PACER INTERNATIONAL INC, S-1/A, 1998-07-30

PACER INTERNATIONAL INC
S-1/A, 1998-07-30
ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1998

REGISTRATION NO. 333-53983

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- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------

PACER INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 4731 94-3285040
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)

----------------

3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
(925) 284-7145
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

----------------

DONALD C. ORRIS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
3746 MT. DIABLO BOULEVARD, SUITE 110
LAFAYETTE, CALIFORNIA 94549
(925) 284-7145
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)

----------------

WITH COPIES TO:
JOHN J. SUYDAM, ESQ. PETER P. WALLACE, ESQ.
O'SULLIVAN GRAEV & KARABELL, LLP MORGAN, LEWIS & BOCKIUS LLP
30 ROCKEFELLER PLAZA 300 SOUTH GRAND AVENUE
NEW YORK, NEW YORK 10112 LOS ANGELES, CALIFORNIA 90071
(212) 408-2400 (213) 612-2500

----------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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- -------------------------------------------------------------------------------
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

3,200,000 Shares JULY 30, 1998
LOGO
PACER INTERNATIONAL, INC.
Common Stock

--------

Of the 3,200,000 shares of Common Stock (the "Common Stock") offered hereby,
2,800,000 shares are being sold by Pacer International, Inc. ("Pacer" or the
"Company") and 400,000 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any proceeds
from the sale of shares by the Selling Stockholders. See "Principal and Selling
Stockholders." Prior to this offering, there has been no public market for the
Common Stock. It is currently estimated that the initial public offering price
will be between $11.00 and $13.00 per share. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The Company has applied for the Common Stock to be quoted and
traded on the Nasdaq National Market under the symbol "PACR."

--------

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.

--------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
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Total(2)........................... $ $ $ $
</TABLE>
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(1) Before deducting expenses of the offering estimated at $1,200,000.
(2) The Company and certain of the Selling Stockholders have granted the
Underwriters 30-day options to purchase up to an aggregate of 480,000
additional shares of Common Stock solely to cover over-allotments, if any.
To the extent the options are exercised, the Underwriters will offer the
additional shares at the Price to Public shown above. If the options are
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."

--------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale when, as and if delivered to and accepted by them and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares will be made at the offices of BT Alex.
Brown Incorporated, Baltimore, Maryland, on or about , 1998.

BT ALEX. BROWN

PAINEWEBBER INCORPORATED

MORGAN KEEGAN & COMPANY, INC.

THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>

[PHOTOS]

------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and the consolidated financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus. Unless the context otherwise indicates, "Pacer" or "Company" refers
to Pacer International, Inc. and its subsidiaries. Unless otherwise indicated
herein, all information in this Prospectus (i) gives effect to a 9.5-for-1
stock split of the Common Stock to be effected immediately prior to this
offering; and (ii) assumes no exercise of the Underwriters' over-allotment
option. Certain terms used in this Prospectus are defined in the Glossary on
page 53.

THE COMPANY

GENERAL

Pacer, originally founded in 1928, is a multi-modal, value-added
transportation and logistics solutions provider, offering a broad menu of
transportation-related services, including a variety of trucking, intermodal
marketing, logistics and freight services. As a non-asset based company, Pacer
provides integrated freight services through a national network of sales
agents, independent contractors and railroad/drayage partnerships. To date, the
Company's business model has required minimal capital investment in physical
assets such as transportation equipment. The Company's strong internal growth
has been supplemented by strategic acquisitions, enabling the Company to
increase its revenues from $86.8 million in 1996 on a stand alone basis to $252
million for the twelve month period ended March 31, 1998 on a pro forma basis
after giving effect to such acquisitions. See "--Acquisition History."

According to a leading industry source, the total domestic market for freight
transportation in 1996 was approximately $467 billion, representing over 6% of
the U.S. gross national product. The transportation industry is highly
fragmented, and a shipper faces a broad array of changing service alternatives.
Integrated logistics providers, such as the Company, have the ability to
utilize a portfolio of transportation products and design optimal
transportation solutions for the shipper. By optimizing the flow of goods
through the supply chain, a company's overall freight handling, delivery and
inventory costs can be significantly reduced. As companies' transportation and
logistics decisions involve greater emphasis on cost efficiency and increased
focus on core competencies, many companies are reevaluating their in-house
transportation functions. At the same time, major shippers are seeking to
utilize fewer firms to service their transportation management and logistics
needs.

COMPETITIVE ADVANTAGES

The Company attributes its market position and its significant opportunities
for continued growth and increased profitability to the following competitive
advantages:

Diverse Product Offerings. The Company offers its customers one of the
broadest menus of service offerings in the transportation industry, including
flatbed and specialized heavy-haul trucking, intermodal marketing (rail or
over-the-road), warehousing, consolidation/deconsolidation, cross-dock, less-
than-truckload ("LTL"), cartage and drayage. The Company also provides
specialized services, such as rail car maintenance and inspection, to
transportation providers. Furthermore, the Company provides logistics services
to coordinate the foregoing services, offering integrated freight
transportation solutions to its customers.

National Presence. By combining a network of regional sales offices and
independent agents, complemented by national sales offices, the Company offers
integrated national services while maintaining the entrepreneurial
responsiveness of a small business. The Company's service network comprises a
broad range of national, regional and local transportation providers, including
rail partners, trucking companies, independent contractors and other third
party providers.

3
<PAGE>

Tailored Customer Focus. The Company has developed a customer philosophy
which categorizes each major customer as a distinct market. Accordingly, the
Company creates a package of services integrated and customized for each
customer and strives to broaden the relationship with each customer by
identifying, addressing and servicing an increasing share of the customer's
transportation and logistics needs. As a result of the Company's philosophy,
the Company has established a strong, diverse customer base consisting of
global, national and regional manufacturers and retailers, including numerous
Fortune 500 corporations, several of which have been customers of the Company
for more than 15 years.

Targeted Industry Expertise. The Company derives a significant portion of its
revenues from providing transportation services within certain core shipping
sectors where the Company's industry focus leads to greater expertise and
higher added value for the customer. For example, through its extensive network
of service providers, the Company provides a range of specialized services to
many of the nation's largest "superstore" or mass market retailers. In addition
to general consumer freight, the Company has developed customized services to
meet the special needs of certain product categories. Similarly, the Company
provides a range of specialized services for the transportation sector, with
customers including railroads, other intermodal transportation service
providers and equipment vendors to the rail industry. In the flatbed and
specialized trucking sector, the Company has limited its participation in
traditional commodity sectors and developed a specialty in industrial freight
with non-standard requirements, such as the transportation of heavy or
oversized materials.

Strong West Coast Market Position. Management believes that the Company has
developed a leading market position in intermodal and related logistics
services on the U.S. West Coast, where it operates specialized consolidation
and trucking facilities and provides cartage, drayage and LTL services.
Management believes that the Company is well-positioned to benefit from the
continued growth in international trade, the trend towards importing certain
product categories from Asia and the continued strength of the U.S. dollar in
foreign currency markets. The Company has also been able to replicate services
originally provided in the West Coast market for its customers operating in
other parts of the country. See "Business--Competitive Advantages--Strong West
Coast Market Position."

Information Technology. The Company has made significant investments in
information technology. The Company's information systems are capable of
providing a wide range of communication alternatives, typically through the
medium requested by a customer. This interconnection allows the Company to
easily communicate requirements and availability of equipment and volume, to
confirm and bill orders and to trace shipments. In addition, each office is
able to track trailers and containers entering its service area through the
Company's network and to redeploy that equipment to fulfill its customers'
outbound shipping requirements before the equipment is returned for use by
another intermodal user.

4
<PAGE>

GROWTH STRATEGY

The Company's growth strategy consists of (i) expanding its service
offerings, (ii) increasing sales to existing customers, (iii) leveraging its
core service provider capability, (iv) expanding its customer base and (v)
pursuing strategic acquisitions.

Expand Service Offerings. The Company believes it is increasingly important
to be able to meet the diverse needs of customers who are increasingly looking
to a limited number of sources for their transportation and logistics needs,
whether on a national or regional scale or even within a single shipping lane.
Thus, the Company intends to maintain its broad range of current service
offerings and selectively introduce new services without compromising its
commitment to superior service on an efficient and cost effective basis. See
"Business--Growth Strategy--Expand Service Offerings."

Increase Sales to Existing Customers. As part of its growth strategy, the
Company intends to provide additional services to existing customers. For
example, many of the Company's high volume nationwide customers currently use
only its intermodal transportation services for a portion of their overall
transportation needs. The Company believes that it will be able to expand the
services provided to its customers as they increasingly outsource their
transportation and logistics needs. The Company will continue to focus on
capturing additional freight volume from existing customers currently being
handled by long-haul trucking companies or intermodal competitors and on
providing supplementary logistics services to those customers.

Leverage Core Service Provider Capability. The Company seeks to capitalize on
the trend, especially among larger shippers, toward reducing the number of
authorized service providers the shippers use in favor of a small number of
core service providers with the size and diverse service capability to satisfy
most of the shippers' transportation needs. Accordingly, the Company has
concentrated on consolidating and integrating its multi-modal service offerings
and value-added logistics solutions capabilities, enabling it to handle a broad
range of each customer's transportation and logistics requirements.

Pursue Strategic Acquisitions. As an additional component of its growth
strategy, the Company intends to continue its disciplined acquisition program.
Acquisition candidates will typically fall into one or more of the following
three categories: (i) operations that expand the Company's presence in a
particular service category, (ii) operations that expand the Company's existing
services in a new geographic area, or (iii) operations that enable the Company
to provide a new or expanded form of complementary services to its customer
base. The Company intends to seek acquisition candidates with complementary
management and operating philosophies and service capabilities that the Company
can add to and integrate with its current menu of services. Given the highly
fragmented nature of the industry, the relatively large number of small and
mid-size transportation companies, and the recent consolidation in the
transportation industry, management believes there is increased pressure on
these smaller transportation and logistics companies to consolidate. The
Company's nationwide network, together with its strong and diverse customer
base, make it well-positioned to benefit from the expected continued growth in
both the intermodal and transportation logistics services markets and the
potential for consolidation of the smaller companies.

5
<PAGE>

ACQUISITION HISTORY

In March 1997, pursuant to a management buyout funded in part by Eos
Partners, L.P. ("Eos"), the Company acquired all of the capital stock of
Pacific Motor Transport Company ("PMTC"), a provider of truckload freight
services through its Pacer division. PMTC formerly offered intermodal marketing
services through its ABL-TRANS division, now a division of Interstate
Consolidation Service, Inc. (d/b/a Pacer Intermodal, Inc.). PMTC was founded in
1928 under the name Pacific Electric Motor Transport Company as a subsidiary of
UPRC (a subsidiary of the Union Pacific Railroad ("UP")).

In December 1997, the Company acquired (the "Interstate Acquisition") all of
the capital stock of Interstate Consolidation, Inc. ("ICI") and Interstate
Consolidation Service, Inc. ("ICSI") and its wholly owned subsidiary Intermodal
Container Service, Inc. ("IMCS", and together with ICI and ICSI, "Interstate").
Interstate is a multipurpose provider of transportation services, including
intermodal marketing, cartage and freight consolidation and handling.

In April 1998, the Company acquired (the "Stutz Acquisition") all of the
capital stock of Intraco, Inc. d/b/a Stutz & Company ("Stutz").

In June 1998, the Company acquired (the "Cross Con Acquisition") all of the
capital stock of Cross Con Terminals, Inc. ("Terminals") and Cross Con
Transport, Inc. ("Transport" and, together with Terminals, "Cross Con").

The Interstate Acquisition, the Stutz Acquisition and the Cross Con
Acquisition are referred to herein collectively as the "Acquisitions."

RECENT DEVELOPMENTS

The following discussion summarizes certain preliminary unaudited results of
operations of the Company for the three months ended June 30, 1998 and 1997.

For the three months ended June 30, 1998, the Company had revenues of $53.5
million as compared to $23.1 million for the three months ended June 30, 1997.
Income from operations was $2.6 million for the three months ended June 30,
1998 as opposed to $1.1 million for the three months ended June 30, 1997. Net
income was $1.2 million for the three months ended June 30, 1998 as compared to
$0.5 million for the three months ended June 30, 1997. The increases resulted
primarily from the Acquisitions, together with internal growth.

Income per diluted common share was $.19 for the three months ended June 30,
1998 before giving effect to the dividend of $378,000 paid on the Company's
Series A Preferred Stock on June 30, 1998, compared to $.13 per share for the
three months ended June 30, 1997. After giving effect to such dividend, income
per share was $.13 for the three months ended June 30, 1998.

Additionally, on July 24, 1998, the Company acquired substantially all of the
assets of Professional Logistics Management Co., Inc. and 3PL Corporation, two
companies that provide transportation management programs and services. These
companies are based in Lafayette, California and are affiliated with each other
through common share ownership. The total purchase price was approximately $2.8
million in cash and the assumption of certain liabilities incurred in the
ordinary course of business.

------------

The Company's principal executive offices are located at 3746 Mt. Diablo
Boulevard, Suite 110, Lafayette, California 94549 and its telephone number is
(925) 284-7145.

6
<PAGE>

THE OFFERING

<TABLE>
<C> <S>
Common Stock offered by the Company ................ 2,800,000 shares
Common Stock offered by the Selling Stockholders.... 400,000 shares(1)
Common Stock to be outstanding after this offering.. 8,412,392 shares(2)
Use of proceeds..................................... To repay outstanding
indebtedness and
repurchase the Company's
outstanding Series A
Preferred Stock. See "Use
of Proceeds."
Proposed Nasdaq National Market Symbol.............. PACR
</TABLE>
- --------
(1) Includes 175,000 shares of Common Stock issuable upon exercise of the
warrant issued by the Company to UPRC (the "UPRC Warrant"), at an exercise
price of $10.00 per warrant unit (collectively, the "Warrant Units"). Each
Warrant Unit is exercisable for 9.5 shares of Common Stock and one share of
Series A Preferred Stock (to be redeemed at or prior to the closing of this
offering at a price of $9 per share). See "Management--Executive
Compensation."

(2) Excludes (a) 1,045,000 shares of Common Stock and 110,000 shares of Series
A Preferred Stock (collectively, the "Option Units") reserved for issuance
under the Company's 1997 Stock Option Plan (the "1997 Option Plan"), of
which options to purchase 40,000 Option Units, at an exercise price of
$40.00 per Option Unit, and 70,000 Option Units, at an exercise price of
$11.24 per Option Unit, were outstanding as of March 31, 1998 and (b)
650,000 shares of Common Stock reserved for issuance under the Company's
1998 Stock Option Plan (the "1998 Option Plan").

------------

Forward-Looking Statements. Certain statements contained in this Prospectus,
including statements regarding the anticipated development and expansion of the
Company's business, the intent, belief or current expectations of the Company,
its directors or its officers, primarily with respect to the future operating
performance of the Company and other statements contained herein regarding
matters that are not historical facts, are "forward-looking" statements.
Because such statements include risks and uncertainties, actual results may
differ materially from those expressed or implied by such forward-looking
statements. Factors that potentially could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include, but are not limited to, the inability to manage growth of the
Company's operations, the loss of services of senior managers, the inability to
hire and retain salespersons and other logistics professionals, including
independent contractors, work stoppages at railroads or adverse weather
conditions affecting operations, the inability to successfully integrate
acquired companies and/or realize the competitive and business advantages of
such acquisitions and enhance the financial prospects of the Company, an
economic recession or a downturn in customers' business cycles, the inability
to secure sufficient equipment or other transportation services from third
parties to service customers' needs, a decrease in demand for intermodal
transportation services relative to other transportation services, the
inability to obtain the use of drayage services from third parties, as well as
other risks detailed in "Risk Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business."

7
<PAGE>

SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
PREDECESSOR (1)
-------------------------------------------------
THREE
MONTHS
YEAR ENDED DECEMBER 31, ENDED
--------------------------------------- MARCH 31,
1993 1994 1995 1996 1997
----------- ----------- ------- ------- ---------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues......... $67,300 $75,905 $78,278 $86,766 $19,538
Net revenues..... 10,085 11,109 12,378 13,650 3,040
Selling, general
and
administrative.. 7,059 7,149 8,697 10,037 2,300
Amortization of
intangibles..... -- -- -- -- --
Income from
operations...... 2,985 3,744 3,593 3,520 193
Net income....... $ 1,672 $ 2,678 $ 3,036 $ 3,008 $ 119
Income per
share(3):
Basic...........
Diluted.........
Weighted average shares
outstanding:
Basic...........
Diluted.........
<CAPTION>
COMPANY (1)
--------------------------------------------------------------
PRO FORMA PRO FORMA
NINE NINE THREE THREE
MONTHS MONTHS PRO FORMA MONTHS MONTHS
ENDED ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1997 1997(2) 1997(2) 1998 1998(2)
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues......... $81,102 $187,417 $ 238,859 $50,362 $64,582
Net revenues..... 12,389 28,638 36,546 8,359 10,388
Selling, general
and
administrative.. 8,799 19,497 25,009 5,634 6,702
Amortization of
intangibles..... 257 945 1,254 228 334
Income from
operations...... 3,187 7,771 9,718 2,384 3,188
Net income....... $ 1,416 $ 3,207 $ 3,878 $ 1,065 $ 1,413
Income per
share(3):
Basic........... $ 0.41 $ 0.59 $ 0.71 $ 0.23 $ 0.26
Diluted......... $ 0.34 $ 0.49 $ 0.60 $ 0.19 $ 0.22
Weighted average shares
outstanding:
Basic........... 3,403,480 5,437,392 5,437,392 4,678,750 5,437,392
Diluted......... 4,141,041 6,499,216 6,499,216 5,604,877 6,499,216
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------------------
ACTUAL PRO FORMA(4) AS ADJUSTED(5)
------- ------------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficiency ................ $(2,242) $ (315) $ (315)
Total assets............................... 56,134 78,389 78,389
Long-term debt and capital leases.......... 22,079 33,700 7,302
Stockholders' equity....................... 10,524 16,741 43,641
</TABLE>
- -------
(1) The "Predecessor" includes the accounts of PMTC prior to the management
buyout on March 31, 1997. The "Company" includes the accounts of PMTC
acquired in the management buyout, after purchase accounting adjustments,
and the accounts of Interstate subsequent to the Interstate Acquisition as
of December 16, 1997. The management buyout of PMTC and the Interstate
Acquisition were accounted for under the purchase method of accounting. As
a result of these transactions, the financial information presented above
is not comparable in certain respects.
(2) The pro forma information gives effect to the Acquisitions as if they were
completed on the first day of the periods presented. See "--Acquisition
History." Pro forma information has been presented for nine months and the
year ended December 31, 1997 for comparative purposes.
(3) Income per share has been computed for all periods reflecting the effect of
a 9.5 to 1 stock split to be effected immediately prior to this offering.
Shares outstanding for the year ended December 31, 1997 have been
calculated assuming all shares and options issued in connection with the
formation of the Company and the Interstate, Cross Con and Stutz
Acquisitions were outstanding as of January 1, 1997.
(4) Includes the Stutz Acquisition and the Cross Con Acquisition, which were
accounted for under the purchase method of accounting.
(5) Adjusted to give effect to the application of estimated net proceeds to the
Company from this offering based upon an assumed initial public offering
price of $12.00 per share. See "Use of Proceeds" and "Capitalization."

8
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. This Prospectus contains,
in addition to historical information, forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the following
risk factors, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this Prospectus.

Lack of Significant Combined Operating History. Prior to being acquired by
the Company in connection with its respective Acquisition, each acquired
company had been operating as a separate independent entity and there can be
no assurance that the Company will be able to integrate each acquired business
effectively. In addition, there can be no assurance that management will be
able to oversee the combined entity and effectively implement the Company's
operating or growth strategies. The pro forma combined financial results of
the acquired companies cover periods when the acquired companies and Pacer
were not under common control or management and, therefore, may not be
indicative of the Company's future financial or operating results. The success
of the Company will depend on the extent to which management is able to
centralize and integrate certain operating, administrative and accounting
functions and otherwise integrate the acquired companies and other companies
acquired in the future into one organization in a profitable manner. The
inability of the Company to successfully integrate the acquired companies
would have a material adverse effect on the Company's financial condition and
results of operations.

Management of Growth. The Company's strategy is to expand its operations
through both internal growth and acquisitions. Management expects to spend
significant time and resources in evaluating, completing and integrating
acquisitions. There can be no assurance that the Company's systems, procedures
and controls will be adequate to support its operations as they expand. Any
future growth will impose significant added responsibilities on members of
senior management, including the need to recruit and integrate new senior
level managers and executives. There can be no assurance that such additional
management will be successfully recruited and retained by the Company. The
Company's failure to manage its growth effectively, or its inability to
attract and retain additional qualified management, could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Growth Strategy."

Dependence on Management. The Company is highly dependent upon the continued
services of its senior management team. The sudden loss of the services of
several members of senior management could have a material adverse effect on
the Company. See "Management."

Reliance on Agents and Independent Contractors. The Company relies upon the
services of independent commission agents to market its transportation
services, to act as intermediaries with customers, and to recruit independent
contractors who are in turn relied upon for providing trucking services on
behalf of the Company. Contracts with agents and independent contractors are,
in most cases, terminable upon short notice by either party. Although the
Company believes its relationships with agents and independent contractors are
good, there can be no assurance that the Company will continue to be
successful in retaining its agents and independent contractors or that agents
or independent contractors who terminate their contracts can be replaced by
equally qualified persons. Furthermore, since the agents have the primary
relationship with customers and the day-to-day relationship with the
independent contractors, it can be expected that some customers and
independent contractors will terminate their relationship with the Company
whenever an agent terminates its relationship with the Company. See
"Business--Sales and Marketing" and "--Relationships with Independent
Contractors."

9
<PAGE>

Risk Associated with Independent Contractors. From time to time, tax and
other regulatory authorities have sought to assert that independent
contractors in the trucking industry are employees, rather than independent
contractors. No tax claim has been successfully made with respect to
independent contractors of the Company, and management is confident that the
independent contractors of the Company are not employees of the Company under
existing interpretations of federal and state tax laws. There can be no
assurance, however, that tax authorities will not successfully challenge this
position, or that such interpretations will not change, or that tax laws will
not change. If the independent contractors were determined to be employees,
such determination could materially increase the Company's exposure under a
variety of federal and state tax, worker's compensation, unemployment
benefits, labor and employment and tort laws, as well as potential liability
for employee benefits. See "Business--Relationships with Independent
Contractors."

Dependence on Railroads. The Company is dependent upon the major railroads
in the United States for substantially all of the intermodal services provided
by the Company. In many markets, rail service is limited to a few railroads or
even a single railroad. Consequently, a reduction in, or elimination of, rail
service to a particular market is likely to adversely affect the Company's
ability to provide intermodal transportation services to some of the Company's
customers. In addition, the railroads are relatively free to adjust shipping
rates up or down as market conditions permit. Rate increases would result in
higher intermodal transportation costs, reducing the attractiveness of
intermodal transportation as an alternative to truck or other modes of
transportation and could cause a decrease in demand for the Company's
services. Further, the Company's ability to continue to expand its intermodal
transportation business is dependent upon the railroads' ability to increase
capacity for intermodal freight. A significant portion of the Company's
revenues are derived from intermodal marketing. As a result, a decrease in
demand for intermodal transportation services relative to other transportation
services could have a material adverse effect on the Company's results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Services." The Company's business
would also be adversely affected by a work stoppage at one or more railroads
or by adverse weather conditions that hinder the railroads' ability to provide
transportation services. The Company cannot predict what effect, if any, the
recent trend toward consolidation among railroads may have on intermodal
transportation services or the Company's results of operations. In recent
years, the Company has received revenues for transportation services provided
to railroads in connection with their capital expenditure programs implemented
to improve their infrastructure. The Company cannot predict the duration of
such programs or whether the Company will continue to provide services to the
railroads in connection with such programs. See "Business--Relationships with
Railroads."

Risks Associated with Acquisitions. No assurance can be given that the
Company will be successful in identifying, closing and integrating future
acquisitions. Identifying, acquiring and integrating businesses requires
substantial management, financial and other resources and may pose risks with
respect to production, customer service and market share. Further,
acquisitions involve a number of special risks, including failure of the
acquired business to achieve expected results, diversion of management's
attention, failure to retain key personnel of the acquired business and risks
associated with unanticipated events or liabilities, some or all of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company may consider acquiring
complementary businesses that provide services that the Company currently does
not provide, and there can be no assurance that these complementary businesses
can be successfully integrated. While the Company believes that it has
sufficient financial and management resources to accomplish such activities,
there can be no assurance in this regard or that the Company will not
experience difficulties with customers, personnel or others. In addition,
although the Company believes that its acquisitions will enhance the
competitive position and business and financial prospects of the Company,
there can be no assurance that such benefits will be realized or that any
combination will be successful. See "Business--Growth Strategy."

10
<PAGE>

Risks Related to Acquisition Financing. The timing, size and success of the
Company's future acquisition efforts and the associated capital requirements
cannot be predicted at this time. The Company currently intends to finance
future acquisitions by using a combination of Common Stock, cash and debt. To
the extent the Company issues shares of Common Stock to finance future
acquisitions, the interests of existing stockholders will be diluted. If the
Common Stock does not maintain a sufficient market value, or if potential
acquisition candidates are unwilling to accept Common Stock as part of the
consideration for the sale of their businesses, the Company may be required to
utilize more of its cash resources, if available, in order to pursue its
acquisition program. See "Use of Proceeds." If the Company does not have
sufficient cash resources, its growth through acquisitions could be limited
unless it is able to obtain additional capital through debt or equity
financings. There can be no assurance that the Company will be able to obtain
the financing it will need for its acquisition program on acceptable terms, or
at all. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."

Risks of Adverse Economic Developments and Downturn in Business
Cycle. Certain sectors of the transportation industry historically have been
cyclical as a result of economic recession, customers' business cycles,
increases in prices charged by third party carriers, interest rate
fluctuations and other economic factors over which the Company has no control.
Increased operating expenses incurred by third party carriers can be expected
to result in higher transportation costs, and the Company's net revenues and
income from operations could be adversely affected if it were unable to pass
through to its customers the full amount of increased transportation costs.
Economic recession or a downturn in customers' business cycles, particularly
among certain national retailers or in the consumer products, railroad, toy or
other industries in which the Company has a large number of customers, also
could have a material adverse effect on the Company's operating results if the
volume of freight shipped by those customers were also reduced. Additionally,
a significant reduction in imports from Asia could have a material adverse
effect on the Company's business. See "Business--Competitive Advantages" and
"--Growth Strategy."

Dependence on Equipment and Services Availability. The Company is dependent
in part on the availability of truck, rail, ocean and air services provided by
independent third parties. There have historically been periods of equipment
shortages in the transportation industry, particularly among truckload
carriers and in a strong economy. If the Company were unable to secure
sufficient equipment or other transportation services to meet its customers'
needs, its results of operations could be materially adversely affected, and
customers could seek to have their transportation and logistics needs met by
other third parties on a temporary or permanent basis. See "Business--
Competitive Advantages" and "--Services."

Relationship with Drayage Companies. The Company only provides a portion of
the drayage services required by its intermodal customers and relies on
outside providers for the balance of such services. Most drayage companies
operate relatively small fleets and have limited access to additional capital
for expansion. Thus, as the Company expands, it will likely need the services
of additional drayage companies. At some locations, only a few drayage
companies meet the Company's quality standards. In addition, the trucking
industry has experienced severe shortages of available drivers in recent
years, which may curtail the ability of the drayage companies to expand the
size of their fleets. This shortage may also require drayage companies to
increase drivers' compensation, thereby increasing drayage costs to the
Company. If the Company were unable to secure additional local drayage
capacity to handle the drayage needs of its customers or had to increase the
amount paid for drayage services, the Company's results of operations could be
adversely affected and the Company could experience difficulty increasing its
business volume. See "Business--Relationships with Drayage Companies."

Safety Risks. Accidents in the trucking industry can be serious, and
occurrences are unpredictable. Although the Company has an active training and
safety program, there can be no assurance that the frequency or severity of
accidents or workers' compensation claims will not increase in the future,
that there will not be unfavorable developments of existing claims or that
insurance premiums will not

11
<PAGE>

increase. A material increase in the frequency or severity of accidents or
workers' compensation claims or the unfavorable development of existing claims
can be expected to adversely affect the Company's operating results. See
"Business--Risk Management; Insurance."

Highly Competitive Industry. The transportation services industry is highly
competitive and fragmented. The Company competes against other non-asset based
logistics companies, as well as asset-based logistics companies, third-party
freight brokers and carriers offering logistics services. The Company also
competes against carriers' internal sales forces and shippers' own
transportation departments. Some of the Company's competitors have
substantially greater financial and other resources than the Company. The
Company also buys and sells transportation services from and to many companies
with which it competes. Historically, competition has created downward
pressure on freight rates, and continuation of this rate pressure may
adversely affect the Company's net revenues and income from operations. See
"Business--Competition."

Seasonality. In the transportation industry generally, results of operations
show a seasonal pattern as customers reduce shipments during and after the
winter holiday season. In recent years, the Company's operating income and
earnings have been higher in the second and third quarters than in the first
and fourth quarters. The Company expects this seasonality to continue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Government Regulation. The Company is licensed by the Department of
Transportation (the "DOT") as a broker in arranging for the transportation of
general commodities by motor vehicle. The DOT prescribes qualifications for
acting in this capacity, including certain insurance and surety bond
requirements. The Company's failure to comply with the laws and regulations
applicable to entities holding such a license and any resultant suspension or
loss of such license could have a material adverse effect on the Company's
results of operations or financial condition. The transportation industry is
subject to legislative or regulatory changes that can affect the economics of
the industry by requiring changes in operating practices or influencing the
demand for, and the cost of providing, transportation services. See
"Business--Government Regulation."

Control by Existing Management and Stockholders. Following consummation of
this offering, the executive officers and directors of the Company and Eos
will beneficially own an aggregate of approximately 61.86% of the outstanding
shares of Common Stock. Accordingly, following this offering, such persons
will effectively be able to control the affairs of the Company, including the
election of all directors and the outcome of all matters submitted to a vote
of the stockholders of the Company. Such concentration of ownership may have
the effect of delaying, deterring or preventing a change of control of the
Company, including transactions in which the holders of Common Stock might
receive a premium for their shares over prevailing market prices. See
"Principal and Selling Stockholders."

Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the pro forma net tangible book value per share of
Common Stock. Purchasers of shares of Common Stock in this offering will incur
immediate and substantial dilution of $12.51 in the pro forma net tangible
book value per share of the Common Stock, assuming an initial public offering
price of $12.00 per share. See "Dilution."

Shares Eligible for Future Sale. Upon consummation of this offering, the
Company will have 8,412,392 shares of Common Stock issued and outstanding. The
3,200,000 shares of Common Stock sold in this offering will be freely tradable
without restriction or limitation under the Securities Act of 1933, as amended
(the "Securities Act"), except for shares purchased by "affiliates" (as
defined in Rule 144 under the Securities Act). Additionally, certain members
of management and others will own 5,212,392 shares of Common Stock following
this offering. None of these shares was issued in a transaction registered
under the Securities Act, and, accordingly, such shares may not be sold except
in transactions registered under the Securities Act or pursuant to an
exemption from registration, including the exemption contained in Rule 144
under the Securities Act. When these shares become eligible for sale, the
market price of the Common Stock could be adversely affected by the sale of
substantial amounts of the shares

12
<PAGE>

into the public market. Prior to this offering, the Company expects to grant
demand registration rights to Eos and piggy-back registration rights to all of
its existing stockholders who will continue to be stockholders following this
offering. It is expected that such registration rights will be exercisable
after the expiration of the lock-up period described below. If such
stockholders, by exercising such registration rights, cause a large number of
shares to be registered and sold in the public market, such sales may have an
adverse effect on the market price of the Common Stock. See "Shares Eligible
for Future Sale."

The Company currently has outstanding options to purchase 1,045,000 shares
of Common Stock and 110,000 shares of Series A Preferred Stock issued pursuant
to the 1997 Option Plan, constituting the total number of shares of Common
Stock and Series A Preferred Stock issuable pursuant to such plan. The Company
intends to register all the shares of Common Stock subject to these options
under the Securities Act for public resale. See "Management--1997 Stock Option
Plan." In May 1998, the Company adopted the 1998 Option Plan. See
"Management--1998 Stock Option Plan."

The Company, the Selling Stockholders and the directors, executive officers
and all other stockholders of the Company have agreed that they will not
offer, sell or issue any shares of Common Stock or options, rights or warrants
to acquire any Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of BT Alex. Brown Incorporated,
except for the transfer by such stockholders pursuant to bona fide gifts, the
grant of employee stock options and for shares issued (i) in connection with
acquisitions and (ii) pursuant to the exercise of options granted under the
1997 Option Plan or the 1998 Option Plan.

The Company currently intends to file a Registration Statement on Form S-1
covering up to an additional 2 million shares of Common Stock under the
Securities Act for its use in connection with future acquisitions. These
shares generally will be freely tradable after their issuance by persons not
affiliated with the Company unless the Company contractually restricts their
resale.

The effect, if any, of the availability for sale, or sale, of the shares of
Common Stock eligible for future sale on the market price of the Common Stock
prevailing from time to time is unpredictable, and no assurance can be given
that the effect will not be adverse.

