CEO Belden says $17M deal will improve local company's sales, profits
02/12/04
Huntsville-based Verilink Corp. said Wednesday its Feb. 5 acquisition of XEL Communications will improve both its sales and profits.
During a conference call, Verilink CEO Leigh Belden said the $17 million deal will broaden Verilink's range of products and give it access to new customers.
"We believe this is an extraordinarily complementary acquisition," Belden said.
Verilink makes high-speed telecommunications devices.
Aurora, Colo.-based XEL, which was founded as a products company associated with GTE in the 1940s, provides voice and data service products for each of the regional Bell telephone companies and longtime phone exchange companies.
Belden said XEL will remain a distinct brand within Verilink and the company's GTE legacy and reputation has significant value for Verilink.
XEL also has an active service business for its customers, a facet of the company that Belden said was particularly attractive.
"The service organization has been a key element to their strategy, serving their carrier customers," Belden said. "That is very key for us, both in terms of relationship and how best to serve our customers, the major carriers, domestically and abroad with new services."
Bill Smith, Verilink's chief financial officer, said the company's next quarterly results would begin to reflect the costs of the XEL acquisition. The deal includes a payment of $7.65 million in cash, and some $10 million in a note that can be converted into ownership of Verilink stock. The note has a stock purchase price of $5.32 per share and can be exercised at any time over the next two years.
XEL had revenues of $20.9 million in 2003, up 20 percent from 2002, Smith said. The company reported net income of $478,000 in 2003 and $485,000 in 2002.
Smith said Verilink had $10.6 million in cash at the end of the December quarter. With the cash payment for XEL, he said he plans to obtain a "working capital" line-of-credit to provide Verilink a cushion to continue to operate its business.
Smith said the company is still talking to a potential buyer for its former headquarters building in Cummings Research Park. He said Verilink has also started discussions with banks about a possible refinancing of the property.