WINLAND ELECTRONICS, INC. ANNOUNCES
THIRD QUARTER 2007 FINANCIAL RESULTS
CONTACT: Lorin E. Krueger Brett Maas or Cameron Donahue
Chief Executive Officer Hayden Communications
(507) 625-7231 (651) 653-1854
http://www.winland.com/
MANKATO, Minn. /(DATE XX, 2007 / PR Newswire / Winland Electronics, Inc. (Amex: WEX), a leading designer and manufacturer of custom electronic control products and systems, today announced financial results for the third quarter ended September 30, 2007.
Revenue for the third quarter was $9.9 million, an increase of 0.5 percent compared to the $9.8 million reported for the third quarter of 2006. The increase was due to an increase in net sales of raw materials and sub-assemblies for original equipment manufacturing (OEM) customers as well as increased net sales for engineering design services, offset by a 6.1 percent decrease in sales of Winland’s electronic controls and final assemblies for OEM customers and the Company’s proprietary line of products. Sales of excess raw materials and sub-assemblies to OEM customers under customer agreements totaled $0.9 million for the period just ended. Management does not believe that this level of sales derived from excess raw materials and sub-assemblies to OEM customers is likely to occur in the future.
Gross profit for the third quarter was $1.85 million, or 18.7 percent of sales, up slightly from the $1.76 million or 18.0 percent of sales for the third quarter last year. Increased gross profit was due to raw component cost savings of $188,000 and decreased indirect personnel costs of $124,000. In addition, the Company was successful in enforcing customer agreements regarding excess raw materials and received additional orders for inventory that had earlier been reserved for. As a result, obsolete inventory expense was reduced by $42,000. Rework and warranty expenses incurred during the period were $98,000, $255,000 higher than the same period last year. The increase was primarily due to the $177,000 reduction in the Company’s liability for the Enviro-Alert Enhancement Program during the same period a year ago.
Operating expenses were $1.24 million in the third quarter compared to $1.13 million for the third quarter last year. The increase was primarily due to increased research and development expense for new product development for Winland’s proprietary products.
Winland reported income from operations of $603,000 for the third quarter compared to income from operations of $635,000 for the same period last year. The Company reported net income of $487,000, or $0.13 per basic and fully diluted share (based on 3.6 million fully diluted shares) for the third quarter, compared to net income of $385,000, or $0.11 per basic and fully diluted share (based on 3.6 million fully diluted shares) for the same period last year.
Lorin Krueger, Winland’s Chief Executive Officer, commented, “Our revenue mix for the third quarter was favorable resulting in improved margins. A significant component in our revenue for the quarter was the sale of excess inventories to customers pursuant to existing contracts. The revenue created atypical sales of $0.9 million during the quarter that is unlikely to repeat. Despite normalized sales being below our prior year levels, I remain encouraged at our continued success to diversify and broaden our customer and business base”.
“We are making progress in our efforts to increase awareness of Winland’s proprietary products, particularly in new European sales channels. In addition, product and market development of our new proprietary critical environment-sensing and control products is on track and we still expect to release them in early 2008. We continue to have confidence that this portion of our business will contribute growth in revenue and positively impact our gross profit margins going forward. We remain committed to transitioning to a new and more diversified business model while maintaining our focus on “lean” and continuous improvement initiatives in our electronic manufacturing services business that will benefit Winland and the customer”.
For the first nine months of 2007, net sales decreased 5.1 percent to $27.3 million from $28.7 million for the first nine months of fiscal 2006. Gross profit was $3.9 million, or 14.4 percent, compared to gross profit of $5.0 million, or 17.5 percent for the first nine months of fiscal 2006. Total operating expenses were $4.4 million, up 27.8 percent compared to $3.4 million last year due in large part to an increase in research and development expense related to investments in Winland’s proprietary line of products. The Company incurred an operating loss of $431,000 compared to income from operations of $1.6 million in the same period last year. The net loss was $270,000, or $(0.07) per basic and fully diluted share (based on 3.6 million shares) compared to net income of $987,000, or $0.28 per basic and $0.27 per fully diluted share (based on 3.7 million fully diluted shares) for the first nine months of last year.
“During the fourth quarter, we expect to open an office in the Minneapolis area to support our efforts in increasing sales of our proprietary products,” concluded Mr. Krueger. “This should position us to achieve the performance targets we’ve set for ourselves and contribute to winning new business.” We also continue initiatives to expand our services and geographic markets for Winland’s manufacturing services business by recruiting sales staff and enhancing current customer relationships.”
Stockholders’ equity was $10.3 million as of September 30, 2007 compared to $10.4 million at December 31, 2006. The Company completed the third quarter 2007 with $6.7 million in working capital, a current ratio of 2.9 to 1 and cash of $107,000. At September 30, 2007, Winland had no balance outstanding on its bank revolving line-of-credit agreement compared to $1.9 million outstanding at December 31, 2006.
Management will conduct a conference call to discuss its financial results today at 4:30 p.m. ET. Interested parties may access the call by calling 866-225-8754 from within the United States, or 480-293-1744 if calling internationally, approximately five minutes prior to the start of the call. A replay will be available through November 6, 2007 and can be accessed by dialing 800-406-7325 (U.S.), 303-590-3030 (Int'l), passcode 3799163.
