issues, and
desire to enter into this Agreement to set forth the agreed
resolution.
NOW, THEREFORE, intending to be legally bound hereby,
the parties hereto agree as follows:
1. Definitions. The following words, terms and phrases
shall in this Agreement have the following meaning:
(a) "Value Added Pack Software" means the source code and
object code for the computer programs developed by Intergraph
entitled "Value Added Pack," together with all updates and
enhancements thereto, and documentation therefor.
(b) "Source Film" means the source film separates for
printing the MicroStation Digitizing Menu Tablet Template.
(c) "Localization Auxiliary Programs" means auxiliary
programs developed by Intergraph or third parties to facilitate
translation and MicroStation usage in local languages, such as
keyboard input front-end processors, and includes source code,
object code and documentation therefor.
2. European Language Foreign Translations. Concurrently
with the execution of this Agreement, Intergraph and Bentley
shall execute and deliver to the other an agreement between
Bentley and Intergraph for the purchase by Bentley of the
European language translations of MicroStation, in the form
attached hereto as Exhibit "A".
3. Source Code for Value Added Pack Software/Film for
Digitizing Menu Template.
(a) Intergraph hereby grants, assigns and
conveys to Bentley all of Intergraph's right, title and interest
whatsoever throughout the world, including without limitation
all of Intergraph's copyrights and other intellectual property
rights, in and to (i) the Value Added Pack Software, and (ii)
the Source Film.
(b) Within ten (10) days after the execution of this
Agreement, Intergraph shall deliver to Bentley on one or more
diskettes an electronic copy and two paper copies of the Value
Added Pack Software and the Source Film.
(c) Intergraph shall perform acts and execute
documents, at Bentley's expense and request, which are
reasonably necessary to transfer or perfect in Bentley the
foregoing rights granted by Intergraph to Bentley.
4. Cancellation of OEM Software License Agreement; Limited
Release.
(a) The parties hereby cancel and terminate the "OEM
Software License Agreement for MicroStation V5 Runtime Engine"
dated May 2, 1994 ("OEM Agreement"), and neither party shall
have any further obligations under the OEM Agreement.
(b) Except for the rights and obligations created by
this Agreement, for good and valuable consideration, the
receipt of which is hereby acknowledged, Bentley and Intergraph
do hereby remise, release, acquit and forever discharge one
another and their respective present and former parents,
subsidiaries, affiliates, divisions, successors, assigns,
agents, attorneys, officers, directors and employees of and
from all manner of actions, causes of action, claims, suits,
demands, dues, debts, liabilities, liens, indemnities,
obligations, sums of money, accounts, bonds, covenants,
compensation, contracts, agreements, judgments, controversies,
promises, trespasses, damages, costs, losses, and expenses of
any kind or nature whatsoever, whether legal, equitable or
statutory, liquidated or unliquidated, fixed or contingent,
known or unknown, suspected or unsuspected, which Bentley or
Intergraph ever had, now have, or which they hereafter can,
shall or may have against one another, expressly limited to any
and all claims, asserted or unasserted, based upon any matter,
cause, thing or event relating to the performance or non-
performance by the parties of the OEM Agreement.
5. Amendment to Distribution Agreement. Concurrently with
the execution of this Agreement, Intergraph and Bentley shall
execute and deliver to the other an Amendment to the
Distribution Agreement dated May 2, 1994, between Bentley and
Intergraph, in the form attached hereto as Exhibit "B".
6. "I/RAS" Application Bundles.
(a) Intergraph hereby confirms to Bentley its intent
to develop a version of the "I/RAS" software for operation with
MicroStation PowerDraft ("Power I/RAS"). Bentley shall furnish
to Intergraph such development tools and technical support as
may be reasonably necessary to facilitate Intergraph's
development of Power I/RAS, including information for running
"DLMs" within MicroStation PowerDraft. Intergraph shall not
use the foregoing tools and information for any purpose other
than the development of Power I/RAS. In the event of the
discontinuation by Intergraph of the development or support of
Power I/RAS or the termination of this Agreement, Intergraph
shall promptly return to Bentley all of the foregoing tools and
information.
(b) Intergraph expressly acknowledges and agrees
that all development tools, technical support and information
furnished by Bentley pursuant to subparagraph (a) shall
constitute Confidential Information within the meaning of
Paragraph 6.11 of the Business Relations Agreement dated May 2,
1994, between the parties. Intergraph hereby accepts such
Confidential Information. Intergraph agrees that, in addition
to its confidentiality obligations under the foregoing
provision of the Business Relations Agreement, it shall not,
until the later of written agreement by the parties to announce
Power I/RAS or the execution of a written agreement by the
parties for the distribution of Power I/RAS: (i) publicly
disclose or acknowledge the existence of tools to run DLMs
within MicroStation PowerDraft, or (ii) discuss, demonstrate or
acknowledge Power I/RAS or its development to or with any third
party (including prospects and customers), even if such
activities are subject to a non-disclosure agreement between
Intergraph and such third party. The foregoing obligations of
Intergraph shall survive the termination of this Agreement.
(c) Intergraph and Bentley shall, upon the completion
of Power I/RAS, enter into a written agreement (the "Power
I/RAS Agreement") setting forth mutually agreeable terms for
the marketing and distribution of Power I/RAS.
(d) For so long as Intergraph diligently proceeds
with the development of Power I/RAS, Intergraph shall
have the right to distribute and license an "I/RAS
Application Bundle" with one or more of the "I/RAS B",
"I/RAS C", or "I/RAS Engineer" products, provided,
however, I/RAS shall not be deemed an Application Bundle
Product pursuant to the Amendment, and MicroStation V5
Kits purchased by Intergraph for licensing with I/RAS
shall not be eligible for the volume discounts for
Application Bundles set forth in the Amendment, unless
and until Intergraph and Bentley enter into the Power
I/RAS Agreement. In the event Intergraph and Bentley
enter into the Power I/RAS Agreement on or before June
30, 1995, Bentley shall issue to Intergraph a credit in
the amount of the difference between the price actually
paid by Intergraph for such Kits distributed as part of
I/RAS Application Bundles on or after January 1, 1995,
and the price that would have been applicable to Kits
distributed as part of I/RAS Application Bundles if they had
been deemed an Application Bundle as of January 1, 1995,
provided that the I/RAS Application Bundles meet all of
the criteria for Application Bundles set forth in
Paragraph 2 of the Amendment to the Distribution
Agreement. In the event Intergraph and Bentley do not
enter into the Power I/RAS Agreement on or before June
30, 1995, then Intergraph shall discontinue the distribution
of I/RAS Application Bundles on July 1, 1995.
7. MicroStation PowerDraft Application Bundles. Bentley agrees
to negotiate in good faith with Intergraph the establishment of
Application Bundles based on MicroStation PowerDraft and
discounts therefor.
8. Asia Pacific -- Japan/Korea.
(a) Concurrently with the execution of this Agreement,
Bentley and Intergraph shall execute and deliver to the other
the Japanese and Korean Language Translations Purchase
Agreement in the form attached hereto as Exhibit "C".
(b) Intergraph shall introduce and acknowledge Bentley
in product advertisements, marketing brochures and promotional
materials for Bentley products directed to the Japanese and
Korean markets.
(c) Subject to availability, Intergraph shall provide
reasonable office space for Bentley technical personnel (pre-
and post-sales personnel and personnel supporting local
independent software developers) in Intergraph's offices in
Japan and Korea through December 31, 1996. Intergraph
represents that reasonable office space is currently available.
(d) Intergraph shall furnish advance written notice to
Bentley of each Intergraph users group meeting in Japan and
Korea through December 31, 1996. Intergraph shall encourage
such user groups to invite representatives of Bentley to
participate in such meetings, including making presentations
and setting up displays of Bentley products.
9. Chinese/Taiwanese Translations.
(a) Within thirty (30) days of the date of this
Agreement, Intergraph shall deliver to Bentley on one or more
diskettes for its review: (i) copies of the foreign language
translations of MicroStation for China and Taiwan, and
documentation therefor, (ii) the source code, object code and
documentation for the Localization Auxiliary Programs, and (iii)
any other software and documentation, including without
limitation all font libraries and resource files, necessary or
desirable for the development and distribution of the foreign
language kits of MicroStation for China and Taiwan.
(b) In the event Bentley elects to purchase some or all
of the translations and other materials furnished pursuant to
subparagraph (a), Bentley shall give written notice to
Intergraph, and Intergraph shall, within ten (10) days of its
receipt of such notice, execute and return to Bentley the
Chinese and Taiwanese Language Translations Purchase Agreement
with Bentley in the form of Exhibit "D" hereto.
10. Purchase of Intergraph Year-End Inventory of MicroStation Kits.
Intergraph shall deliver to Bentley on or before January 6, 1995, in
writing a complete and final list setting forth its inventory as of
January 1, 1995, of all MicroStation Kits and MicroStation Review Kits,
including work in progress. On or before January 13, 1995, Bentley shall
notify Intergraph on one or more occasions in writing of the inventory
items on such final list or on such preliminary list previously furnished
to Bentley that Bentley intends to purchase as set forth below. Intergraph
shall deliver at its expense to Bentley within fourteen (14) days after
its receipt of each such request all of the inventory items that Bentley
has elected to purchase for retrofitting by Bentley to conform with
Bentley-manufactured Kits. Bentley shall have the right to use such
retrofitted Kits to fulfill orders by Intergraph for Kits. Bentley shall
issue to Intergraph within thirty (30) days after the later of delivery
of or receipt of Intergraph's invoice for Alternate Platform MicroStation
V5 Kits purchased by Bentley from Intergraph's inventory a credit in the
amount of Forty-One Dollars (U.S.) ($41) for English-language Kits and
Ninety Dollars (U.S.) ($90) for translated Kits. With respect to
MicroStation 32 Kits, Bentley shall: (a) for each English-language
MicroStation 32 Kit purchased by Bentley, issue to Intergraph within
thirty (30) days after the later of delivery or receipt of Intergraph's
invoice a credit equal to Forty-One Dollars (U.S.) ($41) toward the
future purchase by Intergraph from Bentley of an English-language
MicroStation 32 Kit, and (b) for each foreign language MicroStation 32
Kit purchased by Bentley,issue to Intergraph within thirty (30) days after
the later of delivery or receipt of Intergraph's invoice a
credit equal to Ninety Dollars (U.S.) ($90) toward the future
purchase by Intergraph from Bentley of a foreign language
MicroStation 32 Kit. Bentley shall be obligated hereunder to purchase all
of Intergraph's 1994 year-end inventory of MicroStation Alternate Platform
V5 Kits set forth in Exhibit E hereto (but not more), provided, however,
Bentley shall not be obligated to purchase all of Intergraph's work in
progress for such Kits. As used herein, "Alternate Platform"
means a platform on which MicroStation operates other than a
MicroStation 32 workstation.
11. MicroStation Registration Database. Intergraph shall,
pursuant to Section 3.01 of the Business Relations Agreement,
provide to Bentley registration information in its possession,
custody or control for all end users known to Intergraph
worldwide of any and all versions of MicroStation products,
regardless of the physical form, condition or lack of
organization of such information. In the event Intergraph
locates additional user registration information after
delivering the foregoing materials to Bentley, Intergraph shall
promptly deliver the additional information to Bentley.
12. Japanese Kit Inventory. Intergraph shall, on or before
March 31, 1995, deliver at its expense to Bentley the
MicroStation Kits remaining in the inventory of Sharp, Mutoh
and Softbank, its distributors in Japan, as of January 1, 1995.
In the event Intergraph delivers such Kits, Bentley shall
replace them within a reasonable time with Japanese-language
MicroStation Kits manufactured and licensed by Bentley.
Intergraph shall pay to Bentley within thirty (30) days after
receipt of Bentley's invoice for each such Kit replaced by
Bentley the difference between the royalty previously paid by
Intergraph to Bentley for such Kit and the price applicable
during 1995 under the Distribution Agreement for a Japanese-
language MicroStation Kit, plus shipping costs.
13. Termination for Material Breach. Either party may, at its
option, terminate this Agreement in the event of a material
breach by the other party. Such termination may be effected
only through a written notice to the other party, specifically
identifying the breach or breaches on which termination is
based. Following receipt of such notice, the party in breach
shall have sixty (60) days to cure such breach or breaches, and
this Agreement shall terminate in the event that such cure is
not made by the end of such period. In the event that the
parties dispute either the existence of a material breach or
the adequacy of attempted cure, and either party submits such
dispute to arbitration under Paragraph 15.09 hereof, the
termination shall not be deemed effective until the arbitrator
renders a final decision finding an uncured material breach.
14. Bankruptcy. If either party files a petition in
bankruptcy (or is the subject of an involuntary petition in
bankruptcy that is not dismissed within sixty (60) days after
the effective filing date thereof); or is or becomes insolvent;
or enters into any formal arrangement with its creditors, or
ceases doing business in the ordinary course; or admits of a
general inability to pay its debts as they become due; then the
other party shall have the right to terminate this Agreement
upon fifteen (15) days written notice.
15. General Provisions.
15.01 Entire Agreement. This Agreement, together with
the Exhibits hereto, collectively set forth the entire agreement
and understanding between the parties hereto with respect to
the subject matter hereof and, except as specifically provided
herein, supersede and merge all prior oral and written
agreements, discussions and understandings between the parties
with respect to the subject matter hereof, and neither of the
parties shall be bound by any conditions, inducements or
representations other than as expressly provided for herein.
15.02 Independent Contractors. In making and performing
this Agreement, Bentley and Intergraph act and shall act at all
times as independent contractors and nothing contained in this
Agreement shall be construed or implied to create an agency,
partnership or employer and employee relationship between
Bentley and Intergraph. At no time shall either party make
commitments or incur any charges or expenses for or in the name
of the other party.
15.03 Notices. Any notice required or permitted to be
given hereunder, shall, except where specifically provided
otherwise, be given in writing to the person listed below by
registered mail or overnight delivery service, and the date
upon which any such notice is received at the designated
address shall be deemed to be the date of such notice. Any
notice shall be delivered as follows:
If to Intergraph: Intergraph Corporation
One Madison Industrial Park
Huntsville, Alabama 35894
Attention: James W. Meadlock
President
If to Bentley: Bentley Systems, Inc.
690 Pennsylvania Drive
Exton, Pennsylvania 19341
Attention: Keith Bentley,
President
or addressed to such other address as that party may have given
by written notice in accordance with this provision.
15.04 Amendments; Modifications. This Agreement may not
be amended or modified except in a writing duly executed by the
parties hereto.
15.05 Assignment. Neither party shall assign this
Agreement, or any part thereof, without the prior written
consent of the other party.
15.06 Severability. The provisions of this Agreement
shall be severable, and if any of them are held invalid or
unenforceable for any reason, such provision shall be adjusted
to the minimum extent necessary to cure such invalidity. The
invalidity or unenforceability of one or more of the provisions
contained in this Agreement shall not affect any other
provisions of this Agreement.
15.07 Waivers. Any delay or forbearance by either party
in exercising any right hereunder shall not be deemed a waiver
of that right.
15.08 Governing Law. This Agreement shall be governed
by and interpreted in accordance with the substantive laws of
the State of Delaware.
15.09 Arbitration. In the event of a dispute between
the parties arising under this Agreement, the parties shall
submit to binding arbitration before a single arbitrator in
Wilmington, Delaware, under the Commercial Arbitration Rules of
the American Arbitration Association, except that temporary
restraining orders or preliminary injunctions, or their
equivalent in any country of the world, may be obtained from
any court of competent jurisdiction. The pre-hearing and
hearing proceedings in the arbitration shall be generally
governed by the Federal Rules of Civil Procedure and the
judicial precedent interpreting those rules. The decision of
the arbitrator shall be final and binding with respect to the
dispute subject to the arbitration and shall be enforceable in
any court of competent jurisdiction. Each party shall bear its
own expenses, attorney's fees and costs incurred in such
arbitration.
15.10 Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which when taken
together shall constitute one Agreement.
15.11 Construction. This Agreement is the product of
joint draftsmanship and shall not be construed against one
party more strictly than against the other.
15.12 Confidentiality of Agreement. The detailed terms
of this Agreement shall remain confidential. In no event shall
either party disclose the detailed terms of this Agreement
without the prior written consent of the other party; provided,
however, each of the parties may announce publicly the
framework of this Agreement without consent of the other party.
15.13 Headings. The headings in this Agreement are
inserted merely for the purpose of convenience and shall not
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties has executed
this Agreement as of the date and year first above written.
ATTEST: BENTLEY SYSTEMS, INCORPORATED
/s/ Jennifer S. Ware BY: /s/ Keith Bentley
- -------------------- ---------------------------
TITLE: /s/ President
---------------------------
ATTEST: INTERGRAPH CORPORATION
/s/ Marcus B. Maddox BY: /s/ T.D. Steele
- -------------------- ---------------------------
TITLE: /s/ President, Intergraph Software
---------------------------
Solutions
EXHIBIT A
EUROPEAN LANGUAGE TRANSLATIONS PURCHASE AGREEMENT
-------------------------------------------------
THIS AGREEMENT is entered into this 16th day of December,
1994, by and between INTERGRAPH CORPORATION ("Intergraph"), a
Delaware corporation having its principal office and place of
business at One Madison Industrial Park, Huntsville, Alabama
35894, and BENTLEY SYSTEMS, INCORPORATED ("Bentley"), a
Delaware corporation having its principal office and place of
business at 690 Pennsylvania Drive, Exton, Pennsylvania 19431.
W I T N E S S E T H:
WHEREAS, pursuant to Paragraph 3.04 of the Business
Relations Agreement dated May 2, 1994, between Bentley and
Intergraph, Bentley has elected to exercise its option to
purchase Intergraph's interest in the Italian, Spanish, French
and German translation of the documentation and machine-
readable information prepared by Donnelley Language Service
("DLS") for Intergraph for the MicroStation software, as well
as the Finnish translation and any other translation to be
mutually agreed.
NOW, THEREFORE, intending to be legally bound, the
parties hereto agree as follows:
1. Definition. As used herein, "Translations" means the
Italian, Spanish, French, German and Finnish foreign language
translation, as well as any other translation to be mutually
agreed, of the documentation, machine-readable information and
resource files for all versions of MicroStation operating on
any hardware or software platform, including without limitation
the MicroStation Windows NT-specific, MicroStation DOS-specific
and MicroStation Clipper-specific as well as German HP-specific
documentation and resource files.
2. Grant. Intergraph hereby grants, assigns and conveys
to Bentley all of Intergraph's right, title and interest
whatsoever, including without limitation all of Intergraph's
copyrights and other intellectual property rights, in and to
the Translations, together with the right to sue for past
infringement of the Translations.
3. Delivery of Materials. Within seven (7) days after the
execution of this Agreement, Intergraph shall deliver to
Bentley on one or more diskettes an electronic copy and two
paper copies of the Clipper-specific, DOS-specific and Windows
NT-specific as well as the German HP-specific versions of the
Translations, together with a copy of the written assignments
of the copyrights in and to the Translations from DLS to
Intergraph.
4. Payment.
(a) Bentley shall compensate Intergraph for the
rights granted herein up to an amount representing seventy
percent (70%) of the documented direct costs (as set forth in
Exhibit A1 hereto) incurred by Intergraph to prepare the
various Translations as set out hereunder:
- German:
Bentley's invoices to Intergraph for German kits of
MicroStation Version 5 shall not bear the four
percent (4%) mark-up for the translation until the
earliest of December 31, 1996 or until the cumulative
sum of the number of kits times four percent (4%) of
U.S. list price is equal to seventy percent (70%) of
the amount of the respective Translation mentioned in
Exhibit A1.
