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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to______
Commission file number 0-9722
INTERGRAPH CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 63-0573222
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Intergraph Corporation
Huntsville, Alabama 35894-0001
- --------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
(205) 730-2000
--------------------
(Telephone Number)
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
Common stock, par value $.10 per share: 48,062,854 shares
outstanding as of September 30, 1997
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INTERGRAPH CORPORATION
FORM 10-Q
September 30, 1997
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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Consolidated Balance Sheets at September 30, 1997
and December 31, 1996 2
Consolidated Statements of Operations for the
quarters ended September 30, 1997 and 1996 3
Consolidated Statements of Operations for the nine
months ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10 - 18
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 19 - 20
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
PART I. FINANCIAL INFORMATION
---------------------
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
- ---------------------------------------------------------------------------
September 30, December 31,
1997 1996
- ---------------------------------------------------------------------------
(In thousands except share and per share amounts)
Assets
Cash and cash equivalents $ 38,829 $ 50,674
Accounts receivable, net 304,321 326,117
Inventories 102,868 89,411
Other current assets 36,948 37,718
- ---------------------------------------------------------------------------
Total current assets 482,966 503,920
Investments in affiliates 13,997 19,102
Other assets 56,011 59,106
Property, plant, and equipment, net 153,005 174,219
- ---------------------------------------------------------------------------
Total Assets $705,979 $756,347
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Liabilities and Shareholders' Equity
Trade accounts payable $ 57,878 $ 51,205
Accrued compensation 51,672 50,364
Other accrued expenses 68,395 72,798
Billings in excess of sales 56,038 62,869
Short-term debt and current maturities
of long-term debt 26,311 35,880
- ---------------------------------------------------------------------------
Total current liabilities 260,294 273,116
Deferred income taxes 5,944 6,204
Long-term debt 51,696 29,764
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Total liabilities 317,934 309,084
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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 227,005 229,675
Retained earnings 290,177 339,679
Unrealized holding gain on securities
of affiliate --- 6,858
Cumulative translation adjustment 681 6,049
- ---------------------------------------------------------------------------
523,599 587,997
Less - cost of 9,298,508 treasury shares at
September 30, 1997 and 9,656,295 treasury
shares at December 31, 1996 (135,554) (140,734)
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Total shareholders' equity 388,045 447,263
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Total Liabilities and Shareholders' Equity $705,979 $756,347
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The accompanying notes are an integral part of these consolidated
financial statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Quarter Ended September 30, 1997 1996
- ---------------------------------------------------------------------------
(In thousands except per share amounts)
Revenues
Systems $199,720 $185,310
Maintenance and services 82,347 91,003
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Total revenues 282,067 276,313
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Cost of revenues
Systems 131,258 117,210
Maintenance and services 49,632 56,102
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Total cost of revenues 180,890 173,312
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Gross profit 101,177 103,001
Product development 23,991 26,563
Sales and marketing 61,637 60,482
General and administrative 25,106 25,325
- ---------------------------------------------------------------------------
Loss from operations ( 9,557) ( 9,369)
Interest expense ( 1,805) ( 1,318)
Gains on sales of investments in affiliates 4,858 316
Other income (expense) - net ( 682) ( 3,559)
- ---------------------------------------------------------------------------
Loss before income taxes ( 7,186) ( 13,930)
Income taxes --- ---
- ---------------------------------------------------------------------------
Net loss $( 7,186) $( 13,930)
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Net loss per share $( .15) $( .29)
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Weighted average shares outstanding 48,006 47,243
===========================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
- ---------------------------------------------------------------------------
Nine Months Ended September 30, 1997 1996
- ---------------------------------------------------------------------------
(In thousands except per share amounts)
Revenues
Systems $568,646 $523,409
Maintenance and services 254,788 277,776
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Total revenues 823,434 801,185
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Cost of revenues
Systems 368,996 335,691
Maintenance and services 156,536 165,722
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Total cost of revenues 525,532 501,413
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Gross profit 297,902 299,772
Product development 75,121 77,812
Sales and marketing 186,858 189,936
General and administrative 75,916 72,879
Nonrecurring operating charge 1,095 ---
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Loss from operations ( 41,088) ( 40,855)
Interest expense ( 4,652) ( 3,723)
Arbitration award ( 6,126) ---
Gains on sales of investments in affiliates 4,858 9,689
Other income (expense) - net ( 2,494) ( 611)
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Loss before income taxes ( 49,502) ( 35,500)
Income taxes --- ---
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Net loss $( 49,502) $( 35,500)
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Net loss per share $( 1.03) $( .75)
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Weighted average shares outstanding 47,885 47,046
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The accompanying notes are an integral part of these consolidated
financial statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended September 30, 1997 1996
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(In thousands)
Cash Provided By (Used For):
Operating Activities:
Net loss $(49,502) $(35,500)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Depreciation and amortization 46,192 57,569
Arbitration award 5,835 ---
Gains on sales of investments in affiliates ( 4,858) ( 9,689)
Net changes in current assets and liabilities (12,008) ( 778)
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Net cash provided by (used for) operating
activities (14,341) 11,602
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Investing Activities:
Purchase of property, plant, and equipment (17,872) (23,974)
Capitalized software development costs ( 7,149) (12,093)
Proceeds from sales of division and
investments in affiliates 5,749 10,077
Other ( 1,165) ( 605)
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Net cash used for investing activities (20,437) (26,595)
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Financing Activities:
Gross borrowings 39,078 11,439
Debt repayment (22,381) (17,715)
Proceeds of employee stock purchases and
exercise of stock options 2,419 2,970
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Net cash provided by (used for)
financing activities 19,116 ( 3,306)
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Effect of exchange rate changes on cash 3,817 487
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Net decrease in cash and cash equivalents (11,845) (17,812)
Cash and cash equivalents at beginning of period 50,674 56,407
- ---------------------------------------------------------------------------
Cash and cash equivalents at end of period $38,829 $38,595
===========================================================================
The accompanying notes are an integral part of these consolidated
financial statements.