This call is being web cast by ViaVid Broadcasting and can be accessed at Winland Electronics' website at http://www.winland.com. The web cast may also be accessed at ViaVid's website at http://www.viavid.net. The web cast can be accessed until November 30, 2007 on either site. To access the web cast, you will need to have the Windows Media Player on your desktop. For the free download of the Media Player please visit: http://www.microsoft.com/windows/windowsmedia/en/download/default.asp.
About Winland Electronics
Winland Electronics is an electronic manufacturing services (EMS) company, providing product development and manufacturing expertise and innovation for more than 20 years. Winland also markets proprietary products for the security/industrial marketplace. Winland's product development offering includes program management, analog circuit design, digital circuit design, printed circuit board design and embedded software design. Winland differentiates itself from the contract manufacturer competition with its integrated product development and manufacturing services to offer end-to-end product launch capability, including design for manufacturability, design for testability, transition to manufacturing and order fulfillment. Winland's core competency is delivering time-to-market through superior program management, experience, integrated development processes, and cross-functional teams. Winland Electronics is based in Mankato, MN.
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) our expectation to release new proprietary critical environment sensing and control products in early 2008; (ii) our confidence that the proprietary products portion of our business will contribute growth in revenue and positively impact our gross profit margins going forward; and (iii) our expectation to open an office in the Minneapolis area in the fourth quarter that will position us to achieve our performance objectives. These statements involve a variety of risks and uncertainties, known and unknown, including, among others, the risks that (i) we may encounter unexpected delays in the development of our new proprietary products that cause delays in their release; (ii) our proprietary products may not receive acceptance in the marketplace due to product quality, pricing, competition or other factors and may not contribute materially to our growth; and (iii) we may encounter unanticipated delays in opening a sales support office in the Minneapolis area and there is no assurance that we will be able to staff the office with effective personnel. Consequently, no forward-looking statement can be guaranteed and actual results may vary materially.
-Tables Follow-
WINLAND ELECTRONICS, INC. | |
CONDENSED BALANCE SHEETS | |
(In Thousands of Dollars) | |
| | | | | | | | | | | | | |
ASSETS | | September 30, 2007 | | | December 31, 2006 | | | | |
| | | (Unaudited) | | | | | | | | | | |
| Current Assets | | | | | | | | | | | | |
| Cash | | | | | $ | 107 | | | | | | $ | 51 | |
| Accounts receivable, net | | | | | | 4,663 | | | | | | | 5,165 | |
| Refundable Income taxes | | | | | | 441 | | | | | | | 237 | |
| Inventories | | | | | | | | | | | | | | |
| Raw materials | | | 3,630 | | | | | | | | 4,881 | | | | | |
| Work in process | | | 293 | | | | | | | | 327 | | | | | |
| Finished goods | | | 1,038 | | | | | | | | 1,976 | | | | | |
| Allowance for obsolete inventory | | | (551 | ) | | | | | | | (190 | ) | | | | |
| Total inventories | | | | | | | 4,410 | | | | | | | | 6,994 | |
| Prepaid expenses | | | | | | | 393 | | | | | | | | 360 | |
| Deferred income taxes | | | | | | | 296 | | | | | | | | 278 | |
Total current assets | | | | | | | 10,310 | | | | | | | | 13,085 | |
| | | | | | | | | | | | | | | | | |
| Other Assets | | | | | | | 3 | | | | | | | | 3 | |
| | | | | | | | | | | | | | | | | |
| Property and Equipment, at cost: | | | | | | | | | | | | | | | | |
| Land and land improvements | | | 383 | | | | | | | | 383 | | | | | |
| Building | | | 3,052 | | | | | | | | 3,048 | | | | | |
| Machinery and equipment | | | 7,037 | | | | | | | | 6,863 | | | | | |
| Data processing equipment | | | 1,258 | | | | | | | | 1,003 | | | | | |
| Office furniture and equipment | | | 483 | | | | | | | | 457 | | | | | |
Total property and equipment | | | | | | | 12,213 | | | | | | | | 11,754 | |
| Less accumulated depreciation | | | | | | | (6,632 | ) | | | | | | | (5,975 | ) |
Net property and equipment | | | | | | | 5,581 | | | | | | | | 5,779 | |
Total assets | | | | | | $ | 15,894 | | | | | | | $ | 18,867 | |
