Microtel International Inc 3rd Quarter 2003 Profit Reaches Over a Half Million Dollars

3rd Quarter 2003 Profit is the 4th Consecutive Profitable Quarter and Represents a 253% Improvement over the 3rd Quarter of 2002


RANCHO CUCAMONGA, Calif., Nov. 6, 2003 (PRIMEZONE) -- MicroTel International Inc. (OTCBB:MCTL), an international manufacturer of defense and aerospace electronic components and subsystems and telecommunications equipment today announced its financial results for the third quarter of 2003 and nine months of 2003.

The Company reported net income of $504,000 for the third quarter ended September 30, 2003, a 253% improvement as compared to a net loss of $330,000 for the third quarter ended September 30, 2002. Also, net income for the third quarter of 2003 represents a $145,000, or 40%, improvement over the $359,000 net income for the second quarter of 2003. Basic and diluted earnings per share for the three months ended September 30, 2003 were $0.02 as compared to a net loss of $0.02 in the third quarter of 2002. This improvement in earnings resulted from improved operating performance in all of the Company's operations primarily due to increased sales and increased gross profit.

Net sales for the third quarter of 2003 increased by $656,000, or 11%, to $6,420,000 as compared to $5,764,000 for the third quarter of 2002, primarily due to a 30% improvement in the sales of electronic components to the defense and aerospace markets. The increase in sales of electronic components was partially offset with a 15% decrease in sales of communications equipment.

The Company recorded a net profit of $907,000 for the nine months ended September 30, 2003 as compared to a net loss of $774,000 for the nine months ended September 30, 2002. This represents a $1,681,000 improvement, which was primarily due to increased gross profit in both of the Company's business segments. Before tax earnings for the communications equipment segment improved by 103% primarily due to substantial cost reductions and improved sales of network access and transmission products produced in Europe. Also, the before tax earnings of the electronic components segment improved 41% mostly due to an increased number of products shipped under long-term programs by the Company's power supply business in the United Kingdom.

Basic and diluted earnings per share for the nine-month period ended September 30, 2003 were $0.04 as compared to a loss of $0.04 per share in the first nine months of 2002. Net sales for the nine months ended September 30, 2003 increased by $2,220,000, or 13%, to $18,922,000 as compared to $16,702,000 for the first nine months of 2002, reflecting a 24% increase in sales of electronic components for the defense and aerospace markets and a slight decrease of 2% in sales of communications equipment. This slight decrease in sales of communications equipment includes a $271,000 reduction in European sales of resale test equipment that was discontinued last year.

Randolph D. Foote, MicroTel's Senior Vice President and Chief Financial Officer, said, "We are pleased to report strong sales and income growth in the third quarter of 2003 and for the first nine months of 2003 as compared to the comparable periods of 2002. This improvement in performance results primarily from both substantially improved sales and aggressive reductions in costs, especially in our communications equipment operations and an overall increase in gross margin as a percent of net sales to 42% in the third quarter of 2003 compared to 36% in the third quarter of 2002. While we are exceedingly pleased with our revenue and profit performance, our balance sheet improvements are equally impressive. During the first nine months of 2003, we generated $1,058,000 in cash flow from operations, which was used mostly to reduce our debt. Our cash flow from operations in the first nine months of 2003 improved by $925,000 as compared to the $133,000 of cash provided by operations in the prior year period. We increased our working capital by $1,284,000 to $5,245,000 as of September 30, 2003 from $3,961,000 as of December 31, 2002. Our cash improved to $605,000 as of September 30, 2003 from $254,000 at December 31, 2002. As of September 30, 2003, our stockholders' equity increased by $1,569,000 to $7,301,000 from $5,732,000 as of December 31, 2002 due to earnings and a 41% contribution from favorable currency translation and preferred stock conversions. Our backlog remains strong, but has declined to $8,785,000, as compared to a backlog of $12,702,000 as of December 31, 2002, mainly due to an increasing rate of shipments of power supplies from our United Kingdom facility."

Carmine T. Oliva, MicroTel's Chairman, President and CEO stated, "MicroTel has truly emerged from the telecom meltdown as a stronger and healthier defense and aerospace focused business while retaining the diversity of the best of our communications products business. Our business strategies and commitment to geographic, product and market diversity are returning MicroTel to solid growth and profitability. We have in the past three-quarters surpassed our full year forecast for profitability. Earnings per share planned for the full year has also been achieved within three-quarters. The dynamics of our quarterly performance is changing as aerospace and defense revenues exceed communication revenues. Aerospace and defense is historically strongest in the second and third quarter and is now offsetting weaker third quarter revenue in Europe for our communications products. Due to this shift we believe that our fourth quarter performance will not surpass our performance during the third quarter. However, we believe that we will achieve solid profitability in the fourth quarter, exceeding our profitability during the fourth quarter of 2002. In addition, we believe that earnings per share for the full year should equal or exceed five cents per share."

