<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 13, 2000
-----------------
PACER INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Commission file number 333-85041
Tennessee 62-0935669
----------- ----------
(State or other jurisdiction (I.R.S. employer
of incorporation) identification no.)
1340 Treat Blvd., Suite 200
Walnut Creek, CA 94596
Telephone Number (800) 225-4222
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements are filed as part of this report pursuant to
Rule 3.05(a) of Regulation S-X:
Conex Global Logistics Services, Inc., MSL Transportation Group, Inc. and
Jupiter Freight, Inc. Combined Financial Statements:
<TABLE>
<CAPTION>
Page
---------------
<S> <C>
Report of Independent Accountants.................................................. 4
Combined Balance Sheets as of December 31, 1998 and
September 30, 1999 (Unaudited)................................................... 5
Combined Statements of Operations for the Year Ended
December 31, 1998 and the Nine Months Ended September 30, 1999
and 1998 (Unaudited)............................................................. 6
Combined Statements of Stockholders' Equity for the Year Ended
December 31, 1998 and the Nine Months Ended September 30, 1999
(Unaudited)...................................................................... 7
Combined Statements of Cash Flows for the Year Ended
December 31, 1998 and the Nine Months Ended September 30, 1999
and 1998 (Unaudited)............................................................. 8
Notes to Combined Financial Statements............................................. 9
</TABLE>
The following pro forma financial statements are filed as part of this report
pursuant to Article 11 of Regulation S-X:
Pacer International, Inc. Unaudited Pro Forma Financial Statements:
<TABLE>
<CAPTION>
Page
---------------
<S> <C>
Unaudited Pro Forma Consolidated Balance Sheet as of September 17, 1999.............. 19
Unaudited Pro Forma Consolidated Statements of Operations for the Year
Ended December 25, 1998 and the Nine Months Ended September 17, 1999.............. 20
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PACER INTERNATIONAL, INC.
Date: March 27, 2000 By: /s/ Lawrence C. Yarberry
-------------- ------------------------
Lawrence C. Yarberry
Vice President - Finance
(Principal Financial Officer)
<PAGE>
Report of Independent Accountants
December 2, 1999
To the Stockholders and Board of Directors of
Pacer International, Inc.
In our opinion, the accompanying combined balance sheet, and the related
combined statements of operations, stockholders' equity and cash flows present
fairly, in all material respects, the combined financial position of Conex
Global Logistics Services, Inc., MSL Transportation Group, Inc. and Jupiter
Freight, Inc. (together, the "Company") as of December 31, 1998, and the results
of their operations and their cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States. 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 audit. We conducted our audit in accordance with auditing standards
generally accepted in the United States, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Combined Balance Sheets
December 31, 1998
and September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------- --------------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ - $ 5,159,712
Marketable equity securities - available for sale - 1,195,020
Accounts receivable, net 7,462,955 5,896,550
Prepaid expenses and other current assets 126,593 96,420
----------- -----------
Total current assets 7,589,548 12,347,702
Property, plant and equipment, at cost 13,137,289 12,872,953
Accumulated depreciation and amortization (3,983,514) (4,729,444)
----------- -----------
Property, plant and equipment, net 9,153,775 8,143,509
Other assets 429,837 424,862
----------- -----------
Total assets $17,173,160 $20,916,073
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Cash overdraft $ 120,756 $ -
Accounts payable and accrued expenses 1,099,538 1,311,324
Current maturities of long-term debt and capital leases 258,325 33,223
----------- -----------
Total current liabilities 1,478,619 1,344,547
Long-term liabilities:
Long-term debt and capital leases 8,563 -
Stockholders notes 213,900 163,896
----------- -----------
Total long-term liabilities 222,463 163,896
Commitments and contingencies
Stockholders' equity:
Conex Global Logistics Services, Inc. - Common stock, no par value;
2,000,000 shares authorized; 10,000 shares issued and outstanding 10,000 10,000
MSL Transportation Group, Inc. - Common stock, no par value;
500,000 shares authorized, 100 shares issued and outstanding 10,000 10,000
Jupiter Freight, Inc. - Common stock, no par value; 500,000 shares
authorized, 50 shares issued and outstanding 5,000 5,000
Retained earnings 15,447,078 19,505,880
Accumulated other comprehensive income - (123,250)
----------- -----------
Total stockholders' equity 15,472,078 19,407,630
----------- -----------
Total liabilities and stockholders' equity $17,173,160 $20,916,073
=========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
5
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Combined Statements of Operations
For the Year Ended December 31, 1998
and the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
December 31, ---------------------------
1998 1999 1998
------------- ------------ -------------
(Unaudited)
<S> <C> <C> <C>
Gross revenues $40,106,155 $31,604,389 $29,848,273
