<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


                                   (Mark One)


     [x]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001


                                       or


     [x]  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 of Incorporation)                   (I.R.S. Employer ID 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)


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 [ ]

As of the close of business on August 7, 2001, 9,983,898 shares of the
registrant's common stock, par value $.0001 per share, were outstanding.


<PAGE>   2



                                XETEL CORPORATION
                                      INDEX




<Table>
<S>      <C>                                                                                              <C>
PART I.  FINANCIAL INFORMATION


ITEM 1.  Condensed Financial Statements (unaudited)

         Balance Sheets as of June 30, 2001 and March 31, 2001                                            3

         Statements of Operations for the three months ended
             June 30, 2001 and July 1, 2000                                                               4

         Statements of Cash Flows for the three months ended
             June 30, 2001 and July 1, 2000                                                               5

         Notes to Financial Statements                                                                    6

ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations            9

ITEM 3.  Quantitative and Qualitative Disclosure about Market Risk                                       12


PART II.  OTHER INFORMATION

ITEM 5.  Other Information                                                                               13

ITEM 6.  Exhibits and Reports on Form 8-K                                                                13

SIGNATURES                                                                                               13
</Table>

<PAGE>   3

PART I   FINANCIAL INFORMATION

ITEM 1.  CONDENSED FINANCIAL STATEMENTS

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

<Table>
<Caption>
                                                                               June 30,       March 31,
                                                                                 2001           2001
                                                                             ------------   ------------
                                                                             (unaudited)
<S>                                                                          <C>            <C>
ASSETS

Current assets:
     Cash and cash equivalents                                               $        743   $      1,744
     Trade accounts receivable, net                                                32,697         41,202
     Inventories, net                                                              44,298         49,856
     Deferred tax asset                                                             1,077          1,077
     Prepaid expenses and other                                                     1,453          1,505
                                                                             ------------   ------------
         Total current assets                                                      80,268         95,384

Property and equipment, net                                                         7,623          7,133
                                                                             ------------   ------------
         TOTAL ASSETS                                                        $     87,891   $    102,517
                                                                             ============   ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Trade accounts payable                                                  $     27,508   $     32,019
     Accrued expenses and other liabilities                                         3,434          4,947
                                                                             ------------   ------------
         Total current liabilities                                                 30,942         36,966


Deferred income taxes                                                                 143            143
Long-term debt                                                                     25,525         34,329

Commitments and contingencies

Stockholders' equity:
     Preferred stock, $0.0001 par value, 4,000,000 shares authorized,
        none issued and outstanding                                                    --             --
     Common stock, $0.0001 par value, 25,000,000 shares authorized,
        9,982,898 and 9,938,066 shares issued and 9,976,902 and
        9,932,070 shares outstanding, respectively                                      1              1
     Additional paid in capital                                                    23,122         23,001
     Retained earnings                                                              8,158          8,077
                                                                             ------------   ------------
         Total stockholders' equity                                                31,281         31,079
                                                                             ------------   ------------
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $     87,891   $    102,517
                                                                             ============   ============
</Table>



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

                                                                               3
<PAGE>   4


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

<Table>
<Caption>
                                                           Three Months Ended
                                                        ------------------------
                                                         June 30,      July 1,
                                                           2001          2000
                                                        ----------    ----------
<S>                                                     <C>           <C>
Net sales                                               $   39,400    $   42,697
Cost of sales                                               36,379        38,597
                                                        ----------    ----------
     GROSS PROFIT                                            3,021         4,100

Selling, general and administrative expenses                 2,377         1,899
Recoveries, net                                                 --          (724)
                                                        ----------    ----------
     INCOME FROM OPERATIONS                                    644         2,925
Other expense, net                                            (507)         (409)
                                                        ----------    ----------
                                                               137         2,516

    INCOME BEFORE INCOME TAXES

Provision for income taxes                                      56           956
                                                        ----------    ----------
     NET INCOME                                         $       81    $    1,560
                                                        ==========    ==========

     Basic earnings per share                           $     0.01    $     0.16
                                                        ==========    ==========

     Basic weighted average shares outstanding               9,965         9,513
                                                        ==========    ==========

     Diluted earnings per share                         $     0.01    $     0.16
                                                        ==========    ==========

