Pressure continues on North State to sell

Nov. 21, 2012 @ 04:21 PM

Paul Johnson

HIGH POINT — An investor in North State Communications again is calling for the High Point-based company to consider a sale of the business that has been based in the city since its founding 117 years ago as a rural telephone exchange.

Leeward Investments, a California-based enterprise with a relatively small holding in North State, contends that “the long term prospects for this company (North State) in the hands of its current shareholders are decidedly unfavorable.” In a letter sent earlier this month to North State, Leeward Investments said recent initiatives by North State’s management haven’t bolstered the company’s bottom line.

North State “operates in an industry that continues to undergo rapid, profound and unpredictable technological change. A small company cannot expect to manage in such an environment,” writes Kent Rowett, manager of Leeward Investments. Rowett told The High Point Enterprise that Leeward Investments has a single-digit percentage holding in North State, though he didn’t elaborate on a specific investment figure.

North State issued a statement Monday to the Enterprise reiterating its position that the company is operating well under current ownership and management.

“Our position has not changed. Our board of directors and executive team remain excited and committed to continuing to grow the company,” North State said in its statement.

In its letter, Leeward Investments cites actions taken by North State that haven’t panned out in earnings. The company made $215 million in capital expenditures in the last 10 years, but annual earnings per share have declined from a high of $8.28 in the past decade to $3.71 last year, Leeward Investments contends. The coverage ratio of earnings to dividends has dropped in half from 150 percent 10 years ago to 71 percent, the letter states.

Dissident shareholders have sought a sale of North State during the past three years, though company management has rejected the overtures.

The future of North State carries major implications for the city. In addition to serving as one of the most prominent companies with a headquarters in High Point, North State is a major employer. The High Point Economic Development Corp. ranks North State, which had 414 employees at the end of last year, as the 17th-largest employer in the city.

North State also has a long history of corporate philanthropy, supporting a range of charitable causes. North State is a primary sponsor of the annual Fox 8 Gifts for Kids Christmas toy drive taking place now for the holiday season.

pjohnson@hpe.com | 888-3528