- Spanish, French, Italian and Finnish:
Bentley's invoices to Intergraph for Spanish, French,
Italian and Finnish kits of MicroStation Version 5
and PowerDraft shall bear the four percent (4%) mark-
up and shall show a credit of Three Hundred Dollars
(U.S.) ($300) per kit until the earlier of December
31, 1996 or when the cumulative sum of the number of
kits times Three Hundred Dollars (U.S.) ($300) is
equal to seventy percent (70%) of the amount of the
respective Translation mentioned in Exhibit A1.
(b) In addition, Bentley shall grant a credit of
Three Hundred Dollars (U.S.) ($300) to Intergraph for each kit
of MicroStation Version 5 directly or indirectly sold by
Bentley in Italy and Finland until the earlier of December 31,
1996, or when the respective cumulative sum is equal to the
above seventy percent (70%). This does not apply to sales by
Intergraph since such is covered in the previous paragraph.
5. Other Translations.
(a) Intergraph will make available for inspection by
Bentley any MicroStation Version 5 Translation for Swedish,
Polish, Czech/Slovakian, Hungarian, Russian/ Ukrainian, along
with documentation of Intergraph's costs and rights for same.
At Bentley's election, Intergraph shall promptly assign to
Bentley its entire right, title and interest whatsoever in and
to each Translation that Bentley elects to acquire. In the
event of an assignment of any such Translation, Bentley
invoices for MicroStation Version 5 and PowerDraft kits in such
language shall also show a credit of Three Hundred Dollars
(U.S.) ($300) for each kit, until the earlier of December 31,
1996 or (for each language respectively) when the cumulative
sum of the number of kits times Three Hundred Dollars ($300) is
equal to seventy percent (70%) of Intergraph's documented costs
(per Exhibit A1) for such language Translation.
(b) In addition, Bentley shall grant to Intergraph a
credit of Three Hundred Dollars (U.S.) ($300) for each kit of
MicroStation Version 5 directly or indirectly sold by Bentley
in Sweden, Poland, Czech Republic, Slovakia, Hungary, Russia
and Ukraine until the earlier of December 31, 1996, or when the
respective cumulative sum is equal to the above seventy percent
(70%).
6. Glossaries. Intergraph hereby grants to Bentley the
non-exclusive right to use the glossaries for the above
languages developed by Intergraph, and the software tools to
utilize same, with basic instruction and perpetual rights to
use such tools at material and instruction costs.
7. Execution of Documents. Intergraph shall perform acts
and execute documents, at Bentley's expense and request, which are
reasonably necessary to transfer or perfect in Bentley the
rights granted by Intergraph to Bentley herein.
8. Warranty. Intergraph represents and warrants to Bentley
that (a) it has paid DLS in full for the preparation of the
relevant Clipper-specific, DOS-specific and Windows NT-specific
as well as German HP-specific versions of the Translations, and
has received from DLS an assignment of the copyrights for such
translations; (b) it is the owner of the relevant Clipper-
specific, DOS-specific and Window NT-specific as well as German
HP-specific versions of the Translations, including all
intellectual property rights therein; (c) it has the right,
power and authority to grant the rights granted under this
Agreement and fully perform its obligations hereunder; and (d)
it has not, as of the date hereof, received notice of a claim
that the Translations infringe any patent, copyright or other
intellectual property right anywhere in the world or that any
third party has any proprietary interest in or to the
Translations.
9. DLS. The parties shall provide instructions to DLS in
accordance with this Agreement upon its execution.
10. General Provisions.
10.01 Entire Agreement. This Agreement, together
with the Exhibits hereto, collectively set forth the entire
agreement and understanding between the parties hereto with
respect to the purchase of the Translations and, except as
specifically provided herein, supersede and merge all prior
oral and written agreements, including the Agreement dated
December 7, 1994, between Intergraph and Bentley Systems
Europe, discussions and understandings between the parties with
respect to the subject matter hereof, and neither of the
parties shall be bound by any conditions, inducements or
representations other than as expressly provided for herein.
10.02 Independent Contractors. In making and
performing this Agreement, Bentley and Intergraph act and shall
act at all times as independent contractors and nothing
contained in this Agreement shall be construed or implied to
create an agency, partnership or employer and employee
relationship between Bentley and Intergraph. At no time shall
either party make commitments or incur any charges or expenses
for or in the name of the other party.
10.03 Notices. Any notice required or permitted to
be given hereunder, shall, except where specifically provided
otherwise, be given in writing to the person listed below by
registered mail or overnight delivery service, and the date
upon which any such notice is received at the designated
address shall be deemed to be the date of such notice. Any
notice shall be delivered as follows:
If to Intergraph: Intergraph Corporation
One Madison Industrial Park
Huntsville, Alabama 35894
Attention: James W. Meadlock
President
If to Bentley: Bentley Systems, Inc.
690 Pennsylvania Drive
Exton, Pennsylvania 19341
Attention: Keith Bentley,
President
or addressed to such other address as that party may have given
by written notice in accordance with this provision.
10.04 Amendments; Modifications. This Agreement may
not be amended or modified except in a writing duly executed by
the parties hereto.
10.05 Assignment. Neither party shall assign this
Agreement, or any part thereof, without the prior written
consent of the other party.
10.06 Severability. The provisions of this Agreement
shall be severable, and if any of them are held invalid or
unenforceable for any reason, such provision shall be adjusted
to the minimum extent necessary to cure such invalidity. The
invalidity or unenforceability of one or more of the provisions
contained in this Agreement shall not affect any other
provisions of this Agreement.
10.07 Waivers. Any delay or forbearance by either
party in exercising any right hereunder shall not be deemed a
waiver of that right.
10.08 Governing Law. This Agreement shall be
governed by and interpreted in accordance with the substantive laws of
the State of Delaware.
10.09 Arbitration. In the event of a dispute between
the parties arising under this Agreement, the parties shall
submit to binding arbitration before a single arbitrator in
Wilmington, Delaware, under the Commercial Arbitration Rules of
the American Arbitration Association, except that temporary
restraining orders or preliminary injunctions, or their
equivalent in any country of the world, may be obtained from
any court of competent jurisdiction. The pre-hearing and
hearing proceedings in the arbitration shall be generally
governed by the Federal Rules of Civil Procedure and the
judicial precedent interpreting those rules. The decision of
the arbitrator shall be final and binding with respect to the
dispute subject to the arbitration and shall be enforceable in
any court of competent jurisdiction. Each party shall bear its
own expenses, attorney's fees and costs incurred in such
arbitration.
10.10 Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which when taken
together shall constitute one Agreement.
10.11 Construction. This Agreement is the product of
joint draftsmanship and shall not be construed against one
party more strictly than against the other.
10.12 Confidentiality of Agreement. The detailed
terms of this Agreement shall remain confidential. In no event shall
either party disclose the detailed terms of this Agreement
without the prior written consent of the other party; provided,
however, each of the parties may announce publicly the
framework of this Agreement without consent of the other party.
10.13 Headings. The headings in this Agreement are
inserted merely for the purpose of convenience and shall not
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties has executed
this Agreement as of the date and year first above written.
ATTEST: BENTLEY SYSTEMS, INCORPORATED
/s/ Jennifer S. Ware BY:/s/ Keith Bentley
- -------------------- ------------------------
Title: /s/ President
--------------------
ATTEST: INTERGRAPH CORPORATION
/s/ Marcus B. Maddox BY: /s/ T.D. Steele
- -------------------- -------------------
TITLE: /s/ President, Intergraph Software
-----------------------------------------
Solutions
-----------------
EXHIBIT A1
TO
EUROPEAN LANGUAGE TRANSLATIONS PURCHASE AGREEMENT
- ---------------------------------------------------
Foreign Language Translations
Full Intergraph costs (as agreed between the parties)
French
- ------
MicroStation Resource Files (Intergraph internal)
$ 31,293.00
MicroStation Documentation
MicroStation Clipper-specific Documentation
MicroStation Windows NT-specific Documentation
(Donnelly Language Solutions) $157,166.50
German
- ------
MicroStation Resource Files (Intergraph internal)
$ 27,815.00
MicroStation Documentation
MicroStation Clipper-specific Documentation
MicroStation Windows NT-specific Documentation
(Donnelly Language Solutions) $157,166.50
Italian
- -------
MicroStation Resource Files (Intergraph internal)
$ 31,115.00
MicroStation Documentation
MicroStation Clipper-specific Documentation
MicroStation Windows NT-specific Documentation
(Donnelly Language Solutions) $157,166.50
Spanish
- -------
MicroStation Resource Files (Intergraph internal)
$ 15,094.00
MicroStation Documentation
MicroStation Clipper-specific Documentation
MicroStation Windows NT-specific Documentation
(Donnelly Language Solutions) $157,166.50
Finnish
- -------
MicroStation Resource Files $ 70,000.00
and all available MicroStation documentation
including derived Help Files
Swedish
- -------
- - External costs 468.062 SEK
- - Internal Labor 186.000 SEK
-----------
654.062 SEK = $ 88,260.00
70% $ 61,782.00
Available Translations:
- -----------------------
MicroStation Resource Files
MicroStation On-line Help (in electronic format)
MicroStation Reference Manual
Introducing MicroStation PC (in electronic format)
Russian/Ukraine
- ----------------
- - External costs 4.100 US$
- - Labor costs 10.500 US$
- - Courses and overhead 1.000 US$
----------
15.600 US$
70% $ 10,920.00
Available Translations:
- ------------------------
MicroStation Resource Files
MicroStation On-line Help
MicroStation full documentation
Czech/Slovak
- ------------
- - External costs 14.200 US$
- - Labor costs 27.200 US$
----------
41.400 US$ 70% $ 28,980.00
Available Translations:
- -----------------------
MicroStation Resource Files
MicroStation Installation notes and dictionary
MicroStation Czech installation program with
four (4) installation diskettes
Polish
- ------
- - External costs 21.000 US$
- - Labor costs 3.500 US$
----------
24.500 US$ 70% $ 17,150.00
Available Translations:
- ------------------------
MicroStation On-line Help
MicroStation Polish fonts raster and vector
MicroStation full documentation
(all in electronic format)
EXHIBIT B TO DECEMBER AGREEMENT
AMENDMENT TO DISTRIBUTION AGREEMENT
-----------------------------------
THIS AMENDMENT to the Distribution Agreement dated
May 2, 1994 (this "Amendment"), is entered into this 16th day
of December, 1994, by and between INTERGRAPH CORPORATION
("Intergraph"), a Delaware corporation having its principal
office and place of business at One Madison Industrial Park,
Huntsville, Alabama 35894, and BENTLEY SYSTEMS, INCORPORATED
("Bentley"), a Delaware corporation having its principal office
and place of business at 690 Pennsylvania Drive, Exton,
Pennsylvania 19431.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a series of
written agreements dated May 2, 1994, including a Distribution
Agreement (the "Agreement") and an OEM Software License
Agreement for MicroStation V5 Runtime Engine ("OEM Agreement");
and
WHEREAS, the parties have agreed to cancel and
terminate the OEM Agreement and to enter into this Amendment to
provide for special pricing to Intergraph for MicroStation
Product Kits distributed by Intergraph with a minimum number of
units of specified software applications.
NOW, THEREFORE, intending to be legally bound hereby,
the parties hereto agree as follows:
1. Definitions. The following words, terms and phrases
shall in this Agreement have the following meaning:
1.01 "Approved Application" means an Intergraph
application software product set forth in Exhibit A hereto (as
may be amended from time to time to add additional applications
with the written consent of Bentley) and that meets each of the
following criteria:
(a) it must have been developed by Intergraph
(but may contain third-party content comprising less than fifty
percent (50%) of the object code), or Intergraph must hold the
exclusive right to distribute it to all end users in the United
States;
(b) it must prerequisite MicroStation (that is,
technically require MicroStation for its operation);
(c) it must have been, and must continue to
be, actively marketed, licensed and distributed as a product to
end users and resellers for operation with MicroStation, even
if also available in the form of an Application Bundle; and
(d) Bentley and Intergraph must agree that it
demonstrates "Significant Value Added," as to its Intergraph
value content, to an extent at least on the order of existing
Intergraph applications having a U.S. list price exceeding One
Thousand Dollars ($1,000) and meeting the criteria of (a)
through (c) above. For application products solely developed
by Intergraph (or for which Intergraph holds the exclusive
distribution right to all end users in the United States), the
bona fide U.S. list price shall be considered to measure the
Intergraph value content.
1.02 "Application Bundle" means a bundled software
product distributed by Intergraph consisting of an Approved
Application together with a MicroStation Kit.
1.03 "MicroStation Kit" means a Kit (as defined in
the Agreement) for the then-current version of the product
"MicroStation" distributed by Bentley.
1.04 "Significant Value Added" means vertical
application software that provides significant functions not
available through MicroStation alone. Such application
software should combine the functionality of MicroStation in
novel ways, enhance the basic capabilities of MicroStation, and
otherwise provide "higher" level functions.
2. Application Bundle: Criteria. Notwithstanding
Paragraph 5.03 of the Agreement, the price payable by
Intergraph to Bentley for purchase of a MicroStation Kit shall
be that set forth in Paragraph 3 of this Amendment where:
a. said MicroStation Kit is licensed to end users as
part of an Application Bundle;
b. the US List Price for said Application Bundle is
greater than or equal to Five Thousand Dollars (U.S.) ($5,000);
c. the discounts offered by Intergraph to
distributors, resellers and end-users on the Application Bundle
are no greater than the discounts offered by Intergraph on its
other application software products; and
d. the MicroStation licenses distributed as part of
the Application Bundles are not separately identified on either
(i) any Intergraph quotation or (ii) the distributor, reseller
or end-user purchase order.
3. Quantity Commitments; Discounts on MicroStation Kits
for Bundled Applications.
(a) Intergraph shall furnish to Bentley within ten
(10) days of the date hereof in writing a list setting forth
the unit quantities of each Application Bundle based on the
Approved Applications set forth in Exhibit "A" hereto that
Intergraph shall commit to distribute during calendar year
1995. The foregoing quantity figures shall be placed next to
the corresponding Approved Applications in Exhibit "A", and
made part of this Amendment. The cumulative total distribution
commitment by Intergraph for 1995 for the Application Bundles
based upon the Approved Applications set forth in Exhibit "A"
shall equal or exceed five thousand (5,000) copies. Exhibit
"A" may, with the written consent of Bentley, be amended from
time to time to set forth additional Approved Applications.
(b) The price payable by Intergraph to Bentley
during a calendar year for a MicroStation Kit for distribution
by Intergraph as part of each Approved Application identified
in Exhibit A hereto ("Application Bundle Product") shall be
based on the number of kits Intergraph commits in writing to
purchase during such calendar year for distribution as part of
said Application Bundle Product, and shall be expressed as a
discount (the "Bundled Application Volume Discounts") to the
price to Intergraph for such Kits set forth in Paragraph 5.03
of the Agreement. The "Bundled Application Volume Discounts"
shall be divided into four categories as follows:
(i) Where Intergraph commits in writing to purchase a
minimum of two hundred (200), but not more than three hundred
ninety-nine (399), MicroStation Kits for distribution as part
of an Application Bundle Product, Intergraph shall receive a
Fourteen and One-Quarter Percent (14.25%) discount from the
price for each such Kit set forth in the Agreement. By way of
example, if the US List Price of each MicroStation Kit during
1995 is Three Thousand Seven Hundred Ninety Dollars ($3,790),
then the price payable by Intergraph in 1995 shall be One
Thousand Three Hundred Dollars ($1,300) for each Kit
distributed as part of an Application Bundle Product for which
Intergraph has made a minimum commitment of between two hundred
(200) and three hundred ninety-nine (399) Kits.
(ii) Where Intergraph commits in writing to purchase
a minimum of four hundred (400), but not more than five hundred
ninety-nine (599), MicroStation Kits for distribution as part
of an Application Bundle Product, Intergraph shall receive a
Thirty-Four and Four One-Hundredths Percent (34.04%) discount
from the price for each such Kit set forth in the Agreement.
By way of example, if the US List Price of each MicroStation
Kit during 1995 is Three Thousand Seven Hundred Ninety Dollars
($3,790), then the price payable by Intergraph in 1995 shall be
One Thousand Dollars ($1,000) for each Kit distributed as part
of an Application Bundle Product for which Intergraph has made
a minimum commitment of between four hundred (400) and five
hundred ninety-nine (599) Kits.
(iii) Where Intergraph commits in writing to purchase
a minimum of six hundred (600), but not more than nine hundred
ninety-nine (999), MicroStation Kits for distribution as part
of an Application Bundle Product, Intergraph shall receive a
Forty-Three and Ninety-Three One-Hundredths Percent (43.93%)
discount from the price for each such Kit set forth in the
Agreement. By way of example, if the US List Price of each
MicroStation Kit during 1995 is Three Thousand Seven Hundred
Ninety Dollars ($3,790), then the price payable by Intergraph
in 1995 shall be Eight Hundred Fifty Dollars ($850) for each
Kit distributed as part of an Application Bundle Product for
which Intergraph has made a minimum commitment of between six
hundred (600) and nine hundred ninety-nine (999) Kits.
(iv) Where Intergraph commits in writing to purchase
a minimum of one thousand (1000) MicroStation Kits for license
as part of an Application Bundle Product, Intergraph shall
receive a Fifty and Fifty-Three One-Hundredths Percent (50.53%)
discount from the price for each such Kit set forth in the
Agreement. By way of example, if the US List Price of each
MicroStation Kit during 1995 is Three Thousand Seven Hundred
Ninety Dollars ($3,790), then the price payable by Intergraph
in 1995 shall be Seven Hundred Fifty Dollars ($750) for each
Kit distributed as part of an Application Bundle Product for
which Intergraph has made a minimum commitment of one thousand
(1000) Kits.
4. Order Procedure.
(a) The procedures pursuant to which Intergraph
shall order, purchase and make payment to Bentley for
MicroStation Kits distributed as part of an Application Bundle
Product shall be those set forth in the Distribution Agreement.
(b) For each Application Bundle Product, Intergraph
shall purchase a minimum of twenty-five percent (25%) of the
committed annual number of MicroStation Kits on or before March
31, fifty percent (50%) of the committed annual number of Kits
on or before June 30, seventy-five percent (75%) of the
committed annual number of Kits on or before September 30, and
one hundred percent (100%) of the committed annual number of
Kits on or before December 31 as a condition to payment by
Bentley of the rebate set forth in Paragraph 6 below. In the
event cumulative purchases by Intergraph of Kits for
distribution with an Application Bundle Product do not, at the
end of any calendar quarter, meet the foregoing minimum
purchase requirements, Intergraph shall purchase from Bentley
within ten (10) days after the end of each calendar quarter a
sufficient number of additional licenses for inventory
("Application Bundle Inventory") in order to meet or exceed its
cumulative minimum purchase commitment as of the end of such
quarter. Intergraph shall not be obliged to take delivery of
physical Kits for such additional licenses for Application
Bundle Inventory, provided, however, in the event Intergraph
elects to accept delivery of physical Kits, it shall segregate
and account for its inventory of such Kits with respect to each
Application Bundle Product for which it has accepted delivery
of such Kits. Intergraph may
distribute Kits purchased for Application Bundle Inventory
hereunder only as part the Application Bundle Product for which
Intergraph has purchased them, unless and until Intergraph pays
to Bentley the difference between the price actually paid by
Intergraph and the total price otherwise payable to Bentley if
all such Kits for said Application Bundle Product been
purchased at the standard price set forth in the Agreement.
