Rimage: Fiscal 2Q09 Financial Results

Rimage Corporation reported sales of $19,818,000 for the second quarter of 2009 ended June 30, compared to $22,686,000 in the year-earlier period. Second quarter earnings increased slightly to $1,973,000 or $0.20 per diluted share from $1,927,000 or $0.19 per diluted share in the same period of 2008.

Bernard P. (Bernie) Aldrich, chief executive officer, commented: "Rimage’s second quarter sales and earnings were improved from the levels reported in this year’s first quarter and operating cash flows continued to increase. Our second quarter performance benefited from an increased gross margin in comparison to last year’s second quarter, due primarily to reduced service-related costs associated with improvements to our products and from actions we took previously to streamline our expense structure. However, we are continuing to experience lengthened selling lead times for our disc publishing systems due to customer hesitancy toward capital equipment purchases. For this reason, we remain guarded about our near-term performance, since our visibility into future orders is limited at this time. Longer-term, we are optimistic about Rimage’s future, given our current and future opportunities and ongoing commitment to product development."

He added: "From a strategic standpoint, we are focusing on strengthening Rimage’s core business to further capitalize upon our current technological competencies and global sales channel. This effort, which is headed by Sherman L. Black, our new president and chief operating officer, also is preparing us for exploring new opportunities that could extend beyond the scope of our current operations. Once adequately prepared, we will evaluate opportunities that could be complementary to our core business and possess solid growth potential."

Financial Review

Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media and maintenance contracts, decreased 4% in this year’s second quarter in comparison to the year-earlier period and accounted for 64% of sales, compared to 58% in the second quarter of 2008. Recurring revenues, which have benefited from Rimage’s large installed base, have accounted for a higher than normal proportion of total sales over the past year due to reduced demand for disc publishing hardware as a result of the recession.

International sales declined 31% in this year’s second quarter, due primarily to the impact of the weak economy on Rimage’s European operation. Sales in the Asia/Pacific market exceeded Rimage’s internal forecast for this period. International sales accounted for 38% of total second quarter sales, compared to 47% in the year-earlier period. Currency effects decreased worldwide sales by 4% in the second quarter of 2009.

Reflecting the cash-generating ability of Rimage’s business, cash and investments rose to $104.4 million at June 30, 2009, from $96.7 million at the end of the first quarter and $95.4 million at the beginning of this year. At these levels, cash reserves are more than adequate for supporting Rimage’s growth initiatives. Reflecting its conservative cash management practices, Rimage sold its holdings of municipal bonds during the second quarter, resulting in a one-time gain of approximately $278,000. The sale proceeds were reinvested in U.S. Treasury securities. While safeguarding Rimage’s cash position, this transaction will result in reduced levels of interest income in future quarters.

Working capital totaled $89.8 million at the end of the second quarter, compared to $71.7 million at the end of the first quarter and $62.1 million at the end of 2008. Rimage’s balance sheet is debt-free, while stockholders’ equity increased to $112.8 million at June 30, 2009, from $110.3 million at March 31, 2009 and $109.0 million at December 31, 2008.