Winland Electronics, Inc. (NYSE Amex: WEX) today reported sales
of Proprietary Environmental Monitoring products of $984,000 for
the second quarter ended June 30, 2011, up $233,000, or 31.0
percent, from the $751,000 that the company reported in the
comparable period in 2010. Net loss from the quarter totaled
$140,000, or $0.04 per share, an improvement over a loss of
$822,000 in the second quarter of 2010. The loss for the current
quarter was attributable primarily to lower gross margins.
The company reported an operating loss of $250,000 for the three
months ended June 30, 2011 compared to an operating loss of
$475,000 for the comparable period in 2010. Gross margins decreased
from 38.2 percent to 33.7 percent for the three months ended June
30, 2011 compared to the same period in 2010. As has been the case
in previous quarters, the declines in gross margin were expected
based on the agreed upon price structure that is part of Winland’s
manufacturing agreement with Nortech Systems, Incorporated.
“The positive sales trends we have been experiencing continued
into our second quarter,” said Brian Lawrence, Winland’s Chief
Financial Officer and Senior Vice President. “Sales were up seven
percent on a sequential quarterly basis, the result of a large
project sale to a new customer, and continued strong sales from our
existing customers. We continue to gain traction in our markets as
both new and existing customers recognize the value of our critical
condition monitoring solutions.”
During the second quarter Winland recognized additional sales of
EMS related inventories to Nortech. These sales provided additional
cash flow and a net gain on the sale of the EMS business.
The company continued to benefit from the lower cost structure
realized by its restructuring in late 2010 and early 2011. General
and Administrative expenses totaled $295,000 for the second
quarter, down $215,000 year-over-year. Sales and marketing expenses
were $240,000 for the three months ended June 30, 2011, down
slightly from the second quarter of 2010. The decrease was due to
reduced product support costs of $10,000, reduced advertising
expenses of $7,000 offset by increased salaries and benefits
expenses of $16,000.
Winland Introduces EnviroAlert EA800-ip
In mid-July, the company announced the introduction of its
EnviroAlert EA800-ip. The EA800-ip adds Ethernet connectivity to
Winland’s EA800 product, allowing remote monitoring and
modification of sensor settings.
“We believe the EA800-ip will add value to our current customer
base and provide opportunities in vertical markets outside the
security channel,” Mr. Lawrence said. Winland plans to debut the
product in mid-September at the ASIS International Show in Orlando,
Florida.
Six-Month Results
Net sales for the six months ended June 30, 2011 were $1.9
million, up $323,000 from the comparable period in 2010. The
increase was related to increased sales of $216,000 to our largest
distributor, a large project sale of $72,000 to a new customer and
increased sales to numerous smaller distributors.
The company reported a net loss of $346,000, or $0.09 per basic
and diluted share for the six months ended June 30, 2011, versus a
net loss of $1.4 million, or $0.37 per basic and diluted share for
the same period in 2010.
For the six months ended June 30, 2011, the company reported an
operating loss of $411,000 compared to an operating loss of
$852,000 for the same period in 2010. Gross margins decreased to
31.7 percent from 39.7 percent for the six months ended June 30,
2011 compared to the same period in 2010.
General and Administrative expenses were $502,000 in the first
half of 2011, down from $970,000 from the same period in 2010. The
decline in expense was primarily related to decreased salaries
expenses of $247,000, decreased audit fees of $70,000, decreased
financial advisor consulting fees of $66,000 and decreased
professional fees of $61,000 offset by $47,000 of increased bank
fees related to non-recurring financing fees.
For the six months ended June 30, 2011, sales and marketing
expenses were $466,000 down $44,000 compared to the same period in
2010. The decrease was due to reduced product support costs of
$23,000 and reduced advertising expenses of $16,000.
“While we are encouraged by the increased sales in our
proprietary product line, we remain focused on the need to return
to profitability,” Mr. Lawrence said. “That said, we believe that
the investments we’ve been making in sales and the research and
development of our expanding product line are helping us gain the
needed traction in the marketplace which we anticipate will result
in future profitability.”
About Winland
Electronics
Winland Electronics, Inc. (www.winland.com), is an industry
leader of critical condition monitoring devices. Products including
EnviroAlert, WaterBug, TempAlert, Vehicle Alert and more are
designed in-house to monitor critical conditions for industries
including health/medical, grocery/food service,
commercial/industrial, as well as agriculture and residential.
Proudly made in the USA, Winland products are compatible with any
hard wire or wireless alarm system and are available through
distribution worldwide. 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 continues to gain
traction in markets as both new and existing customers recognize
the value of its critical condition monitoring solutions (ii) that
the company’s EA800-ip will add value to its current customer base,
(iii) that the company’s EA800-ip will provide opportunities in
vertical markets outside the security channel and (iv) that the
investments in sales and the research and development of our
expanding product line will help gain the needed traction in the
marketplace and result in future profitability. These statements
involve a variety of risks and uncertainties, known and unknown,
including among other risks that (i) the company’s customers
recognize the value of its critical condition monitoring solutions,
(ii) the company’s customers will find value in the EA800-ip, (iii)
the EA800-ip will provide opportunities in vertical markets outside
the security channel and (iv) that investments in sales and
research and development of its expanding product line will gain
the needed traction and result in future profitability.
