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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K


                                   (Mark One)
  [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
              Act of 1934 for the fiscal year ended April 1, 2000,

                                       or

     [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934
             For the transition period from __________ to __________

                         Commission File Number: 0-27482

                                XETEL CORPORATION
             (Exact Name of Registrant as Specified in its Charter)


            DELAWARE                                            74-2310781
(State or Other Jurisdiction of                              (I.R.S. Employer
 Incorporation or Organization)                           Identification Number)

                              2105 GRACY FARMS LANE
                               AUSTIN, TEXAS 78758
          (Address of principal executive offices, including zip code)

                                 (512) 435-1000
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, $0.0001 Par Value Per Share

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such other shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K [ ].

At May 26, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $9,121,320 (affiliates being, for these
purposes only, directors, executive officers and holders of more than 5% of the
Registrant's Common Stock). At May 26, 2000, there were 9,533,388 outstanding
shares of the Registrant's Common Stock.


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                       DOCUMENTS INCORPORATED BY REFERENCE

Certain information is incorporated into Part III of this report by reference to
the Proxy Statement for the Registrant's 2000 annual meeting of stockholders to
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year covered by this Form
10-K.


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PART I

ITEM 1.   BUSINESS

THE COMPANY

In addition to the historical information contained herein, the discussion in
this Form 10-K contains "forward-looking" statements, within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, that involve risks and uncertainties, such as statements
concerning: growth and expansion, future operating results, developments in the
Company's markets and strategic focus, and new production processes and
capabilities. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements whenever they appear
in this Form 10-K. Actual results could differ materially from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
under the section "Risk Factors".

XeTel Corporation ("XeTel" or the "Company") provides comprehensive and
customized manufacturing solutions to original equipment manufacturers ("OEMs")
primarily in the networking, computer and telecommunications industries. The
Company holds ISO 9002 and BABT certifications. The Company's design and
prototype services support customers in the product development phase and assist
in their efforts to reduce time to market and time to volume as well as
production costs. In its assembly operations, the Company employs advanced
surface mount technologies and manufacturing processes and has developed
production capabilities using advanced packaging technologies such as flip chip
and chip-scale packages ("CSP"). The Company incorporates its design and
prototype services and assembly capabilities, together with materials
management, advanced testing, systems integration and order fulfillment
services, to provide turnkey solutions for its customers. The Company believes
that as a result of providing design and prototype services, it is well
positioned to provide other value added manufacturing services for products
through production volumes. The Company believes that its turnkey operations
provide its customers with access to advanced manufacturing capabilities, quick
turnaround, greater production flexibility and shorter delivery cycles. The
Company's principal OEM customers include Cielo Communications, Crossroads
Systems, Efficient Networks, Ericsson, General Instrument, Intel, Micro Motion
(a subsidiary of Emerson Electric), Motorola (various divisions), Pathlight
Technology, SBE, Sony Electronics, Titan Wireless, TouchStar Technologies (a
subsidiary of the Williams Companies) and Visual Networks. The Company is
headquartered in Austin, Texas with manufacturing services operations in Austin
and Dallas, Texas and San Ramon, California.

The Company was incorporated in Texas in 1984 and reincorporated in Delaware in
1995. The Company maintains its principal executive offices at 2105 Gracy Farms
Lane, Austin, Texas 78758, and its telephone number is (512) 435-1000.

RISK FACTORS

The following summary of risk factors relevant to an investment in shares of the
Company's common stock is derived, in part, from the section captioned "Risk
Factors" in the prospectus of the Company dated February 13, 1996 (the
"Prospectus"), as filed with the Securities and Exchange Commission (the
"Commission") pursuant to the initial registration of shares of common stock of
the Company under the Securities Act of 1933, as amended (the "Securities Act").
This discussion does not purport to be complete and is subject to, and qualified
by, the discussion of risk factors set forth in the Prospectus. A copy of the
Prospectus and additional reports, proxy statements and other information filed
with the Commission may be read or copied at the following public reference
rooms of the Commission: 450 Fifth Street, NW., Room 1024, Washington DC 20549;
7 World Trade Center, Suite 1300, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies can be requested by writing
to the Commission and paying a duplicating fee at prescribed rates. Please call
the Commission's toll-free number, 1-800-SEC-0330, for further information on
the operation of the public reference rooms. Commission filings, including the
Prospectus, are also available on the Commission's internet website,
http://www.sec.gov.


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FLUCTUATIONS IN OPERATING RESULTS. XeTel's operating results are affected by a
number of factors, including the timing of orders from and shipments to major
customers, availability of materials and components, the volume of orders
relative to the Company's capacity, timing of expenditures in anticipation of
future sales, the gain or loss of significant customers, variations in the mix
between consignment and component purchase arrangements with customers,
variations in the demand for products in the industries served by the Company
and general economic conditions. Operating results can also be significantly
influenced by the development and introduction of new products or technologies
by the Company's customers, or such customer's competitors, which may materially
and adversely affect the demand for the Company's services. The Company's
customers generally require short delivery cycles, and a substantial portion of
the Company's backlog is typically scheduled for delivery within 120 days. In
the absence of substantial backlog, quarterly sales and operating results depend
on the volume and timing of bookings received during the quarter which can be
difficult to forecast. Backlog fluctuations affect the Company's ability to plan
production and inventory levels, which could lead to fluctuations in operating
results. Variations in the size and delivery schedules of purchase orders
received by the Company, changes in customers' delivery requirements, or the
rescheduling or cancellation of orders and commitments, may result in
substantial fluctuations in backlog from period to period. Accordingly, the
Company believes that backlog may not be a meaningful indicator of future
operating results.

A significant portion of the Company's expenses is relatively fixed in nature
and planned expenditures are based in part on anticipated orders. The inability
to adjust expenditures quickly enough to compensate for a decline in net sales
may magnify the adverse impact of such decline in the Company's results of
operations. Due to the factors noted above and elsewhere in this Form 10-K and
other filings by XeTel with the Securities and Exchange Commission, the
Company's future earnings and stock price may be subject to significant
volatility, particularly on a quarterly basis. Past financial performance should
not be considered a reliable indicator of future performance and investors
should not use historical trends to anticipate results or trends in future
periods. Any shortfall in revenue and earnings from the levels anticipated by
securities analysts could have an immediate and significant effect on the
trading price of the Company's common stock in any given period. Also, the
Company participates in a highly dynamic industry, which often results in
volatility of the Company's common stock price.

CONCENTRATION OF CUSTOMERS. The Company's customer base is highly concentrated.
For the fiscal year ended April 1, 2000 ("fiscal 2000"), the Company's three
largest customers accounted for approximately 13%, 12% and 10%, of its net
sales. The Company's three largest customers accounted for approximately 32%, 8%
and 7%, respectively, of net sales for its fiscal year ended March 27, 1999
("fiscal 1999"). The Company anticipates that a significant portion of its sales
will continue to be concentrated in a relatively small number of customers for
the foreseeable future. In addition, the Company's objective is to develop new
and expand existing relationships with leading and emerging OEM's in the
electronics industry. Such emerging growth and technology companies tend to have
limited operating histories, and also may have changes in management and limited
capitalization. As a result, the Company may experience difficulties in
maintaining long-term relationships with these customers and in receiving
payment for services rendered to them. To the extent that any significant
customers of the Company terminate their relationship with the Company, or the
Company is unable, for any reason, to receive payment for its services, the
Company's business, financial condition and results of operations likely would
be materially and adversely affected.

UNAVAILABILITY OF COMPONENTS AND MATERIALS. Components and material used by
XeTel in producing surface mount assemblies and turnkey solutions are purchased
by XeTel from approved suppliers of its customers. Any failure on the part of
these suppliers to deliver required components to the Company or any failure of
such components to meet performance requirements could impair the Company's
ability to meet scheduled shipment dates and could delay sales of systems by the
Company's customers and thereby adversely affect the Company's business,
financial condition and results of operations. The Company has in the past
experienced shortages of certain types of electronic components, and may
experience shortages of certain electronic components that are customer supplied
or are in short supply generally within the electronics industry. Component
shortages or price fluctuations, to the extent not absorbed by customers under
their agreements with the Company, could have a material adverse effect on the
Company's business, financial condition and results of operations. Certain
components used in a number of the Company's customer programs are obtained from
a single source.


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VARIABILITY OF CUSTOMER REQUIREMENTS; ABSENCE OF LONG-TERM PURCHASE ORDERS. The
level and timing of purchase orders placed by the Company's customers are
affected by a number of factors, including variation in demand for the
customer's products, customer attempts to manage inventory and changes in the
customer's manufacturing strategies. Many of such factors are outside of the
control of the Company. The Company typically does not obtain long-term purchase
orders or commitments, but instead works with its customers to develop
nonbinding forecasts of the future volume of orders. Based on such nonbinding
forecasts, the Company makes commitments regarding the level of business that it
will seek and accept, the timing of production schedules and the levels and
utilization of personnel and other resources. Generally, customers may cancel,
reduce or delay purchase orders and commitments without penalty, except for
payment for services rendered, materials purchased or procured and, in certain
circumstances, charges associated with such cancellation, reduction or delay.
Significant or numerous cancellations, reductions or delays in orders by
customers, or inability by customers to pay for services provided by the Company
or to pay for components and materials purchased by the Company on such
customer's behalf, have adversely affected the Company's business, financial
condition and results of operations in the past and could have a material
adverse effect on the Company's business, financial condition and results of
operations in the future.

MANAGEMENT OF GROWTH AND EXPANSION. The Company's design, prototype, assembly
and turnkey business has grown rapidly in recent years and the Company has
expanded its operations to multiple locations primarily through acquisitions.
This growth has increased the Company's fixed costs and required it to hire
additional personnel. Furthermore, the Company plans to establish additional
regional manufacturing services centers, which will increase the Company's fixed
costs, and will require additional personnel. A continuing period of rapid
growth, including additional geographic expansion and acquisitions, could place
a significant strain on the Company's management, operations and other
resources. The Company's ability to manage its growth will require it to manage
its existing resources more efficiently, to continue to invest in its
operations, including its financial and management information systems and
internal process controls, and to retain, motivate and manage its employees. If
the Company's management is unable to manage growth effectively, the quality of
the Company's services and its ability to retain key personnel could be
materially and adversely affected, which would have a material adverse effect on
the Company's business, financial condition and results of operations.


INDUSTRY OVERVIEW

The electronics manufacturing services market emerged over 20 years ago as a
result of the need by OEMs to utilize additional manufacturing sources for
excess production capacity when in-house capacity was insufficient to meet
product demand. Small, local manufacturers were often used by OEMs for temporary
and unpredictable capacity overruns and for specialty work, when required. As a
result of the capital intensive requirements of the manufacturing process and
the demand for more complex and sophisticated technologies, outsourcing by OEMs
has continued to gain acceptance. Today, many OEMs consider the electronics
manufacturing services industry an integral part of their business and
manufacturing strategy and have established long-term relationships with
electronics manufacturers. As a result, the electronics manufacturing services
industry has experienced significant growth. The Institute for Interconnecting
and Packaging Electronic Circuits ("IPC") estimates electronics manufacturing
services in North America totaled $27.4 billion in 1999, 84% of which was
attributable to the approximately 24 companies in the industry that achieved net
sales in 1999 of over $100 million. According to IPC, sales for companies in the
electronics manufacturing services industry have grown at an average rate of 18%
per year since 1984, and will continue to grow through 2003 at an average rate
of 21% per year.

