Inter Tel (INTL) 8-K Financial statements and exhibits

EXHIBIT 99.1

For Release	February 17, 2004
Release Number	INTL 04-01
Contact	Steven G. Mihaylo, Chairman, President and CEO (775) 954-1211 Norman Stout, Executive Vice President and CAO (480) 449-8900 Craig W. Rauchle, Executive Vice President and COO (775) 954-1200 Jeffrey T. Ford, Sr. Vice President and CTO (480) 961-9000 Kurt R. Kneip, Sr. Vice President and CFO (480) 449-8900

INTER-TEL ANNOUNCES 2003 FOURTH QUARTER AND YEAR-END RESULTS
FOURTH QUARTER SALES OF $100.0 MILLION, EPS OF $0.35 AND
RECORD FOURTH QUARTER OPERATING INCOME

Tempe, Arizona . . . February 17, 2004 . . . Inter-Tel, Incorporated (Nasdaq: INTL)today announced operating results for the fourth quarter and year ended December 31, 2003. Net sales for the fourth quarter of 2003 were $100.0 million, an increase of 1.3% compared to net sales of $98.8 million for the fourth quarter of 2002. Net sales for the year ended December 31, 2003 were $373.8 million, compared to net sales of $381.5 million for the same period in 2002.

For the quarter ended December 31, 2003, the Company reported net income of $9.4 million ($0.35 per diluted share), an increase of 8.0% compared to net income of $8.7 million ($0.33 per diluted share) in the fourth quarter of 2002. Net income for the year ended December 31, 2003 was $28.5 million ($1.08 per diluted share), compared to net income of $38.6 million ($1.49 per diluted share) for the same period in 2002, including an arbitration settlement¹. Excluding the arbitration settlement in 2002, net income for the year ended December 31, 2002 was $29.1 million ($1.13 per diluted share).

“We are extremely pleased with Inter-Tel’s operating performance and cash generation during the fourth quarter of 2003,” noted Steven G. Mihaylo, Inter-Tel’s Chairman and CEO. “Inter-Tel achieved record operating profit for any quarter in the Company’s history at $14.5 million. In addition, Inter-Tel’s fourth quarter gross margin increased to 53.5% compared to 52.5% in the fourth quarter of 2002. This increase reflected the continued strength of recurring revenues from our existing customer base, cost reductions achieved through process improvements and increases in sales of our software as a component of our system shipments and installations. Inter-Tel’s research and development spending also increased 13.6% in the year ended December 31, 2003 compared to 2002 as we focused on the development of SIP presence management and collaboration applications. In the second half of 2003, Inter-Tel released a family of new SIP and IP endpoints including a softphone for 802.11 pocket PCs, and three SIP and multi-protocol display endpoints. In addition, Inter-Tel released Unified Communicator version 2.0, an industry-leading presence management application, and Enterprise Conferencing, a SIP audio and web collaboration application. During the fourth quarter, Inter-Tel also announced new endpoints scheduled for release in early 2004 for two 802.11 wireless phones and a new, advanced color touch-screen IP endpoint.”

Mr. Mihaylo added, “Inter-Tel’s cash and short-term investment balances at December 31, 2003 totaled $174.5 million, an increase of more than $48 million compared to December 31, 2002. This quarter again reflected continued cash generated from operations, with effective management of our inventory and accounts receivable levels. For the year ended December 31, 2003, days sales outstanding were approximately 42 days and inventory turns were approximately 14 times.”

You may access our quarterly earnings results webcast, which is scheduled for February 17, 2004 at 5:30 p.m. (EDT) via the Internet at http://www.inter-tel.com. Select “News & Events” from the top

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navigation bar. A link to the webcast will be displayed within the “News & Events” section. A replay of the conference call will be available on the Internet until February 17, 2005.

About Inter-Tel, Incorporated

Inter-Tel (Nasdaq: INTL) offers value-driven communications products; applications utilizing networks and server-based communications software; and a wide range of managed services that include voice and data network design and traffic provisioning, custom application development, and financial solutions packages. An industry-leading provider focused on the communications needs of business enterprises, Inter-Tel employs over 1,800 communications professionals worldwide, and services business customers through a network of approximately 50 company-owned direct sales offices and over 350 authorized providers in the United States, United Kingdom and Japan. More information is available at www.inter-tel.com.