INTERGRAPH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: In the opinion of management, the accompanying
unaudited consolidated financial statements contain all
adjustments (consisting of normal recurring items)
necessary for a fair presentation of results for the
interim periods presented.
Certain reclassifications have been made to the
previously reported consolidated statements of operations
and cash flows for the quarter and nine months ended
September 30, 1996 to provide comparability with the
current period presentation.
NOTE 2: Bentley Systems, Inc. Arbitration. As further
described in the Company's Form 10-K filing for its year
ended December 31, 1996, the Company has been party to
certain arbitration proceedings with its approximately
50%-owned affiliate, Bentley Systems, Inc. (BSI), the
developer and owner of MicroStation, a software product
utilized in many of the Company's software applications
and for which the Company serves as a nonexclusive
distributor. In May 1997, the Company received notice of
the adverse determination of an arbitration proceeding
with BSI in which the Company had alleged that BSI had
inappropriately and without cause terminated a
contractual arrangement with the Company, and in which
BSI had filed a counterclaim against the Company seeking
significant damages as the result of the Company's
alleged failure to use best efforts to sell software
support services pursuant to terms of the contractual
arrangement terminated by BSI. The arbitrator's award
against the Company was in the amount of $6,126,000 ($.13
per share). This charge is included in "Arbitration
award" in the consolidated statement of operations for
the nine months ended September 30, 1997. The
arbitration award did not materially impact the Company's
cash position, as approximately $5,800,000 in fees
otherwise owed the Company by BSI were offset against the
amount awarded BSI. In addition, the contractual
arrangement that was the subject of this arbitration has
been terminated effective with the award and, as a
result, the Company will no longer sell the related
software support services under this agreement. The
Company and BSI have entered into a new agreement which
establishes single support services between the two
companies. The Company believes that neither the
arbitration related change in BSI software support
services or its new agreement with BSI relative to such
services will have a material impact on the Company's
financial position, results of operations, or cash flows
in future periods.
The Company has one other arbitration proceeding in
process related to its business relationship with BSI.
The Company is vigorously defending its positions in that
proceeding, but at present is unable to predict its
outcome. See "Management's Discussion and Analysis" and
"Part II., Item 1., Legal Proceedings" included in this
Form 10-Q and the Company's Form 10-K for the year ended
December 31, 1996 for further details of the Company's
business relationship with BSI, its sales of
MicroStation, and the financial effects on the Company of
changes in this business relationship.
Zydex, Inc. Litigation. The Company filed a legal action
in August 1995, seeking to dissolve and wind up its
business arrangement with Zydex, Inc. ("Zydex"), a
company with which it jointly developed its plant design
application software product ("PDS"), and seeking an
order allowing the Company to continue the business of
that arrangement without further responsibility or
obligation to Zydex. In response, Zydex filed a
counterclaim against the Company in November 1995,
alleging wrongful dissolution of the business
relationship and seeking both sole ownership of PDS and
significant compensatory and punitive damages.
In April 1997, the parties agreed to settle the dispute,
but failed to agree on certain terms of the settlement.
In September 1997, the court issued an order resolving
the disputed issues and requiring the parties to close
the settlement agreement, and dismissed the case. The
settlement includes the purchase of 100% of Zydex common
stock by Intergraph for $24,750,000, with $8,250,000 due
at closing of the agreement and the remaining amount
payable over a 24 month period. The deferred payment
portion of the total purchase price is secured by a
subordinate interest in the PDS intellectual property and
by an irrevocable letter of credit in favor of the
current owner of Zydex. Interest on the unpaid amount
will accrue at a rate of 1% less than the rate charged by
Intergraph's primary lender. The current owner of Zydex
will retain certain limited rights to use PDS products
for a period of 15 years following the date of closing.
In November 1997, a hearing was held during which the
judge ordered both parties to sign the closing documents.
Such documents have been executed by both parties, but
Zydex has indicated they may appeal the judge's order. A
formal closing of the transaction has to date not
occurred, but the Company believes the transaction will
close on substantially the terms described above. The
Company will not record the settlement in its books of
account until the date of closing. When recorded, the
purchase price of Zydex stock will be recorded as a long-
term asset and amortized over the remaining useful life
of the PDS product, currently estimated at 10 years. Had
the closing occurred November 1, 1997, the Company
estimates its total cash outlay to Zydex would have been
approximately $14,000,000, all of which was to be
obtained from the Company's primary lender. See
"Liquidity and Capital Resources" included in
Management's Discussion and Analysis in this Form 10-Q
for discussion of the Company's liquidity.
The Company's sales of PDS products during the first nine
months of 1997 and for the full year 1996 were
approximately $34 million and $36 million, respectively.
NOTE 3: Inventories are stated at the lower of average cost
or market and are summarized as follows:
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September 30, December 31,
1997 1996
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(In thousands)
Raw materials $ 28,644 $26,601
Work-in-process 39,568 24,008
Finished goods 12,692 12,945
Service spares 21,964 25,857
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Totals $102,868 $89,411
======================================================
NOTE 4: Property, plant, and equipment - net includes
allowances for depreciation of $288,466,000 and
$307,536,000 at September 30, 1997 and December 31, 1996,
respectively.
NOTE 5: In first quarter 1997, the Company sold an
unprofitable business unit to a third party. The total
loss on the sale was $8,100,000, of which $7,000,000
($.15 per share) had been recorded as an asset
revaluation in fourth quarter 1996. The remaining loss
of $1,100,000 ($.02 per share) was recorded upon final
determination of the loss and closure of the sale in
first quarter 1997, and is included in "Nonrecurring
operating charge" in the consolidated statement of
operations for the nine months ended September 30, 1997.
In addition, the Company discontinued the operations of a
second unprofitable business unit. This business unit
was sold to a third party during the second quarter of
1997. This business closure and sale did not materially
affect the Company's results of operations for the nine
months ended September 30, 1997.