     Diluted weighted average shares outstanding            10,174         9,773
                                                        ==========    ==========
</Table>

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


                                                                               4
<PAGE>   5


                                XETEL CORPORATION
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<Table>
<Caption>
                                                         Three Months Ended
                                                      ------------------------
                                                       June 30,       July 1,
                                                         2001          2000
                                                      ----------    ----------
<S>                                                   <C>           <C>
Cash flows from operating activities:
   Net income                                         $       81    $    1,560
   Adjustments to reconcile net income
       to net cash (used in) provided
       by operating activities:
        Depreciation and amortization                        514           489
        Deferred compensation                                 --            16
        Loss on disposal of equipment                         26            --
Changes in operating assets and liabilities:
        Trade accounts receivable                          8,505        (2,174)
        Inventories                                        5,558       (11,445)
        Prepaid expenses and other                            52            39
        Trade accounts payable                            (4,511)        3,327
        Accrued expenses and other liabilities            (1,513)          (45)
                                                      ----------    ----------
CASH PROVIDED BY (USED IN)
     OPERATING ACTIVITIES                                  8,712        (8,233)
Cash flows from investing activities:
       Purchases of property and equipment                (1,066)         (603)
       Proceeds from sale of equipment                        36            --
                                                      ----------    ----------
CASH USED IN INVESTING ACTIVITIES                         (1,030)         (603)
Cash flows from financing activities:
      Net borrowings (repayments) under debt
             agreements                                   (8,804)        8,772
      Proceeds from stock options exercised                   33            --
      Cash proceeds from stock issued under
              employee stock purchase plan                    88            54
                                                      ----------    ----------
CASH PROVIDED BY FINANCING ACTIVITIES                     (8,683)        8,826
Decrease in cash and cash equivalents                     (1,001)          (10)
Cash and cash equivalents, beginning of period             1,744         7,398
                                                      ----------    ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD              $      743    $    7,388
                                                      ==========    ==========
</Table>

                                                                               5
<PAGE>   6


                                XETEL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1. THE COMPANY AND DESCRIPTION OF BUSINESS ACTIVITIES

    XeTel Corporation (the "Company") provides comprehensive and customized
electronics manufacturing solutions to original equipment manufacturers
primarily in the networking, telecommunications and computer industries in the
United States of America. The Company incorporates advanced 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.

NOTE 2. BASIS OF PRESENTATION

    These interim financial statements have been prepared by the Company,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). All adjustments have been made to the accompanying
interim financial statements which are, in the opinion of the Company's
management, necessary for a fair presentation of the Company's operating results
and include all adjustments of a normal recurring nature. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is recommended that these
interim financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended March 31, 2001. The results of operations for any
interim period are not necessarily indicative of the results of operations for
the entire year.

NOTE 3. RECOVERIES, NET

    The components of Recoveries, net included in the Statements of Operations
are as follows (in thousands):

<Table>
<Caption>
                                                        THREE MONTHS
                                                            ENDED
                                                    --------------------
                                                    JUNE 30,     JULY 1,
                                                      2001        2000
                                                    --------    --------
<S>                                                 <C>         <C>
Recoveries from customer A under forbearance
     agreement ..................................   $     --    $   (724)
                                                    --------    --------
                                                    $     --    $   (724)
                                                    ========    ========
</Table>

    Recoveries totaling $724,000 in the quarter ended July 1, 2000 were realized
from a work out plan and forbearance agreement with customer A.

    The work out plan and forbearance agreement was entered into with customer A
and related to a provision for certain amounts receivable at the end of fiscal
year 1999. As a result of the work out plan, the Company recovered substantially
all of the fiscal 1999 principal amounts reserved.