Cost of purchased transportation and services 28,313,761 21,673,879 20,580,142
----------- ----------- -----------
Net revenues 11,792,394 9,930,510 9,268,131
Operating expenses:
Selling, general and administrative expenses 6,364,453 4,888,153 4,985,036
Depreciation and amortization 1,363,029 914,897 1,045,695
----------- ----------- -----------
Income from operations 4,064,912 4,127,460 3,237,400
Other (income) expense:
Interest income (92,915) (97,172) (76,275)
Interest expense 142,037 43,089 128,520
Gain on sale of assets (17,015) (54,971) (17,015)
Gain on sale of marketable securities - (993,462) -
Dividend income - (15,099) -
Other, net (35,119) (51,688) (16,139)
----------- ----------- -----------
Income before income taxes 4,067,924 5,296,763 3,218,309
Income taxes 24,854 15,980 17,442
----------- ----------- -----------
Net income $ 4,043,070 $ 5,280,783 $ 3,200,867
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
6
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Combined Statements of Stockholders' Equity
For the Year Ended December 31, 1998
and the Nine Months Ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Earnings Income Total
-------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 $25,000 $13,122,900 $ - $13,147,900
Distributions to stockholders, net - (1,718,892) - (1,718,892)
Net income - 4,043,070 - 4,043,070
-------- ----------- ---------- -----------
Balance, December 31, 1998 25,000 15,447,078 - 15,472,078
Distributions to stockholders (unaudited) - (1,221,981) - (1,221,981)
Net income (unaudited) - 5,280,783 - 5,280,783
Other comprehensive income - unrealized holding losses (unaudited) - - (123,250) (123,250)
-------- ----------- ---------- -----------
Comprehensive income (unaudited) - 5,280,783 (123,250) 5,157,533
-------- ----------- ---------- -----------
Balance, September 30, 1999 (unaudited) $25,000 $19,505,880 ($123,250) $19,407,630
======== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
7
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Combined Statements of Cash Flows
For the Year Ended December 31, 1998
and the Nine Months Ended September 30, 1999 and 1998 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30,
December 31, --------------------------
1998 1999 1998
------------- ------------ ------------
<S> <C> <C> <C>
(Unaudited)
Cash flows from operating activities:
Net income $ 4,043,070 $ 5,280,783 $ 3,200,867
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of assets (17,015) (54,971) (17,015)
Gain on sale of marketable securities - (993,462) -
Depreciation and amortization 1,363,029 914,897 1,045,695
(Increase) decrease in assets:
Accounts receivable (2,223,714) 1,566,405 (558,784)
Due from related party 4,983 - 4,983
Prepaid expenses and other current assets 43,392 30,173 53,415
Other assets (248,803) 4,975 5,897
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (479,532) 211,786 (494,138)
----------- ----------- -----------
Total adjustments (1,557,660) 1,679,803 (40,053)
----------- ----------- -----------
Net cash provided by operating activities 2,485,410 6,960,586 3,240,920
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (122,349) (58,291) (120,695)
Proceeds from sale of property, plant and equipment 670,673 208,631 650,551
Proceeds from sale of marketable securities - 7,191,452 -
Payments for marketable securities - (7,516,260) -
----------- ----------- -----------
Net cash provided by (used in) investing activities 548,324 (174,468) 529,856
----------- ----------- -----------
Cash flows from financing activities:
Repayment of short-term loans (600,001) - (600,001)
Checks drawn in excess of cash balances 120,756 - -
Repayment of checks drawn in excess of cash balances - (120,756) -
Payments on long-term debt (2,844,290) (188,764) (2,774,901)
Payments on stockholders notes (66,671) (50,004) (51,012)
Principal payments under capital lease obligations (66,395) (44,901) (45,928)
Distributions to stockholders, net (1,718,892) (1,221,981) (828,416)
----------- ----------- -----------
Net cash used in financing activities (5,175,493) (1,626,406) (4,300,258)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (2,141,759) 5,159,712 (529,482)
Cash and cash equivalents at beginning of the period 2,141,759 - 2,141,759
----------- ----------- -----------
Cash and cash equivalents at end of the period $ - $ 5,159,712 $ 1,612,277
=========== =========== ===========
Supplemental cash flow disclosure:
Cash paid for:
Interest $ 142,037 $ 43,089 $ 128,520
Income taxes $ 24,854 $ 15,980 $ 17,442
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
8
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements
- --------------------------------------------------------------------------------
1. The Company
Conex Global Logistics Services, Inc. ("Conex"), MSL Transportation Group,
Inc. ("MSL"), and Jupiter Freight, Inc. ("Jupiter") (together, the
"Company") operate as interrelated freight service companies and are
controlled by the same stockholders. The Company's business consists of
(1) intermodal marketing, which involves the provision of logistics
services by coordinating the transportation of goods by truck and rail, (2)
specialized trucking services, including drayage, and (3) other
transportation services, such as freight consolidation, handling and a
bonded container freight station. The services are primarily provided in
the United States, with occasional movements to Canada and Mexico.