Certain Anti-Takeover Provisions. Certain provisions of the Company's
Restated Certificate of Incorporation and Amended and Restated By-laws and
Delaware law could, together or separately, discourage potential acquisition
proposals, delay or prevent a change in control of the Company or limit the
price that certain investors may be willing to pay in the future for shares of
the Common Stock. These provisions (i) classify the Company's Board of
Directors into three classes, each of which will serve for different three-
year periods, (ii) provide that only the Board of Directors or certain members
thereof or officers of the Company may call special meetings of the
stockholders and (iii) authorize the issuance of "blank check" preferred stock
having such designations, rights and preferences as may be determined from
time to time by the Board of Directors. The Company also is subject to Section
203 of the Delaware General Corporation Law (the "DGCL"), which, subject to
certain exceptions, prohibits a Delaware corporation from engaging in any of a
broad range of business transactions with an "interested stockholder" for a
period of three years following the date such stockholder became an interested
stockholder. See "Description of Capital Stock."

No Prior Public Market; Determination of Offering Price; Stock Price
Volatility. Prior to this offering, there has been no public market for the
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering. The initial public offering price
will be determined through negotiations among the Company and the
Representatives (as defined) of the Underwriters and may bear no relationship
to the price at which the Common Stock will trade after this offering. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The market price of the Common Stock may be
volatile and be significantly affected

13
<PAGE>

by factors such as actual or anticipated fluctuations in the Company's
operating results, announcements of new services by the Company or its
competitors, developments with respect to conditions and trends in the
logistics or transportation industries served by the Company, changes in
governmental regulation, changes in estimates by securities analysts of the
Company's future financial performance, general market conditions and other
factors, many of which may be beyond the Company's control. In addition, the
stock markets have from time to time experienced significant price and volume
fluctuations that have adversely affected the market prices of securities of
companies for reasons often unrelated to their operating performance.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,800,000 shares of
Common Stock offered hereby by the Company, after deducting underwriting
discounts and commissions and estimated offering expenses, are estimated to be
$30.0 million ($35.4 million if the Underwriters' over-allotment option is
exercised in full). The Company intends to use $26.8 million of such net
proceeds to repay in full the Term Loan (as defined) and to repay in part the
Revolving Loan (as defined) under the Company's existing credit agreement with
The First National Bank of Chicago (the "Credit Agreement") and $3.2 million
to repurchase from certain principal stockholders of the Company all
outstanding shares of the Company's Series A Preferred Stock. See "Certain
Transactions." The amount outstanding under the Credit Agreement at June 30,
1998 was $34.9 million. The debt under the Credit Agreement was incurred for
working capital purposes and to finance, in part, the Acquisitions, and bore
interest at a weighted average rate of 8.79% as of June 30, 1998. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The Company will not receive any
proceeds from the sale of shares by the Selling Stockholders.

The Company continually reviews and evaluates acquisition candidates to
complement and expand its existing business, and is at various stages of
evaluation and discussion with a number of such candidates. The Company has
not entered into a definitive purchase agreement with respect to any
acquisition candidate, and no portion of the net proceeds has been allocated
to specific acquisitions. It is possible, however, that a portion of the net
proceeds will be used for one or more acquisitions.

DIVIDEND POLICY

The Company currently intends to retain its future earnings, if any, to
finance the growth, development and expansion of its business and,
accordingly, does not currently intend to declare or pay any cash dividends on
the Common Stock in the immediate future. The declaration, payment and amount
of future cash dividends, if any, will be at the discretion of the Company's
Board of Directors after taking into account various factors, including, among
others, the Company's financial condition, results of operations, cash flows
from operations, current and anticipated capital requirements and expansion
plans, the income tax laws then in effect and the requirements of Delaware
law. In addition, the Company expects that the terms of any credit facility
that it may obtain in the future will include restrictions on payment of cash
dividends by the Company without the consent of the lender.

14
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1998 (i) on a historical basis, (ii) on a pro forma basis after giving
effect to the Stutz Acquisition and the Cross Con Acquisition and (iii) as
adjusted to give effect to the sale by the Company of 2,800,000 shares of
Common Stock in this offering at an assumed initial public offering price of
$12.00 per share, after deducting estimated underwriting discounts and
commissions and expenses of this offering and the initial application of the
net proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of the
Company, including the notes thereto, appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------
ACTUAL PRO FORMA(1) AS ADJUSTED
------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt and capital leases, including
current maturities of long-term debt......... $ 2,459 $ 2,481 $ 2,481
======= ======= =======
Long-term debt and capital leases, less
current portion.............................. $22,079 $33,700 $ 7,302
Stockholders' equity:
Preferred Stock, $0.01 par value, 5,000,000
shares authorized, 478,421 shares
designated Series A Preferred Stock,
350,000 shares issued and outstanding
actual, 350,000 shares outstanding pro
forma and no shares outstanding as adjusted
(2)(3)..................................... 4 4 --
Common Stock, $0.01 par value, 20,000,000
shares authorized, 4,678,750 shares issued
and outstanding actual, 5,437,392 shares
outstanding pro forma and 8,412,392 shares
outstanding as adjusted(2)(3).............. 5 6 36
Warrants, 18,421 outstanding actual and pro
forma, and no outstanding as adjusted(3)... 53 53 --
Additional paid-in capital.................. 7,981 14,197 41,124
Retained earnings(4)........................ 2,481 2,481 2,481
------- ------- -------
Total stockholders' equity................ 10,524 16,741 43,641
------- ------- -------
Total capitalization.................... $32,603 $50,441 $50,943
======= ======= =======
</TABLE>
- --------
(1) Gives effect to the Stutz Acquisition and the Cross Con Acquisition as if
such transactions had occurred on March 31, 1998.

(2) Excludes (a) 1,045,000 shares of Common Stock and 110,000 Shares of Series
A Preferred Stock issuable upon exercise of 40,000 outstanding Option
Units, at an exercise price of $40.00 per Option Unit, and 70,000
outstanding Option Units, at an exercise price of $11.24 per Option Unit
and (b) 650,000 shares of Common Stock reserved for issuance under the
1998 Option Plan.
(3) Gives effect to the exercise of the UPRC Warrant into 175,000 shares of
Common Stock upon consummation of this offering.
(4) Gives effect to the redemption by the Company of all issued and
outstanding shares of Series A Preferred Stock at face value of
$3,150,000. See "Use of Proceeds" and "Certain Transactions."

15
<PAGE>

DILUTION

At March 31, 1998, the pro forma net tangible book value (deficiency) of the
Company was $(31,177,000), or $(5.73) per share. Pro forma net tangible book
value (deficiency) per share represents the Company's pro forma total tangible
assets less its pro forma total liabilities divided by 5,437,392 pro forma
shares of Common Stock outstanding as of March 31, 1998. After giving effect
to the sale by the Company of 2,800,000 shares of Common Stock offered hereby
based on an assumed initial public offering price of $12.00 per share and
after deducting estimated underwriting discounts and commissions and expenses
of this offering, and after redemption of all issued and outstanding shares of
Series A Preferred Stock at face value of $3,150,000, the pro forma net
tangible book value (deficiency) of the Company at March 31, 1998 would have
been approximately $(4,279,000), or $(0.51) per share of Common Stock,
representing an immediate increase in pro forma net tangible book value of
$5.22 per share to existing stockholders and an immediate, substantial
dilution of $12.51 per share to persons purchasing shares of Common Stock
offered hereby. The following table illustrates this dilution to new
investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price...................... $12.00
Pro forma net tangible book value (deficiency) per share
at March 31, 1998....................................... $(5.73)
Increase attributable to price paid by new investors per
share................................................... 5.22
------
Pro forma net tangible book value per share as adjusted for
this offering............................................. (0.51)
------
Dilution per share to new investors........................ $12.51
======
</TABLE>

The following table sets forth, as of March 31, 1998, the number of shares
of Common Stock purchased from the Company, including shares issued to effect
the Interstate, Stutz and Cross Con Acquisitions (the Stutz and Cross Con
Acquisitions occurring in April and June, 1998, respectively) the total
consideration paid to the Company and the average price paid per share by
existing stockholders and purchasers of shares of Common Stock offered hereby,
after giving effect to the sale by the Company of 2,800,000 shares of Common
Stock offered hereby based on an assumed initial public offering price of
$12.00 per share and before deducting estimated underwriting discounts and
commissions and expenses of this offering.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 5,612,392 66.7% $11,073,591 24.8% $ 1.97
New investors............... 2,800,000 33.3 33,600,000 75.2 12.00
--------- ----- ----------- -----
Total..................... 8,412,392 100.0% $44,673,591 100.0%
========= ===== =========== =====
</TABLE>

The foregoing computations give effect to (a) the automatic conversion of
the UPRC Warrant into 175,000 shares of Common Stock upon consummation of this
offering and (b) the redemption by the Company of all issued and outstanding
shares of Series A Preferred Stock at face value of $3,150,000, but do not
include the effect of the issuance of 1,045,000 shares of Common Stock and
110,000 shares of Series A Preferred Stock issuable upon exercise of 40,000
outstanding Option Units, at an exercise price of $40.00 per Option Unit, and
70,000 outstanding Option Units, at an exercise price of $11.24 per Option
Unit. See "Use of Proceeds" and "Certain Transactions."

16
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected statement of operations data of the Predecessor and the Company
for the periods ended December 31, 1995 through 1997 have been derived from
the consolidated financial statements, which have been audited by Arthur
Andersen LLP, independent public accountants, and which are included elsewhere
in this Prospectus. The data as of and for the years ended December 31, 1993,
1994 and as of December 31, 1995 and for the three months ended March 31, 1998
have been derived from the Company's unaudited consolidated financial
statements which, in the opinion of the Company's management, contain all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of the financial condition and results of operations for these
periods. The results of operations for the three months ended March 31, 1998
are not necessarily indicative of the results that may be expected for the
entire year. The selected historical consolidated financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR (1) COMPANY (1)
--------------------------------------------------- -------------------------------------------------
PRO FORMA
THREE NINE PRO FORMA THREE THREE
MONTHS MONTHS YEAR MONTHS MONTHS
YEAR ENDED DECEMBER 31, ENDED ENDED ENDED ENDED ENDED
---------------------------------------- MARCH 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1993 1994 1995 1996 1997 1997 1997(2) 1998 1998(2)
----------- ----------- ------- ------- --------- ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenues............ $67,300 $75,905 $78,278 $86,766 $19,538 $ 81,102 $ 238,859 $ 50,362 $ 64,582
Cost of
transportation and
services........... 57,215 64,796 65,900 73,116 16,498 68,713 202,295 42,003 54,194
------- ------- ------- ------- ------- --------- --------- --------- ---------
Net revenues....... 10,085 11,109 12,378 13,650 3,040 12,389 36,546 8,359 10,388
Selling, general and
administrative..... 7,059 7,149 8,697 10,037 2,300 8,799 25,009 5,634 6,702
Depreciation and
amortization(3).... 41 216 88 93 37 403 1,819 341 498
Transaction costs... -- -- -- -- 510 -- -- -- --
------- ------- ------- ------- ------- --------- --------- --------- ---------
Income from
operations........ 2,985 3,744 3,593 3,520 193 3,187 9,718 2,384 3,188
Interest expense
(income)........... (451) (837) (1,383) (1,376) -- 659 3,055 554 760
------- ------- ------- ------- ------- --------- --------- --------- ---------
Income before
provision for
income taxes and
extraordinary
loss.............. 3,436 4,581 4,976 4,896 193 2,528 6,663 1,830 2,428
Income tax
provision.......... 1,544 1,903 1,940 1,888 74 983 2,785 765 1,015
------- ------- ------- ------- ------- --------- --------- --------- ---------
Income before
extraordinary
loss.............. 1,892 2,678 3,036 3,008 119 1,545 3,878 1,065 1,413
Extraordinary loss,
net of tax
benefit............ -- -- -- -- -- 129 -- -- --
Cumulative effect of
accounting
change(4).......... (220) -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- --------- --------- --------- ---------
Net income......... $ 1,672 $ 2,678 $ 3,036 $ 3,008 $ 119 $ 1,416 $ 3,878 $ 1,065 $ 1,413
======= ======= ======= ======= ======= ========= ========= ========= =========
Income per share(5)..
Basic...............
Income before
extraordinary loss.. $ 0.45 $ 0.71 $ 0.23 $ 0.26
Extraordinary loss.. (0.04) -- -- --
--------- --------- --------- ---------
Net income......... $ 0.41 $ 0.71 $ 0.23 $ 0.26
========= ========= ========= =========
Weighted average
shares outstanding.. 3,403,480 5,437,392 4,678,750 5,437,392
========= ========= ========= =========
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR (1) COMPANY (1)
----------------------------------------------------- -------------------------------------------------
PRO FORMA
NINE PRO FORMA THREE THREE
MONTHS YEAR MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1997 1997(2) 1998 1998(2)
------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Diluted
Income before
extraordinary
loss........... $0.37 $0.60 $0.19 $0.22
Extraordinary
loss (0.03) -- -- -
--------- --------- --------- ---------
Net income...... $0.34 $0.60 $0.19 $0.22
========= ========= ========= =========
Weighted average
shares
outstanding.... 4,141,041 6,499,216 5,604,877 6,499,216
========= ========= ========= =========
<CAPTION>
DECEMBER 31,
------------------------------------------- MARCH 31, DECEMBER 31, MARCH 31,
1993 1994 1995 1996 1997 1997 1998
----------- ----------- ----------- ------- --------- ------------ -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
BALANCE SHEET
DATA: (DOLLARS IN THOUSANDS) (DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital.. $ (1,851) $ 605 $ 2,772 $ 4,800 $ 2,783 $ (311) $ (2,242)
Total assets..... 26,789 31,550 32,275 37,582 11,350 57,067 56,134
Long-term debt
and capital
leases.......... -- -- -- -- -- 25,045 22,079
Stockholders'
equity.......... 16,296 20,022 23,059 26,067 2,964 9,459 10,524
</TABLE>
- -------
(1) The "Predecessor" includes the accounts of PMTC prior to the management
buyout on March 31, 1997. The "Company" includes the accounts of PMTC
acquired in the management buyout, after purchase accounting adjustments,
and the accounts of Interstate after its acquisition by the Company as of
December 16, 1997. The management buyout of PMTC and the Interstate
Acquisition were accounted for under the purchase method of accounting. As
a result of these transactions, the financial information presented above
is not comparable in certain respects.
(2) The pro forma information gives effect to the Acquisitions as if they were
completed on the first day of the periods presented. See "Prospectus
Summary--Acquisition History."
(3) Amortization of goodwill for the pro forma nine months ended December 31,
1997 and the pro forma three months ended March 31, 1998 was $945,000 and
$334,000, respectively.
(4) The Predecessor adopted Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" and, accordingly, reflected its initial
application.
(5) Income per share has been computed for all periods reflecting the effect
of a 9.5 to 1 stock split to be effected on the date of the initial public
offering. Shares outstanding for the year ended December 31, 1997 have
been calculated assuming all shares and options issued in connection with
the formation of the Company and the Interstate, Cross Con and Stutz
Acquisitions were outstanding as of January 1, 1997.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions, and the
actual events or results may differ materially from the results discussed in
the forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors"
as well as those discussed elsewhere in this Prospectus. The historical
results set forth in this discussion and analysis are not indicative of trends
with respect to any actual or projected future financial performance of the
Company. This discussion and analysis should be read in conjunction with the
financial statements and the related notes thereto included elsewhere in this
Prospectus.

OVERVIEW

The Company is a multi-modal, value-added transportation and logistics
solutions provider, offering a broad menu of transportation-related services,
including a variety of trucking, intermodal marketing, logistics and freight
services. As a non-asset based company, Pacer provides integrated freight
services through a national network of sales agents, independent contractors
and railroad/drayage partnerships. To date, the Company's business model has
required minimal capital investment in physical assets such as transportation
equipment.

In March 1997, pursuant to a management buyout funded in part by Eos, the
Company acquired all of the capital stock of PMTC, a provider of truckload
freight services through its Pacer division and intermodal marketing services
through its ABL-TRANS division, for approximately $13.0 million in cash and
the UPRC Warrant. PMTC was founded in 1928 as a subsidiary of SPTC. In
December 1997, the Company acquired all of the capital stock of Interstate for
$20.0 million in cash, and 1,353,750 shares of Common Stock, which was valued
at $4.5 million by independent appraisal. In April 1998, the Company acquired
all of the capital stock of Stutz for $400,000 in cash plus up to 217,142
shares of Common Stock. In June 1998, the Company acquired all of the capital
stock of Cross Con for $10.5 million in cash and 541,500 shares of Common
Stock. Acquisitions have been and will continue to be a significant component
of the Company's growth strategy. The Acquisitions and the management buyout
have been accounted for under the purchase method of accounting.

In the nine months ended December 31, 1997, and three months ended March 31,
1998, the Company's volumes have increased over the comparable periods of the
prior years. In recent years, the Company has received revenues for
transportation services provided to railroads in connection with their capital
expenditure programs implemented to improve their infrastructure. The Company
cannot predict the duration of such programs or whether the Company will
continue to provide services to the railroads in connection with such
programs.

19
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth certain items in the Company's and the
Predecessor's statements of operations as a percentage of total revenues for
the periods indicated.

<TABLE>
<CAPTION>
PREDECESSOR (1) COMPANY (1)
------------------------ --------------------
THREE NINE THREE
YEAR ENDED MONTHS MONTHS MONTHS
DECEMBER 31, ENDED ENDED ENDED
-------------- MARCH DECEMBER MARCH 31,
1995 1996 31, 1997 31, 1997 1998
------ ------ -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of transportation and
services........................ 84.2 84.3 84.4 84.7 83.4
------ ------ ----- ----- -----
Net revenues.................... 15.8 15.7 15.6 15.3 16.6
Selling, general and
administrative.................. 11.1 11.6 11.8 10.8 11.2
Depreciation and amortization.... 0.1 0.1 0.2 0.5 0.7
Transaction costs................ 0.0 0.0 2.6 0.0 0.0
------ ------ ----- ----- -----
Income from operations.......... 4.6 4.1 1.0 3.9 4.7
Interest expense (income)........ (1.8) (1.6) 0.0 0.8 1.1
------ ------ ----- ----- -----
Income before provision for
income taxes and extraordinary
loss........................... 6.4 5.6 1.0 3.1 3.6
Income tax provision............. 2.5 2.2 0.4 1.2 1.5
------ ------ ----- ----- -----
Income before extraordinary
loss........................... 3.9 3.5 0.6 1.9 2.1
Extraordinary loss, net of tax
benefit......................... 0.0 0.0 0.0 (0.2) 0.0
------ ------ ----- ----- -----
Net income...................... 3.9% 3.5% 0.6% 1.7% 2.1%
====== ====== ===== ===== =====
</TABLE>
- --------
(1) The "Predecessor" includes the accounts of PMTC prior to the management
buyout on March 31, 1997. The "Company" includes the accounts of PMTC
acquired in the management buyout, after purchase accounting adjustments,
and the accounts of Interstate after its acquisition by the Company as of
December 16, 1997. The management buyout of PMTC and the Interstate
Acquisition were accounted for under the purchase method of accounting. As
a result of these transactions, the financial information presented above
is not comparable in certain respects.

THREE MONTHS ENDED MARCH 31, 1998 ("FIRST QUARTER 1998") AS COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1997 ("FIRST QUARTER 1997").

Revenues. Revenues increased $30.8 million to $50.4 million in First Quarter
1998 from $19.5 million in First Quarter 1997. Approximately $23.6 million of
the increase is due to the Interstate Acquisition on December 16, 1997. In
addition, the Company experienced increased volumes at Pacer Transport
(formerly PMTC), the Company's flatbed and specialized heavy-haul trucking
subsidiary, and commenced business at Pacer International Rail Services LLC
(formerly known as American International Rail Services LLC) ("PIRS") in
September 1997. A portion of the increased volumes at Pacer Transport is a
result of UP's capital programs and integration issues resulting from its
merger with Southern Pacific Railroad.

Net Revenues. Net revenues increased $5.3 million to $8.4 million in First
Quarter 1998 from $3.0 million in First Quarter 1997. Approximately $3.7
million of the increase in net revenue is due to the Interstate Acquisition,
and the remaining increase is primarily due to higher volumes at Pacer
Transport. Net revenues as a percentage of revenues increased to 16.6% for
First Quarter 1998 from 15.6% for First Quarter 1997 as a result of the
Interstate Acquisition, because Interstate has historically operated at a
slightly higher margin than Pacer, as well as a change in the mix of services
provided.

Selling, General and Administrative. Selling, general and administrative
expenses increased $3.3 million to $5.6 million in First Quarter 1998 from
$2.3 million in First Quarter 1997. Approximately $2.4 million of the increase
is a result of the Interstate Acquisition. The remaining increase is primarily
due to increased salary and administrative costs associated with the growth of
the Company and its management team after the management buyout. As a
percentage of revenues, selling, general and administrative

20
<PAGE>

expenses decreased to 11.2% in First Quarter 1998 from 11.8% in First Quarter
1997. The decrease is primarily a result of the Interstate Acquisition,
because Interstate has historically operated with lower overhead than Pacer,
partially offset by the increases described above.

Transaction Costs. During First Quarter 1997, the Predecessor incurred
transaction costs of $0.5 million in connection with its sale to the Company.

Interest Expense (Income). Interest expense increased $0.6 million in First
Quarter 1998 from First Quarter 1997 as a result of borrowings utilized to
fund the management buyout of the Predecessor as well as the Interstate
Acquisition. Prior to the management buyout, the Predecessor did not have any
borrowings outstanding and had a significant cash position which generated
interest income.

Income Tax Provision. The Company's effective tax rate increased to 41.8% in
First Quarter 1998 from 38.3% in First Quarter 1997, primarily as a result of
non-deductible goodwill in connection with the Interstate Acquisition as well
as an increased effective state tax rate resulting from additional earnings
generated in higher tax states.

NINE MONTHS ENDED DECEMBER 31, 1997 ("FISCAL 1997") AS COMPARED TO THE YEAR
ENDED DECEMBER 31, 1996 ("1996").

As a result of the management buyout in March 1997, the period ended
December 31, 1997 consists of only nine months as compared to twelve months in
the period for the year ended December 31, 1996. For information purposes,
year-to-year comparisons have also been provided.

Revenues. Revenues decreased $5.7 million, or 6.5%, to $81.1 million in
Fiscal 1997 from $86.8 million in 1996. This decrease is due to the additional
quarter of revenues in 1996, which is partially offset by additional business
with UP in Fiscal 1997. Revenues increased $13.9 million, or 16.0%, to $100.6
million in the twelve month period ended December 31, 1997 compared to $86.8
million in the twelve month period ended December 31, 1996.

Net Revenues. Net revenues decreased $1.3 million, or 9.2%, to $12.4 million
in Fiscal 1997 from $13.7 million in 1996. Net revenues as a percentage of
gross revenues decreased to 15.3% in Fiscal 1997 from 15.7% in 1996. This
decrease is due to the additional quarter of revenues in 1996, which is
partially offset by additional business with UP in Fiscal 1997. The net
revenue percentage decrease reflects a marginal increase in the cost of
purchased transportation. Net revenues increased $1.8 million, or 13.0%, to
$15.4 million in the twelve month period ended December 31, 1997 compared to
$13.7 million in the twelve month period ended December 31, 1996.

Selling, General and Administrative. Selling, general and administrative
expenses decreased $1.2 million to $8.8 million in Fiscal 1997 from $10.0
million in 1996. As a percentage of revenues, selling, general and
administrative expenses decreased to 10.8% in Fiscal 1997 from 11.6% in 1996.
The decrease is due to the additional quarter of selling, general and
administrative expense included in 1996, which is partially offset by
additional salary and administrative costs associated with the growth of the
Company and its management team after the management buyout. Selling, general
and administrative expenses increased $1.1 million, or 10.6%, to $11.1 million
in the twelve month period ended December 31, 1997 compared to $10.0 million
in the twelve month period ended December 31, 1996.

Interest Expense (Income). Net interest expense increased $2.0 million to
$0.7 million in Fiscal 1997 from $1.4 million in net interest revenue in 1996.
This increase is a result of increased borrowings to finance the management
buyout and the Interstate Acquisition.

Income Tax Provision. The Company's effective tax rate remained relatively
unchanged in Fiscal 1997 as compared to 1996.

21
<PAGE>

YEAR ENDED DECEMBER 31, 1996 ("1996") AS COMPARED TO YEAR ENDED DECEMBER 31,
1995 ("1995")

Revenues. Revenues increased $8.5 million, or 10.8%, to $86.8 million in
1996 from $78.3 million in 1995. This increase is primarily due to the new
sales and marketing campaigns, which resulted in increased volumes.

Net Revenues. Net revenues increased $1.3 million, or 10.5%, to $13.7
million in 1996 from $12.4 million in 1995 as a result of the increased
volumes described above. Net revenues as a percentage of revenues remained
relatively flat.

Selling, General and Administrative. Selling, general and administrative
expenses increased $1.3 million, or 14.9%, to $10.0 million in 1996 from $8.7
million in 1995. As a percentage of revenues, selling, general and
administrative expenses increased to 11.6% in 1996 from 11.1% in 1995. This
increase is primarily a result of an increase in employee headcount related to
the sales and marketing campaigns described above.

Interest Expense (Income). Interest income was relatively unchanged in 1996
as compared to 1995.

Income Tax Provision. The Company's effective tax rate remained relatively
unchanged in 1996 as compared to 1995.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception on March 31, 1997, the Company's cash needs have been
primarily to fund acquisitions, working capital and, on a limited basis,
capital expenditures. The Company's primary sources of capital have been the
Credit Agreement and cash raised in connection with formation of the Company.
In addition, the Company has issued shares of Common Stock as part of the
consideration in the Acquisitions. The Company uses the Credit Agreement to
manage its cash flow. At December 31, 1997 and March 31, 1998, availability
under the Credit Agreement was $5.6 million and $7.9 million, respectively,
and the Company's working capital deficit was $0.3 million and $2.2 million,
respectively. Immediately following this offering, the Company expects to have
approximately $17.0 million of availability under the Credit Agreement. See
"Use of Proceeds."

During Fiscal 1997, net cash used in operating activities was $2.7 million.
The Company's net use of cash during Fiscal 1997 resulted from funding working
capital for increased business levels and the start-up of PIRS. During the
three months ended March 31, 1998, net cash provided from operations was $2.7
million. This increase in cash provided from operations reflects collections
from the Company's customers, and collection of volume rebate payments from
the railroads for prior periods, a large portion of which are typically paid
in the first calendar quarter in accordance with industry norms.

Net cash used in investing activities during Fiscal 1997 was $10.0 million,
which was primarily used to finance the management buyout of the Company and
the Interstate Acquisition. Net cash provided by financing activities during
Fiscal 1997 was $11.2 million, which was provided by borrowings under the
Credit Agreement and cash raised in connection with the formation of the
Company. Borrowings under the Credit Agreement are secured by substantially
all of the Company's assets. On December 16, 1997, the Company issued $20.0
million in promissory notes and amended the Credit Agreement in connection
with the Interstate Acquisition. The Credit Agreement provides for a $20.0
million term loan (the "Term Loan") and a $12.0 million revolving line of
credit (the "Revolving Loan"). The Term Loan was used to extinguish the
promissory notes issued in connection with the Interstate Acquisition on
January 2, 1998. The Term Loan expires on November 21, 2004 and bears
interest, at the Company's option, at the prime rate plus 0.75 percent or
LIBOR plus 3.0 percent. The Revolving Loan expires on October 31, 2002 and
bears interest, at the Company's option, at the prime rate or LIBOR plus 2.3
percent. The Credit Agreement requires the Company to maintain certain
leverage and cash flow ratios and limits the level of capital expenditures.

22
<PAGE>

Net cash used in investing activities during the three months ended March
31, 1998 was $387,000 and was used for purchases of property and equipment.
Net cash used in financing activities during the three months ended March 31,
1998 was $2.3 million and was primarily used to repay debt.

Prior to formation of the Company, the Predecessor had generated significant
cash from operations over a long period of time. Excess cash was generally
advanced to the Predecessor's parent on an interest-bearing basis. Prior to
its sale to the Company, the Predecessor declared and paid a $23.2 million
dividend to its parent, and the parent in turn repaid in full its $21.9
million advance from the Predecessor.

Upon completion of this offering, the Company intends to use a portion of
the net proceeds to repay in full the Term Loan, to repay in part the
Revolving Loan and to repurchase all of the outstanding shares of the Series A
Preferred Stock. See "Use of Proceeds" and "Certain Transactions."

In April 1998, the Company acquired Stutz. In June 1998, the Company
acquired Cross Con. In connection with the Cross Con Acquisition, the Company
further amended the Credit Agreement to increase the availability thereunder.

The Company believes that the net proceeds from this offering, together with
available cash, cash generated from operations and available borrowings under
the Credit Agreement, will be sufficient to finance working capital, capital
expenditures and acquisitions for at least the next 12 months. There can be no
assurance, however, that such resources will be sufficient to meet the
Company's anticipated financing requirements or that the Company will not
require additional financing within this time frame. In particular, depending
upon the success of the Company's acquisition strategy, the Company could
require significant additional debt and or equity financing to make future
acquisitions.

RECENT ACCOUNTING PRONOUNCEMENTS

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards to measure all changes in equity that result
from transactions and other economic events other than transactions with
owners. Comprehensive income is the total of net income and all other nonowner
changes in equity. Except for net income, the Company does not have any
transactions and other economic events that qualify as comprehensive income as
defined under SFAS No. 130.

In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 introduces a new model for segment reporting called the "management
approach." The management approach is based on the manner in which management
organizes segments within a company for making operating decisions and
assessing performance. The management approach replaces the notion of industry
and geographic segments. SFAS No. 131 is effective for the Company as of
January 1, 1998; however, in accordance with SFAS 131, this statement has not
been applied for interim periods in the initial year of application but will
be adopted as of December 31, 1998.

In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
modifies the accounting for derivative and hedging activities and is effective
for fiscal years beginning after December 15, 1999. The adoption of SFAS No.
133 will require the Company to modify its method of accounting for its
interest rate hedging activities. Based on information currently available,
the Company does not expect the adoption of SFAS No. 133 to have a significant
impact on its financial position or results of operations.

In 1998, the AICPA issued Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use." The
Company will adopt SOP 98-1 in 1999. The adoption of SOP 98-1 will require the
Company to modify its method of accounting for software. Based on information
currently available, the Company does not expect the adoption of SOP 98-1 to
have a significant impact on its financial position or results of operations.

23
<PAGE>

The Company believes the adoption of SFAS No. 130 and SFAS No. 131 will not
significantly affect the Company's financial position, results of operations
or financial statement presentation.

SEASONALITY

Historically, the Company's operating income and earnings have been higher
in the second and third quarters than in the first and fourth quarters due to
the shipping patterns of its customers. Based on its current business mix, the
Company expects this seasonality to continue. See "Risk Factors--Seasonality."

YEAR 2000

The Company has assessed and continues to assess the impact of the Year 2000
issue on its reporting systems and operations. The majority of the Company's
internal information systems are in the process of being replaced with fully
compliant new systems, or are being corrected to be Year 2000 compliant. The
Company believes that with upgrades or modifications, the impact of the Year
2000 issue can be mitigated. The Company plans to complete the Year 2000
replacement and testing by June 1999, and expects the total project cost to be
approximately $500,000, although additional costs may be incurred as the
project develops further. If the Company's remediation plan is not successful,
there could be a significant disruption of the Company's ability to transact
business with its customers and suppliers. Based on information currently
available, the Company does not believe the Year 2000 issue will adversely
impact its operations or significantly impact the Company's ability to conduct
business with customers or vendors. The cost of addressing the Year 2000 issue
will be funded by cash from operations or availability under the Credit
Agreement.

24
<PAGE>

INDUSTRY OVERVIEW

The Company competes in sizable markets, which are continually evolving and
undergoing substantial change. The market for domestic freight transportation
involves virtually every tangible product manufactured, assembled, mined,
grown, or otherwise produced or consumed, in the United States. The domestic
freight transportation market includes the transport of goods made and
consumed domestically, as well as the domestic portion of the transport of
import and export freight. According to a leading industry source, the total
domestic market for freight transportation in 1996 was $467 billion,
representing over 6% of the U.S. economy as measured by gross national
product. Providers of freight transportation services include shippers who
manage the distribution of their freight, as well as third party providers who
develop and market services to shippers.

The U.S. market for third party transportation services is highly
fragmented, with thousands of service providers. Management believes that no
third party service provider represents more than 3% of the total market. In
recent years, many sectors of the transportation industry have experienced a
trend toward consolidation. The basis of competition in the freight
transportation industry includes cost, delivery time, reliability and
precision of delivery and pick-up, as well as freight-specific requirements
such as handling and temperature control. Increasingly, providers of
transportation services are seeking to use information technology and
customized service packages to offer their customers solutions to broader
business issues than simply the delivery of goods.

Transportation modes include ground-based, air and water transportation
services. Of these, ground-based transportation makes up the largest component
of the domestic market, totaling $404 billion in 1996 according to a leading
industry source. Ground transportation utilizes primarily trucking ($369
billion) and rail ($35 billion) services to transport freight. Some of this
freight enters the domestic freight system via water or air transport. Air-
borne freight represents a rapidly growing, but small sector of the domestic
market, estimated at $20 billion in 1996. Water-borne freight is typically
used for international shipments where a ground-based alternative does not
exist and air costs cannot be justified. Although low in cost, water-borne
freight suffers from limited routes and slow transit time. As a result, there
is limited use of water-borne freight in the domestic market. Because of the
competitive nature of the transportation business, providers have developed
service offerings that utilize multiple modes of transportation which are
commonly known as intermodal. The Company's services are primarily targeted at
freight that is ground-based and transported within the U.S. by truck, rail or
intermodal service.

Logistics is the management and transportation of materials and inventory
throughout the supply chain. Using a network of transportation, handling and
storage providers in multiple modes, logistics companies seek to optimize the
movement of freight based not only on service and price but also on the total
economics of the customer, including inventory requirements and handling
costs. Integrated logistics providers, such as the Company, have the ability
to utilize a portfolio of transportation products and design optimal logistics
solutions for the shipper. Like the Company, many logistics providers are non-
asset-based, primarily utilizing physical assets owned by others in multiple
transport modes. Increasingly, the transportation process involves the
handling, consolidation/deconsolidation and storage of freight, including the
adding of value to the freight in process.