NOTE 4. TRADE ACCOUNTS RECEIVABLE, NET

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


<Table>
<Caption>
                                              JUNE 30,      MARCH 31,
                                                2001          2001
                                             ----------    ----------
                                             (UNAUDITED)
<S>                                          <C>           <C>
Accounts receivable ......................   $   32,876    $   41,382
Less: allowance for doubtful accounts ....         (179)         (180)
                                             ----------    ----------
                                             $   32,697    $   41,202
                                             ==========    ==========
</Table>

                                                                               6
<PAGE>   7


                                XETEL CORPORATION
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


NOTE 5. INVENTORIES, NET

    Inventories, net consist of the following (in thousands):


<Table>
<Caption>
                                                    JUNE 30,      MARCH 31,
                                                      2001          2001
                                                   ----------    ----------
                                                   (UNAUDITED)
<S>                                                <C>           <C>
Raw materials ..................................   $   38,228    $   42,319
Work in progress ...............................        6,300         7,981
Finished goods .................................          503           301
Less:  allowance for obsolete raw materials ....         (733)         (745)
                                                   ----------    ----------
                                                   $   44,298    $   49,856
                                                   ==========    ==========
</Table>

NOTE 6. NOTES PAYABLE AND LONG-TERM DEBT

    As of June 30, 2001 and March 31, 2001, the Company had a $35 million,
three-year revolving credit facility with a commercial lender. There was $25.5
million and $34.3 million outstanding under the credit facility as of June 30,
2001 and March 31, 2001, respectively.

    The credit agreement, entered into on March 31, 2000, has a three-year term
with automatic renewals for successive terms of equal duration thereafter. Loans
under the revolving credit facility bear interest at either LIBOR plus 2.25% to
3.00% (depending upon certain financial ratios), prime (6.75% at June 30, 2001),
prime plus 0.25% or prime plus 0.50% (such rate determined based upon the
amounts, financial ratios and period of loans), are scheduled to mature March
30, 2003 and are collateralized by certain of the Company's assets. The
revolving credit 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 inventory and accounts receivable
availability requirements.

The Company's credit facilities and certain operating leases contain certain
covenants and restrictions, which, among others, require maintenance of minimum
financial ratios. At June 30, 2001, the Company was in compliance with all such
financial covenants.

NOTE 7. LITIGATION

    A previous customer has refused to accept liability for a majority of the
$7.7 million in inventory the Company purchased on their behalf, resulting in
our filing of a lawsuit against the customer in July, 2001. Although the Company
believes that it will prevail in this litigation, it is currently unable to
predict when it will be resolved or for what amount. Accordingly, no provision
for any loss has been made in the financial statements. However, the Company
cannot guarantee that it will prevail in this litigation or, if the Company does
prevail, that it will be able to collect any amounts awarded in the litigation.

NOTE 8. EARNINGS PER COMMON SHARE

    Basic earnings per share ("EPS") is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the related period. 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.

                                                                               7
<PAGE>   8


                                XETEL CORPORATION
                   NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


    The following table sets forth the computation of basic and diluted earnings
per share (unaudited):

<Table>
<Caption>
                                                   THREE MONTHS
                                                      ENDED
                                             -----------------------
                                              JUNE 30,      JULY 1,
                                                2001         2000
                                             ----------   ----------
<S>                                          <C>          <C>
Basic earnings per share:
  Weighted average shares outstanding ....        9,965        9,513
                                             ==========   ==========
  Net income .............................   $       81   $    1,560
                                             ==========   ==========
  Basic earnings per share ...............   $     0.01   $     0.16
                                             ==========   ==========

Diluted earnings per share:
  Weighted average shares outstanding ....        9,965        9,513
Common stock equivalents:
  Stock options ..........................          209          260
                                             ----------   ----------
                                                 10,174        9,773
                                             ==========   ==========
  Net income .............................   $       81   $    1,560
                                             ==========   ==========
  Diluted earnings per share .............   $     0.01   $     0.16
                                             ==========   ==========
</Table>

Options to purchase 1,148,365 and 848,775 shares of common stock were
outstanding at June 30, 2001 and July 1, 2000, respectively, but were not
included in the computation of diluted EPS because the exercise of such options
would be anti-dilutive.


                                                                               8
<PAGE>   9
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

    The following discussion and analysis of financial condition and results of
operations should be read in conjunction with our financial statements and
related notes included elsewhere in this filing. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in the forward-looking
statements as a result of certain factors, including the risks discussed in
"Risk Factors that May Affect Future Results, Financial Condition and Market
Price of Securities" set forth elsewhere in this filing.

    All percentage amounts and ratios were calculated using the underlying data
in thousands. Operating results for the three months ended June 30, 2001 and
July 1, 2000 are not necessarily indicative of the results that may be expected
for the full fiscal year.

