Avatech Solutions Reports Earnings for Fiscal 2010

BALTIMORE, MD -- (MARKET WIRE) -- Sep 28, 2010 -- Avatech Solutions, Inc. (OTCBB: AVSO), a Rand Worldwide company and the leading professional services provider of design, engineering, and facilities management technology solutions, announced financial results for its fourth quarter and fiscal year ended June 30, 2010.

The Company reported revenues of $31.3 million compared to $35.4 million in the prior-year period. Selling, general and administrative expenses decreased to $13.9 million when compared to $16.2 million in the same period of the prior fiscal year. As a result, Avatech reported net income of $1.3 million, or $0.05 per fully diluted share, as compared to a net loss of $313,000, or $(0.05) per fully diluted share for the fiscal year 2009. Adjusted EBITDA (as defined) was $2,996,000 in fiscal 2010, a significant increase from the $483,000 reported in the prior year period.

For the fourth quarter, the Company earned revenues of $7.5 million compared to $7.2 million in the prior-year quarter. On the expense side, selling, general and administrative expenses decreased to $3.5 million in the three months ended June 30, 2010 compared to $3.8 million for the same period of the prior fiscal year. For its fourth fiscal quarter, the Company realized net income of $66,000, or $0.00 per fully diluted share, as compared with a net loss of $97,000, or $(0.01) per fully diluted share in the same period in the prior year. Adjusted EBITDA (as defined) was $356,000, a large increase from the negative adjusted EBITDA of $4,000 in the prior year period. It is important to note, fourth quarter and full fiscal year results were reduced by approximately $300,000 of costs relating to our August merger with Rand Worldwide, Inc.

With four sequential quarters of profitability, the Company reported that it continued to strengthen its financial position, evidenced by its cash balance of $2.5 million, the presence of only $33,000 in long-term liabilities, and the redemption of the final $2 million of its outstanding Series F Preferred Stock. In addition, the Company noted that, while it continues to maintain its $5 million line of credit, it had no borrowings on its line for the entire fiscal year.

"The results that we reported demonstrate the Company's ability and commitment to effectively manage through difficult economic periods. The last two quarters we have seen revenue growth when compared with the same quarter of last fiscal year," commented Lawrence Rychlak, President and Chief Financial Officer of Avatech.

"We continue to be well positioned to take advantage of the recovering economy. The merger with Rand is an exciting development for our customers, employees and shareholders because we are now a larger company with greater resource offerings to our customers. In addition, an expanded group of sales and technical professionals are now available to address more of our customers' needs in more locations throughout the world. Once we have concluded our integration efforts, we will be a financially stronger company and expect to continue with our growth and diversification strategies," continued Mr. Rychlak.

Company CEO, Marc Dulude added, "I am very pleased to have completed the merger between Rand Worldwide and Avatech. These solid results demonstrate how effectively the company's operations have been managed and we look forward to bringing solutions to an even wider base of customers than the two companies were addressing individually."

Conference Call Information

Avatech Solutions will hold a conference call to discuss its fourth quarter and year end results at 11:00 am ET on September 28, 2010. The dial-in numbers for the conference call are 1 (866) 203-2528 (domestic) or 1 (617) 213-8847 (International), and enter the passcode (52674716). A live, listen-only Webcast of the conference call will be available to all investors in the Investor Relations section of the Company's Web site ( www.avatech.com).

Note Regarding Use of Non-GAAP Financial Measure

This news release contains the non-GAAP measure Adjusted EBITDA. Adjusted EBITDA represents earnings (or losses) before interest, income taxes, depreciation and amortization, and stock-based compensation expense.

Adjusted EBITDA is used by management, analysts, investors and other interested parties in evaluating our operating performance compared to that of other companies in our industry, as the calculation of EBITDA as adjusted eliminates the effect of financing, income taxes, stock-based compensation costs, the accounting effects of capital spending and certain other merger related expenses, which items may vary from different companies for reasons unrelated to overall operating performance.

Avatech believes this non-GAAP measure provides useful information to both management and investors by excluding certain expenses that may not be indicative of its core operating results. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. The non-GAAP measure included in this press release has been reconciled to the GAAP results in the accompanying table.

About Avatech Solutions and Rand Worldwide

Rand Worldwide and Avatech Solutions have combined to form one of the world's leading professional services and technology companies for the engineering community, targeting organizations in the building, infrastructure, and manufacturing industries. The combined company advances the way organizations design, develop, and manage building, infrastructure, and manufacturing projects. Fortune 500 and Engineering News Record's Top 100 companies work with the company to gain a competitive advantage through technology consulting, implementation, training, and support services. One of the world's largest integrators of Autodesk software, the company designs systems that accelerate innovation while improving quality and profitability. For more information see ( www.avatech.com) and ( www.rand.com).

