8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):    October 19, 2004

Rimage Corporation
(Exact name of Registrant as Specified in its Charter)

Minnesota
(State Or Other Jurisdiction Of Incorporation)

000-00619	41-1577970
(Commission File Number)	(I.R.S. Employer Identification No.)

7725 Washington Avenue South
                Minneapolis, MN                
(Address Of Principal Executive Offices) 55439
(Zip Code)

(952) 944-8144
Registrant's Telephone Number, Including Area Code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Items under Sections 1 and 3 through 8 are not applicable and therefore omitted.

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

Rimage Corporation hereby furnishes a press release, issued on October 21, 2004, disclosing material non-public information regarding its results of operations for the quarter ended September 30, 2004 and hereby furnishes statements of its Chief Executive Officer and Chief Financial Officer made on October 21, 2004 at a telephone conference relating to the quarter ended September 30, 2004 results.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

Exhibit No.	Description
99.1	Press Release issued on October 21, 2004.
99.2	Statements of Bernard P. Aldrich, Chief Executive Officer, and Robert M. Wolf, Chief Financial Officer, at a telephone conference held on October 21, 2004.

SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

RIMAGE CORPORATION

By: /s/ Robert M. Wolf        

      Robert M. Wolf
      Chief Financial Officer

Dated: October 21, 2004

EX-99.1

Exhibit 99.1

Rimage Reports Strong Third Quarter Operating Results

Minneapolis, MN—October 21, 2004—Rimage Corporation (Nasdaq: RIMG) today reported revenues of $17,879,000 for the third quarter of 2004 ended September 30, an increase of 30% from $13,791,000 in the year-earlier period. Net income came to $2,132,000 or $0.21 per diluted share, up 7% from $1,980,000 or $0.20 per diluted share in the third quarter of 2003. Rimage previously forecasted third quarter earnings of $0.18 to $0.20 per diluted share on revenues of $16.0 to $17.0 million.

Rimage’s third quarter revenue growth was generated, in part, by strong sales of its recently introduced DiscLab™ product line, a new CD/DVD publishing system designed as a network appliance to meet the specialized requirements of retail and medical applications. Equipped with an embedded microprocessor that eliminates the need for an external host computer, the highly compact DiscLab system has been integrated into OEM equipment for the medical imaging and retail digital photography markets. Reflecting this initiative, Rimage is posting strong sales into the medical market, where CT, MRI and other medical imaging modalities are being retrofitted with the company’s digital output systems. The DiscLab system also is being deployed by a major national retailer in one-hour photo finishing labs at selected stores.

Rimage’s third quarter results also benefited from an 86% increase in sales of consumable supplies. Under its new consumables initiative, the company is marketing kits consisting of blank CD or DVD discs with replacement printer ribbons and cartridges. As its worldwide installed base of CD/DVD publishing systems continues to grow, Rimage is capitalizing on the opportunity for generating significantly higher levels of recurring revenues by making it easier for customers to order their consumable supplies. By leveraging its infrastructure over an expanding base of media kit sales, which carry profit margins below the company’s historic norm, Rimage believes its consumables strategy also should result in growing amounts of incremental earnings.

Bernard P. (Bernie) Aldrich, president and chief executive officer, commented: “Rimage is in the process of implementing a fundamentally new growth strategy, which has already had a strongly positive impact on our 2004 sales. Although we fully intend to maintain our industry-leading position in the markets served by our high-end Producer product line, we are aggressively pursuing higher-growth opportunities in such emerging markets as retail photography, medical imaging and recordkeeping, and business offices. Toward this end, we have focused considerable resources on developing appropriate products for these specialized markets, which require physically downsized, highly user-friendly and lower-cost CD/DVD publishing solutions. Our new DiscLab and Desktop product lines share these market-driven characteristics. At the same time, we have been strengthening Rimage’s sales and marketing organization to penetrate these markets. The shift in our sales mix toward lower-margin publishing systems and consumable supplies, combined with increased R&D and sales and marketing expenses, has caused our earnings growth to lag the significant expansion of our top line. We fully expect long-term earnings growth to strengthen as our strategic business plans are more fully implemented. It also is important to understand that Rimage has remained strongly profitable throughout this transitional period. For these reasons, we are very optimistic about Rimage’s future.”

