Four ‘coming attractions’ eye future Star 40 rankings
05/06/2014 12:40 PM
05/06/2014 12:40 PM
The drought is over. It’s raining companies.
AMC Entertainment Holdings Inc. — the national cinema chain based in Leawood — heads a group of four new publicly traded companies in the Star 40 universe. Combined, they raised $1 billion last year by selling stock to the public.
Star 40 hasn’t seen that kind of action in more than a decade. And since 2007, only one business has held an initial public offering to raise capital throughout the entire Star 40 footprint, which covers Kansas and Missouri, excluding the St. Louis area.
Inergy Midstream went public in 2011 but already has fallen out of the Star 40 universe of companies because it merged into a Texas company.
Tallgrass Energy Partners LP, a newly public company in Overland Park, competes in the same field as Inergy Midstream. The two other new names: QTS Realty Trust Inc., also in Overland Park, deals in data centers, and Aratana Therapeutics Inc., based in Kansas City, Kan., is developing pet medicines.
This shower of new public companies comes in the nick of time. Star 40 has been withering steadily since 2002 as companies merged, moved, failed or simply opted out of public life.
Our 2002 rankings had compared 80 public companies based on their financial data for 2001 and 2000. (We also called this section Star 50 then.) Among them was No. 18 AMC Entertainment, which last showed up in the 2004 ranking before the company was bought by private investors.
Now AMC is back, though it and the other new public companies won’t qualify for rankings until their stocks have traded for at least a year.
Here’s a look at them and their potential to stir next year’s rankings.AMC Entertainment
Investors who owned AMC shares a decade ago may not recognize the company today. It is opening bars, installing leather recliners, running kitchens and serving up meals seat-side.
“We’re trying to change the fundamental dynamics that have characterized the business literally for the last 100 years,” said Gerry Lopez, chief executive of AMC Entertainment.
Movies for years have been about setting more seats in front of more screens inside more theaters in more markets. Bigger meant better.
Lopez argues that has changed. Better is bigger now, and AMC is promising a business built on a new experience for moviegoers.
For example, the company ripped out the seats at Ward Parkway 14 and installed leather recliners that stretch out with the push of a button. It meant only a third as many customers could see the movie at the same time.
No problem. More than 80 percent of the seats available throughout the week go empty regardless of the crowds you might see on weekends or evenings. With the better seats in place, significantly more paying customers are showing up.
And those relaxed movie viewers luxuriating in leather recliners spend more on food and beverages.
AMC also is changing its comestible offerings. The company recently opened its expanded concessions stand called Marketplace at the AMC Town Center 20 in Leawood. And there is a full kitchen for the Fork Screen and Cinema Suites — dine-in theaters at AMC Studio 30 in Olathe.
Its MacGuffins bars are popping up pretty much wherever AMC can get liquor licenses and spare a little bit of floor space in its existing multiplexes.
All this is being watched from afar — by AMC’s principal owner, China-based Dalian Wanda Group. It bought the U.S. business in 2012, and its ownership fell to about 80 percent when AMC went public.
Mostly a commercial property company, Wanda is interested in AMC’s business as more than an owner. It operates China’s biggest cinema chain, though it’s considerably smaller than AMC’s operations and only a couple of decades old.
Lopez served as host to a dozen or so Wanda officials last month when they visited AMC and attended an industry convention in Las Vegas. The executives compared best practices, Lopez said.
In competing in the United States, AMC essentially is zigging as its rivals are still zagging by expanding their screen counts, said analyst James Goss at Barrington Research, though Regal Cinema, the industry’s biggest, has started installing reclining seats in a few theaters.
The goal, of course, is to make more money, and AMC says it is. In theaters where changes have come, AMC estimates recliners have added $1.17 to what it earns on average from customers, MacGuffins bars an extra 30 cents, Marketplace 12 cents and the Freestyle Coke dispensers 8 cents.
“They’re not really raising ticket prices right now,” Goss said.
Lopez said the company works closely with movie studios, which earn a share of the take from tickets, when it considers price changes. But he said tickets are going up over time as renovations settle in.
Fewer seats, for example, present an opportunity to charge more for the most popular show times on the most popular movies. And that would be nothing new.
AMC already charges more for weekend shows than for matinees and weekday shows. Premiums for highly sought show times with limited seating would be no different.
“We’re already down that road,” Lopez said.
AMC’s revenues last year topped $2.7 billion. That’s bigger than H Block and sure to affect rankings in next year’s Star 40.
The word energy often conjures images of drilling rigs, fracking controversies and exploration of remote areas for new deposits.
