Intergraph Reports First Quarter 2006 Financial Results

Intergraph Corporation (NASDAQ: INGR), a leading global providerof spatial information management (SIM) software, today announcedfinancial results for its first quarter ended March 31, 2006. Revenuefor the quarter was $139.0 million, an increase of 1.9% from the$136.5 million reported in the first quarter of 2005. Operating incomefor the quarter was $6.2 million, or 4.5% of revenue, compared to $5.9million, or 4.3% of revenue, reported in the first quarter of 2005.The Company reported a restructuring charge of $4.7 million in thefirst quarter of 2006, compared to $1.7 million in the first quarterof 2005. Operating income before restructuring (a non-GAAP measure)for the quarter was $10.9 million, or 7.9% of revenue, compared to$7.6 million, or 5.6% of revenue, reported in the first quarter of2005.

Net income for the quarter was $14.0 million, or $0.44 per dilutedshare, compared to $81.9 million, or $2.40 per diluted share, reportedin the first quarter of 2005. Net income includes approximately $8.5million and $81.0 million of after-tax intellectual property income,net of all fees and expenses, in the first quarter of 2006 and 2005,respectively.

"We are pleased with our continued improvements in operatingperformance as first quarter operating income and operating incomebefore restructuring exceeded our financial guidance," said R. HalseyWise, Intergraph President & CEO. "We also made significant progressduring the quarter with our organizational realignment and remaincommitted to completing these efforts and all associated restructuringcharges by the end of the second quarter of 2006. As part of ourrestructuring actions in the first quarter and in an effort toincrease operational focus, we divested our Teranetix Europeoperations, a legacy hardware repair business that we previouslyidentified as a non-core asset. We view such steps as evidence of ourcontinued efforts to enhance operational focus and build shareholdervalue."

(dollars in
millions)
Quarterly Results Financial Guidance (a)
----------------------- ------------------------------
Q1 2006 Q4 2005 Q1 2005 Q2 2006 2006
------- ------- ------- -------------- ---------------

Revenue $139.0 $145.1 $136.5 $145 - $147 $600 - $610 (b)
Year-over-year
growth 1.9% (0.7%) 3.2%

Operating income
- before
restructuring
(c) $10.9 $12.5 $7.6 $10.5 - $11.5 $53.0 - $57.0
Operating margin
- before
restructuring
(c) 7.9% 8.6% 5.6%

Restructuring
charges $4.7 $2.7 $1.7 $4.5 - $5.5 $9.2 - $10.2

Operating income $6.2 $9.8 $5.9 $5.0 - $7.0 $42.8 - $47.8
Operating margin 4.5% 6.8% 4.3%

Net income $14.0 $11.2 $81.9
Earnings per
share (diluted) $0.44 $0.35 $2.40

----------------
(a)Forward-looking statements. See "Cautionary Note Regarding
Forward-Looking Statements."

(b)2006 Revenue Guidance reflects the sale of Intergraph's Teranetix
Europe operations in the first quarter of 2006, which generated
approximately $5 million in annual revenue.

(c)See "Non-GAAP Financial Measures."

"Our recent customer wins and operating results illustrateIntergraph's continued progress as we execute on our Strategic Plan,"Mr. Wise said. "We are committed to further enhancing our operationalefficiency and investing in various growth initiatives for the future.While our first quarter revenue was lower than we expected, we arepleased that our orders and backlog trends remain strong. We areoptimistic about our forward prospects because we believe our businesstransformation actions will help us to highlight our differentiatedcapabilities and to pursue our attractive market opportunities."

Fluctuations in the value of the U.S. Dollar in internationalmarkets can have a significant impact on the Company's financialresults. The Company estimates for the quarter that the strengtheningof the U.S. dollar in its international markets, primarily in Europe,negatively impacted revenue by 3.0%, reduced operating expenses by2.9%, and decreased its quarterly net income by approximately $0.02per diluted share in comparison to the first quarter of 2005. TheCompany estimates that the weakening of the U.S. dollar in the firstquarter of 2006 as compared with the fourth quarter of 2005 positivelyimpacted revenue by 0.4%, increased operating expenses by 0.4%, andincreased its quarterly net income by approximately $0.01 per dilutedshare.

Recent Business Highlights

-- Security, Government & Infrastructure (SG&I) generated first quarter orders of $79.5 million, compared to $68.4 million in the first quarter of 2005. SG&I ending backlog was $203.2 million, an increase of 25.0% from the $162.6 million at the end of the first quarter of 2005. The increase in backlog has been primarily driven by global demand for Intergraph's public safety and transportation security solutions.

