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): July 19, 2006

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	55439
(Address Of Principal Executive Offices)	(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):

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

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

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

o 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 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

On July 19, 2006, upon recommendation of the Compensation Committee and with the approval by the Board of Directors, Rimage Corporation (the “Company”) entered into a severance/change of control letter agreement with Pamela Lampert, the Company’s Vice President Human Resources. The change of control agreement is the form of Severance/Change in Control Letter Agreement dated November 5, 2004 entered into between the Company and certain executive officers and incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

The Company hereby furnishes a press release, issued on July 20, 2006, disclosing material non-public information regarding its results of operations for the quarter ended June 30, 2006 and hereby furnishes statements of its Chief Executive Officer and Chief Financial Officer made on July 20, 2006 at a telephone conference relating to the quarter ended June 30, 2006 results.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

Exhibit No.	Description
99.1	Press Release issued on July 20, 2006.
99.2	Statements of Bernard P. Aldrich, Chief Executive Officer, and Robert M. Wolf, Chief Financial Officer, at a telephone conference held on July 20, 2006.

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
Date:   July 21, 2006

EX-99.1

Exhibit 99.1

Rimage Corporation’s Second Quarter Sales and Earnings

Significantly Exceed Previously Forecasted Levels

Minneapolis, MN—July 20, 2006—Rimage Corporation (Nasdaq: RIMG) today reported sales of $25,319,000 for the second quarter of 2006 ended June 30, an increase of 14% from $22,307,000 in the year-earlier quarter. Second quarter earnings were $3,384,000 or $0.33 per diluted share, an increase of 48% from $2,288,000 or $0.22 per diluted share in the second quarter of 2005. Rimage had previously forecasted second quarter earnings of $0.18 to $0.23 per diluted share on sales of $22.0 to $24.0 million. Second quarter earnings included stock compensation expense of approximately $350,000 due to the required adoption of SFAS No. 123(R), “Share Based Payment,” which was consistent with the previously issued guidance for this period.

Bernard P. (Bernie) Aldrich, president and chief executive officer, commented: “Our second quarter operating results benefited from strong sales of our mission-critical Producer CD/DVD publishing systems for retail applications, including digital photography and video-on-demand. We ended the second quarter with a retail order backlog of approximately $2 million, which is scheduled for shipment in the third quarter. Moreover, a number of national retail chains are currently testing our Producer systems for photography, music, video and software publishing applications. As we have stated in the past, retail-related sales likely will continue to fluctuate between quarters due to the uneven pace of customer rollout schedules. Our second quarter results also benefited from the continuation of strong demand for Producer systems for medical imaging applications. Given these positive factors, we remain confident that 2006 should be another strong year for Rimage.”

Aldrich continued: “Our strong second quarter earnings were attained despite expenses associated with the implementation of an enterprise resource planning system that will significantly strengthen our ability to manage Rimage’s anticipated future growth. As previously reported, we expect to invest more than $4.0 million in this initiative during 2006, of which approximately $2.0 million will be capitalized.”

Financial Highlights

Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media and maintenance contracts, increased 20% in the second quarter of 2006 and accounted for 45% of sales, compared to 42% in the second quarter of 2005. The growth of consumable supplies has been generated by the continued expansion of the worldwide installed base of CD/DVD publishing system, as well as Rimage’s strategic emphasis on this portion of its business.

International sales increased 11% in the second quarter and accounted for 34% of total sales during the second quarters of both 2006 and 2005. Rimage’s European operation, which is being strengthened to capitalize on growing opportunities in that market, continued to generate the majority of international sales. However, sales in Asian markets made a growing contribution, reflecting intensified sales efforts in this region. Currency effects had a minimal impact on worldwide sales in the second quarter of 2006.

Rimage generated substantial operating cash flows in the second quarter. Cash and investments rose to $69,631,000 from $64,471,000 at the end of 2005. Stockholders’ equity increased to $84,149,000 from $76,529,000 as of 2005.

For the third quarter of 2006 ending September 30, Rimage is forecasting revenues of $23 to $25 million and earnings of $0.24 to $0.28 per diluted share, which includes estimated stock compensation expense of $550,000 to $750,000 on a pre-tax basis. In the third quarter of 2005, Rimage reported sales of $28.0 million and record quarterly earnings of $0.39 per diluted share, reflecting shipments of approximately $6.0 million related to retail applications.

About Rimage

Rimage Corporation is the world’s leading provider of 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, including digital photography, medical imaging and financial institutions. Visit our web site at www.rimage.com.

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.