Cash and short-term investments totaled $49,188,000 at September 30, 2004, down modestly from $49,386,000 at the end of the second quarter, reflecting the use of cash to finance the increased inventories required for supporting new products and the consumables strategy. Cash at the end of the third quarter was up from $48,597,000 at the end of 2003. Stockholders’ equity came to $59,370,000 at September 30, up from $56,233,000 at the end of the second quarter and $52,011,000 at year-end 2003.

Fourth Quarter Guidance
For the fourth quarter of 2004 ending December 31, Rimage is forecasting earnings of $0.20 to $0.22 per diluted share on revenues of $17.5 million to $18.5 million. Results at these levels would bring Rimage’s full-year earnings to the range of $0.80 to $0.82 on full-year sales of $67.5 million to $68.5 million.

About Rimage
Rimage Corporation is the world’s leading provider of recordable CD and DVD publishing systems, which are used by businesses to produce discs with customized digital content on an on-demand basis. Rimage’s publishing systems, which span the range from high to low CD/DVD production volumes, integrate robotics, software and surface label printers into a complete publishing solution. Rimage is focusing its CD/DVD publishing solutions on a set of vertical markets with special needs for customized, on-demand digital information: digital photography, medical imaging, financial institutions, business offices, and government.

Statements regarding Rimage’s anticipated performance in 2004 are forward-looking and therefore involve risks and uncertainties, including but not limited to: market conditions in the computer peripherals market, 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.

# # #

RIMAGE CORPORATION
Selected Consolidated Financial Information
(In thousands except per share data)
(Unaudited)

Consolidated Statement of Operations Information:

	Three months ended September 30,				Nine months ended September 30,
	2004		2003		2004		2003
Revenues	$	17,879	$	13,791	$	49,953	$	38,126
Cost of Revenues		10,029		7,109		26,963		19,377
Gross Profit		7,850		6,682		22,990		18,749
Operating Expenses:
Research and Development		1,010		867		3,361		2,642
Selling, General and Administrative		3,708		2,798		10,577		8,255
Total Operating Expenses		4,718		3,665		13,938		10,897
Operating Income		3,132		3,017		9,052		7,852
Other Income, Net		191		101		355		338
Income Before Income Taxes		3,323		3,118		9,407		8,190
Income Tax Expense		1,213		1,138		3,434		2,989
Net Income		2,110		1,980		5,973		5,201
Net Income Per Basic Share	$	.23	$	.22	$	.65	$	.59
Net Income Per Diluted Share	$	.21	$	.20	$	.60	$	.54
Basic Weighted Average
Shares Outstanding		9,339		9,067		9,265		8,873
Diluted Weighted Average
Shares Outstanding		9,920		9,834		9,911		9,670

Consolidated Balance Sheet Information:

	Balance as of
	September 30, 2004		December 31, 2003
	(Unaudited)
Cash and Marketable Securities	$	49,188	$	48,597
Accounts Receivable		8,767		6,243
Inventories		6,326		3,334
Total Current Assets		65,904		59,849
Property and Equipment, Net		1,720		1,137
Total Assets		67,763		61,024
Current Liabilities		8,393		9,013
Stockholders' Equity		59,370		52,011

# # #

For additional information, contact:
Bernard P. (Bernie) Aldrich, CEO	Richard G. Cinquina
Robert M. Wolf, CFO	Equity Market Partners
Rimage Corporation	800/522-1744 or 904/261-2210
952/944-8144

Conference Call and Replay

Rimage Corporation will review its third quarter operating results in a conference call at 10:00 AM Eastern today. To participate, call 1-800-257-1836 about 10 minutes before the scheduled start time and ask for the Rimage conference call. A replay of the conference call will be available through October 28, 2004 by dialing 1-303-590-3000 and providing the 11012203 confirmation code. Investors also 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.

EX-99.2

Exhibit 99.2

Remarks of Bernard P. Aldrich
Rimage Corporation 3rd Quarter 2004 Conference Call
October 21, 2004

• Good morning and thanks for taking the time to participate in our third quarter earnings conference call.

• Joining me today is Rob Wolf, our Chief Financial Officer, who will review our recent operating results in some detail, Dave Suden, our Chief Technology Officer, and Manny Almeida, our Executive Vice President.

