MicroTel Announces Improved Third Quarter Results Net of Write-Down of Goodwill
ONTARIO, Calif.--(BUSINESS WIRE)--Nov. 17, 1997--MicroTel International Inc. (NASDAQ Small Cap:MCTL - news) Monday reported that excluding the loss from the write down of goodwill in the third
quarter of $(5,693,000), or $(0.50) per share, it incurred a net loss from operations of $(1,080,000), or $(0.09) per share, on net sales of $11,536,000 for the three months ended Sept. 30, 1997 vs. net income of $45,000, or $0.01 per share on net sales of $8,637,000 for the same period in 1996.
For the nine month period ending Sept. 30, 1997 exclusive of the goodwill write down, MicroTel incurred a net loss of $(3,118,000), or $(0.24) per share, on net sales of $31,272,000 vs. net income of $870,000, or $0.15 per share, on net sales of $24,453,000 for the first nine months of 1996.
MicroTel merged with XIT Corp. on March 26, 1997 in a reverse acquisition by XIT, in which the former shareholders of XIT obtained a majority interest in the common stock of MicroTel outstanding after the merger. In accordance with the accounting treatment for a reverse acquisition, the financial statements of the combined
entity after the merger are those of XIT, the accounting acquirer.
Accordingly, the results of operations reported above include those of the ''former'' MicroTel subsequent to the date of the merger and the comparative results for 1996 are those of XIT only.
While overall the operating results for the first nine months of 1997 are disappointing, MicroTel has made substantial progress in steadily reducing its operating loss. On a pro forma basis, assuming the merger of MicroTel and XIT had occurred as of Jan. 1, 1997, the net loss, exclusive of one-time write-downs or other similar adjustments, was $(1,946,000), $(1,435,000) and $(1,080,000) for the 1st, 2nd and 3rd quarters of 1997, respectively.
This steady reduction in the net loss results from increased sales efforts which produced higher net sales during the 2nd and 3rd quarters combined with elimination of operating costs through reductions in staff, overtime and outsourcing.
The cost reduction efforts implemented by the company resulted in a 10 percent reduction in selling, general and administrative costs from the 2nd to 3rd quarter. As a result, despite a slight decline in net sales in the 3rd quarter from the 2nd, the net loss declined by approximately $350,000.
MicroTel expects to continue this progress during the 4th quarter of 1997 and thereafter in order to return to a position of sustained profitability. MicroTel wrote off $1,693,000 of goodwill which originated in XIT's purchase in 1986 of its Digitran division and XIT's acquisition of a majority interest in its HyComp Inc. subsidiary in 1993.
Additionally, goodwill originating in the reverse merger with MicroTel was written down by $4 million and the life of such goodwill was reduced from 15 to 10 years. These write downs resulted from an assessment that expected future cash flows for the individual business units may not be sufficient to support the recorded
goodwill, pursuant to the requirements of Financial Accounting Standard No. 121.
MicroTel recently announced it had entered into an agreement in principle to sell one of its Circuit sector subsidiaries to a private corporation. This subsidiary is the primary source of the net loss for 1997 and while efforts to improve its profitability have met with some recent success, MicroTel believes this operation will not
ultimately achieve operating margins comparable to its other operations and its retention is therefore not consistent with the company's strategic objectives. The company is actively proceeding to finalize the transaction which is expected to close in mid-December.
MicroTel, through its wholly-owned subsidiaries CXR Telcom Corp., based in Fremont, Calif., and CXR, S.A., based in Paris, designs, manufactures and markets electronic test instruments and data transmission equipment to the telecommunications industry, including telephone companies, interconnect carriers, private networks, banks, brokerage firms and government agencies. MicroTel's wholly-owned subsidiary, XIT, with vertically integrated operations in the United States, England and Japan, designs, manufactures and markets information technology products, including displays and input components, subsystem assemblies, power supplies and hybrid
microelectronic and other circuits for the international telecommunications, medical, industrial and military/aerospace markets.
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. |
