MINNEAPOLIS, May 3 -- Delphax Technologies Inc. today reported net sales of $12.8 million for its second fiscal quarter ended March 31, 2006, equal to $12.8 million for the same period of fiscal 2005. The company reported a second-quarter net loss of $314,000, or $0.05 per share, compared with net income of $262,000, or $0.04 per diluted share, for the second quarter of fiscal 2005. For the six months ended March 31, 2006, net sales were $25.6 million and the net loss was $470,000, or $0.07 per share, compared with net sales of $25.8 million and a net loss of $257,000, or $0.04 per share, for the same period of fiscal 2005. "As we expected, our service-related revenues returned to more typical levels in the second quarter after what our analysis indicates was an unusual but transient drop-off in print volume on the part of some of our major customers in the first quarter," said Jay Herman, chairman and chief executive officer. "Our service-related revenues for the second quarter were up 11 percent sequentially from the first quarter of fiscal 2006 and very nearly equal to our total for the second quarter a year ago. We may see some continued fluctuation in sales of supplies and consumables over the near term, but as more and more high-speed CR Series equipment goes into service, we expect these higher-volume presses to drive increasing levels of service- related revenue growth. "Second-quarter equipment sales included our initial sale of a CR Series web press to RR Donnelley & Sons Company, the world's premier full-service provider of print and related services. This important placement brought to four the number of CR Series presses sold in the first half of fiscal 2006, compared with two in the first half of fiscal 2005. Total equipment sales for the first six months of fiscal 2006 were $4.3 million versus $3.0 million for the same period last year, an increase of 44 percent. Our improved performance in equipment sales in the first half of fiscal 2006 has offset much of the extraordinary shortfall in service-related revenues we experienced last quarter." Gross margin for the second quarter of fiscal 2006 totaled $7.0 million compared with $7.2 million for the second quarter of fiscal 2005. The gross margin rate for the fiscal 2006 second quarter was 55 percent versus 56 percent for the same quarter last year. For the six months ended March 31, 2006, gross margin was $13.8 million compared with $13.9 million for the first six months of fiscal 2005. The gross margin rate for the first six months of fiscal 2006 was 54 percent, equal to the 54 percent for the same period last year. "The decline in our operating income in fiscal 2006 from fiscal 2005 was almost entirely attributable to two factors -- certain cost reduction measures implemented during fiscal 2005 that led to improved gross margins and reduced operating expenses during fiscal 2005, and the continued strengthening of the Canadian dollar as compared with the U.S. dollar," Herman continued. "During fiscal 2005 we implemented an employee workshare program at our Canadian subsidiary. Due to governmental requirements, the program was only temporary and could not be extended into fiscal 2006. Accordingly, our payroll costs increased by $223,000 for the second quarter of fiscal 2006 compared with the second quarter of fiscal 2005. "In addition, we have also been negatively impacted by the continued strengthening of the Canadian dollar as compared with the U.S. dollar. The average exchange rate of the Canadian dollar versus the U.S. dollar has increased by approximately 5 percent from the second quarter of fiscal 2005 to the second quarter of fiscal 2006. This had the effect of increasing our reported costs in the second quarter of fiscal 2006 by over $200,000 when converting the same level of costs incurred in Canadian dollars in the second quarter fiscal 2005. "During March, we announced a major advance in the industry-leading speed and productivity of the CR Series presses: We are accelerating the performance of the CR2000 from its pacesetting running speed of 450 feet per minute to 500 feet per minute, with accompanying increases throughout the entire CR Series product line."