OVERVIEW

    We were founded in 1984 and, since our inception, have manufactured surface
mount assemblies and performed other manufacturing services for original
equipment manufacturers, or OEMs, in the electronics industry. The development
and growth of our business have generally followed the trend by OEMs in the
electronics industry to outsource all or a portion of their manufacturing
requirements. In view of this trend, we have developed a range of electronics
manufacturing services including product design, development support, advanced
prototyping, materials procurement, supply base management, complex surface
mount assembly, total system assembly and integration, manufacturing in various
production volumes, advanced test engineering and testing, and after-market
support. We have sought to forge long-term relationships with our customers as a
single-source provider of comprehensive electronics manufacturing services.

    In recent years we have implemented strategies to diversify our customer
base, improve profitability, advance our manufacturing technologies and
capabilities, broaden our service offerings and expand our manufacturing
capacity. We have continued to adopt advanced technologies, such as flip-chip
and micro-ball grid array, in advance of the continuing emergence and commercial
introduction of more complex electronics devices. In addition, we have expanded
into high growth markets requiring low- to moderate-volume, highly complex
manufacturing solutions, and reorganized our service offerings by establishing
dedicated service centers and broadening our services in total system assembly,
systems integration and order fulfillment.

    In the quarter ended June 30, 2001, we derived approximately 52% of our net
sales from telecommunications OEMs and 32% of our net sales from networking
OEMs. The percentage of net sales derived from our largest customer was 33%, 32%
and 19% of net sales, respectively, in the first quarter of fiscal 2002, fourth
quarter of fiscal 2001 and the first quarter of fiscal 2001.

    Our results of operations are affected by the level of capacity utilization
of our manufacturing facilities, direct and 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. Margins also vary based on the type of services we
provide.

RESULTS OF OPERATIONS

    The following table sets forth, as a percentage of net sales, statements of
operations data for the three month periods ended June 30, 2001 and July 1,
2000.

<Table>
<Caption>
                                                            THREE MONTHS
                                                               ENDED
                                                      -----------------------
                                                       JUNE 30,      JULY 1,
                                                         2001         2000
                                                      ----------   ----------
<S>                                                   <C>          <C>
  Net sales........................................        100.0%       100.0%
  Cost of sales....................................         92.3         90.4
                                                          ------       ------
  Gross profit.....................................          7.7          9.6
  Selling, general and administrative expenses.....          6.1          4.4
  Recoveries, net..................................          0.0         (1.7)
                                                          ------       ------
  Income from operations...........................          1.6          6.9
  Other expense, net...............................         (1.3)        (1.0)
                                                          ------       ------
  Income before income taxes.......................          0.3          5.9
  Provision for income taxes.......................          0.1          2.2
                                                          ------       ------
  Net income.......................................          0.2%         3.7%
                                                          ======       ======
</Table>


                                                                               9
<PAGE>   10


NET SALES

    Net sales for the quarter ended June 30, 2001 were $39.4 million, reflecting
a decrease of 7.7% from our net sales in the comparable quarter period of the
prior year of $42.7 million. Sales to our three largest customers during the
quarter ended June 30, 2001 represented 33%, 12% and 7% of total net sales, with
no other customer accounting for more than 5% of net sales. Sales to our three
largest customers during the quarter ended July 1, 2000 represented 19%, 11% and
11% of total net sales.

    Net sales for the quarter ended June 30, 2001 included approximately $6.0
million of sales of excess components to customers. Net sales in the comparable
quarter of the prior year included approximately $1.7 million of excess
inventory sales to customers. The lower sales levels for the three month period
ended June 30, 2001, versus the comparable period of the prior fiscal year,
reflected reduced customer demand in the Company's primary telecommunications
and networking markets.

COST OF SALES AND GROSS PROFIT

    Gross profit is defined as net sales less cost of sales. Cost of sales
consists of material costs, direct labor, direct material and manufacturing
overhead (which includes manufacturing and process engineering expenses). Gross
profit is affected by, among other factors, the level of sales, mix of services,
component costs and the level of capacity utilization of our equipment and
facilities.

