MicroTel's Third-Quarter Profit Soars to More Than $1 Million; The Company's Profitability is Being Driven by an Increase in New Telecommunications Test Instrument Sales in the U.S

Business Wire, Oct 25, 2000

Business Editors & High-Tech Writers

RANCHO CUCAMONGA, Calif.--(BUSINESS WIRE)--Oct. 25, 2000

MicroTel International Inc. (OTCBB:MCTL) ("MicroTel") Wednesday announced that for the three months ended Sept. 30, 2000, it recorded a net profit of $1,028,000, or 4.9 cents basic pre-tax earnings per share.

This compared with a net loss of $1,034,000, or 6.2 cents per share for the third quarter of 1999. Earnings in the third quarter of 2000 included a gain on the sale of Wi-LAN stock of $197,000 and a net income contribution of $239,000 for two months from the recent acquisition of T-Com.

Sales for the three months ended Sept. 30, 2000, were $7,524,000, which includes lower seasonal sales for the summer months of July and August especially in Europe. This compares with sales of $6,952,000 for the three months ended Sept. 30, 1999, an improvement of 8.3%.

The company realized net income of $1,048,000 for the nine months ended Sept. 30, 2000, compared with a net loss of $2,923,000 for the nine months ended Sept. 30, 1999. The gross margin increased to 41.9% for the nine months of 2000, compared with 34.0% for the prior-year period.

EBITDA profit for the third quarter 2000 reached $1,361,000, compared with $411,000 for the second quarter of 2000, an improvement of 231.1%.

Randolph D. Foote, MicroTel's CFO, commented: "In 1999 MicroTel publicly announced $24 million in new business revenue expected over a multi-year period and this new revenue base is now favorably impacting our 2000 revenue and profitability. New higher margin test instrument product sales by our CXR subsidiary in the U.S. jumped from $1,655,000 for the nine-month period ending Sept. 30, 1999, to $3,239,000 for the year 2000 period, an increase of 95.7%.

"This coupled with strong profitability in our U.S. Electronic Components Segment has fueled our exceptional profit performance in the third quarter."

Graham Jefferies, MicroTel's executive vice president and telcom group chief operating officer commented: "While we are elated over our third-quarter profit we would have performed even better if we were not continuing to experience delayed shipments and losses from our recent Belix acquisition. However, the European Electronic Components Group which includes Belix, returned to a small profit in September and is expected to improve steadily from here onwards.

"CXR, S.A. our French-based telecom operation, has been impacted by a 17.5% decline in the value of the French franc vs. the U.S. dollar as compared to 1999, causing a significant erosion of margin since the subsidiary not only purchases raw material components from the U.S. but also resells U.S. manufactured test instruments and networking products.

"Corrective actions are being taken and we expect improved performance in the fourth quarter. The 17.5% decline in the French franc coupled with a 15.0% decline in the British pound is also negatively impacting revenue growth as more than 60% of our revenue is in these currencies and converted for consolidation purposes into U.S. dollars."

Carmine T. Oliva, MicroTel's chairman, president and CEO stated: "Third-quarter profitability clearly demonstrates what MicroTel is capable of achieving going forward. Our basic business strategy of new telecom product sales to a broader base of customers will be greatly enhanced by the T-Com acquisition which takes MicroTel not only into a new customer base, but it allows us access to the central office test equipment market which is T-Com's strength.

"U.S. sales of new field-test products to customers such as Bell Atlantic, SBC Telecom and the FAA, among others, is driving the increase in sales and profitability. Our last remaining challenge in implementing our 1999 strategy of divesting loss operations and divesting all Circuit Segment businesses and other low margin product lines, will be achieved with the sale or discontinuance of our last remaining circuit operation Xcel Etch-Tek in the fourth quarter.

"Lastly, we are especially pleased that in the short space of the third quarter we have added over $2 million to our net worth as a result of the T-Com acquisition and third-quarter profitability and this achieves the first major cornerstone of $4 million in tangible net worth which is one of the key criteria for eventually achieving a Nasdaq National listing for MicroTel's common shares."

MicroTel International is an international telecommunications electronics company comprising three wholly owned subsidiaries -- CXR Telcom Corp. in Fremont, Calif., CXR, S.A. in Paris and XIT Corp. (Xcel Information Technologies Corp.) in Rancho Cucamonga, Calif.

CXR Telcom and CXR design, manufacture and market electronic telecommunications test instruments, wireless and wireline voice, data and video transmission and network access equipment. XIT designs, manufactures and markets electronic components. The company operates out of facilities in the United States, France, England and Japan.

The statements in this news release relating to matters that are not historical are forward-looking statements which involve risks and uncertainties including, without limitation, economic and competitive conditions in the markets served by the company affecting the demand for the company's products, product pricing, market acceptance, access to distribution channels and other risks detailed from time to time in the company's Securities and Exchange Commission filings. These risks could cause actual results to differ materially from those anticipated or described herein.