Revenues and losses of these two business units totaled
$24,000,000 and $16,000,000, respectively, for the full
year 1996. Assets of the business units totaled
$14,000,000 at December 31, 1996.
NOTE 6: In third quarter 1997, the Company sold its stock
investment in a publicly traded affiliate at a gain of
$4,858,000 ($.10 per share). The gain is included in
"Gains on sales of investments in affiliates" in the
consolidated statements of operations for the quarter and
nine months ended September 30, 1997. At December 31,
1996, the unrealized gain on this investment resulting
from periodic mark-to-market adjustments totaled $6.9
million and was included in "Investments in affiliates"
and "Unrealized holding gain on securities of affiliate"
in the consolidated balance sheet at that date.
In first quarter 1996, the Company sold its stock
investment in an affiliated company at a gain of
$9,373,000 ($.20 per share). The gain is included in
"Gains on sales of investments in affiliates" in the
consolidated statement of operations for the nine months
ended September 30, 1996.
NOTE 7: Supplementary cash flow information is summarized as follows:
Changes in current assets and liabilities, net of the
effects of business divestitures, in reconciling net loss
to net cash provided by operations are as follows:
-----------------------------------------------------------
Cash Provided By (Used For) Operations
Nine Months Ended September 30, 1997 1996
-----------------------------------------------------------
(In thousands)
(Increase) decrease in:
Accounts receivable, net $( 800) $10,570
Inventories (19,508) 18,889
Other current assets 246 8,105
Increase (decrease) in:
Trade accounts payable 8,002 (15,197)
Accrued compensation and other
accrued expenses 3,193 ( 9,863)
Billings in excess of sales ( 3,141) (13,282)
------------------------------------------------------------
Net changes in current assets
and liabilities $(12,008) $( 778)
============================================================
Cash payments for income taxes totaled $4,050,000 and
$3,719,000 for the nine months ended September 30, 1997
and 1996, respectively. Cash payments for interest
during those periods totaled $4,655,000 and $3,494,000,
respectively.
Investing and financing transactions in the first nine
months of 1997 that did not require cash included the
sale of two noncore business units of the Company in part
for notes receivable and future royalties totaling
$3,950,000. Investing and financing transactions in the
first nine months of 1996 that did not require cash
included the issuance of 438,357 shares of the Company's
common stock in connection with a professional services
agreement related to the Company's efforts to build its
public safety business in the Asia Pacific region.
NOTE 8: Net loss per share is computed by dividing net loss
by the weighted average number of common and equivalent
common shares outstanding. Employee stock options are
the only common stock equivalent and are included in the
weighted average number of common shares only if
dilutive. Weighted average common and equivalent common
shares outstanding for both the primary and fully diluted
loss per share calculations for the quarters ended
September 30, 1997 and 1996 were 48,006,000 and
47,243,000, respectively. For the nine months ended
September 30, 1997 and 1996, weighted average common and
equivalent common shares outstanding were 47,885,000 and
47,046,000, respectively.
In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards
No. 128, Earnings Per Share, which establishes standards
for computing and presenting earnings per share data for
publicly held entities. The Statement is effective for
fiscal years ending after December 15, 1997. Upon
adoption, the Statement requires restatement of prior
periods' earnings per share data. The Company will adopt
this Statement for its fiscal year ending December 31,
1997 but does not expect the new standard to materially
affect previously reported or future earnings per share
data.
INTERGRAPH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SUMMARY
- -------
Earnings. In the third quarter of 1997, the Company incurred a
net loss of $.15 per share on revenues of $282.1 million,
including a $4.9 million ($.10 per share) gain on the sale of an
investment in an affiliated company. The third quarter 1996 net
loss was $.29 per share on revenues of $276.3 million. The
Company's loss from operations was unchanged from the third
quarter 1996 level at $.20 per share.
For the first nine months of 1997, the Company lost $1.03 per
share on revenues of $823.4 million, including the $.10 per
share gain referenced above and a $6.1 million ($.13 per share)
charge for an adverse contract arbitration award to Bentley
Systems, Inc. (BSI) (see "Litigation" and "MicroStation" below).
The loss for the first nine months of 1996 was $.75 per share on
revenues of $801.2 million, including a $9.4 million ($.20 per
share) gain on the sale of an investment in an affiliated
company. Losses excluding these non-recurring items and all
other items of nonoperating income and expense totaled $.84 per
share in the first nine months of 1997 versus $.87 per share for
the first nine months of 1996. The slight decline in operating
losses results primarily from a 9% increase in systems revenues.
The Company's continuing operating losses are the result of
declining margins and operating expenses that are too high for
the level of revenue being generated by the Company.
Disposition of Noncore Business Units. In the first quarter of
1997, the Company sold an unprofitable business unit to a third
party. The total loss on the sale was $8.1 million, of which
$7.0 million ($.15 per share) had been recorded as an asset
revaluation in fourth quarter 1996. The remaining loss of $1.1
million ($.02 per share) was recorded upon final determination
of the loss and closure of the sale in first quarter 1997 and is
included in "Nonrecurring operating charge" in the consolidated
statement of operations for the nine months ended September 30,
1997. In addition, during the first quarter the Company
discontinued the operations of a second unprofitable business
unit and sold the unit to a third party during the second
quarter of 1997. This business closure and sale did not
materially affect the results of operations of the Company in
the first nine months of 1997. Revenues and losses of these two
business units totaled $24.0 million and $16.0 million,
respectively, for the full year 1996. Assets of the business
units totaled $14.0 million at December 31, 1996.
Organizational Changes. In October, the Company announced the
formation of a new company for operation of its computer
hardware business. The new company, Intergraph Computer Systems
(ICS), is a wholly owned subsidiary of Intergraph Corporation.
ICS supplies high performance Windows NT-based graphics
workstations and PCs, 3D graphics subsystems, and servers. ICS
is being spun off to allow greater focus on the hardware
business and to provide clear accountability as a business
enterprise.