Trucking. The trucking market is comprised of private and for-hire fleets,
handling either truckload or LTL shipments over various lengths of haul.
Although private fleets operated by shippers still represent the largest
sector of the non-local trucking industry, this sector has been losing market
share (since deregulation of the trucking industry began in 1980) to for-hire
carriers that are more service oriented and typically more efficient. In
effect, the shipper's increased focus on cost reduction and core competencies
has been the catalyst behind the outsourcing of private fleets. This trend
toward outsourcing has led to an accelerated rate of increase in the for-hire
trucking sector.

25
<PAGE>

The truckload sector is composed primarily of specialized carriers operating
in sectors defined by the length of haul as well as the type of transportation
equipment utilized. Sectors include dry van, flatbed, heavy-haul and
temperature controlled services. Truckload carriers who compete on the basis
of specialized equipment often require substantial capital investment. The
Company estimates that the truckload market, including both the for-hire and
the private fleet sectors, generated approximately $187 billion of revenue in
1996, with approximately one third of this amount, or $62 billion,
representing shipments in excess of 500 miles. A majority of the Company's
trucking services is provided in the truckload sector.

LTL services are provided by a large number of carriers that specialize in
consolidating smaller shipments into truckload quantities for transportation
across regional and national networks. Many LTL carriers have high fixed costs
due to their heavy investment in infrastructure. Other LTL market
participants, such as the Company, seek to utilize the fixed facilities of
others, providing specialized outsourced LTL services. According to a leading
industry consultant, the LTL market generated approximately $20 billion of
revenues in 1996. The Company derives only a small portion of its revenues
from LTL freight.

Additional elements of the trucking business involve the use of independent
contractors, rather than employee drivers, to provide trucking services, as
well as the provision of truck brokerage services. Independent contractors are
entrepreneurs who own transportation equipment and provide services under
contract to for-hire trucking operations. Independent contractors are commonly
responsible for, among other things, the investment in and maintenance of
their equipment as well as fuel and operating expenses. Advantages to
companies providing trucking services through independent contractors include
low investment in transportation equipment and increased flexibility.
Disadvantages include generally lower operating margins, reduced operating
control and potential difficulties attracting owner-operators during times of
tight capacity. Truck brokerage involves the outsourced arrangement of
trucking services by a third party with a licensed carrier on behalf of a
shipper. Truck brokerage allows the provider to offer trucking services
without actually having dedicated capacity. However, the ability to provide
service is dependent on the available capacity of others. Substantially all of
the Company's trucking services involves either independent contractors or
truck brokerage, allowing the Company flexibility and minimizing its capital
investment in tractors and related transportation equipment.

Relative advantages to the domestic shipper of trucking (versus other modes,
excluding air transport) include flexibility of pickup, route, and delivery as
well as relatively rapid delivery cycles. Due to the capacity limitations of a
truck and the high variable fuel and labor content of a truck shipment,
however, trucking is often at a cost disadvantage versus other modes of
transportation such as rail. This disadvantage is exacerbated during periods
when trucking capacity or drivers are in short supply.

Rail. Rail transport is particularly competitive for moving bulk commodities
over long distance, due to its high capacity per shipment and low variable
labor and fuel requirements per ton/mile. A majority of the rail industry
infrastructure consists of traditional rail equipment, such as boxcar and
hopper, utilized in single mode service. Additionally, for general freight
moving in truckload (or container load) quantities in excess of 500 miles,
rail often represents a cost-effective alternative to trucking. Rail service
is limited in its origin and destination points, however, typically
contracting to transport freight from a specific loading/unloading point, or
"railhead," to a destination railhead. In recent decades, a significant and
growing portion of rail traffic has been characterized as intermodal business,
where rail service is augmented by other forms of transportation, usually
trucking, for portions of the shipment.

Intermodal. Intermodal freight service employs multiple modes of transit to
complete a freight movement. An intermodal movement may utilize a combination
of air, rail, truck or water services. Because the rail service fails to
complete a freight movement from origin to destination, IMCs complete the
freight movement by providing "door to door" transportation services in a
competitive manner. Intermodal services utilize specialized equipment,
including trailer-on-flat-car, container-on-flat-car and

26
<PAGE>

doublestack container, for the rail portion of the journey. The proliferation
in the use of freight containers, which allow freight to be easily handed off
among different modes of transportation without unloading and re-loading, has
contributed to the rapid growth of the intermodal sector in recent years.
Additionally, the advent of the doublestack container and the development of a
national doublestack handling infrastructure have materially improved the
efficiency of the rail portion of the shipment.

In the intermodal sector, railroads have relied heavily on third party sales
agents, primarily due to the need to arrange other transportation modes on
either end of the rail shipment. In addition, large IMCs with sophisticated
information systems are able to enhance service and reduce transportation
costs to customers through the efficient matching of customer transportation
requirements with available equipment. IMCs provide value to shippers by
passing on certain of the economies of scale of being a volume buyer from
railroads and drayage companies, providing access to large equipment pools and
streamlining the paperwork and logistics of an intermodal move. The customer
typically deals with only one party for the intermodal move and pays a single
bill. The Company estimates that the combined domestic and U.S. international
intermodal transportation industry generated approximately $8 billion in
revenue in 1996 and that IMCs accounted for approximately $3 billion of this
amount.

Management believes that many customers have become indifferent to the mode
of transportation being used to deliver freight, caring more about the
measures of service provided such as convenience, cost, transit time and
reliability. Management further believes that this trend benefits
sophisticated multi-modal service providers like the Company that do not have
a fixed infrastructure but can provide a service offering which takes
advantage of the most competitive resources that meet the transportation
customer's needs.

Logistics. The logistics business has been bolstered in recent years by the
competitiveness of the global economy, which causes shippers to focus on
reducing handling costs, operating with lower inventories and shortening
transit times. Management believes that these trends favor flexible non-asset-
based logistics providers such as the Company. The logistics provider in
effect supplements or replaces the shipper's transportation department, in
some cases allowing the shipper to take advantage of purchasing economies and
improve efficiencies through such methods as just-in-time processes. A key
trend in the logistics business is the increasing importance and application
of information technology as a link with the customer and as an analytical
tool to optimize transportation solutions. This trend favors the larger, more
professionally managed companies that have the resources to support a larger
information technology infrastructure. According to a leading industry
consultant, the logistics sector of the transportation industry was
approximately $25 billion in 1996.

Freight Handling, Consolidation and Storage. Because of the complexity of
freight patterns and the need to optimize multi-modal routes, the handling
and/or storage of freight on behalf of the shipper is often required during
the transportation process. Certain of these services involve freight
consolidation and deconsolidation, in which freight is unloaded, sometimes
temporarily stored in a warehouse or on a cross-dock, and then re-loaded for
further shipment. An example of such a service category in which the Company
competes involves the unloading of imported container freight on the West
Coast and the re-consolidation of the freight into new shipments for domestic
redistribution.

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BUSINESS

GENERAL

Pacer is a multi-modal, value-added transportation and logistics solutions
provider, offering a broad menu of transportation-related services, including
a variety of trucking, intermodal marketing, logistics and freight services.
As a non-asset based company, Pacer provides integrated freight services
through a national network of sales agents, independent contractors and
railroad/drayage partnerships. To date, the Company's business model has
required minimal capital investment in physical assets such as transportation
equipment. The Company's strong internal growth has been supplemented by
strategic acquisitions, enabling the Company to increase its revenues from
$86.7 million in 1996 on a stand alone basis to $252 million for the twelve
month period ended March 31, 1998 on a pro forma basis after giving effect to
such acquisitions.

COMPETITIVE ADVANTAGES

The Company attributes its market position and its significant opportunities
for continued growth and increased profitability to the following competitive
advantages:

Diverse Product Offerings. The Company offers its customers one of the
broadest menus of service offerings in the transportation industry. The
Company's current menu of services includes flatbed and specialized heavy-haul
trucking, intermodal marketing (rail or over-the-road), warehousing,
consolidation/ deconsolidation, cross-dock, LTL, cartage and drayage. The
Company also provides specialized services, such as rail car maintenance and
inspection, to transportation providers. Furthermore, the Company provides
logistic services to coordinate the foregoing services, offering integrated
freight transportation solutions to its customers.

National Presence. The Company has developed a national presence as a result
of its extensive marketing and service networks. By combining a network of
regional sales offices and independent agents, complemented by national sales
offices, the Company offers integrated national services while maintaining the
entrepreneurial responsiveness of a small business. The Company's service
network comprises a broad range of national, regional and local transportation
providers, including rail partners, trucking companies, independent
contractors and other third party providers. Management expects its sales and
service networks to continue to grow as the Company expands its service
offerings and customer base.

Tailored Customer Focus. The Company has developed a unique customer
philosophy which categorizes each major customer as a distinct market.
Accordingly, the Company creates a package of services integrated and
customized for each customer and strives to broaden the relationship with each
customer by identifying, addressing and servicing an increasing share of the
customer's transportation and logistics needs. This in turn strengthens the
relationship with the customer and enhances the customer's loyalty to the
Company. As a result of the Company's philosophy, the Company has established
a strong, diverse customer base consisting of global, national and regional
manufacturers and retailers, including numerous Fortune 500 corporations,
several of which have been customers of the Company for more than 15 years.
For example, on behalf of a national clothing retailer, the Company provides
domestic intermodal marketing, warehousing, drayage and bonded container
freight station handling services for that customer's freight originating in
Southern California, including imports. The Company originally provided simple
consolidation and cross-dock services to this customer. On behalf of a major
computer retailer, the Company provides intermodal transportation from ports
in Los Angeles, transloading of port containers, repackaging and
redistribution of freight to each individual store, and cross-dock
capabilities in Los Angeles, Chicago, Totowa, New Jersey, and Atlanta. This
relationship originally included basic cross-dock services on the West Coast.

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Targeted Industry Expertise. The Company derives a significant portion of
its revenues from providing transportation services within certain core
shipper sectors where the Company's industry focus leads to greater expertise
and higher added value for the customer. For example, through its extensive
network of service providers, the Company provides a range of specialized
services to many of the nation's largest "superstore" or mass market
retailers. In addition to general consumer freight, the Company has developed
customized services to meet the special needs of certain product categories
such as the seasonal needs of the toy business or the special handling
requirements of a major computer retailer. Similarly, the Company provides a
range of specialized services for the transportation sector, with customers
including railroads, other intermodal transportation service providers and
equipment vendors to the rail industry. In the flatbed and specialized
trucking sector, the Company has limited its participation in traditional
commodity sectors and developed a specialty in industrial freight with non-
standard requirements, such as the transportation of heavy or oversized
materials.

Strong West Coast Market Position. Based on management's knowledge of the
industry and information provided by customers and vendors, management
believes that the Company has developed a leading market position in
intermodal and related logistics services on the West Coast, where it operates
specialized consolidation and trucking facilities and provides cartage,
drayage and LTL services. Much of the freight handled by the Company is
imported from Asian markets and distributed throughout the U.S. Management
believes that the Company is well-positioned to benefit from the continued
growth in international trade, the trend towards importing certain product
categories from Asia and the continued strength of the U.S. dollar in foreign
currency markets. The Company has also been able to replicate services
originally provided in the West Coast market for its customers operating in
other parts of the country.

Information Technology. To maintain and expand its network and provide
participants in the network with advanced information support, the Company has
made significant investments in information technology. The Company's
information systems are capable of providing a wide range of communication
alternatives, typically through the medium requested by a customer. As such,
employees are linked with each other and with customers and carriers by
telephone, facsimile, E-mail, the internet and/or EDI. This interconnection
allows the Company to easily communicate requirements and availability of
equipment and volume, to confirm and bill orders and to trace shipments. In
addition, through the Company's network, each office is able to track trailers
and containers entering its service area and redeploy that equipment to
fulfill its customers' outbound shipping requirements before the equipment is
returned for use by another intermodal user. As a result, the Company is
better positioned to offer its customers the container or trailer that meets
the customer's shipping requirements.

Experienced Management Team. One of the Company's most valuable assets is
its experienced team of senior management personnel, led by Don Orris, the
Company's President and Chief Executive Officer. Mr. Orris is the former
President and Chief Operating Officer of Southern Pacific Transportation
Company, where he oversaw, among other functions, sales, marketing, intermodal
operations and network design. Prior to that, Mr. Orris was instrumental in
the establishment of the nation's doublestack intermodal infrastructure as
domestic head of American President Companies. The Company's senior management
team has an average of more than 25 years of experience in the transportation
and logistics industry, forming a core team with significant leadership
experience. Each has direct knowledge of the business based on past
experience, including experience in managing and building large companies,
which the Company believes will be a particularly valuable asset as the
Company proceeds with its strategic acquisition program. Members of the senior
management team also have been successful in creating extensive relationships
in the transportation and customer communities and have established
reputations within the industry. Following this offering, members of the
Company's senior management will own or have the right to acquire, subject to
certain performance requirements, an aggregate of approximately 35% of the
issued and outstanding voting securities of the Company on a fully diluted
basis, giving them a personal stake in the continued success of the Company.

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GROWTH STRATEGY

Expand Service Offerings. Based on the Company's experience in the industry
and information provided by customers and other participants in the industry,
the Company believes it is increasingly important to be able to meet the
diverse needs of customers who are increasingly looking to a limited number of
sources for their transportation and logistics needs, whether on a national or
regional scale or even within a single shipping lane. Thus, the Company
intends to maintain its broad range of current service offerings and
selectively introduce new services without compromising its commitment to
superior service on an efficient and cost effective basis. Recent acquisitions
by the Company have added rail-related logistics services and expanded
geographic coverage with respect to its intermodal marketing capabilities.

Increase Sales to Existing Customers. The Company intends to expand its
service offerings by providing additional services to existing customers. For
example, many of the Company's high volume nationwide customers currently use
only its intermodal transportation services for a portion of their overall
transportation needs. The Company believes that it will be able to expand the
services provided to its customers as they increasingly outsource their
transportation and logistics needs. The Company will continue to focus on
capturing additional freight volume from existing customers currently being
handled by long-haul trucking companies or intermodal competitors and on
providing supplementary logistics services to those customers. In addition,
the Company will continue to solicit and encourage customers to establish EDI
interfaces which will reduce paperwork and automate billing and payment
processes.

Leverage Core Service Provider Capability. The Company seeks to capitalize
on the trend, especially among larger shippers, toward reducing the number of
authorized service providers the shippers use in favor of a small number of
core service providers with the size and diverse service capability to satisfy
most of the shippers' transportation needs. Accordingly, the Company has
concentrated on consolidating and integrating its multi-modal service
offerings and value-added logistics solutions capabilities, enabling it to
handle a broad range of each customer's transportation and logistics
requirements. The Company's service capabilities and network are integrated
through technology and can be tailored to meet a specific customer's needs.

Expand Customer Base. The Company intends to continue to expand its customer
base by (i) leveraging its operating infrastructure, (ii) adding sales agents
and independent contractors, which will increase the Company's capacity to
solicit and maintain customer relationships, (iii) increasing its geographic
scope through internal growth and acquisitions, (iv) expanding its size and
service offerings and (v) continuing to establish relationships with
additional transportation service providers who meet the Company's stringent
quality and pricing standards. The Company currently provides services on a
nationwide basis, with the bulk of its operations concentrated on the West
Coast, the Midwest and, especially in the case of Pacer Transport, Texas and
the Southeast. The Company has not identified specific markets in which to
expand but intends to both increase its presence in existing markets and enter
new markets as opportunities arise.

Pursue Strategic Acquisitions. As an additional component of its growth
strategy, the Company intends to continue its disciplined acquisition program.
Acquisition candidates typically will fall into one or more of the following
three categories: (i) operations that expand the Company's presence in a
particular service category (ii) operations that expand the Company's existing
services in a new geographic area or (iii) operations that enable the Company
to provide a new or expanded form of complementary services to its customer
base. The Company intends to seek acquisition candidates with complementary
management and operations philosophies and service capabilities that the
Company can add to and integrate with its current menu of services. Given the
highly fragmented nature of the industry, the relatively large number of small
and mid-size transportation companies, and the recent consolidation in the
transportation industry, management

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believes there is increased pressure on these smaller transportation and
logistics companies to consolidate. The Company's nationwide network of sales
personnel, independent contractors and railroad and drayage brokerage
partnerships, together with its strong and diverse customer base, make it
well-positioned to benefit from the expected continued growth in both the
intermodal and transportation logistics services markets and the potential for
consolidation of the smaller intermodal companies. The Company recently
completed the acquisitions of Stutz, a Kansas City-based provider of
warehousing, materials consolidation and regionalized dedicated trucking
services, and Cross Con, a Chicago-based intermodal marketing and drayage
company. By adding Stutz, the Company has expanded its rail-related logistics
services, and by adding Cross Con, the Company has materially expanded its
intermodal marketing capabilities and added valuable new industrial customers.
The Cross Con Acquisition is expected to improve the Company's access to
equipment in key freight markets where such access provides a competitive
advantage. Both acquisitions increased the Company's presence and service
capabilities in the Midwest region.

SERVICES

Trucking Services. The Company competes in the common and contract flatbed
truckload segment of the domestic transportation industry, providing flatbed
and specialized heavy-haul trucking services. The Company offers its customers
a broad range of truckload services, a fleet of diverse equipment and
extensive geographic coverage. Operating under a 48-state, irregular route,
common and contract carrier authority and national freight brokerage license,
the Company provides specialized services through a fleet of trailers capable
of hauling extremely heavy or oversized loads such as machinery, construction
equipment, building materials, lumber, chemicals, automotive products and
metals. The Company's diverse fleet, consisting of over 500 vehicles operated
by independent contractors and small fleet owners, includes flatbed trailers
required to transport open-top shipments, "drop deck" trailers, which are
designed to transport high or over-dimensioned loads (generally over 8 feet 6
inches in height), "low boy" trailers, which often have multiple axles and are
used to carry the largest and heaviest types of over-dimensioned loads and
"hot shot" trailers, which are lightweight flatbed trailers designed to
minimize fuel costs when transporting light truckload freight. In addition,
the Company owns 57 specialized trailers used to deliver rail equipment as an
outsourcing function for a major railroad. In connection with its trucking
services, agents provide marketing and sales, terminal facilities and driver
recruiting, while an operations center provides, among other services,
insurance, claims handling, safety compliance, credit, billing and collection
and operating advances and payments to drivers and agents.

The Company also provides truck brokerage services throughout North America.
The coverage of the Company's truck brokerage operation starts with its
customer service centers in Los Angeles, Lafayette, California, Dallas,
Chicago and Totowa, New Jersey, and the Company intends to expand into other
locations by strategic acquisitions. The Company is expanding its truck
brokerage operation significantly from its previous role in Los Angeles and
Lafayette as a service recovery option for intermodal into a flexible,
nationwide network of customer service centers supplying freight to a core
group of reliable carriers. The network provides a cost efficient and
convenient back-up service to handle surges in customers' volume. Services
provided by the network are managed by a sophisticated new brokerage
information system.

As a common carrier with 48-state operating authority, the Company offers a
Los Angeles-based LTL service which operates throughout the continental U.S.,
as well as Canada and Mexico. The LTL operation specializes in long-haul
transportation of general commodities freight through hubs operated by other
companies located throughout the U.S. The Company leverages the mix of traffic
it gets from customers by integrating shipments which have common destinations
in order to lower the line haul, pick-up and delivery costs. While some of the
Company's LTL business is line-hauled by rail, most of its LTL traffic
utilizes over-the-road transportation, which the Company purchases from third-
party carriers. In a typical

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assignment, LTL dispatchers contract with one or several independent
contractors to pick up a freight order and take it to the Company's dock. Upon
arrival, the freight is offloaded and then transloaded onto a line haul unit
which has been contracted by the Company to deliver the load to its final
destination. The Company does not employ any drivers used directly by this
operation and coordinates with quality regional transportation providers at
each hub to provide local delivery and distribution services in end markets.
The Company offers single carrier responsibility including bills of lading and
insurance coverage through the Company's cargo insurance policy.

Intermodal Marketing. In its role as an intermodal marketing company, the
Company arranges for the movement of freight in containers and trailers
throughout North America for global, national and regional manufacturers and
retailers and provides customized electronic tracking and analysis of
accessorial charges. In addition, the Company negotiates rail and drayage
rates, consolidates billing and handles claims for freight loss or damage on
behalf of its customers. The Company's intermodal marketing operations are
based in California and, with the Cross Con Acquisition, Chicago and employ
experienced transportation personnel. This staff is responsible for
operations, customer service, marketing, management information systems and
the Company's relationships with the rail carriers. Services offered by the
Company include truck and rail brokerage, drayage and rail and over-the-road
(line haul).

By providing outsourcing services, the Company assists the railroads and
stacktrain operators in balancing freight originating in or destined to its
service areas, resulting in improved asset utilization. The Company provides
value to its customers by passing on certain economies of scale as a volume
buyer from railroads and stacktrain operators, providing access to the large
equipment pools that the Company effectively controls and streamlining the
paperwork and logistics of an intermodal move. In a typical transaction, a
customer places a freight movement order with a Company representative, the
information is then processed and a driver is dispatched to a facility with a
trailer for loading. When the load is ready, the driver transports it to the
appropriate intermodal facility. Shipping instructions are transmitted via EDI
to the rail carrier or stacktrain operator. The load's location and movement
can be checked at any time through the Company's information systems. Upon
arrival at its destination, the Company makes drayage arrangements for final
delivery.

Logistics. The Company believes that it has a unique capacity to provide not
only a broad range of traditional transportation related services, such as
trucking and intermodal marketing, but also an array of logistics solutions
which can be tailored to fit a particular customer's needs. Logistics
solutions currently offered by the Company include cartage, drayage, railcar
maintenance and inspection and railroad signal parts reclamation service based
in Kansas City. The Company also provides materials distribution services on
behalf of a major U.S. railroad. The Company believes that demand for value-
added logistics services will continue to grow as more companies continue to
downsize and outsource many of these functions to third parties.

The Company maintains its own cartage service, operated out of a facility in
Los Angeles, California, offering drayage of containers and intermodal
trailers to and from the Los Angeles and Oakland area harbors, rail centers
and airports, consolidation and deconsolidation, pick-up of freight from a
customer's southern California vendors, and distribution to a customer's
southern California locations. The Company contracts with independent
contractors controlling more than 230 trucks, serves full or less than
container loads and maintains five acres of fully secured port area yards. In
addition, all services are U.S. Customs bonded. The Company maintains
interchange agreements with all of the major steamship lines, railroads and
stacktrain operators. By maintaining its own cartage operation, the Company
has greater access to trailers owned by railroads, stacktrain operators and
other third parties which it can allocate to its customers during periods of
peak demand, a distinct competitive advantage over intermodal companies that
do not maintain internal cartage capabilities.

As part of its cartage operation, the Company coordinates drayage
transportation services through its network of drayage partners. In a typical
assignment, one of the Company's independent contractors will be contacted by
radio dispatch and directed to pick up a container or LTL shipment for a
customer. The

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goods are brought to the Company's facility for transloading and redirected to
the appropriate transportation mode or stored until the shipper instructs the
Company as to its final destination. This network of independent contractors
is a valuable asset that allows the Company to serve shippers, ocean carriers
and freight forwarders across the country.

The Company also offers a variety of freight handling services, including
consolidation/ deconsolidation, warehousing and cross-dock. The Company's
logistics operation has prospered by focusing on providing customers with
specially designed transportation packages which fit the particular shipper's
origin relative to a destination's traffic flow. Additionally, the Company has
designed service packages intended to reduce the shipper's handling
requirements and improve inventory efficiency. These services are primarily
offered on the West Coast, but in recent years the Company has established
additional regional freight handling facilities to meet the needs of its
customers.

SALES AND MARKETING

The Company believes that its sales force is one of its major assets. The
Company has a total of 155 sales agents which are supported by regional sales
offices in 17 cities, including Los Angeles, Chicago, Atlanta, Seattle, Dallas
and Oakland. Because of its close interaction with customers, the sales force
is in a unique position to understand and anticipate customer needs, manage
customer relationships and contribute to business development. The Company's
salaried sales representatives are deployed in major transportation hubs and
target major accounts, while commissioned sales agents located throughout the
country contribute additional business that enables the Company to meet its
volume commitments and balance traffic flows. A number of the Company's sales
agents focus on particular industries and in many cases the Company dedicates
personnel to service particular customers. Sales agents and representatives
regularly call on major shippers to develop business relationships and to
expand the Company's participation in meeting their transportation and
logistics needs. When a business opportunity is identified by a sales agent or
representative, the Company's marketing and pricing personnel work together to
provide a transportation solution tailored to the customer's needs. The
Company also has a national network of commissioned sales agents,
strategically located in key metropolitan areas, who, in connection with its
trucking services, contact local customers, solicit business and move freight
in conjunction with central dispatch coordinators. In addition, regional sales
offices that support the agents' initiatives with respect to marketing and
selling the Company's services make joint calls and represent the Company in
interacting with national accounts.

RELATIONSHIPS WITH INDEPENDENT CONTRACTORS

Although the Company owns a small number of tractors and trailers, the vast
majority of the Company's truck equipment is provided by independent
contractors and small fleet owners, who either hire their own drivers or drive
themselves. The Company's relationships with independent contractors allow the
Company to provide its customers with a broad range of trucking services
without the need to commit capital to acquire and maintain an asset base.
Independent contractors and fleet owners typically sign contracts with the
Company, pursuant to which the independent contractor or fleet owner makes its
equipment available to the Company. Typical lease contracts detail the
Company's economic arrangements with the independent contractors and fleet
owners, including payment terms and allocation of responsibility for operating
costs, insurance and road and fuel taxes. Although the leases are typically
long-term agreements, they are terminable by either party on short notice.

Independent contractors and fleet owners are compensated on the basis of
mileage rates and a fixed percentage of the revenue generated from the
shipments they haul. Under the terms of the Company's typical lease contracts,
independent contractors must pay all the expenses of operating their
equipment, including driver wages and benefits, fuel, physical damage
insurance, maintenance and debt service. On a combined basis, these
independent contractors and small fleet owners supplied over 700 tractors and
trailers to the Company in 1997. A leased truck usually has the Company's name
placard applied. The average length of a flatbed and specialized haul is 800
over the road miles. Cartage and drayage movements are typically local in
nature.

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Most independent contractors are recruited locally by the Company's sales
agents. Each independent contractor must meet specified Company-wide
guidelines relating to such matters as safety record, driving experience, past
work history and physical examinations in accordance with DOT regulations. The
Company requires drivers to pass a road test and to review the Company's
safety manual and operational handbook. The Company also provides both video
and supervised training. Similarly, the Company imposes requirements for the
independent contractors' equipment, including safety features. The Company
emphasizes safety to its independent contractors and maintains driver safety
inspection programs, safety awards, frequent local safety meetings and
stringent driver qualification standards. In addition, the Company performs
daily audits of all driver logs to assure regulatory compliance. Management
believes these factors encourage the independent contractors to operate in a
safe fashion. See "--Risk Management; Insurance."

RELATIONSHIPS WITH DRAYAGE COMPANIES

The Company has established a good working relationship with a large network
of draymen in many major urban centers throughout the U.S. The quality of
these relationships helps ensure reliable pick-ups and deliveries, which is a
major differentiating factor among intermodal marketing companies. The
Company's strategy has been to concentrate business with a select group of
draymen in a particular urban area, which increases the economic value of the
Company to the drayage companies, and in turn raises the quality of service
that the Company receives. The Company seeks draymen who are committed to a
high quality of service, clean and safe equipment and a satisfactory on-time
performance level, and who follow established procedures designed to minimize
freight loss and damage. The Company requires its drayage partners to carry
substantial amounts of auto liability, general liability and cargo insurance.
See "--Risk Management; Insurance." The Company negotiates drayage rates for
transportation between specific origin and destination points. These rates
generally are valid, with minor exceptions for fuel surcharge increases, for a
period of one year. The Company's ability to deliver its customers' freight on
time depends in large part on the quality and service provided by the drayage
companies with which it does business.

RELATIONSHIPS WITH RAILROADS

The Company maintains close working relationships with all of the major
railroads in the U.S. The Company views each relationship as a partnership and
continues to focus its efforts on strengthening these relationships. On a
regular basis, senior executives of the Company and key railroads meet to
discuss major strategic issues concerning intermodal transportation. A number
of the Company's executive officers, including the Company's President and
Chief Executive Officer, Don Orris, are former railroad executives, which
makes them well suited to understand the railroads' service capabilities.

Contracts with the railroads govern the transportation services and payment
terms pursuant to which the Company's intermodal shipments are handled by the
railroads. The Company's contracts with the railroads are typically of short
duration (usually twelve month terms) and subject to renewal or extension.
While there can be no assurance that these contracts will be renewed, the
Company has in the past successfully negotiated extensions of the contracts
with the railroads. Transportation rates are market driven and are typically
negotiated between the Company and the railroads on a customer specific basis.
Consistent with industry practice, many of the rates negotiated by the Company
are special commodity quotations ("SCQs"), which provide discounts from
published price lists based on competitive market factors and are designed by
the railroads to attract new business or to retain existing business. SCQ
rates are generally issued for the account of a single intermodal marketing
company. SCQ rates apply to specific customers in specified shipping lanes for
a specific period of time, usually six to 12 months. The Company's
computerized pricing systems use historical lane-specific data to optimize the
Company's rail and drayage costs.

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RISK MANAGEMENT; INSURANCE

The Company has focused substantial efforts on the development,
implementation, and administration of consistent risk management policies and
programs for all of its subsidiaries in an effort to minimize losses (such as
vehicle accidents) and to manage claims at the least possible cost to the
Company. Efforts have been concentrated in the areas of safety equipment and
training and equipment maintenance. Safety training programs focus on both
drivers and office and field employees. Drivers must satisfy qualification
standards higher than DOT requirements and every new driver receives
orientation that includes a standardized accident prevention program.

Management believes that the Company realizes significant savings in
insurance premiums by retaining a larger amount of risk than might be prudent
if any of the Company's subsidiaries were separate companies. Central handling
of most substantial insurance-related functions by the Company also results in
savings and in a degree of effectiveness in handling such functions that the
Company's subsidiaries could not achieve by themselves.

Potential liability associated with accidents in the trucking industry is
severe and occurrences are unpredictable. The Company currently retains
liability of up to $250,000 on each individual property, auto, casualty,
general liability and individual cargo claim. The Company provides for the
estimated cost of property, casualty and general liability claims reported and
for claims incurred but not reported. The Company generally requires that all
of its drayage partners carry at least $1 million in general liability and
auto insurance and $200,000 in cargo insurance. The Company's standard form
contract with independent contractors provides that the independent
contractors are covered under the Company's insurance policies while
performing services for the Company. Accordingly, to the extent not covered by
insurance, the Company may be liable for damages caused by independent
contractors engaged by the Company. The Company is not liable for damages
caused by its drayage partners. Railroads provide limited common carrier
liability protection.

COMPETITION

The transportation services industry is highly competitive and fragmented.
The Company competes primarily against a large number of other domestic non-
asset based transportation and logistics companies, as well as asset-based
transportation and logistics companies, third-party freight brokers, carriers
offering logistics services and freight forwarders. The Company also competes
against carriers' internal sales forces and shippers' own transportation
departments. It also buys and sells transportation services from and to
companies with which it competes. Competition is based primarily on freight
rates, quality of service (such as damage free shipments, on-time delivery and
consistent transit times), reliable pickup and delivery and scope of
operations. Other logistics companies and transportation services companies
and numerous carriers have substantially greater financial and other resources
than the Company. The Company also competes with transportation services
companies for the services of independent commission agents, and with
trucklines for the services of independent contractors and drivers.

Competition with the Company's trucking services from non-trucking modes of
transportation and from intermodal transportation would be likely to increase
if state or federal taxes on fuel were to increase without a corresponding
increase in taxes imposed upon other modes of transportation.

GOVERNMENT REGULATION

The transportation industry has been subject to legislative and regulatory
changes that have affected the economics of the industry by requiring changes
in operating practices or influencing the demand for, and cost of providing,
transportation services. The Company cannot predict the effect, if any, that
future legislative and regulatory changes may have on the transportation
industry.

The Company is subject to licensing and regulation as a transportation
provider. The Company is licensed by the DOT as a national freight broker in
arranging for the transportation of general commodities

35
<PAGE>

by motor vehicle and operates pursuant to a 48-state, irregular route common
and contract carrier authority. The DOT prescribes qualifications for acting
in its capacity as a national freight broker, including certain surety bonding
requirements. The Company provides motor carrier transportation services that
require registration with the DOT and compliance with certain economic
regulations administered by the DOT, including a requirement to maintain
insurance coverage in minimum prescribed amounts. Other sourcing and
distribution activities may be subject to various federal and state food and
drug statutes and regulations. Although Congress enacted legislation in 1994
that substantially preempts the authority of states to exercise economic
regulation of motor carriers and brokers of freight, the Company and several
of its subsidiaries continue to be subject to a variety of vehicle
registration and licensing requirements. The Company and the carriers that the
Company relies on in arranging transportation services for its customers are
also subject to a variety of federal and state safety and environmental
regulations. Although compliance with the regulations governing licensees in
these areas has not had a materially adverse effect on the Company's
operations or financial condition in the past, there can be no assurance that
such regulations or changes thereto will not adversely impact the Company's
operations in the future. Violation of these regulations could also subject
the Company to fines or, in the event of serious violation, suspension or
revocation of operating authority as well as increased claims liability.

