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Thomas Built Buses Make History

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RALEIGH — Many of us who grew up in North Carolina, and a lot who have moved here, know the name Thomas Built Buses. The High Point company's logo is implanted on those ubiquitous yellow carriages that have carted kids back and forth to school for much of this century.

But did you know that the same company once manufactured streetcars? And did you know that some of those streetcars were sold for service in New Orleans and rode the rails of that fabled city on the "Desire" line.

The rest of the story is obvious: Those North Carolina-built streetcars inspired the name of one of the greatest works in the history of theatrical literature, Tennessee Williams' "A Streetcar Named Desire."

I was intrigued by this historical nugget as I examined the background of Thomas Built Buses -- research made necessary because the company is being sold after 80 years of ownership by members of the Thomas family.

GiantDaimler-BenzAG of Germany is paying an estimated $200 million to $250 million to take over Thomas Built Buses. This transaction illustrates how quickly business can change, and how large some companies are getting.

Thomas Built Buses, for example, will be operated as a unit of Freightliner Corp., which also is owned by Daimler Benz. The giant German company is best known for Mercedes automobiles, but it's also taking over big chunks of American industry -- the most notable being its $36 billion purchase ofChrysler Corp.

The sale of Thomas Built might at first glance appear unsettling for North Carolina. But folks in High Point are upbeat.

In fact, an executive at Freightliner said the product line probably will be expanded and the Thomas Built work force will be increased beyond its current 1,400. The company employs another 500 in Canada and Mexico.

But it is a bit sad to see such massive change for a company that traces its lineage to 1916 when it was founded as the Perley A. Thomas Car Works. Today, the company is the second largest-maker of school buses in North America and the ninth-largest private company in North Carolina, according to Arthur Anderson, with 1998 revenues projected at $331 million.It's tough being an investor these days, and I'm not going to predict when this rocky ride will end. But I'm a firm believer in identifying fundamentally sound companies when you do make the "buy" decision, and here's one in a sector that might fare relatively well in a slowing economy.

Charlotte-basedFamily Dollar Stores(FDO/NYSE) has been operating its chain of small discount stores since 1959, and management has grown the company from 1,759 outlets at the end of 1991 to 3,049 today.

Stores currently operate in 38 states with the largest concentrations in Alabama, Florida, Georgia, North Carolina, Pennsylvania, Tennessee, Texas, South Carolina and Virginia. All stores are in contiguous states -- a smart move for distribution and management purposes.

Merchandise is first-quality but cheap, with most of it priced at $17.99 or less. These stores are a haven for price-conscious customers, and FDO has a reliable network of 1,600 suppliers.

FDO's financials are impressive. Management has doubled revenues since 1998 while maintaining tight cost controls to boost net income from $62 million in 1994 to $103.27 million this year.

Investors have been rewarded with a near-doubling of per-share payout from 37 cents in 1994 to 60 cents (after a stock split) in 1998.

FDO has grown with company-generated funds and has taken on zero debt -- a factor that impresses me a lot. FDO's stock has performed well in a tough market and has been as high as $17 3/4 in October after slumping to $12 in September.

Family Dollar Stores plans to open 350 to 400 new outlets and continue a remodeling program in 1999.

Analysts like the near-term outlook for retail discounters because of the slowing economy. Increasingly, consumers will look for value in spending their hard-earned dollars, and FDO stands ready to deliver.

The stock is favored by analysts, with the majority calling it a buy/hold.

Have a prosperous week. Dale Gibson is a Raleigh-based journalist who publishesThe Gibson Report, a weekly electronic newsletter focused on North Carolina business. Questions or comments may be directed to him by e-mail atdale@gibsonreport.comor by phone at 919-834-1033.

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