But don’t forget the need to move that energy to market. That is the business of Tallgrass Energy Partners. It owns natural gas pipelines and storage space as well as natural gas processing operations.
The Overland Park partnership formed in February 2013. Chief executive David Dehaemers, who had worked previously at Inergy LP, paired up with some private equity partners. They bought pipelines, storage and other assets that another company put on the market to gain federal approval for a merger.
In May, Tallgrass Energy raised $295.9 million by selling partnership units to the public, the equivalent of stock shares for a limited partnership. It raised the money with plans of adding a crude oil pipeline to its business.
Tallgrass’s Pony Express Project has been converting 430 miles of natural gas pipeline to carry crude oil instead. And it is extending the line 260 miles to reach energy hub Cushing, Okla.
The target is oil from the Bakken deposits in North Dakota. Other pipelines carry it to Guernsey, Wyo., where Tallgrass’s new line will pick it up.
“There’s a lot of crude up there that needs to get to refineries in the south,” Dehaemers said.
The project brings the existing pipeline full circle. Originally built in the 1970s as an oil pipeline, it was converted to natural gas in 1996.
Tallgrass didn’t spend its IPO proceeds on the pipeline. It used the money to pay off debt. That gives it enough borrowing capacity to finance the rest of the work as it comes, with the project wrapping up in August or September.
“You don’t spend $1 billion in one fell swoop,” Dehaemers said.
The company has about 15 employees at its headquarters and more than 550 in energy fields.
As far as the Star 40 rankings, Tallgrass generated $268 million in revenues last year, enough to rank No. 27 had it qualified this year. Profits reached $14 million, or 25th among the Star 40 group.QTS Realty
The information age runs on computers, and each one of them needs a home.
QTS Realty Trust, an Overland Park company that went public a year ago, operates 10 data centers to house those machines. Combined, the centers cover 3.8 million square feet of space.
The inventory includes the company’s smallest and first data center in Overland Park, with 7,831 square feet, and its big Atlanta shop that is 80 times that size and can pull in 108 times as much rent.
Computers housed in QTS Realty’s centers handle work for more than 870 other companies, including Internet businesses, banks and manufacturers. Many of the machines belong to those other companies.
For its biggest customers, QTS Realty provides space to set up arrays of computers in a secure site ready to meet customers’ compliance standards whether they’re in banking or health care.
Others, with smaller computing needs, share space alongside other customers’ computers in a data center.
Others buy computing capacity on QTS Realty’s own computers, called cloud computing by its customers who don’t have to buy and maintain the computer systems themselves.
Customers sign contracts for five to 10 years for the large space deals, and three years when they share space with other customers. The contracts lend a real estate investment feel to QTS Realty’s revenues, locking in a stream of income.
Revenue reached $178 million, growing as its customers’ businesses grow.
“We add a lot of new logos each year, too,” said Chad Williams, QTS Realty’s chief executive officer.
Williams expects that revenue to grow as businesses become increasingly comfortable with relying on others for their data centers.
“In the corporate world, there’s been very little outsourcing over the last 10 years compared with what we look at happening over the next 10 years,” Williams said.Aratana Therapeutics
Pets get arthritis and cancer, too. Aratana Therapeutics is in the business of finding treatments — by working with human medicines.
It’s expensive work with delayed payoffs, but the Kansas City, Kan., company has had little trouble raising money.
An initial public offering last June raised $34.2 million. A private offering in October raised nearly $20 million. And Aratana went back to Wall Street in January to raise an additional $90.5 million.
Along the way, Aratana has bought two other animal heath companies — Vet Therapeutics Inc. in California and Okapi Sciences NV in Belgium — for a combined $98 million.
The company also has spent millions to buy licensing rights.
Its first revenues came last year and totaled $123,000, but efforts are underway to develop products for future sales. Aratana said it ended 2013 with enough cash to finance its work through 2015.
An example on track for U.S. approval in 2016 includes an appetite stimulant for animals that aren’t eating because of a medical condition or pain from an operation.
One product in the works is a once-a-day treatment for dogs with osteoarthritis. A rival company is working on a twice-a-day dose.
Undaunted, founder Steven St. Peter told analysts in March that it’s a big market and he’ll stand behind Aratana’s version.
“If that twice-a-day product gets to market before us, we view that as continuing to build the market and tell the story about unmet medical needs,” St. Peter said.
Because Aratana is a developing business, its Star 40 effect may come less from revenues and profits than the company’s stock market value. At $555.8 million at the end of December, the company was worth about the same as Epiq Systems Inc. and Kansas City Life Insurance Co.