Intergraph denies all of the allegations in the lawsuit and believes that its disclosures are appropriate under the law. Nevertheless, Intergraph and the other defendants have agreed to settle the purported class action litigation in order to avoid costly litigation and eliminate the risk of any delay to the closing of the merger.
The following information supplements the Proxy Statement and should be read in conjunction with the Proxy Statement. All page references in the information below shall refer to those contained in the Proxy Statement, and terms used below shall have the meanings set forth in the Proxy Statement unless otherwise defined below):
Projected Financial Information
Intergraph's senior management does not as a matter of course make public projections as to future performance or earnings beyond the current fiscal year and is especially wary of making projections for extended earnings periods due to the unpredictability of the underlying assumptions and estimates. However, senior management did provide financial forecasts to the board of directors, Goldman Sachs and the sponsor group in connection with their consideration of a possible leveraged buyout of Intergraph. We have included a subset of these projections to give our stockholders access to certain nonpublic information deemed material by our board of directors for purposes of considering and evaluating the merger. The inclusion of this information should not be regarded as an indication that management, our board of directors, Goldman Sachs, the sponsor group or any other recipient of this information considered, or now considers, it to be a reliable prediction of future results.
Intergraph believes the assumptions Intergraph's management used as a basis for the projections were reasonable at the time the projections were prepared, given the information Intergraph's management had at the time. However, Intergraph advised the recipients of the projections that its internal financial forecasts, upon which the projections were based, are subjective in many respects. The projections reflect numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, all of which are difficult to predict and beyond Intergraph's control. The projections do not take into account any circumstances or events occurring after the date they were prepared and also reflect numerous estimates and assumptions related to the business of Intergraph that are inherently subject to significant economic, political, and competitive uncertainties, all of which are difficult to predict and many of which are beyond Intergraph's control and that are inherently subject to factors such as industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operation of Intergraph, including the factors described under "Special Note Regarding Forward-Looking Statements" beginning on page 11. As a result, there can be no assurance that the projected results will be realized or that actual results will not be significantly higher or lower than projected. Since the projections cover multiple years, such information by its nature becomes less reliable with each successive year.
The financial projections were prepared for internal use and to assist the sponsor group and Goldman Sachs with their respective due diligence investigations of Intergraph and not with a view toward public disclosure or toward complying with United States generally accepted accounting principles, the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Intergraph's independent registered public accounting firm has not examined or compiled any of the financial projections, expressed any conclusion or provided any form of assurance with respect to the financial projections and, accordingly, assumes no responsibility for them.
Additionally, since the date of the projections described below, Intergraph has made publicly available its actual results of operations for the quarter and nine months ended September 30, 2006 (the "Form 10-Q"). You should review the Form 10-Q for the quarter ended September 30, 2006, which is incorporated herein by this reference, to obtain this information. Readers of this proxy statement are cautioned not to place undue reliance on the specific portions of the financial projections set forth below. No one has made or makes any representation to any stockholder regarding the information included in these projections.
For the foregoing reasons, as well as the bases and assumptions on which the financial projections were compiled, the inclusion of specific portions of the financial projections in this proxy statement should not be regarded as an indication that such projections will be an accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, Intergraph does not intend to update, or otherwise revise the financial projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.
For purposes of rendering its financial opinion in connection with the merger, Goldman Sachs assumed that the financial projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of Intergraph. Goldman Sachs did not assist management in the preparation of the financial projections. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Intergraph or any of its subsidiaries, and, except for the Real Estate Appraisals, Goldman Sachs was not furnished with any evaluation or appraisal of the assets or liabilities of Intergraph or any of its subsidiaries. See "The Merger--Opinion of Goldman Sachs & Co." beginning on page 25.
Projections
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2006E 2007E 2008E
-------- -------- --------
(dollars in millions)
Total Revenue 613,560 665,393 720,320
Revenue Growth 6.4% 8.4% 8.3%
Gross Profit 322,360 352,289 384,446
Gross Margin 52.5% 52.9% 53.4%
Operating Income Before Restructuring 65,787 84,624 97,786
Operating Margin Before Restructuring 10.7% 12.7% 13.6%
EBITDA Before Restructuring 97,907 117,017 130,385
EBITDA Margin Before Restructuring 16.0% 17.6% 18.1%
Operating Income 55,397 84,624 97,786
Operating Margin 9.0% 12.7% 13.6%
Net Income 70,056 75,967 71,447