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For additional information, contact:
Bernard P. (Bernie) Aldrich, CEO	Richard G. Cinquina
Robert M. Wolf, CFO	Equity Market Partners
Rimage Corporation	904/415-1415
952/944-8144

RIMAGE CORPORATION

Selected Consolidated Financial Information

(In thousands except per share data)

(Unaudited)

Consolidated Statement of Operations Information:

	Three months ended		Six months ended
	June 30,		June 30,
	2006	2005	2006	2005
Revenues	$25,319	$22,307	$47,956	$43,182
Cost of Revenues	13,668	12,662	26,641	23,926
Gross Profit	11,641	9,645	21,315	19,256
Operating Expenses:
Research and Development	1,746	1,499	3,322	2,778
Selling, General and Administrative	4,959	4,787	11,083	9,147
Total Operating Expenses	6,705	6,286	14,405	11,925
Operating Income	4,936	3,359	6,910	7,331
Other Income, Net	637	334	1,258	534
Income Before Income Taxes	5,573	3,693	8,168	7,865
Income Tax Expense	2,189	1,405	3,150	2,886
Net Income	3,384	2,288	5,018	4,979
Net Income Per Basic Share	$.35	$.24	$.51	$.53
Net Income Per Diluted Share	$.33	$.22	$.49	$.49
Basic Weighted Average Shares Outstanding	9,808	9,491	9,747	9,457
Diluted Weighted Average Shares Outstanding	10,298	10,214	10,317	10,152

Consolidated Balance Sheet Information:

	Balance As Of
	June 30, 2006	December 31, 2005
	(Unaudited)
Cash and Cash Equivalents	$  53,309	$  64,471
Accounts Receivable	13,171	12,689
Inventories	6,921	6,621
Total Current Assets	76,985	86,444
Property and Equipment, Net	3,053	2,525
Marketable Securities – Non-Current	16,322	—
Total Assets	96,494	89,009
Current Liabilities	12,326	12,467
Long-term Liabilities	19	13
Stockholders’ Equity	84,149	76,529

Conference Call and Replay

Rimage Corporation will review its second 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 call will be available through July 27, 2006 by dialing 1-303-590-3000 and providing the 11066410 confirmation code.

EX-99.2

Exhibit 99.2

Remarks of Bernard P. Aldrich

Rimage Corporation 2nd Quarter/FYE 2006 Conference Call

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

• Joining me today is Rob Wolf, our chief financial officer, who will review our recent operating results in some detail.

• Also with us are Manny Almeida, our chief operating officer, and Dave Suden, Rimage’s chief technology officer.

• We will be pleased to take your questions at the conclusion of our opening remarks.

• Since Regulation FD prohibits us from providing any guidance or other forward-looking statements unless they are simultaneously released to the public, we have provided financial guidance for the third quarter of 2006 in this morning’s earnings 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, our second quarter revenues rose 14% to $25.3 million from the year-earlier period, which exceeded our previously issued guidance for this period by approximately $1 million.

• Second quarter earnings came to $3,384,000 or $0.33 per diluted share, an increase of 48% from $2,288,000 or $0.22 per diluted share in the second quarter of 2005.

• This was well above our previously forecasted second quarter earnings of $0.18 to $0.23 per diluted share.

• It also should be noted that our second quarter earnings included stock compensation expense of $350,000 which was consistent with our previously issued guidance for this period.

• During the second quarter, we continued selling into a broad range of markets, and medical imaging applications made another strong contribution to our sales growth.

• However, our second quarter operating results particularly benefited from strong sales of our mission-critical Producer CD/DVD publishing systems for retail applications, including digital photography and video-on-demand.

• Due to the shift in our second quarter sales mix toward our higher-margin Producer line, our gross margin strengthened to 46% from 43% in this year’s first quarter.

• The material strengthening of our gross margin was the primary driver behind our strong second quarter earnings growth on both a year-over-year and sequential quarterly basis.

• We believe this gives you some idea of the potential impact on Rimage’s profitability as our Producer-related retail business continues to grow over the next few years.

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• On a sequential quarterly basis, this year’s second quarter earnings also benefited from a drop in SG&A expense of more than $1 million from the first quarter level.

• In this year’s first quarter, we incurred approximately $1.2 million of expense that represented the final payment to the international consulting group that conducted our previously-discussed long-range strategic study.

• Since we incurred no further consulting-related expense in the second quarter, our SG&A expense returned to more normalized levels.

• We believe the momentum of our wide-ranging retail initiatives is building steadily, and it is doing so for two reasons.

• First, many consumer activities are converging at the retail level.

• Today, these include the in-store publishing of photos, music, video, software and business documents on CDs and DVDs on a customized, on-demand basis.

• The digital world of customized, on-demand publishing based on optical technology is real, and we believe it is expanding at an accelerating rate.

• And second, due to the quality of our products and worldwide customer support, we believe Rimage is strongly positioned to capitalize upon this major opportunity.

• For example, in this year’s first quarter, we introduced our next-generation line of disc publishing systems, the Producer III series.

• These units offer improved software features, resulting in higher production throughput and greater operator convenience.

• These and other key benefits make the Producer III extremely well suited for retail applications.

• Our systems are currently installed in over 1,000 retail locations, and several major national retailers are currently field testing our Producer publishing systems for photography, music, video and software publishing applications.

