Intergraph Reports Fourth Quarter 2003 Results; Revenue of $145.8 Million and Net Income of $1.4 Million.Business Editors HUNTSVILLE, Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. .--(BUSINESS WIRE)--Jan. 28, 2004 Intergraph Corporation (Nasdaq:INGR) today reported operating results for its fourth quarter and year ended December 31, 2003. For the quarter, Intergraph reported revenue of $145.8 million, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $2.0 million (after restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. of $4.0 million) and net income of $1.4 million. Net income was $.03 per share (basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ). The Company believes a separate disclosure of the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). expenses gives a more comparative view of the current and prior quarterly results of operations and is therefore important information to the readers of this press release in evaluating and understanding the Company's results of operations.
(In millions) Q4 2003 Q3 2003 Q4 2002 12 months 12 months Q1 2004
2003 2002 forecast
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Revenues $145.8 $133.6 $122.0 $527.3 $501.1 $130.4
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Income from
operations before
restructuring $5.9 $5.5 $5.3 $18.5 $16.5 $3.9
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Restructuring
charges $4.0 $--- $2.1 $4.0 $2.1 $1.2
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Income from
operations $2.0 $5.5 $3.2 $14.6 $14.4 $2.7
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Net income $1.4 $12.9(a) $90.1(a) $23.2(a) $377.8(a)
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(a) includes intellectual property settlement
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"Intergraph again delivered solid results as all business units exceeded their forecasts for the quarter," said Halsey Wise, Intergraph president and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "Since July, we have focused intently on business unit execution and the development of an overall strategy to improve our future operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: . These actions resulted in an increase in operating income before restructuring compared to last quarter and a year ago. Although we view the results as positive, we remain mindful mind·ful adj. Attentive; heedful: always mindful of family responsibilities. See Synonyms at careful. mind of our need to be focused on further improvements in operating performance. In addition, we are pleased with the successful completion of our $260 million Dutch Tender Offer in December. Since 2001, we have returned approximately $378 million to shareholders -- a figure greater than the proceeds from our Intellectual Property settlements to date on an after-tax basis After-tax basis The comparison basis used to analyze the net after-tax returns on a corporate taxable bond and a municipal tax-free bond. ." In comparison to Q3 2003, total revenue increased 9.1%, with all business units reporting higher revenue. Income from operations declined $3.5 million as a result of a restructuring charge of $4.0 million. Without the charge, operating income increased 8% as higher revenues more than offset a $2.6 million (4.3%) increase in operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. . For the year 2003, revenue increased 5.2% and operating income increased 11.9% prior to restructuring costs. The PPO PPO abbr. preferred provider organization PPO Managed care Preferred provider organization, see there Infectious disease Pleuropneumonia-like organism, see there , IMGS IMGS International Medical Graduates IMGS Image Map Generation Services and IPS (1) (Inches Per Second) The measurement of the speed of tape passing by a read/write head or paper passing through a pen plotter. (2) (IPS) (Intrusion Prevention S business units had revenue growth exceeding 5% each, while ISG ISG Iraq Study Group ISG Iraq Survey Group ISG International Steel Group ISG Integrated Security Gateway ISG Information Systems Group ISG Information Systems Group (IBM) ISG Integrated Starter/Generator had a 4.8% decline in revenue for the year as a result of a decline in revenue from legacy hardware maintenance and fewer product sales. The additional revenue at slightly higher gross margins more than offset an 8% increase in operating expenses prior to any restructuring changes. After restructuring charges, income from operations was slightly higher than 2002. Operating Expenses of $67.1 million, including a restructuring charge of $4.0 million, were 10.9% higher than Q3 2003. Without the restructuring charge, operating expenses increased 4.3%. The increase in operating expenses was primarily in sales and marketing as a result of higher Q4 2003 revenue. The restructuring charges taken in Q4 2003 are necessary in order to better match costs with revenues in certain areas of the Company's business. For the year 2003, operating expenses (including restructuring costs) increased 8.8%. Without the restructuring charge, operating expenses increased 8%. Almost half of the increase in operating expenses before restructuring costs was due to continuing R&D investments in several new product offerings in the PPO and IPS business units. G&A increased primarily due to higher general corporate legal costs, and sales and marketing increased primarily in PPO and IPS as a result of higher headcount. Restructuring charges also increased from $2.1 million for 2002 to $4.0 million for 2003. Currency Impact -- Fluctuations in the value of the U.S. dollar in international markets had a significant impact on the Company's results of operations. Most international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. sell to customers and incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. and pay operating expenses in local currencies. These local currency revenues and expenses are translated into U.S. dollars for reporting purposes. A weaker U.S. dollar increases the level of reported U.S. dollar orders and revenues, increases the dollar gross margin, and increases reported dollar operating expenses of the international subsidiaries. The Company estimates that the weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. of the U.S.
