Georgia’s Public Companies: Small vs. Big
Investors in some of Georgia’s small-cap public companies saw bigger returns last year than those who invested in the largest companies in the state. The chart compares total stock returns for the largest 10 firms, by revenue, with the state’s 10 smallest firms with at least $150 million in annual revenue and at least $250 million in stock-market value.
Biggest companies….. Revenue (past year)….. Total stock return (past year)
Home Depot …..$72.5 billion….. 54%
UPS….. $53.7 billion….. 6%
Coca-Cola….. $47.6 billion….. 10%
Delta Air Lines….. $36.6 billion….. 61%
Aflac….. $25.0 billion….. 21%
Southern Co…… $16.5 billion….. 1%
Genuine Parts….. $12.9 billion….. 9%
SunTrust Banks….. $11.1 billion….. 56%
AGCO….. $9.8 billion….. 14%
Rock-Tenn….. $9.2 billion….. 25%
Average return: 26%
Small-cap companies…Revenue (past year)….. Total stock return (past year)
Carmike Cinemas….. $515 million….. 142%
Premiere Global….. $498 million….. 11%
Cbeyond….. $492 million….. 5%
Manhattan Associates….. $364 million….. 53%
United Community Bancorp….. $334 million …..37%
Post Properties….. $327 million….. 18%
Internap Network Services….. $267 million….. 17%
Cousins Properties….. $183 million….. 30%
Ameris Bancorp….. $168 million….. 21%
AFC Enterprises….. $168 million….. 82%
Average return: 42%
Sources: Bloomberg, staff research
Like a bunch of street-rocket motorcycles zipping through Perimeter traffic, many of Georgia’s small publicly-traded companies are expecting revved up profits this year compared to their bigger, slower-moving cousins.
Small and nimble companies like Atlanta-based Premiere Global and Manhattan Associates are expected to clock double-digit profit growth this year with the help of new products and other moves hatched during the dark days of the 2007-2009 recession.
Likewise, Columbus-based Carmike Cinemas’ profits are projected to nearly double in 2013 after a years-long makeover that included changing its top management, giving its cinemas a facelift, and retooling its balance sheet.
Profits are expected to rise an average of 14 percent this year at Georgia’s smaller public companies, according to analysts’ estimates for ten firms with annual revenues ranging from about $150 million to $515 million and market values of at least $250 million.
As a group, the ten companies produced a 42 percent total return for their investors over the past 12 months.
By contrast, Georgia’s corporate behemoths, such as Home Depot, UPS, Coca-Cola and Delta Air Lines, are tens or even hundreds of times larger. At Georgia’s ten largest public companies, with revenues ranging from $9.2 billion to $72.5 billion, analysts expect profits to rise an average of 10 percent this year.
Total shareholder return for the Big Ten was 26 percent over the past year.
While the so-called “small-cap” companies have been quicker to accelerate during the recovery, they also had little margin for error during the downturn. With smaller cash reserves and operations that were less likely to be diversified across multiple nations and products, most of these smaller companies came closer to crashing during the Great Recession.
“Smaller companies are faster-growing on average, but they’re also much more volatile,” said Tavis McCourt, a Raymond James managing director who covers Premiere Global and other technology companies.
Premiere Global, for instance, which sells software and services that allow companies to hold virtual meetings online, saw its profits plunge 75 percent from 2008 to 2010 as big financial firms and other big corporate customers laid off tens of thousands of employees — Premiere’s users.
Premiere did well in the early months of the recession as customers turned to virtual meetings to cut travel costs, said McCourt, but then “everyone got fired. You’ve got to have people to have meetings.”
Sean O’Brien, Premiere’s executive vice president of strategy and communications, said the company had to transform itself — from something like a telephone company that ran a meeting and message service for business customers — into a software company.
Premiere cut costs and sold off an unwanted division that accounted for about a fifth of its revenue. Those moves, along with the crashing economy, slashed about $125 million in annual revenue and more than 700 employees from Premiere’s operations. The company also focused on internally developing two new software products, iMeet and GlobalMeet, that are simple enough for end users to set up meetings online, often at their desks.
“We invested throughout the downturn,” said O’Brien, spending about $20 million on developing new products and expanding the sales force. “We are a business in transition,” he said, but the decision to re-tool during the recession has put the company in a good position to benefit from the economic recovery.
“The idea was, we weren’t going to waste a good crisis,” he said.
Premiere now has about $500 million in annual revenue and about 1,800 employees, 400 in metro Atlanta. Analysts expect the firm’s profits to jump about 27 percent this year, to about $31.6 million.
The company weathered “a very difficult 2009,” said McCourt. Now it’s “steadily recovering as white-collar employment has recovered and [customers’] operations have spread all over the world, leading to more video conferencing,” he said.
Likewise, Manhattan Associates responded to a steep drop in profits during the recession by cutting jobs and re-doubling its product development efforts, said Terry Tillman, managing director at Raymond James.
Manhattan Associates, with about 2,300 employees, sells software and other services that help big retailers and clothing and other suppliers to manage their warehouse and logistics operations.
“They had a really bad 2009,” he said, but did a good job of cutting costs without cutting product development or other key areas. For instance, he said, the firm shifted all its software to the same platform in 2010 and 2011, so that they have the same look and feel for users. Its software aimed at managing retailers’ e-commerce operations is also “gaining traction,” he said.
Analysts expect the firm’s profits to jump about 12 percent this year, to about $57.9 million, on roughly $400 million in annual revenue.
Another small-cap company, Carmike Cinemas, was already headed for trouble before the Great Recession hit.
But after losing money for six years, analysts think the Columbus-based company turned the corner last year. They’re projecting a $9.8 million profit when the company reports its full-year results for 2012, after a $7.7 million loss in 2011. They expect profits to almost double this year, to $19.3 million.
Carmike’s shareholders — including several hedge funds and other Wall Street specialty firms who hold substantial stakes — have driven Carmike’s shares up roughly 140 percent over the past year. Most analysts still rate the company a “buy.”
“We have gone from being a laggard to being a leader,” said Carmike CEO David Passman. “We are a Cinderella in the industry.”
But there were no glass slippers in sight in 2009 when Carmike’s board of directors suddenly named Passman, a board member, as the new head of the company, replacing Michael Patrick, the son of the cinema operator’s founder.
Carmike had emerged from a bankruptcy restructuring in 2002, but by 2006, it was losing money again.
By 2009, Carmike’s new executive team feared the company was headed for bankruptcy again.
The company’s bottom line had taken big hits from big write-offs related to re-stated accounting for its long-term theater leases and tax-related issues. Worse, the company was losing real money in its theater operations, and heavily in debt. Maintenance at many of its theaters had been neglected for years, and patrons were choosing to go elsewhere.
Still, “we thought [the company] was viable, so we came up with a plan,” Passman said. “We needed to fix operations very, very quickly.”
So the company concentrated of fixing things like “sticky, ugly floors” in its theaters, he said. It closed about 80 poorly performing theaters, cut nearly 15 percent of its headquarters staff, replaced about half of its theater managers, increased theater staff training, and started new promotions to boost its concession sales, which have an out-sized impact on theaters’ profitability.
Meanwhile, the company worked on re-tooling its finances, cutting more than $100 million from its debt load, issuing $60 million in new stock, and re-financing $210 million in debt.
These days, Carmike’s debt load is at “a comfortable level,” said Passman, and the company has begun expanding again. Last year, Carmike opened four new theaters and bought 19 others, adding more than 300 movie screens.
The 232-theater, 2,242-screen chain hopes to reach 300 theaters with 3,000 screens.
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