Also in October, the Company announced jointly with Electronic
Data Systems, Inc. (EDS) the intention to form a new company to
pursue market leadership in the mechanical CAD market,
addressing the growing demand for high-end computer-aided design
and manufacturing solutions and the dynamic market for Windows-
based design products. The new company will combine the
Unigraphics Division of EDS with the Company's Solid Edge line
of products. EDS will have majority ownership of the new
company. This proposed transaction is in an early stage, but is
projected for completion by the end of 1997.
Litigation. Bentley Systems, Inc. As further described in the
Company's Form 10-K filing for its year ended December 31, 1996,
the Company has been party to certain arbitration proceedings
with BSI, an approximately 50%-owned affiliate and the developer
and owner of MicroStation, a software product utilized in many
of the Company's software applications and for which the Company
serves as a nonexclusive distributor. In May 1997, the Company
received notice of the adverse determination of an arbitration
proceeding with BSI in which the Company had alleged that BSI
had inappropriately and without cause terminated a contractual
arrangement with the Company, and in which BSI had filed a
counterclaim against the Company seeking significant damages as
the result of the Company's alleged failure to use best efforts
to sell software support services pursuant to terms of the
contractual arrangement terminated by BSI. The arbitrator's
award against the Company was in the amount of $6.1 million
($.13 per share). This charge is included in "Arbitration
award" in the consolidated statements of operations for the nine
months ended September 30, 1997. The arbitration award did not
materially impact the Company's cash position, as approximately
$5.8 million in fees otherwise owed the Company by BSI were
offset against the amount awarded BSI. In addition, the
contractual arrangement that was the subject of this arbitration
has been terminated effective with the award and, as a result,
the Company will no longer sell the related software support
services under this agreement. The Company and BSI have entered
into a new agreement which establishes single support services
between the two companies. The Company believes that neither
the arbitration related change in BSI software support services
or its new agreement with BSI relative to such services will
have a material impact on the Company's financial position,
results of operations, or cash flows in future periods.
The Company has one other arbitration proceeding in process
related to its business relationship with BSI. The Company is
vigorously defending its position in that proceeding, but at
present is unable to predict its outcome. See "MicroStation"
below for further details of the Company's business relationship
with BSI, its sales of MicroStation, and the financial effects
on the Company of changes in this business relationship.
Zydex, Inc. The Company filed a legal action in August 1995,
seeking to dissolve and wind up its business arrangement with
Zydex, Inc. ("Zydex"), a company with which it jointly developed
its plant design application software product ("PDS"), and
seeking an order allowing the Company to continue the business
of that arrangement without further responsibility or obligation
to Zydex. In response, Zydex filed a counterclaim against the
Company in November 1995, alleging wrongful dissolution of the
business relationship and seeking both sole ownership of PDS and
significant compensatory and punitive damages.
In April 1997, the parties agreed to settle the dispute, but
failed to agree on certain terms of the settlement. In
September 1997, the court issued an order resolving the disputed
issues and requiring the parties to close the settlement
agreement, and dismissed the case. The settlement includes the
purchase of 100% of Zydex common stock by Intergraph for
$24,750,000, with $8,250,000 due at closing of the agreement and
the remaining amount payable over a 24 month period. The
deferred payment portion of the total purchase price is secured
by a subordinate interest in the PDS intellectual property and
by an irrevocable letter of credit in favor of the current owner
of Zydex. Interest on the unpaid amount will accrue at a rate
of 1% less than the rate charged by Intergraph's primary lender.
The current owner of Zydex will retain certain limited rights to
use PDS products for a period of 15 years following the date of
closing.
In November 1997, a hearing was held during which the judge
ordered both parties to sign the closing documents. Such
documents have been executed by both parties, but Zydex has
indicated they may appeal the judge's order. A formal closing
of the transaction has to date not occurred, but the Company
believes the transaction will close on substantially the terms
described above. The Company will not record the settlement in
its books of account until the date of closing. When recorded,
the purchase price of Zydex stock will be recorded as a long-
term asset and amortized over the remaining useful life of the
PDS product, currently estimated at 10 years. Had the closing
occurred November 1, 1997, the Company estimates its total cash
outlay to Zydex would have been approximately $14,000,000, all
of which was to be obtained from the Company's primary lender.
See "Liquidity and Capital Resources" included in Management's
Discussion and Analysis in this Form 10-Q for discussion of the
Company's liquidity.
The Company's sales of PDS products during the first nine months
of 1997 and for the full year 1996 were approximately $34
million and $36 million, respectively.
See "Part II., Item 1., Legal Proceedings" included in this Form
10-Q and the Company's Form 10-K for the year ended December 31,
1996 for further details of the Bentley and Zydex litigation.
Remainder of the Year. Industry conditions and changes in
operating system and hardware architecture strategies resulted
in a transition period for the Company characterized by revenues
that declined from 1992 through 1994, by restructuring charges
in 1993 and 1995, and by annual net losses from 1993 through
1995. Although the Company substantially completed its
operating system and hardware architecture transition in 1995,
revenue to date associated with resulting new product offerings
has not met expectations, and gross margin on product sales has
continued to decline due primarily to price competition in the
industry. The Company expects that the industry will continue
to be characterized by higher performance and lower priced
products, intense competition, rapidly changing technologies
that result in shorter product cycles, and development and
support of generic software standards that result in less
specific hardware and software dependencies by customers.
The Company continues to believe that its operating system and
hardware architecture strategies are the correct choices, that
the industry is accepting Windows NT, and that Windows NT will
become the dominant operating system in markets served by the
Company. However, acceptance of this system and the Company's
new products built around this system has been slower than
anticipated, and the timing of such acceptance is unpredictable.
Competing operating systems and products are available in the
market, and several competitors of the Company offer or are
adopting Windows NT as the operating system for their products.