LITIGATION

Interstate is a named defendant in a purported class action filed in July
1997 in the State of California, Los Angeles Superior Court, Central District,
alleging, among other things, breach of fiduciary duty, unfair business
practices, conversion and money had and received in connection with monies
allegedly wrongfully deducted from truck drivers' earnings. The class has not
been certified. Plaintiffs have demanded in excess of $8.8 million, together
with unspecified punitive damages, costs and interest, as well as equitable
relief. The Company intends to defend this action vigorously and believes that
its defenses are meritorious. There can be no assurance, however, as to a
favorable outcome of the action and an adverse outcome could have a material
adverse effect on the Company. To date, this action has not had a material
negative impact on the Company's relationships with independent contractors,
drayage companies or fleet owners.

The Company is currently not otherwise subject to any other pending or
threatened litigation other than routine litigation arising in the ordinary
course of business, none of which is expected to have a material adverse
effect on the business, financial condition or results of operations of the
Company. Most of the lawsuits to which the Company is party are covered by
insurance and are being defended by the Company's insurance carriers.

PROPERTIES

The Company's branch offices and its central office space are leased from
related parties and third parties under leases with terms ranging up to 10
years. The Company considers its current office space adequate for its current
level of operations. The Company has not had difficulty in obtaining
sufficient office space and believes it can renew existing leases or relocate
branch offices to new space as leases expire. The Company also leases freight
terminals in Los Angeles consisting of approximately 12 acres of parking for
tractors and trailers and approximately 40,000 square feet of dock space and
approximately 100,000 square feet warehouse on an adjacent property. In
addition, the Company leases two warehouses in Kansas City, consisting of
approximately 89,000 total square feet. See "Certain Transactions."

EMPLOYEES

As of June 30, 1998, the Company had approximately 250 employees,
substantially all of whom are full-time employees. PIRS is party to a
collective bargaining agreement, effective July 1, 1997, with the Brotherhood
of Railway Carmen Division, Transportation Communications International Union.
As of June 30, 1998, 20 of the Company's employees were covered under such
collective bargaining agreement. The Company is not party to any other
collective bargaining agreements. The Company considers its relationship with
its employees to be good.

36
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the directors
and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Donald C. Orris............... 56 Chairman, President, Chief Executive
Officer and Director
Gerry Angeli.................. 51 Executive Vice President, Assistant
Secretary and Director
Gary I. Goldfein.............. 53 Executive Vice President and Director
Douglas R. Korn............... 35 Vice Chairman and Director
Robert L. Cross............... 51 Executive Vice President and Assistant
Secretary
Richard P. Hyland............. 44 Executive Vice President
Allen E. Steiner.............. 58 Executive Vice President
Lawrence C. Yarberry.......... 56 Executive Vice President, Chief Financial
Officer and Treasurer
Joseph P. Atturio............. 40 Vice President, Controller and Secretary
Edward L. Moyers*............. 70 Director
Jeffery M. Boetticher*........ 47 Director
</TABLE>
- --------
* Messrs. Moyers and Boetticher have agreed to become directors of the
Company upon consummation of this offering.

Upon consummation of this offering, the Company's Board of Directors will be
classified into three classes, which will consist of, as nearly as
practicable, an equal number of directors. The members of each class will
serve staggered three-year terms. Messrs. Orris and Goldfein will be Class I
directors, Messrs. Angeli and Boetticher will be Class II directors and
Messrs. Korn and Moyers will be Class III directors. Nominees for director
will be divided between the three classes upon their election or appointment.
The initial terms of the Class I, Class II and Class III directors expire at
the annual meeting of stockholders of the Company to be held in 1999, 2000 and
2001, respectively. See "Description of Capital Stock--Certain Provisions of
the Company's Certificate of Incorporation and By-laws--Classified Board of
Directors." Messrs. Goldfein and Steiner are brothers-in-law. There are no
other family relationships among the directors and executive officers.

Donald C. Orris has been the Chairman, President and Chief Executive Officer
of the Company and a director since the Company's inception in March 1997. He
is also a director of each of the Company's subsidiaries. From March 1997
until May 1998, Mr. Orris served as President and Chief Executive Officer of
PMTC. He also has served as Chairman of the Company's other subsidiaries since
their formation or acquisition by the Company. Mr. Orris has been the
President of Pacer International Consulting LLC (f/k/a Logistics International
LLC), a wholly owned subsidiary of the Company, since September 1996. From
January 1995 to September 1996, Mr. Orris served as President and Chief
Operating Officer, and from 1990 until January 1995, he served as an Executive
Vice President, of Southern Pacific Transportation Company. Mr. Orris was the
President and Chief Operating Officer of American President Domestic Company
and American President Intermodal Company from 1982 until 1990.

Gerry Angeli has been an Executive Vice President and Assistant Secretary of
the Company since the Company's inception in March 1997 and a director since
April 1998. He is also a director of each of the Company's subsidiaries. Since
May 1998, Mr. Angeli has served as President and Chief Executive Officer of
PMTC and Vice President of Interstate and Pacer Logistics, Inc., a wholly
owned subsidiary of Pacer ("Logistics"). Mr. Angeli also served as a Vice
President and Assistant Secretary of PMTC from March 1997 until May 1998.
Since 1982 Mr. Angeli has served as President of the Pacer division of PMTC
and, concurrent therewith, from 1987 until December 1993, Mr. Angeli served as
President and Chief Executive Officer of Southern Pacific Motor Trucking
("SPMT"), a wholly owned subsidiary of the Southern Pacific Railroad.

37
<PAGE>

Gary I. Goldfein has been an Executive Vice President of the Company and a
director since December 1997. He is also a director of each of the Company's
subsidiaries. Mr. Goldfein also has served as the President of Logistics and
as Vice President of PMTC since May 1998. Mr. Goldfein was a co-founder of ICI
and ICSI in 1972. From 1972 until December 1997, Mr. Goldfein served as
President and Treasurer of ICSI and IMCS and Vice President and Secretary of
ICI.

Douglas R. Korn has been a director of the Company since its inception in
March 1997 and Vice Chairman since March 1998. From March 1997 until May 1998,
Mr. Korn served as a Vice President, Assistant Secretary and Assistant
Treasurer of PMTC and has been a director of PMTC since March 1997. He is also
a director of each of the Company's other subsidiaries. Mr. Korn has been a
Managing Director of Eos since 1994. Mr. Korn also served as Vice President of
Acquisitions for Davis Companies from January 1992 until May 1993, and as
President of Water Mill Capital from July 1991 until December 1993. From 1988
to 1991, Mr. Korn was a Vice President and Associate with The Blackstone
Group.

Robert L. Cross has been an Executive Vice President and Assistant Secretary
of the Company since its inception in March 1997 and Vice President of PMTC
since March 1997. Mr. Cross has served as President--West of Pacer Intermodal,
the intermodal operations subsidiary of Logistics, and Executive Vice
President of Interstate since May 1998. From 1991 until March 1997, Mr. Cross
served as President of ABL-TRANS, formerly a division of PMTC and now a
division of ICSI.

Richard P. Hyland has been an Executive Vice President of the Company and
President--East of Pacer Intermodal since June 1998. He is the founder of
Cross Con and has served as President of Cross Con since 1977.

Allen E. Steiner has served as an Executive Vice President of the Company
and Interstate since December 1997. Since May 1998, Mr. Steiner has served as
Executive Vice President of Logistics. Mr. Steiner was a co-founder of ICI and
ICSI in 1972. From 1972 until December 1997, Mr. Steiner served as President
and Treasurer of ICI and Vice President and Secretary of ICSI and IMCS.

Lawrence C. Yarberry has been an Executive Vice President, Chief Financial
Officer and Treasurer of the Company since May 1998 and served as a consultant
to the Company from February 1998 until April 1998. From April 1990 until
December 1997, Mr. Yarberry served as Vice President of Finance of Southern
Pacific Transportation Company. From April 1990 until September 1996 he also
served as Chief Financial Officer and director of Southern Pacific
Transportation Company, and was Vice President of Finance and Chief Financial
Officer of Southern Pacific Rail Corporation ("SPRC"). He also served as a
director of SPRC from April 1990 until August 1993.

Joseph P. Atturio has served as Vice President and Secretary of the Company
since its inception in March 1997 and as Controller since May 1998. Mr.
Atturio also served as Treasurer of the Company from March 1997 until May
1998. Prior to joining the Company, Mr. Atturio served as Controller of SPMT
from August 1988 until December 1993 and as a Vice President of SPMT from July
1992 until December 1993. From January 1994 until March 1997 he served as Vice
President and Controller of PMTC and was a Regional Director of PMT Auto
Transport, a division of PMTC, from January 1986 until July 1988.

Edward L. Moyers has agreed to become a director of the Company upon
consummation of this offering. Since June 1996, Mr. Moyers has served as
Chairman and Chief Executive Officer of Brazil Rail Partners, LLC. From July
1993 until February 1995 he served as director, President and Chief Executive
Officer of Southern Pacific Rail Corporation and as President and Chief
Executive Officer of Southern Pacific Transportation Company. From March 1989
until February 1993 he served as Director, President and Chief Executive
Officer of Illinois Central Corporation ("ICC") and its wholly owned
subsidiary, The Illinois Central Railroad Company ("ICRC"). He also served as
Chairman of ICC and ICRC from 1990 until February 1993.

Jeffery M. Boetticher has agreed to become a director of the Company upon
consummation of this offering. Mr. Boetticher served as Chairman and Chief
Executive Officer of Black Box Corporation ("Black Box"), a provider of
computer networking, communications, services and equipment, from 1991 until
June 1998. He has been a director of Black Box since 1991. He has also served
as a director and as Chairman of the Audit Committee of JLK Direct since July
1997.

38
<PAGE>

COMMITTEES OF THE BOARD OF DIRECTORS

Audit Committee. The Board of Directors intends to establish an Audit
Committee within 45 days following the consummation of this offering to make
recommendations concerning the engagement of independent public auditors;
review with the independent public auditors the plans for and scope of the
audit, the audit procedures to be used and results of the audit; approve the
professional services provided by the independent public auditors; review the
independence of the independent public auditors; and review the adequacy and
effectiveness of the Company's internal accounting controls.

Compensation Committee. The Board of Directors intends to establish a
Compensation Committee within 45 days following the consummation of this
offering to determine compensation for the Company's executive officers and
key employees and to administer the 1997 Option Plan, the 1998 Option Plan and
other Company benefit plans.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

To date, the Company's Board of Directors has established levels of
compensation for the Company's executive officers. There are not now, nor
following this offering will there be, any Compensation Committee interlocks
between the Company and other entities involving the Company's executive
officers and Board members who serve as executive officers or Board members of
such other entities.

DIRECTOR COMPENSATION

Following this offering, non-employee directors will receive an annual
retainer of $12,000 and will be paid a customary fee for attendance at each
meeting of the Board or committee thereof, including reimbursement for
reasonable expenses. Employee and consultant directors will not receive
additional compensation for serving on the Board. It is expected that non-
employee directors will be granted options under the 1998 Option Plan.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid to the Chief Executive
Officer of the Company and to each of the three other most highly compensated
executive officers of the Company (the "Named Executive Officers") with
respect to fiscal 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS/SARS COMPENSATION
------------------ ------ -------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Donald C. Orris......... 1997 $123,750 $ 83,000 $16,134 36,666.66(2) $ --
President and Chief
Executive Officer
Gerry Angeli............ 1997 194,190 108,440 8,242 36,666.66(2) 232,040(3)
Vice President and
Assistant Secretary
Robert L. Cross......... 1997 193,758 83,000 14,128 36,666.66(2) 65,000(3)
Vice President and
Assistant Secretary
Joseph P. Atturio....... 1997 104,475 37,127 4,624 -- 71,100(3)
Vice President,
Secretary and Treasurer
</TABLE>
- --------
(1) Includes car allowance or use of a Company car, 401(k) matching
contributions and life insurance.
(2) Indicates number of Option Units, each of which consists of nine and one-
half shares of Common Stock and one share of Series A Preferred Stock.
(3) Change in control payment.

39
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth grants of stock options during fiscal 1997 to
the Named Executive Officers pursuant to the 1997 Option Plan. No stock
appreciation rights have ever been granted to the Named Executive Officers.

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATE OF STOCK
PERCENTAGE PRICE
OF APPRECIATION
NUMBER OF SHARES OPTIONS/SARS FOR OPTION
UNDERLYING OPTIONS/SARS GRANTED TO EXERCISE OR TERM(2)
-------------------------EMPLOYEES-IN BASE PRICE EXPIRATION ---------------
NAME COMMON PREFERRED FISCAL YEAR PER UNIT(1) DATE 5% 10%
---- ------------ ------------------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald C. Orris......... 221,666.64 23,333.33 64% $11.24 3/31/07 308,804 522,678
126,666.64 13,333.33 36% 40.00 3/31/03 -- --
Gerry Angeli............ 221,666.64 23,333.33 64% 11.24 3/31/07 308,804 522,678
126,666.64 13,333.33 36% 40.00 3/31/03 -- --
Robert L. Cross......... 221,666.64 23,333.33 64% 11.24 3/31/07 308,804 522,678
126,666.64 13,333.33 36% 40.00 3/31/03 -- --
Joseph P. Atturio....... -- -- -- -- -- -- --
</TABLE>
- --------
(1) Each Unit consists of 9.5 shares of Common Stock and one share of Series A
Preferred Stock.
(2) Based upon the estimated fair value of the Common Stock on the date of
grant and assumed appreciation over the term of the options at the
respective annual rates of stock appreciation shown. Potential gains are
net of the exercise price but before taxes and other expenses associated
with the exercise. The 5% and 10% assumed annual rates of compounded stock
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
the future price of the Common Stock. Actual gains, if any, on stock
option exercises are dependent on the future financial performance of the
Company, the future performance of the Company's Common Stock and overall
market conditions. The actual value realized may be greater or less than
the potential realizable value set forth in the table.

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE

The following table presents information as of the end of fiscal 1997 with
respect to the unexercised options to purchase the Common Stock granted under
the Option Plan to the Named Executive Officers. No options were exercised
during the last fiscal year.

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED IN
SHARES UNDERLYING UNEXERCISED THE MONEY OPTIONS/SARS AT
ACQUIRED OPTIONS/SARS AT YEAR-END FISCAL YEAR-END
NAME AND PRINCIPAL ON VALUE ------------------------- -------------------------
POSITION EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald C. Orris......... -- -- 126,666.64 221,666.64 6,667 682,733
President and Chief
Executive Officer
Gerry Angeli............ -- -- 126,666.64 221,666.64 6,667 682,733
Vice President and
Assistant Secretary
Robert L. Cross......... -- -- 126,666.64 221,666.64 6,667 682,733
Vice President and
Assistant Secretary
Joseph P. Atturio....... -- -- -- -- -- --
Vice President,
Secretary and Treasurer
</TABLE>

40
<PAGE>

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements dated as of March 31,
1997 with each of Donald C. Orris, Gerry Angeli and Robert L. Cross
(collectively, the "PMTC Employment Agreements"), employment agreements dated
as of December 16, 1997 with each of Gary I. Goldfein and Allen E. Steiner
(the "Interstate Employment Agreements") and an employment agreement with
Richard P. Hyland dated as of June 5, 1998 (the "Hyland Employment Agreement"
and, together with the PMTC Employment Agreements and the Interstate
Employment Agreements, the "Employment Agreements"). Base compensation under
the Employment Agreements is $225,000, $225,000, $200,000, $235,000, $220,000
and $220,000 per year for Messrs. Orris, Angeli, Cross, Goldfein, Steiner and
Hyland, respectively, subject to increase by the Board of Directors, except in
the case of Mr. Orris, in which case base compensation is subject to increase
on the second anniversary thereof to reflect customary market compensation and
thereafter as agreed by Mr. Orris and the Board of Directors.

Under the PMTC Employment Agreements, the Board of Directors may award an
annual bonus to the employee in an amount up to $83,000 and under the
Interstate Employment Agreements and the Hyland Employment Agreement such
bonus may be in an amount up to $90,000. In each case, such bonus is based on
the attainment of certain operating income targets. The Company may terminate
the employee at any time and for any reason; provided that if the Employment
Agreements are terminated without cause (as defined in each such agreement),
the Company must pay the employee a severance amount determined in accordance
with a formula contained in that employee's agreement. In the case of certain
of the Employment Agreements, such severance also is due in the event of the
employee's death. In the case of the PMTC Employment Agreements, the employee
is prohibited from directly or indirectly competing with the Company during
the term of employment and the period beginning on the effective date of
termination of employment and ending on the third anniversary thereof. In the
case of the Interstate Employment Agreements and the Hyland Employment
Agreement, the employee is prohibited from directly or indirectly competing
with the Company during his employment period and the period beginning on the
effective date of any termination of employment and ending on the later of (i)
the second anniversary thereof and (ii) the fifth anniversary of the
commencement date of the employment agreement. There can be no assurance,
however, as to the enforceability of the Employment Agreements with respect to
such non-competition provisions. The restraint on competition by the employee
prohibits the employee from engaging in a competing business (as defined in
each agreement) and is geographically limited. Under the terms of each of the
Employment Agreements, the employee acknowledges that any confidential
information (as defined in each such agreement) that he may develop is the
sole property of the Company and agrees not to disclose to, or use for the
benefit of, any person or entity (other than the Company) any of such
confidential information, whether or not developed by him.

1997 STOCK OPTION PLAN

In order to further the growth and success of the Company by enabling
employees of and consultants to the Company to acquire Option Units and to
reward outstanding performances by such persons, the Company, pursuant to its
1997 Option Plan, has granted to certain of its employees options to purchase
an aggregate of 110,000 Option Units, each of which consists of nine and one-
half shares of Common Stock and one share of Series A Preferred Stock (subject
to adjustment in certain circumstances). If any options expire without being
exercised, the Company may, in accordance with the terms of the 1997 Option
Plan, grant additional Option Units with respect to those shares of Common
Stock and Series A Preferred Stock underlying the unexercised portion of such
expired Option Units.

The 1997 Option Plan may be administered by the Board of Directors or by a
two-person committee of the Board of Directors (the "Committee," and
references to the Committee shall mean the Board of Directors, if a committee
is not appointed). Grants of Option Units consist of (i) options intended to
qualify as incentive stock options ("ISOs") and (ii) non-qualified stock
options that are not intended to so qualify ("NSOs"). Except as set forth
below, the term of any such option is ten years.

41
<PAGE>

The Company has entered into Supplemental Stock Option Agreements and
Service Stock Option Agreements with each of Messrs. Orris, Angeli and Cross.
The Supplemental Stock Option Agreements provide for the option to purchase
Option Units at the price of $40.00 per Option Unit, which options expire not
later than the sixth anniversary of the date of grant. All options granted
pursuant to the Supplemental Stock Option Agreements are immediately
exercisable. The Service Stock Option Agreements provide for the option to
purchase Option Units at the price of $11.24 per Option Unit, which options
expire not later than the tenth anniversary of the date of grant. Of such
options, 25% vested and became exercisable on April 1, 1998, 25% will be
accelerated and vest and become exercisable upon the closing of this offering
and 25% will vest and become exercisable on April 1 of each of 2000 and 2001.

The option price of any ISO granted under the 1997 Option Plan will not be
less than the fair market value of the underlying shares of Common Stock and
Series A Preferred Stock on the date of grant; provided that the price of an
ISO granted to a person who owns more than 10% of the total combined voting
power of all classes of stock of the Company must be at least equal to 110% of
the fair market value of Common Stock and Series A Preferred Stock on the date
of grant and, in such case, the ISO's term may not exceed five years. The
option price of an NSO will be determined by the Committee in its sole
discretion, and may be greater than, equal to or less than the fair market
value of the underlying shares of Common Stock and Series A Preferred Stock on
the date of grant. A grantee may pay the option price in cash or personal or
certified check or by delivering shares of Common Stock and/or Series A
Preferred Stock already owned by the grantee for more than six months. In the
event of a Sale of the Company (as defined in the 1997 Option Plan), all
options that are otherwise subject to time vesting provisions automatically
will be subject to acceleration.

The Board of Directors may amend or modify the 1997 Option Plan at any time;
provided that, under certain circumstances, the approval of the stockholders
of the Company may be required. The 1997 Option Plan will terminate on the
earlier to occur of (i) the tenth anniversary of the effective date thereof
and (ii) consummation of a Sale of the Company (as defined in the 1997 Option
Plan).

1998 STOCK OPTION PLAN

In May 1998, the Company adopted the 1998 Option Plan and submitted such
plan to its existing stockholders for approval. The 1998 Option Plan will be
administered by the Committee. Under the 1998 Option Plan, the Committee may
grant ISOs and NSOs at an exercise price of not less than fair market value on
the date of grant to directors, officers and other key employees and
affiliates of the Company. The Committee will determine the number of shares
of Common Stock with respect to such awards and the terms of such awards,
including the applicable vesting periods. The maximum number of shares of
Common Stock subject to options that may be outstanding at any time under the
1998 Option Plan will be 650,000. The Company will not be able to issue more
than 650,000 shares of Common Stock under the 1998 Option Plan, except to the
extent that the Committee determines to grant options for an additional number
of shares equal to the number of shares surrendered to the Company to exercise
options granted under the 1998 Option Plan.

42
<PAGE>

CERTAIN TRANSACTIONS

The Company leases a facility consisting of office, warehousing and trucking
space from A&G Investments, a California general partnership of which Messrs.
Goldfein and Steiner are the only partners. Mr. Goldfein is a Director and
Executive Vice President of the Company, as well as President of Logistics.
Mr. Steiner is an Executive Vice President of the Company and of Logistics.
Lease payments in 1997 from the Company were $22,500 and are expected to be
approximately $540,000 in 1998.

On June 30, 1998, the Company paid each of Messrs. Goldfein and Steiner
$63,000, representing a purchase price adjustment in connection with the
Interstate Acquisition.

Under an Amended and Restated Management Consulting Agreement dated as of
December 16, 1997 between the Company, PMTC, ICI, ICSI, IMCS and Eos
Management, Inc. ("EMI"), the Company pays EMI a monthly management fee of
$10,416 for management consulting services rendered to the Company. In
addition, on December 17, 1997 and June 30, 1998, the Company paid EMI fees of
$100,000 and $40,000 pursuant to the management agreement for consulting
services rendered to the Company in connection with the Interstate and Cross
Con Acquisitions, respectively. Upon consummation of this offering, such
management agreement will be terminated. Following this offering, the Company
may from time to time retain EMI to provide management consulting services in
connection with specific transactions. Such arrangements will be on terms no
less favorable than those that would be available in a similar transaction
with an unrelated third party.

The Company provided over-the-road transportation services and purchased
Line Haul transportation services from UP and its subsidiaries for $6.1
million and $5.8 million, respectively, from March 1997 through December 31,
1997.

The Company's predecessor also provided over-the-road transportation
services and purchased Line Haul transportation services from UP and its
subsidiaries. During the three months ended March 31, 1997, and the years
ended December 31, 1996 and 1995, revenues earned by the Company's predecessor
from UP and its subsidiaries related to over-the-road transportation services
were $2.2 million, $4.8 million and $4.1 million, respectively. Purchased
transportation costs from UP and its subsidiaries were $2.7 million for the
three months ended March 31, 1997, $13.5 million for the year ended December
31, 1996 and $10.6 million for the year ended December 31, 1995.

Cross Con leases a facility consisting of office space from Richard P.
Hyland, an Executive Vice President of the Company and President and Chief
Executive Officer of Cross Con. Such lease is pursuant to an oral agreement
and is on a month to month basis. Lease payments are expected to be
approximately $36,000 in 1998, plus $16,000 for real estate taxes.

Pursuant to an Operations Agency Agreement, TEK, Incorporated ("TEK") is
entitled to 65% of the gross profit on Terminals' Detroit office. Thomas
Hyland, brother of Richard Hyland, is the owner of TEK. In 1997, TEK received
$350,990 pursuant to such Agreement.

Pursuant to an oral Commission/Bonus Agreement with Mark Hyland, an employee
of Cross Con and the brother of Richard Hyland, Mark Hyland is entitled to 30%
of the net profits before tax of the California office of Cross Con. In 1997,
Mark Hyland received $74,200 pursuant to such Agreement.

Prior to this offering, the Company intends to amend the terms of the Series
A Preferred Stock to provide that the Series A Preferred Stock may be redeemed
at the option of the Company. The Company currently intends to use a portion
of the proceeds of this offering to redeem all outstanding shares of Series A
Preferred Stock at face value. As a result of the foregoing, the Company will
make payments to Eos and Messrs. Orris, Angeli and Cross in the amounts of
$2,677,500, $157,500, $157,500 and $157,500, respectively. See "Use of
Proceeds." In addition, on June 30, 1998, the Company paid regular dividends
on the Series A Preferred Stock in the amounts of $321,300, $18,900, $18,900
and $18,900 to Eos and Messrs. Orris, Angeli and Cross, respectively.

The Company has entered into employment agreements with each of Messrs.
Orris, Angeli, Cross, Goldfein and Steiner. See "Management--Employment
Agreements."

The Company believes that the terms of each of the foregoing transactions
were no less favorable than could have been obtained in arm's-length
transactions with unaffiliated third parties.

43
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information with respect to the
beneficial ownership as of June 30, 1998 of shares of Common Stock by (i) all
persons known by the Company to own beneficially more than 5% of the Common
Stock; (ii) each Selling Stockholder; (iii) each of the Company's directors;
(iv) each of the Named Executive Officers; and (v) all directors and executive
officers as a group. Unless otherwise indicated, the address of each person
listed is c/o the Company, 3746 Mt. Diablo Boulevard, Suite 110, Lafayette,
California 94549.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON
BENEFICIALLY OWNED SHARES STOCK BENEFICIALLY
PRIOR TO OFFERING TO BE OWNED AFTER OFFERING
NAME AND ADDRESS OF --------------------------- SOLD IN --------------------
BENEFICIAL OWNER NUMBER PERCENT(1) OFFERING NUMBER PERCENT(1)
------------------- ------------- ------------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Eos Partners, L.P. ..... 2,826,250 51.98% 225,000(2) 2,601,250 30.92%
320 Park Avenue, 22nd
Floor
New York, New York
10022
Union Pacific Railroad 175,000 3.12 175,000 -- --
Company(3).............
1717 Main Street, 59th
Floor
Dallas, Texas 75201
Donald C. Orris(4)...... 403,750 7.12 -- 403,750 4.67
Gerry Angeli(4)......... 403,750 7.12 -- (5) 403,750 4.67
Douglas R. Korn(6)...... 2,826,250 51.98 225,000(2) 2,601,250 30.92
Gary I. Goldfein(7)..... 676,875 12.45 -- 676,875 8.05
Richard P. Hyland....... 541,500 9.96 -- 541,500 6.44
Allen E. Steiner(8)..... 676,875 12.45 -- 676,875 8.05
Robert L. Cross(4)...... 403,750 7.12 -- 403,750 4.67
Joseph P. Atturio(9).... 8,899 * -- 8,899 *
All directors and
executive officers as a
group (8 persons)...... 5,941,649 96.61% 225,000 5,716,649 62.65%
</TABLE>
- --------
*Less than one percent.
(1) Applicable percentage of ownership is based on 5,437,392 shares of Common
Stock outstanding as of June 30, 1998 and 8,412,392 shares of Common Stock
outstanding upon consummation of this offering. Beneficial ownership is
determined in accordance with the rules of the Commission and includes
voting and investment power with respect to securities. Securities subject
to options or warrants currently exercisable or exercisable within 60 days
of the date of this offering are deemed outstanding for purposes of
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Except for shares held jointly
with a person's spouse or subject to applicable community property laws,
or as indicated in the footnotes to this table, each stockholder
identified in the table possesses sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
stockholder.
(2) Does not include up to 125,000 shares of Common Stock subject to the
Underwriters' overallotment option.
(3) Represents shares of Common Stock issuable upon exercise of the UPRC
Warrant.
(4) Includes 237,500 shares of Common Stock issuable upon the exercise of
presently exercisable options held by the stockholder.
(5) Does not include up to 25,000 shares of Common Stock subject to the
Underwriters' overallotment option.
(6) Includes 2,826,250 shares of Common Stock owned beneficially and of record
by Eos. Mr. Korn is a Managing Director of Eos. Mr. Korn disclaims
beneficial ownership of the shares of Common Stock held by Eos.
(7) All of Mr. Goldfein's shares are held by the Goldfein Living Trust, of
which Mr. Goldfein and his wife are the named beneficiaries.
(8) All of Mr. Steiner's shares are held by the Steiner Living Trust, of which
Mr. Steiner and his wife are the named beneficiaries.

(9) Represents shares of Common Stock issuable upon the exercise of presently
exercisable options held by the stockholder.

44
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $0.01 par value, and 5,000,000 shares of Preferred Stock, $0.01
par value (the "Preferred Stock"). The following description of the capital
stock of the Company is a summary of the material provisions of, and is
qualified in its entirety by reference to, the Company's Restated Certificate
of Incorporation (the "Certificate") and Amended and Restated By-laws (the
"By-laws").

COMMON STOCK

The Certificate provides for the authorization of 20,000,000 shares of
Common Stock, par value $0.01 per share. Subject to the prior rights of any
series of Preferred Stock which may from time to time be authorized and
outstanding, holders of Common Stock are entitled to receive dividends out of
funds legally available therefor when, as and if declared by the Board of
Directors and to receive pro rata the net assets of the Company legally
available for distribution upon liquidation or dissolution.

Holders of Common Stock are entitled to one vote for each share of Common
Stock held on each matter to be voted on by the holders of Common Stock,
including the election of directors. Holders of Common Stock are not entitled
to cumulative voting, which means that the holders of more than 50% of the
outstanding Common Stock can elect all of the directors of any class if they
choose to do so. The stockholders do not have preemptive rights. All
outstanding shares of Common Stock are fully paid and nonassessable.

Prior to this offering, there has been no public market for the Common
Stock. The Company intends to apply for the Common Stock to be quoted and
traded on the Nasdaq National Market under the symbol "PACR."

PREFERRED STOCK

The Certificate authorizes the issuance of 5,000,000 shares of Preferred
Stock, par value $0.01 per share, of which 600,000 shares have been designated
Series A Preferred Stock. All outstanding shares of Series A Preferred Stock
will be redeemed immediately prior to the consummation of this offering.
Following this offering, options to purchase 110,000 shares of Series A
Preferred Stock will remain outstanding under the 1997 Option Plan. The terms
of the Series A Preferred Stock provide that holders thereof are entitled to
receive cash dividends at the rate of 12% per annum, as, if and when declared
by the Board of Directors at its sole discretion. So long as any shares of
Series A Preferred Stock are outstanding, the Company may not pay or declare
any dividend on or with respect to any shares of Common Stock. Upon
liquidation, holders of Series A Preferred Stock will be entitled to receive,
prior and in preference to any distribution to any holder of Common Stock, an
amount per share equal to the original issuance price of such share, plus the
aggregate amount of all dividends declared, if any, less the aggregate amount
of all distributions, including payments of dividends. In general, holders of
Series A Preferred Stock will not be entitled to vote on any matters submitted
to the vote of stockholders except as set forth in the Certificate.

The Board of Directors is authorized to provide for the issuance of
Preferred Stock in one or more series and to fix the number of shares
constituting any such series, the voting powers, designations, preferences and
relative participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including the dividend rights, redemption
privileges, conversion rights and liquidation preferences of the shares
constituting any series, without any further vote or action by the
stockholders of the Company. The issuance of Preferred Stock by the Board of
Directors could adversely affect the rights of holders of Common Stock. For
example, the issuance of Preferred Stock could result in a series of
securities outstanding that would have preferences over the Common Stock with
respect to dividends and in liquidation and that could (upon conversion or
otherwise) enjoy all of the rights appurtenant to Common Stock.

45
<PAGE>

The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by others to obtain control
of the Company through merger, tender offer, proxy, consent or otherwise by
making such attempts more difficult to achieve or more costly. The Board of
Directors may issue Preferred Stock without stockholder approval and with
voting and conversion rights which could adversely affect the voting power of
holders of Common Stock. There are no agreements or understandings for the
issuance of Series A Preferred Stock and the Board of Directors has no present
intent to issue additional shares of Preferred Stock other than shares
issuable pursuant to the exercise of options granted under the 1997 Option
Plan.

DIRECTORS' LIABILITY

As authorized by the DGCL, the Certificate provides that no director of the
Company shall be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or purchases or (iv)
for any transaction from which the director derived an improper personal
benefit. The effect of the provision in the Certificate is to eliminate the
rights of the Company and its stockholders to recover monetary damages against
a director for breach of fiduciary duty as a director except in the situations
described in clauses (i) through (iv) above. This provision does not limit or
eliminate the rights of the Company or any stockholder to seek non-monetary
relief such as an injunction or rescission in the event of a breach of a
director's fiduciary duty. In addition, the Certificate provides that if the
DGCL is amended to authorize the further elimination or limitation of the
liability of a director, then the liability of the directors shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended. These provisions do not alter the liability of directors under
federal securities laws.

The Certificate also contains provisions requiring the indemnification of
the Company's directors and officers to the fullest extent permitted by the
DGCL, including circumstances in which indemnification is otherwise
discretionary. The Company also has the power to maintain insurance, on terms
and conditions the Board deems acceptable, on behalf of officers and directors
against any expense, liability or loss arising out of such person's status as
an officer or director. The Company believes that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and officers.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to the provisions of Section 203 of the DGCL. Section
203 provides, with certain exceptions, that a Delaware corporation may not
engage in any of a broad range of business combinations with a person or
affiliate or associate of such person who is an "interested stockholder" for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination, is approved by the board
of directors of the corporation before the person becomes an interested
stockholder, (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
persons who are both officers and directors of the corporation, and shares
held by certain employee stock ownership plans); or (iii) on or after the date
the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by the holders of at
least 66 2/3% of the corporation's outstanding voting stock at an annual or
special meeting, excluding shares owned by the interested stockholder. An
"interested stockholder" is defined as any person (other than the corporation
or any direct or indirect majority owned subsidiary of the corporation) that
is (i) the owner of 15% or more of the outstanding voting stock of the
corporation or (ii) an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.