The Company believes that there are four principal factors supporting the trend
by OEMs in the electronics industry to establish continuing relationships with
independent manufacturers for design, engineering and volume production of
sophisticated electronics products. First, the demand for more complex
electronics products has increased significantly due to the continued
development of more advanced telecommunications, networking and computer systems
and other devices for rapidly growing markets. The manufacture of these products
requires increasingly advanced engineering and manufacturing expertise and
substantial capital investment. By using independent manufacturers, OEMs can
reduce their overall capital equipment requirements while maintaining access to
advanced manufacturing facilities. Second, due to intense competitive pressures
and shorter life cycles for products in the electronics industry, OEMs are
required to reduce the time needed to both introduce new products to market and
manufacture such products in volume. OEMs can reduce product time to market and
time to volume by using the specialization and flexibility afforded by an
independent manufacturer's design, prototype and manufacturing expertise. Third,
as OEMs experience greater levels


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of competition, many OEMs seek to focus their resources on their core
competencies in technology and product development and marketing. By offering
comprehensive electronics assembly and turnkey manufacturing services,
independent manufacturers enable OEMs to concentrate their efforts on such
activities. Finally, OEMs in the electronics industry are faced with increased
difficulties in reducing overhead while planning, procuring and managing their
inventories efficiently due to frequent design changes, short product life
cycles, large investments in electronics components, component price
fluctuations and the need to achieve economies of scale in materials
procurement. OEMs can reduce product costs by using an independent
manufacturer's volume procurement, materials management and manufacturing
capabilities.

In response to the intense competition in the electronics manufacturing services
industry, an increasing number of independent manufacturers have expanded the
range of their value added services to serve as a single source provider of a
comprehensive set of services, or turnkey solutions, for their customers. For
example, by developing design and prototype expertise, an independent
manufacturer can assist an OEM customer in the critical preproduction planning
phase of product development, and follow on with traditional volume production
services. The expansion in the types of value added services offered by
independent electronics manufacturers has enabled OEMs to streamline their
production processes by utilizing fewer independent service providers to meet
their production needs. As a result, the establishment of mutually beneficial
strategic relationships between OEMs and independent manufacturers are
increasingly becoming an important competitive factor for both OEMs and
independent manufacturers within their respective industries.

In addition, rapid advances in technology have further supported the trend by
OEMs to utilize independent electronics manufacturers. OEMs in the advanced
electronics industries continue to devote considerable resources to the
development of new technologies to incorporate into their products. Due to their
reduced size and higher performance standards, these products require
state-of-the-art assembly, manufacturing and process technologies to achieve
targeted levels of performance. OEMs are increasingly utilizing independent
electronics manufacturers that have demonstrated capabilities in these
developing technologies.


XETEL STRATEGY

The Company's objective is to establish and expand long-term relationships with
OEMs of advanced electronics products primarily in the networking, computer
telecommunications and industrial/medical industries by providing a wide range
of sophisticated design, engineering and manufacturing services. In order to
attain this goal and assist customers in continually improving time to market
and time to volume production, the Company's strategy includes the following
elements:

IMPLEMENT ADVANCED MANUFACTURING PROCESS TECHNOLOGIES. To meet anticipated
long-term market demands, the Company has invested and intends to continue to
invest in advanced manufacturing process technologies. The Company expects that
it will continue to work closely with its customers to identify and implement
the next-stage process technologies needed for the design and manufacture of
complex new products. The Company will continue to expand its capabilities in
leading surface mount technologies, such as fine pitch surface mount, and
intends to further develop its capabilities in CSP. Moreover, the Company plans
to devote additional resources to the development of capabilities in
chip-on-board ("COB") process technologies.

DEVELOP DESIGN, PROTOTYPE AND MANUFACTURING SERVICES CENTERS IN TARGETED
GEOGRAPHIC AREAS. XeTel has expanded the range of its value added services to
include design, prototype and preproduction services, volume production,
testing, system integration, and order fulfillment. By offering these services,
the Company believes it is well positioned with its customers to provide value
added manufacturing of their products through production volumes. The Company
currently operates full service manufacturing centers in Austin and Dallas,
Texas and San Ramon, California and plans to establish additional design,
prototype and manufacturing service centers in other geographic areas which have
a high current customer concentration, or in certain other targeted geographic
markets. This expansion may be implemented by acquisitions of existing companies
or the commencement of new operations in these areas. No assurance can be given
that any acquisition by the Company will not materially and adversely affect the
Company's business, financial condition and results of operations or that any
such acquisition will enhance the Company's business.


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EXPAND STATE-OF-THE-ART MANUFACTURING CAPACITY. During fiscal 1998, the Company
relocated its Austin manufacturing and administrative operations to new
facilities totaling 145,000 square feet. To support higher demand levels, the
Company increased its investments in advanced test, surface mount and other
equipment during fiscal 1998. During fiscal 2000, the Company, in response to
changed market conditions, sublet approximately 25,000 square feet of office
space. The Company expects to continue to expand its manufacturing facilities
with state-of-the-art equipment and retain additional personnel to increase its
production capacity and enhance its customer service as required by additional
demand levels.

CONTINUE TO IMPROVE PRODUCTION AND BUSINESS PROCESSES. The Company continually
seeks to improve production quality and reduce cycle time. The Company combines
materials management and continuous flow manufacturing with sophisticated
computer-aided design and manufacturing capabilities to shorten the time from
receipt of customers' electronic design data to manufacturing. The Company will
continue to coordinate its design, prototype, manufacturing and support
operations to provide customers with quick turnaround, greater production
flexibility and shorter delivery cycles. In addition, the Company seeks to
refine its computer integrated manufacturing processes, including management
resources planning ("MRP II"), materials procurement and order fulfillment. All
of the quality management systems at the Company's three sites are ISO 9002
certified.

EXPAND SERVICES TO TARGETED CUSTOMERS. The Company targets customers with whom
it can establish long-term, primary or sole source relationships and endeavors
to provide such customers with turnkey solutions for existing and new products.
The Company intends to expand the range of services that it provides by
developing expertise in areas complementary to the Company's existing
capabilities and identifying additional market opportunities where its
capabilities can improve customer time to market, time to volume, product yields
and utilization.

MANUFACTURING CAPABILITIES AND SERVICES

XeTel seeks to establish strategic relationships with its customers primarily in
the telecommunications, networking and computer industries by providing advanced
manufacturing process technologies and high quality, responsive and flexible
manufacturing services. Such technologies and services include the following:

DESIGN AND PROTOTYPE SERVICES. As XeTel's customers experience greater
competition and shorter product life cycles in their respective industries,
XeTel has responded by expanding its design, prototype and preproduction
services. The Company's engineers work closely with customers to design products
that will meet customers' specifications for functionality and reliability,
while providing optimal manufacturability under planned production requirements.
By applying its computer-aided design and manufacturing capabilities and quick
turnaround techniques in manufacturing and surface mount assembly to the design
and prototype of a customer's product, the Company's engineering team assists
the customer in improving the manufacturability and performance reliability of
the product, thereby reducing production time and costs. Following completion of
the design and engineering of a product, the Company can, as requested by the
customer, manufacture prototypes or preproduction versions of the product. The
Company believes that as a result of its involvement in the design and prototype
of a customer's product, it is well positioned to provide value added
manufacturing of the product through production volumes.

SURFACE MOUNT ASSEMBLY SERVICES. XeTel has made a substantial investment in
specialized equipment, which includes 17 SMT machines, GenRad and HP testers, HP
xray laminography, BGA xray, optical inspection and nitrogen atmosphere reflow
soldering machines. In addition, the Company employs advanced manufacturing
processes, including sophisticated surface mount technologies ("SMT"). SMT has
generally replaced pin-through-hole technology as the preferred method for
printed circuit board assemblies. Using SMT, the leads on integrated circuits
and other electronic components are soldered to the surface of the printed
circuit board rather than inserted into holes, thereby accommodating a
substantially greater component density than can be achieved with
pin-through-hole technology. This permits a reduction in the size of the printed
circuit board which, in turn, enhances the performance of the product and can
reduce the costs of materials. Advanced surface mount technologies, which
include double-sided component attachment and fine pitch SMT component
placement, have further increased the component density and reduced the printed
circuit board size. Double-sided component attachment consists of SMT components
placed on both sides of the printed circuit board, and fine pitch SMT involves
placing components with tightly spaced leads, typically less than 30 mil
lead-to-lead spacing. Currently, the most common fine pitch surface mount device
is a quad flat pack ("QFP"), which is a device with tightly spaced leads around
the periphery. Substantially all of the printed circuit boards


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assembled by the Company utilize SMT, and an increasing percentage employ fine
pitch SMT and double-sided SMT attachment. In addition, XeTel continues to
devote resources to develop new process technologies to support customer
requirements.

XeTel has integrated BGA, CSP and flip-chip placement capabilities into its
manufacturing processes. A BGA, CSP or a flip-chip component has leads arrayed
on the underside of the component, which supports higher speed devices and
results in better assembly yields than fine pitch surface mount placement. XeTel
is currently directing additional resources into the further deployment of COB
technology. Two methods of COB technology exist: direct chip attachment ("DCA")
and wirebonding. Specifically, DCA (commonly known as "flip-chip") involves
placing the chip (or integrated circuit) with the leads facing down so that the
electrical interconnects are in direct contact with the printed circuit board.
In comparison, wirebonding involves sequentially bonding wires from the chip
leads to the printed circuit board.

TURNKEY SOLUTIONS. To meet the diverse requirements and specifications of its
customers, the Company has broadened the range of its electronics manufacturing
services to provide comprehensive turnkey solutions. The Company's turnkey
solutions generally consist of product design and prototype, component
procurement, utilization of the components to manufacture printed circuit board
assemblies, testing, systems integration services, order fulfillment and
distribution to the OEM or directly to its customers. The Company's testing
services include test development, board-level in-circuit testing and functional
and environmental stress screening of both board-level and system-level
products.

ADVANCED MANUFACTURING PROCESSES. XeTel has applied statistical process control
("SPC") and design of experiment ("DOE") techniques in order to control its
critical process parameters. Additionally, the Company's total quality
management ("TQM") approach supports continuous improvement in key processes
such as cycle time reduction. To improve production efficiencies, a variety of
computer-aided manufacturing methods have been implemented. For example, the
Company has implemented an innovative automated system to reduce the set-up time
and improve the quality of loading components on its SMT placement machines, and
has also internally developed a data collection system which utilizes
touchscreen technology to gather data to maintain process controls and provide
quality feedback. The quality management systems at the Company's three
facilities are ISO 9002 certified.

MATERIALS MANAGEMENT. XeTel's materials management organization focuses on
supply base and inventory management. The Company's services include planning,
purchasing and warehousing of electronic components. XeTel's materials
management system combines traditional approaches such as MRP II with responsive
procurement strategies, including just-in-time inventory management techniques
and dock-to-stock shipments from qualified suppliers. XeTel actively manages its
materials pipeline and supplier base to enable the Company's customers to adjust
production requirements within established frameworks. The Company maintains
more than one supply source wherever possible, however, components for certain
major OEM contracts are only obtainable from a single source. The Company's
computer integrated information systems facilitate the tracking of components
and materials from forecast to delivery, thus enabling the Company to
efficiently procure components and materials, determine inventory levels by
customer and monitor the flow of parts through each major step of the production
process. The Company provides its customers with flexible inventory
arrangements, including in certain circumstances the acceptance of components on
a consignment basis, or the purchase of components in advance of lengthy
manufacturing programs. An interruption or loss of any such component supply
could have a material adverse effect on the Company's business, financial
condition and results of operations.

PROGRAM MANAGEMENT. Customer responsiveness is a key priority at XeTel. To
provide better service to its customers, the Company has implemented a customer
team approach. Each customer team typically consists of a program manager, an
assigned customer engineer and a materials planner, resulting in a cohesive
group with expertise in the production process. Customer teams interact with
customers on a regular basis and work with XeTel's engineering, materials
management and manufacturing personnel to enhance responsiveness to customers.


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CUSTOMERS AND MARKETING

XeTel has over 16 years of experience in the electronics manufacturing services
industry. The Company serves a diversified customer base consisting of
approximately 120 customers spread over a variety of growing industries,
including the networking, computer, telecommunications and industrial/medical
industries.

Although XeTel serves a large and varied group of customers, a substantial
portion of the Company's sales are derived from a small number of customers.
Three customers, Visual Networks, Cielo Communications, and Crossroads Systems,
accounted for approximately 13%, 12% and 10% of net sales for fiscal 2000,
respectively. Three of the Company's customers, Motorola SD, Intel, and Real
3-D, accounted for 32%, 8% and 7% of the Company's net sales for fiscal 1999,
respectively. In addition, the Company's fifteen largest customers (including
the top three customers) collectively accounted for approximately 76% of the
Company's net sales during fiscal 2000. The loss of, or a significant
curtailment of purchases by, one or more of these customers, or any other
significant customer of the Company, could have a material adverse effect on the
Company's business, financial condition and results of operations.