    Gross profit for the quarter ended June 30, 2001 was $3.0 million versus
$4.1 million for the quarter ended July 1, 2000. Our gross profit as a
percentage of net sales, decreased to 7.7% in the first quarter of fiscal 2002,
versus 9.6% in the first quarter of fiscal 2001. The decrease in gross profit
percentage from the prior year was due primarily to an increased level of fixed
costs for facilities and equipment leases and a higher level of sales of lower
yielding excess components to customers. Gross profit in the current quarter was
also negatively affected by unfavorable material and manufacturing usage
variances of $388,000, negative gross profits of $141,000 associated with the
wind down of our San Ramon, California facility, both of which were partially
offset by a favorable material pricing variance of $481,000.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

    Selling, general and administrative, or SG&A, expenses consist primarily of
salaries and related expenses, marketing and promotional expenses, outside
services, travel and entertainment and sales commissions paid to direct sales
personnel and independent sales representative organizations.

    SG&A expenses were $2.4 million in the quarter ended June 30, 2001 versus
$1.9 million in the comparable quarter of the prior fiscal year. SG&A expenses
represented 6.0% of net sales for the quarter ended June 30, 2001 versus 4.4% of
net sales for the quarter ended July 1, 2000. The increase in over the
comparable quarter of the prior year, both the dollar amount and percentage of
net sales, was attributable to additional headcount in our the Sales and Finance
departments, increased consulting and other outside services and higher travel
expenses.

RECOVERIES, NET

    Recoveries totaling $724,000 in the quarter ended July 1, 2000 were realized
from a work out plan and forbearance agreement with customer A.

    The work out plan and forbearance agreement was entered into with customer A
related to a provision for certain amounts receivable at the end of fiscal year
1999. As a result of the work out plan, the Company recovered substantially all
of the fiscal 1999 principal amounts reserved. The work out plan also called for
the issuance of warrants to acquire shares of the customer's common stock and
the recovery of amounts due to the Company in the form of interest. These
warrants were exercised and the shares were sold in February 2001.

    There were no recoveries in the first quarter of fiscal 2001.

OTHER EXPENSE, NET

    Other expense, net for the quarter ended June 30, 2001 increased to $507,000
compared to $409,000 for the quarter ended July 1, 2000. The increase in other
expense, net was due to increased interest expense incurred on higher average
borrowings in the current fiscal quarter compared to the prior year, partially
offset by lower interest rates.

INCOME TAXES

    The provision for income taxes of $56,000 and $956,000 for the quarter ended
June 30, 2001 and July 1, 2000, respectively, reflected effective tax rates of
41% and 38%, respectively.

                                                                              10
<PAGE>   11


LIQUIDITY AND CAPITAL RESOURCES

    Our working capital was $49.3 million at June 30, 2001, compared to $58.4
million at March 31, 2001. Our available working capital at June 30, 2001
included cash and cash equivalents of $743,000.

    Net cash provided by operating activities was $8.7 million for the three
months ended June 30, 2001. Cash flows provided by operating activities during
the three months ended June 30, 2001 primarily resulted from reductions in
inventories and accounts receivable balances associated with lower sales levels,
accounts receivable collections and the sale of approximately $6.0 million of
excess inventory to customers. These cash flows were partially offset by the
reduction of trade payables and other liabilities.

    Capital expenditures during the three months ended June 30, 2001 were $1.1
million. Management anticipates that capital expenditures in fiscal 2002 will
decrease from the level of capital expenditures made in fiscal 2001.

    As of June 30, 2001, we had a three-year revolving credit facility for $35
million that was entered into on March 31, 2000. There was $25.5 million
outstanding under the revolving credit facility at June 30, 2001. The Company
was eligible to borrow an additional $2.3 million, at June 30, 2001, pursuant to
the revolving credit facility's borrowing formula. The revolving credit facility
provides for automatic renewals for successive terms of equal duration
thereafter unless terminated by either party prior to the renewal date. Loans
under the revolving credit facility bear interest at either LIBOR plus 2.25% to
3.00% (depending upon certain financial ratios), prime (6.75% at June 30, 2001),
prime plus 0.25% or prime plus 0.50% (such rate determined based upon the
amounts, financial ratios and period of loans), are scheduled to mature on March
30, 2003 and are collateralized by certain of our assets. The revolving credit
facility requires the payment of a monthly commitment fee equal to one-quarter
of one percent (0.25% per annum) of the unused balance, and borrowings are
limited based upon certain collateral availability requirements on eligible
accounts receivable and inventory.