1 Inter-Tel received a gross cash award of $20 million in February 2002 in settlement of a binding arbitration claim. Income taxes, attorney’s fees, expert witness costs, arbitration costs and additional costs and expenses, were estimated at $10.5 million during 2002. Accordingly, after-tax net income from this arbitration totaled approximately $9.5 million ($0.37 per diluted share) in the year ended December 31, 2002.

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INTER-TEL, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

		Three Months
(in thousands, except per share amounts)		Ended December 31,
		2003			2002
NET SALES		$	100,020		$	98,774
	Cost of sales		46,515			46,879
GROSS PROFIT			53,505			51,895
	Research & development		5,600			5,613
	Selling, general and administrative		32,956			32,568
	Amortization		444			327
			39,000			38,508
OPERATING INCOME			14,505			13,387
	Interest and other income		581			572
	Foreign currency transaction gains		27			57
	Interest expense		(18	)		(42	)
INCOME BEFORE INCOME TAXES			15,095			13,974
INCOME TAXES			5,736			5,310
NET INCOME		$	9,359		$	8,664
NET INCOME PER SHARE—BASIC		$	0.37		$	0.35
NET INCOME PER SHARE—DILUTED		$	0.35		$	0.33
Average number of common shares outstanding — Basic			25,338			24,783
Average number of common shares outstanding — Diluted			27,020			26,307
Selected accounts as percentage of net sales:
Gross profit (margin)			53.5	%		52.5	%
Research and development			5.6	%		5.7	%
Selling general and administrative			32.9	%		33.0	%
Operating Income			14.5	%		13.6	%
Net Income			9.4	%		8.8	%

INTER-TEL, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

			Year								12/31/2002				Year ended
(in thousands, except per share amounts)			Ended December 31,								Excluding				12/31/2002
		2003				2002				0				0
NET SALES			$	373,836			$	381,456			$	381,456			$	0
	Cost of sales			176,763				186,983				186,983				—
GROSS PROFIT				197,073				194,473				194,473				—
	Research & development			21,978				19,340				19,340				—
	Selling, general and administrative			128,964				128,284				128,284				—
	Amortization			1,803				1,122				1,122
				152,745				148,746				148,746				—
OPERATING INCOME				44,328				45,727				45,727				—
	Litigation settlement (net of costs except for taxes)			—				15,516				—				15,516
	Interest and other, net			1,807				1,936				1,936				—
	Write-down of investment in Inter-Tel.NET/Vianet			—				(1,200	)			(1,200	)			—
	Foreign currency transaction gains (losses)			18				330				330				—
	Interest expense			(155	)			(156	)			(156	)			—
INCOME BEFORE INCOME TAXES				45,998				62,153				46,637				15,516
INCOME TAXES				17,480				23,516				17,492				6,024
NET INCOME			$	28,518			$	38,637			$	29,145			$	9,492
NET INCOME PER SHARE—BASIC			$	1.14			$	1.58			$	1.19			$	0.39
NET INCOME PER SHARE—DILUTED			$	1.08			$	1.49			$	1.13			$	0.37
Average number of common shares outstanding — Basic				25,078				24,444				24,444				24,444
Average number of common shares outstanding — Diluted				26,473				25,864				25,864				25,864

OTHER SELECTED FINANCIAL DATA

(in millions, except DSO and	December 31,		December 31,
Inventory turn amounts)	2003		2002
Cash and short-term investments	$	174.5	$	125.8
Accounts receivable — net		43.4		42.6
Inventory		14.6		11.3
DSO (based on 90 days sales)		39.1		38.8
DSO (based on trailing 12 mo. sales)		41.8		40.2
Inventory turns		14.1		10.6
Current net investment in sales-leases		15.5		13.3
Long-term net investment in sales-leases		32.5		24.7

		December 31,		December 31,
		2003		2002
Depreciation and amortization (in SG&A and R&D):
	For the year ended December 31	$	9.1	$	8.7
	For the quarter ended December 31		2.3		2.2
Capital Expenditures:
	For the year ended December 31		7.0		7.6
	For the quarter ended December 31		1.8		2.4