Rimage: Fiscal 2Q08 Financial Results

Rimage Corporation reported sales of $22,686,000 for the second quarter of 2008 ended June 30, compared to $25,486,000 in the year-earlier period, when retail-related equipment sales totaled $4.3 million. There were no significant equipment sales into the retail market in the current quarter. Second quarter earnings of $1,927,000 or $0.19 per diluted share were down from $2,921,000 or $0.28 per diluted share in the comparable period of 2007.

Bernard P. (Bernie) Aldrich, president and chief executive officer, commented: "Although our performance continued to be affected by weak economic conditions, Rimage’s second quarter results exceeded the downwardly revised guidance that we issued on June 9, due primarily to higher than forecasted sales transacted through our global distribution channel during the latter stages of the quarter. This enabled us to report second quarter sales and earnings comparable to the results recorded in this year’s first quarter. Given the lengthened selling cycles for our disc publishing hardware that are a consequence of today’s difficult economic environment, the stabilization of our operating results on a sequential quarterly basis makes us optimistic about Rimage’s prospects once the economy begins to strengthen. At this time, we believe our performance should remain relatively stable, and consistent with this outlook, we are forecasting earnings of $0.17 to $0.23 per diluted share on revenues of $21 to $23 million for the third quarter of 2008."

Aldrich added: "Our optimism about Rimage’s future is based on several factors. First, our field sales representatives are reporting interest in our optical technology among prospective customers representing a diverse range of applications. Second, our European operation is strengthening in response to its restructured management and new sales and marketing initiatives. Third, we are establishing the foundation required for penetrating several highly promising business services markets. To help capitalize on the large video production market, which we view as one of our best opportunities, we recently introduced software that supports video production houses utilizing Macintosh systems. At the same time, we have been adding value-added resellers focused on the video market and establishing strategic partnerships with key industry players. Fourth, in May, we instituted expense reductions totaling approximately $2.0 million on an annualized basis. We will begin to realize the impact of our streamlined cost structure in this year’s third quarter. Finally, we 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
Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media and maintenance contracts, increased 10% in the second quarter of 2008 and accounted for 58% of sales, compared to 47% in the second quarter of 2007. Sales of consumables, which are benefiting from Rimage’s growing installed base of disc publishing systems in retail and other markets, accounted for a significantly larger portion of Rimage’s second quarter sales mix due to the economy-related slowdown in sales of disc publishing hardware.

International sales increased 23% in the second quarter and accounted for 47% of total sales, compared to 34% of total sales in the year-earlier period. This increase was due primarily to foreign currency effects. Rimage’s European operation accounted for the great majority of the second quarter’s international sales.

Cash and investments totaled $93.7 million at June 30, 2008, compared to $94.2 million at the beginning of 2008 and $86.9 million at the end of the second quarter of 2007. Rimage repurchased approximately 249,000 shares during the second quarter under two 500,000 share buyback authorizations. Approximately 725,000 shares remain available for repurchase under these authorizations.