Pacer International, Inc. (Nasdaq: PACR), the asset-light North
American freight transportation and logistics services provider,
today announced that it has entered into new arrangements with
Union Pacific Railroad (UP) that will further accelerate Pacer’s
transformation into a fully-integrated, door-to-door intermodal
service provider. In addition, Pacer reported today its financial
results for the three- and nine-month periods ending September 30,
2009.
NEW ARRANGEMENTS BETWEEN PACER AND
UNION PACIFIC
- Multi-year arrangements
provide continued access to the entire UP intermodal rail network
and establishes a new rate structure.
- Pacer increases focus on
door-to-door integrated intermodal services with seamless
coordination and control of equipment, technology, and service
delivery.
- Pacer’s full portfolio of
intermodal, trucking, and logistics services is positioned to meet
shipper requirements.
“We are delighted to announce that Pacer and UP have entered
into new multi-year arrangements that provide Pacer with continued
access to the entire UP network,” said Michael E. Uremovich,
chairman and CEO of Pacer. “This is a significant positive
development for Pacer and our customers. The direct beneficiaries
of the arrangements are companies seeking door-to-door intermodal
services who demand a higher degree of service delivery integration
and greater efficiency.”
The new arrangements provide Pacer with continued access to the
entire UP intermodal network, featuring a multi-year line-haul
services extension that replaces the parties’ current terms for
domestic big-box shipments that were to expire in 2011. In
addition, it resolves outstanding claims between Pacer and UP
relating to domestic container transportation; facilitates a more
efficient equipment model through a fleet-sharing arrangement that
provides customers access to equipment of both companies; and
allows Pacer to strategically focus on its direct-to-customer
intermodal service offering. The multi-faceted arrangements form a
firm foundation for intermodal service growth by both
organizations.
Pacer will utilize the $30 million cash payment received in
connection with the new arrangements to reduce outstanding debt
under its revolving credit facility, a reduction of nearly 50
percent, providing the Company with additional availability under
the facility.
The increased focus on high-value, door-to-door service is
expected to result in long-term benefits for Pacer, though a
substantial reduction in revenues from third-party, ramp-to-ramp
services is anticipated due to the new arrangements’ terms and
conditions.
“Pacer’s strategy recognizes that shippers favor direct control
over each element of the transportation process. This is an
exciting and dynamic time because intermodal has emerged as a key
growth sector in the transportation industry. We are positioned for
growth as one of the largest intermodal services providers with the
most diverse container fleet in North America and focused on what
the customer demands—seamless coordination and control of
equipment, technology, and service delivery,” said Uremovich.
“We continue to offer our premier array of transportation and
logistics services, through our cartage, highway, warehousing, and
ocean carrier and freight forwarding businesses; and we continue to
dedicate ourselves to delivering the very highest service with
confidence every day,” said Uremovich.
Pacer will discuss its new arrangements during its earnings call
that is scheduled for Wednesday, November 4th at 8 a.m. ET. Details
for analysts who would like to participate in the call are
below.
THIRD-QUARTER FINANCIAL
RESULTS
- Revenues decreased $139.1
million to $418.7 million compared to $557.8 million for the
quarter ended September 19, 2008.
- Income from operations
declined $28.6 million to an income of $0.7 million compared to an
income of $29.3 million in the 2008 quarter.
- Net income declined from
$20.8 million in the 2008 quarter to a net income of $0.6 million
in the 2009 quarter.
- During the quarter the
Company completed an amendment to its credit agreement, closed the
sale of certain assets of its truck services unit and recorded a
gain of $1.4 million on the transaction in Selling, General and
Administrative Expenses. In addition, it continued its cost cutting
efforts during the quarter with a reduction of 253 people and
recorded $2.0 million in severance expense.
********
- Intermodal segment income
from operations decreased $30.0 million from the 2008 quarter to an
income of $4.9 million compared to an income of $34.9 million in
the 2008 quarter. Volumes showed improvement from the second
quarter of 2009, especially automotive volumes, but are still below
the 2008 quarter. Results include $1.0 million for severance
expense.
- Logistics segment income
from operations declined $1.9 million to a loss of $0.2 million
compared to an income of $1.7 million in the 2008 quarter. Losses
at the truck services unit were the primary cause of the
decrease.