The Company's customers typically enter into a manufacturing services agreement
("MSA") with XeTel to provide the general terms and conditions applicable to
purchase orders delivered to the Company. A MSA is not an authorization for the
Company to provide services or ship product, but provides the contractual
framework for the future relationship between the parties. Although the terms of
MSAs will vary from customer to customer depending on the particular
requirements of each customer, the Company's standard MSA provides that (i) the
Company will provide price quotations for services to the customer, (ii) if the
customer determines to proceed with ordering services based on such price
quotations, the customer then will provide a purchase order to the Company and
(iii) the Company may then accept such purchase order, at which time the Company
is authorized to ship product or provide services in accordance with the terms
of the purchase order and MSA. Upon execution of a MSA, the customer will
typically provide the Company with a binding purchase order for required
deliveries for a minimum of 90 days, and will further provide a non-binding
forecast (with the exception of customer material liability) of its requirements
for an additional 180 to 270 day period, updated monthly. In the event of the
modification or cancellation of a purchase order or forecast changes within lead
times, the customer is generally liable for services rendered, materials
purchased or procured and, in certain circumstances, charges associated with
such modification or cancellation. MSAs typically are terminable by either party
upon 120 days prior written notice to the other for convenience or within 30
days prior written notice to the other for cause. Significant cancellations,
reductions or delays in orders by customers, or inability by customers to pay
for services provided by the Company or to pay for components and materials
purchased by the Company on such customer's behalf, have in the past adversely
affected the Company's business, financial condition and results of operations
and could have a material adverse effect on the Company's business, financial
condition and results of operations in the future.

The Company markets its services through its sales and marketing organization
and its customer support and service organization. The Company also utilizes
independent sales representative organizations located in the major electronics
market areas in the United States to develop new customer introductions and
generate new orders from existing customers.


COMPETITION


XeTel competes in the electronics manufacturing services industry which is
highly fragmented and is characterized by intense competition. The Company
competes against numerous domestic independent electronics manufacturers,
including ACT Manufacturing, Benchmark Electronics, Celestica, Flextronics, IEC
Electronics, Jabil Circuit, SCI Systems, Solectron and numerous regional
manufacturers. Certain of these competitors have substantially greater
manufacturing, financial and marketing resources than the Company. In addition,
the Company may be operating at a cost disadvantage compared to manufacturers
who have greater direct buying power with component suppliers or who have lower
cost structures. Current and prospective customers continually evaluate the
merits of manufacturing products internally and will from time to time offer
manufacturing services to third parties in order to utilize excess capacity.
During downturns in the electronics industry, OEMs may become more price
sensitive.


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The Company believes that the principal competitive factors in the electronics
manufacturing services industry are quality, service, technology, manufacturing
capability, price, reliability, timeliness and regional access. There can be no
assurance that competition from existing or potential competitors will not have
a material adverse effect on the Company's business, financial condition or
results of operations. The introduction of lower priced competition or
significant price reductions by the Company's competitors could result in price
reductions that would adversely affect the Company's business, financial
condition and results of operations, as could the introduction of new
technologies which would render the Company's manufacturing process technology
less competitive or obsolete.


BACKLOG


The Company's backlog as of April 1, 2000 was approximately $107.8 million
compared to approximately $101.6 million as of March 27, 1999. Backlog consists
of purchase orders received by the Company and commitments under scheduled
releases, both of which generally specify delivery dates within twelve months.
Variations in the size and delivery schedules of purchase orders received by the
Company, as well as changes in customers' delivery requirements or the
rescheduling or cancellation of orders and commitments, has resulted in the past
and may in the future result in substantial fluctuation in backlog from period
to period. Accordingly, the Company believes that backlog may not be a
meaningful indicator of future financial results. See "Risk Factors -
Variability of Customer Requirements; Absence of Long-Term Purchase Orders" and
"- Fluctuations in Operating Results."


EMPLOYEES


As of April 1, 2000, the Company had approximately 540 full-time employees
supplemented from time to time by part-time employees. The employees are not
represented by a union and the Company believes its employee relations to be
satisfactory.

The Company's success depends to an extent upon the continued services of
several key employees. The loss of key personnel could have a material adverse
effect on the Company. The Company's business also depends upon its ability to
continue to attract and retain senior managers and skilled employees. Failure to
do so could adversely affect the Company's operations.


ENVIRONMENTAL MATTERS

In the past, electronics manufacturing services companies have used
chlorofluorocarbon ("CFC") cleaners which are believed to contribute to
depletion of the ozone layer in the atmosphere. In 1993, the Company eliminated
the use of CFC-based chemicals in its manufacturing operations.

The Company is required to comply with all federal, state, county and municipal
regulations regarding protection of the environment. The Company believes that
its facilities currently comply with all applicable regulations regarding
environmental protection. The cost to the Company of such compliance to date has
not materially affected the Company's business, financial condition or results
of operations. However, there can be no assurance that violations will not occur
in the future as a result of human error, equipment failure or other causes. The
Company cannot predict the nature, scope or effect of environmental legislation
or regulatory requirements that could be imposed or how existing or future laws
or regulations will be administered or interpreted. Compliance with more
stringent laws or regulations, as well as more vigorous enforcement policies of
regulatory agencies, could require substantial expenditures by the Company and
could adversely affect the Company's business, financial condition and results
of operations.


                                                                              10
<PAGE>   11


ACQUISITIONS

In July 1996, the Company acquired Maxtron Corporation located in Dallas, Texas.
Maxtron was a contract manufacturer focusing on high complexity, custom
assemblies. In December 1996, the Company acquired the manufacturing operations
of SBE, Inc. located in San Ramon, California. Under the asset purchase
agreement related to the SBE, Inc. transaction, the Company acquired all
manufacturing activities, including production. The companies have entered into
a long term purchasing agreement under which SBE, Inc. has agreed to purchase
contract manufacturing services from the Company. The Company believes these
acquisitions have further established and expanded the Company's long-term
relationships with OEM's of advanced electronic products in targeted geographic
areas.

ITEM 2.   PROPERTIES

XeTel holds a lease for 145,000 square feet of space in Austin, Texas for its
executive offices and manufacturing operations of which approximately 25,000 of
office space has been sublet. Additional leased manufacturing plants are located
in Dallas, Texas (25,000 square feet) and San Ramon, California (25,000 square
feet).

A disruption of the Company's manufacturing operations resulting from sustained
process abnormalities, human error, theft, government intervention or a natural
disaster, such as fire, earthquake, or flood, could cause the Company to curtail
or suspend its manufacturing operations and consequently have a material adverse
effect on the Company.

The Company believes that its existing facilities are adequate for its current
level of business. The Company anticipates that additional space will be needed
to meet increased demand associated with targeted geographic markets currently
not served by the Company.


ITEM 3.   LEGAL PROCEEDINGS

To the Company's knowledge, there are no pending legal proceedings to which it
is a party or to which any of its property is subject that are material to the
Company or its business.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2000.


                                                                              11
<PAGE>   12


PART II

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY
          AND RELATED STOCKHOLDERS

COMMON STOCK INFORMATION

The following table sets forth the quarterly high and low per share closing
sales prices of the Company's common stock by quarter for fiscal 2000 and fiscal
1999 as reported by the Nasdaq National Market. The Company's common stock is
quoted on the Nasdaq National Market under the symbol "XTEL".


<TABLE>
<CAPTION>
                                          2000                      1999
                                    ----------------          -----------------
QUARTER                             HIGH         LOW          HIGH          LOW
                                    ----         ---          ----          ---
<S>                                <C>          <C>          <C>          <C>
First                              $2.938       $1.750       $6.375       $ 3.75

Second                              2.625        1.625        5.125        2.625

Third                               2.000        1.250        3.000        2.000

Fourth                              5.125        1.313        3.000        1.938
</TABLE>

XeTel has not paid any dividends since its inception and does not intend to pay
any dividends in the foreseeable future. As of May 26, 2000, the approximate
number of shareholders of record was 2,065 based upon information obtained from
the Company's transfer agent.


ITEM 6.   SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
financial statements, including the notes to financial statements. The
information set forth below is not necessarily indicative of results of future
operations. The information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."


                                                                              12
<PAGE>   13


FIVE YEAR SELECTED FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                   Fiscal Year Ended
                                         --------------------------------------------------------------------
                                          April 1,      March 27,      March 28,      March 29,     March 30,
STATEMENT OF OPERATIONS DATA:               2000          1999            1998          1997          1996
                                         ---------      ---------      ---------      ---------     ---------
<S>                                      <C>            <C>            <C>            <C>           <C>
Net sales                                $ 117,743      $ 135,713      $ 112,685      $  90,453     $ 117,846
Cost of sales                              110,161        130,249        105,171         83,442       102,605
                                         ---------      ---------      ---------      ---------     ---------

Gross profit                                 7,582          5,464          7,514          7,011        15,241
Selling, general and administrative
expenses                                     6,176          6,539          6,469          6,573         5,875
Other (recoveries) charges                  (1,854)         6,855             --             --            --
                                         ---------      ---------      ---------      ---------     ---------

Income (loss) from operations                3,260         (7,930)         1,045            438         9,366
Other (expense) income, net                   (787)          (712)           (30)           268          (605)
                                         ---------      ---------      ---------      ---------     ---------

Income (loss) before income taxes            2,473         (8,642)         1,015            706         8,761

Provision (benefit) for income taxes           935         (3,104)           386            257         3,106
                                         ---------      ---------      ---------      ---------     ---------

Net income (loss)                        $   1,538      $  (5,538)     $     629      $     449     $   5,655
                                         =========      =========      =========      =========     =========
Basic earnings (loss) per share          $    0.16      $   (0.61)     $    0.07      $    0.05     $    0.85
                                         =========      =========      =========      =========     =========
Basic weighted average shares
outstanding                                  9,349          9,096          8,863          8,709         6,673
                                         =========      =========      =========      =========     =========

Diluted earnings (loss) per share        $    0.16      $   (0.61)     $    0.07      $    0.05     $    0.76
                                         =========      =========      =========      =========     =========
Diluted weighted average shares
outstanding                                  9,608          9,096          9,532          9,575         7,411
                                         =========      =========      =========      =========     =========


BALANCE SHEET DATA:

Working capital                          $  24,689      $  15,671      $  20,953      $  20,384     $  20,560

Total assets                                64,721         51,783         58,806         39,802        45,156
Notes payable and current portion of
long-term debt                               7,120         10,600          5,800             --            --

Long-term debt, less current portion         7,591          2,167          2,667             42            --

Stockholders' equity                     $  24,832      $  22,754      $  27,744      $  26,661     $  24,922
                                         =========      =========      =========      =========     =========
</TABLE>


                                                                              13
<PAGE>   14


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF
          FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion in this document contains trend analysis and other
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. Actual results could differ materially from those projected in the
forward-looking statements throughout this document as a result of the risk
factors set forth above and elsewhere in this Annual Report on Form 10-K.

OVERVIEW

XeTel was founded in 1984. In 1986, Rohm U.S.A., Inc. ("Rohm"), a subsidiary of
Rohm Co., Ltd., Japan, a diversified electronics company, acquired a controlling
interest in the Company. Since its inception, the Company has manufactured
surface mount assemblies and performed other manufacturing services for OEMs in
the electronics industry. In a number of cases, such services were rendered
during periods in which customers were experiencing fluctuations in demand for
their products. During such periods, the Company's net sales and operating
results were subject to significant fluctuations that often were tied to the
market demand for its customers' products, competitive factors and the
customers' need to utilize independent manufacturers to maintain sufficient
product supply to meet such demand. Such fluctuations are expected to continue
to affect the demand for the Company's services.