There can be no assurance that the Windows NT operating system
will become dominant in markets served by the Company or that
the Company's product strategies will result in restoration of
profitability. Improvement in the Company's operating results
will depend on its 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. To achieve and maintain
profitability, the Company must continue to increase sales
volume and further align its operating expenses with the level
of revenue being generated.
ORDERS/REVENUES
- ---------------
Orders. Systems orders for the third quarter and first nine
months of 1997 totaled $199.7 million and $576.1 million,
respectively, an increase of approximately 10% and 13%,
respectively, from the same prior year periods. U.S. systems
orders increased 30% and 37%, respectively, from the third
quarter and first nine months of 1996. Orders for the Company's
hardware products were also strong. Strengthening of the dollar
against international currencies, primarily in Europe, reduced
systems orders growth by approximately 2 points. International
systems orders declined approximately 8% from both the third
quarter and first nine months of 1996 due primarily to order
declines in the Asia Pacific and Middle East regions (both
regions included unusually large individual orders in the first
nine months of 1996) and to strengthening of the dollar as
described above. European orders were up 5% from the first nine
months of 1996. Excluding the impact of a stronger dollar,
European orders were up 11%.
New Products. During the first quarter of 1997, the Company
added a line of Intel/Windows-based personal workstations priced
to compete in the PC market. The workstations have features and
performance required by professional users and provide 3D
graphics that the Company believes will be required by users in
the future. In second quarter, the Company introduced twelve new
workstations in its TD and TDZ lines, including the first
Windows NT-based workstations using dual Pentium II processors.
Also introduced were two new InterServe servers, the
ImageStation Z digital photogrammatic workstation, and the first
28-inch, high resolution, wide-format monitor. These products
will commence shipping at various dates throughout 1997. In original
equipment manufacturer (OEM) business in the third quarter, the
Company announced it would develop and manufacture Sony-branded
computers for Sony Corporation's professional and business
systems and would become the exclusive provider of high-
performance 3D graphics hardware for Digital Equipment
Corporation's Windows NT-based personal workstations. The
Company is unable to predict the financial impact of these new
products and business agreements. It does not expect that
introduction of these new products and fulfillment of its new
business agreements will adversely affect the carrying value of
its existing inventories.
The Company introduced two new software products that began
shipping in the second quarter, Solid Edge 3.0 (see
"Organizational Changes" above) and GeoMedia 1.0, both based on
the Company's Jupiter technology. Solid Edge 3.0 is a solid
modeling system for designing mechanical parts and assemblies.
The Company believes it removes the obstacles that once
prevented companies from using 3D solid modeling as a mainstream
design tool. GeoMedia allows users to access data warehouses
virtually anywhere in the world and simultaneously perform
analyses with varying data types and formats.
Revenues. Total revenues for the third quarter and first nine
months of 1997 were $282.1 million and $823.4 million,
respectively, up 2% and 3%, respectively, from the comparable
prior year periods. Sales outside the U.S. represented 51% of
total revenues in the first nine months of 1997, compared to
approximately 55% for the full year 1996. European revenues
were 31% of total revenues for the first nine months of 1997,
down 2 points from the full year 1996 level.
Systems. Systems revenue for the third quarter and first nine
months of 1997 was $199.7 million and $568.6 million,
respectively, up 8% and 9%, respectively, from the same prior
year periods. U.S. revenues were up 28% from the third quarter
1996 and 19% from the first nine months of 1996 (up 26% for the
first nine months excluding the effect of disposal of two
unprofitable business units). International systems revenues
were down 10% from the third quarter 1996 and down 1% from the
first nine months of 1996. European systems revenues were up 1%
from the first nine months of 1996 (excluding the impact of a
stronger dollar, European systems revenues were up 7%). The
factors that affected systems order growth have similarly
affected systems revenue growth.
Hardware revenues for the first nine months of 1997 have
increased 27% from the prior year period. Unit sales of
workstations and servers were up 75% (workstation and server
average per unit selling price declined 40%), while sales of
peripheral hardware products increased by 92% from the first
nine months of 1996 due primarily to sales of 3D graphics cards
introduced during the third quarter of 1996. Third quarter revenues
were significantly impacted by a delay in shipment of the Company's
new TDZ 2000 line of workstations. The delay is the result of
defects in Intel's PIIX4 I/O bridge and Intel's lack of remedy
of those defects with respect to the Company's products. The
Company has now resolved these problems and will commence shipment
of this product line in fourth quarter. Software revenues
were relatively flat with the prior year level, despite a 29%
decline in MicroStation revenues (see further details below).
Excluding MicroStation, software revenues increased 5% from the
first nine months of 1996 due primarily to an increase in plant
design and shipbuilding software applications sales, partially
offset by declines in sales of infrastructure and database
software. Sales of Windows-based software represented
approximately 81% of total software revenues in the first nine
months of 1997, up from approximately 77% in the first nine
months of 1996.
The Company is unable to predict the level of success of its
products in the marketplace. However, it expects a sequential
systems revenue increase in the fourth quarter of 1997 through
growth in core product sales and sales of new hardware and
software product offerings.
MicroStation. Through the end of 1994, the Company had an
exclusive license agreement with 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. As a result of
settlement of a dispute between the companies relative to the
exclusivity of the Company's distribution license, effective
January 1, 1995, the Company had 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. The Company's sales of MicroStation
have declined each year since the change in the license
agreement. During the first nine months of 1997, the Company's
sales of MicroStation declined by approximately 29% from the
same prior year period. The Company estimates that this decline
increased net losses for the first nine months of 1997 by
approximately $4.6 million ($.10 per share). MicroStation sales
did not have a material impact on the third quarter of 1997
versus the third quarter of 1996. The Company is unable to
predict the level of MicroStation sales that will occur in the
future, but it is likely that such sales will be further
reduced.