5. Reports; Records; Audit.
(a) Intergraph shall, during the term of the
Agreement and for so long thereafter as Intergraph continues to
distribute Application Bundles or maintains any Application
Bundle Inventory, furnish to Bentley within thirty (30) days
after the end of each calendar quarter a written distribution
report setting forth, by Application Bundle Product, the serial
number of each MicroStation Kit distributed as part of each
Application Bundle during such quarter, together with the date
of license, the identity of the licensee and a contact person
for such licensee, and the site to which the Kit was shipped.
Such report shall also indicate, for each such Application
Bundle Product, the number of Kits purchased by Intergraph from
Bentley during such quarter and the number distributed by
Intergraph from the Application Bundle Inventory. Bentley
acknowledges that Intergraph does not currently have the
technical capability to furnish Bentley with the serial number
of each MicroStation Kit distributed as part of an Application
Bundles. Intergraph shall use best efforts to develop such
capability and shall thereafter furnish Bentley with such
serial number information.
(b) Intergraph shall maintain complete and accurate
records of the distribution of Application Bundles to permit
Bentley to determine whether Intergraph has complied with its
obligations hereunder. Intergraph shall, upon ten (10) days
advance written notice by Bentley, permit reasonable inspection
of such records by Bentley or a third-party auditor retained by
Bentley at the offices of Intergraph during normal working
hours. Bentley shall maintain in confidence all information
contained in or derived from such records. The cost of any
audit shall be borne solely by Bentley. This provision shall
survive the termination of the Agreement for a period of one
(1) year after the date of receipt by Bentley of the last
quarterly distribution report under subparagraph (a).
6. Rebate of Purchase Price on Application Bundles. If,
at the conclusion of a calendar quarter, Intergraph has
satisfied its cumulative minimum quarterly unit purchase
commitment for an Application Bundle Product in compliance with
Paragraph 2 of this Amendment, then Bentley shall, within
thirty (30) days following its receipt of the quarterly
distribution report from Intergraph, compute and furnish to
Intergraph a credit toward future product purchases in an
amount equal to the difference between the price actually paid
by Intergraph for the MicroStation Kits under the Agreement and
the price payable under the terms of this Amendment for Kits
purchased during such quarter for distribution as part of said
Application Bundle Product, less the price of the Kits
purchased by Intergraph to meet its quarterly minimum unit
purchase commitment pursuant to Paragraph 4(b). If the
quarterly distribution report shows that Intergraph has
distributed Kits from Application Bundle Inventory, then
Bentley shall compensate Intergraph by increasing the foregoing
credit by the total actual price previously paid by Intergraph
to Bentley for such Kits. If these calculations yield a
negative figure, Bentley will promptly issue a net invoice to
Intergraph, payable by Intergraph within thirty (30) days.
7. Distribution in Excess of Unit Commitment. In the
event Intergraph purchases in a calendar year, for an
Application Bundle Product, a number of units of MicroStation
Kits for distribution as part of such Application Bundle
Product in excess of the discount category (i.e., Paragraphs
3(b)(i) through 3(b)(iv)) to which Intergraph has previously
committed, then Intergraph shall, for those Kits purchased for
distribution with said Application Bundle Product in excess of
such discount category, receive the higher discount applicable
in the category corresponding with the number of such Kits
actually purchased. The higher discount level shall apply only
to the excess Kits purchased by Intergraph above the category
to which Intergraph committed. By way of example:
(a) if Intergraph commits to purchase a minimum of four
hundred (400), but not more than five hundred ninety-nine
(599), Kits in a calendar year as part of a specific
Application Bundle, but Intergraph in fact purchases seven
hundred (700) Kits, then Intergraph shall pay to Bentley,
assuming a U.S. list price for each Kit of Three Thousand Seven
Hundred Ninety Dollars ($3,790), One Thousand Dollars ($1,000)
for each of the first five hundred ninety-nine (599) Kits and
Eight Hundred Fifty Dollars ($850) for each additional Kit.
(b) if Intergraph commits to purchase a minimum of four
hundred (400), but not more than five hundred ninety-nine
(599), Kits in a calendar year as part of a specific
Application Bundle, but Intergraph in fact purchases eleven
hundred (1100) Kits, then Intergraph shall pay to Bentley,
assuming a U.S. list price for each Kit of Three Thousand Seven
Hundred Ninety Dollars ($3,790), One Thousand Dollars ($1,000)
for each of the first five hundred ninety-nine (599) Kits,
Eight Hundred Fifty Dollars ($850) for each of the next four
hundred (400) Kits, and Seven Hundred Fifty Dollars ($750) for
each of the remaining one hundred one (101) Kits.
8. 1996 Prices. In the event Intergraph purchases
(including purchases for inventory) during 1995 a total of five
thousand (5,000) or more MicroStation Kits for distribution as
part of Application Bundles, then Intergraph shall continue to
receive volume discounts for purchases during 1996 of
MicroStation Kits for distribution as part of Application
Bundles, as set forth below:
(a) If the total unit commitment by Intergraph for
purchases of both MicroStation Kits and MicroStation PowerDraft
Kits during 1996 for distribution as part of Application Bundle
Products is greater than or equal to Fifty Percent (50%) of the
actual total unit volume of both MicroStation Kits and
MicroStation PowerDraft Kits purchased during 1995 for
distribution as part of Application Bundle Products, then the
baseline price, before volume discounts, for MicroStation Kits
purchased during 1996 for distribution as part of Application
Bundles shall be Fifty-Two Percent (52%) of the US List Price,
plus any surcharge for foreign translations.
(b) If the total unit commitment by Intergraph for
purchases of both MicroStation Kits and MicroStation PowerDraft
Kits during 1996 for distribution as part of Application Bundle
Products is greater than or equal to the actual total unit
volume of both MicroStation Kits and MicroStation PowerDraft
Kits purchased during 1995 for distribution as part of
Application Bundle Products, then the baseline price, before
volume discounts, for MicroStation Kits purchased during 1996
for distribution as part of Application Bundles shall be Forty-
Six Percent (46%) of the US List Price, plus any surcharge for
foreign translations.
(c) If the total unit commitment by Intergraph for
purchases of both MicroStation Kits and MicroStation PowerDraft
Kits during 1996 for distribution as part of Application Bundle
Products is greater than or equal to One Hundred Fifty Percent
(150%) of the actual total unit volume of both MicroStation
Kits and MicroStation PowerDraft Kits purchased during 1995 for
distribution as part of Application Bundle Products, then the
baseline price, before volume discounts, for MicroStation Kits
purchased during 1996 for distribution as part of Application
Bundles shall be Forty Percent (40%) of the US List Price, plus
any surcharge for foreign translations.
(d) If the total unit commitment by Intergraph for
purchases of both MicroStation Kits and MicroStation PowerDraft
Kits during 1996 for distribution as part of Application Bundle
Products is less than fifty percent (50%) of the actual total
unit volume of both MicroStation Kits and MicroStation
PowerDraft Kits purchased during 1995 for distribution as part
of Application Bundle Products, then the prices for
MicroStation Kits set forth in the Distribution Agreement shall
apply.
9. Distribution in Japan and Korea. Notwithstanding the
limitations contained in Paragraph 2.01(a) of the Agreement,
Intergraph shall have a non-transferable non-exclusive right to
distribute Product Kits in Japan and Korea through Distributors
and Resellers and directly to End Users during the period
January 1, 1995, through December 31, 1996.
10. Demonstration; Loan.
(a) Intergraph shall have the right to use Product
Kits, as defined in the Agreement, for demonstrations to
prospective end users of Bundled Applications and for training.
(b) Intergraph shall have the right to loan Product
Kits, as defined in the Agreement, to prospective end users of
Bundled Applications upon the terms and conditions set forth in
Paragraph 2.05 of the Agreement.
11. Trademarks. Intergraph shall have the right to
market the Application Bundle Products under any name of its
choosing, provided, however, Intergraph shall identify Bentley
as the owner of MicroStation and designate the Application
Bundle Products as containing Bentley's MicroStation product by
labeling each such Product, and advertising and promotional
materials therefor, with the "MicroStation Powered" logo, and
shall do so in accordance with the existing standards prepared
by Intergraph. Intergraph shall also comply with the
standards set forth in Exhibit "B" hereto. Intergraph shall
request and use reasonable diligence to ensure compliance
herewith by all of its distributors and resellers.
All other terms and conditions of the Distribution
Agreement shall remain unchanged.
IN WITNESS WHEREOF, each of the parties has executed
this Amendment as of the date and year first above written.
ATTEST: BENTLEY SYSTEMS, INCORPORATED
/s/ Jennifer S. Ware BY: /s/ Keith Bentley
- -------------------- ------------------------
TITLE: /s/ President
------------------------
ATTEST: INTERGRAPH CORPORATION
/s/ Marcus B. Maddox BY: /s/ T.D. Steele
- -------------------- ------------------------
TITLE: /s/ President, Intergraph Software
------------------------
Solutions
------------------------
EXHIBIT "A" TO AMENDMENT TO DISTRIBUTION AGREEMENT
--------------------------------------------------
Minimum Annual Volume
Product Commitment (1995)
-------------------------------------------------
InXpress
InRoads
SiteWorks
Project Architect
MGE Nucleus
MGE PC1/PC2
I/Call
I/Dispatch
FRAMME
FRAMME Lite
I/GEOVEC
WireWorks
FrameWorks
FieldWorks
CogoWorks
EXHIBIT B TO AMENDMENT TO DISTRIBUTION AGREEMENT
------------------------------------------------
Intergraph shall acknowledge the use of MicroStation in all
advertisements and promotional materials for Application Bundle
Products and on the box, if any, for such Products by including
the following statements:
MicroStation (registered trademark) Copyright Bentley Systems, Incorporated
"MicroStation Field (registered trademark)", "MicroStation Modeler (registered
trademark)", "MicroStation PowerDraft (registered trademark)" "MicroStation
Powered" and "MicroStation Review (registered trademark)" are a registered*
trademarks of Bentley Systems, Incorporated
MicroStationCSP (SM) is a service mark of Bentley Systems,
Incorporated
"MicroStation (registered trademark)" is the registered trademark of Bentley
Systems, Incorporated
* (to be added at such time as Bentley receives registration
for this trademark)
In connection with its distribution of Applications Bundle
Products, Intergraph shall comply in all respects with a
certain Amended License Agreement between the parties dated
January 28, 1993 relating to the trademark "MICROSTATION." In
the event of any conflict between the trademark provisions of
the Distribution Agreement and those of the Amended License
Agreement, the provisions of the Distribution Agreement shall
control.
In addition, Intergraph shall comply with the following
requirements:
BENTLEY SYSTEMS, INCORPORATED trademarks, service marks and
trade names shall be used as follows:
MicroStation (registered trademark)
MicroStation CSP(SM)
MicroStation Field (TM)
MicroStation Modeler (TM)
MicroStation PowerDraft (TM)
MicroStation Powered (TM)
MicroStation Review (TM)
Upon registration , Intergraph shall include the appropriate (registered
trademark) symbol to the Bentley trademarks
When the Bentley name and the Company are used, the Bentley
must always be in FULL CAPITALS, bold italic, Caslon 540 and
the Bentley "B" as follows:
[BENTLEY LOGO]
The Bentley "B" is an artistic "B" and will be provided to
Intergraph.
When the Company name is used without the Company logo, it must
always be in FULL CAPITALS, standard type as follows:
BENTLEY SYSTEMS, INCORPORATED
EXHIBIT C TO DECEMBER AGREEMENT
JAPANESE AND KOREAN LANGUAGE TRANSLATIONS PURCHASE AGREEMENT
- --------------------------------------------------------------
THIS AGREEMENT is entered into this 16th day of
December, 1994, by and between INTERGRAPH CORPORATION
("Intergraph"), a Delaware corporation having its principal
office and place of business at One Madison Industrial Park,
Huntsville, Alabama 35894, and BENTLEY SYSTEMS, INCORPORATED
("Bentley"), a Delaware corporation having its principal office
and place of business at 690 Pennsylvania Drive, Exton,
Pennsylvania 19431.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a series of
written agreements dated May 2, 1994, including a Business
Relations Agreement;
WHEREAS, pursuant to Paragraph 3.04 of the Business
Relations Agreement, Bentley received an option to acquire
Intergraph's rights to certain foreign language translations of
MicroStation prepared by or for Intergraph;
WHEREAS, Bentley desires to exercise its option to
purchase Intergraph's interest in the Japanese and Korean
translations of the documentation and machine-readable
information of the MicroStation software;
WHEREAS, the parties hereto have agreed to vary the
terms under which Bentley may exercise such option.
NOW, THEREFORE, intending to be legally bound, the
parties hereto agree as follows:
1. Definitions. As used herein, the following words,
terms and phrases shall have the following meanings:
1.01 "Translations" means the Japanese (Kanji) and
Korean (Hangul) foreign language translations of the
documentation, machine-readable information, and resource files
for all versions of MicroStation operating on any hardware or
software platform, including without limitation the
MicroStation Windows NT-specific, MicroStation DOS-specific and
MicroStation Clipper-specific as well as Japanese NEC-PC-
specific documentation and resource files.
1.02 "Localization Auxiliary Programs" means
auxiliary programs developed by Intergraph or third parties to
facilitate translation and MicroStation usage in the Japanese
and Korean languages, such as keyboard input front-end
processors, and includes source code, object code and
documentation therefor.
1.03 "Auxiliary Translation Materials" means:
(i) the Localization Auxiliary Programs for
Japan and Korea; and
(ii) any other software and documentation,
including without limitation glossaries (and software tools
therefor), all font libraries and resource files, necessary or desirable
for the development and distribution of the foreign language kits
of MicroStation for Japan and Korea.
1.04 "Third-Party Contractor" means a third party
which has entered into a written agreement with Bentley to
prepare Japanese or Korean foreign language translations of
MicroStation, or to manufacture or distribute Japanese or
Korean language kits of MicroStation.
2. Grant.
(a) Intergraph hereby grants, assigns and conveys to
Bentley all of Intergraph's right, title and interest
whatsoever, including without limitation all of Intergraph's
copyrights and other intellectual property rights, in and to
the Translations, together with the right to sue for past
infringement of the Translations.
(b) Intergraph hereby grants to Bentley, its
distributors, resellers and Third-Party Contractors a perpetual
non-exclusive royalty-free worldwide right and license to use,
reproduce, modify, enhance, publicly perform, publicly display,
transmit and distribute to the public as an integral part of a
localized MicroStation product the Auxiliary Translation
Materials.
3. Delivery of Materials. Within the later of (a)
fourteen (14) days after the date of this Agreement, or (b)
seven (7) days after completion of any Translation, Intergraph
shall deliver to Bentley on one or more diskettes an electronic
copy and two paper copies of the Translations and the Auxiliary
Translation Materials, together with a copy of the written
assignments of the copyrights in and to the Translations to
Intergraph.
4. Payment; Documentation. Bentley shall compensate
Intergraph for the rights granted herein as follows:
(a) Bentley's invoices to Intergraph for purchases by
Intergraph of Japanese MicroStation Version 5 kits shall not
include the ten percent (10%) surcharge, as permitted in
Paragraph 5.03(e) of the Distribution Agreement dated May 2,
1994, between the parties, for such translated kits until the
earlier of December 31, 1996, or such time as the cumulative
number of such kits purchased by Intergraph times four percent
(4%) of the U.S. list price for MicroStation is equal to
seventy percent (70%) of the documented direct costs (as set
forth in Exhibit A hereto) incurred by Intergraph to prepare
the Japanese Translations.
(b) Bentley's invoices to Intergraph for purchases by
Intergraph of Korean MicroStation Version 5 kits shall not
include the ten percent (10%) surcharge, as permitted in
Paragraph 5.03(e) of the Distribution Agreement dated May 2,
1994, between the parties, for such translated kits until the
earlier of December 31, 1996, or such time as the cumulative
number of such kits purchased by Intergraph times four percent
(4%) of the U.S. list price for MicroStation is equal to
seventy percent (70%) of the documented direct costs (as set
forth in Exhibit A hereto) incurred by Intergraph to prepare
the Korean Translations.
(c) Upon written request by Bentley, Intergraph shall
permit reasonable inspection by Bentley or a third-party
auditor retained by Bentley of all of its documentation
supporting the direct costs of the Translations.
5. Execution of Documents. Intergraph shall perform acts
and execute documents, at Bentley's expense and request, which
are reasonably necessary to transfer or perfect in Bentley the
rights granted by Intergraph to Bentley herein.
6. Warranty. Intergraph represents and warrants to Bentley
that (a) it has paid in full for the preparation of the
Translations and Auxiliary Translation Materials, and has
received from an assignment of the copyrights in each instance
where such materials were prepared by third parties; (b) it is
the owner of the Translations and the Auxiliary Translation
Materials, including all intellectual property rights therein;
(c) it has the right, power and authority to grant the rights
granted under this Agreement and fully perform its obligations
hereunder; and (d) it has not, as of the date hereof, received
notice of a claim that the Translations or Auxiliary
Translation Materials infringe any patent, copyright or other
intellectual property right anywhere in the world or that any
third party has any proprietary interest in or to the Translations
or Auxiliary Translation Materials.
7. Instructions. The parties shall provide instructions to
Bentley's Third-Party Contractor in accordance with this
Agreement upon its execution.
8. Termination for Material Breach. Either party may, at
its option, terminate this Agreement in the event of a material
breach by the other party. Such termination may be effected
only through a written notice to the other party, specifically
identifying the breach or breaches on which termination is
based. Following receipt of such notice, the party in breach
shall have sixty (60) days to cure such breach or breaches, and
this Agreement shall terminate in the event that such cure is
not made by the end of such period. In the event that the
parties dispute either the existence of a material breach or
the adequacy of attempted cure, and either party submits such
dispute to arbitration under Paragraph 10.09 hereof, the
termination shall not be deemed effective until the arbitrator
renders a final decision finding an uncured material breach.
9. Bankruptcy. If either party files a petition in
bankruptcy (or is the subject of an involuntary petition in
bankruptcy that is not dismissed within sixty (60) days after
the effective filing date thereof); or is or becomes insolvent;
or enters into any formal arrangement with its creditors, or
ceases doing business in the ordinary course; or admits of a
general inability to pay its debts as they become due; then the
other party shall have the right to terminate this Agreement
upon fifteen (15) days written notice.
10. General Provisions.
10.01 Entire Agreement. This Agreement, together
with the Exhibits hereto, collectively set forth the entire
agreement and understanding between the parties hereto with
respect to the purchase of the Translations and license of the
Auxiliary Translation Materials and, except as specifically
provided herein, supersede and merge all prior oral and written
agreements, discussions and understandings between the parties
with respect to the subject matter hereof, and neither of the
parties shall be bound by any conditions, inducements or
representations other than as expressly provided for herein.
10.02 Independent Contractors. In making and
performing this Agreement, Bentley and Intergraph act and shall
act at all times as independent contractors and nothing
contained in this Agreement shall be construed or implied to
create an agency, partnership or employer and employee
relationship between Bentley and Intergraph. At no time shall
either party make commitments or incur any charges or expenses
for or in the name of the other party.
10.03 Notices. Any notice required or permitted to
be given hereunder, shall, except where specifically provided
otherwise, be given in writing to the person listed below by
registered mail or overnight delivery service, and the date
upon which any such notice is received at the designated
address shall be deemed to be the date of such notice. Any
notice shall be delivered as follows:
If to Intergraph: Intergraph Corporation
One Madison Industrial Park
Huntsville, Alabama 35894
Attention: James W. Meadlock
President
If to Bentley: Bentley Systems, Inc.
690 Pennsylvania Drive
Exton,Pennsylvania 19341
Attention: Keith Bentley,
President
or addressed to such other address as that party may have given
by written notice in accordance with this provision.
10.04 Amendments; Modifications. This Agreement may
not be amended or modified except in a writing duly executed by
the parties hereto.
