Preston Corp., the Eastern Shore-based parent of Preston Trucking Co. Inc., said yesterday that it continued to lose money in the fourth quarter despite the closing earlier last year of two money-losing subsidiaries.
The company lost $316,000 in the fourth quarter, or 5 cents a share. That was a considerable improvement over the $4.2 million, or 73 cents a share, that it lost in the last quarter of 1989.
"A sharper-than-expected decline in tonnage during December was principally responsible for the fourth quarter's operating results," William B. Potter, president and chief executive officer, said in a prepared statement. "Due to the rapidly softening economy, we experienced a tonnage drop in each of the companies that was significantly more than anticipated."
For the year, Preston reported a net loss of $18.7 million, or $3.26 a share, compared with a loss of $850,000, or 15 cents a share, in 1989. Most of the 1990 loss came from a $17.8 million charge against earnings resulting from the closing of Reeves Transportation Co. and Pioneer Transportation Systems.
The Reeves and Pioneer subsidiaries had been heavy drains on the company, and their closing was expected to improve the company's performance. In fact, in the fourth quarter, the remaining trucking operations generated a 10.5 percent gain in operating income over the previous year, the company said.
Preston's hopes for getting back into the black now rest on its ability to increase rates. Although the company expects tonnage to remain unchanged in the first quarter of 1991, Mr. Potter said higher rates "should permit earnings to rebound."
Mark A. Roberts, an analyst who follows the trucking industry for Alex. Brown Inc. in Baltimore, said he was unsure whether Preston would succeed in keeping rates up. "We remain somewhat circumspect about their ability to execute that strategy," he said.
He said the bigger trucking companies have been willing to sacrifice tonnage to keep rates up. Preston has shown less willingness to follow suit, he said, leading him to wonder whether the company will be able to hold the line on rates now.
"If they can't, we're probably looking at more of the same," he said.
J. Sean Callahan, executive vice president of Preston, said yesterday that he expects Preston to show a profit during the first quarter of this year. "A number of weaker carriers are no longer in business," he said, and he thinks that will stabilize prices.
The bigger long-haul carriers have already begun to realize the benefits of the consolidation of the trucking industry. Regional carriers such as Preston now expect to see the benefits of reduced competition and less pressure on prices, he said.
Preston's loss took Wall Street by surprise. The stock fell 75 cents, to $9.50 a share.
The two subsidiaries Preston closed last year were full-truckload carriers. That is, their customers generally shipped entire trailers of goods.
Preston's three remaining subsidiaries -- Preston Trucking Co., Houma, La.-based Saia Motor Freight Line Inc. and Smalley Transportation Co. of Tampa, Fla. -- are all less-than-truckload operations. Such companies serve customers shipping smaller loads that must be consolidated at a terminal and then trucked to a second terminal, where the shipments are re-sorted for local delivery.