Maintenance and Services. Maintenance and services revenue
consists of revenues from maintenance of Company systems and
from Company provided services, primarily training and
consulting. These forms of revenue totaled $82.3 million for
the third quarter and $254.8 million for the first nine months
of 1997, down 10% and 8%, respectively, from the comparable
prior year periods. Maintenance revenues for the first nine
months of 1997 totaled $185.8 million, down 14% from the same
prior year period. The trend in the industry toward lower
priced products and longer warranty periods has resulted in
reduced levels of maintenance revenue, and the Company believes
this trend will continue in the future. Services revenue
represents approximately 8% of year to date 1997 revenues and
has increased 9% from the same prior year period. Growth in
services revenue has acted to partially offset the decline in
maintenance revenue. The Company is endeavoring to increase
revenues from its services business. Such revenues, however,
produce lower gross margins than maintenance revenues.
GROSS MARGIN
- ------------
The Company's total gross margin for the third quarter was
35.9%, down 1.4 points from the third quarter of 1996. For the
first nine months of 1997, total gross margin was 36.2%, down
1.2 points from the first nine months of 1996 and .6 points from
the full year 1996 level.
Systems margin for the third quarter was 34.3%, a decline of 2.4
points from the third quarter 1996 level. For the first nine
months of 1997 systems margin was 35.1%, down approximately .8
points from the same prior year period and from the full year
1996 level. Systems margin has been unfavorably impacted by a
strengthening U.S. dollar against international currencies,
primarily in Europe, and by a higher hardware content in the
product mix, partially offset by production efficiencies
recognized by a significant increase in hardware unit sales
volume. Since the end of 1994, the Company's systems margin has
declined by 4.6 points, due primarily to price competition in
the industry.
In general, the Company's systems margin may be lowered by price
competition, a higher hardware content in the product mix, a
stronger U.S. dollar in international markets, the effects of
technological changes on the value of existing inventories, and
a higher mix of federal government sales, which generally
produce lower margins than commercial sales. Systems margin 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 expects continuing pressure
on its systems margin due primarily to industry price
competition.
Maintenance and services margin for the third quarter and first
nine months of 1997 were 39.7% and 38.6% (38.8% for the full
year 1996), respectively, up 1.3 points and down 1.7 points,
respectively, from the comparable prior year periods. The
Company's maintenance revenue has declined at a faster rate than
cost associated with that form of revenue. The Company
continues to closely monitor maintenance and services cost and
has taken certain measures, including reductions in headcount,
to more closely align cost with the current revenue level. The
Company believes that the trend in the industry toward lower
priced products and longer warranty periods will continue to
reduce its maintenance revenue, which will pressure maintenance
margin in the absence of corresponding cost reductions.
OPERATING EXPENSES
- ------------------
Operating expenses for the third quarter and first nine months
of 1997 declined by 2% and 1%, respectively, from the comparable
prior year periods. Total employee headcount has declined 7%
during that same period. The sale of two unprofitable business
units reduced total operating expenses by approximately 3%, with
most of the expense savings being achieved in the product
development and sales and marketing areas.
Product development expense for the third quarter and first nine
months of 1997 declined by 10% and 4%, respectively, from the
same prior year periods due primarily to significant reductions
in headcount, including those resulting from sale of the two
business units. The expense savings achieved through headcount
reductions have been partially offset by a decline in new
software product development expenses qualifying for
capitalization. Third quarter sales and marketing expenses were
up slightly from the prior year level; however, year to date
expenses declined by 2%. The decline from 1996 levels is due
primarily to sale of the two unprofitable business units
described above and to strengthening of the U.S. dollar in
international markets, primarily in Europe, partially offset by
increased trade show and advertising expenses in the U.S.
General and administrative expense was flat with the third
quarter 1996 level, but increased by 4% from the first nine
months of 1996 due to increased legal expenses (see "Litigation"
above).
NONOPERATING INCOME AND EXPENSE
- -------------------------------
Interest expense was $1.8 million for the third quarter and $4.7
million for the first nine months of 1997 versus $1.3 million
and $3.7 million, respectively, for the comparable prior year
periods. The Company's average outstanding debt has increased
in comparison to the same prior year periods; however, the
Company's rate of interest on the debt has declined
approximately 2 points due primarily to a change in lenders
under the Company's primary credit facility. See "Liquidity and
Capital Resources" below for a discussion of the Company's
current financing arrangements.
In the third quarter of 1997, the Company sold a stock
investment in a publicly traded affiliate, resulting in a gain
of $4.9 million ($.10 per share). The gain is included in
"Gains on sales of investments in affiliates" in the
consolidated statements of operations for the quarter and nine
months ended September 30, 1997. At December 31, 1996, the
unrealized gain on this investment resulting from periodic mark-
to-market adjustments totaled $6.9 million and is included in
"Investments in affiliates" and "Unrealized holding gain on
securities of affiliate" in the consolidated balance sheet at
that date. In the first quarter of 1996, the Company sold a
stock investment in an affiliated company, resulting in a gain
of $9.4 million ($.20 per share). This gain is included in
"Gains on sales of investments in affiliates" in the
consolidated statement of operations for the nine months ended
September 30, 1996.
"Other income (expense) - net" in the consolidated statements of
operations consists primarily of foreign exchange gains and
losses, equity in earnings and losses of investee companies,
other miscellaneous items of nonoperating income and expense,
and nonrecurring charges/credits.
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 the Company's results
of operations. For the first nine months of 1997, approximately
51% (55% for the full year 1996) of the Company's revenues were
derived from customers outside the United States, 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 stronger
U.S. dollar will decrease the level of reported U.S. dollar
orders and revenues, decrease the dollar gross margin, and
decrease reported dollar operating expenses of the international
subsidiaries. For the first nine months of 1997, the U.S.
dollar strengthened on average from its prior year level, which
decreased reported dollar revenues, orders, and gross margin,
but also decreased reported dollar operating expenses in
comparison to the prior year period. The Company estimates
that currency effects increased the Company's year to date 1997
loss by approximately $.15 per share. Such currency effects did
not materially impact the Company's results of operations for
the comparable prior year period.