10.05 Assignment. Neither party shall assign this
Agreement, or any part thereof, without the prior written
consent of the other party.
10.06 Severability. The provisions of this Agreement
shall be severable, and if any of them are held invalid or
unenforceable for any reason, such provision shall be adjusted
to the minimum extent necessary to cure such invalidity. The
invalidity or unenforceability of one or more of the provisions
contained in this Agreement shall not affect any other
provisions of this Agreement.
10.07 Waivers. Any delay or forbearance by either
party in exercising any right hereunder shall not be deemed a
waiver of that right.
10.08 Governing Law. This Agreement shall be
governed by and interpreted in accordance with the substantive
laws of the State of Delaware.
10.09 Arbitration. In the event of a dispute between
the parties arising under this Agreement, the parties shall
submit to binding arbitration before a single arbitrator in
Wilmington, Delaware, under the Commercial Arbitration Rules of
the American Arbitration Association, except that temporary
restraining orders or preliminary injunctions, or their
equivalent in any country of the world, may be obtained from
any court of competent jurisdiction. The pre-hearing and
hearing proceedings in the arbitration shall be generally
governed by the Federal Rules of Civil Procedure and the
judicial precedent interpreting those rules. The decision of
the arbitrator shall be final and binding with respect to the
dispute subject to the arbitration and shall be enforceable in
any court of competent jurisdiction. Each party shall bear its
own expenses, attorney's fees and costs incurred in such
arbitration.
10.10 Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which when taken
together shall constitute one Agreement.
10.11 Construction. This Agreement is the product of
joint draftsmanship and shall not be construed against one
party more strictly than against the other.
10.12 Confidentiality of Agreement. The detailed
terms of this Agreement shall remain confidential. In no event
shall either party disclose the detailed terms of this
Agreement without the prior written consent of the other party;
provided, however, each of the parties may announce publicly
the framework of this Agreement without consent of the other
party.
10.13 Headings. The headings in this Agreement are
inserted merely for the purpose of convenience and shall not
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties has executed
this Agreement as of the date and year first above written.
ATTEST: BENTLEY SYSTEMS, INCORPORATED
/s/ Jennifer S. Ware BY: /s/ Keith Bentley
- --------------------- -----------------------
TITLE: /s/ President
-----------------------
ATTEST: INTERGRAPH CORPORATION
/s/ Marcus B. Maddox BY: /s/ T.D. Steele
- -------------------- -----------------------
TITLE: /s/ President, Intergraph Software
-----------------------
Solutions
-----------------------
EXHIBIT A
TO
JAPANESE AND KOREAN LANGUAGE TRANSLATIONS PURCHASE AGREEMENT
------------------------------------------------------------
Japanese
- --------
MicroStation Resource Files
MicroStation DOS-specific Documentation
MicroStation Windows NT-specific Documentation
MicroStation Clipper-specific Documentation
MicroStation NEC-PC-specific Documentation
TOTAL: $560,000 (U.S.)
Korean
- ------
MicroStation Resource Files
MicroStation DOS-specific Documentation
MicroStation Windows NT-specific Documentation
MicroStation Clipper-specific Documentation
TOTAL: $210,000 (U.S.)
EXHIBIT D TO DECEMBER AGREEMENT
CHINESE AND TAIWANESE LANGUAGE TRANSLATIONS PURCHASE AGREEMENT
- --------------------------------------------------------------
THIS AGREEMENT is entered into this 16th day of
December, 1994, by and between INTERGRAPH CORPORATION
("Intergraph"), a Delaware corporation having its principal
office and place of business at One Madison Industrial Park,
Huntsville, Alabama 35894, and BENTLEY SYSTEMS, INCORPORATED
("Bentley"), a Delaware corporation having its principal office
and place of business at 690 Pennsylvania Drive, Exton,
Pennsylvania 19431.
W I T N E S S E T H:
WHEREAS, the parties hereto entered into a series of
written agreements dated May 2, 1994, including a Business
Relations Agreement;
WHEREAS, pursuant to Paragraph 3.04 of the Business
Relations Agreement, Bentley received an option to acquire
Intergraph's rights to certain foreign language translations of
MicroStation prepared by or for Intergraph;
WHEREAS, Bentley desires to exercise its option to
purchase Intergraph's interest in the foreign language
translations of the documentation and machine-readable
information of the MicroStation software for China and Taiwan;
WHEREAS, the parties hereto have agreed to vary the
terms under which Bentley may exercise such option.
NOW, THEREFORE, intending to be legally bound, the
parties hereto agree as follows:
1. Definitions. As used herein, the following words, terms
and phrases shall have the following meanings:
1.01 "Translations" means the foreign language
translations for China and Taiwan of the documentation, machine-
readable information and resource files for all versions of
MicroStation operating on any hardware or software platform,
including without limitation the MicroStation Windows NT-
specific, MicroStation DOS-specific and MicroStation Clipper-
specific documentation and resource files.
1.02 "Localization Auxiliary Programs" means
auxiliary programs developed by Intergraph or third parties to
facilitate translation and MicroStation usage in the Chinese
and Taiwanese languages, such as keyboard input front-end
processors, and includes source code, object code and
documentation therefor.
1.03 "Auxiliary Translation Materials" means:
(i) the Localization Auxiliary Programs for
China and Taiwan; and
(ii) any other software and documentation,
including without limitation glossaries (and software tools
therefor), all font libraries and resource files, necessary or
desirable for the development and distribution of the foreign
language kits of MicroStation for China and Taiwan.
1.04 "Third-Party Contractor" means a third party
which has entered into a written agreement with Bentley to
prepare Chinese or Taiwanese foreign language translations of
MicroStation, or to manufacture or distribute Chinese or
Taiwanese language kits of MicroStation.
2. Grant.
(a) Intergraph hereby grants, assigns and conveys to
Bentley all of Intergraph's right, title and interest
whatsoever, including without limitation all of Intergraph's
copyrights and other intellectual property rights, in and to
the Translations, together with the right to sue for past
infringement of the Translations.
(b) Intergraph hereby grants to Bentley, its
distributors, resellers and Third-Party Contractors a perpetual
non-exclusive royalty-free worldwide right and license to use,
reproduce, modify, enhance, publicly perform, publicly display,
transmit and distribute to the public as an integral part of a
localized MicroStation product the Auxiliary Translation
Materials.
3. Delivery of Materials. Within the later of (a) fourteen
(14) days after the date of this Agreement, or (b) seven (7)
days after completion of any Translation, Intergraph shall
deliver to Bentley on one or more diskettes an electronic copy
and two paper copies of the Translations and the Auxiliary
Translation Materials, together with a copy of the written
assignments of the copyrights in and to the Translations to
Intergraph.
4. Payment; Documentation. Bentley shall compensate
Intergraph for the rights granted herein as follows:
(a) Bentley's invoices to Intergraph for purchases by
Intergraph of Chinese MicroStation Version 5 kits shall not
include the ten percent (10%) surcharge, as permitted in
Paragraph 5.03(e) of the Distribution Agreement dated May 2,
1994, between the parties, for such translated kits until the
earlier of December 31, 1996, or such time as the cumulative
number of such kits purchased by Intergraph times four percent
(4%) of the U.S. list price for MicroStation is equal to
seventy percent (70%) of the documented direct costs (as set
forth in Exhibit A hereto) incurred by Intergraph to prepare
the Chinese Translations.
(b) Bentley's invoices to Intergraph for purchases by
Intergraph of Taiwanese MicroStation Version 5 kits shall not
include the ten percent (10%) surcharge, as permitted in
Paragraph 5.03(e) of the Distribution Agreement dated May 2,
1994, between the parties, for such translated kits until the
earlier of December 31, 1996, or such time as the cumulative
number of such kits purchased by Intergraph times four percent
(4%) of the U.S. list price for MicroStation is equal to
seventy percent (70%) of the documented direct costs (as set
forth in Exhibit A hereto) incurred by Intergraph to prepare
the Taiwanese Translations.
(c) Upon written request by Bentley, Intergraph shall
permit reasonable inspection by Bentley or a third-party
auditor retained by Bentley of all of its documentation
supporting the direct costs of the Translations.
5. Execution of Documents. Intergraph shall perform acts
and execute documents, at Bentley's expense and request, which
are reasonably necessary to transfer or perfect in Bentley the
rights granted by Intergraph to Bentley herein.
6. Warranty. Intergraph represents and warrants to Bentley
that (a) it has paid in full for the preparation of the
Translations and Auxiliary Translation Materials, and has
received from an assignment of the copyrights in each instance
where such materials were prepared by third parties; (b) it is
the owner of the Translations and the Auxiliary Translation
Materials, including all intellectual property rights therein;
(c) it has the right, power and authority to grant the rights
granted under this Agreement and fully perform its obligations
hereunder; and (d) it has not, as of the date hereof, received
notice of a claim that the Translations or Auxiliary
Translation Materials infringe any patent, copyright or other
intellectual property right anywhere in the world or that any
third party has any proprietary interest in or to the
Translations or Auxiliary Translation Materials.
7. Instructions. The parties shall provide instructions to
Bentley's Third-Party Contractor in accordance with this
Agreement upon its execution.
8. Termination for Material Breach. Either party may, at
its option, terminate this Agreement in the event of a material
breach by the other party. Such termination may be effected
only through a written notice to the other party, specifically
identifying the breach or breaches on which termination is
based. Following receipt of such notice, the party in breach
shall have sixty (60) days to cure such breach or breaches, and
this Agreement shall terminate in the event that such cure is
not made by the end of such period. In the event that the
parties dispute either the existence of a material breach or
the adequacy of attempted cure, and either party submits such
dispute to arbitration under Paragraph 10.09 hereof, the
termination shall not be deemed effective until the arbitrator
renders a final decision finding an uncured material breach.
9. Bankruptcy. If either party files a petition in
bankruptcy (or is the subject of an involuntary petition in
bankruptcy that is not dismissed within sixty (60) days after
the effective filing date thereof); or is or becomes insolvent;
or enters into any formal arrangement with its creditors, or
ceases doing business in the ordinary course; or admits of a
general inability to pay its debts as they become due; then the
other party shall have the right to terminate this Agreement
upon fifteen (15) days written notice.
10. General Provisions.
10.01 Entire Agreement. This Agreement, together
with the Exhibits hereto, collectively set forth the entire
agreement and understanding between the parties hereto with
respect to the purchase of the Translations and license of the
Auxiliary Translation Materials and, except as specifically
provided herein, supersede and merge all prior oral and written
agreements, discussions and understandings between the parties
with respect to the subject matter hereof, and neither of the
parties shall be bound by any conditions, inducements or
representations other than as expressly provided for herein.
10.02 Independent Contractors. In making and
performing this Agreement, Bentley and Intergraph act and shall
act at all times as independent contractors and nothing
contained in this Agreement shall be construed or implied to
create an agency, partnership or employer and employee
relationship between Bentley and Intergraph. At no time shall
either party make commitments or incur any charges or expenses
for or in the name of the other party.
10.03 Notices. Any notice required or permitted to
be given hereunder, shall, except where specifically provided
otherwise, be given in writing to the person listed below by
registered mail or overnight delivery service, and the date
upon which any such notice is received at the designated
address shall be deemed to be the date of such notice. Any
notice shall be delivered as follows:
If to Intergraph: Intergraph Corporation
One Madison Industrial Park
Huntsville, Alabama 35894
Attention: James W. Meadlock
President
If to Bentley: Bentley Systems, Inc.
690 Pennsylvania Drive
Exton, Pennsylvania 19341
Attention: Keith Bentley,
President
or addressed to such other address as that party may have given
by written notice in accordance with this provision.
10.04 Amendments; Modifications. This Agreement may
not be amended or modified except in a writing duly executed by
the parties hereto.
10.05 Assignment. Neither party shall assign this
Agreement, or any part thereof, without the prior written
consent of the other party.
10.06 Severability. The provisions of this Agreement
shall be severable, and if any of them are held invalid or
unenforceable for any reason, such provision shall be adjusted
to the minimum extent necessary to cure such invalidity. The
invalidity or unenforceability of one or more of the provisions
contained in this Agreement shall not affect any other
provisions of this Agreement.
10.07 Waivers. Any delay or forbearance by either
party in exercising any right hereunder shall not be deemed a
waiver of that right.
10.08 Governing Law. This Agreement shall be
governed by and interpreted in accordance with the substantive
laws of the State of Delaware.
10.09 Arbitration. In the event of a dispute between
the parties arising under this Agreement, the parties shall
submit to binding arbitration before a single arbitrator in
Wilmington, Delaware, under the Commercial Arbitration Rules of
the American Arbitration Association, except that temporary
restraining orders or preliminary injunctions, or their
equivalent in any country of the world, may be obtained from
any court of competent jurisdiction. The pre-hearing and
hearing proceedings in the arbitration shall be generally
governed by the Federal Rules of Civil Procedure and the
judicial precedent interpreting those rules. The decision of
the arbitrator shall be final and binding with respect to the
dispute subject to the arbitration and shall be enforceable in
any court of competent jurisdiction. Each party shall bear its
own expenses, attorney's fees and costs incurred in such
arbitration.
10.10 Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed
shall be deemed to be an original and all of which when taken
together shall constitute one Agreement.
10.11 Construction. This Agreement is the product of
joint draftsmanship and shall not be construed against one
party more strictly than against the other.
10.12 Confidentiality of Agreement. The detailed
terms of this Agreement shall remain confidential. In no event
shall either party disclose the detailed terms of this
Agreement without the prior written consent of the other party;
provided, however, each of the parties may announce publicly
the framework of this Agreement without consent of the other
party.
10.13 Headings. The headings in this Agreement are
inserted merely for the purpose of convenience and shall not
affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties has executed
this Agreement as of the date and year first above written.
ATTEST: BENTLEY SYSTEMS, INCORPORATED
BY:
- --------------------- --------------------------------
TITLE:
--------------------------
ATTEST: INTERGRAPH CORPORATION
/s/ Marcus B. Maddox BY: /s/ T.D. Steele
- --------------------- --------------------------------
TITLE: /s/ President,Intergraph Software
--------------------------------
Solutions
--------------------------------
EXHIBIT A
TO
CHINESE AND TAIWANESE LANGUAGE TRANSLATIONS PURCHASE AGREEMENT
--------------------------------------------------------------
Chinese and Taiwanese Translations
- ----------------------------------
MicroStation Resource Files
MicroStation DOS-specific Documentation
MicroStation Windows NT- specific Documentation
MicroStation Clipper-specific Documentation
TOTAL: $115,000 (U.S.)
EXHIBIT E TO DECEMBER AGREEMENT
INTERGRAPH 1994 YEAR-END INVENTORY OF
MICROSTATION ALTERNATE PLATFORM V5 KITS
---------------------------------------
Platform Number of Kits
- -------- --------------
(English) (Foreign Languages)
MS NT 572
MS DOS 2,292
DEC ALPHA 355
HP 613
SPARC 3
FIVE-YEAR FINANCIAL SUMMARY
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1994 1993 1992 1991 1990
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(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues $1,041,403 $1,050,277 $1,176,661 $1,195,378 $1,044,617
Restructuring charges (credit) (4,826) 89,806 4,418 --- ---
Net income (loss) (70,220) (116,042) 8,442 71,108 62,557
Net income (loss) per share (1.56) (2.51) .18 1.47 1.28
Working capital 282,893 348,756 430,974 502,152 443,272
Total assets 839,618 855,329 986,663 996,615 907,460
Total debt 61,114 26,606 21,887 27,661 21,416
Shareholders' equity 522,337 588,710 736,863 754,994 682,272
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SUMMARY. The Company lost $1.56 per share in 1994 and $2.51 per share in 1993
(including a restructuring charge of $1.34 per share) versus earnings of $.18
per share in 1992. Competitive price and performance conditions in the
industry, the Company's transition to software applications based on the
Windows NT operating system and to hardware based on Intel Corporation
microprocessors, and slower than anticipated market acceptance of Windows NT
have adversely affected the Company's revenues and profitability during 1993
and 1994. These factors combined to reduce systems revenue by 8% in 1992, 15%
in 1993, and 1% in 1994, and to reduce systems gross margin by 1.9 points in
1992, 8.8 points in 1993, and 5.1 points in 1994, resulting in net losses in
1993 and 1994. In addition, the 1994 net loss was increased by the expiration
of tax loss benefits.
The Company expects that current industry conditions characterized by the
demand for higher performance and lower priced products, intense competition
and rapidly changing technology will continue in 1995 and beyond. However, the
Company substantially completed its product transition late in 1994, and
believes that the availability of its products for a full year and the growing
acceptance of Windows NT, together with the benefits of its restructuring
efforts over the last two years, will restore sales growth and profitability.
To achieve profitability in 1995, the Company must significantly increase its
sales volume and continue to reduce its operating expenses.
BUSINESS TRANSITION AND RESTRUCTURING. 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 (best exhibited by gross margins that have declined steadily), 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. As
described further below, during late 1992 and 1993 the Company made several
strategic decisions to better position itself to compete in this environment.
These decisions led to an $89.8 million restructuring charge in 1993 and
operating losses in the transitional years of 1993 and 1994.
Operating Systems. In November 1992, the Company announced its decision to port
its technical software applications to Microsoft Corporation's new 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 (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.
Hardware Architecture. 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).
In August 1993, the Company entered into an agreement with Sun Microsystems
Computer Corporation (Sun) to co-develop the next generation Sun SPARC high-end
microprocessor, develop a SPARC-based, high quality desktop computer system,
and port the Windows NT operating system to that computer system. Under the
agreement, the Company had the right to purchase from Sun the co-developed
microprocessor and the right to sell the SPARC-based, high-end computer system
operating under Windows NT with Intergraph's technical software applications,
both in the second half of 1995. In addition, Sun hired all of the employees of
the Company's former microprocessor division. Sun and the Company agreed to
revise certain terms of the agreement in mid-1994. Thereafter, Sun terminated
the agreement effective October 7, 1994. As a result, the next generation Sun
SPARC microprocessor will not be co-developed and the Company will not develop
the SPARC-based desktop computer system, port the Windows NT operating system to
that computer system, or have the right to sell the computer system. However,
the Company has retained the right for three years to purchase Sun developed
microprocessors. Company employees hired by Sun remain the employees of Sun.
Termination of the contract by Sun did not of itself produce any adverse
financial effects for the Company, and the Company does not expect that such
termination will result in adverse effects on its future operations.
Restructuring Charge. The strategic decisions described above led to actions
that resulted in an $89.8 million pretax restructuring charge in 1993 ($61.7
million after related tax benefit, or $1.34 per share). The restructuring
charge was comprised of $10.5 million for direct workforce reductions, $17.1
million for elimination of operations, primarily the Company's European
manufacturing and distribution facility (IEM), $56.1 million for revaluation of
assets resulting from new product strategies (primarily spares inventory,
goodwill, and investments in other companies), and $6.1 million for restructure
of the Company's electronics business.
There have been no changes to the Company's 1993 restructuring plan that have a
material effect on the amount of the 1993 restructuring charge. 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.
The original plan called for sale or lease of the facility. All manufacturing
activity will continue to be performed in the U.S. The Company expects its
limited use of the IEM facility to positively impact its results of operations
in 1995 and that the savings anticipated from its 1994 closure will not be
significantly reduced.
The Company estimates that restructuring actions taken in 1993 reduced full
year 1994 expenses by approximately $50 million, as expected, primarily in the
areas of selling, product support, and product development expenses. However,
the beneficial effect of these savings was offset in 1994 by the continuing
decline in systems margins and by increases in certain sales and marketing
expenses. Cash outlays during 1994 related to the 1993 restructuring were
approximately $10 million, which was less than anticipated, primarily for
severance pay and associated personnel costs, all of which was funded by cash
from operations or borrowings under credit facilities. There are no
significant remaining cash requirements from the 1993 restructuring, and the
Company expects no long-term effects on its liquidity and sources and
uses of capital.
