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Winland Electronics Reports First Quarter Fiscal 2011 Earnings

Winland Electronics, Inc. (NYSE Amex: WEX) today reported sales of Proprietary Environmental Monitoring products of $920,000 for the first quarter ended March 31, 2011 up $73,000, or 8.6 percent, from the $847,000 that the Company reported in the comparable period in 2010. Net loss from the quarter totaled $206,000, or $0.06 per share, an improvement over a loss of $539,000 in the first quarter of 2010. The loss for the current quarter was attributable primarily to increased product costs and significant non-recurring financing fees.

The Company reported an operating loss of $161,000 for the three months ended March 31, 2011 compared to an operating loss of $374,000 for the same period in 2010. Gross margins for the three months ended March 31, 2011 decreased to 29.6 percent from 40.1 percent compared to the comparable period in 2010. The decline in margins was forecasted, based on the terms of the manufacturing agreement signed with Nortech Systems Incorporated, which purchased the Company’s Electronic Manufacturing Services business segment on January 1, 2011.

“We were encouraged by our sales trends in the first quarter,” said Brian Lawrence, Winland’s Chief Financial Officer and Senior Vice President. “Our year-over-year increase in sales was attributable primarily to increased sales of approximately $158,000 to our largest distributor, offset by moderate sales declines among a number of smaller customers.”

In early 2011 the Company’s largest customer completed a restructuring of its stocking program. As a result, the Company received non-customary stocking orders in January for $350,000 to be delivered throughout the balance of the first quarter and April 2011. In addition to these non-customary stocking orders, the Company continues to receive regular weekly stocking orders, reinforcing the demand our products have in the markets served.

During the quarter, the Company continued to benefit from the lower cost structure that has resulted from the restructuring of its business. General and administrative expenses for the quarter were $207,000, down $253,000, or 55 percent, versus the comparable period in 2010. Sales and marketing expenses totaled $226,000 for the three months ended March 31, 2011, a decrease of $28,000 compared to the same time period a year ago.

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