2. Summary of Significant Accounting Policies
Principles of Combination
The combined financial statements of the Company include all accounts of
Conex, MSL and Jupiter. All material intercompany amounts and transactions
have been eliminated.
Interim Financial Information
The interim financial data as of September 30, 1999 and for the nine months
ended September 30, 1999 and September 30, 1998 is unaudited; however, in
the opinion of the Company, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
statement of the results of the interim periods.
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.
The accompanying notes are an integral part of these combined financial
statements.
9
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (Continued)
Marketable Equity Securities
Marketable equity securities are classified as available for sale, and are
reported at fair value, with unrealized gains and losses excluded from
earnings and reported as other comprehensive income in the accompanying
statement of stockholders' equity. Realized gains or losses have been
computed using the specific identification method.
Accounts Receivable
Trade accounts receivable are reflected net of allowances for doubtful
accounts of $883,296 and $677,356 at December 31, 1998 and September 30,
1999 (unaudited), respectively.
Property, Plant and Equipment
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, plant and
equipment, with a corresponding amount recorded as a capital lease
obligation. Depreciation and amortization are provided on a straight-line
basis over the estimated useful lives of the assets as follows:
Classification Estimated Useful Life
-------------- ---------------------
Building 31.5 years
Airplane 5 years
Equipment 5 to 7 years
Automobiles and trucks 5 years
Furniture and fixtures 7 years
Leasehold improvements 5 to 15 years
When assets are sold, the applicable costs and accumulated depreciation are
removed from the accounts, and any gain or loss is included in income.
Expenditures for maintenance and repairs are expensed as incurred.
The accompanying notes are an integral part of these combined financial
statements.
10
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (Continued)
Reliance on Independent Contractors
The Company relies upon the services of independent contractors for
underlying transportation services for their customers. Contracts with
independent contractors are, in most cases, terminable upon short notice by
either party. Although the Company believes its relationships with
independent contractors are good, there can be no assurance that the
Company will continue to be successful in retaining and recruiting
independent contractors or that independent contractors who terminate their
contracts can be replaced by equally qualified persons.
Dependence on Railroads and Equipment and Service 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 services are 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 rail,
truck and ocean 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
materiality adversely affected on a temporary or permanent basis.
Concentration of Business on Intermodal Marketing
Significant portions 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.
The accompanying notes are an integral part of these combined financial
statements.
11
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (Continued)
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of accounts receivable. The Company sells
its services primarily on 21-day terms, performs credit evaluation
procedures on its customers, and generally does not require collateral.
The Company maintains an allowance for doubtful accounts.