Annual and/or quarterly gross margins and operating results are also affected by
the level of capacity utilization of manufacturing facilities, indirect labor
costs and selling, general and administrative expenses. Accordingly, gross
margins and operating income margins have generally improved during periods of
high volume and high capacity utilization. XeTel generally has idle capacity and
reduced operating margins during periods of lower volume.

In an effort to achieve greater stability and higher gross margins, the Company
made the strategic decision in 1993 to reduce its dependence on the computer
industry and expand its service offerings in order to establish long-term
relationships with targeted customers in diversified markets. With the addition
of new management personnel in 1993, including a new President in September
1993, the Company focused certain of its resources to establish capabilities in
product design and prototype, improve materials management processes,
restructure the Company's management organization, establish dedicated customer
teams, and to expand and diversify its customer base. The Company has reduced
its role as a source of additional capacity for OEMs during periods of
fluctuating product demand and has positioned itself to provide a more
comprehensive set of services within the electronics manufacturing services
industry.

The development and growth of the Company's business has generally followed the
trend by OEMs in the electronics industry to outsource all or a portion of their
manufacturing requirements. Recognizing the benefits offered by using
independent manufacturers, OEMs in the electronics industry have increasingly
relied on independent manufacturers not only as a source of additional
manufacturing capacity during periods of fluctuating demand, but as the primary
source for their manufacturing and assembly needs. In addition, the Company has
developed competencies in additional areas where it can add value to its
customers' requirements, such as design, prototype, systems integration and
order fulfillment, and has sought to use such competencies to forge long-term
relationships as a single source provider of turnkey solutions for its
customers. During fiscal 1997, XeTel acquired two full-service manufacturing
services centers in Dallas, Texas and San Ramon, California to further establish
and expand its long-term relationships with OEMs of advanced electronic
products.


                                                                              14
<PAGE>   15


RESULTS OF OPERATIONS

The following table sets forth the percentage of net sales of certain items in
the Statement of Operations. The financial information and the discussion below
should be read in conjunction with the financial statements and notes thereto.


<TABLE>
<CAPTION>
                                                             Fiscal Year Ended
                                                 -----------------------------------------
                                                  April 1,       March 27,       March 28,
                                                    2000           1999            1998
                                                 ---------       ---------       ---------
<S>                                              <C>             <C>             <C>
Net sales                                            100.0%          100.0%          100.0%

Cost of sales                                         93.6            96.0            93.3
                                                 ---------       ---------       ---------
Gross profit                                           6.4             4.0             6.7

Selling, general and administrative expenses           5.2             4.8             5.7

Other (recoveries) charges                            (1.6)            5.1              --
                                                 ---------       ---------       ---------

Income (loss) from operations                          2.8            (5.8)            1.0

Other (expense) income, net                           (0.7)           (0.5)           (0.1)
                                                 ---------       ---------       ---------

Income (loss) before income taxes                      2.1            (6.4)            0.9

Provision (benefit) for income taxes                   0.8            (2.3)            0.3
                                                 ---------       ---------       ---------

Net income (loss)                                      1.3%           (4.1)%           0.6%
                                                 =========       =========       =========
</TABLE>


FISCAL 2000 COMPARED TO FISCAL 1999

Net sales for fiscal 2000 decreased $18 million or 13%, to $117.7 million from
$135.7 million for fiscal 1999. This decrease was primarily due to the
discontinuation of certain programs which represented $52 million of net sales,
one of which resulted from a customer transferring a large program internally as
a part of its restructuring. This $52 million decrease in net sales was
primarily offset by the addition of $34 million in sales from new networking
segment customers and the expansion of sales from existing customers. Sales to
the Company's three largest customers for fiscal 2000 represented 13%, 12%, 10%,
respectively, of total net sales. The Company's sales to its three largest
customers for fiscal 1999 represented 32%, 8% and 7%, respectively, of total net
sales.

Gross profit for fiscal 2000 increased to $7.6 million from $5.5 million in
fiscal 1999. Gross profit is defined as net sales less cost of sales. Cost of
sales consists of direct labor, direct material and manufacturing overhead
(which includes manufacturing and process engineering expenses). Gross profit
margin (gross profit as a percentage of net sales) increased to 6.4% of sales in
fiscal 2000 versus 4.0% in the comparable year period. The increase in gross
profit margin was primarily due to changes in product mix towards lower material
content programs, higher value added services, cost reduction actions and the
write-down of certain impaired assets in the prior year.

Selling, general and administrative ("SG&A") expenses consist primarily of
salaries and related expenses, marketing and promotional expenses, and sales
commissions paid to direct sales personnel and independent sales representative
organizations. SG&A expenses decreased 5.6% to $6.2 million in fiscal 2000 from
$6.5 million in fiscal 1999. This decrease was primarily due to cost controls
and lower variable expenses. SG&A expenses represented 5.2% of net sales in
fiscal 2000 compared to 4.8% of net sales for fiscal 1999. The increase in SG&A
expenses as a percentage of sales reflected the lower sales levels and the
implementation of cost controls.

Recoveries in fiscal 2000 totaled $1.9 million and were realized from a work out
plan with a customer. The work out plan calls for the issuance of certain
warrants to acquire shares of the customer's common stock and the recovery of
amounts due the Company in the form of interest, accounts receivable and
inventory. Due to the uncertainty of realization, a value has not been recorded
for such warrants. Interest is being applied to amounts due the Company and then
subsequently to interest income at such time, if ever, amounts due are fully
recovered.


                                                                              15
<PAGE>   16


In fiscal 1999, asset impairment and other charges consisted of a $6.9 million
special charge to adjust the carrying value of certain non-performing assets.

Other (expense), net for fiscal 2000 reflects expense of $787,000 compared to
$712,000 for fiscal 1999. The change in other (expense), net was due to
increased interest expense incurred on the Company's term note and revolving
line of credit in fiscal 2000.

The provision for income taxes of $935,000 reflects an effective tax rate of
37.8% in fiscal 2000 and the income tax benefit of $3,104,000 reflects an
effective tax rate of 35.9% in fiscal 1999.

Fiscal 2000 included 53 weeks versus 52 weeks in Fiscal 1999 to adjust the
corporation's calendar to the closest Saturday nearest to March 31.

FISCAL 1999 COMPARED TO FISCAL 1998

Net sales for fiscal 1999 increased 20.4% to $135.7 million from $112.7 million
for the year ended March 28, 1998 ("fiscal 1998"). The increase in net sales
resulted primarily from increased shipments to the Company's major computer,
networking and telecommunications customers. The Company's sales to its three
largest customers for fiscal 1999 represented 32%, 8% and 7%, respectively, of
total net sales. Sales to the Company's three largest customers for fiscal 1998
represented 20%, 16% and 9%, respectively, of total net sales.

Gross profit for fiscal 1999 decreased to $5.5 million from $7.5 million in
fiscal 1998. Gross profit margin decreased to 4.0% for fiscal 1999 from 6.7% for
fiscal 1998. The decrease in the Company's gross margin was primarily due to the
insourcing by one of the Company's major computer customers, changes in product
mix towards higher material content programs and higher infrastructure costs
associated with strategic investments in equipment, facilities and operations.
Management took actions to respond to the decrease in gross profit margins
including establishing aggressive new targets in cost management and
manufacturing efficiency.

SG&A expenses remained relatively stable at $6.5 million in fiscal 1999 and
fiscal 1998. SG&A expenses represented 4.8% of net sales for fiscal 1999 as
compared to 5.7% for fiscal 1998. The decrease in SG&A expenses as a percentage
of sales reflected the higher sales levels and the implementation of cost
controls.

Asset impairment and other charges consisted of a $6.9 million special charge to
write-down certain non-performing assets and write-off impaired assets. In
response to an uncured default of payments by, and assessment of, a certain
customer, the Company wrote-down all receivables and inventory, totaling $6.0
million, associated with this customer's program. The Company pursued available
alternatives to mitigate the loss as well as legal rights and remedies under its
various agreements. In addition, during the year, the Company recorded an
impairment charge of $897,000 for the write-down of certain property and
equipment and the write-off of goodwill.


Other (expense) income, net for fiscal 1999 reflects expense of $712,000
compared to $30,000 for fiscal 1998. The change in other (expense) income, net
was due to increased interest expense incurred on the Company's term note and
revolving line of credit in fiscal 1999.

The income tax benefit of $3,104,000 reflects an effective tax rate of 35.9% in
fiscal 1999 and a provision for income taxes of $386,000 reflects an effective
tax rate of 38.0% for fiscal 1998.


                                                                              16
<PAGE>   17


QUARTERLY RESULTS

The following table sets forth certain quarterly financial data for the periods
indicated (in thousands, except per share data).


<TABLE>
<CAPTION>
                                                       Three Months Ended
                                         ------------------------------------------------
                                         April 1,     Dec. 25,     Sept. 25,     June 26,
Fiscal 2000                                2000         1999         1999          1999
                                         --------     --------     --------      --------
<S>                                      <C>          <C>          <C>           <C>
STATEMENT OF OPERATIONS DATA:

   Net sales                             $ 33,176     $ 29,425     $ 23,150      $ 31,992

   Gross profit                             2,412        1,688        1,249         2,233

   Income from operations                   1,975          579           92           614

   Net income (loss)                        1,060          274          (35)          239
                                         --------     --------     --------      --------

   Basic earnings (loss) per share       $   0.11     $   0.03     $  (0.00)     $   0.03
                                         ========     ========     ========      ========

   Basic weighted average shares            9,466        9,379        9,288         9,255
                                         ========     ========     ========      ========

   Diluted earnings (loss) per share     $   0.11     $   0.03     $  (0.00)     $   0.02
                                         ========     ========     ========      ========
   Diluted weighted average shares
   outstanding                              9,913        9,499        9,288         9,625
                                         ========     ========     ========      ========
</TABLE>


<TABLE>
<CAPTION>
                                                         Three Months Ended
                                         ------------------------------------------------
                                         March 27,    Dec. 26,     Sept. 26,     June 27,
Fiscal 1999                                1999         1998         1998          1998
                                         --------     --------     --------      --------
<S>                                      <C>          <C>          <C>           <C>
STATEMENT OF OPERATIONS DATA:

   Net sales                             $ 24,604     $ 30,590     $ 36,211      $ 44,308

   Gross (loss) profit                       (275)       1,282        1,387         3,070

   (Loss) income from operations           (8,724)        (324)        (165)        1,283

   Net (loss) income                       (5,671)        (311)        (240)          684
                                         --------     --------     --------      --------

   Basic (loss) earnings per share       $  (0.62)    $  (0.03)    $  (0.03)     $   0.08
                                         ========     ========     ========      ========

   Basic weighted average shares            9,198        9,118        9,062         9,008
                                         ========     ========     ========      ========
   Diluted (loss) earnings per share     $  (0.62)    $  (0.03)    $  (0.03)     $   0.07
                                         ========     ========     ========      ========
   Diluted weighted average shares
   outstanding                              9,198        9,118        9,062         9,695
                                         ========     ========     ========      ========
</TABLE>


                                                                              17
<PAGE>   18


LIQUIDITY AND CAPITAL RESOURCES

Working capital was $24.7 million at the end of fiscal 2000, compared to $15.7
million at the end of fiscal 1999. In addition to the Company's working capital
as of April 1, 2000, which included cash and cash equivalents of $7.4 million,
the Company also had $11 million available from unused credit facilities.

Net cash used in operating activities was $1.2 million during fiscal 2000, $3.6
million in fiscal 1999 and $2.7 million in fiscal 1998 mainly as a result of
changes in sales levels and a net loss in fiscal 1999.

Capital expenditures during fiscal 2000, 1999 and 1998 were $1.2 million, $1.6
million and $6.3 million, respectively. Management anticipates capital
expenditures in fiscal 2001 will increase from the level of capital expenditures
made in fiscal 2000. During fiscal 1998, the Company relocated its Austin
manufacturing and administrative operations to a new facility and incurred
larger capital expenditures to upgrade its equipment and capabilities. The
Company's expenditures on research and development in fiscal 2000, 1999 and 1998
were $183,000, $189,000, and $183,000, respectively.