dollar in its international markets, primarily in Europe, positively
impacted revenue approximately 5.5%, negatively impacted operating
expenses by approximately 4.9% and improved its 2003 operating results
by approximately $0.16 per share (diluted) in comparison to 2002.Total Other Expense, Net for the fourth quarter was $6.3 million and included $6.8 million of legal and related expenses associated with protecting and licensing the Company's intellectual property, $1.5 million interest income, and $1.0 million net other expense items. Income Tax Benefit was $5.7 million for the quarter. This benefit was primarily a result of a pre-tax loss for the quarter resulting in a $1.8 million reduction in the annual tax provision and a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. $4.1 million resolution of a tax dispute related to items from the early 1990s. We expect our effective tax rate to be approximately 40% for 2004. The Balance Sheet continues to reflect a solid financial position. During the quarter the Company spent $260 million to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. its common stock via a modified Dutch auction Dutch Auction An auction where the price on an item is lowered until it gets its first bid, and then the item is sold at that price. Notes: The U.S. Treasury (and other countries) uses a Dutch auction when it sells securities. tender offer. The stock repurchase Stock repurchase A firm's repurchase of outstanding shares of its common stock. was the principal reason cash and short-term investments decreased to $265.8 million at December 31, 2003. Cash flow for the quarter benefited from the receipt of $18 million from last quarter's intellectual property settlement with TI and the sale of excess land for $2.6 million. Business Outlook Information contained in this news release (including this Business Outlook) includes statements that are forward-looking as defined in Section 21E of the Securities Exchange Act of 1934. Readers are cautioned against placing undue reliance on any forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. which are subject to known and unknown risks and uncertainties. Please refer to the "Cautionary Note Regarding Forward-Looking Statements" at the end of this news release. Commenting on the annual results, Wise said, "2003 was a year of change -- change in leadership, change in our Board, change in our capital structure, and change in our focus. The purpose of these changes and others to come is to focus our company on building shareholder value via execution in our core businesses. Certainly, we will continue to remain diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d in defending our intellectual property." Commenting on the quarterly results, Wise added, "We are pleased with our fourth quarter operating results, but remain focused on our efforts to show additional improvements in operating results in 2004. The restructuring charges we announced in Q3 and executed in Q4 will help us to create a foundation for improved profitability in FY 2004. In addition, we have recently introduced new Intergraph vision and mission statements that better describe who we are, what we do and how we are different. Our company is united in focus on a three-phase operating strategy called 'Now-Next-After Next' which will be our guide for the next several years. We look ahead with optimism." There were no significant changes in the lawsuit lawsuit: see procedure; tort. against Dell, Gateway, and Hewlett-Packard. On December 1, the Company and Intel presented oral arguments in Intel's appeal of the October 2002 verdict in Intergraph's favor. Capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. The Company repurchased 10 million shares of its common stock in Q4 2003 for $260 million under a modified Dutch auction tender offer. In addition, the Company has repurchased approximately 6.3 million shares since late 2001 under a stock repurchase program. Total expenditures under the tender offer and repurchase program through December 31, 2003 have been $378 million. The stock repurchase plan stock repurchase plan 1. See buyback. 2. See self-tender. was suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. during Q4 2003 because of the tender offer. Following completion of the tender offer, the Board reinstated the repurchase program. Review of Intergraph's Core Businesses Intergraph consists of four core business units -- three focused on visualization Using the computer to convert data into picture form. The most basic visualization is that of turning transaction data and summary information into charts and graphs. Visualization is used in computer-aided design (CAD) to render screen images into 3D models that can be viewed from all software and the fourth focused on government IT services. Each core business unit is managed as a separate business. Therefore, the Company believes that providing details about each business unit is useful to investors. Intergraph Mapping and Geospatial Geospatial is a term widely used to describe the combination of spatial software and analytical methods with terrestrial or geographic datasets. The term is often used in conjunction with geographic information systems and geomatics. Solutions (IMGS)
(In millions) Q4 Q3 Q4 12 12 Q1 2004 Backlog
2003 2003 2002 months months forecast
2003 2002
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Revenues $60.2 $54.5 $52.4 $210.0 $195.1 $49.5 $68.2
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Income (loss) from
operations before
restructuring $3.7 $2.8 $1.0 $5.4 $(1.0) $1.6
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Restructuring charges $1.6 $--- $1.0 $1.6 $1.0 $---
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Income (loss) from
operations $2.1 $2.8 $0.0 $3.8 $(2.1) $1.6
