FF and Thread - Sort of OT, Intergraph sued by PCB maker for misrepresentation.
only relevance may be that 1) INGR is suing Intel, and 2) may be an indication that these guys are not easy to do business with (?).
techweb.com
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Intergraph Sued For $25 Million
(07/08/99, 7:27 p.m. ET)
By Bolaji Ojo, Electronic Buyers' News
Barely a year after signing an agreement expected to benefit both parties, Praegitzer Industries and Intergraph are headed to court.
In a tit-for-tat move this week, Tualatin, Ore.-based Praegitzer slapped Intergraph with a $25 million lawsuit one month after it was dragged to court to answer breach of contract charges filed by Intergraph.
Praegitzer's lawsuit claims Intergraph gave it inaccurateinformation when the printed-circuit-board maker bought Intergraph's Huntsville, Ala., plant in March 1998 for $16 million.
According to Praegitzer, Intergraph misrepresented the sales and production history of the Huntsville plant during negotiations in early 1998.
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Rumblings of discontent in the relationship were heard when Praegitzer announced it would close the Huntsville plant and fire 150 employees to cut its losses.
The alleged misrepresentations include statements that circuit boards produced at the plant from January to November 1997 grossed $15.18 million in sales and that 76,661 boards were made at the plant during that period.
"The production figures were inflated materially by purchases of finished circuit boards from outside vendors, which were falsely shown on the financial information as production and sales by Intergraph," Praegitzer said in the court filings. "On account of such representations, plaintiff [Praegitzer] has been damaged in an amount exceeding $25 million."
Praegitzer initially conveyed its grievances privately to Intergraph. But by early last month, rumblings of discontent in the relationship were heard when Praegitzer announced it would close the Huntsville plant and fire 150 employees to cut its losses.
Praegitzer's lawsuit is only the second in a series of legal salvos fired by the two parties in the past two months. The first shot was touched off by Intergraph, which last month hauled Praegitzer into court, claiming it had been supplied substandard PCBs.
When the transaction began to unravel in the first half of this year, following Praegitzer's decision to reduce its manufacturing plants from six to four, the company demanded compensation from Intergraph, claiming certain financial information given during acquisition-related discussions was inaccurate.
Intergraph rejected the claims, and in early June, asked a U.S. district court in Alabama to rule it had "not breached its representations and warranties," and that Intergraph had "substantially performed its duties and obligations under the agreement," the company stated in the court filings.
Intergraph later amended the lawsuit to charge Praegitzer had supplied it with defective PCBs. As part of the deal to sell the Huntsville plant, Intergraph agreed to purchase PCBs from Praegitzer.
"Intergraph subsequently discovered the PCBs manufactured by Praegitzer were not 'high quality,' " Intergraph said in the court papers. Even as court papers fly back and forth, Praegitzer and Intergraph still have contractual obligations to fulfill stemming from the Huntsville agreement. The PCB sales contract has not been annulled by either party and is still in effect, according to lawyers for Intergraph.
This point was reiterated by a spokeswoman for Intergraph, who said the closure of the Huntsville plant should not influence the agreement.
"Our agreement is with Praegitzer, and it does not matter to us where they manufacture the PCBs," she said.
A Praegitzer spokeswoman declined to comment on the case.
The acquisition of the Huntsville plant was one of a series of bold moves Praegitzer embarked on last year to shore up its revenue. After buying the plant, the company increased the staff, hoping to boost production, and extended its services to current and potential customers on the East Coast.
That dream did not materialize. Reeling from losses incurred at the plant and elsewhere, Praegitzer began cutting back last September, and finally announced early in June that it would close the plant. Earlier this year, Praegitzer shut down its Redmond, Wash., facility.
Earlier this week, Praegitzer said it will take a $16.5 million restructuring charge in the quarter ended June 30, in conjunction with the closure of the Huntsville plant. The company said it expects costs associated with the closure of the two plants, as well as weak sales, to result in a fiscal third-quarter loss of between 33 and 38 cents per share.
Analysts said they expect Praegitzer to now focus on the internal reorganization of its various units.
"The company is in the process of becoming more focused, and I interpret this as positive for them," said Vernon Essi Jr., an analyst at Adams, Harkness & Hill, in Boston. "The only winding down they might need to do now is the plant in Malaysia, and that is a small one. All the other plants are doing very well."
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