As of April 1, 2000, the Company has $51 million in credit lines and equipment
financing facilities, as follows: (i) a three-year revolving loan facility for
$35 million with commercial banks and (ii) an equipment financing facility for
$16 million from a financial services company of which $4 million was unused at
April 1, 2000. There was $14.7 million and $12.8 million outstanding under these
commercial bank lines of credit at April 1, 2000 and March 27, 1999,
respectively.

On March 31, 2000, the Company entered into a $35 million asset-based revolving
loan facility. The credit agreement has a three-year term with automatic
renewals for successive terms of equal duration thereafter. The bank revolving
credit facility bears interest at LIBOR plus 2.25% to 3.00% depending upon
certain financial ratios or prime or prime plus one-half of one percent (such
rate determined based upon the amounts, financial ratios and period of loans),
matures March 30, 2003 and is secured by certain assets of the Company. The bank
facility requires the payment of a monthly commitment fee equal to one-quarter
of one percent (0.25% per annum) on the unused balance, and borrowings are
limited based upon certain collateral availability requirements. The equipment
financing facility provides for the leasing of equipment over a five-year period
commencing on the date of acceptance of such equipment.

The financing facilities contain certain restrictions, which among others,
require maintenance of minimum financial ratios. At March 27, 1999, the Company
did not satisfy certain financial covenants imposed under its then existing
financing facility. The Company received waivers with respect to these financial
covenants as of March 27, 1999 and for the fourth quarter then ended. The
Company believes it was in compliance with the covenants relating to its
financing facilities as of April 1, 2000.

The Company believes that its working capital, together with cash generated from
operations and financing facilities, will be sufficient to satisfy anticipated
sales growth and investment in manufacturing facilities and equipment through
its fiscal year 2001.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

The Company invests its cash in money market funds or instruments which meet
high credit quality standards specified by the Company's investment policy. The
Company does not use financial instruments for trading or other speculative
purposes. The Company's financing facilities are subject to interest rate
fluctuations.


                                                                              18
<PAGE>   19


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The information required by Item 8 of Form 10-K is presented here in the
following order:



<TABLE>
<S>                                                                                            <C>
REPORT OF INDEPENDENT ACCOUNTANTS                                                              20


BALANCE SHEETS AS OF APRIL 1, 2000 AND MARCH 27, 1999                                          21


STATEMENTS OF OPERATIONS FOR THE FISCAL YEARS ENDED APRIL 1, 2000, MARCH 27, 1999
AND MARCH 28, 1998                                                                             22


STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE FISCAL YEARS ENDED
APRIL 1, 2000, MARCH 27, 1999 AND MARCH 28, 1998                                               23


STATEMENTS OF CASH FLOWS FOR THE FISCAL YEARS ENDED APRIL 1, 2000, MARCH 27, 1999
AND MARCH 28, 1998                                                                             24


NOTES TO FINANCIAL STATEMENTS                                                                  25
</TABLE>


                                                                              19
<PAGE>   20


REPORT OF INDEPENDENT ACCOUNTANTS

 To the Board of Directors and Stockholders of XeTel Corporation:

In our opinion, the accompanying balance sheets and the related statements of
operations, changes in stockholders' equity and cash flows present fairly, in
all material respects, the financial position of XeTel Corporation at April 1,
2000 and March 27, 1999, and the results of its operations and its cash flows
for each of the three years in the period ended April 1, 2000 in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.


/s/ PRICEWATERHOUSECOOPERS LLP
------------------------------------
    PRICEWATERHOUSECOOPERS LLP

Austin, Texas
May 3, 2000


                                                                              20
<PAGE>   21


                                XETEL CORPORATION
                                 BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)


<TABLE>
<CAPTION>
                                                                        April 1,      March 27,
                                                                          2000          1999
                                                                        --------      --------
<S>                                                                     <C>           <C>
ASSETS

Current assets:

     Cash and cash equivalents                                          $  7,398      $  7,330

     Trade accounts receivable, net                                       24,464        14,940

     Inventories                                                          23,074        18,247

     Prepaid expenses and other                                            1,918         1,833
                                                                        --------      --------
         Total current assets                                             56,854        42,350

Property and equipment, net                                                6,367         7,233

Deferred tax asset                                                         1,500         2,200
                                                                        --------      --------

         TOTAL ASSETS                                                   $ 64,721      $ 51,783
                                                                        ========      ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

     Trade accounts payable                                             $ 21,643      $ 12,574

     Current portion of long-term debt                                     7,120        10,600

     Accrued expenses and other liabilities                                3,402         3,505
                                                                        --------      --------
         Total current liabilities                                        32,165        26,679

Deferred income taxes                                                        133           183

Long-term debt, net of current portion                                     7,591         2,167

Commitments (Note 9)

Stockholders' equity:
     Common stock, $0.0001 par value, 25,000,000 shares authorized,
        9,482,429 and 9,212,700 shares issued and 9,476,433 and
        9,206,702 shares outstanding, respectively                        22,228        21,818

     Retained earnings                                                     2,625         1,087

     Deferred compensation                                                   (21)         (151)
                                                                        --------      --------
         Total stockholders' equity                                       24,832        22,754
                                                                        --------      --------

         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $ 64,721      $ 51,783
                                                                        ========      ========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                                                              21
<PAGE>   22


                                XETEL CORPORATION
                            STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                            Fiscal Year Ended
                                                 ---------------------------------------
                                                  April 1,      March 27,      March 28,
                                                   2000           1999            1998
                                                 ---------      ---------      ---------
<S>                                              <C>            <C>            <C>
Net sales                                        $ 117,743      $ 135,713      $ 112,685

Cost of sales                                      110,161        130,249        105,171
                                                 ---------      ---------      ---------

Gross profit                                         7,582          5,464          7,514

Selling, general and administrative expenses         6,176          6,539          6,469

Other (recoveries) charges                          (1,854)         6,855             --
                                                 ---------      ---------      ---------

Income (loss) from operations                        3,260         (7,930)         1,045

Other (expense), net                                  (787)          (712)           (30)
                                                 ---------      ---------      ---------

Income (loss) before income taxes                    2,473         (8,642)         1,015

Provision (benefit) for income taxes                   935         (3,104)           386
                                                 ---------      ---------      ---------

Net income (loss)                                $   1,538      $  (5,538)     $     629
                                                 =========      =========      =========

Basic earnings (loss) per share                  $    0.16      $   (0.61)     $    0.07
                                                 =========      =========      =========

Basic weighted average shares outstanding            9,349          9,096          8,863
                                                 =========      =========      =========

Diluted earnings (loss) per share                $    0.16      $   (0.61)     $    0.07
                                                 =========      =========      =========

Diluted weighted average shares outstanding          9,608          9,096          9,532
                                                 =========      =========      =========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                                                              22
<PAGE>   23


                                XETEL CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                         Common Stock                                        Total
                                    ----------------------      Deferred      Retained    Stockholders'
                                     Shares        Amount     Compensation    Earnings       Equity
                                    --------      --------    ------------    --------    -------------
<S>                                 <C>           <C>         <C>             <C>         <C>
Balance, March 29, 1997                8,796      $ 20,998      $   (333)     $  5,996      $ 26,661

   Stock options exercised               115           149            --            --           149

   Employee stock purchase plan           67           254            --            --           254

   Transfer of restricted stock          (42)         (294)          294            --            --
   Tax benefit on disqualifying
     dispositions                         --            35            --            --            35
   Amortization of deferred
     compensation                         --            --            16            --            16

   Net income                             --            --            --           629           629
                                    --------      --------      --------      --------      --------

Balance, March 28, 1998                8,936        21,142           (23)        6,625        27,744

   Stock options exercised               108           144            --            --           144

   Employee stock purchase plan          106           286            --            --           286

   Issuance of restricted stock           57           246          (246)           --            --
   Amortization of deferred
     compensation                         --            --           118            --           118

   Net loss                               --            --            --        (5,538)       (5,538)
                                    --------      --------      --------      --------      --------

Balance, March 27, 1999                9,207      $ 21,818      $   (151)     $  1,087      $ 22,754

   Stock options exercised               149           196            --            --           196

   Employee stock purchase plan          120           214            --            --           214
   Amortization of deferred
     compensation                         --            --           130            --           130

   Net income                             --            --            --         1,538         1,538
                                    --------      --------      --------      --------      --------

Balance, April 1, 2000                 9,476      $ 22,228      $    (21)     $  2,625      $ 24,832
                                    ========      ========      ========      ========      ========
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                                                              23
<PAGE>   24


                                XETEL CORPORATION
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                      Fiscal Year Ended
                                                              ----------------------------------
                                                              April 1,    March 27,    March 28,
                                                                2000         1999        1998
                                                              -------     ---------    ---------
<S>                                                           <C>         <C>          <C>
Cash flows from operating activities:

   Net income (loss)                                          $ 1,538      $(5,538)     $   629
   Adjustments to reconcile net income (loss) to net cash
   (used in) provided by operating activities:
        Deferred income taxes                                     719       (2,859)         121
        Other charges                                              --        6,855           --
        Depreciation and amortization                           1,975        2,769        2,736
        Provision for deferred compensation                       130          118           --
        (Gain) loss on disposal of equipment                       (9)        (132)          51
   Change in operating assets and liabilities:
        Trade accounts receivable                              (9,524)       4,719       (9,001)
        Inventories                                            (4,827)      (2,727)      (7,562)
        Prepaid expenses and other                               (154)        (362)         788
        Trade accounts payable                                  9,069       (6,822)       9,456
        Accrued expenses and other liabilities                   (103)         418           35
                                                              -------      -------      -------

CASH USED IN OPERATING ACTIVITIES                              (1,186)      (3,561)      (2,747)
                                                              -------      -------      -------
Cash flows from investing activities:
   Proceeds from sale of equipment                                 68          516          426
   Purchases of property and equipment                         (1,168)      (1,594)      (6,334)
                                                              -------      -------      -------

CASH USED IN INVESTING ACTIVITIES                              (1,100)      (1,078)      (5,908)
                                                              -------      -------      -------
Cash flows from financing activities:
  Net borrowings under debt agreements                          1,944        4,300        8,424
  Proceeds from stock options exercised                           214          144          149
  Cash proceeds from stock issued under employee
       stock purchase plan                                        196          286          254
  Tax benefit on disqualifying dispositions                        --           --           35
                                                              -------      -------      -------

CASH PROVIDED BY FINANCING ACTIVITIES                           2,354        4,730        8,862
                                                              -------      -------      -------

Increase in cash and cash equivalents                              68           91          207

Cash and cash equivalents, beginning of period                  7,330        7,239        7,032
                                                              -------      -------      -------

CASH AND CASH EQUIVALENTS, END OF PERIOD                      $ 7,398      $ 7,330      $ 7,239
                                                              =======      =======      =======
</TABLE>


The accompanying notes are an integral part of these financial statements.


                                                                              24
<PAGE>   25
                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS



NOTE 1 BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

XeTel provides comprehensive and customized manufacturing solutions to original
equipment manufacturers primarily in the networking, computer and
telecommunications industries. XeTel incorporates advanced design and prototype
services and complex electronics manufacturing assembly capabilities together
with materials and supply base management, advanced testing, systems integration
services and order fulfillment to provide turnkey solutions for its customers.

CASH EQUIVALENTS

The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the date of purchase to be cash
equivalents.

INVENTORIES

Inventories are stated at the lower of cost (principally standard cost which
approximates actual cost on a first-in, first-out basis) or market.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated over the estimated
useful lives of the assets, which ranges from three to seven years, using the
straight-line method. Upon sale, the cost of assets disposed of and the related
accumulated depreciation are removed from the accounts and resulting gain or
loss is credited or charged to income. Long-lived assets are reviewed for
impairment when events or changes in circumstances indicate the carrying amount
may not be recoverable. Losses, if any, are recognized in accordance with
Financial Accounting Standards Board Statement No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".

REVENUE RECOGNITION

Revenue is recognized when title and risk of loss is transferred and
collectability of the resulting receivable is reasonably assured. Sales returns
are not material.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes". Under SFAS No. 109, deferred income taxes are
provided for temporary differences between the basis of assets and liabilities
for financial reporting and tax purposes.