• We believe some of these field tests could ultimately result in national rollouts.

• As we have stressed in the past, our retail-related sales will probably continue to fluctuate between quarters, due to the uneven rollout rates of our customers.

• The current quarter is a prime example of this pattern, because we recorded minimal retail hardware sales in this year’s first quarter.

• Since it is the positive long-term trend that really counts, the fluctuating nature of this business does not alter or diminish in any way the fundamental, ongoing vitality of our retail opportunity.

• It is encouraging to realize that our strong earnings were realized despite the significant investment that we are currently making in a new enterprise resource planning system.

• As previously reported, we have started implementing this system in order to strengthen our ability to manage Rimage’s anticipated future growth.

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• Due to the growth and increased complexity of our business operations, a new system is absolutely required and implementation is proceeding on schedule toward a U.S. conversion this fall.

• We expect to invest more than $4.0 million in this initiative during 2006, of which approximately $2.0 million will be capitalized.

• Turning to the guidance contained in this morning’s release, we are forecasting earnings of $0.24 to $0.28 per diluted share on revenues of $23 to $25 million for the third quarter of 2006 ending September 30.

• This earnings guidance includes estimated stock compensation expense of $550,000 to $750,000 on a pre-tax basis.

• To put our guidance into perspective, we reported exceptionally strong results in the third quarter of 2005, when we posted earnings of $0.39 per diluted share on revenues of $28 million.

• Our strong sales and record quarterly earnings in last year’s third quarter were driven by retail-related hardware shipments of approximately $6 million, which, again, serves as a reminder of the lumpy nature of this portion of our business.

• In closing, I want to say that we are optimistic about Rimage’s prospects for 2006.

• Our targeted markets remain robust and we feel we are strongly positioned to capitalize upon a range of highly attractive growth opportunities.

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

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Remarks of Robert M. Wolf

Rimage Corporation 2nd Quarter/FYE 2006 Conference Call

• Thanks, Bernie

• Since our top line growth has already been covered in some detail, I will run through only a few highlights about our second quarter sales.

• Recurring revenues, including sales of printer ribbons and cartridges, parts, blank CD/DVD media and maintenance contracts, increased 20% in the second quarter of 2006 and accounted for 45% of sales, compared to 42% in the second quarter of 2005.

• The growth of consumable supplies has been generated by the continued expansion of our worldwide installed base of CD/DVD publishing systems and our strategic emphasis on this portion of our business.

• International sales increased 11% in the second quarter and accounted for 34% of total sales during the second quarters of both 2006 and 2005.

• European sales continued to generate the majority of our international business, but sales in Asia made a growing contribution in the second quarter, reflecting intensified sales efforts in these regions.

• Currency effects had a minimal impact on worldwide sales in this year’s second quarter.

• As Bernie mentioned earlier, Rimage’s gross margin strengthened to 46% from 43% in this year’s first quarter, due to the shift in our second quarter sales mix toward our higher-margin Producer line.

• The increase in our gross margin was the primary driver behind our strong second quarter earnings growth, and we expect our third quarter gross margin to remain in the mid-40% range.

• Moving down the P&L, R&D expense of $1.7 million was up from $1.6 million in the first quarter of 2006 and $1.5 million in last year’s second quarter, reflecting development of several important new products.

• However, as a percentage of sales, R&D expense remained unchanged at 7% in comparison to both the first quarter and last year’s second quarter.

• Third quarter R&D expense is forecasted to remain at or near the second quarter level.

• Selling, general and administrative expense, which included costs related to the implementation of our new enterprise resource planning system, declined to $5.0 million in the second quarter, from $6.1 million in this year’s first quarter.

• SG&A in this year’s first quarter included the final $1.2 million payment for the previously reported strategic study that was conducted by an international consulting group.

• The resulting sharp drop in SG&A expense between this year’s first and second quarters also contributed to our sequential quarterly earnings growth.

• SG&A in the current quarter was up modestly from $4.8 million in last year’s second quarter.

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• As a percentage of sales, SG&A declined to 20% from 27% in the first quarter of 2006 and 22% in the second quarter of 2005.

• We believe third quarter SG&A should increase by at least 5% over the second quarter level, due primarily to initiatives aimed at further strengthening our sales and marketing organization.

• We believe that the majority of third quarter expenditures related to our ERP implementation will probably be capitalized.

• Turning now to our balance sheet, cash and investments totaled $69.6 million at the end of the second quarter, up from $66.2 million at March 31, and $64.5 million at the end of 2005.

• As you will notice on the balance sheet that accompanied this morning’s release, we have started investing a portion of our cash in longer-term securities to take advantage of higher interest rates.

• Despite our high level of business investments, Rimage is continuing to generate significant cash flows from its internal operations.

• Finally, stockholders’ equity rose to $84.1 million at the end of the second quarter, from $80.3 million at the end of this year’s first quarter and $76.5 million at the end of 2005.

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

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