Continental Carriers, Inc.
Continental Carriers Inc., established in 1952, is a regulated general commodities motor carrier whose routes ran the length of the Pacific Coast, from Oregon and California to the industrial Midwest, and from Chicago to several points in Texas. Continental Carriers struggled early, experiencing little growth, until the mid-1970¡¯s. Continental needed help in reducing operating costs and also sought improvement in terminal facilities. John Evans, president of CCI, made this possible. Entering CCI as a former executive of a major eastern carrier, he concentrated his efforts on expanding CCI¡¯s revenues on existing routes through an intensive marketing effort and a renewed emphasis on improving service. Evans also turned the company around by reducing its operating costs through a combination of extensive computerization of operations and improving the terminal facilities. By the late 1980¡¯s, Evans, along with the directors of the firm, realized that the key to continued expansion in revenues and income was a policy of selected acquisitions. Continental Carriers currently has the opportunity to purchase Midland Freight Inc. for a mere $50 million in cash. The decision to move ahead with the purchase has already been unanimously approved by the Board of Directors. No interference from the ICC is expected and the deal should be completed by the first of October. Given that Midland will add nearly $8.5 million to CCI¡¯s earnings before interest and taxes, it is not foreseeable that external financing would be hard to obtain. However, obtaining a loan and taking on debt goes against past policies for CCI. Throughout their history, it has been company policy to avoid long-term debt. Currently, CCI has no fixed debt on their balance sheet. The problem facing Continental Carriers is not the inability to raise funding for the acquisition, but instead how to go about doing so. One option is to issue shares of common stock....
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