EARNINGS PER SHARE

Basic earnings per share (EPS) is computed by dividing income available to
common shareholders by the weighted average number of common shares for the
year. Diluted EPS is similar to Basic EPS except that the weighted average of
common shares outstanding is increased to include the number of common share
equivalents, when inclusion is dilutive. Common share equivalents are comprised
of stock options. The number of common share equivalents outstanding relating to
stock options is computed using the treasury stock method.





                                                                              25
<PAGE>   26


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of the Company's financial instruments, including cash and
cash equivalents, trade accounts receivable and payable approximate fair values
due to the short term nature of these instruments. The carrying amount of the
Company's long-term debt approximates fair value due to the periodic adjustment
of interest rate on the debt to market rates. SFAS No. 105, "Disclosure of
Information About Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risk", requires disclosure
of any significant off-balance-sheet and credit risk concentrations. The
Company's exposure to concentrations of credit risk relate primarily to trade
receivables. The Company controls credit risk by performing credit evaluations
and requires letters of credit, bank guarantees and advanced payments, if deemed
necessary. The Company is exposed to risks pertaining to cash and cash
equivalents in the event of default by a financial institution and issuer of
investments. The Company maintains its cash and cash equivalent balances in
highly rated financial institutions and has not experienced losses therein.

RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the current
year presentation.

USE OF ESTIMATES

Judgments and estimates by management are required in the preparation of
financial statements to conform with generally accepted accounting principles.
The estimates and underlying assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingencies at the balance sheet date and
the reported revenues and expenses for the period. Actual results could differ
from those estimates.

STOCK BASED COMPENSATION

The Company adopted SFAS No. 123, "Accounting and Disclosure of Stock-Based
Compensation" for the fiscal year ended March 28, 1998. SFAS No. 123 introduces
a fair-value based method of accounting for stock-based compensation. It
encourages, but does not require, companies to recognize compensation expense
for grants of stock, stock options, and other equity instruments to employees
based on their estimated fair market value on the date of grant. The Company has
opted to apply the accounting rules contained in APB Opinion No. 25, "Accounting
for Stock Issued to Employees". As such, SFAS No. 123 did not have any effect on
the Company's financial position or results of operations. Companies that
continue to use APB Opinion No. 25 are required to present in the notes to the
financial statements the pro forma effects on reported net income (loss) and
earnings (loss) per share as if compensation expense had been recognized based
on the fair value of options granted (see Note 12).

FISCAL YEAR

The Company's fiscal year is the 52 or 53 weeks ending on the Saturday nearest
to March 31. Reference to fiscal years ended 2000, 1999 and 1998 are for the 53
weeks ended April 1, 2000 and the 52 weeks ended March 27, 1999 and March 28,
1998 respectively.

COMPREHENSIVE INCOME

The Company adopted SFAS No. 130, "Reporting Comprehensive Income," in the
fiscal year ended March 27, 1999. SFAS No. 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's net income (loss) or
stockholders' equity.


                                                                              26
<PAGE>   27


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


SEGMENTS

The Company adopted SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information," in the fiscal year ended March 27, 1999. The adoption
of SFAS No. 131 did not affect the Company's results of operations or financial
position. The Company operates in one industry segment: electronics
manufacturing services, which encompasses design, prototype, manufacturing and
other turnkey manufacturing solutions to original equipment manufacturers. The
manufacturing services are sold to customers in the networking,
telecommunications and computer industries, which are geographically dispersed
throughout the United States. The Company's manufacturing facilities are located
in the United States.

NEW ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. SFAS No.133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. SFAS No. 133 is effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The
adoption of this new accounting prounouncement is not expected to have a
material impact on the financial statements.


NOTE 2 OTHER (RECOVERIES) CHARGES

The components of Other (recoveries) charges included in the Statement of
Operations and Statement of Cash Flows are as follows (in thousands):

<TABLE>
<CAPTION>
                                                            Fiscal Year Ended
                                                             2000        1999
                                                           --------     ------
<S>                                                        <C>           <C>
(Recoveries) provision for doubtful accounts               $  (420)      3,228

(Recoveries) provision for excess and obsolete inventory    (1,434)      2,541

Impairment of long-lived assets                                 --         897

Other                                                           --         189
                                                           -------     -------

                                                           $(1,854)      6,855
                                                           =======     =======
</TABLE>

During fiscal 1999, the Company recorded a charge of $6.0 million to write-down
all receivables and inventory and other costs in response to an uncured default
of payments by, and an assessment of, a certain customer. This charge included a
provision for doubtful accounts, a provision for excess and obsolete inventory
and other associated costs. Subsequently, in fiscal 2000, the Company
established a work out plan with this customer which required the issuance of
certain warrants to acquire shares of the customer's common stock and a plan to
recover amounts due the Company in the form of interest, accounts receivable and
inventory. Recoveries in the fiscal year 2000 totaled $1.9 million. Due to the
uncertainty of realization, a value has not been recorded for the warrants.


                                                                              27
<PAGE>   28


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


Additionally, Financial Accounting Standards Board Statement No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", requires long-lived assets, including goodwill, be reviewed for impairment
and be written-down to their fair value whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. As a
result of management's assessment, the Company, in fiscal 1999 recorded an
impairment charge of $897,000 for the write-down of certain property and
equipment and the write-off of goodwill. In fiscal 1999 the Company recorded a
tax benefit of $2.8 million in connection with these charges.


NOTE 3 TRADE ACCOUNTS RECEIVABLE, NET


Trade accounts receivable, net consist of the following (in thousands):

<TABLE>
<CAPTION>
                                          April 1,   March 27,
                                            2000        1999
                                         ---------   ---------
<S>                                      <C>         <C>
Accounts receivable                      $ 27,512    $ 18,408
Less:  allowance for doubtful accounts     (3,048)     (3,468)
                                         --------    --------
                                         $ 24,464    $ 14,940
                                         ========    ========
</TABLE>

NOTE 4 INVENTORIES


Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                        April 1,      March 27,
                         2000           1999
                        --------      ---------
<S>                     <C>           <C>
Raw materials           $19,203        $14,444
Work in progress          3,602          3,584
Finished goods              269            219
                        -------        -------
                        $23,074        $18,247
                        =======        =======
</TABLE>

As of April 1, 2000 and March 27, 1999, the Company had reserves for obsolete
raw materials (principally printed circuit board components) of $2,235,000 and
$3,849,000, respectively. As discussed in Note 2, Other (recoveries) charges
include a $2,541,000 provision to the reserve for excess and obsolete inventory
for fiscal 1999. Cost of sales for fiscal 2000, 1999 and 1998 include provisions
to the allowance for obsolete materials of $478,000, $0 and $344,000,
respectively.


                                                                              28
<PAGE>   29


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 5 PROPERTY AND EQUIPMENT, NET

Property and equipment, net consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                     April 1,      March 27,
                                                       2000          1999
                                                     --------      ---------
<S>                                                  <C>           <C>
Machinery and equipment                              $ 12,794      $ 12,086
Leasehold improvements                                  4,039         3,884
Furniture and fixtures                                    893           890
                                                     --------      --------
                                                       17,726        16,860
Less:  accumulated depreciation and amortization      (11,359)       (9,627)
                                                     --------      --------
                                                     $  6,367      $  7,233
                                                     ========      ========
</TABLE>


NOTE 6 NOTES PAYABLE AND LONG-TERM DEBT

As of April 1, 2000, the Company has (i) a three-year revolving loan facility
for $35 million with commercial banks and (ii) an equipment financing facility
from a financial services company. There was $14.7 million outstanding under the
commercial bank line of credit as of April 1, 2000.

The credit agreement has a three-year term with automatic renewals for
successive terms of equal duration thereafter. The bank revolving credit
facility bears interest at LIBOR plus 2.25% to 3.00%, depending upon certain
financial ratios, or prime (9% at April 1, 2000) or prime plus one-half of one
percent (such rate determined based upon the amounts, financial ratios and
period of loans), matures March 30, 2003 and is secured by certain assets of the
Company. The bank facility requires the payment of a monthly commitment fee
equal to one-quarter of one percent (0.25% per annum) on the unused balance, and
borrowings are limited based upon certain collateral availability requirements.
The equipment financing facility provides for the leasing of equipment over a
five-year period commencing on the date of acceptance of such equipment. All
equipment leased to date under this facility has qualified for operating lease
treatment.

As of March 27, 1999, the Company had (i) a revolving line of credit for $17
million from a commercial bank, (ii) a term loan facility for $3.3 million from
a commercial bank, and (iii) an equipment financing facility from a financial
services company. There was $10.1 million outstanding under the commercial bank
line of credit and $2.7 million outstanding under the term note at March 27,
1999. The term loan facility was subject to interest at 9.2% and was secured by
certain assets. The bank line was subject to interest at prime (7.75% at March
27, 1999) or LIBOR plus 1.25% or 1.75% depending upon the amounts, financial
ratios and period of loans.

The financing facilities contain certain restrictions, which among others,
require maintenance of minimum financial ratios. At March 27, 1999, the Company
did not satisfy certain financial covenants imposed under its then existing
financing facility. The Company received waivers with respect to these financial
covenants as of March 27, 1999.

Interest paid totaled $793,000, $841,000 and $209,000 for fiscal 2000, 1999 and
1998, respectively.


                                                                              29
<PAGE>   30


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 7 INCOME TAXES

The provision (benefit) for income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
                         Fiscal Year Ended
                -----------------------------------
                 April 1,    March 27,    March 28,
                   2000         1999         1998
                ---------    ---------    ---------
<S>             <C>          <C>          <C>
Federal
   Current      $   216      $  (245)     $   228
   Deferred         605       (2,485)         125
State
   Current           --           --           37
   Deferred         114         (374)          (4)
                -------      -------      -------

                $   935      $(3,104)     $   386
                =======      =======      =======
</TABLE>

The differences in income taxes provided and the amounts determined by applying
the federal statutory tax rate to income (loss) before income taxes result from
the following:

<TABLE>
<CAPTION>
                                                           Fiscal Year Ended
                                                ----------------------------------------
                                                 April 1,      March 27,       March 28,
                                                  2000            1999           1998
                                                ---------      ---------       ---------
<S>                                             <C>       <C>        <C>
Tax at statutory rate                                34.0%         (34.0)%          34.0%
Add (deduct) the effect of state income tax           3.0           (2.9)            2.6
Other, net                                            0.8            1.0             1.4
                                                ---------      ---------       ---------
                                                     37.8%         (35.9)%          38.0%
                                                =========      =========       =========
</TABLE>

The components of deferred income tax assets, partially included in prepaid
expenses and other current assets, and liabilities are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                   April 1,   March 27,
                                                     2000       1999
                                                   --------   ---------
<S>                                                <C>        <C>
Deferred tax assets:
   Reserves                                        $ 1,966    $ 2,557
   Net operating loss carry-forwards                    20        397
   Franchise tax                                        14          5
   Accrued vacation                                    137        132
   AMT credits                                         137         --
Other                                                  248        200
                                                   -------    -------
Gross deferred tax asset                             2,522      3,291
Deferred tax liabilities:
   Depreciation                                       (133)      (183)
                                                   -------    -------
Gross long-term deferred tax liability                (133)      (183)
                                                   -------    -------
Net deferred tax asset                             $ 2,389    $ 3,108
                                                   =======    =======
</TABLE>


                                                                              30
<PAGE>   31


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


Realization of the total deferred tax assets representing tax loss and credit
carry-forwards is dependent on the Company's ability to generate future taxable
income. Management believes that it is more likely that not future taxable
income will be sufficient to utilize the tax carry-forwards prior to their
expiration to fully recover the asset. However, there can be no assurance that
the Company will meet these expectations. As a result, the amount of the
deferred tax assets considered realizable could be reduced. Such an occurrence
could adversely affect the Company's results of operations and financial
condition.

