Rimage: Fiscal 3Q08 Financial Results

Rimage Corporation reported sales of $25,210,000 for the third quarter of 2008 ended September 30, compared to $33,650,000 in the year-earlier period, which included $8.4 million of retail-related equipment sales, maintenance contracts and replacement printer ribbons. There were no significant equipment sales into the retail market in the current quarter. Third quarter earnings of $4,006,000 or $0.42 per diluted share were down from $6,203,000 or $0.59 per diluted share in the same period of 2007.

Bernard P. (Bernie) Aldrich, president and chief executive officer, commented: "Rimage’s third quarter results exceeded our previously issued guidance for this period due to higher than forecasted sales of digital publishing equipment transacted through our global sales channel, which had a positive impact on Rimage’s profitability for this period. Rimage’s ability to remain solidly profitable amid today’s difficult economic environment stems from several factors. Our distribution partners and field sales representatives, both of which are reporting ongoing interest in our systems across a broad range of applications, have stepped up their efforts to pursue all available opportunities. We are continuing to benefit from our position as the industry-leading provider of CD/DVD/Blu-ray publishing solutions for mission-critical, high-end applications. The $2.0 million of annualized expense reductions that we instituted earlier this year have streamlined our cost structure. Equally important, our strong financial condition is enabling us to operate effectively in a global economy where credit has become difficult to attain. With quarter-ending cash and investments of nearly $91 million and a debt-free balance sheet, we have more than ample resources for supporting our various growth initiatives."

He continued: "We expect to continue being affected by the lengthened selling cycles for our equipment that has resulted from the cautious attitude of many customers toward capital expenditures. Even so, we expect to remain solidly profitable in the fourth quarter and are forecasting earnings of $0.15 to $0.21 per diluted share on sales of $20 to $22 million for the three-month period ending December 31, 2008. In addition, we remain optimistic about Rimage’s longer-term prospects. We are establishing the foundation required for penetrating several highly promising business services markets. Supported by our strong cash position, we also are moving forward with important enhancements to our disc publishing systems that will keep Rimage at the forefront of the on-demand disc publishing industry."

Financial Review
Sales of digital publishing systems declined in this year’s third quarter due to the absence of significant equipment sales into the retail market.

Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media and maintenance contracts, increased 3% in the third quarter of 2008 and accounted for 58% of sales, compared to 43% in the third quarter of 2007. The growth in consumables as a percentage of total sales reflects the fact that equipment accounted for a significantly higher proportion of sales in the third quarter of 2007.

International sales declined 3% in the third quarter and accounted for 35% of total sales, compared to 27% of total sales in the year-earlier period. Rimage’s European and Asian operations are being affected by weakening economic conditions.

Cash and investments totaled $90.6 million at September 30, compared to $93.7 million at the end of the second quarter and $94.2 million at the beginning of 2008. During the third quarter, Rimage used cash of $4.3 million to repurchase approximately 275,000 shares under two 500,000 share buyback authorizations. Approximately 449,000 shares remain available for repurchase under the uncompleted authorization. Cash of $3.9 million also was used to purchase Rimage’s Minneapolis headquarters and manufacturing facility.