LAS VEGAS, Oct. 23, 2001 (PRIMEZONE) -- PurchasePro (Nasdaq:PPRO) today announced measures implemented in the second phase of its turnaround strategy. In June, the company realigned its senior management and headcount and refocused its product line.
The company today said additional cost cutting and realignment measures include:
- a greater than 55 percent reduction in senior management salaries;
- an 81 percent reduction in facilities space occupied;
- a 50+ percent reduction in employee costs;
- additional pricing models for its products;
- an examination of financing options.
Richard L. Clemmer, chief executive officer, said, "While we were on track in our turnaround strategy following our realignment announcement in June, it became increasingly clear in the third quarter that PurchasePro is faced with new issues that require the company to alter its strategy and financial plan.
"When we announced our realignment, we said we were reducing our employee base to be more in line with our anticipated revenues for the year. We had anticipated sales traction through the summer and the third quarter. However, as we recently announced, that traction did not materialize in the magnitude we had anticipated. Consequently, today we are implementing a further realignment of our headcount and additional cost reduction measures that will better fit the company's immediate revenue prospects and reduce the company's burn rate. The headcount reductions, totaling 125, were spread among the entire range of PurchasePro employees and resulted in a current employee base of 125. Additionally, members of the management team are taking salary reductions and facilities space is being significantly reduced immediately. We anticipate an immediate savings of $2 million and annual savings of more than $14 million from these actions.
"We believe that these strategic reductions place our employee base at the best level to manage PurchasePro through the next phase of its turnaround. This headcount reduction comprised the departure of some members of senior management, as well as a redeployment of our resources and management responsibilities. I am saddened to announce that Allen Winder, executive vice president and chief operating officer, has resigned from the company. He has done so, in his words `to do my part in reducing the company's overhead and to spend more time with my family.' His primary responsibilities of sales and technology have been divided between Chris Benyo, senior vice president, and Mark Donachie, chief financial officer. Allen, however, has graciously agreed to stay on as a consultant to assist the company with specific international and key accounts."
Mr. Clemmer pointed out that a "major senior management restructuring has been put in place, with the senior team comprising myself, Mr. Benyo and Mr. Donachie with their added responsibilities. Donachie, the newest member of PurchasePro's management team, has an extensive software background, both in finance and other areas of operations. He is the perfect choice to lead our technology and financial efforts.
"It is clear," Mr. Clemmer noted, "that we have not recorded the sales that we had anticipated and to that end, we have refocused our sales staff and provided it with additional tools and a streamlined process with which to close the prospective sales in our pipeline. Moreover, Mr. Benyo has put a substantive sales process in place in order to have the best possible opportunity to close those sales."
With regard to the company's overall financial structure and outlook, Mark Donachie, chief financial officer, said, "We have developed a financial plan that will support our strategy going forward. It is a plan that we believe to be nimble enough to take advantage of changes in the economic environment and to support our revised objective of generating positive EBITDA by mid-year and free cash flow in 2002. With regard to guidance, we do not have the visibility to issue estimates."
Mr. Clemmer stated that the company is "actively seeking a strategic partner or a straight cash infusion. We are simultaneously reviewing a range of financing opportunities. To this end, we are engaged in discussions with a number of sources for financing and will make an announcement on this issue when appropriate. Although our new financial plan and strategy results in an appropriate burn rate to carry the company through this transition, with even nominal sales, we believe that a cash infusion will help mitigate the financial viability question and therefore better position PurchasePro to close sales in its pipeline."
Mr. Benyo, said, "Over the past month we have developed new pricing models and are in the process of rolling them out into the marketplace. Initially, we targeted companies with revenues in excess of $300 million for our e-Source product. As a result of the extraordinary interest generated from companies of all sizes from our television and marketing campaigns, we have developed and implemented additional pricing models specifically to attack the immense potential in the middle market."
Mr. Clemmer, said, "As I have said in the past, PurchasePro has products that business demands. Our e-Source and e-Procurement products, coupled with our commerce network, saves companies significant amounts in their purchasing activities. We know our products to be more cost effective than our competitors'. Moreover, none of our competitors can implement an e-procurement solution for a customer as fast as PurchasePro, with the supplier base management and enablement we can provide through the 300,000-member commerce network, at the cost we offer. Hilton, Honeywell and Accor, among others, provide proven results on this issue. Owens Corning, Timken, Unocal and ArvinMeritor, to name just a few, have achieved rapid returns on investment and significant reductions in cost through our e-Source product. Since we began tracking monthly e-Source results five months ago, we have seen the product save an average of 25 percent or $48 million in procurement for its users.
"The approach of our competitors has proven not to deliver their promised results. Their approach is little more than a warmed over, outdated ERP solution that is costly and only marginally effective in providing the supplier mix required to consistently drive costs down across an entire spend. PurchasePro clearly accomplishes this. They are the old guard in B2B, the warmed over ERP guard. Our business model is strong, solid, delivering the measurable results that are so critical to the procurement cost reduction process.
"PurchasePro is facing the most difficult challenges in its short history. We must weather an economic downturn, a messy history and short sellers. We have products that will provide customers with the cost savings they require in this recession. We have a management team and employee base to mitigate our history. And, we have an unusual ownership base; individual shareholders who are loyal and supportive to help us battle the short selling contingent. It is that very important constituency that I address here. We are working for you. We are expanding our approach to one more attuned to the current environment. We are revising our financial plan so that it more clearly and efficiently supports our strategy. And, I am very confident that we will succeed.
"I believe in PurchasePro and the city in which it is headquartered, Las Vegas, a city that is important to the company because of PurchasePro's significant share of the lodging and gaming industry and its economic advantages. I am committed to restoring PurchasePro as the technology jewel of Las Vegas. So confident am I of success that I am embarking upon a personal continued program of acquiring stock in this company following our third quarter conference call in November. That accumulation will be publicly available through monthly filings with the Securities and Exchange Commission.
"What we have done today ensures the survival and rebirth of PurchasePro, even with nominal sales and without a cash infusion. The financial plan we have put into effect and our new pricing models allow for our dynamic movement in this challenging economy. I have no doubt that we will win and prosper."
Additionally, the company said it will release its results for the third quarter ended September 30, 2001 no later than November 13, 2001.
About PurchasePro
PurchasePro(r), www.purchasepro.com, is a B2B e-commerce leader with the stated goal of providing software to enable enterprises of all sizes to gain universal access to the world's largest commerce network. The PurchasePro commerce network comprises more than 250,000 businesses, authorized to buy and sell, and powers hundreds of private-label marketplaces. PurchasePro provides the following B2B e-commerce solutions: e-Procurement for enterprise-wide procurement; e-Source for strategic sourcing, v-Distributor for online distributors; and e-MarketMaker for Internet market makers.
This news release may include forward-looking statements, which are subject to the `Safe Harbor' created by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve certain risks and uncertainties that can cause actual results to differ materially from those in the forward-looking statements. These forward-looking statements represent only the views of certain members of management and are based on limited information available to us now, which is subject to change. We have no current plan to update these statements. Actual results may differ substantially from what we say today and no one should assume at a later date that the forward-looking statements provided herein are still valid. They speak only as of today.
For more information about these risks and uncertainties, see the SEC filings of PurchasePro.com, Inc., including the section titled "Factors That May Affect Results" in its 10-K filing for the period ended December 31, 2000, and its 10-Q for the quarter ended June 30, 2001, which are available from the company on request and on the Internet at the SEC's Website, www.sec.gov. Note: PurchasePro is a service mark of PurchasePro.com Inc. All other trademarks or registered trademarks are the property of their respective owners.