Rimage: Fiscal 2Q11 Financial Results

Rimage Corporation reported operating results for the second quarter of 2011 ended June 30.

Sales totaled $20.2 million, compared to $22.3 million in the second quarter of 2010. Sales in last year’s second quarter included shipment of a $3.0 hardware order related to a now-completed $10.6 million agreement for disc publishing systems for integration into the digital photography solution of a major national retailer. There was no similarly-sized retail order in this year’s second quarter.

Operating income was $1.8 million, compared to $3.2 million in the year-earlier period.

Net income came to $1.2 million, or $0.12 per diluted share, compared to $2.1 million or $0.22 per diluted share in last year’s first quarter. Earnings exceeded the guidance for this period of $0.07 to $0.10 per share.

The board of directors expanded the existing share repurchase authorization by 500,000 shares.

Sherman L. Black, president and chief executive officer, commented: "We are pleased with our second quarter performance. Excluding the large retail shipment in last year’s second quarter, revenues in the current quarter would have exceeded the year-earlier level due to increased sales in other market segments; favorable foreign currency adjustments; strong sales growth in the Asia-Pacific market, driven by an order for disc publishing hardware being integrated into a retail software-on-demand system; and a higher level of recurring revenues related to both consumable supplies and service contracts. Rimage’s second quarter earnings benefited from the increase in our gross margin to 49% from 48% in the year-earlier period, reflecting an improvement in our sales mix and lower global service expenses. However, our gross margin was adversely affected by higher material and transportation expenses related to the supply chain disruption caused by the Japanese earthquake in March. We have effectively managed this event with only minimal disruption to our global sales and believe expenses related to this situation will moderate in the third quarter."

Black added: "In response to the maturing of our disc publishing business and the changing technology needs of our customers, we continued development of our previously announced virtual publishing system. This initiative marks a logical technology evolution of our business and a potential new growth engine. Consistent with our development timetable, we started testing a beta of our virtual publishing solution this month and expect to have additional beta sites established in the third quarter. We remain on track toward our goal of launching a first-generation virtual publishing solution by the end of this year, although initial revenues are not anticipated until 2012."

In other developments, Rimage’s board of directors declared a quarterly cash dividend of $0.10 per share on July 26, payable September 15 to shareholders of record on September 1. Approximately 105,000 shares were repurchased in July under the existing share repurchase authorization, which the board augmented with an additional 500,000 shares. As a result of this action, approximately 700,000 shares were available for repurchase on the date of this release. Any repurchases under this expanded authorization will be made based on market conditions and other factors.

For the third quarter of 2011, Rimage is forecasting earnings of $0.16 to $0.20 per diluted share on revenues of $20 to $22 million. Attaining this revenue level is dependent upon receipt of anticipated orders for Rimage’s public safety solutions from the federal government. Rimage also reiterated its previously-issued full-year guidance for earnings of $0.55 to $0.65 per diluted share on sales of $80.0 to $85.0 million.