46
<PAGE>

CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND BY-LAWS

Certain provisions of the Certificate and By-laws summarized below may be
deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including an attempt that might result in the receipt of a premium
over the market price for the shares held by stockholders.

Classified Board of Directors. The Certificate provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, one-third of the Board of Directors will be
elected each year. Moreover, under Delaware law, in the case of a corporation
having a classified board, stockholders may remove a director only for cause.
This provision, when coupled with the provision of the By-laws authorizing
only the Board of Directors to fill vacant directorships, will preclude a
stockholder from removing incumbent directors without cause and simultaneously
gaining control of the Board of Directors by filling the vacancies created by
such removal with its own nominees.

Special Meeting of Stockholders. The Certificate provides that special
meetings of stockholders of the Company may be called only by the Board of
Directors, the Chairman of the Board of Directors or the Chief Executive
Officer. This provision will make it more difficult for stockholders to take
actions opposed by the Board of Directors.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Firstar Trust
Company.

47
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of this offering, the Company will have outstanding
8,412,392 shares of Common Stock (8,742,392 if the Underwriters' over-
allotment option is exercised in full) of which the 3,200,000 shares sold in
the offering (3,680,000 if the Underwriters' over-allotment option is
exercised in full) will be freely tradable without restriction or further
registration under the Securities Act, except for those held by "affiliates"
(as defined in the Securities Act) of the Company, which shares will be
subject to the resale limitations of Rule 144 under the Securities Act. The
remaining 5,212,392 shares of Common Stock are deemed "restricted securities"
under Rule 144 in that they were originally issued and sold by the Company in
private transactions in reliance upon exemptions under the Securities Act, and
may be publicly sold only if registered under the Securities Act or sold in
accordance with an applicable exemption from registration, such as those
provided by Rule 144 promulgated under the Securities Act as described below.

In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of restricted
securities from the issuer or from any affiliate of the issuer, the acquirer
or subsequent holder would be entitled to sell within any three-month period a
number of those shares that does not exceed the greater of one percent of the
number of shares of such class of stock then outstanding or the average weekly
trading volume of the shares of such class of stock during the four calendar
weeks preceding the filing of a Form 144 with respect to such sale. Sales
under Rule 144 are also subject to certain manner of sale provisions and
notice requirements and to the availability of current public information
about the issuer. In addition, if a period of at least two years has elapsed
since the later of the date of acquisition of restricted securities from the
issuer or from any affiliate of the issuer, and the acquirer or subsequent
holder thereof is deemed not to have been an affiliate of the issuer of such
restricted securities at any time during the 90 days preceding a sale, such
person would be entitled to sell such restricted securities under Rule 144(k)
without regard to the requirements described above. Rule 144 does not require
the same person to have held the securities for the applicable periods. The
foregoing summary of Rule 144 is not intended to be a complete description
thereof. The Securities and Exchange Commission (the "Commission") has
proposed certain amendments to Rule 144 that would, among other things,
eliminate the manner of sale requirements and revise the notice provisions of
that rule. The Commission has also solicited comments on other possible
changes to Rule 144, including possible revisions to the one- and two-year
holding periods and the volume limitations referred to above.

As of the closing of this offering, options to purchase approximately
1,045,000 shares of Common Stock will have been granted under the 1997 Option
Plan and options to purchase up to 26,695 shares of Common Stock will have
been granted pursuant to the Atturio Option Agreement. In general, pursuant to
Rule 701 under the Securities Act, any employee, officer or director of, or
consultant to, the Company who purchased his or her shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permit non-affiliates to sell such shares
without compliance with the public information, holding period, volume
limitation or notice provisions of Rule 144, and permit affiliates to sell
such shares without compliance with the holding period provisions of Rule 144,
in each case commencing 90 days after the date of this Prospectus. In
addition, the Company intends to file a Registration Statement on Form S-8
covering the shares issuable upon exercise of stock options issued under the
1997 Option Plan and which may be granted in the future under the 1998 Option
Plan, in which case such shares of Common Stock generally will be freely
tradable by non-affiliates in the public market without restriction under the
Securities Act.

Prior to this offering, the Company expects to grant demand registration
rights to Eos and piggy-back registration rights to all of its existing
stockholders who will continue to be stockholders following this offering. It
is expected that such registration rights will be exercisable after the
expiration of the lock-up period described below. If such stockholders, by
exercising such registration rights, cause a large number of shares to be
registered and sold in the public market, such sales may have an adverse
effect on the market price of the Common Stock.

48
<PAGE>

The Company, the Selling Stockholders and the executive officers, directors
and other stockholders of the Company have agreed not to offer, sell, contract
to sell, grant any option or other right for the sale of, or otherwise dispose
of any shares of Common Stock or any securities, indebtedness or other rights
exercisable for or convertible or exchangeable into Common Stock owned or
acquired in the future in any manner for a period of 180 days following the
date of this Prospectus without the prior written consent of BT Alex. Brown
Incorporated, except for transfers by such stockholders pursuant to bona fide
gifts and except that the Company may, subject to certain conditions, issue
Common Stock in connection with acquisitions, grant options under the 1998
Option Plan and issue Common Stock upon exercise of options granted under the
1997 Option Plan and the 1998 Option Plan. See "Underwriting." These
restrictions will be applicable to any shares acquired by any of those persons
in this offering or otherwise during the lockup period.

Prior to this offering, there has been no established public market for the
Common Stock. No prediction can be made of the effect, if any, that sales of
shares under Rule 144, or otherwise, or the availability of shares for sale
will have on the market price of the Common Stock prevailing from time to time
after this offering. The Company is unable to estimate the number of shares
that may be sold in the public market under Rule 144, or otherwise, because
such amount will depend on the trading volume in, and market price for, the
Common Stock and other factors. Nevertheless, sales of substantial amounts of
the Common Stock in the public market, or the perception that such sales might
occur, could adversely affect the market price of the Common Stock of the
Company and the Company's future ability to raise equity capital and complete
any additional acquisitions for Common Stock. See "Underwriting."

49
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters"), through their representatives,
BT Alex. Brown Incorporated, PaineWebber Incorporated and Morgan Keegan &
Company, Inc. (together, the "Representatives"), have severally agreed to
purchase from the Company and the Selling Stockholders the following
respective number of shares of Common Stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BT Alex. Brown Incorporated.......................................
PaineWebber Incorporated..........................................
Morgan Keegan & Company, Inc. ....................................
----
Total...........................................................
====
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase the total number of shares of Common Stock offered hereby if any of
such shares are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the initial public offering price set forth on the
cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may re-allow, a concession not in excess of $ per share to
certain other dealers. After commencement of the initial public offering, the
offering price and other selling terms may be changed by the Representatives.

The Company and certain of the Selling Stockholders have granted the
Underwriters options, exercisable not later than 30 days after the date of
this Prospectus, to purchase up to an aggregate 480,000 additional shares of
Common Stock at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus. To
the extent that the Underwriters exercise such options, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased
by it shown in the above table bears to 3,200,000, and the Company and the
Selling Stockholders will be obligated, pursuant to the options, to sell such
shares to the Underwriters. The Underwriters may exercise such options only to
cover over-allotments made in connection with the sale of the 3,200,000 shares
of Common Stock offered hereby. If purchased, the Underwriters will offer such
additional shares on the same terms as those on which the 3,200,000 shares are
being offered.

50
<PAGE>

To facilitate this offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Common
Stock. Specifically, the Underwriters may over-allot shares of the Common
Stock in connection with this offering, thereby creating a short position in
the Underwriters' syndicate account. Additionally, to cover such over-
allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the Underwriters, also may reclaim selling
concessions allowed to an Underwriter or dealer, if the syndicate repurchases
shares distributed by that Underwriter or dealer.

The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholders regarding
certain liabilities, including liabilities under the Securities Act.

The Company, the Selling Stockholders, and the executive officers, directors
and other stockholders of the Company have agreed not to offer, sell, contract
to sell, grant any option or other right for the sale of, or otherwise dispose
of any shares of Common Stock or any securities, indebtedness or other rights
exercisable for or convertible or exchangeable into Common Stock owned or
acquired in the future in any manner for a period of 180 days following the
date of this Prospectus without the prior written consent of BT Alex. Brown
Incorporated, except for transfers by such stockholders pursuant to bona fide
gifts and except that the Company may, subject to certain conditions, issue
Common Stock in connection with acquisitions, grant options under the 1998
Option Plan and issue Common Stock upon exercise of options granted under the
1997 Option Plan and the 1998 Option Plan.

The Representatives have advised the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any account over which
they exercise discretionary authority.

Prior to this offering, there has been no public market for the Common
Stock. Consequently the initial public offering price for the Common Stock
will be determined by negotiation between the Company and the Representatives.
Among the factors to be considered in such negotiations will be prevailing
market conditions, the results of operations of the Company in recent periods,
the market capitalization and stages of development of other companies which
the Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the state of the Company's
development and other factors deemed relevant.

51
<PAGE>

LEGAL MATTERS

The validity of the issuance of the shares of the Common Stock offered
hereby will be passed upon for the Company by O'Sullivan Graev & Karabell,
LLP, New York, New York, and for the Underwriters by Morgan, Lewis & Bockius
LLP, Los Angeles, California.

EXPERTS

The financial statements and schedules included in this Prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included in this Prospectus and in the
Registration Statement in reliance upon the authority of said firms as experts
in giving said reports.

The combined financial statements of Interstate Consolidation, Inc. and
Interstate Consolidation Service, Inc. and subsidiary as of December 16, 1997
and December 31, 1996 and for the two year period ending December 31, 1996 and
the period from January 1, 1997 to December 16, 1997 have been included herein
and in the registration statement in reliance upon the report of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP refers to a change in accounting
method for refunds from railroad companies.

ADDITIONAL INFORMATION

A Registration Statement on Form S-1 under the Securities Act, including
amendments thereto, relating to the Common Stock offered hereby has been filed
by the Company with the Commission. This Prospectus does not contain all of
the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is made to such Registration Statement
and exhibits and schedules filed as a part thereof. A copy of the Registration
Statement may be inspected by anyone without charge at the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Northwest Atrium Center, 500 West Madison Street, Suite 140, Chicago, Illinois
60661. Copies of all or any portion of the Registration Statement may be
obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. The
Commission maintains a WorldWide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Such reports, proxy and information
statements and other information may be found on the Commission's site
address, http://www.sec.gov. Copies of such material also can be obtained from
the Company upon request.

Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to the exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.

As a result of this offering, the Company will become subject to the
information and periodic reporting requirements of the Securities Exchange
Act, as amended, and, in accordance therewith, will file periodic reports,
proxy statements and other information with the Commission. Such periodic
reports, proxy statements and other information will be available for
inspection and copying at the public reference facilities, regional offices
and Web site referred to above.

52
<PAGE>

GLOSSARY OF TERMS

TERMS MAY HAVE SEVERAL DIFFERENT MEANINGS IN THE FIELD OF TRANSPORTATION.
FOLLOWING ARE DEFINITIONS OF MOST COMMON USAGE.

Cartage.................... Trucking operations within a local market (e.g.
from one location to another in a metropolitan
area).

Consolidation/
Deconsolidation............ Combining several shipments into one load to
provide more efficient and economical
transportation is the act of consolidation;
deconsolidation is the reciprocal.

Core Service Provider...... The entity selected by a customer to provide an
exclusive or semi-exclusive service within a
particular sector.

Drayage.................... The origination or completion of an intermodal
freight movement via truck.

Freight Brokerage.......... The act of a third party intermediating between
the shipper and the ultimate service provider.

Intermodal Marketing
Company (IMC)............. An entity which provides door-to-door shipping or
transportation services via multiple modes of
transportation, primarily including rail and
trucking.

Less-Than-Truckload (LTL).. A shipment that is less than a full truckload and
is therefore usually shipped with similar loads.

Line Haul.................. The intercity movement of freight for a customer.

Special Commodity
Quotations (SCQs)......... A reduced rate offered to IMCs based on specific
commodities or volumes.

Supply Chain Management.... The process of optimizing the movement and
production of products from raw material to final
sale.

Truckload (TL)............. A shipment which because of either weight or size
is a full truckload.

53
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Basis of Presentation................................................... F-2
Unaudited Pro forma Consolidated Balance Sheet as of March 31, 1998 .... F-3
Unaudited Pro forma Consolidated Statement of Operations for the three
months ended March 31, 1998............................................ F-5
Unaudited Pro forma Consolidated Statement of Operations for the year
ended December 31, 1997................................................ F-7
PACER INTERNATIONAL, INC.
HISTORICAL AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................ F-9
Consolidated Balance Sheets as of December 31, 1997, March 31, 1997 and
December 31, 1996...................................................... F-10
Consolidated Statements of Operations for the nine months ended December
31, 1997, for the three months ended March 31, 1997, and for the years
ended December 31, 1996 and 1995....................................... F-11
Consolidated Statements of Changes in Stockholders' Equity for the nine
months ended December 31, 1997, for the three months ended March 31,
1997, and for the years ended December 31, 1996 and 1995............... F-12
Consolidated Statements of Cash Flows for the nine months ended December
31, 1997, for the three months ended March 31, 1997, and for the years
ended December 31, 1996 and 1995....................................... F-13
Notes to Consolidated Financial Statements.............................. F-14
UNAUDITED INTERIM FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1998 and December 31, 1997.. F-29
Consolidated Statements of Operations for the three months ended March
31, 1998 and 1997...................................................... F-30
Consolidated Statement of Changes in Stockholders' Equity for the three
months ended March 31, 1998............................................ F-31
Consolidated Statements of Cash Flows for the three months ended March
31, 1998 and 1997...................................................... F-32
Notes to Consolidated Financial Statements.............................. F-33
INTERSTATE
HISTORICAL AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................ F-39
Combined Balance Sheets as of December 16, 1997 and December 31, 1996... F-40
Combined Statements of Earnings and Retained Earnings for the period
from January 1, 1997 through December 16, 1997 and for the years ended
December 31, 1996 and 1995............................................. F-41
Combined Statements of Cash Flows for the period from January 1, 1997
through December 16, 1997, and for the years ended December 31, 1996
and 1995............................................................... F-42
Notes to Combined Financial Statements.................................. F-43
CROSS CON
HISTORICAL AUDITED FINANCIAL STATEMENTS
Report of Independent Public Accountants................................ F-49
Combined Balance Sheets as of December 31, 1997 and 1996................ F-50
Combined Statements of Operations for the years ended December 31, 1997,
1996 and 1995.......................................................... F-51
Combined Statements of Stockholders' Equity for the years ending
December 31, 1997, 1996, and 1995...................................... F-52
Combined Statements of Cash Flows for the years ending December 31,
1997, 1996, and 1995................................................... F-53
Notes to Consolidated Financial Statements.............................. F-54
UNAUDITED INTERIM FINANCIAL STATEMENTS
Combined Balance Sheets as of March 31, 1998 and December 31, 1997...... F-58
Combined Statements of Operations for the three months ended March 31,
1998 and 1997.......................................................... F-59
Combined Statement of in Stockholders' Equity for the three months ended
March 31, 1998......................................................... F-60
Combined Statements of Cash Flows for the three months ended March 31,
1998 and 1997.......................................................... F-61
Notes to Consolidated Financial Statements.............................. F-62
</TABLE>

F-1
<PAGE>

UNAUDITED PRO FORMA FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The pro forma consolidated balance sheet as of March 31, 1998 gives effect
to the Stutz Acquisition and the Cross Con Acquisition as if such transactions
occurred at such date. The pro forma consolidated statement of operations for
the nine months ended December 31, 1997 ("Fiscal 1997") and the three months
ended March 31, 1998 give effect to the Acquisitions, as if they had been
completed on April 1, 1997. The information presented under "Fiscal 1997"
presents the actual results of the Company, including the results of
Interstate subsequent to the Interstate Acquisition on December 16, 1997. The
pro forma financial information gives effect to pro forma adjustments that are
based upon available information and certain assumptions that the Company
believes are reasonable. The Acquisitions have been accounted for under the
purchase method of accounting. The allocation of the purchase price to the
underlying net assets acquired is based upon preliminary estimates of the fair
value of the net assets, as prescribed by the purchase method of accounting,
as more fully described in the Company's financial statements appearing
elsewhere in this Prospectus.

The Company paid $20.0 million for Interstate and issued 1,353,750 shares of
Common Stock which were valued at $4.5 million by an independent appraisal.
The Company paid $400,000 for Stutz and issued 217,142 shares of Common Stock
which were valued at $1.4 million. Up to 126,664 of such shares of Common
Stock are subject to forfeiture in the event that Stutz fails to meet certain
operating performance levels ($0.5 million in revenue per quarter) over the
two-year period subsequent to the Stutz Acquisition. Under the terms of the
Cross Con purchase agreement, the Company paid $10.5 million for Cross Con and
issued 541,500 shares valued at $4.8 million. In addition, the Cross Con stock
purchase agreement provides that up to $1.5 million in additional proceeds may
be paid to Richard Hyland if Cross Con meets certain operating performance
levels (earnings before interest and taxes in excess of $3.0 million) during
the period from January 1, 1998 through December 31, 1998. Such payment may be
made in cash or shares of Common Stock at fair market value, at the election
of Richard Hyland. The Company borrowed $20.0 million to finance the
Interstate Acquisition, $0.4 million to finance the Stutz Acquisition and
$10.1 million to finance the Cross Con Acquisition. The purchase prices in
excess of the fair value of net assets acquired for Interstate, Stutz and
Cross Con of $21.0 million, $1.5 million and $13.1 million, respectively, have
been allocated to goodwill for purposes of the pro forma presentation.

The pro forma financial information should be read in conjunction with the
historical financial statements and the other financial information pertaining
to the Company, including "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this Prospectus.

The pro forma financial information does not purport to be indicative of the
results that would have been obtained had such transactions been completed as
of the assumed dates and for the periods presented or that may be obtained in
the future.

F-2
<PAGE>

PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998

<TABLE>
<CAPTION>
COMPANY
HISTORICAL
MARCH 31, CROSS CON STUTZ PRO FORMA
1998 HISTORICAL HISTORICAL ADJUSTMENTS(2) PRO FORMA
ASSETS ---------- ---------- ---------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.. $ 87 $ 135 $ 20 $ -- $ 242
Accounts receivable, net... 19,877 5,742 406 -- 26,025
Prepaid expenses and oth-
er........................ 647 41 -- -- 688
------- ------ ---- ------- -------
Total current assets... 20,611 5,918 426 -- 26,955
------- ------ ---- ------- -------
Property and equipment, net.. 2,008 163 313 -- 2,484
Other assets:
Intangible assets, net..... 32,489 -- -- 14,529 (6) 47,918
Deferred income taxes...... 38 -- -- -- 38
Other assets............... 988 -- 6 -- 994
------- ------ ---- ------- -------
Total assets........... $56,134 $6,081 $745 $14,529 $78,389
======= ====== ==== ======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
<S> <C> <C> <C> <C> <C>
Current liabilities:
Current maturities of debt
and capital leases........ $ 2,459 $ 19 $ 3 $ -- $ 2,481
Accounts payable........... 10,868 3,764 191 -- 14,823
Accrued expenses........... 8,946 436 -- -- 9,382
Income taxes payable....... 437 -- 4 -- 441
Deferred income taxes...... 143 -- -- -- 143
------- ------ ---- ------- -------
Total current liabili-
ties.................. 22,853 4,219 198 -- 27,270
Long-term liabilities
Employee benefits.......... 678 -- -- -- 678
Long-term debt and capital
leases.................... 22,079 -- 171 10,550 (3) 33,700
------- ------ ---- ------- -------
Total liabilities...... 45,610 4,219 369 10,550 61,648
------- ------ ---- ------- -------
Stockholders' equity
Preferred stock............ 4 -- -- 4
Common stock............... 5 -- 8 (4) 13
Warrants................... 53 -- -- 53
Additional paid-in capi-
tal....................... 7,981 1 6,208 14,190
Retained earnings.......... 2,481 1,861 376 (2,237)(5) 2,481
------- ------ ---- ------- -------
Total stockholders' eq-
uity.................. 10,524 1,862 376 3,979 16,741
------- ------ ---- ------- -------
Total liabilities and
stockholders' equity.. $56,134 $6,081 $745 $14,529 $78,389
======= ====== ==== ======= =======
</TABLE>

F-3
<PAGE>

PACER INTERNATIONAL, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

(1) Includes the historical results of Pacer, including the results of
Interstate.

(2) Adjustments are based on events that are directly attributable to the
transaction and are computed assuming the transaction was consummated at
the end of the most recent period presented using the purchase method of
accounting.

(3) Reflects net borrowings of $10.6 million under the Company's Credit
Agreement to affect the purchases.

(4) Reflects the equity issued to the former owners of Stutz and Cross Con in
connection with the purchases.

(5) Reflects the historical retained earnings of Stutz and Cross Con.

(6) Reflects the difference between the cost of the companies acquired and
the preliminary costs assigned to the assets acquired less liabilities
assumed as required under the purchase method of accounting.

F-4
<PAGE>

PACER INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1998

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
PACER --------------------------------------------
INTERNATIONAL, INC. CROSS CON STUTZ PRO FORMA
THREE MONTHS THREE MONTHS THREE MONTHS THREE MONTHS
ENDED ENDED ENDED OTHER ENDED
MARCH 31, 1998 (1) MARCH 31, 1998 MARCH 31, 1998 ADJUSTMENTS(2) MARCH 31, 1998
------------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................ $50,362 $13,439 $1,245 $(464)(3) $64,582
Cost of transportation
and services........... 42,003 11,810 845 (464)(3) 54,194
------- ------- ------ ----- -------
Net revenues......... 8,359 1,629 400 -- 10,388
Operating expenses:
Selling, general, and
administrative........ 5,634 967 112 (11)(4) 6,702
Depreciation and
amortization.......... 341 5 46 106 (5) 498
------- ------- ------ ----- -------
Income from
operations.......... 2,384 657 242 (95) 3,188
------- ------- ------ ----- -------
Interest expense
(income).............. 554 (30) 3 233 (6) 760
------- ------- ------ ----- -------
Income before tax
provision.............. 1,830 687 239 (328) 2,428
Income tax provision... 765 10 -- 240 (7) 1,015
------- ------- ------ ----- -------
Net income.............. 1,065 677 239 (568) 1,413
======= ======= ====== ===== =======
</TABLE>
<TABLE>
<CAPTION>
Income per share(8):
<S> <C>
Basic:
Net income.............................................................. $ 0.26
==========
Pro forma weighted average shares outstanding........................... 5,437,392
==========
Diluted:
Net Income.............................................................. $ 0.22
==========
Pro forma weighted average shares outstanding........................... 6,499,216
==========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations

F-5
<PAGE>

PACER INTERNATIONAL, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(1) Includes the historical results of Pacer, including the results of
Interstate.

(2) Adjustments are based on historical results of operations of the
businesses, the allocation of purchase price to the net assets acquired,
interest on borrowings to effect the Acquisitions and other contractual
arrangements. Depreciation and amortization have been reflected in
accordance with the Company's accounting policy for the related item.

(3) Reflects the elimination of intercompany revenues and direct costs between
Stutz and Pacer.

(4) Reflects compensation differentials to former owners of Interstate, Stutz
and Cross Con that were contractually agreed to and directly attributable
to the purchase transactions.

(5) Reflects amortization of goodwill. Goodwill is being amortized over 40
years for Pacer, Interstate and Cross Con and 15 years for Stutz based on
the expected periods to be benefited.

(6) Reflects additional interest on borrowings used to finance the
Acquisitions based on the current interest rate of 8.7%.

(7) Reflects an increase in the income tax provision associated with the
increase in income before taxes and provisions for Stutz and Cross Con
which were previously taxed as Subchapter S corporations. The income tax
provision has been calculated assuming a pro forma effective tax rate of
41.8%.

(8) Pro forma basic weighted average shares outstanding include shares issued
at inception of the Company, as well as the total shares issued to effect
the acquisitions as if the shares had been outstanding for the entire
period. Pro forma diluted weighted average shares outstanding include the
pro forma basic amount plus the dilutive effect of options and warrants.
Basic and diluted weighted average shares outstanding have been computed
for all periods retroactively reflecting the effect of a 9.5 to 1 stock
split effected on the date of the initial public offering.

F-6
<PAGE>

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
--------------------------------------------
INTERSTATE
ELEVEN AND
ONE-HALF
MONTHS ENDED
PACER DECEMBER 16,
INTERNATIONAL, INC. (1) 1997 STUTZ CROSS CON ADJUSTMENTS(2) PRO FORMA
----------------------- ------------ ------ --------- -------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues................ $100,640 $83,877 $3,571 $51,643 $ (892)(3) $ 238,859
Cost of transportation
and services........... 85,211 69,631 2,376 45,967 (892)(3) 202,295
-------- ------- ------ ------- ------- ---------
Net revenues......... 15,429 14,246 1,195 5,676 -- 36,546
Operating expenses:
Selling, general, and
administrative........ 11,099 9,667 556 3,925 (238)(4) 25,009
Depreciation and
amortization.......... 440 238 99 48 994 (5) 1,819
Transaction costs...... 510 -- -- -- (510)(6) --
-------- ------- ------ ------- ------- ---------
Income from
operations.......... 3,380 4,341 540 1,703 (246) 9,718
Interest expense
(income).............. 659 (114) 8 (85) 2,587 (7) 3,055
-------- ------- ------ ------- ------- ---------
Income before tax
provision.............. 2,721 4,455 532 1,788 (2,833) 6,663
Income tax provision... 1,057 921 -- 29 778 (8) 2,785
-------- ------- ------ ------- ------- ---------
Net income.............. $ 1,664 $ 3,534 $ 532 $ 1,759 $(3,611) $ 3,878
======== ======= ====== ======= ======= =========
<CAPTION>
Income per share(9):
<S> <C> <C> <C> <C> <C> <C>
Basic:
Net income............ $ 0.71
=========
Pro forma weighted
averages shares
outstanding.......... 5,437,392
=========
Diluted:
Net income............ $ 0.60
=========
Pro forma weighted
averages shares
outstanding.......... 6,499,216
=========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations

F-7
<PAGE>

PACER INTERNATIONAL, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

(1) Includes the historical results of Pacer and the Predecessor, including
the results of Interstate subsequent to its acquisition. The historical
results of the Predecessor for the period from January 1, 1997 through
March 31, 1997 have been combined with the results of the Company for the
period from April 1, 1997 to December 31, 1997 in order to present the
historical information for the full year. As a result of the acquisition
of the Predecessor by Pacer on March 31, 1997, the historical data for the
Predecessor and the Company are not comparable in certain respects.

(3) Reflects the elimination of intercompany revenues and direct costs between
Stutz and Pacer.

(4) Reflects compensation differentials to former owners of Interstate, Stutz
and Cross Con that were contractually agreed to and directly attributable
to the purchase transactions.

(5) Reflects amortization of goodwill. Goodwill is being amortized over 40
years for Pacer, Interstate and Cross Con and 15 years for Stutz based on
the expected periods to be benefited.

(6) Reflects the elimination of non-recurring transaction costs incurred in
connection with the sale of the Predecessor to the Company. Such costs
would not have been incurred if the Predecessor was not sold.

(7) Reflects additional interest on borrowings used to finance the
Acquisitions based on the current interest rate of 8.7%.

(8) Reflects an increase in the income tax provision associated with the
increase in income before taxes and provisions for Stutz and Cross Con
which were previously taxed as Subchapter S corporations. The income tax
provision has been calculated assuming a pro forma effective tax rate of
41.8%.

(9) Pro forma basic weighted average shares outstanding include shares issued
at inception of the Company, as well as the total shares issued to effect
the acquisitions as if the shares had been outstanding for the entire
period. Pro forma diluted weighted average shares outstanding include the
pro forma basic amount plus the dilutive effect of options and warrants.
Basic diluted weighted average shares outstanding have been computed
reflecting the effect of a 9.5 to 1 stock split effected on the date of
the initial public offering.

F-8
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Pacer International, Inc.:

We have audited the accompanying consolidated balance sheet of Pacer
International, Inc. (a Delaware corporation) and Subsidiaries (the Company) as
of December 31, 1997, and the related consolidated statements of operations,
stockholders' equity and cash flows for the period from inception, March 31,
1997, through December 31, 1997. We have also audited the accompanying balance
sheets of the Predecessor (business identified in Note 1) as of March 31,
1997, and December 31, 1996, and the related statements of operations,
stockholders' equity and cash flows for the period from January 1, 1997,
through March 31, 1997, and for the years ended December 31, 1996 and 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pacer International, Inc.
and Subsidiaries as of December 31, 1997, and the results of their operations
and their cash flows for the period from inception, March 31, 1997, through
December 31, 1997, and the financial position of the Predecessor as of March
31, 1997, and December 31, 1996, and the result of its operations and its cash
flows for the period from January 1, 1997, through March 31, 1997, and for the
years ended December 31, 1996 and 1995, in conformity with generally accepted
accounting principles.

/s/ Arthur Andersen LLP
San Francisco, California,
May 15, 1998

F-9
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

The consolidated financial statements of the Company and the Predecessor are
not comparable in certain respects.

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------ ----------------------
DECEMBER 31, MARCH 31, DECEMBER 31,
1997 1997 1996
------------ --------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 86 $ 1,623 $ 2,636
Accounts receivable, net of allowances of
$763, $800 and $764, respectively....... 20,729 7,852 11,367
Prepaid expenses and other............... 765 647 312
Deferred income taxes.................... -- 947 639
------- ------- -------
Total current assets................... 21,580 11,069 14,954
------- ------- -------
Property and equipment:
Property and equipment, at cost.......... 1,880 716 683
Accumulated depreciation................. (146) (464) (465)
------- ------- -------
Property and equipment, net............ 1,734 252 218
Other assets:
Advances to affiliates................... -- -- 21,865
Intangible assets, net................... 32,717 -- --
Deferred income taxes.................... 43 -- 526
Other assets............................. 993 29 19
------- ------- -------
Total assets........................... $57,067 $11,350 $37,582
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt and
capital leases.......................... $ 1,810 $ -- $ --
Accounts payable......................... 10,068 4,063 5,228
Accrued expenses......................... 9,447 4,323 3,977
Income taxes payable..................... 389 -- 949
Deferred income taxes.................... 177 -- --
------- ------- -------
Total current liabilities.............. 21,891 8,386 10,154
Long-term liabilities:
Employee benefits........................ 672 -- 1,361
Long-term debt and capital leases........ 25,045 -- --
------- ------- -------
Total liabilities...................... 47,608 8,386 11,515
------- ------- -------
Stockholders' equity:
Preferred stock at December 31, 1997:
$0.01 par value, 600,000 shares
authorized, 350,000 shares issued and
outstanding; at March 31, 1997, and
December 31, 1996: no shares authorized
or outstanding.......................... 4 -- --
Common stock at December 31, 1997: $0.01
par value, 5,700,000 shares authorized,
4,678,750 shares issued and outstanding;
at March 31, 1997, and December 31,
1996: $100.00 par value, 47,500 shares
authorized, 48 shares issued and
outstanding............................. 5 1 1
Warrants at December 31, 1997: 18,421
outstanding............................. 53 -- --
Additional paid-in capital............... 7,981 2,998 2,998
Retained earnings (accumulated deficit).. 1,416 (35) 23,068
------- ------- -------
Total stockholders' equity............. 9,459 2,964 26,067
------- ------- -------
Total liabilities and stockholders'
equity................................ $57,067 $11,350 $37,582
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-10
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

The consolidated financial statements of the Company and the Predecessor are
not comparable in certain respects.

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------- ------------------------------------------
MARCH 31, JANUARY 1, 1997,
1997, THROUGH THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996 1995
------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues................ $ 81,102 $19,538 $86,766 $78,278
Cost of transportation
and services........... 68,713 16,498 73,116 65,900
---------- ------- ------- -------
Net revenues........ 12,389 3,040 13,650 12,378
Operating expenses:
Selling, general and
administrative
expenses............. 8,799 2,300 10,037 8,697
Depreciation and
amortization......... 403 37 93 88
Transaction costs..... -- 510 -- --
---------- ------- ------- -------
Income from
operations......... 3,187 193 3,520 3,593
Interest expense
(income)............... 659 -- (1,376) (1,383)
---------- ------- ------- -------
Income before income
tax provision and
extraordinary
loss............... 2,528 193 4,896 4,976
Income tax provision.... 983 74 1,888 1,940
---------- ------- ------- -------
Income before
extraordinary
loss............... 1,545 119 3,008 3,036
Extraordinary loss, net
of tax benefit of $86.. 129 -- -- --
---------- ------- ------- -------
Net income.......... $ 1,416 $ 119 $ 3,008 $ 3,036
========== ======= ======= =======
Income per share:
Basic:
Income before
extraordinary loss... $ 0.45
Extraordinary loss.... (0.04)
----------
Net income.......... $ 0.41
==========
Weighted average
shares outstanding... 3,403,480
==========
Diluted:
Income before
extraordinary loss... $ 0.37
Extraordinary loss.... (0.03)
----------
Net income.......... $ 0.34
==========
Weighted average shares
outstanding............ 4,141,041
==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-11
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

The consolidated financial statements of the Company and the Predecessor are
not comparable in certain respects.