Income taxes totaling $0, $355,000 and $170,000 were paid in fiscal 2000, 1999
and 1998, respectively. As of April 1, 2000, the Company had net operating loss
carry-forwards of approximately $368,000 expiring primarily in 2019. In
addition, the Company had recoverable income taxes on the balance sheet of
approximately $205,000 and 245,000 at April 1, 2000 and March 27, 1999 included
in prepaid expenses and other current assets.


NOTE 8 CAPITAL STOCK

The Board of Directors has the authority to issue preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences and the number
of shares constituting any series or the designation of such series, without
further vote or action by the Company's stockholders. The issuance of the
preferred stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders and
may adversely affect the voting and other rights of the holders of common stock.


NOTE 9 LEASE COMMITMENTS

XeTel leases its operating facility and certain office equipment under
noncancellable operating leases. Rental expense under all operating leases was
approximately $4,224,000, $4,377,000 and $3,024,000 during fiscal 2000, 1999 and
1998, respectively. Future noncancellable minimum rental payments under all
operating leases with initial terms of greater than one year are $4,222,000 in
2001, $3,328,000 in 2002, $2,374,000 in 2003, $1,488,000 in 2004, $1,283,000 in
2005 and an aggregate of $5,189,000 thereafter.


NOTE 10 SALES TO MAJOR CUSTOMERS

XeTel's sales are concentrated in the electronics industry; however, the
customers operate in diverse markets and geographic areas. The following table
summarizes the percentage of gross revenues generated by sales to customers that
account for more than 10% of sales in fiscal 2000, 1999 and 1998:

<TABLE>
<CAPTION>
                   April 1,       March 27,     March 28,
                     2000           1999           1998
                   --------       ---------     ---------
<S>                <C>            <C>           <C>
Customer A            13%            --%           --%
Customer B            12             --            --
Customer C            10             --            --
Customer D            --             32            20
Customer E            --             --            16
</TABLE>



                                                                              31
<PAGE>   32

                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


NOTE 11 RELATED PARTY TRANSACTIONS

The Company has transactions with certain divisions of Rohm Corporation, a
wholly-owned subsidiary of Rohm U.S.A., Inc. ("Rohm") a subsidiary of Rohm Co.,
Ltd., Japan, during the normal course of business. Purchases from such divisions
were $152,000, $162,000 and $191,000 for fiscal 2000, 1999 and 1998
respectively. Accounts payable to such divisions were $52,000 and $28,000 as of
April 1, 2000 and March 27, 1999, respectively. Accounts receivable from such
divisions were not significant.


NOTE 12 EMPLOYEE BENEFIT PLANS


STOCK OPTION PLAN


The Company applies APB Opinion No. 25 and related interpretations in accounting
for its stock option plan, which is described below. Accordingly, no
compensation cost has been recognized for its stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair market value at the date of grant for awards under that plan
consistently with the method provided for by SFAS No. 123, the Company's net
income (loss) and the diluted earnings (loss) per share would have reflected the
following pro forma amounts for fiscal 2000 and fiscal 1999 (in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                       Fiscal Year Ended
                                               --------------------------------
                                               April 1,   March 27,   March 28,
                                                 2000        1999        1998
                                               --------   ----------  ---------
<S>                                            <C>        <C>         <C>
Net income (loss)                As reported   $  1,538   $  (5,538)  $   629
                                 Pro forma     $  1,116   $  (5,868)  $   361

Diluted earnings (loss) per
share                            As reported   $   0.16   $   (0.61)  $  0.07
                                 Pro forma     $   0.12   $   (0.65)  $  0.04
</TABLE>


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants:

<TABLE>
<CAPTION>
                                  Fiscal Year Ended
                            ------------------------------
                            April 1,  March 27,  March 28,
                              2000     1999       1998
                            --------  ---------  ---------
<S>                         <C>       <C>        <C>
Dividend yield                   --        --         --
Expected volatility            79.9%     63.5%      47.5%
Risk-free rate of return       6.42%     5.11%      5.67%
Expected life               5 years   5 years    5 years
</TABLE>



                                                                              32
<PAGE>   33

                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


XeTel's 1997 Stock Option Plan (the "Option Plan") provides for the grant of
common stock options to key employees. The exercise price of each option is the
fair market value of a share of common stock on the date of grant. The term of
each option can be no more than 10 years from the date of grant and expires 90
days after the termination of employment. Each option vests in equal annual
installments over a period of four years from the date of grant. As of April 1,
2000, the Company has reserved 2,191,525 shares of common stock for the Option
Plan. A summary of activity under the Option Plan is as follows:


<TABLE>
<CAPTION>
                                                 Number        Weighted
                                              of Shares         Average
                                                  Under        Exercise
                                                 Option        Price($)
                                             ----------      ----------
<S>                                          <C>             <C>
Options outstanding as of March 29, 1997      1,485,100            2.36

    Granted                                     415,500            4.94

    Exercised                                  (115,775)           1.29

    Canceled                                   (179,625)           5.20
                                             ----------      ----------
Options outstanding as of March 28, 1998      1,605,200            2.82

    Granted                                     331,000            3.36

    Exercised                                  (108,375)           1.33

    Canceled                                   (147,250)           4.62
                                             ----------      ----------
Options outstanding as of March 27, 1999      1,680,575            2.86

    Granted                                     371,700            2.13

    Exercised                                  (149,325)           1.31

    Canceled                                   (243,550)           2.50
                                             ----------      ----------
Options outstanding as of April 1, 2000       1,659,400            2.89
                                             ==========      ==========

Options exercisable at:
    March 28, 1998                              930,450            1.79

    March 27, 1999                            1,031,325            2.20

    April 1, 2000                               996,625            2.70
</TABLE>

<TABLE>
<CAPTION>
                                              Number of
                                                 Shares        Weighted
Weighted average,  grant date fair value          Under         Average
of options granted during:                       Option   Fair Value($)
                                             ----------   -------------
<S>                                          <C>          <C>
Fiscal 1998                                     415,500            2.42

Fiscal 1999                                     331,000            1.95

Fiscal 2000                                     371,700            1.46
</TABLE>


                                                                              33
<PAGE>   34


                               XETEL CORPORATION
                         NOTES TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                April 1, 2000
                   ----------------------------------------------------------------------
                              Options Outstanding                 Options Exercisable
                   ---------------------------------------   ----------------------------
                                                  Weighted
                                    Weighted       Average
                     Number of       Average     Remaining     Number of         Weighted
                       Options      Exercise   Contractual       Options          Average
Exercise Price     Outstanding         Price     Life(yrs)   Exercisable   Exercise Price
--------------     -----------     ---------   -----------   -----------   --------------
<S>                <C>             <C>         <C>           <C>           <C>
 $1.22 - 1.22          179,500     $    1.22          5.16       179,500        $    1.22
  1.23 - 1.23          352,750          1.23          3.65       352,750             1.23
  1.50 - 2.88          415,650          2.23          6.72        51,625             2.15
  3.50 - 4.88          359,875          3.96          7.68       185,125             4.16
  5.00 - 6.00          351,625          5.09          6.91       227,625             5.10
                    ----------    ----------    ----------    ----------       ----------
 $1.22 - 6.00        1,659,400     $    2.89          6.15       996,625        $    2.70
                    ==========    ==========    ==========    ==========       ==========
</TABLE>


EMPLOYEE STOCK PURCHASE PLAN

Under the Company's Employee Stock Purchase Plan ("Purchase Plan"), employees
meeting specific employment qualifications are eligible to participate and can
purchase shares semi-annually through payroll deductions at the lower of 85% of
the fair market value of the stock at the commencement or end of the offering
period. The Purchase Plan permits eligible employees to purchase common stock
through payroll deductions for up to 10% of qualified compensation to a maximum
of 1,500 shares per enrollment period. During fiscal 2000 and fiscal 1999,
120,406 and 105,427 shares were issued under the plan, respectively. Proceeds
from stock issued under the Purchase Plan were $214,000 and $286,000 for fiscal
2000 and fiscal 1999, respectively. As of April 1, 2000, 706,686 shares were
reserved for future issuance under the plan.

401(k) PLAN

The Company sponsors a defined contribution retirement plan (the "401(k) Plan")
pursuant to Section 401(k) of the Internal Revenue Code. The 401(k) Plan was
amended effective July 1, 1995 whereby substantially all employees are eligible
to participate if they are at least 21 years of age, and such participants may
contribute up to 12% of their compensation. Also in connection with this
amendment, the Company elected to make matching contributions to participants
after the participants have completed one year of service. The matching
contribution is 25% of participant contributions, which is applied to a maximum
of 5% of each participant's compensation. The Company may also make profit
sharing and other contributions to the 401(k) Plan for the benefit of the
participants. Company contributions vest ratably over a five-year period.
Company contributions charged to operations were $125,000, $126,000 and $137,000
for fiscal 2000, 1999 and 1998, respectively.

RESTRICTED STOCK AWARDS

Restricted stock awards are currently granted at the discretion of the Board of
Directors under the Stock Option Plan in connection with the hiring or retention
of key executives and are subject to certain conditions. Restrictions are lifted
two years after the grant date, provided the executive continues to be employed
by the Company. For the year ended April 1, 2000 no stock awards were granted.
For the year ended March 27, 1999, the Company awarded 56,500 shares of common
stock, which had a fair value at the date of grant of $246,000. Compensation
under the plan is charged to operations over the restriction period and amounted
to $130,000 and $118,000 in fiscal 2000 and 1999, respectively.


                                                                              34
<PAGE>   35


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
          ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The directors and executive officers of the Company and their ages are as
follows:

<TABLE>
<S>                           <C>      <C>
Ronald W. Guire               51       Chairman of the Board of Directors (Class III)
Angelo A. DeCaro, Jr.         48       President, Chief Executive Officer and Director (Class III)
Julian C. Hart                60       Senior Vice President, Chief Technical Officer, and Secretary
William A. Peten              52       Senior Vice President, Corporate Materials and Systems
Richard S. Chilinski          48       Senior Vice President, Chief Financial Officer and Assistant
                                       Secretary
Stephen D. Sauter             40       Vice President, Sales and Marketing
Daniel J. Williams            51       Vice President, General Manager XeTel Austin
Norman E. O'Shea              51       Vice President, General Manager XeTel West
David Bibeau                  46       General Manager XeTel Dallas
Sam L. Densmore               59       Director (Class I)
C. Scott Kulicke              50       Director (Class II)
Al R. Schuele                 54       Director (Class II)
</TABLE>


Mr. Guire has served as Chairman of the Board of Directors since April 1998.
Prior to April 1998, Mr. Guire served as a Director of the Company from 1986 to
April 1998 and as Secretary from 1991 to September 1996. Mr. Guire has served
with EXAR Corporation ("EXAR"), a semiconductor designer and manufacturer, since
1984 including as Executive Vice President since June 1995, as Senior Vice
President from 1989 to 1995 and as a director, Secretary of the Board of
Directors and Chief Financial Officer since 1985. Mr. Guire was formerly a
partner in the public accounting firm of Graubart & Co. from 1979 to 1985.

Mr. DeCaro has served as a Director and President of the Company since 1993, and
in August 1995 was elected its Chief Executive Officer. Mr. DeCaro was employed
by IBM from 1974 to 1993, and served as Director of Operations-Printed Wiring
Board and Services at IBM's circuit board facility in Austin, Texas from 1992 to
1993 and Plant Manager of the same facility from 1989 to 1992.

Mr. Hart, a founder of the Company, has served as Senior Vice President of the
Company since 1984, its Chief Technical Officer since November 1995 and
Secretary since September 1996. Mr. Hart served as a Director of the Company
from 1984 until May 1997. From 1964 to 1984, he was employed by Texas
Instruments ("TI") in various development engineering positions, including in
the development of TI's Advanced Scientific Computer. Mr. Hart is a registered
Professional Engineer and a member of The International Society for Hybrid
Microelectronics.

Mr. Peten has served as Senior Vice President - Corporate Materials and Systems
since April 1998. Prior to April 1998, Mr. Peten served as Vice President -
Material Acquisition and Control from 1993 to April 1998. Prior to joining
XeTel, Mr. Peten was employed by IBM for approximately 23 years where he held
numerous management assignments including Materials Manager for the IBM Printed
Circuit Panel Plant in Austin from 1989 to 1993.