-- SG&I was selected by Corpus Christi, TX to provide its incident response and management system. The contract is valued at approximately $4.2 million and includes computer-aided dispatch (CAD), mobile computing, and reporting & analysis software. Additional notable recent public safety wins include Elk Grove County, CA (Sacramento, CA); Mumbai, India; Plantation, FL; and Richmond, VA.

-- SG&I announced that it has significantly expanded the Company's long-standing relationship with the National Geospatial-Intelligence Agency (NGA) by signing a new three-year Enterprise Site License Agreement. Intergraph's software will assist the agency in providing timely, relevant and accurate geospatial intelligence in support of national security objectives.

-- SG&I announced that its software was used in support of the security operations at the President's State of the Union Address in Washington, D.C. SG&I software enabled real-time tracking of resources throughout the course of the event and provided a map-based command and control interface allowing visibility and management of deployed mobile resources.

-- SG&I announced that its software was utilized by Istituto Geografico Militare Italiano (IGMI) to aid in the security operations at the 2006 Olympic Winter Games in Torino, Italy. SG&I software helped IGMI in collecting, validating and integrating mapping data to create valuable location-specific information for use by security personnel in the prevention and response to critical incidents.

-- SG&I software was selected by The Gas Company, Hawaii, to manage its geofacilities data network. Intergraph's software will manage The Gas Company's planning, design, construction, operation and maintenance functions. This selection means that the entire state of Hawaii will use Intergraph's software for all utilities including electric (Hawaiian Electric Company); communications (Hawaiian Telcom); and gas service (The Gas Company).

-- Process, Power & Marine (PP&M) generated year-over-year revenue growth of 20.9% and achieved operating margins of 22.4% in the first quarter of 2006. PP&M produced revenue growth across a wide range of products and geographies, particularly in the Asia-Pacific region.

-- PP&M announced that Rosneft, Russia's leading provider in the fuel and energy sector, has signed a multi-year software license agreement to standardize on Intergraph's SmartPlant Enterprise portfolio in its subsidiaries across the Russian Federation. SmartPlant Enterprise will allow Rosneft to integrate numerous applications used to create, capture and maintain information and institutional knowledge throughout the plant's lifecycle, regardless of changes in the plants and staff.

-- PP&M announced that Bateman Engineering N.V. will standardize on Intergraph's SmartPlant Enterprise to replace its existing AVEVA PDMS design tool. The SmartPlant Enterprise portfolio will form the foundation for a more data-centric and integrated plant design modeling environment.

-- PP&M's SmartPlant Enterprise was selected by Chematur Engineering AB (CEAB), a group of chemical engineering companies in Sweden, United States, Germany, Finland and India. CEAB will implement SmartPlant Enterprise across its worldwide operations to help streamline schedules, boost productivity and increase engineering quality across its global engineering enterprise.

-- PP&M announced SmartPlant Foundation, the Company's data and document management system and integration hub, has now been selected by more than 100 clients worldwide. SmartPlant Foundation provides critical integration capabilities for asset creation, maintenance and operations-related work processes that address the engineering information requirements of a facility throughout the entire plant lifecycle.

-- PP&M acquired Alias Ltd., a leading global provider of piping design automation software, based outside of Manchester, England. Alias provides automatic piping isometric drawing generation capability to the majority of 3D plant design and shipbuilding software users worldwide.

-- Intergraph recently announced that General Colin Powell, USA (Ret.), will serve as the featured keynote speaker for Intergraph 2006, the Company's flagship international users' conference to be held June 12-15, 2006 in Lake Buena Vista, Florida, at Disney's Coronado Springs Resort.

-- Intergraph sold the European operations of its Teranetix division on March 25, 2006, marking the second and final divestiture of this non-core asset. Teranetix provides legacy hardware maintenance and repair services and was identified as a non-core asset by the Company as part of its Strategic Plan. Teranetix generated approximately $5 million in annual revenue with little to no operating profit. The sale of Teranetix did not result in a material gain or loss.

Organizational Realignment

In April 2005, the Company announced, as part of its businesstransformation efforts, the realignment of its organizationalstructure and streamlining of its global operations from four to twodivisions - Security, Government & Infrastructure (SG&I) and Process,Power & Marine (PP&M). The organizational realignment is intended to:(1) improve the customer focus and responsiveness of the Company; (2)facilitate revenue growth by better leveraging the Company's fullrange of technology and services; (3) enhance the Company'sdevelopment capabilities and ability to deliver innovative solutionsto its target markets; and (4) reduce the overall cost structure ofthe Company.