The Company conducts business in all major markets outside the
U.S., but the most significant of these operations with respect
to currency risk are located in Europe (specifically Germany,
U.K., The Netherlands, France and Italy) and Australia.
Primarily, but not exclusively in these locations, the Company
has certain currency related asset and liability exposures
against which certain measures, primarily hedging, are taken to
reduce currency risk. With respect to these exposures, the
objective of the Company is to protect against financial
statement volatility arising from changes in exchange rates with
respect to amounts denominated for balance sheet purposes in a
currency other than the functional currency of the local entity.
The Company therefore enters into forward exchange contracts
primarily related to these balance sheet items (intercompany
receivables and payables). 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 nor 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. The
Company's positions in these derivatives are continuously
monitored to ensure protection against the known balance sheet
exposures described above. By policy, the Company is prohibited
from market speculation via such instruments and therefore does
not take currency positions exceeding its known financial
statement exposures, and does not otherwise trade in currencies.
INCOME TAXES
- ------------
The Company incurred a loss before income taxes of $49.5 million
in the first nine months of 1997 versus $35.5 million for the
same prior year period. These losses generated minimal net
financial statement tax benefit, as the majority of available
tax benefits were offset by tax expenses in individual
profitable international subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At September 30, 1997, cash totaled $38.8 million as compared to
$50.7 million at December 31, 1996. Operations consumed $14.3
million in the first nine months of 1997, as compared to net
cash generation of $11.6 million in the first nine months of
1996. An inventory build-up in response to increased hardware
unit sales volume and to customer demand for faster delivery of
products has consumed approximately $15 million since the
beginning of the year.
Net cash used for investing activities totaled $20.4 million in
the first nine months of 1997 versus $26.6 million in the first
nine months of 1996. Included in investing activities were
capital expenditures of $17.9 million ($24.0 million in the
first nine months of 1996), primarily for Intergraph products
used in hardware and software development and sales and
marketing activities. The Company expects that capital
expenditures will require $25 to $30 million for the full year
1997, primarily for these same purposes. The Company's term
loan and revolving credit agreement contains certain
restrictions on the level of the Company's capital expenditures.
Other significant investing activities included $7.1 million for
capitalizable software development costs ($12.1 million in the
first nine months of 1996) and $5.7 million in proceeds from
sales of a division and investments in affiliated companies ($10
million in the first nine months of 1996.)
Net cash provided by financing activities in the first nine
months of 1997 totaled $19.1 million versus a net use of cash of
$3.3 million in the first nine months of 1996. Year to date
1997 financing activities included a $16.7 million net addition
to short- and long-term debt, compared with a net repayment of
$6.3 million in the first nine months of 1996.
In January 1997, the Company entered into a three year fixed
term loan and revolving credit agreement. Available borrowings
are determined by the amounts of eligible assets of the Company
(the "borrowing base"), as defined in the agreement, including
accounts receivable, inventory, and property, plant, and
equipment, with maximum borrowings of $100 million. The term
loan portion of the agreement is in the principal amount of $20
million, with principal due at expiration of the agreement.
Borrowings are secured by a pledge of substantially all of the
Company's assets in the U.S. The rate of interest on all
borrowings under the agreement is the greater of 7% or the
Norwest Bank Minnesota National Association base rate of
interest (8.5% at September 30, 1997) plus .625%. The agreement
requires the Company to pay a facility fee at an annual rate of
.15% of the maximum amount available under the credit line, an
unused credit line fee at an annual rate of .25% of the average
unused portion of the revolving credit line, and a monthly
agency fee. At September 30, 1997, the Company had outstanding
borrowings of $27.8 million ($43 million at November 10, 1997),
$20 million of which was classified as long-term debt in the
consolidated balance sheet, and an additional $37 million of the
available credit line was allocated to support letters of credit
issued by the Company and the Company's forward exchange
contracts. As of this same date, the borrowing base under the
credit line was $100 million.
The Company is currently negotiating with this lender to
increase the credit line from $100 million to $125 million. The
Company expects negotiations to be completed in the fourth
quarter and that the increase will be granted. The Company
estimates that at present it can support a borrowing base of
approximately $110 million, and expects that the full amount of
the extended line, if granted, will become supportable with
future growth in the Company's business.
The term loan and revolving credit agreement contains certain
financial covenants of the Company, including minimum net worth,
minimum current ratio, and maximum levels of capital
expenditures. In addition, the agreement includes restrictive
covenants that limit or prevent various business transactions
(including repurchases of the Company's stock, dividend
payments, mergers, acquisitions of or investments in other
businesses, and disposal of assets including individual
businesses, subsidiaries, and divisions) and limit or prevent
certain other business changes.
In March of 1997, the Company entered into an agreement for the
sale and leaseback of one of its facilities. Based on the terms
of the agreement, the transaction has been accounted for as a
borrowing. The amount borrowed totals $8.4 million and is
included in "Long-term debt" in the 1997 consolidated balance
sheet. The borrowing will be repaid over a period of 20 years
at an implicit rate of interest of 10.7%.
At September 30, 1997, the Company had approximately $58 million
in debt on which interest is charged under various floating rate
arrangements, primarily under its three year term loan and
revolving credit agreement, an Australian term loan, and various
mortgages. The Company is exposed to market risk of future
increases in interest rates on these loans, with the exception
of the Australian term loan, on which the Company has entered
into an interest rate swap agreement.
The Company is not currently generating adequate cash to fund
its operations and build cash reserves. However, the Company
believes that existing cash balances, together with cash
expected to be generated by improving operations and cash
available under its term loan and revolving credit agreement, when
amended, will be adequate to meet anticipated cash requirements
in the near term. The Company, in the near term, must increase
sales volume and align its operating expenses with the level of
revenue being generated if it is to adequately fund its operations,
build adequate cash reserves, and avoid additional third party
financing.
