CIMdata PLM Industry Summary Online Archive

2 April 2009

Company News

Avatech Solutions Strengthens Operating Program with Enhanced Offerings and Additional Cost Cutting Measures

Avatech Solutions, Inc. announced that it has implemented a new operating program aimed at streamlining operations and addressing new revenue sources in order to align its business with current market demands.

Avatech’s new program is focused on managing its business through the current market contraction and the inherent impact on sales and profitability, while simultaneously identifying new and evolving market opportunities. By proactively identifying changes in the market Avatech will be able to create responsive, diverse technology based solutions ahead of other providers.

In support of this program, Avatech is leveraging its team of technical and business development talent to create solutions that address its customers’ needs associated with cost reduction, productivity and competitiveness. Areas of opportunity include integrated solutions for both manufacturing and building sector customers and include packaged solutions that support state of the art technology with methodology and processes. In the Manufacturing sector Avatech is building and implementing integrated solutions that expand the reach of technology utilization from traditional engineering use to disparate functions including sales and procurement. In the Building and Infrastructure, or AEC sector, the Company is building and implementing solutions that will address the pending demand for advanced technology solutions in support of expected U.S. infrastructure spending and Sustainable and Green technology integration. Additionally, Avatech is engaging with customers and partners to create value added solutions in support of Building Information Modeling and Integrated Product Delivery initiatives.

The cost reduction components of the program include:

•  A temporary 10% reduction in base pay for all employees and management; and

•  Further reductions in the company’s workforce that, coupled with a small reduction in force that was done in January 2009, are expected to result in a decrease in the overall workforce of approximately 10%.

These cost reduction and containment programs are expected to reduce ongoing operating expenses by approximately $500,000 per quarter. The temporary pay reduction will remain in place until Avatech’s business has returned to a level that supports the previous levels of compensation.

The Company expects the new program to support near term cash management objectives while also providing additional and incremental revenue opportunities.

George Davis, President and CEO of Avatech commented, “The economic downturn that has overtaken the U.S. within the past 12-18 months has significantly impacted the markets we serve - including Architecture, Engineering & Construction (AEC) and Manufacturing. This has caused the companies operating within these markets to reduce and delay spending, including spending on the traditional technology and services we provide. In order to protect the financial strength of the Company during this period, we have implemented a focused operating plan that addresses containment and maintenance, discovery, creation and execution. This strategy is expected to cut costs by approximately $2 million annually and put us in a unique position of strength for when this economic downturn comes to an end and the economy improves.

While we are currently experiencing reduced demand for the traditional technology and services we provide to our customers, we are seeing increased demand for new and creative solutions that support productivity improvements and cost reduction initiatives with a focus on enhancing competitiveness. With our technical and business development strength, we are uniquely positioned to be a go-to-company in the markets we serve by developing and providing value added solutions that support these critically important initiatives. We expect to manage through the downturn and emerge in a position of strength.”

Mr. Davis concluded, “Due to the current economic environment and complex level of influencing factors, we will not be providing specific earnings guidance. However, I believe we have taken significant and necessary steps in order to ensure the financial security of our business while simultaneously positioning for future growth.”

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