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Delphax Cuts 52 Positions in Response To Poor Sales

Press release from the issuing company

MINNEAPOLIS, Sept. 28 -- Delphax Technologies Inc., announced today that it is reducing its workforce by approximately 15 percent, or 52 positions, as part of its adjustment to lower- than-expected fiscal 2006 sales. As previously announced, net sales declined by 5 percent in the first nine months of fiscal 2006 compared with the same period in fiscal 2005, and 14 percent in the third quarter of fiscal 2006 compared with the third quarter of fiscal 2005. The workforce reduction touches all areas of the company, but is primarily focused on engineering and manufacturing personnel. The company expects that the workforce reduction will result in a charge of approximately $2.2 million in its fourth fiscal quarter ending Sept. 30, 2006. While the fourth fiscal quarter is not yet complete, the company estimates that its net sales for the quarter will be approximately $10.8 million to $11.8 million and the net loss, including the charge related to the workforce reduction, will be approximately $3.8 million to $4.8 million, compared with net sales of $12.7 million and net income of $0.3 million in the fourth quarter a year ago. As a result of the anticipated fourth quarter loss, the company expects to be out of compliance with the financial covenants in its current loan agreement, which is scheduled to expire in April 2007. The company is in discussions with potential lenders, including its current lender, to structure a new financing arrangement. The company estimates that its cash availability under the current loan agreement will be approximately $1.0 million to $2.0 million as of Sept. 30, 2006. "While a workforce reduction is a step we take reluctantly, we believe it is a step we must take to carry out our business plan and position us for a return to profitability," said Dieter Schilling, president and chief executive officer. "The workforce reduction will lower our costs by over $3.0 million for fiscal 2007. We are focusing our sales efforts and resources on those segments of the market where our proprietary digital printing technology gives us a competitive advantage or can be adapted to customer needs to create an advantage."

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