- SG&A expenses
declined by $8.9 million due in part to the Company’s continued
cost reduction programs.
- Sale of Truck Services–On
August 17, 2009, the Company sold certain assets of its truck
services business to Universal Truckload Services, Inc. and UTS
Leasing, Inc.
“We are very pleased with our progress and return to
profitability in the third-quarter given that the transportation
markets and overall economic conditions remained extremely
challenging,” said Brian C. Kane, chief financial officer of Pacer.
“We successfully amended and extended our credit facility and
closed the sale of certain assets of Pacer Transport, our flatbed
and heavy haul truck services company, during the quarter. We also
implemented a number of additional organizational initiatives that
we believe will further improve our operational execution and the
focus on our door-to-door integrated intermodal product while
reducing our costs. Though we remain in challenging economic times,
we are very encouraged by our financial and organizational progress
during the third-quarter, and by our new arrangements with UP which
will allow us to continue to deliver unparalleled value to our
customers.”
YEAR-TO-DATE FINANCIAL
RESULTS
- Revenues for the nine
months ended September 30, 2009 decreased $423.2 million to
$1,154.0 million compared to $1,577.2 million for the nine months
ended September 19, 2008.
- Income from operations,
which includes a $200.4 million pre-tax, non-cash goodwill
impairment charge (of which $31.4 million related to our logistics
segment and $169.0 million related to our intermodal segment), was
a loss of $234.2 million compared to income of $75.3 million in the
2008 period. Excluding the first quarter impairment charge, income
from operations was a loss of $33.8 million. Included in income
from operations in the 2009 period is $4.3 million for severance
expense.
- Net income declined from
$47.6 million in the 2008 period to a net loss of $184.1 million,
or $5.30 per diluted share, in the 2009 period. Net income includes
the impact of the goodwill impairment charge ($161.2 million
after-tax, or $4.64 per share). Excluding the impairment charge,
net income was a loss of $22.9 million, or $0.66 per diluted
share.
********
- Intermodal segment income
from operations decreased $281.3 million from the 2008 period to a
loss of $184.5 million (including a $169.0 million goodwill
impairment charge) compared to an operating income of $96.8 million
in the 2008 period. Excluding the impairment charge, the intermodal
segment recorded a $15.5 million operating loss.
- Logistics segment income
from operations decreased $35.6 million to a loss of $36.3 million
(including a $31.4 million goodwill impairment charge) compared to
a loss of $0.7 million in the 2008 period. Excluding the impairment
charge, the logistics segment recorded a $4.9 million operating
loss due primarily to our truck services unit.
- SG&A expenses
declined by $13.3 million due in part to the Company’s continued
cost reduction programs.
Note: A tabular
reconciliation detailing the adjustments made to arrive at the
adjusted financial results set forth above and elsewhere in this
press release from financial results determined in accordance with
accounting principles generally accepted in the United States of
America (“GAAP”) is contained in the financial summary statements
attached to this press release.
Pacer International will hold a conference call for investors,
analysts, business and trade media, and other interested parties at
8:00 a.m. ET, tomorrow (Wednesday, November 4). Pacer will discuss
both its third-quarter financial results and its new arrangements
with UP. Details for parties who would like to participate in the
call are below.
CONFERENCE CALL INFORMATION—NOVEMBER 4, 2009, 8:00 a.m.
ET
Conference call participation Please call five minutes
early (800) 553-0326 (domestic) and (612) 332-0819
(international)Ask for "Pacer International Third-Quarter Earnings
Call"
Webcast access Simultaneous audio-only of the live
conference call Select the Investors link on the Company's
Web site at www.pacer.com
For persons unable to participate in either the conference call
or the Webcast, a digitized replay will be available from November
4 at 10:30 a.m. ET to December 4 at 11:59 p.m. ET. For
the replay, dial (800) 475-6701(domestic) or (320) 365-3844
(international), using access code 120963. During such period, the
replay can also be accessed through the Investors link on
the Company’s Web site at www.pacer.com.
