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Delphax Reports 2Q Results: Loss Despite Record Revenues

Press release from the issuing company

MINNEAPOLIS, May 8 -- Delphax Technologies Inc. today reported record sales of $13.1 million for its second fiscal quarter ended March 31, 2002, a 20 percent increase from $10.9 million for the same period a year ago. Revenues from maintenance, spares and supplies increased 153 percent over the year-earlier period but were offset by a 53 percent economy-related decline in equipment revenues. As a result of the reduced equipment revenues and a measured increase in operating expenses, the company reported a net loss of $579,000, or $0.09 per share, compared to net income of $178,000, or $0.03 per share for the year earlier quarter. The loss per share was slightly better than the preliminary guidance issued by the company on April 8. "We're disappointed with our results this quarter despite the record revenues," said Jay Herman, chairman and chief executive officer. "As we disclosed last month, a number of our customers have postponed major purchases of equipment because of continuing economic uncertainty. All of these deferrals have involved products in our established sheet-fed equipment lines -- products that have given us double-digit sales increases over the past two fiscal years -- and we believe that we will see recovery of substantially all of these orders in the second half of the year. "While we have been partially insulated from the recession that has existed in our industry for the last two years, we began to see the impact of the economic downturn on buying decisions during our first quarter. This continued during our second quarter and we now do not expect a return to a significantly healthier climate for capital goods before the fourth quarter of our fiscal year. "Although the second quarter was a difficult one in terms of major equipment sales, it was an extremely positive one in terms of our progress in carrying out our strategic plan to build future growth and profitability on the strength of the unique assets gained through our recent Canadian acquisition. In April, we introduced our new roll-fed product line at two major trade shows and drew significant interest from the industry. Our product line, which now includes the world's fastest continuous-feed digital printing systems, takes us into a marketplace at least four times larger than the market for our sheet-fed equipment. "The acquisition has also had a positive impact on our service-related revenues, which we intend to build into a much more significant portion of our business over time, and which will result in smoothing out the effects of fluctuations in equipment purchasing activity that we are seeing currently." Revenues from maintenance, spares and supplies rose to $9.8 million this quarter from $3.9 million in the second fiscal quarter a year ago. While most of the increase was due to incremental revenues generated by the company's recent Canadian acquisition, approximately $800,000 of the increase was attributable to increased usage of the Imaggia installed base. For the six months ended March 31, 2002, sales increased 14 percent to $24.8 million from $21.8 million a year earlier. The company reported net income of $60,000, or $0.01 per share, for the six months, compared with net income of $689,000, or $0.11 per share, in the first half of fiscal 2001. In April 2002, the company reduced its Canadian workforce by approximately 40 manufacturing and support positions as an element of its continuing integration plan. The cost of terminating the employees in these positions has been included as a cost of the Canadian acquisition in accordance with the Statement of Financial Accounting Standards No. 141. By taking this action, the company anticipates eliminating annual operating expenses of approximately $1.3 million without affecting its ability to fulfill current or future orders.

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