Rimage: Fiscal 3Q09 Financial Results

Rimage Corporation reported operating results for the third quarter of 2009 ended September 30.

• Sales totaled $22,365,000, compared to $25,210,000 in the third quarter of 2008.
• Net income came to $3,109,000 or $0.33 per diluted share, compared to $4,006,000 or $0.42 per diluted share in the year-earlier period.
• Reflecting the cash-generating ability of Rimage’s business, cash and investments rose to $107,323,000 at September 30, 2009, from $104,414,000 at June 30, 2009 and $95,402,000 at the beginning of this year.

Bernard P. (Bernie) Aldrich, chief executive officer, commented: “Rimage has remained a solidly profitable, cash-generator throughout this steep recession, and our third quarter sales and earnings exceeded our internal forecasts. Our third quarter performance benefited from an increased gross margin stemming primarily from the continued favorable impact of reduced service-related costs associated with improvements to our products and from the actions we had previously taken to streamline our expense structure. Producer Series sales into the U.S. government market were robust in the third quarter, increasing 21% from the year-earlier period. These systems were deployed in a variety of applications, including digital forensics at Homeland Security and other federal agencies, tape-to-disc video conversion for training and public affairs, and data archiving utilizing Blu-ray technology. We also are encouraged by the 66% increase in equipment sales generated by our Asia operation. In this growing and under-penetrated geographic market, Rimage recorded strong wins in medical imaging and other traditional applications. All in all, our business development investments in Asia are paying handsome dividends.”

Aldrich added: “We believe it is prudent to remain guarded about our near-term prospects, since challenging economic conditions are continuing to affect the purchasing decisions of many customers, both in North America and overseas. For this reason, we expect fourth quarter sales to be at or near the third quarter level. Fourth quarter earnings will be affected by an increase of approximately $1 million of R&D spending for a strategic new product.”

Sherman L. Black, president and chief operating officer, said: “We are continuing to move ahead with a number of coordinated initiatives aimed at strengthening Rimage’s core business. Our efforts are focused on developing new strategies for our products, our sales channel, our global service offerings and our supply chain. These initiatives, which we intend to begin implementing in 2010, also will position Rimage to effectively pursue opportunities that fall within the scope of our traditional competencies.”

Black continued: “Moreover, we are starting the process of evaluating potential opportunities that are adjacent or complementary to our core business. Samir Mittal, Rimage’s new chief technology officer, is playing a key role in identifying new areas that we could pursue through internal development or an acquisition.”

Financial Review
Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media and maintenance contracts, decreased 14% in this year’s third quarter in comparison to the year-earlier period and accounted for 57% of sales, compared to 59% in the third quarter of 2008. The decline in sales of recurring revenues reflects the impact of the recession on sales of disc publishing hardware and on the utilization of our installed base in retail and other applications.

International sales declined 10% in this year’s third quarter, due primarily to the impact of the weak economy on Rimage’s European operation. As previously noted, sales in the Asia/Pacific market were strongly higher during this period. International sales accounted for 35% of total third quarter sales, unchanged from the year-earlier period.

Working capital totaled $95.0 million at the end of the third quarter, up from $89.8 million at the end of the second quarter and $62.1 million at the end of 2008. Rimage’s balance sheet is debt-free, while stockholders’ equity increased to $116.6 million at September 30, 2009 from $112.8 million at June 30, 2009 and $109.0 million at December 31, 2008.