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For Q4 2003, IMGS reported $60.2 million in revenues and operating income of $2.1 million after restructuring costs. As compared to the previous quarter, total revenues increased by $5.7 million and operating income decreased $0.7 million after restructuring charges of $1.6 million were taken in the quarter to better align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. costs with revenue in certain parts of IMGS' business. Before restructuring, operating income increased 32% over Q3 2003. The increased revenue reflects a combination of increased product sales associated with improved funding and year-end buying by international government customers, and progress made in several long-term projects. The margin increase for the higher revenue was offset by increases in operating expenses associated with restructuring in the period and higher sales compensation. Compared to Q4 2002, total revenue grew by $7.8 million (14.8%) and operating income increased by $2.1 million. Revenue increased mainly as a result of higher product sales, helped by sales of the Digital Mapping Digitizing geographic information for a geographic information system (GIS). Camera from Z/I Imaging(R). Higher services revenue, mainly associated with more utilities and communications projects, also contributed to the revenue increase. The increase in operating income was partially offset by higher restructuring costs and higher sales compensation expenses in the current period. On a total year basis, IMGS revenue was up 7.6% or $14.9 million and operating income increased $5.9 million. While growth occurred in all revenue components, systems and services revenues clearly drove the majority of the increase through higher shipments and progress on large projects. Operating income increased with the higher revenue but the full impact of the higher revenue was partially offset by more restructuring costs in 2003 than in 2002 and lower gross margins due to an increase in the Z/I Imaging hardware inventory reserve in the second quarter 2003. IMGS entered 2004 with a backlog of $68.2 million, a quarter-to-quarter decrease of $5.0 million. Historically, the purchasing cycles of our international government customer base have resulted in reduced sales in the first quarter of the year. As a result of the backlog reduction and the seasonal revenue decline in the first quarter, IMGS is forecasting Q1 2004 revenues of $49.5 million with operating income of $1.6 million. Intergraph Process, Power & Offshore (PPO)
(In millions) Q4 2003 Q3 2003 Q4 2002 12 months 12 months Q1 2004
2003 2002 forecast
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Revenue $36.0 $33.6 $31.5 $132.8 $124.1 $33.5
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Income from
operations before
restructuring $3.5 $4.0 $4.0 $16.0 $19.0 $3.7
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Restructuring
charges $--- $--- $--- $--- $--- $1.2
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Income from
operations $3.5 $4.0 $4.0 $16.0 $19.0 $2.5
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For the third quarter in a row, the Process, Power & Offshore (PPO) business unit reported record revenue. In the fourth quarter, PPO revenue totaled $36.0 million, an increase of 7% compared to the third quarter of 2003 and a 14% increase over the fourth quarter of 2002. For the full year, revenue totaled $132.8 million, an increase of 7% over the prior year. The revenue increase was mainly due to higher new license and software maintenance revenue, including a large maintenance contract signed with GRAD, a consortium of shipbuilders (Samsung Heavy Industries, Universal Shipbuilding Corporation and Odense Steel Shipyard Odense Steel Shipyard (Danish: Odense Staalskibsværft) located in Odense, Denmark was constructed in 1918-1919 by the A.P. Møller. ) for new shipbuilding applications; strong sales of our new information management products; and continued strong sales of our 2D/3D design tools. Operating income was $3.5 million for the quarter, a 13% decrease compared to the third quarter and a 12% decrease compared to last year's fourth quarter. This decrease, compared to the third quarter, was due primarily to an increase in sales and marketing costs resulting from trade shows and customer events and higher sales commission costs due to higher revenue. The decrease, compared to the fourth quarter of 2002, was mainly due to higher operating expenses primarily from higher product development expenses on new products. Operating income for 2003 was $16.0 million, a $3.0 million decrease from the prior year. This lower operating income was due mainly to higher operating expenses as mentioned above that were partly offset by higher revenues and higher gross margins. The division expects continued sales growth in several new product offerings including SmartPlant(R) 3D for plant design, IntelliShip(TM) for ship design and construction, MARIAN(R) for materials management Materials management is the branch of logistics that deals with the tangible components of a supply chain. Specifically, this covers the acquisition of spare parts and replacements, quality control of purchasing and ordering such parts, and the standards involved in ordering, , and SmartPlant(R) Foundation for data management. The division completed a restructuring in mid-January 2004, resulting in a Q1 2004 restructuring charge estimated to be $1.2 million. Fourth quarter revenues remained strong in oil and gas (both on- and off-shore) and in the pharmaceutical sector. The power generation segment remained weak, whereas the chemical industry segment is recovering. In Q4 2003, PPO reached a significant milestone with the first commercial release of SmartPlant 3D for plant design. PPO shipped approximately $1.0 million of backlog to 12 customers. PPO continues to be encouraged by