Included in the statement of operations for the year ended December 31, 1994,
is a $4.8 million credit representing reversal of the remaining unincurred
portion of the restructuring charge related to IEM. Severance costs incurred
were less than anticipated.
ORDERS. Systems orders for 1994 were $640.9 million, an increase of 2% for the
year after declines of 23% and 2% in 1993 and 1992, respectively. Systems
orders during 1994 were adversely affected by product transition and by slower
than anticipated customer acceptance of the Windows NT operating system. Orders
for the Company's new software products based on Windows NT improved during the
last half of the year as more software applications became available, with the
U.S. and Asian markets representing the majority of the improvement. The
Company's European market has been slower in its acceptance of the new
operating system. The decline in systems orders in 1993 was the result of
product transition and general economic weakness, particularly in the Company's
primary U.S. and European markets.
U.S. orders, including federal government orders, were $316.7 million for 1994,
up 1% after a 26% decline in 1993 and an 8% decline in 1992. Federal government
orders totaled $111.2 million, down 7% for the year. European orders totaled
$194.5 million, down 4% after a 30% decrease in 1993 and a 6% increase in 1992.
Other international systems orders totaled $129.7 million, up 12% after
remaining relatively unchanged during the previous two years.
In July 1994, the U.S. Navy awarded the Company the Naval Air Systems Command
and Space and Naval Warfare Command contract ("NAVAIR and SPAWAR") to provide
computer aided design, manufacturing, and engineering (CAD/CAM/CAE) systems and
services for electronics and mechanical applications. The contract is an
indefinite delivery, indefinite quantity (IDIQ) contract. IDIQ contracts
generally provide for the purchase of indefinite quantities of goods and
services, with stated minimum and maximum amounts eligible for order, and with
deliveries scheduled by placing specific orders with the vendor. Funding for
other than the stated minimum quantities is obligated by each delivery order
and not by the contract itself. The estimated maximum value of the
NAVAIR/SPAWAR contract is $398 million, and the term of the contract is twelve
years, assuming all optional annual renewals of the contract are exercised.
Under the terms of of the contract, the customer is obligated to purchase only
$1 million in systems and services, and there can be no assurance that the
Company will receive orders for the maximum value of the contract. Products
and services will be sold to the Navy over the term of the contract at firm,
fixed prices, with escalation of certain prices allowed under certain
circumstances. Given the nature of the contract as described above, the
Company cannot determine the amount of orders that will be received or the
anticipated annual revenues over the term of the contract. There were no
orders or revenues under this contract in 1994.
Soon after the original award, the NAVAIR/SPAWAR contract was formally
protested by one of the losing bidders. The Company supported the efforts of
the Navy in defending against the protest, and in October 1994, the Company was
notified that the original award was upheld. It is possible that the award of
the contract will again be protested. At present, the Company does not expect
any further protest to delay receipt of orders under the contract, and expects
to prevail in any such further protest.
REVENUES. Total revenues for 1994 were $1.04 billion, down 1% for the year
after an 11% decline in 1993 and a 2% decline in 1992.
Systems. Sales of Intergraph systems in 1994 were $665.6 million, down 1%
after declines of 15% and 8%, respectively, in the two preceding years. Factors
previously cited as adversely affecting systems orders also affected systems
revenue. In addition, competitive conditions manifested in declining per unit
sales prices depressed systems revenues in 1994. Workstation and server unit
volume increased 41% in 1994, while workstation and server revenue increased
4%. Systems revenues in 1993 were impacted by product transition and by
competitive conditions, but also by general economic weakness, particularly in
the Company's primary U.S. and European markets.
Systems revenue in the U.S. improved in the last half of 1994; however, in
international markets, systems revenue did not show improvement until late in
the fourth quarter. U.S. systems sales, including sales to the federal
government, grew by 7% (federal government sales grew by 2%) in 1994 after
declining approximately 15% in each of the two previous years. European
systems sales declined 12% in 1994 and 23% in 1993 after growing by 7% in 1992.
Other international systems sales were relatively unchanged in 1994 after
growing by 6% in 1993 and declining 6% in 1992.
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%.
Maintenance and Services. Maintenance and services revenue consists of
revenues from maintenance of Company systems and from Company-provided
training, consulting and other services. These forms of revenue totaled $375.8
million in 1994, relatively unchanged from the previous year after a 14%
increase in 1992. Maintenance revenues grow as the Company's installed base of
systems grows. The shift within the industry toward lower priced products and
longer warranty periods has reduced the rate of increase in maintenance
revenue. Services revenue, which represents less than 5% of total revenues,
declined by 9% in 1994 after growth of 9% in 1993.
Bentley Systems, Inc. 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 Company's sales of MicroStation during the year
ended December 31, 1994, were approximately $88 million, with a gross margin
after royalty payments to BSI of approximately 70% before allocation of
selling, marketing, product development, and general and administrative
expenses. BSI notified Intergraph in February 1994 that, in its opinion,
certain events had occurred that, under the terms of the license agreement,
made the Company's license nonexclusive and, as a result, BSI could compete
with Intergraph in the distribution of MicroStation and in the development and
distribution of additional software products. The Company disputed that the
license agreement had changed and, pursuant to the license agreement, submitted
the dispute to arbitration under the rules of the American Arbitration
Association. Related lawsuits were filed in February 1994 among BSI,
Intergraph, and the other 50% shareholders of BSI.
In May 1994, the Company and BSI completed negotiations settling this matter
and terminated all related arbitration and lawsuits. Under the terms of the
settlement, the Company's exclusive worldwide license to distribute
MicroStation, including related financial terms, remained in effect through
December 31, 1994. Effective January 1, 1995, both BSI and the Company will
distribute MicroStation. The Company has a non-exclusive 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. In addition, effective January 1, 1995, the per copy royalty payable
by the Company to BSI is increased and, for 1995 only, BSI will pay the Company
a per copy distribution fee based on BSI's MicroStation sales to resellers.
The financial impact of the settlement to the Company beyond 1994 ultimately
depends on the level of the Company's and BSI's MicroStation sales, which the
Company is currently unable to predict. It is likely that some MicroStation
sales will be diverted to BSI, and the settlement agreement provides that the
Company will pay royalties to BSI at a higher per copy rate on its MicroStation
sales, though that expense will be partially offset by per copy distribution
fees payable from BSI to the Company in 1995. Any adverse financial effects of
the settlement beyond 1994 will be mitigated by the Company's 50% interest in
existing and incremental profits, if any, earned by BSI, and by reduction in
the Company's MicroStation product marketing and support expense, which become
the responsibility of BSI.
Federal Government Sales. Total systems and maintenance and services revenue
from the United States government was approximately $167 million in both 1994
and 1993 and $186 million in 1992 (16% of total revenue in each of the three
years). The Company sells to the U.S. government under long-term contract
arrangements, primarily IDIQ 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.
PENTIUM PROCESSORS. 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
nor 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
versions of the Pentium processor.
The Company has ceased design and volume production of its own microprocessor.
Substantially all of the Company's microprocessor needs are currently supplied
by Intel. 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.
GROSS MARGIN. The Company's total gross margin was 40.5% in 1994, unchanged
from the previous year after a decline of 5.9 points in 1993 and 2.6 points in
1992.
Margin on systems sales declined 5.1 points in 1994, 8.8 points in 1993, and
1.9 points in 1992. This decline of 15.8 points since 1991 is the result of
lower sales volume and competitive pricing conditions in the industry. Systems
margin was further reduced in 1994 by a decline in the mix of international
systems sales to total systems sales. These negative effects are partially
offset by the increasing software content of the Company's systems.
The primary reason for the Company's lower systems margin is price competition,
but systems margin may also be lowered by a stronger dollar in international
markets, the effects of technological changes on the value of existing
inventories, and a higher mix of federal government sales to total systems
sales. Systems margins may be improved by higher software content in the
product, a weaker dollar in international markets, a higher mix of
international systems sales to total systems sales, and reductions in prices of
component parts, which generally tend to decline over time in the industry. The
Company is unable to predict the effects that many of these factors may have,
but it expects continuing pressure on its systems margin due primarily to
industry price competition.
Margin on maintenance and services revenue improved 8.6 points in 1994 and 1.3
points in 1993 after a decline of .8 points in 1992. As a result of the change
in product strategy in 1993, the Company revalued its oldest generation spares
inventory items in recognition of the diminished value of these parts. The
increase in 1994 maintenance and services margin results in part from the
corresponding decline in the provision for inventory obsolescence. In addition,
headcount reductions from the 1993 restructuring have favorably affected
maintenance and services margin, as have increased presales activities of
application engineers, which are charged to sales and marketing expense.
OPERATING EXPENSES (EXCLUSIVE OF RESTRUCTURING EXPENSES). Operating expenses
declined by 1% in 1994 and 3% in 1993 after growth of 6% in 1992. The total
number of employees of the Company declined by 5% in 1994 and 8% in 1993 after
1% growth in 1992.
Product development expense declined 14% in 1994 after increases of 7% in 1993
and 12% in 1992. The 1994 reduction was due in large part to the 1993
restructuring action that eliminated the Company's microprocessor design
division. Increases in 1992 and 1993 were due to development efforts related to
product transition. After a 1% increase in 1992, general and administrative
expense declined 10% in 1993 and 4% in 1994 due primarily to workforce
reductions and other cost control measures. Savings generated in 1994 were
partially offset by the write-off of a $5.5 million account receivable from a
customer in the Middle East. Sales and marketing expense increased 10% in 1994
after decreasing 6% in 1993 and increasing 5% in 1992. The savings generated by
1993 restructuring actions were offset by an increase in presales support costs
(see "Gross Margin" above) and advertising and promotion costs of the Company's
new product offerings. The Company continues to closely monitor spending.
NONOPERATING INCOME AND EXPENSE. Interest expense was $2.4 million in 1994,
$2.1 million in 1993, and $3.0 million in 1992. The Company's outstanding debt
increased in 1994, primarily in the last half of the year. Interest expense may
increase in 1995 if debt is not reduced and if interest rates continue to
increase.
The Company has two interest rate swap agreements in the principal amounts of
its two European floating rate mortgages (approximately $20 million at December
31, 1994). The agreements are for an original term of two years, expiring in
first quarter 1995 and were entered into to reduce the risk of increase in
interest rates. The Company does no trading in this form of derivative
instrument. Under the agreements, the Company pays a fixed rate of interest and
receives payment based on a variable rate of interest and is thus exposed to
market risk of potential future decreases in interest rates. The weighted
average pay and receive rates of the two agreements as of December 31, 1994
were 7.36% and 5.91%, respectively. The agreements had an insignificant effect
on the total cash flows of the Company in 1994. The fair value of the
agreements approximated original contract amounts at December 31, 1994 based on
the insignificant amount the Company would pay to transfer the agreements to a
third party as of that date. Deferred gains on terminated agreements, which
are not material to the Company's results of operations, are amortized over the
remaining terms of the agreements.
Interest income was $3.0 million in 1994, $4.5 million in 1993, and $5.4 million
in 1992. The average cash balance declined during 1993 and 1994 as the result
of a decline in cash generated from operations in both years and, in 1993, as
the result of purchase of the Company's stock in the open market.
The Company incurred net foreign exchange losses of $2.6 million ($.05 per
share) in 1994, $3.3 million ($.05 per share) in 1993, and $12.5 million ($.18
per share) in 1992. The 1992 loss occurred primarily in the third and fourth
quarters and resulted in large part from instability during that time within
the EMS (European Monetary System). This portion of the loss occurred within
the Company's European manufacturing and distribution center, located in The
Netherlands. The center's exposure among the European currencies was not
hedged, since to that time currency values were generally controlled within the
EMS. Subsequent to this time, the Company has partially hedged its exposure
among the European currencies.
"Other income (expense) - net" in the consolidated statements of operations
consists primarily of equity in the earnings of 20%- to 50%-owned companies,
other miscellaneous items of nonoperating income and expense, and nonrecurring
charges other than restructuring. The 1994 amount includes a charge of $3.4
million for write-down of the Company's investments in two affiliates and a
gain of $5.8 million from the sale of an investment in an affiliated company.
The 1993 amount includes a $3.3 million write-off of an investment in an
affiliated company.
INCOME TAXES. The Company incurred a loss before income tax benefit of $74.2
million in 1994 and a loss before income tax benefit and the cumulative effect
of a change in method of accounting for income taxes of $172.6 million in 1993.
Income before income taxes was $12.4 million in 1992. The 1994 loss generated
only minimal tax benefit as virtually all available financial statement tax
benefits were exhausted with the 1993 loss. The decline in tax benefit
increased 1994 net losses by $19.3 million or $.43 per share.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes". The resulting
change in method of accounting for income taxes did not significantly affect
1993 results of operations.
Note 8 of Notes to Consolidated Financial Statements contains a reconciliation
of statutory to actual income tax benefit and further details of the Company's
tax position.
GEOGRAPHIC AREAS. The Company incurred a loss from operations of $72.6 million
in 1994 (including a credit from 1993 restructuring of $4.8 million) after a
loss of $164.6 million in 1993 (including a restructuring charge of $89.8
million). The Company earned operating income of $25.4 million in 1992. For
1994, sales outside the U.S. represented 49% of total revenues versus 51% for
both 1993 and 1992. European revenues were 33% of total revenues for 1994, 35%
for 1993 and 38% for 1992.
The factors that have limited or reduced the Company's revenue and
profitability over the past three years have similarly affected each of the
geographic areas in which the Company does business. Product transition and
declining per unit sales prices due to competitive conditions negatively
impacted systems revenues and margin in all geographic areas during 1993 and
1994. In addition, in 1993 general economic weakness, particularly in the
Company's primary U.S. and European markets, negatively impacted systems
revenue.
The U.S. geographic region incurred a loss from operations of $27.6 million in
1994 after a loss of $116.5 million in 1993 (including a restructuring charge
of $55.5 million) and income of $18.3 million in 1992. The improvement in
operations in 1994 is attributable to a 7% increase in systems revenue, a 10
point increase in maintenance and services margin, and a 5% decline in
operating expenses, primarily product development, virtually all of which is
performed in the U.S. The increase in systems revenue occurred in the last
half of the year as the Company completed its transition of applications
software to the Windows NT operating system. The Company believes Windows NT
is currently gaining its greatest degree of acceptance in the U.S. market.
Improvements in maintenance and services margin and product development expense
occurred for the reasons previously cited for the total Company. Operations in
1993 were adversely affected by a 12% decline in systems revenue, an 8 point
decline in systems margin, and a 6% increase in operating expenses (primarily
product development and sales and marketing), all attributable to factors
previously discussed that negatively affected the total Company.
The European geographic region incurred a loss from operations of $33.1 million
in 1994 (including a $4.8 million credit for reversal of 1993 restructuring
charges) after a loss of $43.3 million in 1993 (including a restructuring
charge of $30.9 million) and income of $8.2 million in 1992. The increase in
operating loss in 1994 (excluding restructuring charges in both years) is the
result of a 13% decrease in systems revenue and a 9 point decrease in systems
margin. Factors previously cited affecting the revenue and margin of the entire
Company also had effect in Europe, but revenue and profits were also affected
by economic conditions in Germany and the UK, particularly in the first three
quarters of the year. In addition, the Company believes acceptance of Windows
NT in Europe has lagged the pace of acceptance in the U.S. and Asia Pacific
regions, as did acceptance of the UNIX operating system. The loss from
operations in 1993 was due to sharply reduced systems revenue and margin, due
largely to product transition and poor economic conditions.
Other international regions are comprised primarily of the Asia Pacific and
Middle East regions and Canada, with the Asia Pacific region representing
approximately 60% of total revenues generated in these regions in 1994. The
Company considers the majority of these areas to be emerging businesses and, as
such, operating costs are higher as a percentage of revenue than in the
Company's more mature business regions. These regions in total incurred a loss
from operations of $17.4 million in 1994, $16.8 million in 1993 (including
restructuring charges of $8.3 million), and $11.9 million in 1992. The 1994
loss from operations included the write-off of a Middle Eastern account
receivable of $5.5 million.
See Note 11 of Notes to Consolidated Financial Statements for further details
of operations by geographic area.
IMPACT OF CURRENCY FLUCTUATIONS AND CURRENCY RISK MANAGEMENT. Fluctuations in
the value of the U.S. dollar in international markets can have a significant
impact on results of operations. For 1994, approximately 49% of the Company's
revenues were derived from customers outside the United States (51% for both
1993 and 1992), primarily through subsidiary operations. Most subsidiaries
sell to customers and incur and pay operating expenses in local currency.
These local currency revenues and expenses are translated to dollars for U.S.
reporting purposes. A weaker U.S. dollar will increase the level of reported
U.S. dollar orders and revenues, increase the dollar gross margin, and increase
reported dollar operating expenses of the international subsidiaries. During
1994, the U.S. dollar weakened on average from its 1993 level, which increased
reported dollar revenues, orders, and gross margin, but also increased reported
dollar operating expenses in comparison to the prior year period. These effects
were not material to the Company's results of operations in 1994. Currency
effects on the Company's results of operations could become significant if the
percentage of revenues and expenses attributed to the Company's international
operations increases and/or if the dollar fluctuates significantly against
international currencies.
In addition, the Company has certain 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
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 balance sheet items
(intercompany receivables, payables, and formalized intercompany debt) which
are denominated in a currency other than the local entity functional currency.
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 currency rate-
related changes in the recorded values of these balance sheet items, which
represent a calculable exposure for the Company from period to period. Since
this risk is calculable and these contracts are purchased only in offsetting
amounts, neither the contracts themselves or the exposed foreign currency
denominated balance sheet items are likely to have a significant effect on the
Company's financial position or results of operations. Based on the terms of
contracts outstanding and the amount of the Company's balance sheet exposure at
December 31, 1994, the Company's results of operations would not be materially
affected by a 10% increase or decrease in exchange rates underlying the
contracts and the exposure being hedged. The Company's positions in these
derivatives are continuously monitored to ensure protection against the known
balance sheet exposure described above. By policy the Company is prohibited
from market speculation via such instruments and therefore it does not take
currency positions exceeding its known financial statement exposures, and does
not otherwise trade in currencies.
At December 31, 1994, the Company had net outstanding forward exchange
contracts of approximately $41 million ($49 million at December 31, 1993),
maturing at various dates through March 31, 1995. The fair values of these
contracts approximated original contract amounts based on the insignificant
amounts the Company would pay or receive to transfer the contracts to third
parties at those dates. Neither the gains and losses resulting from changes in
exchange rates underlying the exposed balance sheet amounts or the offsetting
gains and losses from the Company's hedging activity were material to results
of operations in 1994 and 1993. See the preceding section "Nonoperating Income
and Expense" for a discussion of 1992 activity. Net cash flow from forward
contract activity, consisting of realized gains and losses from settlement of
exposed assets and liabilities at exchange rates in effect at the settlement
date rather than at the time of recording, settlement of the forward contracts
purchased to mitigate the exposures, and payment of bank fees on the forward
contracts, was $1.8 million negative in 1994, $5.1 million negative in 1993,
and $2.1 million positive in 1992. Deferred gains and losses as of December 31,
1994 and 1993 were not significant.
See Notes 1 and 4 to the consolidated financial statements for further
information related to management of currency risk.
