Preston Corp., a trucking company based on the Eastern Shore, said it will close two unprofitable operating subsidiaries, Reeves Transportation Co. of Calhoun, Ga., and Pioneer Transportation Systems Inc., of Hurlock.
The closings will affect a total 1,000 workers, 500 at each company, according to J. Sean Callahan, executive vice president of Preston. In Maryland about 235 workers will be affected, he said.
Callahan did not know how many of the workers will be absorbed by other Preston operations, but the location of the company's other operation would be prevent many workers from being shifted to other jobs within the company, he said. The company is working with state officials to help the workers find other jobs, Callahan said.
Reeves and Pioneer will not accept any new business as of tomorrow. But the company emphasized that all freight currently in process will be delivered and picked up according to schedule. Carpet Services, a profitable West Coast warehousing division of Reeves, will continue operating its facilities as well as the Reeves terminals located in Texas.
Pioneer was formed by Preston in 1980 and is an irregular-route, truckload carrier providing van, flatbed and refrigerated service to truckload shippers primarily in the eastern United States. Reeves, acquired by Preston in 1985, is a carrier specializing in shipments of carpet and carpet-related products from Georgia and North Carolina throughout the U.S.
As a result of the closings, Preston expects to establish a $17 million after-tax loss reserve, or $3.06 per share, which will be charged to earnings in the third quarter ended Sept. 30, 1990. The company expects a loss of approximately $18 million, or about $3.37 per share, for the third quarter, compared to a net income of $161,000, or 3 cents per share, for the third quarter of 1989.
While the closings will require the modification of certain loans, the company said it expects that cash from the liquidation of assets of Reeves and Pioneer will, after the payment of the closing expenses, total nearly $15 million, which will be used to reduce debt.
The closings will not affect the 9,000 workers at the company's other three operations, which include Preston Trucking Co., the company's largest subsidiary, Saia Motor Freight and Smalley Transportation.
"Preston Corporation management and the board of directors concluded after an intensive financial and operational review that Reeves and Pioneer do not justify continued investment by the company and its shareholders," said William B. Potter, president and chief executive officer.
"The company and the management at Reeves and Pioneer have made every effort over the last several years to return Reeves and Pioneer to profitability, but neither company has been able to overcome the considerable problems affecting its particular market," Potter said.
Losses at Reeves and Pioneer escalated in the third quarter resulting in a combined pre-tax loss of $8.3 million for both companies for the first nine months, the company said. Both companies have been hurt by widespread consolidation in their markets, problems in the long-haul trucking industry, rising fuel costs, falling prices charged to customers, higher operating costs, and increased insurance expenses in both Workers' Compensation and Auto Liability, the company said.
Reeves, in particular, has been severely impacted by the dramatic decline in new construction and softness in the carpet industry, the company said.
"Preston Corp. can now fully devote its resources to its other subsidiaries which are doing very well in the short-haul, less-than-truckload segment of the trucking industry," Potter said. "We remain committed to providing our customers with the highest quality services, our employees with personal and professional growth, and our shareholders with higher earnings."
Potter said the closings will allow the company to reduce debt, cut interest payments, strengthen the corporation's cash flow, and have sufficient capital to meet the needs of Saia, Preston, and Smalley. "We are anticipating a profitable fourth quarter that, in an uncertain economy, should be a positive indicator of the earnings improvement that is possible in the coming year," Potter said.
Preston Corp. is a holding company which, through its subsidiaries, transports freight by truck for a wide range of manufacturers, wholesalers and retailers. The subsidiaries include Preston Trucking Company, Inc., of Preston, Md.; Saia Motor Freight Line, Inc., of Houma, La.; and Smalley Transportation Company of Tampa, Fla.