the growing demand for its integrated data and document management solutions, namely SmartPlant Foundation, with sales increasing more than 50% in 2003. Finally, SmartPlant P&ID, introduced in 2001, grew approximately 40%, primarily from large owner/operators. Compared to 2002, revenues were up significantly in the European region and the Asia Pacific region, showing growth of 25% and 13% respectively, while the Americas region reported slightly lower revenues. For Q1 2004, the division forecasts revenues of $33.5 million and operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. of $2.5 million. Excluding expected restructuring costs of $1.2 million, operating profit is projected to be $3.7 million. Revenues are seasonally lower in the first quarter of the year. This, along with the restructuring, will result in lower profits as compared to the current quarter. Intergraph Public Safety (IPS)
(In millions) Q4 Q3 Q4 12 12 Q1 2004 Backlog
2003 2003 2002 months months forecast
2003 2002
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Revenues $17.2 $16.6 $13.4 $67.2 $63.6 $17.0 $35.4
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Income from operations
before restructuring $3.8 $3.5 $2.5 $14.4 $14.8 $1.7
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Restructuring charges $--- $--- $0.2 $--- $0.2 $---
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Income from operations $3.8 $3.5 $2.3 $14.4 $14.6 $1.7
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For Q4 2003, Intergraph Public Safety reported revenues and operating income slightly above Q3 2003 levels. The slight increase in total revenues is the result of higher maintenance and professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. revenues. In comparison to the fourth quarter of 2002, revenues increased 28% and income from operations increased by 65%. Revenue was higher in all categories, especially in maintenance. Maintenance revenue increased as a result of additional projects reaching end of warranty dates and converting to maintenance contracts in late 2002 and 2003. On a full-year basis, revenues increased 5.6% over 2002. New projects and more maintenance contracts have offset the loss of revenues from a large Australian services contract that ended in September 2002. Income from operations in 2003 declined approximately 1% from 2002. Higher total gross margins partially offset an increase in operating expenses and the loss of margin related to the services contract in Australia. Backlog declined by $5.0 million during Q4 2003 to $35.4 million. Intergraph Solutions Group (ISG)
(In millions) Q4 Q3 Q4 12 12 Q1 2004 Backlog
2003 2003 2002 months months forecast
2003 2002
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Revenues $32.9 $30.5 $26.5 $120.9 $127.0 $29.4 $66.7
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Income from operations
before restructuring $2.1 $2.0 $1.3 $8.1 $5.9 $1.8
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Restructuring charges $--- $--- $--- $--- $---- $---
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Income from operations $2.1 $2.0 $1.3 $8.1 $5.9 $1.8
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For Q4 2003, ISG reported a $2.4 million increase in revenues and a slight increase in operating income compared to Q3 2003. Service, product and maintenance revenue increased slightly in Q4 as compared to Q3 2003. The slight increase in services was due to the increased work through the Enhanced Technical Information Management System (ETIMS ETIMS Enhanced Technical Information Management System ) contract with the U. S. Air Force, which offset the anticipated reduction in billable labor during the holiday period. Product revenue increased in Q4 due to the sale of third-party hardware and software to U.S. Government customers although at very low margins. The slight increase in operating income resulted from higher revenue and cost control over discretionary operating expenses, which offset the negative impact of reduced labor services due to increased holiday hours in Q4. In comparison to Q4 2002, total revenues increased 24% and operating income increased 58%. The Q4 2003 revenue increase resulted from an increase in product revenue associated with third-party hardware and software products sold to U. S. Government customers under the CAD-2 contracts and growth in services revenue primarily from the ETIMS contract, which both offset an expected decline in our legacy hardware maintenance business due to expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. contracts. The increase in operating income was due to higher revenue although at lower gross margins and a 19% reduction in operating expenses from Q4 2002. For 2003, ISG reported revenues of $120.9 million, which is 5% lower than for 2002. The reduction in year-to-year revenues resulted from comparison to a strong Q1 2002 (which saw programs delayed from Q4 2001 to Q1 2002 in the aftermath of the September 11 attacks September 11 attacks Series of airline hijackings and suicide bombings against U.S. targets perpetrated by 19 militants associated with the Islamic extremist group al-Qaeda. ); a 12% decline in product shipments; and a $7 million decrease in legacy hardware maintenance revenue. For the full year, operating income was $8.1 million, which represented a 36% increase from 2002. The increase in operating income resulted from improved gross margin percentages in products and a 14% decline in operating expenses. Product gross margin percentages improved due to a shift in product mix from third-party pass-through products to Intergraph-produced products. Services gross margin percentages were lower in 2003 due to the Q3 and Q4 low gross margins associated with third-party material elements of the ETIMS contract. Sales and marketing and general and administrative