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 Data)
For the Three Months Ended
For the Six Months Ended June 30, June 30,
2011 2010
2011 2010 Net
sales
$ 984 $ 751
$ 1,904 $ 1,581 Cost
of sales
652 464
1,300 953
Gross profit
332 287
604
628 Operating expenses: General and administrative
295 510
502 970 Sales and marketing
240 252
466 510 Research and development
47
-
47 -
582 762
1,015
1,480
Operating loss (250
) (475 )
(411 ) (852 ) Other income
(expenses): Interest expense
(15 ) (19 )
(39
) (31 ) Other, net
13 (9 )
15 (10 )
(2 )
(28 )
(24 ) (41 )
Loss
from continuing operations before income taxes (252
) (503 )
(435 ) (893 ) Income tax
expense
- -
(9
) (2 ) Loss from continuing operations
(252
) (503 )
(444 ) (895 ) Gain (loss) from
discontinued operations, net of tax
112
(319 )
98 (467 )
Net loss
$ (140 ) $ (822 )
$ (346
) $ (1,362 ) Loss per common share data: Basic and
diluted
$ (0.04 ) $ (0.22 )
$
(0.09 ) $ (0.37 ) Loss from continuing operations per
common share data: Basic and diluted
$ (0.07 )
$ (0.14 )
$ (0.12 ) $ (0.24 ) Gain (loss) from
discontinued operations per common share data: Basic and diluted
$ 0.03 $ (0.08 )
$ 0.03 $ (0.13 )
Weighted-average number of common shares outstanding: Basic and
diluted
3,701,630 3,689,930
3,700,449 3,686,683
WINLAND ELECTRONICS, INC. CONDENSED BALANCE
SHEETS (In Thousands, Except Share Data)
ASSETS June 30, 2011 December 31, 2010
(Unaudited) Current Assets Cash and cash equivalents
$ 1,524 $ 318
Accounts receivable, less allowance for
doubtful accounts of $7 as of June 30, 2011 and $10 as of December
31, 2010
501 547 Receivable due from EMS asset sale
619 -
Refundable income taxes
- 277 Inventories
288 112
Prepaid expenses and other assets
83 87 Current assets of
discontinued operations
357
4,649 Total current assets
3,372 5,990
Property and Equipment, at cost
Property and equipment
3,760 3,750 Less accumulated
depreciation and amortization
1,513
1,447 Net property and
equipment 2,247 2,303 Property and equipment of
discontinued operations, net
-
1,151 Total assets
$ 5,619
$ 9,444 LIABILITIES AND
STOCKHOLDERS' EQUITY Current Liabilities Revolving
line-of-credit
$ - $ 1,249 Current maturities of
long-term debt
393 448 Accounts payable
476 381 Other
short-term tax liabilities
- 68 Accrued liabilities:
Compensation
227 410 Other
27 35 Current liabilities
of discontinued operations
118
2,084 Total current liabilities
1,241 4,675
Long-Term Liabilities Deferred revenue
110 114 Long-term liabilities of discontinued operations
- 29
Total long-term liabilities 110
143 Total liabilities
1,351 4,818
Stockholders’ Equity
Common stock, par value $0.01 per share;
authorized 20,000,000 shares; issued and outstanding 3,701,630 as
of June 30, 2011 and 3,699,230 shares as of December 31, 2010
37 37 Additional paid-in capital
5,013 5,025
Accumulated deficit earnings
(782
) (436 )
Total stockholders’ equity 4,268
4,626 Total liabilities and
stockholders’ equity $
5,619 $ 9,444
WINLAND ELECTRONICS, INC. CONDENSED
STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) For
the Six Months Ended June 30,
2011 2010
Cash Flows
From Operating Activities Net loss
$ (346
) $ (1,362 )
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
66 397 Non-cash stock based
compensation
(14 ) 16 Increase (decrease) in
allowance for doubtful accounts
(3 ) 15 Decrease in
allowance for obsolete inventory held for discontinued operations
(112 ) - Loss on disposal of equipment
- 47
Loss on sale of EMS business unit
14 - Changes in assets and
liabilities: Accounts receivables
(101 ) (789 )
Refundable income taxes
277 647 Inventories
(176
) (156 ) Prepaid expenses
4 (52 )
Accounts payable and checks written in
excess of bank balances
(5 ) 560
Accrued expenses, including deferred
revenue and other short and long term tax liabilities
(185 ) 27
Net cash used in
operating activities (581 ) (650 )
Cash Flows From Investing Activities Purchases of
property and equipment
(10 ) (13 ) Proceeds from sale
of property and equipment
- 7 Sale of inventory from
discontinued operations
2,486 - Cash from sale of EMS
business unit, net of transaction costs
613
-
Net cash provided by (used in) investing
activities 3,089 (6 )
Cash flows From
Financing Activities Net borrowings (payments) on revolving
credit agreement
(1,249 ) 881
Net principal payments on long-term
borrowings, including capital lease obligations
(55 ) (187 ) Cash received from exercise of stock
options
2 7
Net cash provided
by (used in) financing activities (1,302 )
701
Net increase in cash and cash
equivalents 1,206 45 Cash and cash equivalents
Beginning
318 55 Ending
$
1,524 $ 100 Supplemental Disclosures of
Cash Flow Information Cash payments for interest
$ 49
$ 35 Cash receipts (payments) for income taxes
$ 209 $ 645 Non-cash reclassification
of other tax liability from long-term to short-term
$
- $ 258 Non-cash investing activities
Receivable recorded for sale of EMS
Business unit
$ 500 $ - Accrued transaction costs for
sale of EMS business unit
$ 100 $ -