Mr. Chilinski has served as Senior Vice President and Chief Financial Officer of
the Company since August 1999 and as Vice President and Chief Financial Officer
of the Company from January 1995 to August 1999 and its Assistant Secretary
since November 1995. He previously served as Chief Financial Officer/Controller
of IBM PC Company Austin, a manufacturer of personal computers, from 1993 to
1994, and Vice President-Finance and Administration and Assistant Secretary of
TN Technologies, a subsidiary of Baker Hughes Technology Products Division,
engaged in the manufacture of process control technology, from 1988 to 1993. He
is a Certified Public Accountant.


                                                                              35
<PAGE>   36


Mr. Sauter has served as Vice President- Sales and Marketing since August 1997.
Prior to joining XeTel, Mr. Sauter was employed by Jabil Circuit, Inc. Mr.
Sauter was employed by Jabil Circuit for over 12 years and last held the
position of Sales and Marketing Manager for North America. Prior to Jabil, Mr.
Sauter worked for Texas Instruments in their Equipment Group as a Manufacturing
Engineer.

Mr. Williams has served as Vice President - General Manager XeTel Austin since
January 1999. Previous to this position, he served as General Manager XeTel
Austin High Volume Manufacturing from 1998 to 1999. Prior to joining XeTel, he
was employed as Director of Operations at Arrowsmith Technologies in 1997 and
Columbia Scientific from 1995 to 1997. He was also employed by Fisher Rosemount
Systems for approximately 18 years where he held numerous management positions
including Manufacturing, Materials and Operations Manager from 1989 to 1995.

Mr. O'Shea has served as Vice President - General Manger XeTel West since
December 1996. Mr. O'Shea joined the Company as part of the acquisition of the
manufacturing operations of SBE. Prior to joining XeTel, Mr. O'Shea served as
Vice President of Manufacturing of SBE. From 1987 to 1993, Mr. O'Shea was
employed at NeXT Computer where he served as Process Engineering Manager from
1987 to 1991 and Materials Manager from 1991 to 1993. From 1979 to 1987, he was
employed by Motorola where he held various management positions.

Mr. Bibeau joined XeTel as General Manager of XeTel Dallas in February 1999.
Prior to joining XeTel, he served as Director of Operations for Current
Technology, a division of Danaher Corporation. From 1986 to 1997, Mr. Bibeau
held several senior management positions in manufacturing and engineering with
General Signal Corporation.

Mr. Densmore has served as a Director of the Company since May 1997. From 1993
to November 1999, Mr. Densmore served with RF Monolithics, Inc., a radio
frequency component and module designer and manufacturer, including as its
President and Chief Executive Officer since 1996, Director since 1994 and
Executive Vice President, Chief Operating Officer, Chief Financial Officer and
Secretary from 1993 to 1996. In 1991, Mr. Densmore founded the IBC Group, a
private consulting company, and served as its President from 1991 to 1993. From
1984 to 1990, Mr. Densmore was employed at Recognition International, Inc., a
document image processing company. During that period, Mr. Densmore served as
Senior Vice President, Treasurer and Chief Financial Officer from 1989 to 1990
and Vice President of Corporate Development from 1984 to 1989. Mr. Densmore is a
Certified Public Accountant.

Mr. Kulicke has served as a Director of the Company since January 2000. Mr.
Kulicke has served with Kulicke & Soffa Industries, Inc., a leading supplier of
semiconductor assembly equipment, as Chief Executive Officer since 1979 and
Chairman of the Board since 1984. Prior to then he held a number of executive
positions with Kulicke & Soffa. Mr. Kulicke also serves on the Board of
Directors of General Semiconductor, Inc.

Mr. Schuele joined XeTel as a Director of the Company in August 1998. Mr.
Schuele is currently a partner at Sevin Rosen Funds, a venture capital firm
focused on investments in high technology companies. From August 1998 to July
1999 Mr. Schuele served as President and COO of Unitrode Corporation. Unitrode
Corporation which designs, manufactures and sells analog/linear and mixed-signal
integrated circuits was acquired by Texas Instruments in 1999. Prior to working
with Unitrode, he was the President and CEO of Benchmarq Microelectronics, Inc.
Mr. Schuele has also held a variety of senior management positions with Crystal
Semiconductor, Mostek Corporation, Motorola Semiconductor and Texas Instruments.

There is no family relationship among any of the foregoing individuals.


                                                                              36
<PAGE>   37


ITEM 11.  EXECUTIVE COMPENSATION

The information required by Item 11 of Form 10-K is incorporated by reference to
the information contained in the section captioned "Executive Officer
Compensation" of the Registrant's definitive Proxy Statement (Notice of Annual
Meeting of Stockholders) for the fiscal year ended April 1, 2000 to be held
August 22, 2000 which the Company will file with the Securities and Exchange
Commission within 120 days after the end of the fiscal year covered by this
report.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
          OWNERS AND MANAGEMENT

Information regarding this item is incorporated herein by reference from the
section entitled "Security Ownership of Certain Beneficial Owners and
Management" of the Registrant's definitive Proxy Statement (Annual Meeting of
Stockholders) for the fiscal year ended April 1, 2000 which the Company will
file with the Securities and Exchange Commission within 120 days after the end
of the fiscal year covered by this report.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has engaged in a number of transactions with Rohm, its largest
stockholder. The Company believes that these transactions were on terms no less
favorable to the Company than would have been obtained from unaffiliated third
parties. All significant transactions in the past and future, if any, between
the Company and its officers, directors, principal stockholders and affiliates
(including Rohm) will be approved by a majority of the Company's independent
directors and will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.

The Company has entered into transactions in the ordinary course of business
with certain divisions of Rohm Corporation, a wholly owned subsidiary of Rohm.
Component purchases from such divisions were $152,000, $162,000 and $191,000 for
fiscal years 2000, 1999 and 1998, respectively.


                                                                              37
<PAGE>   38


PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
          REPORTS ON FORM 8-K

(a)  1.  Financial Statements.

         The financial statements listed in ITEM 8: FINANCIAL STATEMENTS AND
         SUPPLEMENTARY DATA, above are filed as part of this Annual Report on
         Form 10-K.

     2.  Financial Statement Schedules.

         All schedules are omitted because they are not applicable or the
         required information is shown in the financial statements or notes
         thereto.

     3.  Exhibits.

         The exhibits listed in the accompanying Index to Exhibits are filed as
         part of this Annual Report on Form 10-K.

(b)  Reports on Form 8-K

         None


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints, Angelo A. DeCaro, Jr. and
Richard S. Chilinski, and each or either of them, his true and lawful
attorney-in-fact and agent, each with the power of substitution and
resubstitution, for him in any and all capacities, to sign any and all
amendments to this Annual Report ( Form 10-K) and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.


                                                               XETEL CORPORATION
                                                                    (Registrant)

                        Date: June 2, 2000         By: /s/ Angelo A. DeCaro, Jr.
                                                   -----------------------------
                                                           Angelo A. DeCaro, Jr.
                              President and Chief Executive Officer and Director


                                                                              38
<PAGE>   39


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.



<TABLE>
<CAPTION>
             Name                                    Title                              Date
<S>                                 <C>                                              <C>
/s/ Angelo A. DeCaro, Jr.
---------------------------------
Angelo A. DeCaro, Jr.               President and Chief Executive Officer and        June 2, 2000
                                    Director (principal executive officer)

/s/ Richard S. Chilinski
---------------------------------
Richard S. Chilinski                Senior Vice President, Chief Financial           June 2, 2000
                                    Officer and Assistant Secretary (principal
                                    financial and accounting officer)

/s/ Ronald W. Guire
---------------------------------
Ronald W. Guire                     Chairman of the Board of Directors               June 2, 2000

/s/ Sam L. Densmore
---------------------------------
Sam L. Densmore                     Director                                         June 2, 2000

/s/ C. Scott Kulicke
---------------------------------
C. Scott Kulicke                    Director                                         June 2, 2000

/s/ Al R. Schuele
---------------------------------
Al R. Schuele                       Director                                         June 2, 2000
</TABLE>




                                                                              39
<PAGE>   40
                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
EXHIBIT
NUMBER          DESCRIPTION
-------         -----------
<S>       <C>
   3.2(1)  Second Restated Certificate of Incorporation.

   3.3(1)  Restated Bylaws of the Registrant, as amended.

   3.4(1)  Registration Rights, dated June 18, 1986 among the Registrant Rohm
           Corporation, Julian C. Hart, David W. Gault and Emory C. Garth.

    .1(1)  Reference is made to Exhibits 3.1, 3.2 and 3.3.

   4.2(1)  Specimen Common Stock certificate.

  10.2(1)  Form of Indemnification Agreement between the Registrant and
           each of its directors and certain executive officers.

 10.20(1)  Manufacturing Services Agreement February 22, 1989 between Motorola,
           Inc., MOS Memory Products Division and the Registrant, and letter
           from Motorola, Inc., Fast Static RAM Module Division related thereto.

 10.21(1)  Mobile Communication Standard Terms and Conditions dated August 5,
           1994 for Westinghouse Electric.

 10.22(2)  Master Lease Agreement between the Registrant and General Electric
           Capital Corporation.

 10.23(2)  $3,000,000 Promissory Note between the Registrant and Rohm U.S.A.

 10.24(3)  $7,000,000 Promissory Note between the Registrant and Texas Commerce
           Bank National Association.

 10.25(3)  Lease Agreement between Braker Phase III, Ltd. as Landlord, and the
           Registrant, as Tenant.

 10.26(4)  Lease Agreement between Delta HP Limited, as Landlord, and the
           Registrant, as Tenant.

 10.27(4)  First Amendment to Credit Agreement between the Registrant and Texas
           Commerce Bank National Association.

 10.28(4)  Letter of Commitment between the Registrant and General Electric
           Capital Corporation.

 10.29(4)  Amended $3,000,000 Promissory Note between the Registrant and Rohm
           U.S.A.

 10.30(5)  Registrant's 1997 Stock Incentive Plan

 10.31(5)  Registrant's Employee Stock Purchase Plan

 10.32(6)  Lease Agreement between Braker Phase III, Ltd. as Landlord, and the
           Registrant, as Tenant.

 10.33(7)  Amended $10,000,000 Promissory Note between the Registrant and Chase
           Bank of Texas.

 10.34(7)  Second Amendment to Credit Agreement between the Registrant and Chase
           Bank of Texas.

 10.35(7)  Amended Letter of Commitment between the Registrant and General
           Electric Capital Corporation.

 10.36(8)  Amended $17,000,000 Promissory Note

 10.37(8)  Third Amendment to Credit Agreement

 10.38(9)  First Amendment to Credit Agreement between the Registrant and Chase
           Bank of Texas.

 10.39(9)  Amendment No. 1 to 1997 Stock Incentive Plan.

10.40(10)  Stockholders Rights Agreement dated December 31, 1998

    10.41  Loan and Security Agreement between the Registrant and The CIT
           Group / Business Credit, Inc, and Chase Bank as participant

     11.1  Computation of Earnings per Share.

     23.1  Consent of PricewaterhouseCoopers, LLP.

     24.1  Power of Attorney, pursuant to which amendments to this Form 10-K may
           be filed, is included on the signature page contained in Part IV of
           this Form 10-K.

     27.1  Financial Data Schedule
</TABLE>

(1)  Incorporated by reference to the like-numbered exhibits previously filed
     with Registrant's Registration Statement on Form S-1, No. 33-99632 filed
     with the Securities and Exchange Commission on February 14, 1996.

(2)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's 1996 Form 10-K.

(3)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's September 1996 Form 10-Q.

(4)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's 1997 Form 10-K.

(5)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's 1997 Form 14-A.

(6)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's December 1997 Form 10-Q.

(7)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's 1998 Form 10-K.

(8)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's June 1998 Form 10-Q.

(9)  Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's September 1998 Form 10-Q.

(10) Incorporated by reference to the like-numbered exhibits previously filed
     with the Registrant's January 1999 Registration Statement on Form 8-A.