expenses declined, as ISG continued to align expenses with revenue levels. Total systems and services backlog declined by $5.1 million during the fourth quarter. Ending backlog was $66.7 million, reflecting continued performance on federal government programs, which are cyclically funded. ISG remains cautiously optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op of ongoing strength in the federal government sector, specifically the Department of Defense, Homeland Security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States and Force Protection markets. The continued shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. in state government budgets and economic conditions in the commercial IT sector continue to limit near-term growth opportunities in those segments. For Q1 2004, ISG is forecasting revenues of $29.4 million and operating income of $1.8 million. Revenue and operating income are expected to decline due to anticipated lower third-party product and legacy hardware maintenance revenue. Corporate Holding Company
(In millions) Q4 2003 Q3 2003 Q4 2002 12 months 12 months Q1 2004
2003 2002 forecast
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Revenues $3.4 $2.9 $2.9 $12.7 $13.1 $2.4
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Income (loss) from
operations before
restructuring $(7.1) $(6.8) $(3.4) $(25.3) $(22.4) $(4.9)
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Restructuring
charges $2.4 $--- $0.9 $2.4 $0.9 $---
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Income (loss) from
operations $(9.5) $(6.8) $(4.4) $(27.7) $(23.3) $(4.9)
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The corporate holding company reports revenues and costs including: -- Oversight
Oversight may refer to:
Treasurer, Strategic Planning Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. , General Counsel, Corporate Marketing, the Board of Directors, internal and external audit, and other costs that are directly the result of Intergraph being a publicly held company. -- Revenues and costs for Teranetix(TM) (a provider of commercial repair and logistics services) and international hardware maintenance. -- Residual costs of exiting the hardware business, including management of warranty reserves and a repair depot. The increase in the loss in the holding company for the year 2003 is due to higher legal expenses, $1.5 million higher restructuring costs, and the costs of exiting the hardware business, including management of warranty reserves, inventory write-downs, and management of a repair depot. As a result of the Company's restructuring efforts and the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of the hardware warranty obligations, the loss in the holding company is expected to decline beginning in Q1 2004. Intellectual Property The Company has intellectual property that is used in a variety of industries, including computers, consumer electronics, telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , and electronics design. The Company defends the value of its intellectual property (IP) portfolio through licensing and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. . The Company remains actively engaged in licensing discussions, as well as patent litigation with several companies. All income and expenses associated with the IP portfolio, including legal expenses, are classified and reported in the Other Income (Expense) section of the income statement. Intel Litigation: On July 29, 2001, the Company filed a patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. case against Intel Corporation (company) Intel Corporation - A US microelectronics manufacturer. They produced the Intel 4004, Intel 8080, Intel 8086, Intel 80186, Intel 80286, Intel 80386, Intel 486 and Pentium microprocessor families as well as many other integrated circuits and personal computer networking in the U.S. District Court for the Eastern District of Texas. The Texas case pertained to the Company's parallel instruction computing computing - computer (PIC (1) (Programmable Interrupt Controller) An Intel 8259A chip that controls interrupts. Starting with the 286-based AT, there are two PICs in a PC, providing a total of 15 usable IRQs. ) patents and went to trial on July 2, 2002. On October 10, the judge ruled that the PIC patents were valid, enforceable, and infringed by Intel's Itanium and Itanium 2 products. Intel appealed this ruling to the U.S. Court of Appeals for the Federal Circuit. Based upon the trial court's decision and the parties' prior settlement agreement, Intel paid $150 million to the Company in November 2002. Regardless of the outcome on appeal, the Company will retain the $150 million received for the trial court decision. Intel will be required to pay an additional $100 million in damages if the trial court's decision is affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. on appeal. The parties have completed the appellate Relating to appeals; reviews by superior courts of decisions of inferior courts or administrative agencies and other proceedings. briefing process and the appellate argument occurred before a three-judge panel of the Federal Circuit on December 1, 2003. A final decision from the Federal Circuit is not expected until late first quarter or second quarter of 2004. OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and Litigation: On December 16, 2002, the Company filed a patent infringement action against Dell, Gateway and Hewlett-Packard/Compaq (HP) in the U.S. District Court for the Eastern District of Texas. The Company's complaint alleges that products from the three computer vendors infringe in·fringe v. in·fringed, in·fring·ing, in·fring·es v.tr. 1. To transgress or exceed the limits of; violate: infringe a contract; infringe a patent. 