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"Does evolution have intelligence? "

All indications are that the variation within the genome, that range of alleles (possible genes at the same place on the DNA sequence) within a population, is produced without any intelligent tinkering. New alleles are produced mainly by errors during meiosis (when the gametes (germ cells (sperm and the ovum)) are produced) commonly called mutations. Mutations take quite a number of forms, some are deleterious, some advantageous but the vast majority are neutral. Many of those neutral mutations can become deleterious or beneficial if the environment changes. In this context, the environment is not just the weather, or the type of food available but includes the number and type of competing animals outside the population but in the physical area, and those competitors in the population as well as any intra-species sexual/kin preferences. In the factors listed above (normally part of selection), there is no indication of any outside intelligence even though selection can be said to direct evolutionary change.

"Do not the physical laws say that every thing is breaking down on evolving?

Simple answer - No.

Complex answer - There has been a number of people who claim that the 2LoT (2nd Law of Thermodynamics) allows only degradation and loss of information causing organisms to 'wind down' rather than improve. This argument is generally based on a misapplication of 'entropy'- the diffusion of energy from a high energy system to a lower energy environment - to biological organisms. This diffusion is sometimes considered a decrease in order, although it is probabilistic in that statistically it is possible for order to increase.

Within a system where entropy is increasing, there can exist pockets of decreased entropy.

Another way of viewing entropy (and I know I will be corrected by the learned physicists here) is as energy that is no longer available for a system to use to produce work.

In our solar system, during the manufacture of helium (fusion) where a more complex atom is formed by combining two simpler atoms, the sun releases energy previously stored in the atomic bonds of hydrogen. This energy once radiated out into space is obviously no longer available to be used by the sun to produce work, thus the entropy of the system is increased. The sun will eventually, through the production of more and more complex atoms, run out of energy. It is, in your parlance, breaking down.

However all that energy that is no longer available for the sun to use can be used by lower energy level systems in the environment. In this case it is the Earth which is free to use or store that waste energy (at least from the sun's point of view) it receives from the sun.

Some of that energy is captured by the bacteria (called chloroplasts )living inside the cells of plants, which store a part of the received energy in the chemical bonds of complex molecules such as carbohydrates. That energy used in the work performed to store energy is released by the plants as waste O₂. It's obvious that more energy must be received by the plant than it stores since the storage of energy takes energy. Some of this stored energy is used by the plant to survive and reproduce. If no other organism makes use of the energy stored by the plant in chemical bonds, that energy is released, and/or deposited on the earth as C (carbon) when the plant dies, thereby contributing to the increase of over all entropy.

Animals, who need energy to survive and reproduce, eat the plants and use that energy stored in the plants to manufacture their own complex molecules such as proteins and lipids, thus storing some of the energy, while radiating the rest of the energy as heat, dead cells and fecal matter. Remember from the post by ahayes that some DNA codes for proteins. Those particular proteins are used ultimately to produce more animals. Again, the user of energy must take in more energy than it stores. It uses up energy to store energy. It takes a fair bit of plant matter to sustain an animal so some animals have found a source of high density energy called protein. They eat other animals.

Because energy directly, or indirectly, derived from plants that can be used to perform work such as creating gametes, animals can easily add length and content to their genes. As long as energy is available to the parent organism, the child organism is not going to be 'less 'than the parent. (Assuming no deleterious mutation). When an organism dies, much of its stored energy is released, thus increasing entropy, and the rest is stored in complex molecules for use by other organisms, including plants. Eventually all stored energy is released as heat radiated into space after a few possible detours.

Increased information (which is really a red herring, but we can go into that at another time) is more than possible without breaking, bending, or otherwise mutilating the 2LoT through a long line of energy storage and use, starting with the sun and ending with its eventual radiation out into space. Through the use of stored energy, evolution can not only preserve current species but produce new, novel species.

Entropy is increased as it should, and work is performed to keep biological organisms from 'breaking down'.