Avatech Announces Restructuring, Cost Reduction
Company lowers FY07 revenue estimate, expects Q4 loss
 BALTIMORE,
Maryland, July 25, 2007 - Avatech Solutions, Inc. (OTCBB: AVSO.OB) has
implemented an operational restructuring and cost reduction program that is
expected to save the company in excess of $2.5 million annually. The program
supports Avatech’s fiscal plan to achieve consistent profitability and
enhanced shareholder value.
Once fully implemented, Avatech’s cost reduction actions are projected to
reduce ongoing operating expenses, as a percentage of sales, by
approximately seven percentage points. Savings from the full program – which
reduced overhead, elevated critical sales and services functions, and
streamlined information flow and accountability – began in the second half
of fiscal 2007 and will be fully realized beginning in the quarter that
began on July 1, 2007.
President and Chief Executive Officer George Davis commented, “Over the
past several years, Avatech’s primary goal has been to aggressively grow our
core business and become one of the largest solutions providers of Autodesk
products in the U.S. The Company accomplished these important objectives
through a combination of organic growth and strategic acquisitions.
“More recently, we have focused our attention on streamlining our
organization and strengthening fiscal accountability at all levels. During
the second half of fiscal 2007, we significantly reduced our work force
through the elimination of 20 positions, including four senior managers. In
addition, we have taken many other steps, including administrative and
organizational changes, to contain costs and improve efficiency.
“We expect our actions to have a positive impact on Avatech’s future
financial results. However, due in part to the disruptions caused by the
restructuring and cost reduction program, we now expect fiscal 2007 revenues
to be between $50 - $51 million rather than $51 - $55 million, as previously
estimated. In addition, due to severance charges of approximately $500,000
and previously disclosed changes in Autodesk’s incentive program, we now
expect an operating loss in the fourth quarter of 2007. As we return to
normalized margins, we do not expect these losses to continue into fiscal
2008.”
Davis added, “Our organizational changes have focused on improving
accountability, communications and productivity. We have eliminated several
layers of executive management and streamlined the organization by elevating
Sales and Engineering Services leadership positions, which now will report
directly to me. Along with my senior management team, including CFO Larry
Rychlak, Senior Vice President, Sales Bruce White and Senior Vice President,
Services Bill Zavadil, I am confident that this organizational structure
will allow us to better focus on sales performance, engineering productivity
and operational efficiencies – all crucial to improving bottom-line results.
“In addition to dramatically reducing costs, we have been working to
improve our performance under Autodesk’s new incentive program. As a result
of the steps we are taking to enhance the training of our sales force, our
marketing strategies, and our sales and services incentive structures, we
expect our margins to improve significantly over those realized in the most
recently reported quarters.
“Our updated business strategy is built on three core principles designed
to leverage Avatech’s existing strengths and to improve profits and
shareholder value as rapidly as possible:
- Maintain and profitably grow our strong position in the Autodesk
value-added reseller economy.
- Grow our engineering consultancy and services business by leveraging
our core value as a proven, trusted technical advisor in the design
engineering community.
- Acquire and integrate diverse, yet complementary service businesses
to extend our product offerings.
“The market’s need for engineering services is growing, offering us many
opportunities to diversify Avatech’s activities and drive Services revenue.
On a year-over-year basis, we increased Services revenue more than 40%
through the third quarter of fiscal 2007. To continue to expand our Services
division, our acquisition strategy is focused on providers of services and
software to the architectural, engineering, construction, and manufacturing
communities. Growing this critical segment of our business will demonstrate
increased value to our customers, distinguish us from the competition,
provide a recurring, profitable revenue base and help us enhance shareholder
value. Our balance sheet remains strong and will facilitate this program.
“We believe the actions taken over the last several months have
positioned Avatech well to build on our core strengths and advance our
strategic vision in fiscal 2008 and beyond,” concluded Mr. Davis.
About Avatech Solutions
Avatech Solutions, Inc. (OTCBB:AVSO.OB) is the recognized leader in
design and engineering technology with unparalleled expertise in design
automation, data management and process optimization for the manufacturing,
engineering, building design and facilities management markets.
Headquartered in Owings Mills, Maryland, the company specializes in
consulting, software systems integration and implementation, standards
development and deployment, education, and technical support. Avatech is one
of the largest integrators of Autodesk software worldwide and a leading
provider of PLM solutions. The company’s clients include industry leaders
from Fortune 500 and Engineering News Record’s Top 100 companies. Visit http://www.avatech.com
for more information.
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