<TABLE>
<CAPTION>
THE PREDECESSOR
---------------------------------------------------------------
RETAINED
ADDITIONAL EARNINGS
PREFERRED COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK STOCK WARRANTS CAPITAL DEFICIT) EQUITY
--------- ------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1994....... $-- $ 1 $-- $ 2,998 $ 17,024 $ 20,023
Net income............ -- -- -- -- 3,036 3,036
---- ---- ---- ------- -------- --------
December 31, 1995....... -- 1 -- 2,998 20,060 23,059
Net income............ -- -- -- -- 3,008 3,008
---- ---- ---- ------- -------- --------
December 31, 1996....... -- 1 -- 2,998 23,068 26,067
Dividend.............. -- -- -- -- (23,222) (23,222)
Net income............ -- -- -- -- 119 119
---- ---- ---- ------- -------- --------
March 31, 1997.......... $-- $ 1 $-- $ 2,998 $ (35) $ 2,964
==== ==== ==== ======= ======== ========
<CAPTION>
THE COMPANY
---------------------------------------------------------------
RETAINED
ADDITIONAL EARNINGS
PREFERRED COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK STOCK WARRANTS CAPITAL DEFICIT) EQUITY
--------- ------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Elimination of
Predecessor............ $-- $ (1) $-- $(2,998) $ 35 $ (2,964)
Formation of the
Company:
Issuance of common
stock................ -- 4 -- 346 -- 350
Issuance of preferred
stock................ 4 -- -- 3,146 -- 3,150
Issuance of warrants.. -- -- 53 -- -- 53
Issuance of common
stock to acquire
Interstate........... -- 1 -- 4,489 -- 4,490
Net income............ -- -- -- -- 1,416 1,416
---- ---- ---- ------- -------- --------
December 31, 1997....... $ 4 $ 5 $ 53 $ 7,981 $ 1,416 $ 9,459
==== ==== ==== ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-12
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The consolidated financial statements of the Company and the Predecessor are
not comparable in certain respects.
<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
------------- ----------------------------------------
MARCH 31, JANUARY 1,
1997, THROUGH 1997, THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996 1995
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income............ $ 1,416 $ 119 $ 3,008 $ 3,036
Adjustments to
reconcile net income
to net cash provided
by (used in)
operating activities:
Depreciation and
amortization......... 403 37 93 88
Deferred income
taxes................ 152 218 347 (116)
Changes in operating
assets and
liabilities:
Decrease (increase) in
accounts receivable,
net of allowances.... (3,870) 3,515 (1,028) (583)
Decrease (increase) in
prepaid expenses and
other................ 232 (335) (282) 11
Decrease (increase) in
other assets......... (466) (10) (17) 91
Increase (decrease) in
accounts payable..... 43 (1,165) 1,653 (2,775)
Increase (decrease) in
accrued expenses..... (745) 346 (535) 2,118
Increase (decrease) in
income taxes
payable.............. 157 (949) (84) (822)
Increase (decrease) in
employee benefits.... -- (1,361) 265 168
-------- -------- ------- -------
Net cash provided by
(used in) operating
activities.......... (2,678) 415 3,420 1,216
-------- -------- ------- -------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of
businesses, net of
cash of acquired
companies............ (9,616) -- -- --
Purchases of property
and equipment........ (420) (71) (167) (25)
-------- -------- ------- -------
Net cash used in
investing
activities.......... (10,036) (71) (167) (25)
-------- -------- ------- -------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Cash overdrafts....... 1,632 -- -- --
Proceeds on long-term
debt................. 20,654 -- -- --
Principal payments on
long-term debt....... (14,259) -- -- --
Proceeds from issuance
of common stock...... 315 -- -- --
Proceeds from issuance
of preferred stock... 2,835 -- -- --
Decrease (increase) in
advances to
affiliates........... -- 21,865 (630) (1,190)
Dividend paid......... -- (23,222)
-------- -------- ------- -------
Net cash provided by
(used in) financing
activities.......... 11,177 (1,357) (630) (1,190)
-------- -------- ------- -------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS........... (1,537) (1,013) 2,623 1
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF PERIOD... 1,623 2,636 13 12
-------- -------- ------- -------
CASH AND CASH
EQUIVALENTS AT END OF
PERIOD................ $ 86 $ 1,623 $ 2,636 $ 13
======== ======== ======= =======
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
year for:
Interest.............. $ 568 $ -- $ -- $ --
======== ======== ======= =======
Income taxes.......... $ 588 $ 1,125 $ 1,626 $ 2,877
======== ======== ======= =======
SUPPLEMENTAL DISCLOSURE
OF NONCASH INVESTING
AND FINANCING
ACTIVITIES:
Promissory notes
issued for
acquisitions......... $ 19,983 $ -- $ -- $ --
======== ======== ======= =======
Stock issued for
acquisitions......... $ 4,490 $ -- $ -- $ --
======== ======== ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-13
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS:

THE COMPANY

PMT Holdings, Inc. (PMT Holdings), a Delaware corporation, was formed on
March 31, 1997 (inception), to acquire all of the capital stock of Pacific
Motor Transport Company (PMT) in a management buyout that was funded in part
by Eos Partners, L.P. (Eos). On March 31, 1997, PMT Holdings acquired all
issued and outstanding shares of PMT from Union Pacific Railroad Company and
its subsidiaries (UP) for approximately $13 million in cash and warrants to
purchase 18,421 units of PMT Holdings stock. Each unit represents nine and
one-half shares of common stock and one share of preferred stock and may be
purchased by UP for $10 per unit. The purchase of PMT was accounted for using
the purchase method of accounting. Prior to acquisition, PMT was a provider of
truckload freight services and intermodal marketing services. On December 16,
1997, PMT Holdings acquired all of the capital stock of Interstate
Consolidation, Inc. (ICI) and Interstate Consolidation Service, Inc. (ICSI)
and its wholly owned subsidiary, Intermodal Container Service, Inc. (IMCS)
(ICI, ICSI and IMCS, collectively, Interstate) by issuing $20 million in
promissory notes and 142,500 shares of PMT Holdings stock. The acquisition of
Interstate was accounted for using the purchase method of accounting.
Interstate is a multipurpose provider of transportation services, including
intermodal marketing, cartage, and freight consolidation and handling. In May
1998, PMT Holdings was renamed Pacer International, Inc. (Pacer
International). The name change has been given retroactive application in
these consolidated financial statements.

The consolidated balance sheet as of December 31, 1997 includes the accounts
of Pacer International, a Delaware corporation, and its wholly owned
subsidiaries (the Company). The wholly owned subsidiaries are Pacer Transport,
Pacer Logistics and Pacer Rail/Mechanical/Services LLC. The consolidated
statements of operations, changes in stockholders' equity and cash flows
include the accounts of Pacer International from March 31, 1997, and the
results and cash flows of PMT (now operated as part of the Pacer Transport and
Pacer Logistics businesses) since its purchase on March 31, 1997, and
Interstate (operated as a part of the Pacer Logistics business) since its
purchase on December 16, 1997.

THE PREDECESSOR

The balance sheets as of March 31, 1997 and December 31, 1996, and the
statements of operations, stockholders' equity and cash flows for the period
from January 1, 1997 through March 31, 1997, and for the years ended December
31, 1996 and 1995, include the accounts of PMT (the Predecessor), with its two
operating divisions, Pacer and ABL-Trans.

NATURE OF OPERATIONS

The Company's business consists primarily of (i) intermodal marketing, which
involves the provision of brokerage and logistics services by coordinating the
transportation of goods by truck and rail, (ii) specialized trucking services,
including flatbed heavy-haul trucking, drayage and cartage, and (iii) other
transportation services, such as freight consolidation and handling. As a
nonasset-based service provider, the Company is able to focus its efforts on
providing value-added logistics solutions for its customers through its
network of sales personnel and third-party brokerage partnerships. The Company
primarily provides services to numerous global, national and regional
manufacturers and retailers.

Reliance on Agents and Independent Contractors

The Company relies upon the services of independent commission agents to
market its transportation services, to act as intermediaries with customers,
and to recruit independent contractors. Contracts with

F-14
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

agents and independent contractors are, in most cases, terminable upon short
notice by either party. Although the Company believes its relationships with
agents and independent contractors are good, there can be no assurance that
the Company will continue to be successful in retaining its agents and
independent contracts or that agents and independent contractors who terminate
their contracts can be replaced by equally qualified persons. Furthermore,
since agents have the primary relationship with customers and independent
contractors, a loss of an agent can result in the loss of customers or
independent contractors.

Dependence on Railroads and Equipment and Services Availability

The Company is dependent upon the major railroads in the United States for
substantially all of the intermodal services provided by the Company. In many
markets, rail service is limited to a few railroads or even a single railroad.
Consequently, a reduction in or elimination of rail service to a particular
market is likely to adversely affect the Company's ability to provide
intermodal transportation services to some of the Company's customers.
Furthermore, significant rate increases, work stoppage or adverse weather
conditions can impact the railroads and therefore the Company's ability to
provide cost-effective services to its customers.

In addition, the Company is dependent in part on the availability of truck,
rail, ocean and air services provided by independent third parties. If the
Company were unable to secure sufficient equipment or other transportation
services to meet its customers' needs, its results of operations could be
materially adversely affected on a temporary or permanent basis.

Concentration of Business on Intermodal Marketing

A significant portion of the Company's revenues is derived from intermodal
marketing. As a result, a decrease in demand for intermodal transportation
services relative to other transportation services could have a material
adverse effect on the Company's results of operations.

Concentration of Credit Risk and Customer Concentration

Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade accounts receivable. The Company
sells primarily on net 30-day terms, performs credit evaluation procedures on
its customers and generally does not require collateral on its accounts
receivable. The Company maintains an allowance for potential credit losses and
insures certain of its receivables at Interstate through a third party
insurance provider. Sales to the Company's ten largest customers constituted
31 percent of revenues for the nine months ended December 31, 1997.
Receivables from the ten largest customers constituted 33 percent of total
receivables at December 31, 1997. No customer constituted more than 10 percent
of revenues or receivables at December 31, 1997. The sales and receivable
trends are representative of prior periods.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of the Company include the accounts of
Pacer International and its wholly owned subsidiaries. All material
intercompany amounts and transactions have been eliminated in consolidation.

F-15
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less.

ACCOUNTS RECEIVABLE

Trade accounts receivable are reflected net of allowances for doubtful
accounts. Additionally, the Company records receivables for contractually
negotiated rail volume incentives in the period earned. Rail volume incentives
receivable were $1,865,000 at December 31, 1997, $310,000 at March 31, 1997,
and $845,000 at December 31, 1996.

PROPERTY AND EQUIPMENT

Property, plant and equipment purchased in acquisitions are recorded at fair
value as prescribed by the purchase method of accounting. Subsequent purchases
of property, plant and equipment are recorded at cost. For assets financed
under capital leases, the present value of the future minimum lease payments
is recorded at the date of acquisition as property and equipment, with a
corresponding amount recorded as a capital lease obligation.

Depreciation is computed on a straight-line basis over the following
estimated useful lives:

<TABLE>
<CAPTION>
ESTIMATED USEFUL
ASSET CLASSIFICATION LIFE
-------------------- ----------------
<S> <C>
Office equipment........................................ 3 to 5 years
Office furniture........................................ 3 to 10 years
Transportation equipment................................ 3 to 15 years
Communications system................................... 15 years
Assets under capital lease.............................. Term of lease
</TABLE>

SOFTWARE

Purchases of software are capitalized and amortized over three to five years
using the straight-line method. Costs related to internal development of
software are expensed as incurred.

INTANGIBLE ASSETS

Amortization is computed on a straight-line basis over the shorter of
estimated useful lives or contract periods. The Company amortizes goodwill
over 40 years and loan fees over the term of the underlying debt.

Goodwill represents the excess of cost over the estimated fair value of the
net tangible and intangible assets of acquired businesses. Should events or
circumstances occur subsequent to any business

F-16
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

acquisition that bring into question the realizable value or impairment of any
component of goodwill, the Company will evaluate the remaining useful life and
balance of goodwill and make appropriate adjustments. The Company's principal
considerations in determining impairment include the strategic benefit to the
Company of the particular business related to the questioned component of
goodwill as measured by undiscounted current and expected future operating
income levels of that particular business and expected undiscounted future
cash flows. The Company expenses the costs of start-up activities as incurred.

FINANCIAL INSTRUMENTS

The carrying amounts for cash, receivables and accounts payable approximate
fair value due to the short-term nature of these instruments. Other fair-value
disclosures are in the respective notes.

In order to decrease its exposure to unfavorable interest rate movements,
the Company may from time to time purchase interest rate protection agreements
to cap the interest rates on its floating rate obligations. The purchase price
of the interest rate protection agreements is capitalized and amortized over
the life of the agreement. Amortization of the purchase price is charged to
interest expense.

ACCIDENT AND CARGO CLAIMS

The Company is self-insured for a significant portion of its accident and
cargo claims. Reserves are provided for uninsured cargo claims and for the
uninsured costs of personal injury and property damage as a result of vehicle
accidents involving the network of independent owner-operator drivers.
Reserves are based on the Company's best estimate of its expected loss. Actual
losses, if not covered by insurance, at amounts significantly greater than the
recorded amounts could have a material adverse impact on the Company's
financial position and results of operations.

REVENUE RECOGNITION

Revenues and related expenses are recognized when shipment is complete.

NET REVENUES

Net revenues represent transportation and service revenues net of associated
transportation and service costs.

TRANSACTION COSTS

Transaction costs of $510,000 in connection with the sale of PMT primarily
related to legal and financial advisory services.

INCOME TAXES

Income taxes are recognized utilizing the asset and liability method, under
which deferred income taxes are recognized for the consequences of temporary
differences by applying currently enacted statutory rates to differences
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities.

EARNINGS PER SHARE

Basic earnings per share were calculated by dividing net income by the
weighted average number of shares of common stock outstanding during the
period. Diluted earnings per share include the impact of common stock options
and warrants outstanding. Earnings per share for all periods presented and all
share data reflect the Company's proposed 9.5 for 1 stock split effective at
the time of the Company's initial public offering of common stock.

F-17
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

ACCOUNTING FOR STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." As permitted by SFAS No. 123, the Company adopted
the disclosure provisions of this statement.

NEW ACCOUNTING PRONOUNCEMENTS

In 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." In 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 130 establishes
standards to measure all changes in equity that result from transactions and
other economic events other than transactions with owners. Comprehensive
income is the total of net income and all other nonowner changes in equity.
SFAS No. 131 introduces a new model for segment reporting called the
"management approach." The management approach is based on the manner in which
management organizes segments within a company for making operating decisions
and assessing performance. The management approach replaces the notion of
industry and geographic segments. SFAS No. 133 modifies the method of
accounting for derivative instruments. The Company will adopt SFAS No. 130 and
SFAS No. 131 in 1998 and SFAS No. 133 in 2000. The Company believes that
adoption of SFAS No. 130 will not significantly affect the Company's financial
position, results of operations or financial statement presentation. The
adoption of SFAS No. 131 will require the Company to disclose additional
information about its business segments. The adoption of SFAS No. 133 will
require the Company to modify its method of accounting for its interest rate
hedging activities. Based on information currently available, the Company does
not expect the adoption of SFAS No. 133 to have significant impact on its
financial position or results of operations.

3. PROPERTY AND EQUIPMENT:

Property and equipment consisted of the following:

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
-------------- ----------------------
DECEMBER 31, MARCH 31, DECEMBER 31,
1997 1997 1996
-------------- --------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Office equipment....................... $ 560 $ 494 $ 507
Office furniture....................... 137 35 35
Transportation equipment............... 930 187 141
Communications equipment............... 253 -- --
------ ----- -----
1,880 716 683
Less: Accumulated depreciation (146) (464) (465)
------ ----- -----
Property and equipment............... $1,734 $ 252 $ 218
====== ===== =====
</TABLE>

Depreciation expense of the Company for the period from inception through
December 31, 1997, was $146,000, and of the Predecessor for the period from
January 1, 1997, through March 31, 1997, and for the years ended December 31,
1996 and 1995, was $37,000, $93,000 and $88,000, respectively.

F-18
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. ADVANCES TO AFFILIATES:

Advances to affiliates represented cash generated by the Predecessor and
advanced to UP. Advances earned interest at rates ranging from 5.2 percent to
6.0 percent based on monthly commercial paper rates, and interest income was
$1,376,000 and $1,383,000 for the years ended December 31, 1996 and 1995,
respectively. For the period from January 1, 1997, through March 31, 1997, UP
did not pay interest to the Predecessor. On March 31, 1997, the Predecessor
declared a dividend of $23,222,000, which was partially used by UP to repay
the Predecessor's advances.

5. INTANGIBLE ASSETS:

Intangible assets consisted of the following:

<TABLE>
<CAPTION>
THE COMPANY
--------------
DECEMBER 31,
1997
--------------
(IN THOUSANDS)
--------------
<S> <C>
Goodwill...................................................... $32,479
Financing costs............................................... 430
Organizational costs.......................................... 65
-------
32,974
Less: Accumulated amortization (257)
-------
Total intangible assets..................................... $32,717
=======
</TABLE>

Amortization expense for the period from inception through December 31,
1997, was $257,000.

6. ACQUISITIONS:

From inception through December 31, 1997, the Company effected two
acquisitions. The initial acquisition of PMT by PMT Holdings occurred on March
31, 1997, and the acquisition of Interstate occurred on December 16, 1997. The
purchase price, certain costs related to the acquisitions, and the allocation
of the purchase price to the underlying net assets acquired in the
acquisitions were as follows:

<TABLE>
<CAPTION>
PMT INTERSTATE
--------- ------------
MARCH 31, DECEMBER 16,
1997 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Purchase price........................................ $13,215 $ 24,472
Acquisition costs..................................... -- 770
------- --------
Total purchase price.............................. 13,215 25,242
------- --------
Less: Value assigned to assets and liabilities:
Current assets...................................... 9,803 13,011
Long-term assets.................................... 281 2,222
Current liabilities................................. (8,386) (10,024)
Long-term liabilities............................... -- (929)
------- --------
1,698 4,280
------- --------
Goodwill.......................................... $11,517 $ 20,962
======= ========
</TABLE>

F-19
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company accounted for these acquisitions under the purchase method of
accounting. The allocation of the purchase price to the underlying net assets
acquired is based upon preliminary estimates of the fair value of the net
assets, which may be revised at a later date. It is anticipated that any
purchase price allocation adjustments will be made within one year from the
date of acquisition. Management does not presently believe that the final
allocations of the purchase prices will have a material effect on the
Company's financial position or results of operations. Management continues to
monitor a class action lawsuit in which Interstate is a named defendant (Note
16). In connection with the acquisitions, the Company issued 1,353,750 shares
of common stock, which were valued at $3.32 per share, and issued warrants to
purchase 18,421 units. Warrants were valued at their estimated fair value
using the Black-Scholes model. Results of operations of the entities acquired
are included in the consolidated financial statements subsequent to their
purchase date. Pro forma operating results of the Company, assuming that the
March 31, 1997, and December 16, 1997, acquisitions occurred on January 1,
1996, are presented below (unaudited).

<TABLE>
<CAPTION>
APRIL 1, 1997, JANUARY 1, 1997, JANUARY 1, 1996,
THROUGH THROUGH THROUGH
DECEMBER 31, 1997 MARCH 31,1997 DECEMBER 31,1996
----------------- ---------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues................ $ 146,055 $ 38,488 $ 155,328
========= ========= =========
Income before
extraordinary loss..... $ 2,775 $ 517 $ 2,858
========= ========= =========
Earnings per share
before extraordinary
loss:
Basic................. $ 0.59 $ 0.11 $ 0.61
========= ========= =========
Diluted............... $ 0.51 $ 0.09 $ 0.52
========= ========= =========
Weighted average shares
outstanding:
Basic................. 4,678,750 4,678,750 4,678,750
========= ========= =========
Diluted............... 5,471,934 5,471,934 5,471,934
========= ========= =========
</TABLE>

Pro forma adjustments were made to reflect interest expense on cash
consideration, amortization of goodwill, compensation differentials and income
taxes as if the entities were combined and subject to the Company's effective
tax rate for the periods presented.

7. ACCRUED EXPENSES:

Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
-------------- ----------------------
DECEMBER 31, MARCH 31, DECEMBER 31,
1997 1997 1996
-------------- --------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Accident and cargo claims.............. $2,134 $1,951 $1,868
Bank overdrafts........................ 1,632 -- --
Accrued compensation................... 1,212 223 272
Advances from customers................ 1,033 730 691
Road and fuel taxes.................... 738 699 654
Other.................................. 2,698 720 492
------ ------ ------
Total accrued expenses............... $9,447 $4,323 $3,977
====== ====== ======
</TABLE>

F-20
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. DEBT AND CAPITAL LEASES:

Debt and capital leases of the Company as of December 31, 1997, consisted of
the following:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Promissory note to shareholders................................. $19,983
Term loan in the amount of $20,000 requiring 27 consecutive
quarterly installment payments, with all unpaid principal and
interest due on November 21, 2004; the loan bears interest, at
the Company's option, at the prime rate plus 0.75 percent (9.25
percent at December 31, 1997) or LIBOR plus 3.00 percent (8.72
percent at December 31, 1997); the loan is secured by
substantially all of the Company's assets...................... --
Revolving line of credit in an amount up to $12,000; advances
under the line accrue interest, at the Company's option, at the
prime rate (8.5 percent at December 31, 1997) or LIBOR plus
2.25 percent (7.97 percent at December 31, 1997); the line is
secured by substantially all of the Company's assets and
expires on October 31, 2002.................................... 6,395
Capital leases.................................................. 477
-------
Total debt and capital leases................................. 26,855
Less: Current maturities........................................ 1,810
-------
Long-term portion............................................... $25,045
=======
</TABLE>

The promissory note to shareholders represents the cash portion of the
purchase price of the Interstate acquisition owed to the former owners of
Interstate, who became shareholders of PMT Holdings on December 16, 1997. The
amount was paid to these shareholders on January 2, 1998, and was financed by
the term loan of $20 million.

The revolving line of credit and term loan agreements require that the
Company meet certain covenants that, among other things, require maintenance
of ratios related to leverage and cash flow and limit the level of capital
expenditures.

Maturities of debt and capital leases are as follows:

<TABLE>
<CAPTION>
DEBT LEASES TOTAL
------- -------------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
1998....................................... $ 1,630 $233 $ 1,863
1999....................................... 2,520 218 2,738
2000....................................... 2,720 98 2,818
2001....................................... 2,920 -- 2,920
2002....................................... 9,795 -- 9,795
Thereafter................................. 6,793 -- 6,793
Amount representing interest............... -- (72) (72)
------- ---- -------
$26,378 $477 $26,855
======= ==== =======
</TABLE>

The fair value of long-term debt, including the current portion,
approximates fair value because all amounts outstanding at December 31, 1997,
were issued in the current year and are representative of the terms and
interest rates that would be available to the Company at December 31, 1997. As
a hedge against exposure to interest rate risk, the Company entered into an
interest rate swap agreement which becomes effective July 8, 1998, to exchange
the variable interest rate obligations for fixed rate obligations on a portion
of the outstanding principal balance of the $20 million term loan described
above. The fixed rate under the swap is 5.9 percent. Net payments or receipts
under the agreement will be included in interest

F-21
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

expense. The Company is exposed to credit losses in the event of counterparty
nonperformance, but does not currently anticipate any such losses because the
counterparties are established, reputable financial institutions. The
agreement terminates in January, 2000.

9. INCOME TAXES:

The provision for income taxes from continuing operations consists of the
following:

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
-------------- ------------------------------------------
APRIL 1, 1997, JANUARY 1, 1997,
THROUGH THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996 1995
-------------- ---------------- ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal............... $706 $(144) $1,277 $1,690
State and local....... 125 -- 264 366
---- ----- ------ ------
831 (144) 1,541 2,056
---- ----- ------ ------
Deferred:
Federal............... 128 206 291 (97)
State and local....... 24 12 56 (19)
---- ----- ------ ------
152 218 347 (116)
---- ----- ------ ------
Total provision....... $983 $ 74 $1,888 $1,940
==== ===== ====== ======

The reconciliation of income tax from continuing operations computed at the
U.S. federal statutory tax rate to the Company's effective income tax rate is
as follows:

<CAPTION>
THE COMPANY THE PREDECESSOR
-------------- ------------------------------------------
APRIL 1, 1997, JANUARY 1, 1997,
THROUGH THROUGH YEAR ENDED YEAR ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996 1995
-------------- ---------------- ------------ ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C>
Federal statutory income
tax rate............... 34.0% 34.0% 34.0% 34.0%
State income tax rate,
net of federal
benefit................ 4.0 3.8 4.3 4.5
Other items............. 0.9 0.5 0.3 0.5
---- ----- ------ ------
Net effective tax rate.. 38.9% 38.3% 38.6% 39.0%
==== ===== ====== ======
</TABLE>

F-22
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Deferred tax assets and liabilities are composed of the following:

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
-------------- ----------------------
DECEMBER 31, MARCH 31, DECEMBER 31,
1997 1997 1996
-------------- --------- ------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C>
Current deferred tax assets
(liabilities):
Accounts receivable................. $(460) $190 $(85)
Accrued expenses.................... 283 757 724
----- ---- ----
Total current deferred tax assets
(liabilities).................... $(177) $947 $639
===== ==== ====
Noncurrent deferred tax assets
(liabilities):
Depreciation and amortization....... $(175) $-- $--
Employee benefits................... -- -- 526
Deferred compensation............... 218 -- --
----- ---- ----
Total noncurrent deferred tax
assets (liabilities)............. $ 43 $-- $526
===== ==== ====
</TABLE>
The Predecessor was included in the federal and state consolidated tax
returns of UP and its subsidiaries prior to inception. The tax expense
recorded by the Predecessor approximates what would have been recorded had the
Predecessor filed separate tax returns.

10. STOCKHOLDERS' EQUITY:

PREFERRED STOCK

The Company has one class of $0.01 par value Series A Preferred Stock
(preferred stock). Holders of the preferred stock are entitled to receive
dividends in cash at the per annum rate of 12 percent of the original issuance
price of a preferred share as, if and when declared by the Board of Directors
of the Company at its sole discretion. So long as any shares of preferred
stock are outstanding, the Company may not pay or declare any dividend on or
with respect to any shares of common stock. Upon liquidation, the holders of
preferred stock are entitled to receive, prior and in preference to any
distribution to any holder of common stock, for each share of preferred stock,
an amount per share equal to the original issuance price of such share, plus
the aggregate amount of all dividends declared, if any, less the aggregate
amount of all distributions, including payments of dividends. In general, the
holders of preferred stock are not entitled to vote on any matters submitted
to the vote of stockholders except as set forth in the Company's Certificate
of Incorporation. Additionally, upon the closing of an initial public offering
by the Company, each share of preferred stock automatically converts to shares
of common stock based on the ratio of preferred stock original issuance price
divided by the initial public offering price of common stock. No dividends
have been declared on preferred stock. In connection with the Company's
initial public offering the Company plans to redeem all outstanding preferred
stock at face value prior to conversion to Common Stock.

COMMON STOCK

The Company has one class of $0.01 par value common stock. Each holder of
the Company's common stock is entitled to one vote for every share of common
stock owned. In connection with the purchase of ICI and ICS, the Company
issued 1,353,750 shares of common stock, which were valued at $3.32 per share.

F-23
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

STOCKHOLDERS' AGREEMENT

The common and preferred stockholders are parties to a Stockholders'
Agreement that, among other items, places restrictions upon the transfer of
securities, gives the Company and other then existing stockholders the right
of first refusal to purchase securities offered for sale and includes other
rights. The Stockholders' Agreement will be canceled in connection with the
successful completion of the Company's initial public offering.

WARRANTS

The Company issued 18,421 warrants to UP in connection with the acquisition
of PMT on March 31, 1997. The exercise price is $10 per warrant, and each
warrant entitles UP to purchase one share of preferred stock and nine and one-
half shares of common stock. The warrants expire on March 31, 2007. The
warrants were valued using the Black-Scholes model.

DIVIDENDS

On March 31, 1997, prior to the acquisition by PMT Holdings, the Predecessor
declared a dividend of $23,222,000.

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Restated Certificate of Incorporation
and Amended and Restated By-laws and Delaware law could, together or
separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company or limit the price that certain investors may
be willing to pay in the future for shares of the common stock. These
provisions (i) classify the Company's Board of Directors into three classes,
each of which will serve for different three year periods; (ii) provide that
only the Board of Directors or certain members thereof or officers of the
Company may call special meetings of the stockholders; and (iii) authorize the
issuance of "blank check" preferred stock having such designations, rights and
preferences as may be determined from time to time by the Board of Directors.

11. STOCK OPTION PLANS:

On March 31, 1997, the Company adopted the Service Stock Option Agreement
(the Option Plan). The Option Plan assigned eligible employees options to
purchase shares of the Company's common and preferred stock at a price
generally not less than the fair value of the common and preferred stock on
the date of grant. Under the Option Plan, 70,000 options were granted at
$11.24 per option unit (each option unit allows the holder to purchase nine
and one-half shares of common stock and one share of preferred stock). The
combined fair value of the preferred and common stock on the date of grant was
$10.00, the price paid in formation of the Company on March 31, 1997. Options
under the Option Plan vest and become exercisable ratably on April 1 of each
of 1998, 1999, 2000 and 2001 (25 percent of the options may be exercised each
year). Options, if not previously exercised, expire ten years from the date of
grant.

On March 31, 1997, the Company also adopted the Supplemental Stock Option
Agreement (the Supplemental Option Plan). This plan assigned eligible
employees options to purchase shares of the Company's common and preferred
stock at a price generally not less than the fair value of the common and
preferred stock on the date of the grant. Under the Supplemental Option Plan,
40,000 options were granted at $40.00 per option unit (each option unit allows
the holder to purchase one share of common stock and one share of preferred
stock). Combined fair value of the preferred and common stock on the date of
grant was $10.00, the price paid in formation of the Company on March 31,
1997. All options under the Supplemental Option Plan fully vested on March 31,
1997, and expire six years from that date.

F-24
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
------- --------------
<S> <C> <C>
Outstanding at March 31, 1997......................... -- $ --
Granted............................................. 110,000 21.70
------- ------
Outstanding at December 31, 1997...................... 110,000 $21.70
======= ======
Options exercisable at year-end....................... 40,000 $40.00
======= ======
</TABLE>

There were no options exercised, forfeited or expired from inception through
December 31, 1997.

The following summarizes information about stock options outstanding at
December 31, 1997:

<TABLE>
<CAPTION>
WEIGHTED
OPTIONS AVERAGE WEIGHTED
OUTSTANDING AT REMAINING AVERAGE FAIR
EXERCISE DECEMBER 31, CONTRACTUAL VALUE OF OPTIONS
PRICE 1997 LIFE GRANTED
-------- -------------- ----------- ----------------
<S> <C> <C> <C>
$11.24........................... 70,000 2.5 years $0.47
$40.00........................... 40,000 6 years $0.00
</TABLE>

The fair value of each option granted since March 31, 1997, was estimated on
the date of the grant using the Black-Scholes option-pricing model. For the
Option Plan, an expected life of four years, a risk-free interest rate of 6.60
percent and no expected dividends were assumed. For the Supplemental Option
Plan, an expected life of six years, a risk-free interest rate of 6.83 percent
and no expected dividends were assumed.

Had compensation costs for the Company's stock-based compensation plans been
determined based upon the fair value at grant dates for awards under those
plans consistent with the method prescribed by SFAS No. 123, the Company's net
income would have been reduced by $6,000.

12. EARNINGS PER SHARE:

Earnings per share are as follows:

<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
DECEMBER 31, 1997
----------------------------------
PER SHARE
INCOME SHARES AMOUNT
-------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic earnings per share:
Income before extraordinary loss...... $1,545 $0.45
Extraordinary loss, net of tax........ (129) (0.04)
------ -----
Net income.......................... $1,416 3,403,480 $0.41
====== =====
Options outstanding..................... 573,335
Warrants outstanding.................... 164,226
Diluted earnings per share:
Income before extraordinary loss...... $1,545 $0.37
Extraordinary loss, net of tax........ (129) (0.03)
------ --------- -----
Net income.......................... $1,416 4,141,041 $0.34
====== ========= =====
Supplemental pro forma earnings per
share before extraordinary loss:
Basic................................. $1,416 8,430,233 $0.17
====== ========= =====
Diluted............................... $1,416 9,003,568 $0.16
====== ========= =====
</TABLE>

F-25
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Options to purchase 40,000 common shares were excluded from the computation
of diluted earnings per share because the options' exercise price was greater
than the market price of the common shares.

Supplemental pro forma earnings per share have been presented to show the
effect of the Company's proposed initial public offering of common stock and
the shares issued in connection with the Stutz and Cross Con acquisitions as
if such shares were outstanding for the period from April 1, 1997, to December
31, 1997.

As a result of the acquisition of the Predecessor by the Company, earnings
per share are not comparable and have therefore not been presented for the
Predecessor.

13. EXTRAORDINARY LOSS:

In connection with the acquisition of Interstate on December 16, 1997, loan
fees of $215,000 were written off in connection with the early extinguishment
of debt. The loan fees, net of income taxes of $86,000, were recorded in the
accompanying statements of operations as an extraordinary loss.

14. RELATED-PARTY TRANSACTIONS:

During the period from inception through December 31, 1997, the Company paid
$75,000 in management fees and $100,000 in acquisition-related consulting fees
to Eos. Under an Amended and Restated Management Consulting Agreement dated as
of December 16, 1997, between the Company and Eos Management, Inc. (EMI), the
Company pays EMI a monthly management fee of $10,417 for management consulting
services rendered to the Company. The management fee is payable whether or not
EMI has performed any services during the term of the agreement. Upon
consummation of this offering, such management agreement will be terminated.
Following this offering, the Company may from time to time retain EMI to
provide management consulting services in connection with specific
transactions. Such arrangements will be on terms no less favorable than those
that would be available in a similar transaction with an unrelated third
party. The Company provides over-the-road transportation services and
purchases linehaul transportation services from UP and its subsidiaries of
$6.1 million and $5.8 million, respectively, since inception.

