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Winland Electronics, Inc. Reports Fourth Quarter, Full-Year 2010 Results

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.

Discontinued Operations

Winland incurred a loss from discontinued operations, net of tax, of $1.5 million for the year ended December 31, 2010 versus a loss of $153,000 for the comparable period a year ago. Net sales from discontinued operations were $14.7 million and $19.4 million for the years ended December 31, 2010 and 2009, respectively.

Because the Company’s top three EMS customers’ sales were down $5.1 million year-over-year, Winland experienced under-utilization of fixed overhead expenses and incurred a gross loss from discontinued operations of $530,000 in 2010 versus gross profit of $928,000 in 2009. Operating expenses related to discontinued operations for 2010 totaled $840,000 compared to $1.0 million in 2009. The reduction in operating expenses is primarily related to reduced salaries and related expenses of $236,000, reduced professional fees of $19,000 and reduction in bad debt expense of $11,000, partially offset by transaction costs of $122,000 related to the sale of EMS assets. Interest expense in 2010 for equipment under lease for discontinued operations was $37,000 down $13,000 from 2009. The Company also experienced $116,000 loss on the disposal of equipment in 2010 with no loss on asset disposals in 2009.

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