EXHIBIT 99.2
BERNARD ALDRICH REMARKS
RIMAGE CORPORATION FIRST QUARTER 2003 CONFERENCE CALL
APRIL 23, 2003
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* Good afternoon and thanks for taking the time to participate in our
first quarter conference call.
* Joining me today is Dave Suden, our chief technology officer, and Rob
Wolf, our chief financial officer.
* In keeping with Regulation FD, which prohibits us from providing an
investor with any guidance unless it is also publicly released, we
have provided financial guidance in our first quarter release.
* Our guidance is subject to a number of risks, including the potential
impact of weakness in the national economy on the computer data
storage and computer peripherals market.
* Other factors that could affect our performance are set forth in our
filings with the Securities and Exchange Commission, which we urge you
to review.
* As evidenced by our strong first quarter results, Rimage is continuing
to perform at a high level despite the sluggish global economy and
uncertainty created by the Iraqi conflict.
* Net income for the first quarter increased 33% to $1.5 million or
$0.16 per diluted share, which exceeded our previously reported
guidance for this period.
* Revenues rose 17% to $11.5 million.
* Our performance for this period was generated by the across-the-board
strength of Rimage's operations.
* No single customer accounted for a disproportionately large share of
our first quarter sales.
* Our four targeted markets, which include digital photography, medical
imaging, banking and finance, and government, contributed a combined
56% to our first quarter sales total.
* Our strong first quarter earnings were attained despite a 15% increase
in SG&A expense.
* This planned increase reflects a concerted effort to further penetrate
our targeted markets by implementing a range of new sales and
marketing programs.
* SG&A expense is expected to remain at relatively high levels over the
balance of 2003 in comparison to last year's expense levels.
* Now, for the next few minutes, I would like to discuss two recent and
important new product introductions.
* This week, we will introduce our new Desktop publishing system, which
incorporates enriched features and enhancements in comparison to the
line it has replaced.
* Equally important, our new Desktop system features an inkjet color
printer that is the result of our strategic alliance with
Hewlett-Packard.
* In addition to providing customers with the confidence of using an
HP-enabled product, this new printer is significant for another
reason.
* Our previous Desktop system included an inkjet printer that we
purchased from another vendor.
* As a result, we did not share in the recurring revenue stream
generated by customer sales of replacement printer cartridges and
other parts.
* That changes with our new Desktop system, since we will be selling all
after-market products to our customers.
* We believe the recurring revenue stream generated by our new Desktop
publishing system could become significant over the next few years.
* Our second product introduction involves our new DiscLab publishing
system.
* The DiscLab system is designed specifically for the photo-finishing
mini or one-hour labs found in tens of thousands of retail
establishments.
* This new system provides mini-labs with the same CD publishing and
color label printing quality as found in the higher-volume systems
that we sell to large wholesale labs.
Moreover, DiscLab has been integrated into the photo-finishing mini-lab
equipment sold by the industry's leading players to major retailers.
* For this reason, DiscLab represents a key part of our strategy for
participating in the conversion of retail mini-labs to digital
capabilities, meaning publishing photos on CDs.
* We are continuing to pursue a range of promising opportunities in this
market segment, and we believe mini-lab sales should grow steadily
over the balance of 2003.
* We are also encouraged by the progress that we are making in the
medical imaging market.
* Sales into this market were strong in this year's first quarter,
reflecting the growing effectiveness of our strategy of establishing
strategic partnerships with industry-leading players.
* Thus far, substantially all of our sales have been made into the
after-market, where existing medical imaging installations are being
converted to provide digital output on CD/DVD media, in addition to
conventional analog film.
* Industry sources estimate that approximately 80,000 to 100,000
worldwide applications in the medical imaging marketplace currently
exist for our CD/DVD publishing systems.
* These applications, which include all imaging modalities from CT and
MRI to ultrasound and mammography, are found in approximately 20,000
hospitals and clinics around the world.
* So, like digital photography, the medical imaging market represents
another major opportunity for Rimage that we are aggressively
pursuing.
* I will conclude my remarks by reviewing the financial guidance
included in our first quarter earnings release.
* For the second quarter of 2003 ending June 30, we are forecasting
earnings of $0.15 to $0.17 per diluted share on revenues of $12.0
million to $13.0 million.
* At this point, we believe that our year-over-year comparisons will be
affected by the $2 million one-time order that we booked with Eastman
Kodak in last year's second quarter.
* We are not anticipating an order of this size in the current quarter.
* Instead, we believe that our outlook for strong sales and earnings
will continue to be driven by the across-the-board strength of our
ongoing operations.
* As I indicated earlier, this pattern reflects the sustainable
underlying strength of our business.
* And it is why we are confident in our outlook for strong sales and
earnings growth.
* Thank you. Now, Rob Wolf will review our first quarter results in some
detail.
ROBERT J. WOLF REMARKS
RIMAGE CORPORATION FIRST QUARTER 2003 CONFERENCE CALL
APRIL 23, 2003
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* Thanks, Bernie
* Reflecting the steady expansion of our worldwide installed base of
CD/DVD publishing systems, sales of consumable supplies, including
maintenance contracts, printer ribbons, media and parts, increased 34%
in the first quarter from the year-earlier level.
* Recurring revenues accounted for 32% of our total first quarter sales.
* The expansion of Rimage's recurring revenue stream is providing us
with a growing degree of predictability and consistency, and we expect
this revenue component to continue growing.
* Rimage's gross margin improved to 50% in this year's first quarter,
from 48% in the first quarter of 2002, due primarily to improvements
in our sales mix.
* R&D expense of $849,000 was down slightly from the year-earlier level,
but reflecting higher sales in the current quarter, R&D came to 7% of
first quarter sales, compared to 9% a year ago.
* Selling, general and administrative expense increased 15% in the first
quarter from the year-earlier level, reflecting investments in sales and
marketing programs aimed at strengthening Rimage's ability to penetrate its
targeted markets.
* SGA, which is expected to remain at relatively high levels for the next few
quarters, came to 23% of revenues in the first quarters of both 2003 and
2002.
* Our operating margin improved to 20% in this year's first quarter,
from 16% in the year-earlier period.
* In addition, our pre-tax margin rose to 21% in this year's first
quarter, from 18% a year ago.
* Finally, Rimage's effective tax rate was unchanged at 36.5% in the
first quarter.
* Turning now to the balance sheet, cash and investments totaled $37.1
million at March 31, 2003, up from $36.3 million at the end of 2002.
* This rate of cash growth was below that of prior periods due to the
approximately $900,000 increase in inventories in this year's first
quarter.
* Our increased inventories for this period resulted primarily from the
delayed introduction of our new Desktop product line.
* Now that shipments of this new product are scheduled to begin this
week, we expect inventories to decline by the end of the second
quarter.
* Shareholders' equity improved to $43.7 million at the end of the first
quarter, from $42.2 million at year-end 2002.
* This put our return on equity at 25%, up from 21% a year ago.
* That wraps up our formal remarks, and now I will turn the conference
call back to the operator, who will poll you for any questions.