2. U.S. Patent Numbers 4,899,275 and 4,933,835 and 5,091,846. These computer system-level patents relate to memory management technology. The OEM action seeks an unspecified Adj. 1. unspecified - not stated explicitly or in detail; "threatened unspecified reprisals" specified - clearly and explicitly stated; "meals are at specified times" amount of damages for past infringement, plus a statutory patent injunction. The Company delayed serving the defendants with the lawsuit and engaged each defendant in licensing discussions. These licensing discussions were not successful and the defendants were served on April 1. The case has been set for trial on August 2, 2004. On May 28, 2003, HP filed a patent countersuit coun·ter·sue tr.v. coun·ter·sued, coun·ter·su·ing, coun·ter·sues Law To bring proceedings against (a plaintiff) in direct opposition to a suit brought against onself. against the Company in the Northern District of California. HP also asked the Texas court to transfer the OEM case to the Northern District of California for consolidation with HP's countersuit. The Texas court denied HP's motion to transfer the Texas OEM case to California. HP's countersuit did not specify any accused infringing products or resulting damages, and was initially dismissed as legally defective defective adj. not being capable of fulfilling its function, ranging from a deed of land to a piece of equipment. (See: defect, defective title) . HP has since filed a corrected amended complaint amended complaint n. what results when the party suing (plaintiff or petitioner) changes the complaint he/she has filed. It must be in writing, and can be done before the complaint is served on any defendant, by agreement between the parties (usually their lawyers), asserting as·sert tr.v. as·sert·ed, as·sert·ing, as·serts 1. To state or express positively; affirm: asserted his innocence. 2. To defend or maintain (one's rights, for example). four separate patents against a variety of Intergraph products, including SmartPlant 3D, IntelliShip, SmartPlant, SmartSketch, I/Mobile TC, and IntelliWhere. The Company has filed a motion to have HP's California countersuit transferred to the Northern District of Alabama. The California court has not yet ruled on the Company's motion to transfer. The Company has not determined what impact, if any, HP's countersuit may have on the Company's operations and cash flows. The Company will vigorously defend against HP's countersuit. HP has also filed an amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. answer and counterclaim A claim by a defendant opposing the claim of the plaintiff and seeking some relief from the plaintiff for the defendant. A counterclaim contains assertions that the defendant could have made by starting a lawsuit if the plaintiff had not already begun the action. in the Texas case, which alleges that Intergraph's patent assertions are a violation of the Sherman Antitrust Act Sherman Antitrust Act, 1890, first measure passed by the U.S. Congress to prohibit trusts; it was named for Senator John Sherman. Prior to its enactment, various states had passed similar laws, but they were limited to intrastate businesses. . The Company has filed a motion to dismiss HP's antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. counterclaims as a matter of law. The Texas court has not yet ruled on Intergraph's motion to dismiss. The Company believes HP's antitrust counterclaim to be without merit, and will vigorously defend the same. On June 21, 2003, Dell filed a counterclaim against Intel Corporation, adding them as a party to the OEM case. Intel filed a general denial general denial n. a statement in an answer to a lawsuit or claim by a defendant in a lawsuit, in which the defendant denies everything alleged in the complaint without specifically denying any allegation. to Dell's counterclaim. Dell also filed a motion to have their "Intel implied license" defense tried separately from the infringement case. Dell's motion to bifurcate To divide into two. was subsequently denied. Texas Instruments See TI. (company) Texas Instruments - (TI) A US electronics company. A TI engineer, Jack Kilby invented the integrated circuit in 1958. Three TI employees left the company in 1982 to start Compaq. Litigation: The Company filed suit against Texas Instruments (TI) in the U.S. District Court for the Eastern District of Texas on January 30, 2003. The TI case alleged that the Company's PIC patents were infringed by TI's family of Digital Signal Processors A digital signal processor (DSP) is a specialized microprocessor designed specifically for digital signal processing, generally in real-time computing. Characteristics of typical Digital Signal Processors
Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). solutions, optical networking Communications between computers, telephones and other electronic devices using light. An optical network is far more reliable and has far greater potential transmission capacity than networking in the electrical domain. See optical fiber. , telephony Meaning "sound over distance," it refers to electronically transmitting the human voice. In the beginning, telephony dealt only with analog signals in the circuit-switched networks of the telephone companies. , voice processing The computerized handling of voice, which includes voice store and forward, voice response, voice recognition and text to speech technologies. , and wireless communications wireless communications System using radio-frequency, infrared, microwave, or other types of electromagnetic or acoustic waves in place of wires, cables, or fibre optics to transmit signals or data. . TI subsequently asserted counterclaim patents in two separate legal actions in the Eastern District of Texas. As previously reported, the Company concluded settlement discussions with TI in September. In summary, TI agreed to pay the Company $18 million, dismiss all of TI's