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Winland Electronics, Inc. Announces Record Third Quarter 2005 Revenue of $7.4 Million and Earnings of $0.12 per Share

21 October 2005

FlashResults
Winland Electronics, Inc. (Amex: WEX)
(Numbers in Thousands, Except
Per Share Data)

3rd quarter ended 3rd quarter ended
9/30/2005 YTD 9/30/2004 YTD

Sales $7,400 $21,543 $6,614 $17,625
Net Income $437 $1,378 $377 $674
Average Shares 3,690 3,649 3,486 3,536
EPS $.12 .38 .11 .19

Winland Electronics, Inc. (Amex: WEX), a leading designer and manufacturer
of custom electronic control products and systems, announced today financial
results for the third quarter ended September 30, 2005.
Revenues for the third quarter were a record $7.4 million, an increase of
11.9% compared to the $6.6 million reported for the third quarter of fiscal
2004. The increase in sales for the quarter was driven by sales to original
equipment manufacture (OEM) customers including new product line items
integrated during 2004. Gross profit for the quarter was $1.7 million, or
23.0% of sales, an increase of 10.7% compared to the $1.5 million, or 23.2% of
sales, reported for the third quarter one year ago. Total operating expenses
increased 11.6% for the third quarter to $965,872 compared to the $865,149 for
the third quarter of last year. Operating income increased 9.6% to $733,401
for the third quarter compared to the $669,247 reported for the third quarter
of last year. Net income increased more than 15.9% to $436,832, or $0.12 per
basic and fully diluted share, from $376,954, or $0.11 per basic and fully
diluted share in the third quarter of 2004. The Company utilized 3.7 million
fully diluted shares in the calculation compared to 3.5 million for the same
period last year.
Lorin Krueger, Winland's Chief Executive Officer, commented, "We are
pleased to report 15 consecutive quarters of profitability. The efforts of
our sales and marketing team, along with solid execution in our engineering,
manufacturing and proprietary products areas, continue to drive results
quarter-over-quarter despite well-documented industry challenges, increased
competition and ongoing margin compression. As we have previously disclosed,
our master supply contract with Select Comfort expires in August of 2006 and
we recently received notice from Select Comfort that the contract and its
existing terms will not be renewed. The notice also stated they 'strongly
value the partnership with Winland and they have confidence that the
relationship will continue at a re-defined level.' We are continuing our
discussions with Select Comfort to reach a new agreement on terms beneficial
to both companies. Simultaneously we are continuing to expand our customer
base targeting new areas such as medical devices as a new market for our
products and services. To date in 2005 we have had a successful start to this
initiative."
Mr. Krueger continued, "We recently entered into a long-term agreement
with a new customer, Cardiac Science, that increases our exposure and presence
in the medical market. We also received a new long-term contract including a
$4.5 million dollar purchase order from another new customer that wishes to
remain confidential. Over the third quarter we received orders from Select
Comfort totaling $5.8 million dollars to be delivered within the next
6 months. We have made steady progress on winning new business and focusing
on customers that value our services and demand a company which has the
scalability and experience to grow with them. We continue to focus on
diversifying our revenue base and maintaining our growth trajectory."
For the first nine months of 2005, revenues were $21.5 million, an
increase of 22.2% compared to the $17.6 million reported for the first nine
months of fiscal 2004. Gross profit for the nine-month period was $5.3
million, or 24.5% of sales, an increase of 34.1% compared to the $3.9 million,
or 22.3% of sales, reported for the first nine months of fiscal 2004. Total
operating expenses increased 9.6% for the first nine months of fiscal 2005 to
$3.0 million compared to the $2.7 million for the first nine months of fiscal
2004. Operating income increased 90.0% to $2.3 million for the first nine
months of fiscal 2005 compared to the $1.2 million for the first nine months
of fiscal 2004. Net income increased 104.4% to $1.4 million, or $0.39 per
basic and $0.38 per fully diluted share, from $674,344, or $0.20 per basic and
$0.19 per fully diluted share in the first nine months of fiscal 2004. Fully
diluted weighted-average common shares outstanding were 3.6 million shares for
the nine-month period compared to 3.5 million for the same period last year.
Mr. Krueger continued, "We also announced during the third quarter the
release and shipment of our new EA-200 EnviroAlert(TM), the security
industries' only multi-functional environmental security system. This marks
the first release of a new proprietary product since 1999. This is an
important event as higher proprietary product margins help balance the
constant and growing pressure we feel on margins in our electronic
manufacturing services business."
The balance sheet remained strong, with stockholders' equity increasing
22.5% to $8.4 million as of September 30, 2005, from $6.9 million on
December 31, 2004. The Company completed the quarter with $1 million in cash
and a current ratio of 2.48 to 1."