ABOUT PACER INTERNATIONAL (www.pacer.com)
Pacer International, a leading asset-light North American
freight transportation and logistics provider, through its
intermodal and logistics operating segments, offers a broad array
of services to facilitate the movement of freight from origin to
destination. The intermodal segment offers wholesale intermodal
services to transportation intermediaries, and retail intermodal
services directly to beneficial cargo owners. The logistics segment
provides other logistics services to beneficial cargo owners
through its truck brokerage, warehousing and distribution,
international freight forwarding and supply-chain management
services units. Pacer International is headquartered in Concord,
California. Its intermodal and logistics operating segments are
headquartered in Concord, California, and in Dublin, Ohio,
respectively.
USE OF NON-GAAP FINANCIAL MEASURES: This press release
contains “non-GAAP financial measures” as defined by the Securities
and Exchange Commission, including adjusted diluted earnings per
share, adjusted net income and adjusted income from operations for
the logistics and intermodal segments and on a consolidated basis.
These non-GAAP measures which exclude the effect of the Company’s
goodwill impairment write-off in the first quarter of 2009 are used
by management and the Board of Directors in their analysis of the
Company's ongoing core operating performance. Management believes
that these non-GAAP financial measures provide useful supplemental
information that is essential to a proper understanding of the
operating results of the Company's core businesses and allows
investors to more easily compare operating results from period to
period. A tabular reconciliation of the differences between the
non-GAAP financial information discussed in this release and the
most directly comparable financial information calculated and
presented in accordance with GAAP is contained in the financial
summary statements attached to this press release.
CERTAIN FORWARD-LOOKING STATEMENTS--This press release
contains or may contain forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995).
These forward-looking statements are based on the Company's current
expectations and beliefs and are subject to a number of risks,
uncertainties and assumptions. Among the important factors that
could cause actual results to differ materially from those
expressed or implied in the forward-looking statements are general
economic and business conditions including the length and severity
of the current economic recession; industry trends, including
changes in the costs of services from rail and motor transportation
providers; our ability to borrow amounts under our credit agreement
due to borrowing base limitations and/or to comply with the
financial ratio and other covenants in our credit agreement;
increases in interest rates; the loss of one or more of our major
customers; the success of our operational consolidation and other
cost reduction initiatives in improving our operating results and
cash flows without affecting customer service levels; the effect of
the current economic recession on our customers including reduced
transportation needs and an inability to pay us on time or at all;
the impact of competitive pressures in the marketplace; the
frequency and severity of accidents, particularly involving our
trucking operations; changes in the terms of contracts with our
underlying rail carriers that are less favorable to us relative to
our current contracts as these expire; revenue losses and cost
impacts associated with the new UP arrangements; the failure to
comply with, government regulation; changes in our business
strategy, development plans or cost savings plans; congestion, work
stoppages, equipment and capacity shortages, weather related issues
and service disruptions affecting our rail and motor transportation
providers; changes in fuel prices; our ability to successfully
defend or resolve customer and vendor rate and volume adjustment
claims against us; changes in international and domestic shipping
patterns; availability of qualified personnel; difficulties in
maintaining or enhancing our information technology systems
including selecting, developing and implementing applications and
solutions to update our diverse legacy systems; increases in our
leverage; and terrorism and acts of war. Additional information
about these and other factors that could affect the Company's
business is set forth in the Company's various filings with the
Securities and Exchange Commission (the “SEC”), including those set
forth in the Company's annual report on Form 10-K for the year
ended December 26, 2008 filed with the SEC on February 17, 2009 and
the Form 10-Q for the quarter ended June 30, 2009 filed with the
SEC on August 6, 2009. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions or
estimates prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, expected or
intended. Except as otherwise required by federal securities laws,
the Company does not undertake any obligation to update such
forward-looking statements whether as a result of new information,
future events or otherwise.
Pacer International, Inc. Consolidated Balance
Sheet ($ millions) September 30,
2009 (Unaudited)
Assets Current assets
Cash and cash equivalents $ 3.2 Accounts receivable, net 169.0
Prepaid expenses and other 27.9 Deferred income taxes 18.4
Total current assets
218.5
Property and equipment Property, plant &
equipment at cost 106.0 Accumulated depreciation (63.8 )
Property and equipment, net 42.2
Other assets
Goodwill, net - Deferred income taxes 26.8 Other assets 17.1
Total other assets 43.9
Total
assets $ 304.6
Liabilities & Equity
Current liabilities
Current maturities of long-term
debt and capital leases
$ 0.3 Book overdraft 6.1 Accounts payable and accrued liabilities
155.2 Total current liabilities 161.6
Long-term liabilities Long-term debt and capital leases 54.5
Other 1.3 Total long-term liabilities 55.8
Stockholders' equity Common stock 0.4 Paid In capital 301.3
Accumulated deficit
(214.3 ) Accumulated other comprehensive loss (0.2 ) Total
stockholders' equity 87.2
Total liabilities
and equity $ 304.6
Pacer International,
Inc.
