TEC Technology Announces Full Year 2010 and First-Quarter 2011 Financial Results

JINGDE, China, June 2, 2011 /PRNewswire-Asia-FirstCall/ -- TEC Technology, Inc. (OTCQB: HGHN) ("TEC" or the "Company"), a leading supplier of power and communications transmission towers and related infrastructure products, provided a summary of its financial results for the year ended December 31, 2010 and announced detailed financial results for the three months ended March 31, 2011.

Summary of First-Quarter 2011 Results

• Revenues were $3.4 million in the first quarter of 2011, a 33.8% decrease from $5.2 million in the first quarter of 2010;
• Gross profit was $1.0 million in the first quarter of 2011, a 39.4% decrease from $1.7 million in the first quarter of 2010;
• Gross margin was 29.5% compared to 32.2% in the first quarter of 2010;
• Operating income was $0.6 million in the first quarter of 2011, down 47.0% from $1.1 million in the first quarter of 2010; and
• Net income was $0.3 million, or $0.01 per basic and diluted share, in the first quarter of 2011, down 52.7% from $0.6 million, or $0.04 per basic and diluted share, in the first quarter of 2010

Summary of Full-Year 2010 Results

• Revenues were $32.2 million, up 44.1% from $22.4 million in 2009;
• Gross profit increased by 47.9% to $10.7 million from $7.2 million in 2009;
• Gross margin was 33.2%, up from to 32.1% in 2009;
• Operating income was $7.5 million, up 26.2% from $5.9 million in 2009; and
• Net income in 2010 was $5.7 million, or $0.22 per basic and diluted share compared to $4.2 million, or $0.22 per basic and diluted share, in 2009

"Following a strong year of top and bottom line growth in 2010, we recorded lower sales in the first quarter of 2011, as we rejected low-margin orders in favor of higher-margin orders.  In China's competitive market, we have decided to reserve production capacity and inventory for upcoming orders from overseas customers that are generally more profitable," commented Mr. Chun Lu, TEC's Chairman and Chief Executive Officer.  "We also strengthened our sales and marketing efforts and are positive about our order pipeline and revenue in the coming quarters.  We remain confident that the Company will reach its goals for 2011 in a competitive market."

Financial Results for the First Quarter of 2011

Revenues for the first quarter of 2011 were $3.4 million, representing a $1.8 million or 33.8% decrease compared to the first quarter of 2010. The decrease in revenues resulted mainly from a decrease in sales revenue generated by sales of energy transmission towers communications towers compared to the same period in 2010. In the quarter, the price of tower products in China decreased due to the rising steel prices, competition, lower demand, and other factors. The Company also reserved capacity and inventory for anticipated orders from overseas customers, which require immediate production and delivery. As overseas orders generally tend to offer higher prices, the Company made a strategic decision to forego some domestic orders with comparatively lower prices in the first quarter 2011 and redeployed personnel and resources to maintain production lines, train new employees and prepare for the anticipated overseas orders.

Gross profit decreased by 39.4% to $1.0 million from $1.7 million in the year-ago quarter. Gross margin was 29.5% in the first quarter of 2011, compared to 32.2% in the same period last year.  Gross profit and gross margin decreased primarily due to the decrease of sales and higher steel prices.

Selling, general and administrative expenses decreased to $0.2 million, from $0.3 million in the year-ago quarter. The decrease was largely attributable to reduced operations in the sales and marketing department.

The provision for income taxes totaled $0.1 million, compared to $0.1 million in the year-ago period.  TEC has been qualified as a high-tech enterprise since January 2010 and as a result, its income tax rate has been reduced to 15%.

Net income was $0.3 million, or $0.01 per basic and diluted share, compared to $0.6 million, or $0.04 per basic and diluted share, in the year-ago quarter.

Financial Condition

Cash and cash equivalents were $2.9 million as of March 31, 2011, an increase of $0.4 million from $2.5 million as of December 31, 2010. As of March 31, 2011, the Company has $14.7 million in accounts receivable, $10.0 million of which are due within three months, and $2.4 million of which are due within three to six months. The Company had $11.9 million of short-term borrowings as of March 31, 2011, a decrease of $1.0 million from $12.9 million as of December 31, 2010.  Shareholders' equity was $12.2 million as of March 31, 2011, versus $11.8 million as of December 31, 2010.

Cash flow from operations was $3.7 million for the three months ended March 31, 2011, versus $3.8 million for the same period a year ago. Cash used in investing activities for the three months ended March 31, 2011 was $2.4 million, as compared to $0.1 million net cash used in investing activities during the same period a year ago. Cash used in financing activities for the three months ended March 31, 2011 was $1.1 million, as compared to $0.7 million net cash provided by financing activities during the same period a year ago.

Business Outlook

"Although we recorded lower revenues in the first quarter versus a year ago, this was largely due to our decision to be more selective regarding the business we accept and we are positioning TEC for strong results and a successful 2011," concluded Mr. Lu.

About TEC

TEC Technology, Inc., founded in 2006, is a leader in the design, production and sale of transmission towers and related products used in high-voltage electric power transmission and wireless communications in fast-growing Chinese and international markets. The Company's headquarters are located in Anhui Province in southeastern China, and its international sales network is located in the Shenzhen Special Economic Zone. TEC's electric transmission towers currently support 35kV, 110kV, 220kV, and 500kV transmission lines. TEC's wireless communication towers include single-tube towers, 4-strut towers and rooftop towers for 2G, 3G, and microwave networks. For more information, please visit: http://www.tectower.com .

Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of TEC Technology, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding: the general ability of the Company to achieve its commercial objectives, including the ability of the Company to fulfill its obligations under existing contracts, increase sales in domestic and international markets and meet its guidance for 2010 revenue and net income; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

- Financial Tables Follow -

SOURCE TEC Technology, Inc.

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