    At June 30, 2001, our liquidity was negatively impacted by a high level of
inventory and to a lesser extent accounts receivable. During the quarter we
completed the sale of approximately $6.0 million of excess customer inventories.
However, one previous customer has refused to accept liability for a majority of
the $7.7 million in inventory we purchased on its behalf, resulting in our
filing of a lawsuit against the customer in July, 2001. Although we believe that
we will prevail in this litigation, we are currently unable to predict when it
will be resolved. Accordingly, no provision for loss has been made in the
financial statements. We also have approximately $16 million of inventory
on-hand for a current customer and, as a result of a decrease in demand
requirements from this customer, have been working with this customer to have
them purchase a large portion of this inventory. Based upon recent discussions
with this customer, we believe that we will be able to ship and collect on a
majority of this inventory prior to September 30, 2001, although there can be no
assurance that this transaction will be completed. Accounts receivable have been
reduced by approximately $8.5 million since March 31, 2001. However, primarily
due the overall general economic conditions, our customers have slowed their
payments, resulting in the number of our days sales outstanding to increase from
an average of 64 days at March 31, 2001 to 73 days at June 30, 2001 (using the
count-back method). As noted in our Annual Report on Form 10-K for the fiscal
year ended March 31, 2001, we have implemented plans to improve our liquidity by
i) reducing new materials purchases, ii) requesting certain customers to either
purchase inventories in excess of short-term manufacturing requirements or to
prepay our purchases of inventories on their behalf, and, iii) reduce accounts
receivable through increased collections efforts. While we believe that we will
be able to achieve our plans, there is no assurance that our objectives will be
met.

    Our loan facility and certain of our equipment operating leases contain
covenants and restrictions, which among other things, require maintenance of
minimum financial ratios. At June 30, 2001, we believe we were in compliance
with these covenants.

    We may require additional financing in connection with our business. We may
seek additional funds from time to time through public or private debt or equity
offerings or obtain further bank borrowings or off-balance sheet financing. Our
need for funding and the cost of and access to additional funds, are dependent
on our future operating results as well as external conditions. We believe that
our existing credit facilities, working capital, together with cash generated
from operations, will be sufficient to satisfy our anticipated working capital
requirements through the next 12 months.

BACKLOG

    Our backlog at June 30, 2001 was approximately $60.0 million as compared to
approximately $125.0 million at March 31, 2001 and approximately $138.4 million
at July 1, 2000. Backlog consists of purchase orders received by us and customer
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 us, as well as changes in customers' delivery
requirements or the rescheduling or cancellation


                                                                              11
<PAGE>   12


of orders and commitments, have resulted in the past and may result in the
future in substantial fluctuation in backlog from period to period. Accordingly,
backlog may not be a meaningful indicator of our future net sales.

EMPLOYEES

     As of June 30, 2001, we had approximately 536 full-time employees,
supplemented from time to time by part-time employees. Our employees are not
subject to a collective bargaining agreement and we believe our employee
relations to be satisfactory.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS, FINANCIAL CONDITION AND
MARKET PRICE OF SECURITIES

     Factors that could cause actual results or events to differ materially from
those anticipated by forward-looking statements, include, but are not limited
to: 1) our dependence on a limited number of suppliers and the ability to obtain
sufficient components on a timely basis; 2) the loss of any of our major
customers; 3) our ability to manufacture products for our customers on a
cost-effective basis; 4) risk of price increases associated with shortages in
the availability of electronics components; 5) working capital constraints due
to customer inventory requirements or materials shortages; 6) variability in the
volume and timing of our sales; 7) significant customers canceling their orders,
changing production quantities or failing to pay us for our services; 8) the
inability to secure additional financing when needed; 9) the inability to
effectively manage our growth; 10) the expansion of our business and operations
through acquisitions; 11) increased competition which may result in decreased
demand or reductions in prices for our services; 12) our dependence on certain
key personnel; 13) our dependence on the continuing trend by OEMs to outsource
their electronics manufacturing services needs; 14) design or manufacturing
defects in products we manufacture for our customers: 15) costs associated with
plant closures or relocations and 16) provisions in our charter documents,
stockholder rights plan and agreements with executives, as well as provisions of
Delaware law, which could prevent or delay a change in control of us and may
reduce the market price of our stock.