The following summarizes, with respect to significant customers, the
accounts receivable balances at December 31, 1998 and September 30, 1999
and 1998 and sales activity for the year ended December 31, 1998 and the
nine months ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Accounts Receivable Sales
------------------------------- ---------------------------------------------
Nine months ended
Year ended September 30,
December 31, September 30, December 31, -----------------------------
Customer 1998 1999 1998 1999 1998
- --------------------------- -------------- --------------- -------------- -------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
A $2,824,944 $2,217,051 $13,314,490 $ 9,744,600 $10,666,684
B 576,336 470,579 3,004,021 3,159,999 2,341,037
---------- ---------- ----------- ----------- -----------
$3,401,280 $2,687,630 $16,318,511 $12,904,599 $13,007,721
========== ========== =========== =========== ===========
</TABLE>
The Company maintains its cash accounts in commercial banks, money market
accounts and certificates of deposit. As of December 31, 1998, the Company
had cash balances in excess of the Federal Deposit Insurance Corporation
("FDIC") limit of $100,000 per institution. However, the Company does not
anticipate nonperformance by the counterparties.
Financial Instruments
The carrying amounts for cash, accounts 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 for trucking, warehousing and transloading
are recognized upon completion of the Company's services. Rail intermodal
income and expense are recognized at order placement.
The accompanying notes are an integral part of these combined financial
statements.
12
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies (Continued)
Income Taxes
The Company has elected S Corporation status for federal and applicable
state tax reporting purposes. Accordingly, income taxes are generally the
responsibility of the stockholders, not the Company, except with respect to
California state franchise taxes applied to S Corporations.
3. Property, Plant and Equipment
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
---------------------- ----------------------
(Unaudited)
<S> <C> <C>
Land $ 2,607,770 $ 2,607,770
Building 3,135,468 3,135,468
Airplane 4,002,325 4,002,325
Equipment 1,654,967 1,663,772
Trucks 955,299 632,672
Automobiles 265,936 307,922
Furniture and fixtures 308,665 308,665
Leasehold improvements 206,859 214,359
----------- -----------
13,137,289 12,872,953
Less, accumulated depreciation and amortization (3,983,514) (4,729,444)
----------- -----------
Property, plant and equipment $ 9,153,775 $ 8,143,509
=========== ===========
</TABLE>
The Company leases certain equipment totaling $283,059 at December 31, 1998
under capital lease agreements that expire in 1999. Accumulated
depreciation for these assets at December 31, 1998 amounted to $264,306,
for a net book value of $18,753. Depreciation expense on leased assets for
the year ended December 31, 1998 amounted to $52,203.
The accompanying notes are an integral part of these combined financial
statements.
13
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
------------------- --------------------
(Unaudited)
<S> <C> <C>
Accounts payable $ 886,131 $ 944,236
Payroll and payroll tax 66,927 152,580
Vacation - 26,420
Pension 23,524 -
Drayage 97,956 183,088
Legal 25,000 5,000
---------- ----------
Total $1,099,538 $1,311,324
========== ==========
</TABLE>
5. Debt and Capital Leases
The Company has the following debt and capital leases outstanding:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1999
-------------------- --------------------
(Unaudited)
<S> <C> <C>
Loans payable for vehicles, collateralized by the underlying
asset, payable in monthly installments, with interest rates
varying between 7.9% to 8.95% per annum, expiring on various
dates to June 2000. $ 219,172 $ 30,408
Various capital lease obligations expiring on various dates
through 1999, less interest of $1,518. 47,716 2,815
Less, current portion (258,325) (33,223)
--------- --------
$ 8,563 $ -
========= ========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
14
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
5. Debt and Capital Leases (Continued)
Future maturities of debt and capital leases are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
- ------------
<S> <C>
1999 $258,325
2000 8,563
--------
Total future maturities of debt and capital leases $266,888
========
</TABLE>
6. Related Party Transactions
The terms of the following related-party transactions are arranged between
the stockholders and the Company:
Notes Payable to the Stockholders
The Company has notes payable to its stockholders in the amount of $213,900
and $163,896 at December 31, 1998 and September 30, 1999 (unaudited),
respectively. These notes bear interest at the reference rate plus 1.25%,
payable monthly. The reference rate at December 31, 1998 was 7.75%.
Guarantees of Indebtedness
The Company has guaranteed certain indebtedness of a related party totaling
approximately $4 million at September 30, 1999 (unaudited).
Lease Contract
The Company leases certain of the office facilities and warehouses from a
related party. The rent expenses related to these leases were $1,020,000,
$765,000 and $765,000 for the year ended December 31, 1998 and for the nine
months ended September 30, 1999 and 1998 (unaudited), respectively (see
Note 7).
