- The Washington Times - Monday, May 19, 2003

Dollar Tree Stores now can be found almost anywhere in America.

The Chesapeake, Va., company said last week it will buy Greenbacks of Salt Lake City for $100 million in cash.

The deal, which should be completed in June, gives Dollar Tree a presence in every U.S. state except North Dakota, Alaska and Hawaii. Dollar Tree, the largest operator of stores with the $1 price point, has 2,319 stores and will take over all of the 96 “All A Dollar” stores that Greenbacks operates in 10 Western states.

Shares of Dollar Tree fell 80 cents yesterday to close at $24.93 on Nasdaq. They have risen more than $8, or 43 percent, since the beginning of March.

Dollar Tree said the purchase would add between 8 and 10 cents to per-share earnings over the next 12 to 18 months.

With the acquisition of privately owned Greenbacks, Dollar Tree will have stores in most Rocky Mountain states, where it previously had none, and in Arizona and Washington. The company also will have access to a large distribution facility in Salt Lake City.

The 262,000-square-foot facility will be an important factor in the deal’s success, company officials said, because it could double in size and simplify delivery of products out west.

“That capacity is a key for us to expand distribution capacity in the Rocky Mountain area,” Dollar Tree President and Chief Executive Macon Brock said in a conference call.

Dollar Tree said it may lay off some workers at the Salt Lake City headquarters office, because the company has no need for corporate offices there.

Greenbacks stores generated $127.5 million in sales each week in 2002, not including Sunday, when stores were closed. Dollar Tree said it would operate most Greenbacks stores seven days a week.

“There’s a reasonably strong fit,” said David Mann, an analyst with Johnson Rice and Co. “Greenbacks is a well-run company and has performed well the last few years.”

Dollar Tree had hoped to announce the purchase earlier this year, but said thoroughly evaluating the merger’s prospects took longer than expected.

This is understandable, analysts said, because previous acquisitions by Dollar Tree, particularly that of Dollar Express, did not result in the earnings growth the company had hoped for.

Analysts said Greenbacks’ profit margins are smaller than Dollar Tree’s, but that was not a concern for the company, which said it will be able to cut the cost of distributing products. Dollar Tree also said it will save money by importing more products from overseas. Dollar Tree has historically imported about 80 percent of its inventory, while Greenbacks imported about 20 percent.

“Our intent is to improve their operating margins to ours,” Mr. Brock said. “We do see some opportunity there.”

Dollar Tree said integrating the two companies will require between $30,000 and $100,000 of work on each Greenbacks store. Some store designs will be kept relatively untouched, but all will be fitted with back-office technologies, such as checkout and billing systems, used by Dollar Tree stores.

Dollar Tree reported sales of $615.6 million for the first quarter of 2003, compared with $509.7 million a year earlier. The company will release full earnings results for the quarter May 29, when it will divulge more specific financial information about the purchase.

In 2002, Dollar Tree earned $154.6 million ($1.36 per share), compared with $123.1 million ($1.09) in 2001.


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