Teleconference Information
Management will conduct a conference call to discuss its financial results
today at 4:15 p.m. (EDT). Interested parties may access the call by dialing
1-888-394-8091 from within the United States, or 1-973-935-2404 if calling
internationally approximately five minutes prior to the start of the call.
The teleconference will also be available via live webcast on the investor
relations portion of the Company's website located at http://www.winland.com. A
replay will be available through October 27, 2005 and can be accessed by
dialing 1-877-519-4471 (U.S.) or 1-973-341-3080 (international), passcode
6598281. A replay of the teleconference will also be archived on the investor
relations portion of the Company's website.

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 (i) continuing
discussions with Select Comfort to reach a new agreement, and (ii) steady
progress on winning new business are forward looking statements. These
statements involve a variety of risks and uncertainties, known and unknown,
including, among others, the risks that (i) we may be unable to reach a new
agreement with Select Comfort on terms beneficial to Winland or on any terms,
(ii) any new business may be short term, subject to cancellation or not as
profitable as historical business (iii) Select Comfort and other customers may
cease to do business with the company or demand pricing that reduces Winland's
profitability as a condition to retaining the business; (iii) unanticipated
problems in design, manufacture or performance of the products will arise; and
(iv) costs of production will exceed current estimates. Consequently, no
forward-looking statement can be guaranteed and actual results may vary
materially.

CONTACT: Lorin E. Krueger Brett Maas or Cameron Donahue
Chief Executive Officer Hayden Communications
(507) 625-7231 (843) 272-4653
http://www.winland.com/

WINLAND ELECTRONICS, INC. BALANCE SHEET HIGHLIGHTS

September 30, 2005 December 31, 2004

Cash 1,016,058 457,576

Total Current Assets 10,238,401 7,123,426

Net Property and Equipment 4,250,024 4,242,956

Total Assets 14,489,859 11,366,467

Total Current Liabilities 4,121,512 2,506,024

Total Long-Term Liabilities 1,974,984 2,006,088

Stockholders' Equity 8,393,363 6,854,355

Total Liabilities and Equity 14,489,859 11,366,467

WINLAND ELECTRONICS, INC.
STATEMENTS OF INCOME
For the Three Months and Nine Months Ended September 30, 2005 and 2004
(UNAUDITED)

Three Months Ended Nine Months Ended
2005 2004 2005 2004

Net sales $7,399,885 $6,613,692 $21,542,640 17,625,148
Cost of sales 5,700,612 5,079,296 16,265,235 13,689,375
Gross profit 1,699,273 1,534,396 5,277,405 3,935,773

Operating
expenses:
General and
administrative 432,673 397,607 1,390,657 1,223,025
Sales and marketing 321,205 315,789 997,904 946,287
Research and
development 211,994 151,753 611,062 567,486
965,872 865,149 2,999,623 2,736,798

Operating income 733,401 669,247 2,277,782 1,198,975

Other income (expenses):
Interest expense (32,564) (46,413) (92,537) (110,595)
Other, net 15,195 (4,880) 74,040 16,964
(17,369) (51,293) (18,497) (93,631)

Income before
income taxes 716,032 617,954 2,259,285 1,105,344

Income tax expense (279,200) (241,000) (881,100) (431,000)
Net income $436,832 $376,954 $1,378,185 $674,344

Earnings per common
share data:
Basic $0.12 $0.11 $0.39 $0.20
Diluted 0.12 0.11 0.38 0.19

Weighted-average number
of common shares
outstanding:
Basic 3,519,476 3,366,542 3,493,663 3,360,980
Diluted 3,690,430 3,485,670 3,649,174 3,535,633