Other
Included in these combined financial statements are expenses of
approximately $45,000, $34,000 and $34,000 for the year ended
December 31, 1998 and for the nine
The accompanying notes are an integral part of these combined financial
statements.
15
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
months ended September 30, 1999 and 1998 (unaudited), respectively,
incurred on behalf of a related party for which the Company expects no
reimbursement.
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. 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, results of operations or cash flows.
Operating Leases
The Company leases office facilities and warehouses, automobiles, trucks,
radios, and other office equipment under operating leases. Future minimum
lease payments under non-cancelable operating leases at December 31, 1998
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 $1,164,936
2000 1,078,577
2001 1,022,570
2002 1,020,000
2003 and thereafter 2,480,000
----------
$6,766,083
=========
</TABLE>
Total rent expenses under all operating leases were $1,354,759, $1,112,194
and $955,512 for the year ended December 31, 1998 and for the nine months
ended September 30, 1999 and 1998 (unaudited), respectively.
8. 401(k) Defined Contribution Plans
All eligible employees of the Company may participate in either the Conex
Freight Systems, Inc. or Jupiter Freight, Inc. 401(k) Plans (the "401(k)
Plans") qualified under Section 401(k) of the Internal Revenue Code of
1986. Under the 401(k) Plans, employees who have met certain service
requirements may contribute up to the maximum allowed under the Internal
Revenue Code. The Company matches contributions equal to 50% of the
employee's contributions that are not in excess of six percent of the
employee's compensation. The employer contributions vest gradually and are
completely vested after seven years of service to the Company.
Contributions made by the Company were $74,699, $57,074 and $56,024 for the
year ended December 31,
The accompanying notes are an integral part of these combined financial
statements.
16
<PAGE>
Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc.
and Jupiter Freight, Inc.
Notes to Combined Financial Statements (continued)
- --------------------------------------------------------------------------------
1998 and for the nine months ended September 30, 1999 and 1998 (unaudited),
respectively.
9. Subsequent Events (Unaudited)
Effective December 31, 1999, the Company entered into an agreement with a
subsidiary of Pacer International, Inc. ("Pacer") whereby the subsidiary of
Pacer would acquire substantially all the operating assets and assume
certain liabilities of the Company.
The accompanying notes are an integral part of these combined financial
statements.
17
<PAGE>
Pacer International, Inc.
Unaudited Pro Forma Financial Information
Set forth below is certain unaudited pro forma consolidated financial
information for our company which gives effect to our original recapitalization
and acquisition of Pacer Logistics and our current acquisition of certain
assets of Conex Global Logistics Services, Inc., MSL Transportation Group, Inc.
and Jupiter Freight, Inc. (collectively "Conex") pursuant to a purchase
agreement dated December 31, 1999 (the "Purchase Agreement"). The Unaudited Pro
Forma Consolidated Balance Sheet as of September 17, 1999 gives effect to the
acquisition of Conex assets as if it had occurred at September 17, 1999 and
includes the actual results of our recapitalization and acquisition of Pacer
Logistics as they were completed May 28, 1999. The Unaudited Pro Forma
Consolidated Statements of Operations for the year ended December 25, 1998 and
the nine months ended September 17, 1999, give effect to our original
recapitalization and the Pacer Logistics acquisition using the purchase method
of accounting for the Pacer Logistics transaction and the acquisition of Conex
assets, as if our recapitalization, the Pacer Logistics acquisition and the
acquisition of Conex assets had occurred at the beginning of the first period
presented. The historical financial data for September 17, 1999 and the nine
months then ended has been derived from Pacer International's unaudited
financial statements and include, in the opinion of our management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the data for such period. The financial data for September 30,
1999 and the nine months then ended has been derived from Conex's unaudited
financial statements and include, in the opinion of Conex's management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the data for such period.
The results of operations and balance sheet data for Conex have period ending
dates of December 31, 1998 and September 30, 1999. No adjustment has been made
to conform to Pacer International's period ending dates of December 25, 1998 and
September 17, 1999 due to immateriality.
The unaudited pro forma adjustments, as described in the notes to the unaudited
pro forma consolidated financial statements, are based on available information
and upon certain assumptions that management believes are reasonable. The
purchase of Pacer Logistics and the acquisition of Conex assets has been
reflected based on preliminary estimates of fair values, which may be updated
based on final appraisals and other estimates of fair value.