The Predecessor provided over-the-road transportation services and purchased
linehaul transportation services from UP and its subsidiaries. During the
three-month period ended March 31, 1997, and the years ended December 31, 1996
and 1995, revenues earned by the Predecessor from UP and its subsidiaries
related to over-the-road transportation services were $2.2 million, $4.8
million and $4.1 million, respectively. Purchased transportation costs from UP
and its subsidiaries were $2.7 million, for the three-month period ended March
31, 1997, $13.5 million for the year ended December 31, 1996, and $10.6
million from UP and its subsidiaries for the year ended December 31, 1995.

Prior to its acquisition, the Predecessor participated in benefit plans and
the other employee benefit services provided by UP and its affiliates (Note
15). UP and its affiliates also provided tax advice; tax return preparation
services; corporate secretarial services; legal advice; treasury, banking,
cash management and accounting services; services involving the acquisition of
insurance coverage and related services, all at no cost to the Predecessor.
Additionally, the Predecessor from time to time advanced excess cash to UP
(Note 4).

15. EMPLOYEE BENEFITS:

Prior to its acquisition, eligible employees of the Predecessor participated
in the pension and postretirement benefit plans of SP and UP. The Predecessor
recorded benefit charges related to these plans of $0, $266,000 and $167,000
for the period ended March 31, 1997, and for the years ended December 31, 1996
and 1995, respectively, for its proportionate share of the benefit plans as
directed by its parent. In connection with the purchase of PMT by PMT
Holdings, active participants of the plans became fully vested in their
benefits accrued to date and the obligation was assumed by UP.

F-26
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company adopted two 401(k) plans (the Plans) in 1997. A plan was adopted
for PMT employees in July 1997 and for rail service employees in October 1997.
All employees who meet certain service requirements are eligible to
participate. The Company matched 100 percent of the first 3 percent
contributed by employees to the Plans during the year ended December 31, 1997.
In addition, the Company maintains a 401(k) plan for Interstate employees. The
Company matched 25 percent of the first 4 percent contributed by Interstate
employees to the plan since the date of acquisition for the period ended
December 31, 1997. Total expense related to these plans was $59,000 for the
nine months ended December 31, 1997.

16. COMMITMENTS AND CONTINGENCIES:

LEGAL PROCEEDINGS AND CONTINGENCIES

The Company is a party to various legal proceedings, claims and assessments
arising in the normal course of its business activities. Interstate is a named
defendant in a class action filed in July 1997 in the State of California, Los
Angeles. Superior Court, Central District, alleging, among other things,
breach of fiduciary duty, unfair business practices, conversion and money had
and received in connection with monies allegedly wrongfully deducted from
truck drivers' earnings. Plaintiffs have demanded in excess of $8.8 million,
together with unspecified punitive damages, costs and interest, as well as
equitable relief. The Company intends to defend this action vigorously and
believes that its defenses are meritorious. There can be no assurance,
however, as to a favorable outcome of the action and an adverse outcome could
have a material adverse effect on the Company. Based upon information
presently available and in light of legal and other defenses and insurance
coverage, management does not expect these legal proceedings, claims and
assessments, individually or in the aggregate, to have a material adverse
impact on the Company's consolidated financial position or operations.

OPERATING LEASE COMMITMENTS

The Company leases office space and equipment under noncancellable lease
agreements that expire at various dates.

The following is a schedule of future minimum lease payments required under
the Company's leases at December 31, 1997:

<TABLE>
<CAPTION>
OPERATING
LEASES
--------------
(IN THOUSANDS)
<S> <C>
1998........................................................ $1,390
1999........................................................ 988
2000........................................................ 844
2001........................................................ 716
2002........................................................ 716
Thereafter.................................................. 3,164
------
Total minimum lease payments................................ $7,818
======
</TABLE>

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with certain of its
executive officers, with remaining service periods ranging from 2.5 to 3.5
years. The agreements provide for certain payments to each officer upon
termination of employment, other than as a result of death, disability in most
cases or justified cause, as defined. The aggregate estimated commitment under
these agreements was $2,767,000 at December 31, 1997. Under the employee
agreements, the Board of Directors may award an annual bonus to certain of the
executives in an amount up to $99,000 based on the attainment of certain
operating income targets.

F-27
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

17. SUBSEQUENT EVENTS:

In April 1998, the Company acquired all of the capital stock of Intraco,
Inc. (referred to as "Stutz & Company" or "Stutz") for $400,000 in cash plus
217,142 shares of the Company's common stock. Up to 126,664 of such shares of
common stock are subject to forfeiture in the event Stutz's operating
performance (revenue of $0.5 million per quarter) fails to meet certain levels
over the two year period subsequent to the purchase. Stutz is a provider of
transportation services, including intermodal marketing, cartage, and freight
consolidation and handling.

EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT

In June 1998, the Company acquired all of the capital stock of Cross Con
Terminals, Inc. and Cross Con Transport, Inc. (collectively, Cross Con) for
$9.6 million in cash plus 541,500 shares of the Company's common stock. In
addition, the agreement provides that up to $1.5 million additional proceeds
may be paid to Cross Con if it meets certain operating performance levels from
January 1, 1998 through December 31, 1998 Richard Hyland is entitled to the
full $1.5 million payment if earnings before interest and taxes exceed $3.0
million during the performance period. Such payment may be made in either cash
or Common Stock at fair market value, at the election of Richard Hyland. The
additional payment, if any, will be recorded as purchase price when the target
is achieved. In order to finance the acquisition, the Company amended its
Credit Agreement to increase the availability thereunder. Cross Con is a
provider of intermodal marketing services.

The Company filed a registration statement on Form S-1 related to an initial
public offering (IPO) of common stock in May 1998. The Company plans to use a
portion of the proceeds of the IPO to redeem all of the outstanding shares of
preferred stock for a face value of $3,150,000 and will create a new stock
option plan. If the IPO is not consummated, these events may not occur or may
occur at a later date.

F-28
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................... $ 87 $ 86
Accounts receivable, net of allowances of $804, and
$763, respectively................................. 19,877 20,729
Prepaid expenses and other.......................... 647 765
------- -------
Total current assets.............................. 20,611 21,580
------- -------
Property and Equipment:
Property and equipment, at cost..................... 2,267 1,880
Accumulated depreciation............................ (259) (146)
------- -------
Property and equipment, net....................... 2,008 1,734
Other Assets:
Intangible assets, net.............................. 32,489 32,717
Deferred income taxes............................... 38 43
Other assets........................................ 988 993
------- -------
Total assets...................................... $56,134 $57,067
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt and capital
leases............................................. $ 2,459 $ 1,810
Accounts payable.................................... 10,868 10,068
Accrued expenses.................................... 8,946 9,447
Income taxes payable................................ 437 389
Deferred income taxes............................... 143 177
------- -------
Total current liabilities......................... 22,853 21,891
Long-Term Liabilities:
Employee benefits................................... 678 672
Long-term debt and capital leases................... 22,079 25,045
------- -------
Total liabilities................................. 45,610 47,608
------- -------
Stockholders' Equity:
Preferred stock: $0.01 par value, 600,000 shares
authorized, 350,000 shares issued and outstanding
as of March 31, 1998, and December 31, 1997........ 4 4
Common stock: $0.01 par value, 5,700,000 shares
authorized, 4,678,750 shares issued and outstanding
as of March 31, 1998, and December 31, 1997........ 5 5
Warrants: 18,421 outstanding........................ 53 53
Additional paid-in capital.......................... 7,981 7,981
Retained earnings................................... 2,481 1,416
------- -------
Total stockholders' equity........................ 10,524 9,459
------- -------
Total liabilities and stockholders' equity........ $56,134 $57,067
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-29
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)

The consolidated financial statements of the Company and the Predecessor are
not comparable in certain respects.

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
--------------- ---------------
THREE MONTHS THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1998 1997
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Revenues.................... $ 50,362 $19,538
Cost of Transportation and
Services................... 42,003 16,498
---------- -------
Net revenues............ 8,359 3,040
Operating Expenses:
Selling, general and
administrative expenses.. 5,634 2,300
Depreciation and
amortization............. 341 37
Transaction costs......... -- 510
---------- -------
Income from operations.. 2,384 193
Interest Expense............ 554 --
---------- -------
Income before income tax
provision.............. 1,830 193
Income Tax Provision........ 765 74
---------- -------
Net income.............. $ 1,065 $ 119
========== =======
Income Per Share:
Basic..................... $ 0.23
==========
Diluted................... $ 0.19
==========
Weighted Average Shares
Outstanding:
Basic..................... 4,678,750
==========
Diluted................... 5,604,877
==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-30
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
THE COMPANY
---------------------------------------------------------------
RETAINED
ADDITIONAL EARNINGS
PREFERRED COMMON PAID-IN (ACCUMULATED STOCKHOLDERS'
STOCK STOCK WARRANTS CAPITAL DEFICIT) EQUITY
--------- ------ -------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997....... $ 4 $ 5 $53 $7,981 $1,416 $ 9,459
Net income
(unaudited).......... 0 0 0 0 1,065 1,065
--- --- --- ------ ------ -------
MARCH 31, 1998
(unaudited)............ $ 4 $ 5 $53 $7,981 $2,481 $10,524
=== === === ====== ====== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-31
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)

The consolidated financial statements of the Company and the Predecessor are
not comparable in certain respects.

<TABLE>
<CAPTION>
THE COMPANY THE PREDECESSOR
--------------- ---------------
THREE MONTHS THREE MONTHS
ENDED MARCH 31, ENDED MARCH 31,
1998 1997
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................... $ 1,065 $ 119
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization.............. 341 37
Deferred income taxes...................... (29) 218
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable,
net of allowances......................... 852 3,515
Decrease (increase) in prepaid expenses and
other..................................... 118 (335)
Decrease (increase) in other assets........ 5 (10)
Increase (decrease) in accounts payable.... 800 (1,165)
Increase (decrease) in accrued expenses.... (501) 346
Increase (decrease) in income taxes
payable................................... 48 (949)
Increase (decrease) in employee benefits... 6 (1,361)
------- --------
Net cash provided by (used in) operating
activities.............................. 2,705 415
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........... (387) (71)
------- --------
Net cash used in investing activities.... (387) (71)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds on long-term debt................... 1,202 --
Principal payments on long-term debt......... (3,519) --
Decrease (increase) in advances to
affiliates.................................. -- 21,865
Dividend paid................................ -- (23,222)
------- --------
Net cash used in financing activities.... (2,317) (1,357)
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 1 (1,013)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD........................................ 86 2,636
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD..... $ 87 $ 1,623
======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest................................... $ 289 $ --
======= ========
Income taxes............................... $ 418 $ 1,125
======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-32
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS:

THE COMPANY

PMT Holdings, Inc. (PMT Holdings), a Delaware corporation, was formed on
March 31, 1997 (inception), to acquire all of the capital stock of Pacific
Motor Transport Company (PMT) in a management buyout that was funded in part
by Eos Partners, L.P. (Eos). On March 31, 1997, PMT Holdings acquired all
issued and outstanding shares of PMT from Union Pacific Railroad Company and
its subsidiaries (UP) for approximately $13 million in cash and warrants to
purchase 18,421 units of PMT Holdings stock. Each unit represents one share of
common stock and one share of preferred stock and may be purchased by UP for
$10 per unit. The purchase of PMT was accounted for using the purchase method
of accounting. Prior to acquisition, PMT was a provider of truckload freight
services and intermodal marketing services. On December 16, 1997, PMT Holdings
acquired all of the capital stock of Interstate Consolidation, Inc. (ICI) and
Interstate Consolidation Service, Inc. (ICSI) and its wholly owned subsidiary,
Intermodal Container Service, Inc. (IMCS) (ICI, ICSI and IMCS, collectively,
Interstate) by issuing $20 million in promissory notes and 1,353,750 shares of
PMT Holdings stock. The acquisition of Interstate was accounted for using the
purchase method of accounting. Interstate is a multipurpose provider of
transportation services, including intermodal marketing, cartage, and freight
consolidation and handling. In May 1998, PMT Holdings was renamed Pacer
International, Inc. (Pacer International) and its subsidiaries reorganized.
The name change has been given retroactive application in these consolidated
financial statements.

The consolidated balance sheets as of March 31, 1998, and December 31, 1997,
and the consolidated statements of operations, changes in stockholders' equity
and cash flows for the three months ended March 31, 1998, include the accounts
of Pacer International, a Delaware corporation, and its wholly owned
subsidiaries (the Company). The wholly owned subsidiaries are Pacer Transport,
Pacer Logistics and Pacer Rail/Mechanical/Services LLC.

THE PREDECESSOR

The statements of operations, stockholders' equity and cash flows for the
three months ended March 31, 1997, include the accounts of PMT (the
Predecessor), with its two operating divisions, Pacer and ABL-Trans.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

QUARTERLY FINANCIAL DATA

The consolidated financial statements presented herein include the accounts
of the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The company believes that the disclosures
are adequate to make the information presented not misleading, although
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the consolidated financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the company's results of
operations, financial position and cash flows. The consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included elsewhere in this Prospectus.

F-33
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

USE OF ESTIMATES

NEW ACCOUNTING PRONOUNCEMENTS

3. INTANGIBLE ASSETS:

Intangible assets consisted of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Goodwill.............................................. $32,479 $32,479
Financing costs....................................... 430 430
Covenant not to compete............................... 65 65
------- -------
32,974 32,974
Less: Accumulated amortization........................ (485) (257)
------- -------
Total intangible assets............................. $32,489 $32,717
======= =======
</TABLE>

Amortization expense for the three months ended March 31, 1998, was
$228,000, and $257,000 for the nine months ended December 31, 1997.

4. ACQUISITIONS:

From inception through December 31, 1997, the Company effected two
acquisitions. The initial acquisition of PMT by Pacer International occurred
on March 31, 1997, and the acquisition of Interstate

F-34
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

occurred on December 16, 1997. The purchase price, certain costs related to
the acquisitions, and the allocation of the purchase price to the underlying
net assets acquired in the acquisitions were as follows:

The Company accounted for these acquisitions under the purchase method of
accounting. The allocation of the purchase price to the underlying net assets
acquired is based upon preliminary estimates of the fair value of the net
assets, which may be revised at a later date. It is anticipated that any
purchase price allocation adjustments will be made within one year from the
date of acquisition. Management does not believe that the final allocations of
the purchase prices will have a material effect on the Company's financial
position or results of operations. In connection with the acquisitions, the
Company issued 142,500 shares of common stock, which were valued at $31.50 per
share, and issued warrants to purchase 18,421 units. Warrants were valued at
their estimated fair value using the Black-Scholes model. Results of
operations of the entities acquired are included in the consolidated financial
statements subsequent to their purchase date.

Results of operations of the purchased entities are included in the
consolidated financial statements subsequent to the purchase date. Pro forma
operating results of the Company, assuming that all acquisitions before March
31, 1998, were purchased on the first day of the period presented, are as
follows:

<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 1997
--------- ---------
(DOLLARS IN
THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Revenues................................................ $ 50,362 $ 38,488
========= =========
Net income.............................................. $ 1,065 $ 517
========= =========
Earnings per share:
Basic................................................. $ 0.23 $ 0.11
========= =========
Diluted............................................... $ 0.19 $ 0.09
========= =========
Weighted average shares outstanding:
Basic................................................. 4,678,750 4,678,750
========= =========
Diluted............................................... 5,471,934 5,471,934
========= =========
</TABLE>

F-35
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

In April 1998, the Company acquired all of the capital stock of Intraco,
Inc. (referred to as "Stutz & Company" or "Stutz") for $400,000 in cash plus
217,142 shares of the Company's common stock. Up to 126,664 shares of such
common stock are subject to forfeiture in the event Stutz's operating
performance (revenue of $0.5 million per quarter) fails to meet certain levels
over the two year period subsequent to the purchase. Stutz is a provider of
transportation services, including intermodal marketing, cartage and freight
consolidation and handling.

5. DEBT AND CAPITAL LEASES:

Debt of the Company as of March 31, 1998, and December 31, 1997, consisted
of the following:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
Promissory note to
shareholders............. $ -- $19,983
Term loan in the amount of
$20,000.................. 20,000 --
Revolving line of credit
in an amount up to
$12,000.................. 4,104 6,395
Capital leases............ 434 477
------- -------
Total debt and capital
leases................. 24,538 26,855
Less: Current maturities.. 2,459 1,810
------- -------
Long-term portion......... $22,079 $25,045
======= =======
</TABLE>

The promissory note to shareholders represents the cash portion of the
purchase price of the Interstate acquisition owed to the former owners of
Interstate, who became shareholders of the Company on December 16, 1997. The
amount was paid to these shareholders on January 2, 1998, and was financed by
the term loan of $20 million.

F-36
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)

6. EARNINGS PER SHARE:

Earnings per share are as follows:

<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31, 1998
----------------------------------
PER SHARE
INCOME SHARES AMOUNT
-------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Basic earnings per share:
Net income............................ $1,065 4,678,750 $0.23
Options outstanding................... 754,956
Warrants outstanding.................. 171,171
---------
Diluted earnings per share.............. $1,065 5,604,877 $0.19
=========
Supplemental pro forma earnings per
share:
Basic................................. $1,065 8,410,857 $0.13
Options outstanding................... 756,756
---------
Diluted............................... $1,065 9,165,813 $0.12
=========
</TABLE>

Supplemental pro forma earnings per share have been presented to show the
effect of the Company's proposed initial public offering of common stock as if
such shares were outstanding for the period from January 1, 1998 to March 31,
1998.

7. COMMITMENTS AND CONTINGENCIES:

LEGAL PROCEEDINGS AND CONTINGENCIES

The Company is a party to various legal proceedings, claims and assessments
arising in the normal course of its business activities. Interstate is a named
defendant in a class action filed in July 1997 in the State of California, Los
Angeles Superior Court, Central District, alleging, among other things, breach
of fiduciary duty, unfair business practices, conversion and money had and
received in connection with monies allegedly wrongfully deducted from truck
drivers' earnings. Plaintiffs have demanded in excess of $8.8 million,
together with unspecified punitive damages, costs and interest, as well as
equitable relief. The Company intends to defend this action vigorously but
there can be no assurance as to a favorable outcome of the action. Based upon
information presently available and in light of legal and other defenses and
insurance coverage, management does not expect these legal proceedings, claims
and assessments, individually or in the aggregate, to have a material adverse
impact on the Company's consolidated financial position or operations.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with certain of its
executive officers with remaining service periods ranging from 2.5 to 3.5
years. The agreements provide for certain payments to each officer upon
termination of employment other than as a result of death, disability in most
cases or justified cause, as defined. The aggregate estimated commitment under
these agreements was $2,767,000 at March 31, 1998. Under the employee
agreements, the Board of Directors may award an annual bonus to certain of the
executives in an amount up to $90,000 based on the attainment of certain
operating income targets.

F-37
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
(UNAUDITED)

8. SUBSEQUENT EVENTS:

The Company plans to file a registration statement relating to an initial
public offering (IPO) of its common stock in May 1998. The Company plans to
use a portion of the proceeds of the IPO to redeem all of the outstanding
shares of Preferred Stock for face value of $3,150,000 and will create a new
stock option plan. If the IPO is not consummated, these events may not occur
or may occur at a later date.

F-38
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Interstate Consolidation, Inc. and
Interstate Consolidation Service, Inc.
and Subsidiary:

We have audited the accompanying combined balance sheets of Interstate
Consolidation, Inc. and Interstate Consolidation Service, Inc. and subsidiary
as of December 16, 1997 and December 31, 1996 and the related combined
statements of earnings and retained earnings and cash flows for the period
from January 1, 1997 to December 16, 1997 and the years ended December 31,
1996 and 1995. These combined financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Interstate
Consolidation, Inc. and Interstate Consolidation Service, Inc. and subsidiary
as of December 16, 1997 and December 31, 1996 and the results of their
operations and their cash flows for the period from January 1, 1997 to
December 16, 1997 and the years ended December 31, 1996 and 1995 in conformity
with generally accepted accounting principles.

As discussed in note 1 to the combined financial statements, the Company
changed its method of accounting for refunds from railroad transportation
companies.

/s/ KPMG Peat Marwick LLP

Los Angeles, California
April 2, 1998

F-39
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

COMBINED BALANCE SHEETS

DECEMBER 16, 1997 AND DECEMBER 31, 1996
(NOTE 10)

<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 3,733,241 $ 2,836,909
Trade accounts receivable................................. 7,962,913 6,102,825
Rail rebate receivables................................... 1,044,193 822,052
Prepaid expenses and other current assets................. 668,869 550,218
Note receivable from affiliate (note 3)................... -- 80,740
----------- -----------
Total current assets.................................. 13,409,216 10,392,744
Property and equipment, at cost, less accumulated
depreciation of $1,477,272 and $1,309,894 at December 16,
1997 and December 31, 1996, respectively (note 2).......... 659,529 627,678
Cash surrender value of life insurance and officer advances
(note 7)................................................... 673,581 906,230
Goodwill, less accumulated amortization of $712,963 and
$635,347 at December 16, 1997 and December 31, 1996,
respectively............................................... 508,012 585,628
Deferred tax assets, net (note 4)........................... 4,615 --
Other assets, at cost....................................... 320,099 328,447
----------- -----------
$15,575,052 $12,840,727
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Trade accounts payable.................................... $ 6,463,549 $ 4,823,765
Accrued expenses.......................................... 2,102,936 1,056,828
Income taxes payable (note 4)............................. 231,804 55,625
Deferred tax liabilities, net (note 4).................... -- 97,970
----------- -----------
Total current liabilities............................. 8,798,289 6,034,188
Deferred compensation (note 7).............................. 673,580 504,313
----------- -----------
Total liabilities..................................... 9,471,869 6,538,501
----------- -----------
Commitments, contingencies and subsequent event (notes 8, 9
and 10)
Stockholders' equity:
Common stock, $10 par value. Authorized 7,500 shares;
issued and outstanding 200 shares........................ 2,000 2,000
Common stock, no par value. Authorized 2,500 shares;
issued and outstanding 200 shares........................ 8,000 8,000
Retained earnings......................................... 6,093,183 6,292,226
----------- -----------
Total stockholders' equity............................ 6,103,183 6,302,226
----------- -----------
$15,575,052 $12,840,727
=========== ===========
</TABLE>

See accompanying notes to combined financial statements.

F-40
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

COMBINED STATEMENTS OF EARNINGS AND RETAINED EARNINGS

PERIOD FROM JANUARY 1, 1997 TO DECEMBER 16, 1997 AND
THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues............................... $83,876,778 $68,562,302 $61,771,944
Direct costs of operations (note 8).... 69,630,691 55,890,331 51,089,136
----------- ----------- -----------
Gross profit..................... 14,246,087 12,671,971 10,682,808
----------- ----------- -----------
Selling, general and administrative
expenses (note 8)..................... 9,197,863 8,927,744 8,437,466
Amortization of goodwill............... 77,616 78,631 80,879
Officers' salaries..................... 668,359 1,836,239 1,690,000
----------- ----------- -----------
9,943,838 10,842,614 10,208,345
----------- ----------- -----------
Earnings from operations......... 4,302,249 1,829,357 474,463
----------- ----------- -----------
Other income (expense):
Interest............................. 114,761 160,669 118,481
Other, net........................... 38,947 3,336 (9,387)
----------- ----------- -----------
153,708 164,005 109,094
----------- ----------- -----------
Earnings before income taxes..... 4,455,957 1,993,362 583,557
Income taxes (note 4).................. 921,000 363,000 237,000
----------- ----------- -----------
Net earnings..................... 3,534,957 1,630,362 346,557
Retained earnings, beginning of
period................................ 6,292,226 4,811,864 4,465,307
Dividends paid......................... (3,734,000) (150,000) --
----------- ----------- -----------
Retained earnings, end of period....... $ 6,093,183 $ 6,292,226 $ 4,811,864
=========== =========== ===========
</TABLE>

See accompanying notes to combined financial statements.

F-41
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

COMBINED STATEMENTS OF CASH FLOWS

PERIOD FROM JANUARY 1, 1997 TO DECEMBER 16, 1997 AND
THE YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................ $ 3,534,957 $1,630,362 $ 346,557
----------- ---------- ----------
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization of
property and equipment............... 159,952 190,139 191,310
Amortization of intangibles........... 77,616 78,631 78,631
Deferred compensation................. 169,267 151,722 131,586
(Gain) loss on disposition of property
and equipment........................ -- (3,793) 9,459
Change in assets and liabilities:
Trade accounts receivable........... (1,860,089) (1,730,657) 363,842
Rail rebates receivable............. (222,193) (287,396) (99,364)
Prepaid expenses and other current
assets............................. (118,651) 313,554 (2,143)
Deferred taxes...................... (102,585) 26,524 (24,454)
Other assets........................ 8,348 (291,211) --
Trade accounts payable and accrued
expenses........................... 2,685,945 1,785,989 (960,959)
Income taxes payable................ 176,179 8,736 140,073
----------- ---------- ----------
Total adjustments................. 973,789 242,238 (172,019)
----------- ---------- ----------
Net cash provided by operating
activities....................... 4,508,746 1,872,600 174,538
----------- ---------- ----------
Cash flows from investing activities:
Purchases of property and equipment..... (191,803) (183,780) (109,092)
Proceeds from sale of equipment......... -- 89,455 7,201
(Increase) decrease in cash surrender
value of life insurance and officer
advances............................... 232,649 (251,757) (229,123)
----------- ---------- ----------
Net cash provided by (used in)
investing activities............. 40,846 (346,082) (331,014)
----------- ---------- ----------
Cash flows from financing activities:
Payments received on notes receivable
from affiliates........................ 80,740 108,770 100,435
Dividends paid.......................... (3,734,000) (150,000) --
----------- ---------- ----------
Net cash (used in) provided by
financing activities............. (3,653,260) (41,230) 100,435
----------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents............. 896,332 1,485,288 (56,041)
Cash and cash equivalents at beginning of
period................................... 2,836,909 1,351,621 1,407,662
----------- ---------- ----------
Cash and cash equivalents at end of
period................................... $ 3,733,241 $2,836,909 $1,351,621
=========== ========== ==========
Supplemental disclosures of cash flow
information--cash paid during the period
for income taxes......................... $ 437,769 $ 326,041 $ 92,444
=========== ========== ==========
</TABLE>

See accompanying notes to combined financial statements.

F-42
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 16, 1997 AND DECEMBER 31, 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business and Basis of Presentation

Interstate Consolidation, Inc. and Interstate Consolidation Service, Inc.
and Subsidiary (the Company) are commonly owned corporations engaged in
surface-based transportation. These financial statements include the combined
results of the commonly owned corporations. The Company provides trailerload
operations through their third-party shippers' agent and operates as a common
carrier providing service in the United States, Canada and Mexico. The Company
also provides drayage and operates a bonded container freight station.

As more fully described in note 10, the stockholders of the Company sold all
their shares to a third party effective December 16, 1997. Accordingly, the
financial statements for 1997 are as of and for the period ended December 16,
1997.

All significant intercompany accounts and transactions have been eliminated.

Revenue Recognition

Revenues and expenses are recognized upon shipment. This method approximates
the recognition of revenues and expenses when the shipment is complete. The
difference between the Company's method of revenue recognition and the
alternate methods recommended under Emerging Issues Task Force 91-9 is
immaterial. Allowances for discounts are provided when related revenue is
recorded.

During the period from January 1, 1997 to December 16, 1997, the Company had
one customer which accounted for approximately 17% of revenues. At December
16, 1997, the Company had two customers which accounted for approximately 10%,
individually, of trade accounts receivable. The Company had no customers in
1995 or 1996 which accounted for greater than 10% of revenues or trade
accounts receivable.

Depreciation and Amortization

Depreciation and amortization of property and equipment is generally
calculated on the straight-line method over the estimated useful lives of the
assets as follows:

<TABLE>
<S> <C>
Machinery and equipment 5 to 15 years
Furniture and fixtures 5 to 10 years
Leasehold improvements Lease term not to exceed
economic life of related asset
</TABLE>

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 10 to 40 years. The Company assesses the
recoverability of goodwill through undiscounted future operating cash flows
generated from the acquired operation. The amount of goodwill impairment, if
any, is measured based on projected discounted future operating cash flows
using a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if estimated
future operating cash flows are not achieved. As of December 16, 1997,
management has determined that there is no impairment of goodwill.

F-43
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

The Company accounts for income taxes under the asset and liability method
of accounting for income taxes, whereby income taxes are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred taxes of a change in tax rates is recognized in income in
the period that includes the enactment date.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents for purposes
of the statements of cash flows.

Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenue and expenses
and the disclosure of contingent assets and liabilities to prepare these
combined financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.

Long-Lived Assets

The Company accounts for long-lived assets, including intangibles, at
amortized cost. As part of its ongoing review of the valuation and
amortization of long-lived assets, management assesses the carrying value of
such assets if the facts and circumstances suggest that it may be impaired. As
a result, the Company has determined that its long-lived assets are not
impaired as of December 16, 1997 and December 31, 1996.

Accounting Change

The Company has agreements with certain railroad companies for the use of
rail services in meeting the surface-based transportation needs of the Company
and a related rebate sharing agreement with a customer. These agreements
provide for rebates to the Company upon attaining various levels of railroad
usage and limited pass-through of such amounts to a customer, as defined. The
Company changed its method of accounting for railroad rebates and related
pass-through from the cash method to the accrual method. The change to the
accrual method has been retroactively applied in accordance with Accounting
Principle Board Opinion No. 20, and was made to more accurately match the
actual costs of using railroad transportation in the Company's business with
the related revenues.

Reclassifications

Certain reclassifications have been made to the prior years combined
financial statements to conform to the 1997 presentation.

F-44
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(2) PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 16, 1997 and
December 31, 1996:

<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Furniture and office equipment........................ $1,416,403 $1,247,557
Radio system.......................................... 402,752 402,752
Dock improvements and equipment....................... 206,277 175,894
Automotive and trailer equipment...................... 111,369 111,369
---------- ----------
Total property and equipment...................... 2,136,801 1,937,572
Less accumulated depreciation and amortization........ 1,477,272 1,309,894
---------- ----------
Property and equipment, net....................... $ 659,529 $ 627,678
========== ==========
</TABLE>

(3) NOTE RECEIVABLE FROM AFFILIATE

The Company had a note receivable from a partnership whose general partners
are the stockholders of the Company, which was repaid in 1997.

(4) INCOME TAXES

Interstate Consolidation, Inc. has elected to be taxed under the provisions
of Subchapter S of the Internal Revenue Code and under similar provisions for
California franchise tax purposes. Accordingly, the stockholders report their
equity in the earnings and losses of Interstate Consolidation, Inc. on their
individual Federal Income and California franchise tax returns. Interstate
Consolidation Services, Inc. and Subsidiary have elected to be taxed as a C
Corporation and subjected to Federal income and California state franchise
taxes.

A summary of income taxes for the period from January 1, 1997 to December
16, 1997 and the years ended December 31, 1996 and 1995 follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current........................................... $557,000 $241,000 $209,000
Deferred.......................................... 198,000 22,000 (25,000)
-------- -------- --------
755,000 263,000 184,000
-------- -------- --------
State:
Current........................................... 166,000 96,000 61,000
Deferred.......................................... -- 4,000 (8,000)
-------- -------- --------
166,000 100,000 53,000
-------- -------- --------
$921,000 $363,000 $237,000
======== ======== ========
</TABLE>

F-45
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Income taxes for the period from January 1, 1997 to December 16, 1997 and
the years ended December 31, 1996 and 1995 differs from the amounts computed
by applying the Federal statutory rate of 34% to earnings before income taxes
as shown below:

<TABLE>
<CAPTION>
1997 1996 1995
---------- -------- --------
<S> <C> <C> <C>
Computed "expected" tax expense............... $1,515,000 $678,000 $198,000
Adjustment for S-Corporation earnings not
subject to Federal income taxes.............. (861,000) (423,000) (38,000)
State taxes, net of Federal income tax
benefit...................................... 198,000 64,000 32,000
Goodwill amortization......................... 32,000 32,000 32,000
Other......................................... 37,000 12,000 13,000
---------- -------- --------
$ 921,000 $363,000 $237,000
========== ======== ========
</TABLE>

If the combined companies had been taxed as a C Corporation, the combined
provision for income taxes and net earnings would have been $1,782,000 and
$2,674,000, respectively, in 1997, $797,000 and $1,196,000, respectively, in
1996, and $233,000 and $350,000, respectively, in 1995, assuming an effective
tax rate of 40%.

The tax effect of temporary differences that give rise to significant
portions of deferred tax assets at December 16, 1997 and December 31, 1996,
aggregating $305,999 and $220,430, respectively, primarily relate to deferred
compensation. The tax effects of temporary differences that give rise to
significant portions of deferred tax liabilities at December 16, 1997 and
December 31, 1996 of $301,384 and $318,400, respectively, primarily relates to
rail rebate receivables and accelerated depreciation. Accordingly, the Company
recognized a net deferred tax assets of $4,615 and a net deferred tax
liability of $97,970 at December 16, 1997 and December 31, 1996, respectively,
resulting from these temporary differences.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for future taxable
income over the periods which the deferred tax assets are deductible,
management believes it is more likely than not the Company will realize the
benefits of these deductible differences.

The Internal Revenue Service is examining Interstate Consolidation Service,
Inc.'s 1993 and 1994 Federal income tax returns. The amount of liability
cannot be determined with certainty; however, management is of the opinion
that the outcome of any tax assessment will not have a material adverse impact
on the Company's financial position or results of operations.

(5) LINE OF CREDIT

The Company had a line of credit agreement providing for unsecured
borrowings of up to $1,000,000 at the lower of the prime rate or LIBOR plus
2.5%, which was guaranteed by the Company's stockholders. In connection with
the sale of the outstanding stock of the Company, the line of credit was
terminated (note 10). No amounts were outstanding at either December 16, 1997
or December 31, 1996.