The Company expects that the organizational realignment will becompleted by the end of the second quarter of 2006. The Company hasidentified process improvements and expense savings opportunitiesrelated to the organizational realignment efforts. The Companybelieves the majority of these efficiency improvements and expensesavings will be generated by streamlining internal processes aroundthe world and eliminating redundant positions as part of consolidatingdivisions and functions. The Company eliminated approximately 100positions during the first quarter of 2006 and reported arestructuring charge of $4.7 million as part of the organizationalrealignment efforts. In total, the Company has eliminatedapproximately 315 positions and reported restructuring charges of$14.7 million during the second quarter of 2005 through the firstquarter of 2006. The Company estimates that total restructuringcharges for the remainder of the organizational realignment (secondquarter of 2006) will be $4.5 - $5.5 million. The Company estimatesthat the entire organizational realignment will generate total grossexpense savings on an annual basis in the range of $26 - $29 million.As part of the Company's transformation efforts and consistent withits Strategic Plan, Intergraph plans to invest a portion of theexpense savings generated by the organizational realignment into R&Dfor core product upgrades, IT and system improvements, expansion ofsales channels, and targeted growth opportunities where the Companybelieves it has differentiated capabilities.

Division Performance

The Company believes that providing the operating performance ofits two divisions is useful to investors. The following tables andexplanations summarize the results of the two divisions for the firstquarter ended March 31, 2006.

Security, Government & Infrastructure (SG&I):

(dollars in millions)
Quarterly Results Ending
-----------------------
Q1 2006 Q4 2005 Q1 2005 Backlog
------- ------- ------- -------

Revenue $92.3 $98.2 $97.7 $203.2
Year-over-year growth (5.5%) (3.8%) (0.3%)

Operating income - before restructuring $6.3 $6.4 $6.8
Operating margin - before restructuring 6.8% 6.5% 7.0%

Restructuring charges $2.6 $2.6 $1.0

Operating income $3.7 $3.8 $5.8
Operating margin 4.0% 3.8% 5.9%

SG&I revenue for the quarter was $92.3 million, a decrease of 5.5%from the first quarter of 2005 and a sequential decrease of 6.0% fromthe fourth quarter of 2005. The revenue decrease from both periods waspartially driven by the timing of delivery related to Digital MappingCameras. The year-over-year comparison also reflects a decline incertain U.S. Federal Government contracts. Operating income for thequarter was $3.7 million, or 4.0% of revenue, compared to $5.8 millionin the first quarter of 2005 and $3.8 million in the fourth quarter of2005. SG&I reported a restructuring charge of $2.6 million in thefirst quarter of 2006 due to the organizational realignment announcedin April 2005. Operating income before restructuring (a non-GAAPmeasure) for the quarter was $6.3 million, or 6.8% of revenue,compared to $6.8 million in the first quarter of 2005 and $6.4 millionin the fourth quarter of 2005. The year-over-year decline in operatingincome was driven by lower revenue and higher restructuring charges,partially offset by lower operating expenses. The slight sequentialdecline in operating income from the fourth quarter of 2005 reflectslower revenue, offset by improved gross margins and lower operatingexpenses. SG&I generated first quarter orders of $79.5 million,compared to $68.4 million in the first quarter of 2005 and $70.3million in the fourth quarter of 2005. SG&I ending backlog was $203.2million, representing a 25.0% increase from the $162.6 million at theend of the first quarter of 2005 and a 5.1% increase from the $193.3million at the end of the fourth quarter of 2005.

Process, Power & Marine (PP&M):

(dollars in millions)
Quarterly Results
-------------------------------
Q1 2006 Q4 2005 Q1 2005
--------- --------- ---------

Revenue $46.8 $47.2 $38.7
Year-over-year growth 20.9% 8.3% 17.2%

Operating income $10.5 $11.4 $6.3
Operating margin 22.4% 24.2% 16.4%

PP&M revenue for the quarter was $46.8 million, an increase of20.9% from the first quarter of 2005 and a sequential decrease of 0.8%from the fourth quarter of 2005. The year-over-year revenue increasewas primarily due to growth in our core plant design software, theadoption of our new SmartPlant Enterprise technology, increases in our3D design software lease base, and increases in maintenance andservices revenue generated by these products. Operating income for thequarter was $10.5 million, or 22.4% of revenue, compared to $6.3million in the first quarter of 2005 and $11.4 million in the fourthquarter of 2005. The year-over-year growth in operating income wasprimarily due to increases in revenue and gross margins, partiallyoffset by higher operating expenses primarily in sales and marketingfunctions to support the growth in the business.