Forward-looking Statement

This press release contains forward-looking statements about the expectations, beliefs, plans, intentions, and strategies of Avatech Solutions, Inc. There are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. Statements that are not historical in nature, including those that include the words "goal," "expect," "anticipate," "estimate," "should," "believe," "intend," and similar expressions, are based on current expectations, estimates and projections about, among other things, the industry and the markets in which Avatech operates, and they are not guarantees of future performance. Whether actual results will conform to expectations and predictions is subject to known and unknown risks and uncertainties, including risks and uncertainties discussed in this report; general economic, market, or business conditions; changes in interest rates, and demand for our products and services; changes in our competitive position or competitive actions by other companies; the ability to manage growth; changes in laws or regulations or policies of federal and state regulators and agencies; and other circumstances beyond our control. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements, and there can be no assurance that the actual results anticipated will be realized, or, if substantially realized, will have the expected consequences on our business or operations.


                          Avatech Solutions, Inc.

                   Summary Consolidated Financial Data


                          Three Months Ended        Twelve Months Ended
                               June 30,                   June 30,
                       ------------------------   ------------------------
                          2010          2009         2010          2009
                       -----------  -----------   -----------  -----------

Revenues-
  Product sales        $ 3,868,000  $ 3,289,000   $15,340,000  $17,516,000
  Service revenue        1,939,000    1,798,000     8,061,000    9,446,000
  Commission revenue     1,656,000    1,611,000     7,925,000    7,973,000
  Sale of developed
   software                      0      500,000             0      500,000
                       -----------  -----------   -----------  -----------
    Total revenues       7,463,000    7,198,000        31,326,000      35,435,000
                                              -----------    -----------      -----------    -----------

Cost  of  revenues-
    Cost  of  product
      sales                                  2,619,000        2,124,000          9,646,000      11,596,000
    Cost  of  service
      revenue                              1,201,000        1,510,000          4,987,000        7,384,000
                                              -----------    -----------      -----------    -----------
        Total  cost  of
          revenues                        3,820,000        3,634,000        14,633,000      18,980,000
                                              -----------    -----------      -----------    -----------

Gross  margin                          3,643,000        3,564,000        16,693,000      16,455,000
Operating  income
  (loss)                                        153,000          (247,000)        2,240,000          (513,000)
Net  income  (loss)                      66,000            (97,000)        1,267,000          (313,000)

Earnings  (loss)
  per  share:
        Basic                            $            0.00    $          (0.03)    $            0.06    $          (0.05)
                                              ===========    ===========      ===========    ===========
        Diluted                        $            0.00    $          (0.03)    $            0.05    $          (0.05)
                                              ===========    ===========      ===========    ===========

Weighted  average
  common  shares
  outstanding:
        Basic                              17,147,418      16,937,591        17,114,366      16,815,722
                                              ===========    ===========      ===========    ===========
        Diluted                          21,003,107      16,937,591        20,845,058      16,815,722
                                              ===========    ===========      ===========    ===========


                                                June  30,          June  30,
                                                    2010                  2009
                                              -----------    -----------

Current  assets                  $  9,191,000    $  8,835,000
Property  and  equipment          495,000            796,000
Other  long-term  assets      7,302,000        7,628,000
                                              -----------    -----------
    Total  assets                  $16,988,000    $17,259,000
                                              ===========    ===========

Current  liabilities        $  6,973,000    $  6,338,000
Other  long-term
  liabilities                      $        33,000    $      160,000
Series  F  convertible
  preferred  stock                                  0        1,864,000
Stockholders'  equity          9,982,000        8,897,000
                                              -----------    -----------
Total  liabilities  and
  stockholders'  equity    $16,988,000    $17,259,000
                                              ===========    ===========





                                                    Avatech  Solutions,  Inc.

                              Reconciliation  of  non-GAAP  financial  measure


                                        Three  Months  Ended                          Twelve  Months  Ended
                                  6/30/2010            6/30/2009              6/30/2010            6/30/2009

GAAP  net
  income                $            66,000    $          (97,000)    $      1,267,000    $        (313,000)
Provision  for
  income  taxes                  97,000              (157,000)                954,000              (182,000)
                              -------------    -------------      -------------    -------------
Income  before
  income  taxes                163,000              (254,000)            2,221,000              (495,000)

Stock-based
  compensation                  55,000                  77,000                  161,000                257,000
Net  interest
  (income)
  expense                              7,000                    7,000                    32,000                  (2,000)
Depreciation
  and
  amortization                131,000                166,000                  582,000                723,000
                              -------------    -------------      -------------    -------------

    Adjusted
      EBITDA            $    356,000.00    $      (4,000.00)    $2,996,000.00    $    483,000.00
                              =============    =============      =============    =============


Management  uses  adjusted  EBITDA,  a  non-GAAP  measure,  to  evaluate  the
Company's  operating  performance  and  compare  the  Company's  current  results
with  those  for  prior  periods,  but  cautions  that  they  should  not  be
considered  as  a  substitute  for  disclosures  made  in  accordance  with  GAAP.
 

Company Contact:

Chantale Marchand
Rand Worldwide
Phone: (508) 663-1411
Email: 
Email Contact





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