countersuits, and take a license to Intergraph's patents. Pursuant to the terms of the settlement, the Company received TI's settlement payment in Q4 2003. Advanced Micro Devices (AMD (Advanced Micro Devices, Inc., Sunnyvale, CA, www.amd.com) A major manufacturer of semiconductor devices including x86-compatible CPUs, embedded processors, flash memories, programmable logic devices and networking chips. ) Litigation: On January 15, 2004, Advanced Micro Devices (AMD) filed a Declaratory Judgment declaratory judgment In law, a judgment merely declaring a right or establishing the legal status or interpretation of a law or instrument. It is binding but is distinguished from other judgments or court opinions in that it includes no executive element (an order that Act (DJA DJA See Dow Jones Averagesr (DJA). ) patent action against the Company in the Northern District of California. AMD asserted that the Company's family of "Clipper clipper, type of sailing ship, designed for speed. Long and narrow, the clipper had the greatest beam aft of the center; the bow cleaved the waves; and the ship carried, besides topgallant and royal sails, skysails and moonrakers—a veritable cloud of sails. " patents (U.S. Patent Nos. 4,860,192, 4,884,197, 4,899,275, 4,933,835 and 5,091,846) are either invalid Null; void; without force or effect; lacking in authority. For example, a will that has not been properly witnessed is invalid and unenforceable. INVALID. In a physical sense, it is that which is wanting force; in a figurative sense, it signifies that which has no effect. , or not infringed by AMD's microprocessor microprocessor, integrated circuit containing the arithmetic, logic, and control circuitry required to interpret and execute instructions from a computer program. products. The Company had previously engaged in patent licensing discussions with AMD without success. AMD's complaint alleges that a subpoena subpoena (səpē`nə) [Lat.,=under penalty], in law, an order to a witness to appear before a court. A subpoena ad testificandum [Lat. received from the Company's Texas OEM case led them to believe that they were going to be sued and that the DJA was filed in response. No monetary damages Monetary damages, in civil law, refers to compensation given to an injured party by a liable party. Monetary damages may be restitution, a penalty, or both. are being sought by AMD. The Company is currently evaluating its response to AMD's action. Conference Call and Webcast Intergraph will provide an online, real-time Webcast and rebroadcast of the fourth quarter conference call to be held Thursday, January 29, 2004, at 11:00 a.m. (Eastern time). The live broadcast will be available online at www.intergraph.com/investors. Listeners will be asked to pre-register and should plan to visit this Web page a few minutes before the broadcast begins. The replay will be available shortly after the conference call ends and is expected to remain available online until January 31, 2005. In addition, the replay can be heard by telephone any time before the close of business February 29, 2004. Call 1-888-296-6947 and refer to reservation #9601411. Statements and comments made during the conference calls that are not solely historical in nature are "forward-looking statements," within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially and adversely. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that our projected results expressed or implied therein will not be realized.
Intergraph Corporation
Consolidated Balance Sheets (Unaudited)
December 31, December 31,
2003 2002
------------ ------------
(in thousands)
Assets
Cash and short-term investments $ 265,782 $ 506,024
Accounts receivable, net 150,927 152,187
Inventories, net 15,443 19,397
Other current assets 37,673 39,795
----------- -----------
Total current assets 469,825 717,403
Investments in affiliates 9,499 20,700
Capitalized software development costs, net 29,520 29,830
Other assets, net 12,500 16,889
Property, plant, and equipment, net 51,099 50,818
----------- -----------
Total Assets $ 572,443 $ 835,640
=========== ===========
Liabilities and Shareholders' Equity
Trade accounts payable $ 23,052 $ 17,850
Accrued compensation 38,781 31,541
Other accrued expenses 40,855 35,730
Billings in excess of sales 48,711 43,908
Income taxes payable 27,177 67,477
Short-term debt --- 169
----------- -----------
Total current liabilities 178,576 196,675
Deferred income taxes and other noncurrent
liabilities 14,013 17,255
Total shareholders' equity 379,854 621,710
----------- -----------
Total Liabilities and
Shareholders' Equity $ 572,443 $ 835,640
=========== ===========
Intergraph Corporation
Consolidated Statements of Operations (Unaudited)
Quarter Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
-------- -------- -------- --------
(in thousands, except per share amounts)
Revenues
Systems $ 79,390 $ 68,631 $297,972 $287,899
Maintenance 34,548 32,010 131,099 121,513
Services 31,841 21,354 98,191 91,665
-------- -------- -------- --------
Total revenues 145,779 121,995 527,262 501,077
-------- -------- -------- --------
Cost of Revenues
Systems 40,765 33,628 152,584 146,525
Maintenance 11,803 12,766 49,173 55,162
Services 24,181 16,391 72,320 65,550
-------- -------- -------- --------
Total cost of revenues 76,749 62,785 274,077 267,237
-------- -------- -------- --------
Gross profit 69,030 59,210 253,185 233,840
Product development expenses 16,016 11,359 58,958 50,669
Sales and marketing expenses 27,055 25,083 101,393 96,689
General and administrative
expenses 20,034 17,483 74,330 69,945
Restructuring charges 3,952 2,106 3,952 2,106
-------- -------- -------- --------
Income from operations 1,973 3,179 14,552 14,431
Intellectual property income
(expense), net (6,805) 145,520 5,784 434,471
Gains on sales of assets 470 --- 3,421 17,214
Interest income 1,492 1,963 6,588 6,886
