New Business Strategy Outlined
MINNEAPOLIS–(Business Wire)–
Rimage Corporation (Nasdaq: RIMG) today reported operating results for the
fourth quarter of 2009 ended December 31.
* Sales totaled $22,686,000, an increase of 9% from $20,749,000 in the fourth
quarter of 2008.
* Operating income totaled $2,885,000, up 60% from $1,806,000 in the
year-earlier period, reflecting the significantly higher gross margin recorded
in the fourth quarter of 2009.
* Net income came to $2,228,000 or $0.23 per diluted share, up 30% from
$1,712,000 or $0.18 per diluted share in the fourth quarter of 2008.
* Reflecting the cash-generating ability of Rimage`s business, cash and
investments rose to $110,125,000 at December 31, 2009, from $107,323,000 at
September 30, 2009, and $95,402,000 at the beginning of the year.
Sherman L. Black, president and chief executive officer, commented: “We are
generally pleased with Rimage`s improved fourth quarter operating results, which
were attained despite the continued impact of the weak global economy on the
capital spending decisions of our customers. Our fourth quarter revenue was
paced by a nearly 26% increase in sales of our high-end Producer disc publishing
hardware, which included an $800,000 order shipped to the Department of Justice
for our new video surveillance data archiving system. As a result of continued
product improvements that have reduced service-related costs, in addition to the
shift in our sales mix toward Producer hardware, Rimage`s gross margin rose to
51% in the fourth quarter from 39% in the year-earlier period.”
He continued: “We have developed a comprehensive strategy for transforming
Rimage into a higher-performing business by bolstering our management team;
strengthening our core disc publishing business; generating new revenue streams
by developing total solutions that leverage our core capabilities; and
identifying and investing in future opportunities in adjacent markets. Going
forward, we will incur higher expenses related to the implementation of our
growth strategy, including increases in our head count and other costs. We also
anticipate a short-term sales disruption as we institute changes in our
distribution channel and other aspects of our operations. While these factors
will affect our first quarter performance, we believe our operating results will
start benefiting from our transformation initiatives as they gain greater
traction as the year progresses. In addition, the recently introduced
Professional 5400N and 3400 disc publishing systems will be a key contributor to
our 2010 plan. The compact and fully integrated footprints, functionality and
attractive pricing of these systems position them for retail and a range of
other applications. In all, it is our goal to reverse the decline in sales and
earnings that Rimage has posted over the past two years.”
Black added: “We view 2010 as only a first step in a multi-year program toward
transforming Rimage into a higher-performing company. Today, we are investing
not only in 2010 but, more importantly, in 2011 and beyond, which makes us
optimistic about Rimage`s future. We also want to emphasize that throughout our
investment process, we will be prudent stewards of our shareholders` money and
remain committed to safeguarding Rimage`s strong financial condition.”
The process of transforming Rimage into a growing and increasingly profitable
business consists of several elements:
Strengthening Rimage`s Management Team
We have significantly strengthened our management team with the addition of
leading technologists and marketing executives. Samir Mittal, a Ph.D. in
mechanical engineering, became senior vice president and chief technology
officer in September, responsible for evaluating potential new technologies and
products, in addition to managing Rimage`s R&D organization. In December,
Christopher A. Wells joined us as vice president of marketing and strategy to
build an advanced strategic marketing function. Then, in February 2010, we hired
P.D. Mathur, a Ph.D in electrical engineering, as vice president, technology,
responsible for developing new technology solutions.
Strengthening Rimage`s Core Business
* Distribution: In January 2010, we announced that we will cease using
distributors in our largest markets, including the U.S., Germany and the U.K. In
their place, we are expanding our sales force, while continuing to serve
customers through value-added resellers (VARs). Eliminating this layer of
distribution, which will take effect in the second quarter, will remove cost
from our sales system. Equally important, we will move closer to our customers
and VARs, allowing us to gain insights into satisfying unmet needs with our
current and potential new products.
* Product Offerings: We will reduce our hardware offerings from 27 to a more
manageable 13 during the coming year. The eliminated products, which were not
sufficiently differentiated to justify their manufacturing and selling costs,
added to the complexity of the selling efforts of our sales force and VARs.
Streamlining our product offerings also will strengthen our supply chain
efficiencies.
* Consumable Supplies: Based on our conviction that consumable supplies
represent a significant opportunity for Rimage, we are developing a web commerce
system for our consumables business to promote greater customer convenience,
strengthen selling efficiencies and generate enhanced profitability. In addition
to providing us with better visibility into consumption models and customer
needs, our WebShop will give us the opportunity to increase sales of optical
media by leveraging our large customer base for printer ribbons/cartridges. At
the same time, our VAR partners will be able to purchase a complete range of
products, including systems and consumable supplies, through a separate Web
portal.
* Global Service: To capture the full revenue potential of our worldwide service
capability, we have simplified our service offerings, with the goal of
increasing the attach rates of service contracts on system sales. In addition we
have modified our internal sales and VAR incentive programs to drive focus on
this opportunity.