INTERGRAPH CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
-----------------
Item 1: Legal Proceedings
Bentley Systems, Inc. As described in the Company's
Form 10-K filing for its year ended December 31, 1996,
the Company has been party to certain arbitration
proceedings with Bentley Systems, Inc. (BSI), an
approximately 50%-owned affiliate and the developer and
owner of MicroStation, a software product utilized in
many of the Company's software applications and for
which the Company serves as a nonexclusive distributor.
In December 1995, the Company commenced an arbitration
proceeding against BSI with the American Arbitration
Association, Philadelphia, Pennsylvania, alleging that
BSI inappropriately and without cause terminated a
contractual arrangement between BSI and the Company. In
response, in January 1996 BSI filed a counterclaim
against the Company seeking significant damages as the
result of the Company's alleged failure to use best
efforts to sell software support services pursuant to
terms of the contractual arrangement terminated by BSI.
In May 1997, the Company received notice of the adverse
determination of this arbitration proceeding. The
arbitrator's award against the Company was in the amount
of $6,126,000 ($.13 per share). This charge is included
in "Arbitration award" in the consolidated statement of
operations for the nine months ended September 30, 1997.
The arbitration award did not materially impact the
Company's cash position, as approximately $5,800,000 in
fees otherwise owed the Company by BSI were offset
against the amount awarded BSI. In addition, the
contractual arrangement that was the subject of this
arbitration has been terminated effective with the award
and, as a result, the Company will no longer sell the
related software support services under this agreement.
The Company and BSI have entered into a new agreement
which establishes single support services between the
two companies. The Company believes that neither the
arbitration related change in BSI software support
services or its new agreement with BSI relative to such
services will have a material impact on the Company's
financial position, results of operations, or cash flows
in future periods.
Zydex, Inc. The Company filed a legal action in August
1995, seeking to dissolve and wind up its business
arrangement with Zydex, Inc. ("Zydex"), a company with
which it jointly developed its plant design application
software product ("PDS"), and seeking an order allowing
the Company to continue the business of that arrangement
without further responsibility or obligation to Zydex.
In response, Zydex filed a counterclaim against the
Company in November 1995, alleging wrongful dissolution
of the business relationship and seeking both sole
ownership of PDS and significant compensatory and
punitive damages.
In April 1997, the parties agreed to settle the dispute,
but failed to agree on certain terms of the settlement.
In September 1997, the court issued an order resolving
the disputed issues and requiring the parties to close
the settlement agreement, and dismissed the case. The
settlement includes the purchase of 100% of Zydex common
stock by Intergraph for $24,750,000, with $8,250,000 due
at closing of the agreement and the remaining amount
payable over a 24 month period. The deferred payment
portion of the total purchase price is secured by a
subordinate interest in the PDS intellectual property and
by an irrevocable letter of credit in favor of the
current owner of Zydex. Interest on the unpaid amount
will accrue at a rate of 1% less than the rate charged by
Intergraph's primary lender. The current owner of Zydex
will retain certain limited rights to use PDS products
for a period of 15 years following the date of closing.
In November 1997, a hearing was held during which the
judge ordered both parties to sign the closing documents.
Such documents have been executed by both parties, but
Zydex has indicated they may appeal the judge's order. A
formal closing of the transaction has to date not
occurred, but the Company believes the transaction will
close on substantially the terms described above. The
Company will not record the settlement in its books of
account until the date of closing. When recorded, the
purchase price of Zydex stock will be recorded as a long-
term asset and amortized over the remaining useful life
of the PDS product, currently estimated at 10 years. Had
the closing occurred November 1, 1997, the Company
estimates its total cash outlay to Zydex would have been
approximately $14,000,000, all of which was to be
obtained from the Company's primary lender. See
"Liquidity and Capital Resources" included in
Management's Discussion and Analysis in this Form 10-Q
for discussion of the Company's liquidity.
The Company's sales of PDS products during the first nine
months of 1997 and for the full year 1996 were
approximately $34 million and $36 million, respectively.
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibit 10(a), agreement between Intergraph
Corporation and Green Mountain, Inc., dated April 1, 1997. *(1)
Exhibit 10(b), Indemnification Agreement between
Intergraph Corporation and each member of the Board of
Directors of the Company dated June 3, 1997. (2)
Exhibit 10(c), Employment Contract of Wade Patterson
dated May 30, 1997. *(2)
Exhibit 27, Financial Data Schedule.
* Denotes management contract or compensatory plan,
contract, or arrangement.
(1) Incorporated by reference to exhibit filed
with the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1997, under the
Securities Exchange Act of 1934, File No. 0-9722.
(2) Incorporated by reference to exhibit filed
with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997, under the
Securities Exchange Act of 1934, File No. 0-9722.
(b) There were no reports on Form 8-K filed during the
quarter ended September 30, 1997.
INTERGRAPH CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements 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
----------------------
(Registrant)
By: By:
---------------------- ----------------------
Larry J. Laster John W. Wilhoite
Executive Vice President, Vice President and Controller
Chief Financial Officer and (Principal Accounting Officer)
Director
Date: November 13, 1997 Date: November 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 38,829
<SECURITIES> 0
<RECEIVABLES> 304,321
<ALLOWANCES> 0
<INVENTORY> 102,868
<CURRENT-ASSETS> 36,948
<PP&E> 441,471
<DEPRECIATION> 288,466
<TOTAL-ASSETS> 705,979
<CURRENT-LIABILITIES> 260,294
<BONDS> 51,696
0
0
<COMMON> 5,736
<OTHER-SE> 382,309
<TOTAL-LIABILITY-AND-EQUITY> 705,979
<SALES> 568,646
<TOTAL-REVENUES> 823,434
<CGS> 368,996
<TOTAL-COSTS> 525,532
<OTHER-EXPENSES> 338,990<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,652
<INCOME-PRETAX> (49,502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,502)
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<NET-INCOME> (49,502)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
<FN>
<F1>Other expenses includes product development expenses, sales and marketing
expenses, general and administrative expenses, and nonrecurring operating
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</FN>
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