Other income (expense), net (1,456) (6,463) (2,128) (3,830)
-------- -------- -------- --------
Total other income
(expense) (6,299) 141,020 13,665 454,741
-------- -------- -------- --------
Income (loss) before
income taxes and
minority interest (4,326) 144,199 28,217 469,172
Income tax benefit (expense) 5,690 (54,085) (5,010) (91,135)
-------- -------- -------- --------
Income before minority
interest 1,364 90,114 23,207 378,037
Minority interest in earnings
of consolidated subsidiaries --- --- --- (285)
-------- -------- -------- --------
Net income $ 1,364 $ 90,114 $ 23,207 $377,752
======== ======== ======== ========
Earnings per share:
Basic $ 0.03 $ 1.95 $ 0.51 $ 7.87
Diluted $ 0.03 $ 1.85 $ 0.49 $ 7.47
Weighted average shares
outstanding:
Basic 43,553 46,245 45,549 47,991
Diluted 45,382 48,653 47,583 50,536
Systems orders $ 62,300 $ 47,700 $299,700 $250,400
Services orders $ 28,600 $ 24,700 $ 94,700 $ 92,000
Intergraph Corporation
Business Unit Information (Unaudited)
Quarter Ended Twelve Months Ended
December 31, 2003 December 31, 2003
---------------------- ----------------------
Total Operating Total Operating
Revenues Income (Loss) Revenues Income (Loss)
---------------------------------------------
(in thousands)
PPO $ 36,019 $ 3,480 $ 132,818 $ 15,971
IPS 17,151 3,819 67,150 14,377
ISG 32,909 2,079 120,930 8,080
IMGS 60,171 2,126 209,957 3,848
Corporate 3,366 (9,531) 12,744 (27,724)
Eliminations (3,837) --- (16,337) ---
-------- ------- --------- --------
Total Company $145,779 $ 1,973 $ 527,262 $ 14,552
======== ======= ========= ========
Cautionary note regarding forward-looking statements This news release contains forward-looking statements (all statements other than those made solely with respect to historical fact) within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not limited to, the Company's ability to commence and consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. the anticipated tender offer, the Company's Business Outlook, projections about revenues, operating income levels, margins, and market conditions and their anticipated impact on Intergraph and its vertical business segments; expectations regarding Intergraph's various ongoing litigation proceedings; expectations regarding future results and cash flows; information regarding the development, timing of introduction, and performance of new products; and any statements of the plans, strategies, and objectives of management for future operations. The forward-looking statements are subject to known or unknown risks and uncertainties (some of which are beyond Intergraph's control) that could cause actual results to differ materially and adversely from those anticipated in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, potential adverse outcomes in our ongoing efforts to protect our intellectual property, including, but not limited to, an overturn on appeal of the ruling in favor of upon the side of; favorable to; for the advantage of. See also: favor us in our patent infringement action against Intel Corporation, an adverse ruling in our patent infringement action against various original equipment manufacturers ("OEMs"), including Dell Computer Corporation (company) Dell Computer Corporation - One of the biggest US manufacturers of IBM PC compatibles. "From notebooks to networks", their slogan says. http://us.dell.com. (TM), Gateway Inc.(TM) and Hewlett-Packard Co.(TM), and other ongoing and potential litigation and patent enforcement efforts, including uncertainties associated with potential patent infringement claims against non-domestic OEMs, material changes with respect to our business, litigation prospects or the securities markets (including the market for Intergraph common stock), worldwide political and economic conditions and changes, the ability to attract or retain key personnel, increased competition, rapid technological change, unanticipated changes in customer requirements, the ability to enforce and protect Intergraph's intellectual property rights, the ability to access the technology necessary to compete in the markets served, risks associated with doing business internationally, risks associated with various ongoing litigation proceedings, and other risks detailed in our press releases or in our annual, quarterly or other filings with the Securities and Exchange Commission. Intergraph Background Information Intergraph Corporation is a pioneer of computer graphics software and services in the commercial and government sectors. Founded in 1969, we have delivered numerous innovations in interactive graphics solutions. Today, we help our customers organize complex data into understandable visual representations, enabling them to make better and faster operational decisions. They create intelligent maps, manage assets and infrastructure, build and operate plants and ships, and dispatch A dispatch or dispatches can refer to:
Headquartered in Huntsville, Alabama Huntsville is the county seat of Madison County, Alabama. Huntsville is the largest city in northern Alabama in a region of a half-million people, with the city proper having 168,132 residents (2006 estimate). , Intergraph employs more than 3,000 professionals and has operations in more than 60 countries. The company's intellectual property division manages Intergraph's portfolio of intellectual property, including patents, copyrights, and trademarks. The company has more than $500 million in revenue and trades on the NASDAQ market under the symbol INGR. More information can be found at www.intergraph.com. Intergraph, the Intergraph logo, SmartPlant, Z/I Imaging, MARIAN, and IntelliShip are registered trademarks and Teranetix is a trademark of Intergraph Corporation. Other brands and product names are trademarks of their respective owners. |
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