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Winland Reports Q4

MANKATO, Minn. — Winland Electronics, Inc. (AMEX: WEX) today announced net sales of its Proprietary Environmental Monitoring products for the fourth quarter of 2010 were $868,000, up 6 percent over the comparable period of 2009. The Company reported a net loss of $1.9 million or $0.50 per basic and diluted share for the quarter.

As announced on January 3, 2011, the Company completed the sale of its Electronic Manufacturing Services (EMS) business unit to Nortech Systems, Incorporated. The EMS business is reported as discontinued operations.

The Company recorded an operating loss for the fourth quarter of 2010 of $858,000 versus an operating loss of $284,000 for the same period in 2009. Gross margins were significantly impacted by under utilization of manufacturing costs dropping from 36.3 percent to 21.0 percent. Operating expenses for the fourth quarter of 2010 were $1.0 million, a 79 percent increase over 2009 fourth quarter. The substantial increase was primarily due to net effect of severance packages paid to the Company’s previous chief executive and chief financial officer and increased professional fees.

“Our investment in sales and marketing continued to increase market awareness of the solutions our products offer in monitoring critical environments,” said Brian Lawrence, Chief Financial Officer and Senior Vice President. “Sales were up 6 percent over 2009 and have returned to levels consistent with 2008, but were not enough to offset one-time charges related to the sale of our EMS business.”

Full Year results
Proprietary Products net sales for the year ended December 31, 2010 were $3.3 million, up $126,000, or 4 percent, versus the year ended December 31, 2009. The increased sales were the result primarily of a 5 percent increase in sales to the Company’s largest distributor. The Company reported a net loss (including discontinued operations) of $3.5 million, or $0.96 per basic and diluted share for the year ended December 31, 2010, compared to the $1.5 million net loss, or $0.42 per basic and diluted share, for the same period of 2009.

On an operating basis, Winland reported a loss of $1.9 million and $1.8 million for the years ended December 31, 2010 and 2009, respectively. The Company’s gross margin was 35.6 percent in 2010, down from the 41.6 percent reported for 2009, the result of capacity utilization-related factors.

General and Administrative expenses were $2.1 million for the year ended December 31, 2010, an increase of $79,000 compared to the same time period a year ago. The increase was primarily due to increased salary expenses of $162,000 relating to severance packages of $358,000 for the Company’s previous chief executive officer and chief financial officer, offset by other reduced salaries expenses of $196,000 from headcount reductions. In addition, the Company incurred increased professional fees of $56,000 primarily related to engaging financial management consultants throughout the year.

Full-year sales and marketing expenses were $970,000 for 2010, a decrease of $94,000 in 2009. The decrease was due to reduced salaries expenses of $79,000 and reduced advertising expenses of $49,000. These cost savings were partially offset by increased commissions of $99,000 paid to manufacturer’s representative agencies.

Winland Electronics, Inc.

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