Winland Electronics, Inc. Reports Second Quarter 2010 Results

Management will host a conference call and webcast to discuss its second quarter 2010 results on Thursday, August 12, 2010, at 3:30 p.m. CT / 4:30 p.m. ET.

Call Details:Date: Thursday, August 12, 2010Time: 3:30 p.m. CT / 4:30 p.m. ETCall name: Winland Electronics Second Quarter Fiscal Year 2010 Conference CallDial-in number: 877-407-7184

Call Replay:A replay of the conference call will be available from 5:00 p.m. CT / 6:00 p.m. ET on Thursday, August 12, 2010 through Thursday, August 19, 2010. To access the replay, call 877-660-6853, using Account #336 and enter replay ID 354687.

Web Cast:Winland will also host a webcast of the conference call on-line at www.winland.com. The webcast will be available until Thursday, September 9, 2010. To access the web cast, you will need to have the Windows Media Player on your desktop. For a free download of the Media Player, visit http://www.windowsmedia.com/mediaguide/Downloads.

About Winland Electronics

Winland Electronics, Inc. ( www.winland.com), an electronic manufacturing services (EMS) company, designs and manufactures custom electronic controls and assemblies primarily for original equipment manufacturer (“OEM”) customers, providing services from early concept studies through complete product realization. Markets served primarily include medical, industrial, transportation and scientific instrumentation. In addition, the company designs and markets a proprietary line of environmental monitoring products to the security industry. These products monitor and detect critical environmental changes, such as changes in temperature or humidity, water leakage and power failures. Headquartered in Mankato, MN, Winland trades on the NYSE Amex Exchange under the symbol WEX.

Cautionary Statements

Certain statements contained in this press release and other written and oral statements made from time to time by the Company do not relate strictly to historical or current facts. As such, they are considered forward-looking statements, which provide current expectations or forecasts of future events. The statements included in this release with respect to the following matters are forward looking statements; (i) that the Company’s long-term strategy is gaining momentum; (ii) that the Company’s sequential growth from new EMS customers is encouraging; (iii) that the Company continues to be optimistic about the long-term opportunities that its customers present. These statements involve a variety of risks and uncertainties, known and unknown, including among other risks that (i) the Company will attain its long-term strategy; (ii) that the Company’s EMS customers will continue to produce sequential growth; and (iii) that the Company will have success with the long-term opportunities its customers present. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.

WINLAND ELECTRONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Amounts)
(Unaudited)
			For the Three Months Ended June 30,									For the Six Months Ended June 30,
			2010				2009					2010				2009
Net sales			$	5,131			$	5,734				$	9,675			$	12,886
Cost of sales				4,934				5,246					9,061				11,322
Gross profit				197				488					614				1,564
Operating expenses
General and administrative				510				543					970				1,169
Sales and marketing				367				423					744				774
Research and development				114				87					219				252
Total operating expenses				991				1,053					1,933				2,195
Operating loss				(794	)			(565	)				(1,319	)			(631	)
Other income (expense)
Interest expense				(27	)			(23	)				(48	)			(46	)
Other income (expense), net				(1	)			3					7				(12	)
Total other expense				(28	)			(20	)				(41	)			(58	)
Loss before income taxes				(822	)			(585	)				(1,360	)			(689	)
Income tax expense				-				(129	)				(2	)			(150	)
Net loss			$	(822	)		$	(714	)			$	(1,362	)		$	(839	)
Loss per common share:
Basic and diluted			$	(0.22	)		$	(0.19	)			$	(0.37	)		$	(0.23	)
Weighted-average number of common shares outstanding:
Basic and diluted				3,689,930				3,669,148					3,686,683				3,669,148

WINLAND ELECTRONICS, INC.
SEGMENT REPORTING
($ in thousands)		EMS					Proprietary				Other					Total
Three months ended June 30, 2010
Net sales		$	4,380				$	751			$	-				$	5,131
Gross margin			(90	)				287				-					197
Operating income (loss)			(205	)				35				(624	)				(794	)
Three months ended June 30, 2009
Net sales		$	5,005				$	729								$	5,734
Gross margin			159					329									488
Operating income (loss)			22					43				(630	)				(565	)
Six months ended June 30, 2010
Net sales		$	8,094				$	1,581			$	-				$	9,675
Gross margin			(14	)				628				-					614
Operating income (loss)			(248	)				118				(1,189	)				(1,319	)
Six months ended June 30, 2009
Net sales		$	11,448				$	1,438								$	12,886
Gross margin			875					689									1,564
Operating income (loss)			628					162				(1,421	)				(631	)

WINLAND ELECTRONICS, INC.
CONDENSED BALANCE SHEETS
(In Thousands, Except Share Data)
ASSETS		June 30, 2010					December 31, 2009
		(Unaudited)
Current Assets
Cash		$	100				$	55
Accounts receivable, less allowance for doubtful accounts of $64
and $49, respectively			3,597					2,823
Refundable income taxes			376					1,023
Inventories, less allowance for obsolescence of $766 and
$562, respectively			3,195					3,039
Prepaid expenses and other assets			308					256
Total current assets			7,576					7,196
Property and equipment at cost			11,933					12,266
Less accumulated depreciation			(8,045	)				(7,937	)
Net property and equipment			3,888					4,329
Total assets		$	11,464				$	11,525
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Revolving line of credit agreement		$	1,248				$	367
Current maturities of long-term debt			394					380
Accounts payable			1,692					1,132
Accrued expenses:
Compensation			392					369
Other short-term tax liabilities			258					-
Other			53					49
Total current liabilities			4,037					2,297
Long Term Liabilities
Long-term debt, less current maturities			498					699
Deferred revenue			118					122
Other long-term tax liabilities			-					258
Total long-term liabilities			616					1,079
Stockholders' Equity
Common stock, par value $0.01 per share; authorized 20,000,000
shares; issued and outstanding 3,699,230 shares as of June 30, 2010
and 3,686,435 as of December 31, 2009			37					37
Additional paid-in capital			5,039					5,016
Retained earnings			1,735					3,096
Total stockholders' equity			6,811					8,149
Total liabilities and stockholders' equity		$	11,464				$	11,525

WINLAND ELECTRONICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
		For the Six Months Ended June 30,
		2010					2009
Cash Flows From Operating Activities
Net loss		$	(1,362	)			$	(839	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization			397					412
Increase in allowance for doubtful accounts			15					-
Loss on disposal of property and equipment			47					20
Non-cash stock based compensation			16					47
Changes in assets and liabilities:
Accounts receivable			(789	)				333
Refundable income taxes			647					204
Inventories			(156	)				(266	)
Prepaid expenses			(52	)				(199	)
Accounts payable			560					(37	)
Accrued expenses, including deferred revenue and
other short-term tax liabilities			27					26
Net cash used in operating activities			(650	)				(299	)
Cash Flows From Investing Activities
Purchases of property and equipment			(13	)				(59	)
Proceeds from sale of property and equipment			7					7
Net cash used in investing activities			(6	)				(52	)
Cash flows From Financing Activities
Net borrowings on revolving line of credit			881					386
Payments on long-term borrowings, including capital
lease obligations			(187	)				(213	)
Proceeds from issuance of common stock			7					6
Net cash provided by financing activities			701					179
Net increase (decrease) in cash			45					(172	)
Cash
Beginning of period			55					356
Ending of period		$	100				$	184
Supplemental information
Cash payments for:
Interest		$	35				$	47
Cash received for:
Income taxes		$	645				$	-
Non-cash reclassification of other tax liability from long-term to short-term		$	258				$	-

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