Accelerated Stock Buyback (ASB)

On March 22, 2005, the Company repurchased 5.4 million shares froma financial intermediary in a private transaction in connection withan Accelerated Stock Buyback (ASB). The shares were repurchased for anupfront payment of approximately $150 million, or $27.74 per share,and were subject to a market price adjustment provision based on thevolume weighted average market trading price of $41.06 per share overthe period from May 2, 2005 to March 21, 2006. The total amount ofthis market price adjustment provision was approximately $72 millionand was settled by the Company in cash on March 24, 2006.

Intellectual Property

The Company possesses an intellectual property (IP) portfolio,which it protects through licensing and litigation. All income andexpenses associated with the IP portfolio, including legal expenses,are classified and reported in the Other Income (Expense), net sectionof the income statement. For the quarter ended March 31, 2006,Intergraph reported $13.5 million of pre-tax intellectual propertyincome, net of all fees and expenses.

On March 31, 2006, Intergraph entered into a patent licenseagreement with Sony Corporation of Japan. The terms of the agreementrequire Sony to make a one-time, up-front royalty payment of $15.0million for a paid-up worldwide license to Intergraph's patentportfolio. Intergraph recorded after-tax intellectual property incomefrom this agreement of approximately $8.6 million, net of all fees andexpenses, in the first quarter of 2006.

On April 24, 2006, Intergraph announced a patent license agreementwith Acer Incorporated. Under the terms of the agreement, Acer willmake a one-time, fully paid-up royalty payment of $7.5 million basedon a 1% royalty on applicable product revenue. Intergraph expects torecord after-tax intellectual property income from this agreement ofapproximately $4.3 million, net of all fees and expenses, in thesecond quarter of 2006.

Non-GAAP Financial Measures

To supplement its financial statements, which are prepared on aGenerally Accepted Accounting Principles (GAAP) basis, Intergraphreports operating income before restructuring charges and operatingmargin before restructuring charges. The Company believes thesenon-GAAP financial measures provide investors and management withadditional information to evaluate the Company's past financialresults and ongoing operational performance. The Company believesthese non-GAAP financial measures facilitate making period-to-periodcomparisons and are indications of its operating performance. Thepresentation of this additional information is not meant to beconsidered in isolation or as a substitute for any measure prepared inaccordance with GAAP. In addition, these non-GAAP financial measuresmay not necessarily be comparable to those of other companies.

Conference Call and Webcast

Intergraph will provide an online, real-time Webcast andrebroadcast of its first quarter conference call to be held onThursday, April 27, 2006 at 11:00 a.m. EST. The live broadcast will beavailable online at www.intergraph.com/investors. Listeners will beasked to pre-register and should plan to visit the Website a fewminutes before the broadcast begins. The replay will be availableshortly after the conference call ends and will remain availableonline until April 27, 2007. In addition, the replay can be heard bytelephone any time before the close of business on May 27, 2006 bycalling 1-800-337-5619.