Unaudited Consolidated
Statement of Cash Flows
Nine Months ($ in millions)
2009
Cash Flows from Operating Activities Net loss $
(184.1 ) Adjustments to net loss Depreciation and
amortization 5.2 Gain on sale of property, equipment and other
assets (2.2 ) Deferred taxes (47.5 ) Goodwill impairment charge
200.4 Stock based compensation expense 1.9 Change in receivables
14.5 Change in other current assets (0.7 ) Change in current
liabilities (8.2 ) Other (0.1 ) Net
cash used for operating activities (20.8 )
Cash Flows from Investing Activities Capital expenditures
(7.2 ) Proceeds from software license amendment 22.5 Proceeds from
sales of property, equipment and other assets 2.6
Net cash provided by investing activities
17.9
Cash Flows from Financing
Activities Net borrowings under line of credit agreement, net
of debt issuance costs paid to lenders 8.0 Debt issuance costs paid
to other third parties (1.4 ) Repurchase and retirement of common
stock (0.1 ) Debt and capital lease obligation repayment (0.2 )
Dividends paid to shareholders (5.2 ) Net cash
provided by financing activities 1.1
Effect of exchange rate changes on cash -
Net change in cash and cash equivalents (1.8 )
Cash at beginning of period 5.0
Cash
at end of period $ 3.2
Pacer International,
Inc.
Reconciliation of GAAP Financial Results to Adjusted
Financial Results For the Nine Months Ended September 30,
2009 and September 19, 2008 In millions, except share and
per share amounts
Adjusted Nine Months 2009 Nine Months Variance GAAP
Adjusted 2008 2009 vs Item Results Adjustments Results
Results 4/ 2008 % Income (loss) from operations -
intermodal 5/ $ (184.5 ) $ 169.0 1/ $ (15.5 ) $ 96.8 $ (112.3 )
-116.0 % Income (loss) from operations - logistics (36.3 ) 31.4 2/
(4.9 ) (0.7 ) (4.2 ) 600.0 % Income (loss) from operations -
corporate (13.4 ) - (13.4 ) (20.8 )
7.4 -35.6 %
Income (loss) from operations -
total
(234.2 ) 200.4 (33.8 ) 75.3 (109.1 ) -144.9 % Interest expense
2.9 - 2.9 2.0
0.9 45.0 % Income (loss) before income taxes (237.1 )
200.4 (36.7 ) 73.3 (110.0 ) -150.1 % Income tax (benefit)
(53.0 ) 39.2 3/ (13.8 ) 25.7
(39.5 ) -153.7 % Net income (loss) $ (184.1 ) $ 161.2 $ (22.9 ) $
47.6 $ (70.5 ) -148.1 % Diluted earnings (loss) per
share $ (5.30 ) $ 4.64 $ (0.66 ) $ 1.36 $ (2.02 ) -148.7 %
Weighted average shares outstanding 34,760,659
34,760,659 34,760,659 34,917,677
(157,018 ) -0.4 % 1/ Intermodal segment goodwill
impairment charge. 2/ Logistics segment goodwill impairment charge.
3/ Actual tax impact of the goodwill impairment charge excluding
the permanent difference. 4/ 2008 amounts have been adjusted
for the change in revenue recognition policy for the Stacktrain
business unit to conform to the 2009 presentation. 5/
Beginning in the first quarter of 2009, the company’s Stacktrain
business unit changed its revenue recognition method to a completed
service basis from the percent of completed service basis used in
prior periods. This change has been retrospectively applied to all
prior period amounts. In addition, prior to 2009, the company’s
fiscal year was the 52- or 53-week annual accounting period ending
on the last Friday in December. Following the implementation of the
SAP accounting modules during the 2009 first quarter, the company’s
fiscal year was changed to end on December 31 of each year. Amounts
for the transition period between December 27, 2008 and December
31, 2008 are included in the 2009 first quarter.
