MicroTel Reports Record First Quarter 2001 Results; Reorganized Company Sees 27.5 Percent Sales Growth and First-Ever Q1 Profit

Business Wire, May 15, 2001

Business Editors

RANCHO CUCAMONGA, Calif.--(BUSINESS WIRE)--May 15, 2001

MicroTel International Inc. (OTCBB:MCTL) ("MicroTel") today announced that for the first quarter of fiscal year 2001 it recorded record net income from continuing operations of $107,000 compared with a loss from continuing operations for the first quarter of 2000 of $71,000.

This was the fourth consecutive profitable quarter for the company. Revenue from continuing operations in the first quarter of 2001 was $7.47 million, an increase of 27.5 percent as compared with $5.86 million from continuing operations in the first quarter of 2000.

Income from continuing operations for the first quarter of 2001 rose by $178,000 from the $71,000 loss from continuing operations during the first quarter of 2000. Net income for the first quarter of 2001 also reflects a charge of over $135,000 in legal and accounting expenses related to non-routine filings with the Securities and Exchange Commission.

This is the first time MicroTel has reported a first-quarter profit since the merger of XIT Corp. and MicroTel in March 1997. The first quarter has historically been loss producing due to a seasonal lull in the budget cycles of the Regional Bell Operating Companies, which affects the company's North American telecommunications operations.

"We are very pleased to report strong quarterly revenue growth and, for the first time, a profit in the first quarter," said Randolph D. Foote, MicroTel's chief financial officer. "We were able to maintain a gross margin of 41.7 percent -- in line with our gross margin of 42 percent for the fourth quarter of 2000 -- which contributed to our historic first quarter profit."

"In the first two months of the quarter, our CXR Telcom subsidiary experienced low sales and incurred a large loss for the quarter, reflecting adverse telecommunications market conditions in North America during that period," stated Graham Jefferies, executive vice president and chief operating officer, Telcom Group. "Fortunately, order entry and shipments subsequently rebounded sharply, allowing CXR to post a profit in March. This trend has continued through May and we are optimistic that CXR will remain profitable for the rest of the year."

"Despite the uncertain U.S. economic climate and the softening in the North American telecommunications industry, MicroTel's sales in Europe and Asia and sales by our Electronic Components Group -- which sell mainly into the aerospace, military and industrial markets -- have allowed us to offset partially CXR's historically loss-making first quarter," stated Carmine T. Oliva, MicroTel's chairman, president and chief executive officer. "We believe we will continue to increase revenue and profitability throughout 2001, particularly as we complete all non-routine Securities and Exchange Commission filings, thus terminating those legal and accounting costs."

About MicroTel International

MicroTel International Inc. is an international telecommunications and electronics company comprising three wholly owned subsidiaries -- CXR Telcom Corp. in Fremont, Calif. and CXR, S.A. in Paris, France which together comprise the Telecommunications Group and XIT Corp. in Rancho Cucamonga, Calif., which, together with its international subsidiaries, comprise the Electronic Components Group.

CXR Telcom Corp. and CXR, S.A. design, manufacture and market field and central office electronic telecommunications test instruments, voice, data and video transmission and network access equipment. XIT Corp. designs, manufactures and markets electronic components including predominately digital switches and power supplies. The company operates out of facilities in the United States, France, England and Japan.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

With the exception of historical information, the matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of MicroTel could differ from those statements. Factors that could cause or contribute to such differences include, but are not limited to, the projected growth in the telecommunications and electronic components markets, the ability of MicroTel to expand its presence in these markets, trends in MicroTel's financial condition and results of operations, MicroTel's ability to distinguish itself from its current and future competitors, the continued demand for MicroTel's products, worldwide economic conditions, changes in governmental regulations and policies, the emergence of competitive products and services and unforeseen technical issues and those factors contained in the "Risk Factors" Section of the company's Form 10-K/A for the year ended Dec. 31, 2000.

             MicroTel International Inc. and Subsidiaries
            Consolidated Condensed Statements of Operations
                              (Unaudited)

                                         Three Months Ended
                                              March 31,
                                      2001                2000
                              (in thousands except per share amounts)

 Net sales                      $     7,465         $     5,860
 Cost of sales                        4,350               3,534

 Gross profit                         3,115               2,326

 Operating expenses:
  Selling, general and administrative 2,581               2,147
  Engineering and product development   359                 243

 Income (loss) from operations          175                 (64)

 Other income (expense)
      Interest expense                  (93)                (96)
      Other                              28                  96

 Income (loss) from continuing
  operations before income taxes        110                 (64)

 Income tax expense                       3                   7

 Income (loss) from continuing
  operations                            107                 (71)

 Discontinued operations:
  Loss from operations of
   discontinued segment                 --                  (56)

 Net income (loss)              $       107         $      (127)


 Earnings (loss) per share:
      Continuing operations
         Basic                  $      0.01         $     (0.01)
         Diluted                $      0.00         $     (0.01)

      Discontinued operations
         Basic                  $      0.00         $     (0.00)
         Diluted                $      0.00         $     (0.00)

      Net income (loss)
         Basic                  $      0.01         $     (0.01)
         Diluted                $      0.00         $     (0.01)