| | | | | | | | | | | | | | | | | |
| See Notes to Condensed Financial Statements | | | | | | | | | | | | | |
WINLAND ELECTRONICS, INC. | |
CONDENSED BALANCE SHEETS | |
| (In Thousands of Dollars) | |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | September 30, 2007 | | | December 31, 2006 | |
| | | (Unaudited) | | | | |
| Current Liabilities | | | | | | |
| Revolving line of credit agreement | | $ | - | | | $ | 1,924 | |
| Current maturities of long-term debt | | | 558 | | | | 627 | |
| Accounts payable | | | 2,224 | | | | 2,830 | |
| Accrued expenses: | | | | | | | | |
| Compensation | | | 490 | | | | 673 | |
| Allowance for rework and warranty costs | | | 164 | | | | 126 | |
| Other | | | 155 | | | | 197 | |
Total current liabilities | | | 3,591 | | | | 6,377 | |
| | | | | | | | | |
| Long Term Liabilities | | | | | | | | |
| Long-term debt, less current maturities | | | 1,535 | | | | 1,706 | |
| Other long term tax liabilities | | | 48 | | | | - | |
| Deferred income taxes | | | 255 | | | | 255 | |
| Deferred revenue | | | 140 | | | | 146 | |
Total long-term liabilities | | | 1,978 | | | | 2,107 | |
| | | | | | | | | |
| Stockholders' Equity | | | | | | | | |
| Common stock | | | 36 | | | | 36 | |
| Additional paid-in capital | | | 4,640 | | | | 4,429 | |
| Retained earnings | | | 5,649 | | | | 5,918 | |
Total stockholders' equity | | | 10,325 | | | | 10,383 | |
Total liabilities and stockholders' equity | | $ | 15,894 | | | $ | 18,867 | |
| | | | | | | | | |
| See Notes to Condensed Financial Statements | | | | | | | | |
WINLAND ELECTRONICS, INC. | |
CONDENSED STATEMENTS OF INCOME | |
| (In Thousands, Except Per Share Amounts) | |
| (Unaudited) | |
| | | | | | | |
| | | For the Three Months Ended September 30, | |
| | | 2007 | | | 2006 | |
| | | | | | | |
| Net sales | | $ | 9,855 | | | $ | 9,803 | |
| Cost of sales | | | 8,010 | | | | 8,040 | |
Gross profit | | | 1,845 | | | | 1,763 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| General and administrative | | | 549 | | | | 592 | |
| Sales and marketing | | | 388 | | | | 393 | |
| Research and development | | | 305 | | | | 143 | |
| | | | 1,242 | | | | 1,128 | |
| | | | | | | | | |
Operating income | | | 603 | | | | 635 | |
| | | | | | | | | |
| Other income (expenses): | | | | | | | | |
| Interest expense | | | (53 | ) | | | (50 | ) |
| Other income, net | | | 25 | | | | 2 | |
| | | | (28 | ) | | | (48 | ) |
| | | | | | | | | |
Income before income taxes | | | 575 | | | | 587 | |
| | | | | | | | | |
| Income tax expense | | | (88 | ) | | | (202 | ) |
Net income | | $ | 487 | | | $ | 385 | |
| | | | | | | | | |
| Earnings per common share: | | | | | | | | |
| Basic | | $ | 0.13 | | | $ | 0.11 | |
| Diluted | | $ | 0.13 | | | $ | 0.11 | |
| | | | | | | | | |
| Weighted-average number of common shares outstanding: | | | | | |
| Basic | | | 3,622,811 | | | | 3,578,415 | |
| Diluted | | | 3,642,825 | | | | 3,645,336 | |
| | | | | | | | | |
| See Notes to Condensed Financial Statements | | | | | | | | |
WINLAND ELECTRONICS, INC. | |
CONDENSED STATEMENTS OF INCOME | |
| (In Thousands, Except Per Share Amounts) | |
| (Unaudited) | |
| | | | | | | |
| | | For the Nine Months Ended September 30, | |
| | | 2007 | | | 2006 | |
| | | | | | | |
| Net sales | | $ | 27,254 | | | $ | 28,724 | |
| Cost of sales | | | 23,326 | | | | 23,700 | |
Gross profit | | | 3,928 | | | | 5,024 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| General and administrative | | | 1,924 | | | | 1,803 | |
| Sales and marketing | | | 1,237 | | | | 1,197 | |
| Research and development | | | 1,198 | | | | 410 | |
| | | | 4,359 | | | | 3,410 | |
| | | | | | | | | |
Operating income (loss) | | | (431 | ) | | | 1,614 | |
| | | | | | | | | |
| Other income (expenses): | | | | | | | | |
| Interest expense | | | (226 | ) | | | (109 | ) |
| Other income, net | | | 40 | | | | 8 | |
| | | | (186 | ) | | | (101 | ) |
| | | | | | | | | |
Income (loss) before income taxes | | | (617 | ) | | | 1,513 | |
| | | | | | | | | |
| Income tax benefit (expense) | | | 347 | | | | (526 | ) |
Net income (loss) | | $ | (270 | ) | | $ | 987 | |
| | | | | | | | | |
| Earnings (loss) per common share: | | | | | | | | |
| Basic | | $ | (0.07 | ) | | $ | 0.28 | |
| Diluted | | $ | (0.07 | ) | | $ | 0.27 | |
| | | | | | | | | |
| Weighted-average number of common shares outstanding: | | | | | |
| Basic | | | 3,608,086 | | | | 3,558,793 | |
| Diluted | | | 3,608,086 | | | | 3,655,078 | |
| | | | | | | | | |
| See Notes to Condensed Financial Statements | | | | | | | | |