FORWARD LOOKING STATEMENTS

     The foregoing Management's Discussion and Analysis of Financial Condition
and Results of Operations contains various "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 represent our expectations or beliefs
concerning future events, including, but not limited to, statements regarding
growth in sales, profit margins and the sufficiency of our cash flow for our
future liquidity and capital resource needs. These forward looking statements
are further qualified by important factors that could cause actual results to
differ materially from those in the forward looking statements (for these
factors, see the preceding paragraph marked "Risk Factors That May Affect Future
Results, Financial Condition and Market Price of Securities" on page twelve of
this document). Results actually achieved may differ materially from expected
results included in these statements as a result of these or other factors.

ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     We invest our cash in money market funds or other instruments which meet
high credit quality standards as specified by our investment policy. We do not
use financial instruments for trading or other speculative purposes. Our credit
facilities are subject to market risk by way of interest rate fluctuations. The
carrying amount of our long-term debt approximates fair value due to the
periodic adjustments of our interest rate on the debt to current market rates.

     As of June 30, 2001, our long-term debt bore interest at variable rates,
generally tied to a reference rate such as LIBOR or the prime rate of interest
of certain lending institutions. Accordingly, our earnings and after tax cash
flow are affected by changes in interest rates. In the event of an adverse
change in interest rates, we would seek to take actions to mitigate our risk
exposure.


                                                                              12
<PAGE>   13


PART II    OTHER INFORMATION


ITEM 5.    OTHER INFORMATION

     On August 9, 2001, Alan R. Schuele resigned as a member of our board of
directors. Mr. Schuele had served as a director since August 1998 and was a
member of the audit and compensation committees of the board of directors. Mr.
Schuele resigned for personal reasons and to pursue other professional
interests, not due to any disagreement between Mr. Schuele and XeTel.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K


(a)  Exhibits.

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

(b)  Reports on Form 8-K

          The Company did not file any report on Form 8-K during the three month
          period ended June 30, 2001.


SIGNATURES

Pursuant to the requirements 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.


                                    XETEL CORPORATION

           Date: August 14, 2001    By:  /s/ Angelo A. DeCaro, Jr.
                                    ------------------------------
                                    Angelo A. DeCaro, Jr.
                                    President, Chief Executive Officer and
                                    Director
                                    (Principal Executive Officer)


                                    /s/ David G. Osowski
                                    David G. Osowski
                                    Vice President and Chief Financial Officer
                                    (Principal Financial and Accounting Officer)




                                                                              13

<PAGE>   14
                                  EXHIBIT INDEX

<Table>
<Caption>
     EXHIBIT
     NUMBER                             DESCRIPTION
     -------                            -----------
<S>                 <C>
       3.1    --    Second Restated Certificate of Incorporation (Incorporated
                    by reference to Exhibit 3.2 to our Registration Statement on
                    Form S-1 (File No. 33-99632))

       3.2    --    Restated Bylaws of the Registrant, as amended (Incorporated
                    by reference to Exhibit 3.3 to our Registration Statement on
                    Form S-1 (File No. 33-99632))

       3.3    --    Registration Rights Agreement, dated June 18, 1986 among the
                    Registrant, Rohm Corporation, Julian C. Hart, David W. Gault
                    and Emory C. Garth (Incorporated by reference to Exhibit 3.4
                    to our Registration Statement on Form S-1 (File No.
                    33-99632))

       4.1    --    Reference is made to Exhibits 3.1, 3.2 and 3.3

       4.2    --    Specimen Common Stock certificate (Incorporated by reference
                    to Exhibit 4.2 to our Registration Statement on Form S-1
                    (File No. 33-99632))

      10.1    --    Form of Indemnification Agreement between the Registrant and
                    each of its directors and certain executive officers
                    (Incorporated by reference to Exhibit 10.2 to our
                    Registration Statement on Form S-1 (File No. 33-99632))