Pacer International,
Inc.
Unaudited Consolidated
Statements of Operations
($ millions)
3rd Quarter 2009 Year-to-Date
Intermodal 1/ Logistics Corp./Elim.
Consolidated Intermodal 1/ Logistics Corp./Elim.
Consolidated
($ in millions)
($ in millions)
Revenues $ 314.9 $ 104.4 $ (0.6 ) $ 418.7 $
864.8 $ 290.7 $ (1.5 ) $ 1,154.0 Cost of purchased
transportation 252.4 90.1 (0.6 ) 341.9 703.3 247.5 (1.5 ) 949.3
Direct operating expenses 31.1 - 31.1 94.1 - - 94.1 Selling,
general & admin. expenses 25.2 14.2 3.9 43.3 78.9 47.1 13.2
139.2 Goodwill impairment charge - - - - 169.0 31.4 - 200.4
Depreciation expense 1.3 0.3
0.1 1.7 4.0
1.0 0.2 5.2
Loss from operations 4.9 (0.2 ) (4.0 ) 0.7 (184.5 )
(36.3 ) (13.4 ) (234.2 ) Interest expense/income
1.7
2.9 Loss
before income taxes (1.0 ) (237.1 ) Income tax benefit
(1.6 )
(53.0 ) Net
income (loss) $
0.6 $ (184.1 )
Diluted Earnings (Loss) Per Share $ 0.02 $ (5.30 ) 1/
Beginning in the first quarter of 2009, the company’s Stacktrain
business unit changed its revenue recognition method to a completed
service basis from the percent of completed service basis used in
prior periods. This change has been retrospectively applied to all
prior period amounts. In addition, prior to 2009, the company’s
fiscal year was the 52- or 53-week annual accounting period ending
on the last Friday in December. Following the implementation of the
SAP accounting modules during the 2009 first quarter, the company’s
fiscal year was changed to end on December 31 of each year. Amounts
for the transition period between December 27, 2008 and December
31, 2008 are included in the 2009 first quarter.
Pacer International,
Inc.
Unaudited Consolidated
Statements of Operations
($ millions, except per share
amounts)
3rd Quarter Year-to-Date 2009
2008 1/ Variance % 2009 2008 1/
Variance %
Segments
Revenues Intermodal $ 314.9 $ 431.9 $ (117.0 ) -27.1
% $ 864.8 $ 1,235.8 $ (371.0 ) -30.0 % Logistics 104.4 126.7 (22.3
) -17.6 % 290.7 342.7 (52.0 ) -15.2 % Cons. Entries
(0.6 ) (0.8 ) 0.2 -25.0 %
(1.5 ) (1.3 ) (0.2 ) 15.4
% Total $ 418.7 $ 557.8 $ (139.1 ) -24.9 % $ 1,154.0 $ 1,577.2 $
(423.2 ) -26.8 %
Income (loss) from Operations 2/
Intermodal $ 4.9 $ 34.9 $ (30.0 ) -86.0 % $ (184.5 ) $ 96.8 $
(281.3 ) -290.6 % Logistics (0.2 ) 1.7 (1.9 ) -111.8 % (36.3 ) (0.7
) (35.6 ) 5085.7 % Corporate (4.0 )
(7.3 ) 3.3 -45.2 % (13.4 )
(20.8 ) 7.4 -35.6 % Total
$ 0.7 $ 29.3 $ (28.6 ) -97.6 % $ (234.2 ) $ 75.3 $ (309.5 ) -411.0
%
Net Income (Loss) 2/ $ 0.6 $ 20.8 $ (20.2 ) -97.1 %
$ (184.1 ) $ 47.6 $ (231.7 ) -486.8 %
Diluted Earnings (Loss)
per Share 2/ $ 0.02 $ 0.59 $ (0.57 ) -96.6 % $ (5.30 ) $ 1.36 $
(6.66 ) -489.7 %
1/ 2008 amounts have been adjusted
for the change in revenue recognition policy for the Stacktrain
business unit to conform with the 2009 presentation.
2/ Nine month 2009 amounts include
an intermodal segment goodwill impairment charge of $169.0 million
and a logistics segment goodwill impairment charge of $31.4
million, a total of $200.4 million, $161.2 million net of tax, or
$4.64 per diluted share.
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