PURCHASE BUSINESS COMBINATIONS AND INVESTMENTS IN OTHER BUSINESSES. In February
1993, the Company acquired a 100% ownership interest in a company engaged in a
related business for $9.5 million in cash and other consideration. The accounts
and results of operations of that company have been combined with those of the
Company since the date of acquisition using the purchase method of accounting.
The acquisition did not have a material effect on the Company's results of
operations in 1993. During 1992, the Company acquired 100% ownership interests
in three companies for a total purchase price of approximately $25.5 million in
cash and other consideration and acquired less than majority interests or
otherwise invested in six other companies for a total of $19.4 million in cash
and other consideration. All such companies are engaged in businesses related
to that of the Company. These acquisitions and investments did not have a
material effect on the results of operations of the Company for 1992.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, cash and short-term investments totaled $62.4 million,
down $13.3 million from year end 1993. Cash generated from operations in 1994
was $35.7 million ($71.0 million in 1993 and $135.9 million in 1992), including
$34.5 million of refunds of prior years' U.S. federal income tax payments as
the result of carryback of the 1993 U.S. tax return loss. The decline in cash
generated from operations in 1994 and 1993 is due primarily to the Company's
net losses in those years.
Net cash used for investing activities totaled $54.4 million in 1994, $58.9
million in 1993, and $131.5 million in 1992. Included in investing activities
were capital expenditures of $68.0 million in 1994 and $65.4 million in 1993,
primarily for Intergraph products used in hardware and software
development. Capital expenditures of $79.5 million in 1992 were for Intergraph
products and additional facilities and related fixtures and equipment. Other
significant investing activities included cash expenditures of $8.1 million in
1993 and $36.1 million in 1992 for business acquisitions and investments in
other businesses.
Net cash generated from financing activities totaled $26.1 million in 1994
versus a net use of cash for financing activities of $18.4 million in 1993 and
$11.7 million in 1992. Primarily in the last half of 1994, the Company borrowed
a net $32.5 million to fund capital expenditures. Cash used to purchase
Company stock for the treasury totaled $10.4 million in 1994, $29.7 million in
1993, and $13.9 million in 1992.
Historically the Company's collection period for accounts receivable has been
slightly in excess of 100 days. Approximately 49% of the Company's sales are
derived from the U.S. government and European customers, both of which
traditionally carry longer collection periods. The Company endeavors to enforce
its payment terms with these and other customers, and grants extended payment
terms only in very limited circumstances. The Company has added collections
personnel in the U.S. government and international areas in an attempt to
improve its collection period.
Over the last seven years, the Board of Directors of the Company has authorized
the purchase of up to 20 million shares of the Company's stock in the open
market. As of December 31, 1994, the Company had purchased approximately 18.8
million shares for the treasury, of which 1.1 million were purchased in 1994.
Further purchases of treasury shares are dependent on availability of cash and
on market conditions.
The Company expects that capital expenditures will require $40 million to $50
million in 1995, primarily for computer equipment manufactured by the Company
for use in hardware and software development.
The Company has a $50 million revolving credit agreement with a bank that
enables the Company to borrow funds on a revolving basis until May 31, 1995.
Outstanding borrowings under this agreement totaled $15 million at December 31,
1994. The loan commitment is conditional on the maintenance of minimum levels
of tangible net worth at various dates through its expiration. Under certain
circumstances, borrowings under the agreement may create a security interest in
certain of the accounts receivable of the Company. The Company also had
outstanding borrowings of $18.6 million under uncommitted lines of credit and
other short-term borrowing facilities as of December 31, 1994.
The Company's requirements for cash from external sources are dependent on the
future operating results of the Company. Its access to and cost of additional
external funds similarly depend on results of operations and on general
economic conditions. The Company is currently evaluating sources of funding
and expects to have adequate external financing arranged before the expiration
date of its $50 million revolving credit agreement. The cost of any additional
funding may exceed the cost of external funding to date due to the Company's
operating losses and generally higher interest rates. The Company expects to
meet its 1995 cash requirements through cash generated from operations and from
existing and other external sources.
FOURTH QUARTER 1994
Revenues for the fourth quarter were $296.7 million, up 10% from fourth quarter
1993. The Company incurred a loss of $.41 per share for the quarter versus a
loss of $1.54 per share in the fourth quarter of 1993, which included a
restructuring charge of $1.18 per share. The fourth quarter 1994 loss included
the write-off of a $5.5 million account receivable from a Middle Eastern
customer ($.12 per share) and the reversal of $4.8 million of the restructuring
charge recognized in 1993 ($.11 per share).
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------
DECEMBER 31, 1994 1993
- -------------------------------------------------------------------------------
(In thousands except share and per share amounts)
ASSETS
Cash and cash equivalents $61,393 $55,976
Short-term investments 1,023 19,772
Accounts receivable 344,957 314,256
Inventories 114,444 111,555
Refundable income taxes 22,784 42,380
Other current assets 30,097 41,118
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 574,698 585,057
Long-term investments, primarily in affiliates 9,453 23,560
Other assets 28,194 22,281
Property, plant, and equipment, net 227,273 224,431
- -------------------------------------------------------------------------------
TOTAL ASSETS $839,618 $855,329
===============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable $51,224 $42,866
Accrued compensation 47,533 43,366
Other accrued expenses 69,241 75,608
Billings in excess of sales 79,265 62,087
Income taxes payable 6,816 3,309
Short-term debt and current maturities of long-term debt 37,726 9,065
- -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 291,805 236,301
Deferred income taxes 2,088 12,777
Long-term debt 23,388 17,541
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 317,281 266,619
- -------------------------------------------------------------------------------
Shareholders' equity:
Common stock, par value $.10 per share --
100,000,000 shares authorized;
57,361,362 shares issued 5,736 5,736
Additional paid-in capital 243,295 246,642
Retained earnings 454,139 524,359
Cumulative translation adjustment 2,458 (7,606)
- -------------------------------------------------------------------------------
705,628 769,131
Less -- cost of 12,576,082 treasury shares
at December 31, 1994 and 12,006,827
treasury shares at December 31, 1993 (183,291) (180,421)
- -------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 522,337 588,710
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $839,618 $855,329
===============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- -------------------------------------------------------------------------------
(In thousands except per share amounts)
REVENUES
Systems $665,583 $672,790 $795,862
Maintenance and services 375,820 377,487 380,799
- -------------------------------------------------------------------------------
TOTAL REVENUES 1,041,403 1,050,277 1,176,661
- -------------------------------------------------------------------------------
COST OF REVENUES
Systems 401,515 371,157 369,258
Maintenance and services 217,756 251,129 258,110
- -------------------------------------------------------------------------------
TOTAL COST OF REVENUES 619,271 622,286 627,368
- -------------------------------------------------------------------------------
GROSS PROFIT 422,132 427,991 549,293
Product development 137,247 160,294 150,152
Sales and marketing 262,322 238,054 252,619
General and administrative 100,031 104,459 116,696
Restructuring charge (credit) (4,826) 89,806 4,418
- -------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS (72,642) (164,622) 25,408
Interest expense (2,359) (2,097) (3,025)
Interest income 3,049 4,467 5,432
Foreign exchange loss (2,626) (3,267) (12,531)
Other income (expense) -- net 387 (7,031) (2,892)
- -------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING FOR INCOME TAXES (74,191) (172,550) 12,392
Income tax benefit (expense) 3,971 54,008 (3,950)
- -------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES (70,220) (118,542) 8,442
Cumulative effect as of January 1, 1993,
of change in method of accounting
for income taxes --- 2,500 ---
- -------------------------------------------------------------------------------
NET INCOME (LOSS) $(70,220) $(116,042) $8,442
===============================================================================
EARNINGS (LOSS) PER SHARE:
Income (loss) before cumulative effect of change
in accounting for income taxes $(1.56) $(2.56) $.18
Cumulative effect of change in accounting for
income taxes --- .05 ---
- -------------------------------------------------------------------------------
NET INCOME (LOSS) $(1.56) $(2.51) $.18
===============================================================================
Weighted average shares outstanding 44,860 46,199 48,020
===============================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ---------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES:
Net income (loss) $(70,220) $(116,042) $ 8,442
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Cumulative effect of change in method of
accounting for income taxes --- (2,500) ---
Depreciation and amortization 73,640 85,124 79,455
Non-cash portion of restructuring charge (credit) (4,826) 79,565 1,637
Deferred income tax expense (benefit) 15,625 (20,348) 5,300
Collection of income tax refunds 34,472 10,697 6,653
Gain on sale of investment in affiliate (5,815) --- ---
Write-off of investments in affiliates 3,361 3,273 ---
Net changes in current assets and liabilities (13,181) 27,930 21,867
Foreign exchange loss 2,626 3,267 12,531
- ---------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 35,682 70,966 135,885
- ---------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Net decrease (increase) in short- and
long-term securities investments --- 12,376 (4,293)
Purchases of securities (86,620) --- ---
Sales and maturities of securities 118,441 --- ---
Purchase of property, plant, and equipment (67,967) (65,414) (79,497)
Capitalized software development costs (16,584) (9,735) (9,735)
Business acquisitions, net of cash acquired --- (6,938) (19,658)
Purchase of ownership interests in other businesses (770) (1,119) (16,466)
Repayment of loan by affiliate --- 6,994 ---
Other (913) 4,917 (1,813)
- ---------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (54,413) (58,919) (131,462)
- ---------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Gross borrowings 44,609 8,236 363
Debt repayment (12,138) (2,097) (4,722)
Proceeds of employee stock purchases 4,019 4,409 4,418
Proceeds of exercise of stock options --- 829 2,119
Acquisition of treasury stock (10,379) (29,734) (13,925)
- ---------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES 26,111 (18,357) (11,747)
- ---------------------------------------------------------------------------------
Effect of exchange rate changes on cash (1,963) (4,908) (7,796)
- ---------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 5,417 (11,218) (15,120)
Cash and cash equivalents at beginning of year 55,976 67,194 82,314
- ---------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 61,393 $ 55,976 $ 67,194
=================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock Treasury Stock Additional Cumulative Total
Paid-in Retained Translation Shareholders'
Shares Amount Shares Amount Capital Earnings Adjustment Equity
- -----------------------------------------------------------------------------------------------------------------------------
(In thousands except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 57,361,362 $5,736 ( 9,569,997) $(157,342) $251,607 $631,959 $23,034 $754,994
Treasury shares acquired --- --- ( 918,000) ( 13,925) --- --- --- ( 13,925)
Shares issued under employee
stock purchase plan --- --- 353,879 5,801 ( 1,383) --- --- 4,418
Shares issued upon exercise
of stock options --- --- 139,393 2,299 ( 133) --- --- 2,166
Shares issued upon
purchase of a business --- --- 191,354 3,132 ( 548) --- --- 2,584
Translation adjustments --- --- --- --- --- --- (22,822) ( 22,822)
Other --- --- --- --- 1,006 --- --- 1,006
Net income for the year --- --- --- --- --- 8,442 --- 8,442
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 57,361,362 5,736 ( 9,803,371) (160,035) 250,549 640,401 212 736,863
Treasury shares acquired --- --- ( 2,805,000) ( 29,734) --- --- --- ( 29,734)
Shares issued under employee
stock purchase plan --- --- 494,462 7,656 ( 3,247) --- --- 4,409
Shares issued upon exercise
of stock options --- --- 107,082 1,692 ( 863) --- --- 829
Translation adjustments --- --- --- --- --- --- (10,570) ( 10,570)
Recognition of net cumulative
translation loss resulting
from restructuring --- --- --- --- --- --- 2,752 2,752
Other --- --- --- --- 203 --- --- 203
Net loss for the year --- --- --- --- --- (116,042) --- (116,042)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 57,361,362 5,736 (12,006,827) (180,421) 246,642 524,359 ( 7,606) 588,710
Treasury shares acquired --- --- ( 1,080,000) ( 10,379) --- --- --- ( 10,379)
Shares issued under employee
stock purchase plan --- --- 510,625 7,508 ( 3,489) --- --- 4,019
Translation adjustments --- --- --- --- --- --- 10,064 10,064
Other --- --- 120 1 142 --- --- 143
Net loss for the year --- --- --- --- --- ( 70,220) --- ( 70,220)
- ----------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 57,361,362 $5,736 (12,576,082) $(183,291) $243,295 $454,139 $ 2,458 $522,337
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES.
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Intergraph Corporation and its majority-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The Company's business is in one industry segment -- the
development, manufacturing, marketing, and service of interactive computer
graphics systems.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS: The Company's excess funds are
generally invested in short-term, highly liquid, interest-bearing securities,
which may include short-term municipal bonds, time deposits, money market
preferred stocks, commercial paper, and U.S. government securities. The
Company's investment policy limits the amount of credit exposure to any single
issuer of securities. All cash equivalents and short-term investments are
stated at fair market value based on quoted market prices. For financial
statement purposes, investments with original maturities of three months or
less are considered to be cash equivalents.
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115), for investments held as of or acquired after
January 1, 1994. In accordance with the provisions of SFAS 115, prior period
financial statements have not been restated to reflect the provisions of the
new standard. Neither the cumulative effect of adopting SFAS 115 as of January
1, 1994, nor its application for the year ended December 31, 1994 was material
to the Company's results of operations or financial position.
Under the provisions of SFAS 115, the Company's investments in debt securities
and in marketable equity securities not accounted for by the equity method are
valued at fair market value in the balance sheet with any unrealized gains and
losses due to market value changes reported as a component of shareholders'
equity, net of tax. Interest on these securities is included in "Interest
income" in the consolidated statements of operations. Any realized gains and
losses on sales of these securities are included in "Other income (expense) -
net" in the consolidated statements of operations. The cost of securities sold
is based on the specific identification method. See Note 3 for details of
securities held at December 31, 1994.
INVENTORIES: Inventories are stated at the lower of average cost or market and
are summarized as follows:
- --------------------------------------------------------
DECEMBER 31, 1994 1993
- --------------------------------------------------------
(In thousands)
Raw materials $ 29,734 $ 31,023
Work-in-process 35,617 33,118
Finished goods 14,198 14,295
Service spares 34,895 33,119
- ---------------------------------------------------------
Totals $114,444 $111,555
=========================================================
INVESTMENTS IN AFFILIATES: Investments in other companies in which the Company
has the ability to influence operations or finances, generally 20%- to
50%-owned companies, are accounted for by the equity method. Investments in
companies in which the Company does not exert such influence, generally in less
than 20%-owned companies, are accounted for by the cost method.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment, summarized
below, is stated at cost. Depreciation is provided using the straight-line
method over the estimated useful lives of the assets.
- ----------------------------------------------------------------------
DECEMBER 31, 1994 1993
- ----------------------------------------------------------------------
(In thousands)
Land and improvements $ 14,950 $ 14,593
Buildings and improvements 147,632 143,032
Equipment, furniture, and fixtures 349,702 316,251
- ----------------------------------------------------------------------
512,284 473,876
Allowances for depreciation and amortization (285,011) (249,445)
- ----------------------------------------------------------------------
Totals $227,273 $224,431
======================================================================
TREASURY STOCK: Treasury stock is accounted for by the cost method. The Board
of Directors of the Company has authorized the purchase of up to 20,000,000
shares of the Company's common stock in the open market. From the initial
authorization in 1987 through the end of 1994, the Company had purchased
approximately 18,800,000 shares for the treasury. Treasury stock activity is
presented in the consolidated statements of shareholders' equity.
REVENUE RECOGNITION: Revenues from systems sales with no post-shipment
obligations are recognized as equipment and software are shipped. Revenues on
systems sales with significant post-shipment obligations are recognized by the
percentage-of-completion method with progress to completion measured on the
basis of labor costs and other factors. Revenues from certain contracts with
the U.S. government, primarily cost-plus award fee contracts, are recognized
monthly as costs are incurred and fees are earned under the contracts. A
certain portion of revenues from all systems sales is not recognized until
installation is complete and the warranty period has expired. Maintenance and
services revenues are recognized ratably over the lives of the maintenance
contracts or as services are performed.
Billings may not coincide with the recognition of revenue. Unbilled accounts
receivable occur when revenue recognition precedes billing to the customer and
arise primarily from commercial sales with predetermined billing schedules,
U.S. government sales with billing at the end of a performance period, and U.S.
government cost-plus award fee contracts. Billings in excess of sales occur
when billing to the customer precedes revenue recognition, and arise primarily
from maintenance revenue billed in advance of performance of the maintenance
activity, and systems revenue billed at shipment with a portion of the revenue
deferred until completion of installation services and expiration of the
warranty period.
PRODUCT DEVELOPMENT COSTS: The Company capitalizes certain costs of computer
software development incurred after the technological feasibility of the
product has been established. Such capitalized costs are amortized over a two
year period on a straight-line basis. Amortization expense included in "Cost of
revenues - Systems" in the consolidated statements of operations amounted to
$11,278,000 in 1994, $8,409,000 in 1993, and $6,736,000 in 1992.
The unamortized balance of capitalized software development costs, which is
included in "Other assets" in the consolidated balance sheets, totaled
$16,068,000 and $10,762,000 at December 31, 1994 and 1993, respectively.
FOREIGN CURRENCY EXCHANGE AND TRANSLATION: Local currencies are the functional
currencies for the Company's European subsidiaries. The U.S. dollar is the
functional currency for all other international subsidiaries. Foreign currency
gains and losses resulting from remeasurement or settlement of receivables and
payables denominated in a currency other than the functional currency are
included in "Foreign exchange loss" in the consolidated statements of
operations. Translation gains and losses resulting from translating
subsidiaries' financial statements from the functional currency into dollars
for U.S. reporting purposes and foreign currency gains and losses resulting
from remeasurement of intercompany advances of a long-term investment nature
are included in the "Cumulative translation adjustment" component of
shareholders' equity.
The foreign exchange loss included in the 1992 statement of operations was
primarily the result of third and fourth quarter instability within the
European Monetary System (EMS). Currency exposure within the Company's European
manufacturing and distribution center was not hedged, since European currency
values to that time were generally controlled within the EMS. Subsequently, the
Company began hedging a portion of its exposure among the European currencies.
DERIVATIVE FINANCIAL INSTRUMENTS: Derivatives utilized by the Company consist
of forward exchange contracts and interest rate swap agreements.
The Company has certain 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 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 related to balance sheet items (intercompany receivables,
payables, and formalized intercompany debt) which are denominated in a currency
other than the functional currency of the local entity. 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, which are generally less than three months. Gains and
losses on forward exchange contracts are recognized in the period in which the
exchange rate changes. Bank fees charged on the contracts are amortized over
the period of the contract. Gains and losses and fees paid on the contracts are
included in "Foreign exchange loss" in the consolidated statements of
operations, together with exchange rate-related changes in the financial
statement value of the items being hedged. The Company is prohibited by policy
from taking currency positions exceeding its known balance sheet currency
exposure and from otherwise trading in currencies.
The Company has two interest rate swap agreements in the principal amounts of
its two European floating rate mortgages described in Note 7. The agreements
were entered into to reduce the risk of increases in interest rates. The
agreements provide for the receipt of interest based on floating rates in
exchange for fixed rate interest payments over the life of the swap agreements.
The Company accounts for its interest rate swaps as hedges of its debt
obligations. The difference in amounts to be paid and received is accrued and
recognized as an adjustment to interest expense on the debt. Deferred gains
related to terminated interest rate swap agreements are amortized to interest
expense over the remaining terms of the agreements, and are not significant to
the Company's results of operations. The Company does no trading in this form
of derivative investment.
Amounts payable to or receivable from counterparties related to derivative
financial instruments are included in "Other accrued expenses" or "Other
current assets" in the consolidated balance sheets. These amounts were not
significant at December 31, 1994. Cash flows from derivative financial
instruments are classified in the consolidated statements of cash flows
consistent with the cash flows from the assets and liabilities being hedged.