      10.2    --    Manufacturing Services Agreement, dated 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 (Incorporated by Reference
                    to Exhibit 10.20 to our Registration Statement on Form S-1
                    (File No. 33-99632))

      10.3    --    Mobile Communication Standard Terms and Conditions Dated
                    August 5, 1994 for Westinghouse Electric (Incorporated by
                    reference to Exhibit 10.21 to our Registration Statement on
                    Form S-1 (File No. 33-99632))

      10.4    --    Master Lease Agreement between the Registrant and General
                    Electric Capital Corporation (Incorporated by Reference to
                    Exhibit 10.22 to our Annual Report on Form 10-K for fiscal
                    year 1996)

      10.5    --    Lease Agreement between Braker Phase III, Ltd. as Landlord,
                    and the Registrant, as Tenant (Incorporated by Reference to
                    Exhibit 10.25 to our Quarterly Report on Form 10-Q for the
                    quarter ended September 1996)

      10.6    --    Lease Agreement between Delta HP Limited, as Landlord, and
                    the Registrant, as Tenant (Incorporated by reference to
                    Exhibit 10.26 to our Annual Report on Form 10-K for fiscal
                    year 1997)

      10.7    --    Letter of Commitment between the Registrant and General
                    Electric Capital Corporation (Incorporated by reference to
                    Exhibit 10.28 to our Annual Report on Form 10-K for fiscal
                    year 1997)

      10.8    --    Registrant's 1997 Stock Incentive Plan (Incorporated by
                    reference to Exhibit 10.30 to our Schedule 14A for the 1997
                    annual meeting of stockholders)

      10.9    --    Registrant's Employee Stock Purchase Plan (Incorporated by
                    reference to Exhibit 10.31 to our Schedule 14A for the 1997
                    annual meeting of stockholders)

     10.10    --    Lease Agreement between Braker Phase III, Ltd. as Landlord,
                    and the Registrant, as Tenant (Incorporated by reference to
                    Exhibit 10.32 to our Quarterly Report on Form
</Table>

                                                                              14
<PAGE>   15


<Table>
<S>                 <C>
                    10-Q for the quarter ended December 1997)

     10.11    --    Amended Letter of Commitment between the Registrant and
                    General Electric Capital Corporation (Incorporated by
                    reference to Exhibit 10.35 to our Annual Report on Form 10-K
                    for fiscal year 1998)

     10.12    --    Amendment No. 1 to 1997 Stock Incentive Plan (Incorporated
                    by reference to Exhibit 10.39 to our Quarterly Report on
                    Form 10-Q for the quarter ended September 1998)

     10.13    --    Stockholders Rights Agreement dated December 31, 1998
                    (Incorporated by reference to Exhibit 10.40 to our
                    Registration Statement on Form 8-A filed January 1999)

     10.14    --    Loan and Security Agreement between the Registrant and The
                    CIT Group/Business Credit, Inc, and Chase Bank as
                    participant (Incorporated by reference to Exhibit 10.41 to
                    our Annual Report on Form 10-K for fiscal year 2000)

     10.15    --    Form of Change of Control Agreement between the Registrant
                    and certain of its executive officers (Incorporated by
                    reference to Exhibit 10.15 to our Quarterly Report on Form
                    10-Q for the quarter ended December 30, 2000)

     10.16    --    Manufacturing Agreement between Registrant and Intel Flash
                    Products Division (Incorporated by reference to Exhibit
                    10.16 to our Quarterly Report on Form 10-Q for the quarter
                    ended December 30, 2000)

     10.17    --    Purchase Agreement between Registrant and Cielo
                    Communications, Inc. (Incorporated by reference to Exhibit
                    10.17 to our Quarterly Report on Form 10-Q for the quarter
                    ended December 30, 2000)

     10.18    --    Master Manufacturing Agreement between Registrant and
                    Ericsson, Inc. (Incorporated by reference to Exhibit 10.18
                    to our Quarterly Report on Form 10-Q for the quarter ended
                    December 30, 2000)

     10.19    --    Manufacturing Services Agreement between Registrant and
                    Pathlight Technology, Inc. (Incorporated by reference to
                    Exhibit 10.18 to our Quarterly Report on Form 10-Q for the
                    quarter ended December 30, 2000)
</Table>


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