MINNEAPOLIS, May 5 -- Delphax Technologies Inc. today reported sales of $14.7 million for its second fiscal quarter ended March 31, 2004, an increase of 3.1 percent from $14.2 million for the same period a year earlier. Equipment sales increased 13.2 percent to $2.4 million, and revenues from maintenance, spares and supplies reached a record $12.3 million. Operating income improved sharply to $646,000 from $361,000 in the second quarter of fiscal 2003, reflecting a combination of higher sales and gross margin. Second-quarter net income was $380,000, or $0.06 per share, compared with a loss of $9,000 a year earlier. This year's net income was reduced by an income tax expense of $76,000 primarily on profitable European operations. "We are beginning to see some bottom-line evidence of our progress in implementing Delphax's expanded business model, even though the market for most large-scale printing equipment remains soft," said Jay Herman, chairman and chief executive officer. "The sale of three of our new high-speed CR Series presses in the second quarter led our first increase in overall equipment sales in the last three quarters, a hopeful sign of improving econometrics. We also had marginal growth in our very solid base of service and supply revenue, which has been in a tight quarterly range of $12.1 million to $12.3 million quarterly across the last seven quarters." Two of the roll-fed CR Series presses were sold in the United States and one in Europe, raising the total in operation to 13. For the six months ended March 31, 2004, sales were $28.9 million, compared with $29.7 million in the same period of fiscal 2003. The increase in service-related revenues did not offset the overall decline in equipment sales, which reflected last year's successful first quarter objective of lowering inventory levels of older, legacy equipment. The company recorded net income of $740,000, or $0.12 per share, in the first six months of 2004, compared with a loss of $1.1 million, or $0.19 per share, in the first half of fiscal 2003. Last year's six-month results included first-quarter restructuring costs of $1.2 million. This year's net income was reduced by income tax expense of $151,000 primarily on profitable European operations. Research and development expenditures were up 6.3 percent for the first six months of fiscal 2004. The increase was primarily due to preparation for the introduction of our CR2000 digital web press. The CR2000 has an industry- leading continuous running speed of 450 feet per minute, which is 50 percent faster than our CR1300 system that is currently the world's fastest roll-fed digital press. The CR2000 also offers a significant advance in print quality. It will be presented to the printing industry for the first time at the Drupa 2004 trade show in Dusseldorf, Germany, May 6-19.