About Intergraph

Intergraph Corporation (NASDAQ: INGR) is a leading global providerof spatial information management (SIM) software. Securityorganizations, businesses and governments in more than 60 countriesrely on the Company's spatial technology and services to make betterand faster operational decisions. Intergraph's customers organize vastamounts of complex data into understandable visual representations,creating intelligent maps, managing assets, building and operatingbetter plants and ships, and protecting critical infrastructure andmillions of people around the world. For more information, visitwww.intergraph.com.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements (allstatements other than those made solely with respect to historicalfact) within the meaning of the Private Securities Litigation ReformAct of 1995 including, but not limited to, any projections orexpectations regarding future results, including revenue, operatingincome levels, margins, and cash flows; expectations regarding futuremarket conditions; and the Company's organizational realignment andcost reduction efforts, and their anticipated impact on the Companyand its divisions and business units; information regarding thedevelopment, timing of introduction, exportability, and performance ofnew products; the Company's ability to win new orders and anystatements of the plans, strategies, expectations, and objectives ofmanagement for future operations. Forward-looking statements aresubject to known and unknown risks and uncertainties (some of whichare beyond the Company's control) that could cause actual results todiffer materially from those anticipated in the forward-lookingstatements. Factors that could cause or contribute to such differencesinclude, but are not limited to, potential adverse outcomes in ourefforts to improve our operating performance (including uncertaintieswith respect to the timing and magnitude of any expectedimprovements); potential adverse outcomes or consequences associatedwith the Company's organizational realignment; material changes withrespect to our business, litigation, or the securities markets; risksassociated with doing business internationally (including foreigncurrency fluctuations and export controls); worldwide political andeconomic conditions and changes; increased competition; rapidtechnological change; unanticipated changes in customer requirements,including reductions in funding or spending for, or scope of,government projects; ability to identify suitable sources of growthand to identify and execute upon suitable acquisition targets atreasonable prices; ability to improve margins; adverse trends inenergy demand and prices; ability to attract or retain key personnel;the ability to access or deliver the technology necessary to competein the markets served; potential obsolescence or exhaustion of theCompany's intellectual property rights, and changes in the marketvalue of licensed products; the ability, timing, and costs to enforceand protect the Company's intellectual property rights; risksassociated with various ongoing litigation proceedings and otherdisputes; and other risks detailed in our press releases or in ourannual, quarterly, or other filings with the Securities and ExchangeCommission. The Company undertakes no obligation to make any revisionto any forward-looking statement or to update any such statement toreflect events or circumstances occurring after the date thereof.Accordingly, the reader is cautioned not to unduly rely on suchforward-looking statements.

Intergraph and the Intergraph logo are registered trademarks ofIntergraph Corporation. Other brands and product names are trademarksof their respective owners.

Intergraph Corporation
Consolidated Balance Sheets (Unaudited)
(amounts in thousands)

March 31, December 31,
2006 2005
------------ ------------
Assets:
Cash and short-term investments $214,686 $307,177
Accounts receivable, net 165,399 158,295
Inventories, net 26,460 23,467
Other current assets 51,379 39,829
------------ ------------
Total Current Assets 457,924 528,768

Investments in affiliates 9,309 9,375
Capitalized software development costs, net 23,143 23,482
Other assets, net 20,649 9,890
Property, plant and equipment, net 49,413 49,079

------------ ------------
Total Assets $560,438 $620,594
============ ============

Liabilities and Shareholders' Equity:
Trade accounts payable $19,135 $17,172
Accrued compensation 31,314 38,518
Other accrued expenses 42,120 41,290
Billings in excess of sales 58,699 58,489
Income taxes payable 38,479 38,104
Current portion of long-term debt 456 453
------------ ------------
Total Current Liabilities 190,203 194,026

Long-term debt 201 318
Deferred income taxes and other noncurrent
liabilities 7,359 7,388

Total Shareholders' Equity 362,675 418,862

------------ ------------
Total Liabilities and Shareholders'
Equity $560,438 $620,594
============ ============



Intergraph Corporation
Consolidated Statements of Operations (Unaudited)
(amounts in thousands, except per share data)

Quarter Ended March 31,
-----------------------
2006 2005
----------- -----------
Revenue:
Systems $71,789 $69,010
Maintenance 36,979 36,500
Services 30,258 30,978
----------- -----------
Total Revenue 139,026 136,488

Cost of Revenue:
Systems 33,497 33,071
Maintenance 10,655 10,962
Services 21,308 22,803
----------- -----------
Total Cost of Revenue 65,460 66,836

Gross Profit 73,566 69,652

Operating Expenses:
Product development 16,007 14,999
Sales and marketing 30,262 30,376
General and administrative 16,375 16,686
Restructuring charges 4,674 1,694
----------- -----------
Total Operating Expenses 67,318 63,755

Operating Income 6,248 5,897

Other Income (Expense):
Intellectual property income (expense), net 13,456 127,840
Interest income 2,247 1,973
Other income (expense), net 796 (200)
----------- -----------
Total Other Income (Expense) 16,499 129,613

Income Before Income Taxes 22,747 135,510

Income Tax Benefit (Expense) (8,700) (53,580)

----------- -----------
Net Income $14,047 $81,930
=========== ===========

Earnings Per Share:
Basic $0.48 $2.50
Diluted $0.44 $2.40

Weighted Average Shares Outstanding:
Basic 29,213 32,807
Diluted 31,585 34,202

Orders:
Systems orders $82,700 $69,900
Services orders 38,400 34,400
----------- -----------
Total Systems and Services Orders $121,100 $104,300