F-46
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(6) BENEFIT PLANS

The Company maintains an Internal Revenue Code Section 125 salary reduction
"Cafeteria Plan" (the Plan) covering substantially all employees to provide
health care and group term life insurance coverage. The Company may contribute
any amount to the Plan determined at its sole discretion; however, such
contributions cannot exceed the maximum amount deductible for Federal income
tax purposes.

In July 1996, the Company established a defined contribution plan, which has
been qualified under Section 401(k) of the Internal Revenue Service Code (the
Savings Plan). The Savings Plan permits participation by all employees of the
Company who have completed one year of continuous service and attained the age
of 21, subject to their entry into the Savings Plan on enrollment dates of
January 1 or July 1 of each year. Participants may defer up to 18% of their
compensation allowing participants a pretax savings on their deferrals.

During the period from January 1, 1997 to December 16, 1997 and the year
ended December 31, 1996, the amounts expensed by the Company under these plans
for its share of employer contributions were immaterial. No contribution was
made during 1995.

(7) CASH SURRENDER VALUE OF LIFE INSURANCE AND DEFERRED COMPENSATION AND
OFFICER ADVANCES

The Company has agreed to make certain payments to key employees of the
Company upon death or retirement. In the case of retirement, the amount is
based upon the cash surrender value of the life insurance policies purchased
by the Company on the lives of the key employees. In the case of death, the
face amount of the life insurance policy, less cumulative premiums paid, are
the amounts to be paid to the designated beneficiary of the employee.

Deferred compensation payable represents the cash surrender value of the key
employees life insurance, of which $673,581 and $504,313 was outstanding at
December 16, 1997 and December 31, 1996, respectively. Premiums paid in excess
of the increase in cash surrender value have been charged to operations.

The Company has made non-interest bearing advances to the
officers/stockholders and or a trust for their benefit for the purpose of life
insurance on the life of the stockholders, of which $401,917 was outstanding
at December 31, 1996. Such amount was repaid in 1997 and no amounts were
outstanding at December 16, 1997.

(8) COMMITMENTS AND RELATED PARTY TRANSACTIONS

The Company leases a facility in Commerce, California from a partnership
whose general partners are the Company's stockholders. This lease was modified
in connection with the sale of the Company (note 10). The rent for this
facility during the period from January 1, 1997 to December 16, 1997 and the
years ended December 31, 1996 and 1995 was $457,000, $498,000 and $498,000,
respectively.

The Company also leases trailers and equipment from the same partnership on
a month-to-month basis. Rent paid to the partnership for trailers and
equipment during the period from January 1 to December 16, 1997 and the years
ended December 31, 1996 and 1995 was $426,000, $465,000 and $295,000,
respectively. The trailers and equipment were sold in connection with the sale
of the Company (note 10).

F-47
<PAGE>

INTERSTATE CONSOLIDATION, INC. AND
INTERSTATE CONSOLIDATION SERVICE, INC.
AND SUBSIDIARY

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

The Company leases certain equipment under noncancelable operating leases
with third parties expiring through 2000. Future minimum lease payments under
noncancelable operating leases, as of December 16, 1997, are as follows:

<TABLE>
<S> <C>
12 months ending December 16:
1998.......................... $449,000
1999.......................... 48,000
2000.......................... 14,000
========
</TABLE>

(9) CONTINGENCIES

The Company is involved with a purported class action lawsuit filed against
itself and certain other companies in the trucking industry. The complaint
alleges unfair business practices related to the utilization of independent
owner/operators and seeks damages in excess of $8.8 million, together with
unspecified punitive damages, costs and interest, as well as equitable relief.
This matter is in the initial stages of litigation and the Company vigorously
disputes the assertions and believes its defenses are meritorious. Due to the
complexity of the issues involved, a favorable result is not assured and the
ultimate outcome cannot presently be determined. Accordingly, no provision for
any liability has been recorded.

The Company is also involved in other matters of litigation, none of which,
in the opinion of management, will have a material impact on its combined
financial position or results of operations.

(10) SUBSEQUENT EVENT

On December 16, 1997, the Company's stockholders (Stockholders) sold their
entire ownership interest in the Company pursuant to a stock purchase
agreement (Agreement) with a third party. In connection with the Agreement,
the Stockholders also entered into (i) a 9-year and 50-week lease with the
Company of the Commerce facilities providing for monthly rental of
approximately $45,000 through November 2002 and approximately $52,000
thereafter through November 2007, (ii) an agreement for the transfer of
certain trailers and equipment previously leased to the Company from a
partnership controlled by the Stockholders and (iii) employment agreements
expiring December 31, 2000.

F-48
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholder of
Cross Con Terminals, Inc. and
Cross Con Transport, Inc.:

We have audited the accompanying combined balance sheets of CROSS CON
TERMINALS, INC. (a Delaware corporation) AND CROSS CON TRANSPORT, INC. (an
Illinois corporation) (together, the "Company") as of December 31, 1997 and
1996, and the related combined statements of operations, stockholder's equity
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Cross Con
Terminals, Inc. and Cross Con Transport, Inc. as of December 31, 1997 and
1996, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.

/s/ Arthur Andersen LLP

Chicago, Illinois
May 22, 1998

F-49
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED BALANCE SHEETS

DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
1997 1996
---------- ----------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents................................... $1,707,392 $1,193,675
Accounts receivable, net of allowances of $154,000 and
$79,000 in 1997 and 1996, respectively..................... 5,386,938 4,804,301
Prepaid expenses and other current assets................... 67,903 68,285
---------- ----------
Total current assets.................................. 7,162,233 6,066,261
Property And Equipment, Net................................... 112,191 133,125
---------- ----------
Total assets.......................................... $7,274,424 $6,199,386
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
<S> <C> <C>
Current Liabilities:
Accounts payable............................................ $3,122,334 $2,676,149
Accrued expenses............................................ 411,163 339,056
Short-term debt............................................. 38,553 50,297
---------- ----------
Total current liabilities............................. 3,572,050 3,065,502
---------- ----------
Commitments And Contingencies................................. -- --
Stockholder's Equity:
Cross Con Terminals, Inc.--
Common stock, $1 par value; 1,000 shares authorized; 250
shares issued and outstanding at December 31, 1997 and
1996..................................................... 250 250
Cross Con Transport, Inc.--
Common stock, no par value; 100,000 shares authorized;
1,000 shares issued and outstanding at December 31, 1997
and 1996................................................. -- --
Additional paid-in capital................................ 1,000 1,000
Retained earnings......................................... 3,701,124 3,132,634
---------- ----------
Total stockholder's equity............................ 3,702,374 3,133,884
---------- ----------
Total liabilities and stockholder's equity............ $7,274,424 $6,199,386
========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-50
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................... $51,643,226 $47,488,557 $39,972,732
Cost of Transportation..................... 45,966,928 42,034,896 35,009,292
----------- ----------- -----------
Net revenue.......................... 5,676,298 5,453,661 4,963,440
Operating Expenses:
Selling, general and administrative
expenses................................ 3,925,308 4,108,182 3,772,972
Depreciation and amortization............ 48,320 46,952 42,686
----------- ----------- -----------
Income from operations............... 1,702,670 1,298,527 1,147,782
Interest and Other Income.................. 85,042 80,184 51,982
----------- ----------- -----------
Income before income tax provision... 1,787,712 1,378,711 1,199,764
Income Tax Provision....................... 29,337 14,100 13,660
----------- ----------- -----------
Net income........................... $ 1,758,375 $ 1,364,611 $ 1,186,104
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-51
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ----------- -------------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1995........... $250 $1,000 $ 1,511,620 $ 1,512,870
Net income....................... -- -- 1,186,104 1,186,104
Distributions to stockholder..... -- -- (102,044) (102,044)
---- ------ ----------- -----------
BALANCE, DECEMBER 31, 1995......... 250 1,000 2,595,680 2,596,930
Net income....................... -- -- 1,364,611 1,364,611
Distributions to stockholder..... -- -- (827,657) (827,657)
---- ------ ----------- -----------
BALANCE, DECEMBER 31, 1996......... 250 1,000 3,132,634 3,133,884
Net income....................... -- -- 1,758,375 1,758,375
Distributions to stockholder..... -- -- (1,189,885) (1,189,885)
---- ------ ----------- -----------
BALANCE, DECEMBER 31, 1997......... $250 $1,000 $ 3,701,124 $ 3,702,374
==== ====== =========== ===========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-52
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................. $ 1,758,375 $1,364,611 $1,186,104
Adjustments to reconcile net income to
net cash provided
by operating activities--
Depreciation and amortization......... 48,320 46,952 42,686
Gain on sale of assets................ (2,706) (1,300) --
Changes in working capital--
Accounts receivable, net............ (582,637) (917,345) (512,030)
Prepaid expenses and other current
assets............................. 382 48,125 (14,831)
Accounts payable.................... 446,185 401,743 (106,554)
Accrued expenses.................... 72,107 74,601 (17,022)
----------- ---------- ----------
Net cash provided by operating ac-
tivities......................... 1,740,026 1,017,387 578,353
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment,
net.................................... (24,680) (13,632) (50,479)
----------- ---------- ----------
Net cash provided by investing ac-
tivities......................... (24,680) (13,632) (50,479)
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholder............ (1,189,885) (827,657) (102,044)
Payments on short-term debt............. (80,319) (77,855) (59,768)
Proceeds from issuance of short-term
debt................................... 86,743 72,290 67,849
Payments on long-term debt.............. (18,168) (78,368) (107,187)
Proceeds from issuance of long-term
debt................................... -- -- 18,000
----------- ---------- ----------
Net cash used in financing activi-
ties............................. (1,201,629) (911,590) (183,150)
----------- ---------- ----------
NET INCREASE IN CASH AND CASH EQUIVA-
LENTS.................................... 513,717 92,165 344,724
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR..................................... 1,193,675 1,101,510 756,786
----------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR.... $ 1,707,392 $1,193,675 $1,101,510
=========== ========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for--
Interest.............................. $ 3,908 $ 7,155 $ 11,562
Income taxes.......................... 20,612 17,388 7,446
=========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-53
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1997, 1996 AND 1995

1. THE COMPANY

Cross Con Terminals, Inc. ("Terminals") and Cross Con Transport, Inc.
("Transport") (together, the "Company") operate as S Corporations and are
controlled by the same stockholder. Terminals is engaged in the business of
arranging, on behalf of others, for the transportation of freight over long
distances. Terminals contracts with railroads to provide transportation over
the long-haul portion of customer shipments and with local trucking companies,
known as "drayage companies," for pickups and deliveries. Transport provides
trucking services in the Chicago, Illinois, area using both owner-operator
drivers and leased truck equipment.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Combination

The combined financial statements of the Company include all accounts of
Terminals and Transport. All material intercompany amounts and transactions
have been eliminated.

Use of Estimates

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with an original
maturity of three months or less.

Accounts Receivable

Trade accounts receivable are reflected net of allowances for doubtful
accounts. Additionally, the Company records receivables for contractually
negotiated rail volume incentives in the period earned. Rail volume incentives
receivable were approximately $63,000 at December 31, 1997, and $440,000 at
December 31, 1996.

Property and Equipment

Property and equipment are recorded at historical cost. Depreciation is
computed on a straight-line basis over the estimated useful lives of the
assets, which are generally five to seven years.

Software

Purchases of software are capitalized and amortized over 5 years using the
straight-line method. Costs related to internal development of software are
expensed as incurred.

F-54
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of trade accounts receivable. The Company
sells primarily on 21-day terms, performs credit evaluation procedures on its
customers and generally does not require collateral on its accounts
receivable. The Company maintains an allowance for potential credit losses.
One customer accounted for 15%, 19% and 19% of the combined Company's revenues
in 1997, 1996 and 1995, respectively.

No other customer accounted for greater than 10% of revenues in 1997, 1996
or 1995.

Financial Instruments

The carrying amounts for cash, receivables and accounts payable approximate
fair value due to the short-term nature of these instruments. Other fair value
disclosures are in the respective notes.

Revenue Recognition

Revenues and related expenses are recognized when shipment is complete.

Net Revenues

Net revenues represent transportation and service revenues net of associated
transportation and service costs.

Income Taxes

The Company has elected for federal and applicable state tax reporting to
include income with that of its stockholder (an S Corporation election). The
income tax provision on the accompanying income statement represents a
provision for state replacement taxes.

3. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 1997 and
1996:

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Leasehold improvements.............................. $ 6,295 $ 6,295
Office equipment.................................... 139,218 109,123
Office furniture.................................... 51,674 51,674
Automobiles and trucks.............................. 138,783 145,728
--------- ---------
335,970 312,820
Less--Accumulated depreciation...................... (223,779) (179,695)
--------- ---------
Property and equipment.......................... $ 112,191 $ 133,125
========= =========
</TABLE>

Depreciation expense for the years ended December 31, 1997, 1996 and 1995,
was approximately $48,000, $47,000 and $43,000, respectively.

4. ACCRUED EXPENSES

Accrued expenses consisted of the following at December 31, 1997 and 1996:

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Payroll................................................ $120,640 $123,987
Vacation............................................... 54,000 49,000
Commissions............................................ 89,170 57,258
Profit sharing......................................... 50,000 50,000
Replacement state income tax........................... 24,163 15,438
General and administrative expenses.................... 73,190 43,373
-------- --------
Total.............................................. $411,163 $339,056
======== ========
</TABLE>

F-55
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

5. DEBT

The Company maintains a revolving line of credit with a bank in the amount
of $3,000,000 that bears interest at the bank's prime rate. The line is
secured by the assets of the Company, and as of December 31, 1997 and 1996, no
amounts were outstanding on the line of credit. The line requires the Company
to maintain compliance with certain covenants. As of December 31, 1997 and
1996, the Company was in compliance with all of these financial covenants.

As of December 31, 1997 and 1996, the Company has financed insurance
payments in the amounts of approximately $39,000 and $32,000, respectively, at
an interest rate of 9.39% and 9.50%, respectively.

As of December 31, 1996, the Company had various vehicle loans bearing
interest in the range of 7.5% to 10.17%. The loans amounted to approximately
$18,000, all of which matured in 1997 and were paid off.

6. PROFIT-SHARING PLAN

The Company has a profit-sharing plan that the Company contributes to at its
discretion. The Company contributed $50,000 to the plan in each of the years
ended December 31, 1997, 1996 and 1995.

7. RELATED PARTY TRANSACTIONS

Under a formal operation agreement, the Company is provided certain agency
services by a related party. The total commissions charged to the Company
under this agreement were $377,000, $362,000 and $375,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.

Under a verbal agreement, the Company pays a related-party employee an
annual bonus based upon income earned by the employee's sales office. The
amount of bonus expense incurred under this agreement was $74,000, $74,000 and
$23,000 for the years ended December 31, 1997, 1996 and 1995, respectively.

The Company leases its principal office building from its sole stockholder
on a month-to-month basis. Rental expense recorded under this lease was
$36,000 for the years ended December 31, 1997, 1996 and 1995 that is based on
a monthly verbal agreement. In addition, the Company also pays the real estate
taxes and other expenses for this office building on behalf of the sole
stockholder. The related expenses was $17,000, $15,000 and $14,000 for the
years ended December 31, 1997, 1996 and 1995, respectively.

8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings and Contingencies

The Company is a party to various legal proceedings, claims and assessments
arising in the normal course of its business activities. Based upon
information presently available and in light of legal and other defenses and
insurance coverage, management does not expect these legal proceedings, claims
and assessments, individually or in the aggregate, to have a material adverse
impact on the Company's combined financial position or operations.

F-56
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Operating Leases

The Company leases buildings. Future minimum lease payments for operating
leases with remaining noncancellable lease terms in excess of one year as of
December 31, 1997, are as follows:

<TABLE>
<S> <C>
1998..................................... $ 43,388
1999..................................... 39,702
2000..................................... 21,004
--------
Total minimum lease payments......... $104,094
========
</TABLE>

Rental expense was $70,000 in each of the years ended December 31, 1997,
1996 and 1995.

9. SUBSEQUENT EVENTS

In April 1998, the Company signed a letter of intent to sell the Company.

10. PRO FORMA TAX PROVISION (UNAUDITED)

If the Company had been taxed as a C Corporation, the combined provision for
income taxes and net income would have been approximately $751,000 and
$1,037,000, respectively, in 1997, $579,000 and $800,000, respectively, in
1996 and $504,000 and $696,000, respectively, in 1995, assuming an effective
tax rate of 42%.

F-57
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED BALANCE SHEETS

MARCH 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $1,486,970 $1,707,392
Accounts receivable, net of allowances of $189,000
and $98,000 in 1998 and 1997, respectively......... 5,741,904 5,386,938
Prepaid expenses and other current assets........... 41,198 67,903
---------- ----------
Total current assets.............................. 7,270,072 7,162,233
Property and equipment, net......................... 163,194 112,191
---------- ----------
Total assets...................................... $7,433,266 $7,274,424
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................... $3,763,629 $3,122,334
Accrued expenses.................................... 435,737 411,163
Short-term debt..................................... 19,276 38,553
---------- ----------
Total current liabilities......................... 4,218,642 3,572,050
---------- ----------
Commitments and contingencies
Stockholder's equity:
Cross Con Terminals, Inc.:
Common stock, $1 par value; 1,000 shares autho-
rized; 250 shares issued and outstanding at March
31, 1998 and December 31, 1997................... 250 250
Cross Con Transport, Inc.:
Common stock, no par value; 100,000 shares autho-
rized; 1,000 shares issued and outstanding at
March 31, 1998 and December 31, 1997............. -- --
Additional paid-in capital........................ 1,000 1,000
Retained earnings................................. 3,213,374 3,701,124
---------- ----------
Total stockholder's equity...................... 3,214,624 3,702,374
---------- ----------
Total liabilities and stockholder's equity...... $7,433,266 $7,274,424
========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-58
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
-----------------------
1998 1997
----------- -----------
<S> <C> <C>
Revenues............................................... $13,439,009 $12,374,466
Cost of transportation................................. 11,810,328 11,083,520
----------- -----------
Net revenue.......................................... 1,628,681 1,290,946
Operating expenses:
Selling, general and administrative expenses......... 967,094 802,206
Depreciation and amortization........................ 5,437 9,129
----------- -----------
Income from operations............................... 656,150 479,611
Interest and other income.............................. 29,750 15,160
----------- -----------
Income before income tax provision................... 685,900 494,771
Income tax provision................................... 10,000 7,000
----------- -----------
Net income........................................... $ 675,900 $ 487,771
=========== ===========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-59
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED STATEMENTS OF STOCKHOLDER'S EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 1998, AND THE YEAR ENDED DECEMBER 31,

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED STOCKHOLDER'S
STOCK CAPITAL EARNINGS EQUITY
------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1997......... $250 $1,000 $3,701,124 $3,702,374
Net income (unaudited)........... -- -- 675,900 675,900
Distributions to stockholders
(unaudited)..................... -- -- (1,163,650) (1,163,650)
---- ------ ---------- ----------
BALANCE, March 31, 1998 (unau-
dited)............................ $250 $1,000 $3,213,374 $3,214,624
==== ====== ========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-60
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

COMBINED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 675,900 $ 487,771
Adjustments to reconcile net income to net cash
provided by operating activities--
Depreciation and amortization...................... 5,437 9,129
Changes in working capital--
Accounts receivable, net......................... (354,966) (241,800)
Prepaid expenses and other current assets........ 26,705 31,623
Accounts payable................................. 641,294 519,254
Accrued expenses................................. 24,574 (206,252)
---------- ----------
Net cash provided by operating activities...... 1,018,944 599,725
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net............. (56,439) --
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholder......................... (1,163,650) --
Payments on short-term debt.......................... (19,277) (23,847)
Payments on debt..................................... -- (8,260)
---------- ----------
Net cash used in financing activities.......... (1,182,927) (32,107)
---------- ----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (220,422) 567,618
CASH AND CASH EQUIVALENTS, beginning of period......... 1,707,392 1,193,675
---------- ----------
CASH AND CASH EQUIVALENTS, end of period............... $1,486,970 $1,761,293
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for--
Interest........................................... $ 1,289 $ 762
Income taxes....................................... -- 12,262
========== ==========
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.

F-61
<PAGE>

CROSS CON TERMINALS, INC. AND
CROSS CON TRANSPORT, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)

1. THE COMPANY

Cross Con Terminals, Inc. ("Terminals") and Cross Con Transport, Inc.
("Transport") (together, the "Company") operate as S corporations and are
controlled by the same stockholder. Terminals is engaged in the business of
arranging, on behalf of others, for the transportation of freight over long
distances. Terminals contracts with railroads to provide transportation over
the long-haul portion of customer shipments and with local trucking companies,
known as "drayage companies," for pickups and deliveries. Transport provides
trucking services in the Chicago, Illinois, area using both owner-operator
drivers and leased truck equipment.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Quarterly Financial Data

The combined financial statements presented herein include the accounts of
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Company believes that the disclosures
are adequate to make the information presented not misleading, although
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, the combined financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the Company's results of operations,
financial position and cash flows. The combined financial statements should be
read in conjunction with the consolidated financial statements and the notes
thereto included elsewhere in this Prospectus.

PRINCIPLES OF COMBINATION

The combined financial statements of the Company include all accounts of
Terminals and Transport. All material intercompany amounts and transactions
have been eliminated.

USE OF ESTIMATES

INCOME TAXES

The Company has elected for federal and applicable state tax reporting to
include income with that of its stockholder (an S corporation election). The
income tax provision represents a provision for state replacement taxes on the
accompanying income statement.

F-62
<PAGE>

3. DEBT

The Company maintains a revolving line of credit with a bank in the amount
of $3,000,000 that bears interest at the bank's prime rate. The line is
secured by the assets of the Company and as of March 31, 1998, and December
31, 1997, no amounts were outstanding on the line of credit. The line requires
the Company to maintain compliance with certain financial covenants. As of
March 31, 1998, and December 31, 1997, the Company was in compliance with all
of these financial covenants.

As of March 31, 1998 and December 31, 1997, the Company has financed
insurance payments in the amounts of approximately $19,000 and $39,000,
respectively, at an interest rate of 9.40% and 9.39%, respectively.

4. COMMITMENTS AND CONTINGENCIES

Legal Proceedings and Contingencies

5. SUBSEQUENT EVENTS

In April 1998, the Company signed a letter of intent to sell the Company.

6. PRO FORMA TAX PROVISION

If the Company had been taxed as a C corporation, the combined provision for
income taxes and net income would have been approximately $288,000 and
$398,000, respectively, as of March 31, 1998, and $208,000 and $287,000,
respectively, as of March 31, 1997 assuming an effective tax rate of 42%.

F-63
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION AND REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 9
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Industry Overview........................................................ 25
Business................................................................. 28
Management............................................................... 37
Certain Transactions..................................................... 43
Principal and Selling Stockholders....................................... 44
Description of Capital Stock............................................. 45
Shares Eligible for Future Sale.......................................... 48
Underwriting............................................................. 50
Legal Matters............................................................ 52
Experts.................................................................. 52
Additional Information................................................... 52
Glossary of Terms........................................................ 53
Index to Financial Statements............................................ F-1
</TABLE>

------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

3,200,000 Shares

LOGO
PACER INTERNATIONAL, INC.

Common Stock

------------

PROSPECTUS

------------

BT ALEX. BROWN

PAINEWEBBER INCORPORATED

MORGAN KEEGAN & COMPANY, INC.

, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimated
except the Securities and Exchange Commission registration fee, the National
Association of Securities Dealers, Inc. filing fee and the Nasdaq National
Market listing fee.

<TABLE>
<S> <C>
SEC registration fee............................................. $ 14,113
NASD filing fee.................................................. 5,284
Nasdaq National Market listing fee............................... 40,000
Blue sky fees and expenses....................................... 5,000
Printing and engraving expenses.................................. 250,000
Legal fees and expenses.......................................... 300,000
Accounting fees and expenses..................................... 425,000
Transfer agent and registrar fees................................ 5,000
Miscellaneous.................................................... 155,603
----------
Total.......................................................... $1,200,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to Section 102(b)(7) of the Delaware General Corporation Law (the
"DGCL"), Article V of the Restated Certificate of Incorporation of Pacer
International, Inc. (the "Company", "Pacer" or the "Registrant") (the
"Certificate") (filed as Exhibit 3.1 to this Registration Statement)
eliminates the liability of the Company's directors to the Company or its
stockholders, except for liabilities related to breach of duty of loyalty,
actions not in good faith and certain other liabilities.

Section 145 of the DGCL provides for indemnification by the Company of its
directors and officers. In addition, Article VI of the Certificate and Article
IX of the Company's By-laws (filed as Exhibit 3.2 to this Registration
Statement) require the Company to indemnify any current or former director or
officer to the fullest extent permitted by the DGCL. In addition, the Company
intends to enter into indemnity agreements with its directors (a form of which
is filed as Exhibit 10.2 to this Registration Statement) which obligate the
Company to indemnify such directors to the fullest extent permitted by the
DGCL. The Company also maintains officers' and directors' liability insurance,
which insures against liabilities that officers and directors of the Company
may incur in such capacities.

Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1
to this Registration Statement, which provides for indemnification of the
directors and officers of the Company signing the Registration Statement and
certain controlling persons of the Company against certain liabilities,
including those arising under the Securities Act, in certain instances by the
Underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since March 1997, the Company has issued unregistered securities to
investors and to certain other individuals in connection with acquisitions.
Each such issuance was made in reliance upon the exemption from the registered
requirements of the Securities Act, contained in Section 4(2) of the
Securities Act on the basis that such transactions did not involve a public
offering.

(a) On March 31, 1997, pursuant to a Stock Subscription Agreement among
Pacer, Eos Partners, L.P. ("Eos") and Donald C. Orris ("Orris"), the Company
issued to Eos and Orris an aggregate of 2,992,500 shares of Common Stock and
2,992,500 shares of Series A Preferred Stock for an aggregate purchase price
of $3,150,000.

II-1
<PAGE>

(b) On March 31, 1997, pursuant to their respective Restricted Stock
Issuance and Stock Purchase Agreements, Pacer issued to each of Gerry Angeli
("Angeli") and Robert L. Cross ("Cross") 166,250 shares of Common Stock and
166,250 shares of Series A Preferred Stock for an aggregate purchase price of
$350,000.

(c) On December 16, 1997, pursuant to a Stock Purchase Agreement, Pacer
issued an aggregate of 1,353,750 shares of Common Stock to Gary I. Goldfein
("Goldfein") and Allen E. Steiner ("Steiner") as partial consideration for all
of the capital stock of Interstate Consolidation, Inc. ("ICI") and Interstate
Consolidation Service, Inc. ("ICSI").

(d) On April 3, 1998, pursuant to an Agreement and Plan of Merger, Pacer
issued an aggregate of 217,142 shares of Common Stock to John W. Hein ("Hein")
as partial consideration for all of the capital stock of Intraco, Inc. (d/b/a
Stutz & Company) ("Stutz").

(e) On June 5, 1998, pursuant to a Stock Purchase Agreement, Pacer issued an
aggregate of 541,500 shares of Common Stock to Richard Hyland ("Hyland") as
partial consideration for all of the capital stock of Cross Con Terminals,
Inc. ("Terminals") and Cross Con Transport, Inc. ("Transport" and, together
with Terminals, "Cross Con").

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Form of Restated Certificate of Incorporation of the Company.
3.2 Form of Amended and Restated Bylaws of the Company.
4.1 Certificate for Shares.
5.1 Opinion of O'Sullivan Graev & Karabell, LLP (including the consent of
such firm) regarding legality of securities being offered.
10.1 Form of Registration Rights Agreement.
10.2 Form of Indemnification Agreement.
10.3 1997 Stock Option Plan.
10.4 1998 Stock Option Plan.
10.5 Employment Agreement dated March 31, 1997 between Pacific Motor
Transport Company ("PMTC") and Orris.
10.6 Employment Agreement dated March 31, 1997 between PMTC and Angeli.
10.7 Employment Agreement dated March 31, 1997 between PMTC and Cross.
10.8 Employment Agreement dated December 16, 1997 between Pacer and
Goldfein.
10.9 Employment Agreement dated December 16, 1997 between Pacer and
Steiner.
10.10 Employment Agreement dated April 3, 1998 between PMTC and Hein.
10.11 Stock Purchase Agreement dated March 31, 1997 by and among Union
Pacific Railroad Company, Southern Pacific Transportation Company
("SPTC"), PMTC and Pacer.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.12 Stock Purchase Agreement dated as of December 16, 1997 between Pacer,
ICI, ICSI, Goldfein and Steiner.
10.13 Agreement and Plan of Merger dated as of April 3, 1998 between Pacer
Integrated Logistics, Inc. ("PIL"), Stutz and Hein.

10.14 Warrant to purchase 18,421 units (consisting of 18,421 shares of the
Company's Series A Preferred Stock and 18,421 shares of the Company's
Common Stock) issued by the Company in favor of SPTC on March 31,
1997.
10.15 Supplemental Stock Option Agreement dated as of March 31, 1997 between
the Company and Cross. See Schedule A attached to Exhibit 10.15 for a
list of additional Supplemental Stock Option Agreements entered into
by the Company on substantially similar terms.
10.16 Service Stock Option Agreement dated as of March 31, 1997 between the
Company and Cross. See Schedule B attached to Exhibit 10.16 for a
list of additional Service Stock Option Agreements entered into by
the Company on substantially similar terms.
10.17 Restricted Stock Issuance and Stock Purchase Agreement dated as of
March 31, 1997 by and between the Company and Cross. See Schedule C
attached to Exhibit 10.17 for a list of additional Restricted Stock
Issuance and Stock Purchase Agreements entered into by the Company on
substantially similar terms.
10.18 Amended and Restated Credit Agreement dated as of December 16, 1997
(the "Credit Agreement"), among the Company, PMTC, ICI, ICSI, IMCS,
ICI Acquisition Company, Pacer International Rail Services LLC (f/k/a
American International Rail Services LLC) ("PIRS"), Pacer Rail
Services LLC (f/k/a American International Mechanical Services LLC)
("PRS") and The First National Bank of Chicago, as agent (the
"Agent").
10.19 Amendment No. 1 to Credit agreement dated as of March 31, 1998 among
the Company, PMTC, ICI, ICSI, IMCS, PIRS, PRS, PIL and the Agent.
10.20 Amendment No. 2 to Credit Agreement dated as of May 1, 1998 among the
Company, PMTC, ICI, ICSI, IMCS, PIRS, PRS, PIL, Pacer Logistics, Inc.
("Logistics") and the Agent.
10.21 Amendment No. 3 to Credit Agreement dated as of May 29, 1998 among the
Company, PMTC, ICI, ICSI, IMCS, PIRS, PRS, PIL, Logistics and the
Agent.
10.22 Amended and Restated Security Agreement dated as of December 16, 1997
executed by PMTC in favor of the Agent. See Schedule D attached to
Exhibit 10.22 for a list of additional Security Agreements entered
into by the Company on substantially similar terms.
10.23 Pledge Agreement dated as of May 1, 1998 executed by Logistics in
favor of the Agent. See Schedule E attached to Exhibit 10.23 for a
list of additional Pledge Agreements entered into by the Company on
substantially similar terms.
10.24 Stock Purchase Agreement dated as of May 29, 1998 among the Company,
Cross Con and Hyland (the "Cross Con Purchase Agreement").
10.25 Letter Agreement dated June 5, 1998 between the Company and Cross Con
and Hyland, which letter agreement amends the Cross Con Purchase
Agreement.
10.26 Undivided Assignment and Assumption Agreement dated as of June 5, 1998
by and between the Company and Cross Con Acquisition Corp.
10.27 Employment Agreement dated June 5, 1998 between the Company and
Hyland.
10.28 Amendment No. 4 to Credit Agreement dated as of June 5, 1998 among the
Company, PMTC, ICI, ICSI, IMCS, PIRS, PRS, PIL, Logistics, Terminals,
Transport and the Agent.
21.1 List of Subsidiaries.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
23.1 Consent of O'Sullivan Graev & Karabell, LLP (to be included aspart of
its opinion to be filed as
Exhibit 5.1 hereto).
23.2 Consent of Arthur Andersen LLP, independent accountants.
23.3 Consent of KPMG Peat Marwick LLP, independent accountants.
24.1 Powers of Attorney (included on signature page).
27.1 Financial Data Schedule.
</TABLE>

(B) FINANCIAL STATEMENT SCHEDULES.

All schedules are omitted because they are inapplicable or the requested
information is shown in the consolidated financial statements or related
notes.

ITEM 17. UNDERTAKINGS.

The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the DGCL, the Restated Certificate and Bylaws, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-4
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SAN
FRANCISCO, STATE OF CALIFORNIA ON THE 30TH DAY OF JULY, 1998.

PACER INTERNATIONAL, INC.

By: /s/ Donald C. Orris
----------------------------------
Donald C. Orris
President and Chief Executive
Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED ON THE 30TH DAY OF JULY,
1998, BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED:

<TABLE>
<S> <C>
SIGNATURE TITLE

/s/ Donald C. Orris President, Chief Executive
- ------------------------------------- Officer and Director (Principal
DONALD C. ORRIS Executive Officer)

* Chief Financial Officer
- ------------------------------------- (Principal Financial Officer)
LAWRENCE C. YARBERRY

* Vice President and Controller
- ------------------------------------- (Principal Accounting Officer)
JOSEPH P. ATTURIO

* Director
- -------------------------------------
GERRY ANGELI

* Director
- -------------------------------------
DOUGLAS R. KORN

* Director
- -------------------------------------
GARY I. GOLDFEIN

*By /s/ Donald C. Orris
-----------------------------------
DONALD C. ORRIS, ATTORNEY-IN-FACT
</TABLE>

II-5