See Note 4 for further details of the Company's derivative financial
instruments.
INCOME TAXES: Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
changed the Company's method of accounting for income taxes from the deferred
method to an asset and liability approach. The provision for income taxes
includes Federal, foreign, and state income taxes currently payable or
refundable and income taxes deferred because of temporary differences between
the financial statement and tax bases of assets and liabilities. See Note 8.
NET INCOME (LOSS) PER SHARE: Net income (loss) per share is computed using the
weighted average number of common and equivalent common shares outstanding.
Stock options are the only common stock equivalent. See Note 9.
RECLASSIFICATIONS: Certain reclassifications have been made to the previously
reported consolidated statements of cash flows for the years ended December 31,
1993 and 1992 to provide comparability with the current year presentation.
NOTE 2 -- RESTRUCTURING.
During 1993 the Company made several changes in its product, sales, and
manufacturing strategies designed to make the Company more competitive in the
current industry and economic environment, and took actions based on those
decisions that resulted in a before-tax charge to 1993 earnings of $89,806,000
($61,697,000 after related tax benefit, or $1.34 per share). Industry
conditions considered by the Company in its decisions included the trend toward
higher performance, lower priced products and intense competition that have
resulted in lower gross margins in the industry and for the Company, shorter
product cycles, and development and support of software standards that have
resulted in less specific hardware dependency by customers. Changes in strategy
included closure of the Company's European manufacturing and distribution
facility (IEM) and consolidation of worldwide manufacturing and distribution
activities in the U.S., cessation of the design and manufacture of the
Company's microprocessor that resulted in closure of the Company's Advanced
Processor Division at the end of 1994, porting of the Company's technical
software applications to a new operating system (Microsoft Corporation's
Windows NT), and the offering of a new hardware platform based on Intel
Corporation microprocessors.
The 1993 restructuring charge was comprised of $10,467,000 for direct workforce
reductions, $17,136,000 for elimination of operations, primarily IEM,
$56,082,000 for revaluation of assets resulting from new product strategies
(primarily spares inventory, goodwill, and investments in other companies), and
$6,121,000 for restructure of the Company's electronics business unit. These
charges are described individually below.
REDUCTION IN WORKFORCE: This portion of the restructuring charge was the result
of termination of approximately 450 employees, primarily in the Company's
European and U.S. sales and support operations. The charge consisted of
severance pay and other personnel related charges.
ELIMINATION OF OPERATIONS: In January 1994, the Company announced its decision
to close IEM over the course of 1994 and transfer related activities to its
U.S. manufacturing facility. The related restructuring charge consisted
primarily of the costs of severance and other personnel related costs for the
130 employees that were affected. Also included in this amount were charges
related to consolidation of sales and support facilities, primarily in Europe,
connected with the direct reductions in workforce discussed above, and asset
retirements of the Company's Advanced Processor Division.
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. The original plan called for sale
or lease of the facility. All manufacturing activity will continue to be
performed in the U.S. In 1994 the Company reversed the remaining unincurred
portion of the 1993 restructuring charge related to IEM ($4,826,000) as the
result of lower severance costs than originally anticipated.
REVALUATION OF ASSETS DUE TO NEW PRODUCT STRATEGY: The portion of the
restructuring charge related to revaluation of assets was comprised of
$35,300,000 to retire spares inventory and $20,800,000 to write-off goodwill
recognized on previous acquisitions and write-off investments in less than 20%-
owned companies, all as a result of the diminished value of these assets due to
the Company's new product strategy and transition.
RESTRUCTURE OF ELECTRONICS BUSINESS: The Company continued in 1993 to
restructure and position its electronics business in an effort to focus
activity on growth areas and further integrate its DAZIX unit, acquired in
December 1990, with the Company's existing electronics business. The
$6,121,000 restructuring charge in 1993 and $4,418,000 restructuring charge in
1992 consisted of severance pay and facilities consolidation expenses and, in
1993, of write-off of goodwill from related acquisitions and investments in
companies offering complementary products.
NOTE 3 -- INVESTMENTS IN DEBT SECURITIES.
At December 31, 1994 the Company held various debt securities, including bank
time deposits, repurchase agreements, and master note arrangements, with a fair
market value of $32,780,000. These investment securities, all of which were
within three months of maturity at December 31, 1994, are included in "Cash and
cash equivalents" ($31,757,000) and "Short-term investments" ($1,023,000) in
the consolidated balance sheet.
Gross realized gains and losses on securities sold during the year ended
December 31, 1994, were not significant. There were no unrealized holding gains
or losses at December 31, 1994.
NOTE 4 -- FINANCIAL INSTRUMENTS.
Information related to the Company's financial instruments other than cash
equivalents and short-term investments is summarized below.
LONG-TERM INVESTMENTS: The Company's stock investments in less than 20%-owned
companies are included in the consolidated balance sheets as of December 31,
1994 and 1993, at cost of $2,400,000 and $9,100,000, respectively. These
companies are privately held, and therefore quoted market values for these
investments are not available. The Company is unable to determine fair values
for these investments without incurring excessive costs but believes its
investments in these companies have not been impaired.
The Company held long-term debt securities at December 31, 1993 with a carrying
value of $6,100,000, which approximated fair market value based on quoted
market prices at that date.
SHORT- AND LONG-TERM DEBT: The balance sheet carrying amounts of the Company's
floating rate debt, consisting of loans under various short-term credit
facilities and a revolving credit agreement (see Note 7), approximate fair
market values since interest rates on the debt adjust periodically to reflect
changes in market rates of interest. The carrying amounts of fixed rate debt,
including the Company's mortgage debts that are the subject of interest rate
swap agreements described below, approximate fair market values based on
current interest rates for debt of the same remaining maturities and character.
DERIVATIVES: The fair market values of the Company's derivative financial
instruments, consisting of forward exchange contracts and interest rate swap
agreements, were determined by obtaining quotes from banks, and are expressed
in terms of amounts the Company would receive or pay should the Company's
obligations under the instruments be transferred to a third party at the
reporting date. The fair values of the Company's forward exchange contracts and
interest rate swap agreements approximate the original contract amounts on that
basis.
Forward exchange contracts: The Company had outstanding net forward exchange
contracts of $41,030,000 and $49,000,000 at December 31, 1994 and 1993,
respectively. Such amounts approximated the Company's currency related asset
and liability exposures at those dates. The table below summarizes in U.S.
dollars the face amounts of these contracts by major currency. For purposes of
presentation, foreign currency amounts are translated to dollars at the rates
in effect at each balance sheet date. "Sell" amounts represent the U.S. dollar
equivalent of commitments to sell currencies and "buy" amounts represent the
U.S. dollar equivalent of commitments to purchase currencies.
- ----------------------------------------------------------------------------
DECEMBER 31, 1994 1993
-------------------------- ----------------------------
NET FORWARD NET FORWARD
CONTRACT CONTRACT
SELL BUY POSITION SELL BUY POSITION
- ----------------------------------------------------------------------------
(In thousands)
German mark $12,743 --- $12,743 $9,739 $5,762 $3,977
U.S. dollar 6,200 $5,200 1,000 16,000 1,000 15,000
Italian lira 4,859 --- 4,859 6,945 --- 6,945
French franc 3,824 1,120 2,704 1,707 --- 1,707
Dutch guilder 3,600 --- 3,600 24,093 15,544 8,549
Belgian franc 2,944 --- 2,944 6,457 --- 6,457
Other currencies 13,180 --- 13,180 6,365 --- 6,365
- ----------------------------------------------------------------------------
Totals $47,350 $6,320 $41,030 $71,306 $22,306 $49,000
============================================================================
Based on the terms of outstanding forward exchange contracts and the amount of
the Company's balance sheet exposure at December 31, 1994, the Company's
results of operations would not be materially affected by a 10% increase or
decrease in exchange rates underlying the contracts and the exposures hedged.
Cash requirements of forward exchange contracts are limited to receipt of an
amount equal to the exchange gain or payment of an amount equal to the exchange
loss at the contract settlement date, and payment of bank fees related to the
contracts. Net cash flow from forward contract activity, consisting of realized
gains and losses from settlement of exposed assets and liabilities at exchange
rates in effect at the settlement date rather than at the time of recording,
settlement of the forward contracts purchased to mitigate the exposures, and
payment of bank fees on the forward contracts, was $1,800,000 negative in 1994,
$5,100,000 negative in 1993, and $2,100,000 positive in 1992.
Interest rate swap agreements: The Company has two interest rate swap
agreements in the principal amounts of its two European floating rate mortgages
($20,000,000 at December 31, 1994 and $18,497,000 at December 31, 1993). The
agreements are for an original term of two years, expiring in first quarter
1995. The Company pays a fixed rate of interest and receives a variable rate of
interest based on the Amsterdam Interbank Offering Rate (AIBOR), and is thus
exposed to market risk of potential future decreases in AIBOR. The weighted
average pay and receive rates of the two agreements were 7.36% and 5.91%,
respectively, at December 31, 1994 and 7.36% and 6.10%, respectively, at
December 31, 1993. The weighted average receive rate is based on the rate in
effect at each balance sheet date. Cash requirements of the agreements, which
were not significant in either of the two years, are limited to the
differential between the fixed rate paid and the variable rate received.
NOTE 5 -- SUPPLEMENTARY CASH FLOW INFORMATION.
Changes in current assets and liabilities, net of the effects of business
acquisitions and restructuring charges, in reconciling net income (loss) to net
cash provided by operations are as follows:
- -----------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR) OPERATIONS
YEAR ENDED DECEMBER 31, 1994 1993 1992
- -----------------------------------------------------------------------------
(In thousands)
(Increase) decrease in:
Accounts receivable $(20,738) $17,801 $12,680
Inventories 8,331 36,805 6,988
Refundable income taxes (19,596) (39,818) (14,944)
Other current assets (6,476) 5,165 2,099
Increase (decrease) in:
Trade accounts payable 8,013 9,460 (3)
Accrued compensation and other
accrued expenses (836) (1,569) 11,990
Billings in excess of sales 14,824 4,287 6,377
Income taxes payable 3,297 (4,201) (3,320)
- -----------------------------------------------------------------------------
Net changes in current assets and liabilities $(13,181) $27,930 $21,867
==============================================================================
Cash payments for income taxes totaled $4,588,000, $4,201,000, and $13,051,000
in 1994, 1993, and 1992, respectively. Cash payments for interest in those
years totaled $2,413,000, $2,252,000, and $2,913,000, respectively.
There were no significant non-cash investing and financing transactions in 1994
or 1993. Non-cash transactions in 1992 consisted of acquisition of and
investments in other businesses in part through issuance of notes payable and
forgiveness of debt totaling $3,272,000, issuance of treasury shares valued at
$2,584,000, and obligations for other amounts totaling $2,896,000 (see Note 10).
NOTE 6 -- ACCOUNTS RECEIVABLE.
Accounts receivable are summarized as follows:
- --------------------------------------------------------------------
DECEMBER 31, 1994 1993
- --------------------------------------------------------------------
(In thousands)
Billed receivables:
Trade $273,603 $243,152
Unreimbursed costs and fees under
government contracts 16,336 10,047
- --------------------------------------------------------------------
289,939 253,199
- --------------------------------------------------------------------
Unbilled receivables:
Trade 65,227 72,002
Unreimbursed costs and fees under
government contracts 10,100 9,846
- --------------------------------------------------------------------
75,327 81,848
- --------------------------------------------------------------------
365,266 335,047
Less allowances (20,309) (20,791)
- --------------------------------------------------------------------
Totals $344,957 $314,256
====================================================================
Concentrations of credit risk with respect to accounts receivable are limited
due to the diversity of the Company's customer base. The Company performs
periodic credit evaluations of its customers' financial condition and generally
does not require collateral. Historically, the Company has not experienced
significant losses related to trade receivables from individual customers or
from groups of customers in any geographic area, with the exception of the 1994
write-off of a $5,500,000 receivable from a Middle Eastern customer. The
Company's total accounts receivable from Middle Eastern customers at December
31, 1994 was $18,000,000.
Revenues from the U.S. government were $166,955,000 in 1994, $165,655,000 in
1993, and $186,497,000 in 1992, representing 16% of total revenues in each of
the three years. At December 31, 1994, accounts receivable from the U.S.
government was $49,000,000.
NOTE 7 -- DEBT AND LEASES.
Short- and long-term debt is summarized as follows:
- ---------------------------------------------------------------
DECEMBER 31, 1994 1993
- ---------------------------------------------------------------
(In thousands)
Short-term credit facilities $18,617 $6,896
Revolving credit agreement 15,003 ---
Long-term mortgages 20,000 18,497
Other 7,494 1,213
- ----------------------------------------------------------------
Total debt 61,114 26,606
Less amounts payable within one year 37,726 9,065
- ----------------------------------------------------------------
Total long-term debt $23,388 $17,541
================================================================
The Company has entered into short-term, uncommitted credit arrangements with
various banks to provide temporary working capital.
The Company has a $50 million revolving credit agreement with a bank enabling
the Company to borrow funds on a revolving basis until May 31, 1995. The loan
commitment is conditional on the maintenance of minimum levels of tangible net
worth at various dates through May 1995. Under certain circumstances,
borrowings under the agreement may create a security interest in certain of the
accounts receivable of the Company.
The weighted average interest rate on combined debt outstanding under
short-term credit arrangements and the revolving credit agreement for 1994 and
1993 was 6.8% and 9.6%, respectively.
The Company has two long-term mortgages on certain of its European facilities,
including the manufacturing and distribution facility that was closed in 1994
in connection with the Company's 1993 restructuring plan (see Note 2). The
mortgages are payable in varying installments through the year 2017 and bear
interest at the floating Amsterdam Interbank Offering Rate (AIBOR), which
ranged from 5.2% to 6.5% in 1994 and from 6.4% to 9.4% in 1993. During 1993,
the Company entered into two-year interest rate swap agreements in the amounts
of the mortgages to reduce the risk of increases in interest rates, effectively
converting the interest rates on these mortgages to a fixed rate of 7.4%. The
agreements expire in first quarter 1995.
See Note 4 for discussion of fair values of the Company's debt and interest
rate swap agreements.
The Company leases various property, plant, and equipment under operating
leases as lessee. Rental expense for operating leases was $38,628,000 in 1994,
$41,668,000 in 1993, and $44,527,000 in 1992. Subleases and contingent rentals
are not significant. Future minimum lease payments, by year and in the
aggregate, under non-cancellable operating leases with initial or remaining
terms of one year or more are as follows:
- ---------------------------------------------------------
OPERATING
LEASE COMMITMENTS
- ---------------------------------------------------------
(In thousands)
1995 $30,328
1996 21,606
1997 14,992
1998 7,246
1999 4,729
Thereafter 28,485
- ----------------------------------------------------------
Total future minimum lease payments $107,386
==========================================================
NOTE 8 -- INCOME TAXES.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under
SFAS 109, tax liabilities are provided in the financial statements at tax rates
known to be in effect in the future years in which items of income and expense
currently deferred for tax return purposes become includable in the tax return,
rather than at rates in effect in the year of deferral. Since the Company had
historically provided taxes at rates higher than the reduced tax rates now in
effect, it was required to reduce deferred tax liabilities to reflect current
tax rates, which resulted in an increase in 1993 income (shown as the
cumulative effect of a change in accounting principle in the consolidated
statement of operations) of $2,500,000 or $.05 per share. The change in method
did not significantly affect the Company's effective rate of tax for 1993.
The components of income (loss) before income taxes are as follows:
- --------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- --------------------------------------------------------------------------
(In thousands)
U.S. $(26,330) $(115,025) $29,379
International (47,861) ( 57,525) (16,987)
- --------------------------------------------------------------------------
Total income (loss) before income taxes $(74,191) $(172,550) $12,392
==========================================================================
Income tax benefit (expense) consists of the following. The "liability method"
is the method prescribed by SFAS 109 and adopted prospectively by the Company
effective January 1, 1993. The "deferred method" is the method utilized prior
to adoption of SFAS 109.
- ----------------------------------------------------------------------------
LIABILITY METHOD DEFERRED METHOD
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ----------------------------------------------------------------------------
(In thousands)
Current benefit (expense):
Federal $19,931 $32,460 $4,579
State (132) 900 93
International (203) 300 (3,322)
- ----------------------------------------------------------------------------
19,596 33,660 1,350
- ----------------------------------------------------------------------------
Deferred benefit (expense):
Federal (14,775) 16,429 (7,936)
State --- 200 (55)
International (850) 3,719 2,691
- ----------------------------------------------------------------------------
(15,625) 20,348 (5,300)
- ----------------------------------------------------------------------------
Total income tax benefit (expense) $ 3,971 $54,008 $(3,950)
============================================================================
"Refundable income taxes" included in the consolidated balance sheets consist
primarily of the benefit of 1994 and 1993 losses for U.S. federal income tax
return purposes.
Deferred income taxes included in the Company's balance sheet reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the carrying amounts for
income tax return purposes. Significant components of the Company's deferred
tax assets and liabilities are as follows:
- ----------------------------------------------------------------------------
DECEMBER 31, 1994 1993
- ----------------------------------------------------------------------------
(In thousands)
Current deferred tax assets (liabilities):
Inventory reserves $12,194 $18,504
Vacation pay and other employee benefit accruals 7,005 6,367
Accrued liabilities related to restructuring --- 4,292
Other financial statement reserves, primarily
allowance for doubtful accounts 6,875 6,132
Profit on uncompleted sales contracts
deferred for tax return purposes (13,826) (11,730)
Other current tax assets and liabilities, net 3,876 1,516
- ----------------------------------------------------------------------------
16,124 25,081
Less asset valuation allowance (14,911) (3,024)
- ----------------------------------------------------------------------------
Total net current asset (1) 1,213 22,057
- ----------------------------------------------------------------------------
Noncurrent deferred tax assets (liabilities):
Net operating loss and tax credit carryforwards:
U.S. federal and state 15,377 ---
Foreign operations 24,874 12,031
Depreciation (10,047) (10,426)
Other noncurrent tax assets and liabilities, net (2,033) (1,632)
- ----------------------------------------------------------------------------
28,171 (27)
Less asset valuation allowance (30,259) (12,750)
- ----------------------------------------------------------------------------
Total net noncurrent liability (2,088) (12,777)
- ----------------------------------------------------------------------------
Net deferred tax asset (liability) $(875) $9,280
============================================================================
(1) Included in "Other current assets" in the consolidated balance sheets.
The valuation allowance for deferred tax assets, which consists primarily of
reserves against the tax benefit of net operating loss carryforwards, increased
by $29,396,000 in 1994 due to the incurrence of additional losses that may be
carried forward, the future tax benefits of which cannot be assured. If
realized, these tax benefits will be applied to reduce income tax expense in
the year realized.
Net operating loss carryforwards are available to offset future earnings within
the time periods specified by law. At December 31, 1994, the Company had a U.S.
federal net operating loss carryforward of approximately $11,000,000 expiring
in 2009. International net operating loss carryforwards total approximately
$70,000,000 and expire as follows:
- --------------------------------------------------------------
INTERNATIONAL
NET OPERATING LOSS
DECEMBER 31, 1994 CARRYFORWARDS
- --------------------------------------------------------------
(In thousands)
Expiration:
3 years or less $10,000
4 to 5 years 8,000
6 to 10 years 7,000
Unlimited carryforward 45,000
- --------------------------------------------------------------
Total $70,000
==============================================================
Additionally, the Company has $5,400,000 of U.S. alternative minimum tax credit
carryforwards which have no expiration date. U.S. research and development tax
credit carryforwards of $2,500,000 are available to offset regular tax
liability through 2008.
