CIMdata PLM Industry Summary Online Archive

27 October 2004

Financial News

Intergraph Reports Third Quarter 2004 Results; Year-to-Date Operating Income Increases to $24.3 Million from $12.6 Million in Prior Year Period

Intergraph Corporation announced financial results for its third quarter ended September 30, 2004. Revenue for the quarter was $134.7 million, compared to $133.6 million reported in the third quarter of 2003. For the nine months ended September 30, 2004, revenue was $404.9 million, an increase of 6.1% from $381.5 million reported in the same period of 2003.

Operating income for the quarter was $7.6 million, or 5.6% of revenue, compared to $5.5 million, or 4.1% of revenue, reported in the third quarter of 2003. For the nine months ended September 30, 2004, operating income was $24.3 million, or 6.0% of revenue, compared to $12.6 million, or 3.3% of revenue, reported in the same period of 2003.

Net income for the quarter was $1.2 million, or $0.03 per diluted share, compared to $12.9 million, or $0.27 per diluted share, in the third quarter of 2003. For the nine months ended September 30, 2004, net income was $151.6 million, or $4.09 per diluted share, compared to $21.8 million, or $0.45 per diluted share, reported in the same period of 2003. Net income for the first nine months of 2004 includes $202.1 million of pre-tax intellectual property income, net of all fees and expenses.

"Our third quarter financial results underscore our continued progress in expanding operating margins," said Halsey Wise, Intergraph President & CEO. "Our renewed customer-focused orientation and the restructuring actions taken in late 2003 and early 2004 contributed to an operating income increase of 93% in the year-to-date period."

Fluctuations in the value of the U.S. dollar in international markets can have a significant impact on the Company's results of operations. The Company estimates that the weakening of the U.S. dollar in its international markets, primarily in Europe, positively impacted revenue in the third quarter of 2004 by approximately 3.0%, negatively impacted operating expenses by approximately 2.0% and improved its quarterly earnings per diluted share by approximately $0.03 in comparison to the third quarter of 2003. In addition, the Company estimates the weakening of the U.S. dollar in the third quarter as compared with the second quarter of 2004 positively impacted revenue by less than 0.5%, negatively impacted operating expenses by less than 0.5%, and improved quarterly net income by approximately $61,000.

The Company's balance sheet reflects a cash balance of $264.7 million and no debt as of September 30, 2004. The cash balance decreased by $89.9 million from $354.6 million at June 30, 2004, primarily due to the $100 million Accelerated Stock Buyback (ASB) executed on July 28, 2004.

Intergraph intends to amend its Form 10-K for the year ended December 31, 2003 and its Forms 10-Q for the quarters ended March 31 and June 30, 2004 to correct an accounting error in the revenue recognition of the SmartPlant 3D Early Adopter Program. This program was a limited release of SmartPlant 3D, formally announced by the Company's Process, Power & Marine (PPM) division in January 2003, to permit certain users of our PDS software to gain early access to the SmartPlant 3D application. The accounting error was isolated to this single program within the PPM division. Correcting the error is expected to reduce revenue, operating income, net income and earnings per share over the three quarters by an aggregate amount of $2.3 million, $2.2 million, $1.7 million and $0.04, respectively. The Company expects to record the revenue and profits associated with the Early Adopter Program upon the delivery of SmartPlant 3D version 5. SmartPlant 3D version 5 is scheduled to be delivered in the fourth quarter of 2004, pending completion of final product certification.

"After PPM's internal accounting staff became aware that there was a question regarding the timing of revenue recognition from the Early Adopter Program, we thoroughly reviewed this matter to determine the appropriate course of action," said Halsey Wise, Intergraph President & CEO. "We have determined that it is appropriate to amend our financial results for the fourth quarter of last year as well as the first two quarters of 2004, following consultation with our independent auditors and with the concurrence of our Audit Committee and Board of Directors. This issue was identified and brought forward by our own PPM personnel, and the accounting error is limited to a single marketing program in our PPM division. We have taken specific actions to prevent such events from reoccurring and are committed to further improvements. We at Intergraph place the utmost importance on maintaining the complete trust of our shareholders, customers and employees."

The Company expects to file amended financial statements for the affected periods with the Securities and Exchange Commission prior to filing the Company's Quarterly Report on Form 10-Q for the third quarter of 2004. The final adjustments to correct the accounting error remain subject to the Company's completion of the amended filings.

PPM revenue for the quarter was $35.2 million, an increase of 4.8% from the third quarter of the prior year and flat with the second quarter of 2004. For the first nine months of 2004, revenue increased 6.8% from the prior year. The year-over-year revenue growth was primarily due to increasing maintenance and services revenue on new products, shipbuilding maintenance from a contract signed in April 2003, and a small currency impact. Operating income was $4.0 million, flat with the third quarter of the prior year and down from $5.4 million in the second quarter of 2004. The sequential decrease in operating income from the second quarter, despite flat revenues, was mainly the result of slightly lower gross margins and higher sales and marketing costs due to PPM's annual user conference, APEX, which was held in Houston, TX during September.

The Time For Intergraph's Third Quarter Earnings Conference Call Has Been Revised To 9:00 A.M. EST On Thursday, October 28, 2004.

Intergraph will provide an online, real-time Webcast and rebroadcast of the third quarter conference call at http://www.intergraph.com/investors . The replay is expected to remain available online until October 28, 2005. In addition, the replay can be heard by telephone any time before the close of business on November 28, 2004 by calling 1-800-597-8364 and referring to the reservation number 8110283.

For the full text and financial tables go to Intergraph Press Release.

 

Become a member of the CIMdata PLM Community to receive your daily PLM news and much more.

Tell us what you think of the CIMdata Newsletter. Send your feedback.

CIMdata is committed to your privacy. Your personal information will never be sold or shared outside of CIMdata without your express permission.

Subscribe