MINNEAPOLIS, Feb. 17 -- Delphax Technologies Inc. today reported sales of $14.2 million for its first fiscal quarter ended December 31, 2003, a decrease of 8 percent from $15.5 million for the same period a year ago. However, improved gross margins based on the sales mix, lower selling, general and administrative expenses this year, and the absence of the $1.2 million restructuring charge taken last year, resulted in first-quarter operating income of $707,000 this year compared to an operating loss of $861,000 for last year's first quarter. First-quarter net income this year was $360,000, or $0.06 per share, in contrast to a net loss of $1.1 million, or $0.18 per share, for the first quarter last year. The quarter's net income was reduced by an income tax expense of $75,000 on profitable European operations. "We are pleased with our achievement of positive earnings despite the difficult market environment that continues to plague the global printing equipment industry," said Jay Herman, chairman and chief executive officer. "Delphax has established a base of service-related revenue that offsets much of the current weakness in equipment sales, and our margin improvement and expense reduction reflect the consolidation and streamlining of our operations implemented over the past year." Rising service-related revenues -- revenues from maintenance, spares and supplies -- generated by increased usage of the new CR Series and by the company's OEM business partially offset a decline in usage of the company's installed base of check-printing equipment, with total service-related revenues decreasing slightly to $12.1 million in this year's first quarter from last year's $12.3 million. First quarter sales of printing equipment were $2.1 million, versus $3.2 million for the same period a year ago. Equipment sales were up sequentially from the fourth quarter of fiscal 2003 and included additional sales of the company's new ultra-high-speed CR1300, the world's fastest commercial roll-fed digital press. "We're pleased to report the sale of two CR1300 presses to Graphic Inline, a leader in the direct mail industry based in the United Kingdom," Herman said. "We now have three CR Series presses installed in the United Kingdom, raising our total in Europe to six. On the check-printing side of our business, we sold a second high-speed Imaggia system to Liberty Enterprises." First-quarter R&D expenditures rose 12 percent from a year earlier as the company prepared for the previously announced introduction of the next generation in the CR Series this spring.