Under the then-prevailing deferred method, deferred income taxes were provided
in 1992 for significant timing differences in the recognition of revenue and
expenses for tax reporting and financial statement purposes. These timing
differences related primarily to deferred profit on uncompleted contracts and
profits on intercompany asset transfers.
A reconciliation from income tax benefit (expense) at the U.S. federal
statutory tax rate of 35% for 1994 and 1993 (34% for 1992) to the Company's
income tax benefit (expense) is as follows:
- -----------------------------------------------------------------------------
LIABILITY METHOD DEFERRED METHOD
YEAR ENDED DECEMBER 31, 1994 1993 1992
- -----------------------------------------------------------------------------
(In thousands)
Income tax benefit (expense) at federal
statutory rate $25,967 $60,393 $(4,213)
Research and development tax credit --- 3,400 643
Benefit from Foreign Sales Corp. (FSC) 1,689 1,415 1,161
Tax effects of international operations, net (9,836) (13,933) (5,667)
Tax effects of reorganization of certain
international subsidiaries --- 6,200 3,483
State income taxes, net of federal tax benefit (86) 754 86
Non-deductible goodwill amortization --- (3,290) 439
Tax effect of U.S. tax loss carried forward (3,804) --- ---
Tax effect of U.S. tax credits carried forward (7,900) --- ---
Other - net (2,059) ( 931) 118
- -----------------------------------------------------------------------------
Income tax benefit (expense) $3,971 $54,008 $(3,950)
=============================================================================
The Company does not provide for federal income taxes or tax benefits on the
undistributed earnings and/or losses of its international subsidiaries because
earnings are reinvested and, in the opinion of management, will continue to be
reinvested indefinitely. At December 31, 1994, the Company had not provided
federal income taxes on earnings of individual international subsidiaries of
approximately $47,000,000. Upon distribution of these earnings in the form of
dividends or otherwise, the Company would be subject to both U.S. income taxes
and withholding taxes in the various international jurisdictions. Determination
of the related amount of unrecognized deferred U.S. income tax liability is not
practicable because of the complexities associated with its hypothetical
calculation. Withholding taxes of approximately $2,400,000 would be payable if
all previously unremitted earnings as of December 31, 1994 were remitted to the
U.S. company.
During 1994, agreement was reached with the Internal Revenue Service on all
issues raised in the examination of the Company's 1989 and 1990 U.S. federal
income tax returns, with no resulting effect on the Company's results of
operations.
NOTE 9 -- EMPLOYEE STOCK OPTION AND BENEFIT PLANS.
The Company has reserved a total of 5,000,000 shares of common stock to grant
as options to key employees under the 1990 and 1992 stock option plans. Options
may be granted at fair market value or at a price less than fair market value
on the date of grant. Options are not exercisable prior to twenty-four months
from the date of grant or later than ten years after the date of grant (not
later than five years after the date of grant under the 1990 Plan).
At December 31, 1994, 2,484,677 shares were available for future grants. A
summary of activity in the Company's stock option plans is presented below.
- ----------------------------------------------------------------------------
Year Ended December 31, 1994 1993 1992
- ----------------------------------------------------------------------------
Options outstanding at beginning of year 1,408,925 1,574,087 1,761,740
Granted 70,000 345,004 140,000
Exercised --- (107,082) (139,393)
Cancelled (218,288) (403,084) (188,260)
- ----------------------------------------------------------------------------
Options outstanding at end of year 1,260,637 1,408,925 1,574,087
============================================================================
Options exercisable at end of year 598,814 538,602 470,966
============================================================================
Option prices per share:
Granted $ 9.50 $9.00-12.25 $7.88-16.00
Exercised --- 7.56-11.00 11.00-18.25
Cancelled 9.25-15.13 7.56-27.25 11.00-27.25
Options outstanding at end of year 7.88-16.00 7.88-16.00 7.56-27.25
Options exercisable at end of year 7.88-16.00 11.00-15.13 7.56-27.25
============================================================================
Under the 1987 Employee Stock Purchase Plan, 3,200,000 shares of common stock
were made available for purchase through a series of ten consecutive annual
offerings each January beginning January 1, 1987. In order to purchase stock,
each participant may have up to 10% of his pay, not to exceed $25,000 in any
offering period, withheld through payroll deductions. All full-time employees,
except members of the Administrative Committee of the Plan, are eligible to
participate. The purchase price of each share is 85% of the closing market
price of the Company's common stock on the last pay date of each calendar
month. Employees purchased 510,625, 494,462, and 353,879 shares of stock in
1994, 1993, and 1992, respectively.
In 1975 the Intergraph Corporation Stock Bonus Plan was established to provide
retirement benefits to substantially all U.S. employees. Effective January 1,
1987, the Company amended the Plan to qualify it as an employee stock
ownership plan (ESOP). The Company makes contributions to the Plan in amounts
determined at the discretion of the Board of Directors, and the contributions
are funded with Company stock. Amounts are allocated to the accounts of
participants based on compensation. Benefits are payable to participants
subject to the vesting provisions of the Plan. The Company did not make a
contribution to the Plan in 1994, 1993, or 1992.
In 1990, the Company established the Intergraph Corporation SavingsPlus Plan,
an employee savings plan qualified under Section 401(k) of the Internal Revenue
Code, covering substantially all U.S. employees. Employees can elect to
contribute up to 15% of their compensation (13% prior to July 1, 1994) to the
Plan. The Company matches 50% of employee contributions up to 6% of each
employee's compensation. Company contributions to the Plan were $6,169,000,
$5,993,000, and $6,099,000 in 1994, 1993, and 1992, respectively.
The Company also maintains various retirement benefit plans for employees of
its international subsidiaries, primarily defined contribution plans that cover
substantially all employees. Contributions to the plans are made in cash and
are allocated to the accounts of participants based on compensation. Benefits
are payable based on vesting provisions contained in each plan. Contributions
to the plans were $3,331,000, $2,928,000, and $3,127,000 in 1994, 1993, and
1992, respectively.
NOTE 10 -- ACQUISITIONS.
In February 1993, the Company acquired Bestinfo, Inc. for $9,500,000 in cash
and other consideration. Bestinfo is a producer of merchandise advertising
technology for the retail/catalog markets. The accounts and results of
operations of Bestinfo have been combined with those of the Company since the
date of acquisition using the purchase method of accounting. Had the purchase
occurred January 1, 1992, the Company's revenues, net income (loss), and
earnings (loss) per share would not have been materially affected for either
the year ended December 31, 1992 or 1993.
During 1992, the Company in separate transactions acquired three companies for
$25,514,000, consisting of $19,658,000 in cash, issuance of notes payable and
forgiveness of debt totaling $3,272,000, and issuance of 191,354 shares of the
Company's stock valued at $2,584,000. These companies are engaged in businesses
related to that of the Company. The accounts and results of operations of these
companies have been combined with those of the Company since the dates of
acquisition using the purchase method of accounting. Revenues, net income, and
earnings per share were not materially affected for the year ended December 31,
1992.
During 1992, the Company in separate transactions acquired less than majority
ownership interests or otherwise invested in six companies for a total of
$19,362,000, consisting of $16,466,000 in cash and $2,896,000 in other amounts
payable. All of these companies are engaged in businesses related to that of
the Company. These investments did not have a significant impact on the
Company's results of operations for the year ended December 31, 1992.
NOTE 11-- OPERATIONS BY GEOGRAPHIC AREA.
The following summary of operations by geographic area includes both sales to
unaffiliated customers and intercompany transfers between geographic areas.
Transfers between geographic areas are accounted for under a transfer pricing
policy. Income (loss) from operations by geographic areas reflects these
transfers.
- ----------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1994 1993 1992
- ----------------------------------------------------------------------------
(In thousands)
REVENUES
United States:
Unaffiliated customers - U.S. $526,082 $514,399 $571,856
Unaffiliated customers - export 38,908 36,017 41,014
Consolidated subsidiaries 199,663 185,673 189,109
- -----------------------------------------------------------------------------
764,653 736,089 801,979
- -----------------------------------------------------------------------------
Europe:
Unaffiliated customers 344,579 371,313 447,134
- -----------------------------------------------------------------------------
Other International:
Unaffiliated customers 131,834 128,548 116,657
U.S. parent 2,620 2,994 4,554
- -----------------------------------------------------------------------------
134,454 131,542 121,211
- -----------------------------------------------------------------------------
Eliminations -- net (202,283) (188,667) (193,663)
- -----------------------------------------------------------------------------
Total revenues $1,041,403 $1,050,277 $1,176,661
=============================================================================
INCOME (LOSS) FROM OPERATIONS
United States $(27,640) $(116,500) $18,257
Europe (33,147) (43,262) 8,224
Other International (17,403) (16,782) (11,885)
Eliminations -- net 5,548 11,922 10,812
- -----------------------------------------------------------------------------
Total income (loss) from operations $(72,642) $(164,622) $25,408
=============================================================================
IDENTIFIABLE ASSETS
United States $586,041 $612,370 $649,764
Europe 239,649 224,011 322,604
Other International 109,459 103,168 102,310
Eliminations -- net (95,531) (84,220) (88,015)
- -----------------------------------------------------------------------------
Total identifiable assets $839,618 $855,329 $986,663
=============================================================================
Loss from operations in 1993 includes restructuring charges of $55,500,000 in
the U.S., $30,900,000 in Europe, and $8,300,000 in Other International. Loss
from operations in 1994 includes a restructuring credit (reversal of the
unincurred portion of the 1993 restructuring charge) of $4,800,000 in Europe.
NOTE 12 -- SHAREHOLDER RIGHTS PLAN.
On August 25, 1993, the Company's Board of Directors adopted a Shareholder
Rights Plan. As part of this plan the Board of Directors declared a
distribution of one common stock purchase right (a "Right") for each share of
the Company's common stock outstanding on September 7, 1993. Each Right
entitles the holder to purchase from the Company one common share at a price of
$50, subject to adjustment. The Rights are not exercisable until the occurrence
of certain events related to a person or a group of affiliated or associated
persons acquiring, obtaining the right to acquire, or commencing a tender offer
or exchange offer, the consummation of which would result in beneficial
ownership by such a person or group of 15% or more of the outstanding common
shares of the Company. Rights will also become exercisable in the event of
certain mergers or an asset sale involving more than 50% of the Company's
assets or earnings power. Upon becoming exercisable, each Right will allow the
holder, except the person or group whose action has triggered the
exercisability of the Rights, to either buy securities of Intergraph or
securities of the acquiring company, depending on the form of the transaction,
having a value of twice the exercise price of the Rights. The Rights trade
with the Company's common stock. The Rights are subject to redemption at the
option of the Board of Directors at a price of $.01 per Right until the
occurrence of certain events, and are exchangeable for the Company's common
stock at the discretion of the Board of Directors under certain circumstances.
The Rights expire on September 7, 2003.
NOTE 13 -- RELATED PARTY TRANSACTIONS.
BENTLEY SYSTEMS, INC.: 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. Under this agreement, the Company paid royalties to BSI
based on its sales of MicroStation. Royalties expense totaled $21,820,000 in
1994, $18,085,000 in 1993, and $16,854,000 in 1992. At December 31, 1994 and
1993, amounts due to BSI and included in "Other accrued expenses" in the
consolidated balance sheets totaled $5,821,000 and $5,642,000, respectively.
In May 1994, the Company and BSI settled their dispute regarding the
exclusivity of the Company's distribution license. As a result, effective
January 1, 1995, both BSI and the Company 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. In addition, effective January 1,
1995, the per copy royalty payable by the Company to BSI is increased and, for
1995 only, BSI will pay the Company a per copy distribution fee based on BSI's
MicroStation sales to resellers. See Management's Discussion and Analysis of
Financial Condition and Results of Operations for further discussion of the
settlement with BSI and its effects on the Company.
LOAN PROGRAM FOR EXECUTIVE OFFICERS: In order to encourage retention of Company
stock by executive officers, the Company adopted a loan program effective
January 1993, under which executive officers may borrow from the Company, on an
unsecured basis, an amount not exceeding (1) the current market value of the
common stock of the Company owned by any such executive officer, and/or (2) the
net value (current market price less exercise price) of currently exercisable
stock options owned by any such executive officer. Interest on the loans is
charged monthly at the prevailing prime rate. Amounts must be repaid by the
earliest to occur of termination of employment, the date of sale of any common
stock of the Company by the executive officer, or May 1, 1995. At December 31,
1994 and 1993, James W. Meadlock, Chief Executive Officer and Chairman of the
Board of the Company, was indebted to the Company in the amounts of $4,778,000
and $2,502,000, respectively, under the program.
NOTE 14 -- SUMMARY OF QUARTERLY INFORMATION -- UNAUDITED.
- -----------------------------------------------------------------------------
QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- -----------------------------------------------------------------------------
(In thousands except per share amounts)
Year ended December 31, 1994:
Revenues $240,073 $242,395 $262,225 $296,710
Gross profit 97,369 103,544 104,013 117,206
Net loss (14,047) (20,164) (17,496) (18,513)
Net loss per share (.31) (.45) (.39) (.41)
Weighted average shares outstanding 45,353 44,842 44,559 44,695
Year ended December 31, 1993:
Revenues $282,077 $249,110 $250,561 $268,529
Gross profit 117,959 102,783 103,938 103,311
Loss before cumulative effect of
change in accounting for income
taxes (10,172) (18,608) (19,839) (69,923)
Net loss (7,672) (18,608) (19,839) (69,923)
Net loss per share:
Loss before cumulative effect of
change in accounting for income
taxes (.21) (.40) (.43) (1.54)
Cumulative effect of accounting
change .05 --- --- ---
----- ----- ----- -----
Net loss (.16) (.40) (.43) (1.54)
===== ===== ===== =====
Weighted average shares outstanding 47,724 46,252 45,769 45,343
===============================================================================
First quarter 1994 losses were increased by a net $.01 per share by the write-
down of two equity investments totaling $.05 per share and a $.04 per share
gain from the sale of a portion of the Company's stock investment in another
company. Third quarter 1994 losses were reduced by a $.07 per share gain from
the sale of the Company's stock investment in another company. Fourth quarter
1994 losses were increased by a $.12 per share write-off of a Middle Eastern
account receivable and reduced by an $.11 per share reversal of the remaining
unincurred portion of the restructuring charge recognized in 1993.
First quarter 1993 losses were increased by a net $.03 per share by a
restructuring charge of $.04 per share, the write-off of an equity investment
of $.04 per share, and the required adoption of a change in the method of
accounting for income taxes, which reduced losses by $.05 per share.
Restructuring charges increased 1993 losses by $.03 per share in second
quarter, by $.14 per share in third quarter, and by $1.18 per share in fourth
quarter.
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Intergraph Corporation
We have audited the accompanying consolidated balance sheets of Intergraph
Corporation and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Intergraph
Corporation and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 8, in 1993 the Company changed its method of accounting
for income taxes.
/s/ Ernst & Young LLP
Birmingham, Alabama
January 31, 1995
DIVIDEND POLICY
The Company has never declared or paid a cash dividend on its common stock. It
is the present policy of the Company's Board of Directors to retain all
earnings to finance the Company's operations.
PRICE RANGE OF COMMON STOCK
Since April 1981, Intergraph common stock has traded on The NASDAQ Stock Market
under the symbol INGR. As of January 31, 1995, there were 45,652,929 shares of
common stock outstanding, held by 6,360 shareholders of record. The following
table sets forth, for the periods indicated, the high and low sale prices of
the Company's common stock as reported on The NASDAQ Stock Market.
- -----------------------------------------------------------------------------
1994 1993
PERIOD HIGH LOW HIGH LOW
- -----------------------------------------------------------------------------
First Quarter $11 1/4 $ 8 7/8 $13 1/2 $11 5/8
Second Quarter 10 1/4 8 3/4 12 8 7/8
Third Quarter 11 8 5/8 12 3/8 8 1/2
Fourth Quarter 9 1/8 7 3/8 11 1/8 9 1/8
=============================================================================
TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank
Shareholder Services Division
P. O. Box 755
Chicago, IL 60690-0755
CORPORATE COUNSEL
Lanier Ford Shaver & Payne P.C.
200 West Court Square, Suite 5000
Huntsville, AL 35801
INDEPENDENT AUDITORS
Ernst & Young LLP
AmSouth/Harbert Plaza, Suite 1900
Birmingham, AL 35203
FORM 10-K
A copy of the Company's Form 10-K filed with the Securities and Exchange
Commission is available without charge upon written request to Shareholder
Relations, Intergraph Corporation, Huntsville, AL 35894-0001.
ANNUAL MEETING
The annual meeting of Intergraph Corporation will be held May 18, 1995, at the
Corporate offices in Huntsville, Alabama.
BOARD MEMBERS AND OFFICERS
BOARD OF DIRECTORS VICE PRESIDENTS
James W. Meadlock Thomas G. Baybrook
Chief Executive Officer and
Chairman of the Board Edward J. Blaum
Roland E. Brown Klaas Borgers
Director
Edward F. Boyle
Larry J. Laster
Executive Vice President Coleman P. Callaway
and Director
Roger O. Coupland
Nancy B. Meadlock
Executive Vice President Anthony B. Crawford
and Director
Jeffrey H. Edson
Keith H. Schonrock, Jr.
Director Graeme J. Farrell
James F. Taylor, Jr. Milford B. French
Executive Vice President,
President, Intergraph Public Safety
Business Unit, and Director Jeffrey P. Heath
Robert E. Thurber Fred D. Heddens
Executive Vice President
and Director Rune Kahlbom
William H. McClure
EXECUTIVE VICE PRESIDENTS
Robert A. Mueller
William E. Salter
President, Intergraph Federal Systems
Business Unit Winston P. Newton
Tommy D. Steele John R. Owens
President, Intergraph Software Solutions
Business Unit Robert Patience
John M. Thorington, Jr. Wade C. Patterson
President, Intergraph Computer Systems
Business Unit Charles E. Robertson, Jr.
Kenneth C. Sullivan
Lawrence F. Ayers, Jr. John W. Wilhoite
Richard S. Buchheim TREASURER
Penman R. Gilliam James H. Dorton
Neil E. Keith SECRETARY
Stephen J. Phillips John R. Wynn
Herman E. Thomason
Edward A. Wilkinson
Allan B. Wilson
Manfred Wittler
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Annual Report on Form 10-K for the year ended December 31, 1994,
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 61,393
<SECURITIES> 1,023
<RECEIVABLES> 365,266<F1>
<ALLOWANCES> 20,309
<INVENTORY> 114,444
<CURRENT-ASSETS> 574,698
<PP&E> 512,284
<DEPRECIATION> 285,011
<TOTAL-ASSETS> 839,618
<CURRENT-LIABILITIES> 291,805
<BONDS> 23,388
<COMMON> 5,736
0
0
<OTHER-SE> 516,601
<TOTAL-LIABILITY-AND-EQUITY> 839,618
<SALES> 665,583
<TOTAL-REVENUES> 1,041,403
<CGS> 401,515
<TOTAL-COSTS> 619,271
<OTHER-EXPENSES> 494,774<F2>
<LOSS-PROVISION> 10,536<F3>
<INTEREST-EXPENSE> 2,359
<INCOME-PRETAX> (74,191)
<INCOME-TAX> (3,971)
<INCOME-CONTINUING> (70,220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,220)
<EPS-PRIMARY> (1.56)
<EPS-DILUTED> (1.56)
<FN>
<F1>Accounts receivable in the Consolidated Balance Sheet is shown net of
allowances for doubtful accounts.
<F2>Other expenses include Product development expenses, Sales and marketing
expenses, General and administrative expenses, and the Restructuring
charge credit.
<F3>The provision for doubtful accounts is included in Other expenses above.
</FN>
</TABLE>