• We will all be available for your questions following our introductory remarks.

• In keeping with Regulation FD, which prohibits us from providing any guidance or other forward-looking statements unless they are simultaneously released to the public, we have provided financial guidance in our third quarter release.

• It is important to understand that this guidance is subject to a number of risks that could affect our anticipated performance.

• These risks are set forth in our filings with the Securities and Exchange Commission, which we urge you to review.

• Turning now to the subject of this conference call, the third quarter of 2004 was another above-plan period for Rimage.

• Third quarter sales rose 30% to $17.9 million, while net income increased 7% to $2.1 million or $0.21 per diluted share.

• These results exceeded our prior financial guidance for this period, which called for earnings of $0.18 to $0.20 per diluted share on revenues of $16 to $17 million.

• In discussing our third quarter performance, I will not repeat the details provided in this morning’s release except to say that a shift in our sales

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mix, combined with higher levels of operating expenses, caused our earnings growth to lag our strong top line growth.

• These factors are a short-term consequence of the new, growth-oriented business model that we have been implementing in 2004.

• Today, I would like to discuss this business model in some detail, explain why we are taking this step and why we are confident this new model will generate strong long-term growth and profitability.

• First, I want to emphasize that we fully intend to defend and expand our industry-leading position in Rimage’s traditional markets served by our high-end Producer product line.

• We will continue to pursue any number of attractive opportunities in this arena.

• However, in order to drive double-digit sales growth, we are aggressively pursuing higher-growth opportunities in such emerging markets as retail photography, medical imaging and record keeping, and business offices.

• As emerging opportunities, each of these major markets is largely untapped.

• Successfully penetrating them has the potential to drive our sales well over the $100 million mark.

• Moreover, each of these markets has the potential for generating strong levels of recurring revenues related to consumable supplies.

• To participate in these markets, we have had to take a number of actions.

• First, we had to develop the appropriate products.

• Based on market research, we learned that our publishing systems had to have a smaller physical footprint in order to fit onto crowded retail counters or physician offices.

• They also had to be highly user-friendly.

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• Perhaps most importantly, publishers for these markets had to carry lower average selling prices.

• We have met all of these and other requirements with our recently introduced DiscLab and Desktop 2000i systems.

• The DiscLab system is selling strongly into the medical imaging market, and it is being deployed by a major national retailer as the digital output solution for its one-hour photo processing labs.

• The new 2000i is also enjoying strong demand in the general office market, and we expect demand to grow further as we continue building a specialized distribution channel for this product line.

• The job of product development is not done with the DiscLab and 2000i.

• We are working on other new-generation products, and you can expect additional product introductions over the coming year.

• To penetrate retail, medical and general office markets, we also have been significantly strengthening our sales and marketing organization, in addition to expanding marketing support for our new products.

• Prior to implementing our growth plans, Rimage’s sales and marketing organization was relatively small.

• This was in keeping with the Producer-related opportunities we were pursuing, but a sales and marketing organization of that scope and size was inadequate for penetrating far larger markets.

• Consequently, we have devoted considerable resources in 2004 toward hiring high-quality managers with direct experience in our targeted markets.

• Finally, these new markets offer the potential for generating significantly higher volumes of recurring revenues.

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• Under our new consumables initiative, we are marketing kits consisting of blank CD or DVD discs with replacement label printer ribbons and cartridges.

• These Rimage-branded kits are making it easier and more convenient for customers to order their consumable supplies.

• Moreover, by leveraging our infrastructure over an expanding base of media kit sales, which carry profit margins below Rimage’s historic norm, we believe our consumables strategy also should result in growing levels of incremental earnings going forward.

• So what can you, as investors, expect of Rimage from our unfolding growth-oriented business model.

• This model is designed to generate stronger sales growth than we have recorded in past years.

• This initial aspect of our model has started working as planned.

• Due to shift in our sales mix toward lower-priced products and consumable supplies, our gross margins will likely be in the low to mid-40% range going forward.

• As a growth company, R&D and sales and marketing expenses will remain above our historic norms in absolute dollars but are expected to remain consistent with historic norms when measured as a percentage of sales.