Generating New Revenue Streams in 2010
The disc publishing market is gradually maturing due to inevitable technology
substitution. For this reason, we are focused on generating new revenue streams
by transitioning from our historic function as a hardware supplier into a
provider of total solutions that leverages Rimage`s unique disc publishing
platform with growing levels of software functionality.
* Video Surveillance Solution
Our first solutions-based initiative is the video surveillance data archiving
system that was ordered by the Department of Justice in the fourth quarter of
2009. Developed in partnership with a major provider of surveillance software,
this solution enables users to collect, archive and publish video surveillance
data. We expect to engage other federal, state and corporate customers in 2010
as important new features are added to this solution.
* Digital Forensics Solution
We also are developing a solution in the field of digital forensics by
leveraging our disc publishing platform to collect and process information
stored on optical media found at crime scenes. By significantly automating disc
handling, imaging and information processing, this solution will result in rapid
turnaround times, as well as increased accuracy in tracing and authenticating
evidence. We expect this solution to be available in the first half of 2010.
* Medical Opportunities in China
We see substantial opportunity for our solutions approach in China and other
developing economies, particularly in the field of medical imaging. Hospitals
and clinics in China have not converted the output of CT, MRI and other imaging
modalities to discs, but instead continue to rely upon analog film. The benefits
of digital output, including lower cost and convenience, have been proven over
the past few years by our success at penetrating North American and European
hospitals and clinics. We expect to finalize plans for deploying a complete
digital publishing solution for medical imaging in China in the first half of
2010 and recognize initial revenues from this undertaking during the second half
of the year.
Beyond 2010
Rimage has benefited from an established sales channel, over 20,000
installations, a global footprint, a strong digital publishing brand and
strategic relationships. However, Rimage must expand its solution level
offerings to take advantage of adjacent market opportunities. In addition, we
believe future growth opportunities will require investments beyond the realm of
physical distribution of data, which has been Rimage`s traditional business. We
intend to leverage our existing market position, strong financial position and
R&D efforts to develop new solution-based growth opportunities.
About Rimage
Rimage Corporation is the world`s leading provider of digital publishing systems
that businesses and organizations use to quickly and easily produce CDs, DVDs
and Blu-ray discs with customized content and durable color or monochrome disc
labeling. Our systems integrate software, robotics and surface label printers
into a complete disc publishing solution. Major markets for Rimage`s disc
publishing systems currently include retail, medical and government.
Statements regarding Rimage`s anticipated performance are forward-looking and
therefore involve risks and uncertainties, including but not limited to: market
conditions, competitive products, changes in technology, conditions in overseas
markets that could affect international sales, and other factors set forth in
Rimage`s filings with the Securities and Exchange Commission.
Conference Call and Replay
Rimage Corporation will review its fourth quarter operating results in a
conference call at 10:00 AM Eastern today. Investors can listen to the
conference call at www.rimage.com. Listeners should go to this web site at least
15 minutes before the scheduled start time to download and install any necessary
audio software. A replay of the conference will be available at 303-590-3030
with 4243173 conference ID through March 10. In addition, the webcast of the
conference call will be archived in the investor relations section of Rimage`s
web site.
RIMAGE CORPORATION
Selected Consolidated Financial Information
(In thousands except per share data)
(Unaudited)
Consolidated Statements of Income Information:
Three months ended Year ended
December 31, December 31,
2009 2008 2009 2008
Revenues $ 22,686 $ 20,749 $ 83,227 $ 91,394
Cost of revenues 11,203 12,654 42,894 51,731
Gross profit 11,483 8,095 40,333 39,663
Operating expenses:
Research and development 2,153 1,160 7,143 5,251
Selling, general and administrative 6,445 5,129 21,944 22,664
Total operating expenses 8,598 6,289 29,087 27,915
Operating income 2,885 1,806 11,246 11,748
Other income, net 223 631 1,866 2,711
Income before income taxes 3,108 2,437 13,112 14,459
Income tax expense 880 725 4,617 5,028
Net income 2,228 1,712 8,495 9,431
Net income per basic share $ 0.24 $ 0.19 $ .91 $ .99
Net income per diluted share $ 0.23 $ 0.18 $ .89 $ .97
Basic weighted average
shares outstanding 9,403 9,342 9,374 9,559
Diluted weighted average
shares outstanding 9,586 9,447 9,507 9,729
Consolidated Balance Sheet Information:
Balance as of
December 31, December 31,
2009 2008
Cash and marketable securities $ 101,088 $ 54,755
Receivables 13,732 11,099
Inventories 4,123 5,625
Total current assets 120,760 74,151
Property and equipment, net 7,855 6,183
Marketable securities – non-current 9,037 40,647
Total assets 140,282 123,456
Current liabilities 17,589 12,010
Long-term liabilities 2,744 2,398
Stockholders` equity 119,949 109,048
Rimage Corporation
Robert M. Wolf, CFO
952-944-8144
or
Richard G. Cinquina
Equity Market Partners
904-415-1415
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