About MicroTel

MicroTel International Inc. is an international manufacturer of defense and aerospace electronic components and subsystems and communication equipment. Our electronic components group, which includes XET Corporation and its international subsidiaries, provides custom power conversion products, digital and rotary switches and subsystem assemblies to the global electronic components market and are primarily used for defense, aerospace and industrial applications. Our communications group, consisting of CXR Telcom Corporation and CXR Anderson Jacobson, provides network access, transmission and test equipment to the North American and European communications industry. Founded in 1983, MicroTel operates out of facilities in the United States, United Kingdom, France and Japan. As of September 30, 2003, we had a total of 188 employees in our various subsidiaries and divisions.

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

With the exception of historical information, the matters discussed in this press 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 ability of MicroTel to exceed or meet its forecasted sales and profit for the full year of 2003, MicroTel's ability to report a stronger profit in the fourth quarter of 2003 than in the fourth quarter of 2002, a prolonged or increased severity in the downturn in the telecommunications industry, any significant reduction in accounts receivable balances, the inability of MicroTel's contract manufacturers to timely produce quality test equipment products for MicroTel at competitive prices, 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 those factors contained in the "Risk Factors" Section of MicroTel's Form annual report on 10-K for the year ended December 31, 2002.


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

                        Three months ended       Nine months ended
                           September 30            September 30
                        -------------------     ------------------- 
                          2003        2002       2003        2002
                        -------------------     ------------------- 
                         (in thousands except per share amounts)

 Net sales             $  6,420    $  5,764    $ 18,922    $ 16,702
 Cost of sales            3,705       3,680      11,237      10,579
                       --------    --------    --------    --------
 Gross profit             2,715       2,084       7,685       6,123
 Operating expenses:
  Selling, general and
   administrative         1,916       2,094       5,532       5,814
  Engineering and 
   product development      230         242         697         739
                       --------    --------    --------    --------
 Income (loss) from 
  operations                569        (252)      1,456        (430)

 Other income
  (expense)
  Interest expense         (104)       (119)       (317)       (303)
  Other income 
  (expense)                  65         (56)          4         (33)
                       --------    --------    --------    --------
 Income (loss) before
  income taxes              530        (427)      1,143        (766)
 Income tax expense
  (benefit)                  26         (97)        236           8
                       --------    --------    --------    --------
 Net income (loss)          504        (330)        907        (774)
                       ========    ========    ========    ========
 Earnings (loss) 
  per share:
      Basic            $   0.02    $  (0.02)   $   0.04    $  (0.04)
                       ========    ========    ========    ========
      Diluted          $   0.02    $  (0.02)   $   0.04    $  (0.04)
                       ========    ========    ========    ========


             MicroTel International, Inc. and Subsidiaries
                 Condensed Consolidated Balance Sheets

                                     September 30    December 31
                                        2003             2002
                                     (Unaudited)
                                     ------------  ------------
 Current assets:                  
  Cash and equivalents               $      605    $      254
  Accounts receivable                     4,923         5,356
  Inventories                             6,659         7,505
  Prepaid expenses and other                522           343
                                        -------       -------
 Total current assets                    12,709        13,458
 Property, plant and equipment,
   net                                      321           588
 Goodwill, net                            2,375         2,346
 Other assets                               583           394
                                        -------       -------
                                         15,988        16,786
                                        =======       =======
 
 Liabilities and stockholders' 
   equity:
 Current liabilities:
  Notes payable                      $    2,505    $    3,475
  Current portion of long-term
   debt                                     248           318
  Accounts payable                        1,544         2,439
  Accrued expenses                        3,167         3,265
                                        -------       -------
 Total current liabilities                7,464         9,497

 Long term debt, less current 
  portion                                   917           927
 Other liabilities                          306           348
                                        -------       -------
 Total liabilities                        8,687        10,772
                                        -------       -------
 Convertible redeemable 
  preferred stock                            --           282
 Stockholders' equity
  Preferred stock                             4           400
  Common stock                               77            71
  Additional paid in capital             25,597        24,900
  Accumulated deficit                   (18,141)      (19,042)
  Accumulated other
   comprehensive loss                      (236)         (597)
                                        -------       -------
 Total stockholders' equity               7,301         5,732
                                        -------       -------
                                     $   15,988    $   16,786
                                        =======       =======


            

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