• Finally, as sales continue to grow and total operating expenses begin to plateau, operating margins are expected to rebound from their current level in the high teens.

• At this point, I want to emphasize that we are implementing a long-term growth strategy.

• As such, it may be another year before our business model is fully unfolded.

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• However, we fully expect to remain solidly profitable throughout this transitional period.

• Our ability to generate strong earnings while implementing new sales strategies, introducing new products and strengthening our sales and marketing organization speaks well for the underlying earnings power of this organization.

• Thank you. Now, Rob Wolf will review our third quarter results in some detail.

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Remarks of Robert M. Wolf
Rimage Corporation 3rd Quarter 2004 Conference Call
October 21, 2004

• Thanks, Bernie

• Since our top line growth has already been covered in some detail, I will only highlight a few points about our third quarter sales.

• Reflecting the impact of our new consumables strategy, recurring revenues increased 86% in the third quarter and accounted for 41% of total sales, up from 29% in last year’s third quarter.

• International sales, primarily European, increased 7% in the third quarter and accounted for 34% of the sales total for this period, compared to 39% in the year-earlier period.

• As we indicated in our second quarter release, the third quarter is typically the seasonally slowest period of the year for European sales.

• Moreover, international sales as a percentage of total third quarter sales was affected by the strong growth in consumables, which was generated primarily in the U.S.

• Currency effects increased worldwide sales by 2% in this year's third quarter.

• Rimage’s gross margin declined to 44% in the third quarter, from 46% in the second quarter and 48% in last year’s third quarter.

• As forecasted in previous conference calls, our reduced gross margin reflects the shift in our sales mix toward lower-margin products, including consumables and the new DiscLab and 2000i product lines.

• We believe these same factors will cause our fourth quarter gross margin to approximate the third quarter level.

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• As Bernie discussed, we believe that the margin impact of our consumables strategy will be partly offset over time by the growing revenues generated by media kit sales.

• Moving down the P&L, third quarter R&D expense of $1.0 million was down from $1.2 million in this year’s second quarter but was up from $867,000 in the third quarter of 2003.

• However, due to the impact of strongly higher sales, R&D expense declined to 6% of sales in the third quarter, from 7% of sales in this year’s second quarter and was unchanged in comparison to the year-earlier period.

• R&D spending, which even at today’s increased levels remain thoroughly consistent with our historic norms as a sales percentage, is expected to remain at or near current levels in this year’s fourth quarter due to a number of product development initiatives currently underway.

• Selling, general and administrative expense came to $3.7 million in the third quarter, virtually unchanged from the second quarter level but was up 33% from last year’s third quarter.

• The higher SG&A expense reflects the implementation of sales and marketing initiatives aimed at supporting new product introductions and expanding our sales and marketing organization.

• However, again due to the impact of our growing sales, SG&A expense declined to 20% of total third quarter sales, from 21% of second quarter sales and was unchanged from last year’s third quarter. So despite the increase in absolute dollars, SG&A expense also remains in line with our historic sales percentage norms.

• Operating income totaled $3.1 million in this year’s third quarter, virtually unchanged from the second quarter level but was up 4% from the level reported in the third quarter of 2003.

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• As a result, our third quarter operating margin came to 18%, which was unchanged from the second quarter level and down from 22% in last year’s third quarter.

• As sales continue to grow in response to our growth strategies and as operating expenses begin to plateau, we believe that our operating margins should start to rebound from current levels.

• Turning now to our balance sheet, cash and investments totaled $49.2 million at the end of the third quarter, down slightly from $49.4 million at the end of the second quarter and up from $48.6 million at December 31, 2003.

• The modest decline in cash balances between the second and third quarters resulted from the use of cash to finance inventories, which increased in the third quarter due, in part, to support the DiscLab and Desktop 2000i introductions.

• Moreover, due to the growth of our consumables sales, we now must stock additional inventories of both blank CD/DVD media and printer ribbons and cartridges.

• These facts notwithstanding, we are continuing to generate strong operating cash flows due to our low capital requirements and solid margins.

• Finally, shareholders’ equity rose to $59.4 million at the end of the third quarter, from $56.2 million at the end of the second quarter and $52.0 million at year-end 2003.

• That wraps up our formal remarks, and now the conference call operator will poll you for any questions.

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