Management does not claim or represent that the unaudited pro forma consolidated
statement of operations information nor the unaudited pro forma consolidated
balance sheet data set forth below is indicative of the results of operations or
financial position that would have been reported had the transactions actually
occurred at the beginning of the period presented nor is it indicative of our
future results. There can be no assurance that the assumptions used in the
preparation of the unaudited pro forma consolidated financial information, which
we believe to be appropriate in the circumstances, will prove to be correct. The
unaudited pro forma consolidated information should be read in conjunction with
the historical consolidated financial statements of Pacer International and
notes thereto and the audited historical financial statements of Conex included
in this filing.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
18
<PAGE>
Pacer International, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
September 17, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pacer Pacer
International, Inc. Conex Conex International, Inc.
Historical Historical Pro Forma Pro Forma
Balances Balances Adjustments Balances
-------------------- ------------ ------------- -------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 10,094,636 $ 5,159,712 $ (5,159,712) (a)
(11,250,000) (c) $ (1,155,364)
Marketable equity securities - available for sale - 1,195,020 (1,195,020) (a) -
Accounts receivable, net 152,310,234 5,896,550 - 158,206,784
Prepaid expenses and other current assets 3,323,399 96,420 - 3,419,819
------------ ----------- ------------ ------------
Total current assets 165,728,269 12,347,702 (17,604,732) 160,471,239
Property, plant and equipment, at cost 61,832,773 12,872,953 (9,887,024) (a) 64,818,702
Accumulated depreciation and amortization (9,909,296) (4,729,444) 2,330,055 (a) (12,308,685)
------------ ----------- ------------ ------------
Property, plant and equipment, net 51,923,477 8,143,509 (7,556,969) 52,510,017
Goodwill 140,639,999 - 31,984,433 (b) 172,624,432
Other assets 96,030,635 424,862 (400,000) (a) 96,055,497
------------ ----------- ------------ ------------
Total assets $454,322,380 $20,916,073 $ 6,422,732 $481,661,185
============ =========== ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $178,210,041 $ 1,311,324 $ - $179,521,365
Current maturities of long-term debt and capital
leases 1,832,812 33,223 (5,742) (a) 1,860,293
------------ ----------- ------------ ------------
Total current liabilities 180,042,853 1,344,547 (5,742) 181,381,658
Long-term liabilities:
Long-term debt and capital leases 283,312,500 - 15,000,000 (c) 298,312,500
Other liabilities 2,911,736 - - 2,911,736
Stockholders notes - 163,896 (163,896) (a) -
Note payable to seller - - 5,000,000 (c) 5,000,000
------------ ----------- ------------ ------------
Total long-term liabilities 286,224,236 163,896 19,836,104 306,224,236
------------ ----------- ------------ ------------
Minority interest - exchangeable preferred stock 22,875,269 - - 22,875,269
------------ ----------- ------------ ------------
Stockholders' equity: (34,819,978) 19,407,630 (14,142,063) (a)
(5,265,567) (b)
- - 6,000,000 (c) (28,819,978)
------------ ----------- ------------ ------------
Total liabilities and stockholders'
equity $454,322,380 $20,916,073 $ 6,422,732 $481,661,185
============ =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
19
<PAGE>
Pacer International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 17, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pacer Pacer
International, Inc. Conex Conex International, Inc.
Pro Forma Historical Pro Forma Pro Forma
Balances 1/ Balances Adjustments Balances
-------------------- ------------ ------------- --------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Gross revenues $767,425,000 $31,604,389 $ 84,000 (d) $799,113,389
Cost of purchased transportation and services 612,339,000 21,673,879 (277,600) (e) 633,735,279
------------ ----------- ----------- ------------
Net revenues 155,086,000 9,930,510 361,600 165,378,110
------------ ----------- ----------- ------------
Operating expenses:
Direct operating expenses 51,082,000 - - 51,082,000
Selling, general and administrative expenses 56,740,000 5,803,050 (322,400) (f) 62,220,650
Amortization 2,545,000 - 600,000 (g) 3,145,000
Other (income) expense 700,000 - - 700,000
------------ ----------- ----------- ------------
Income from operations 44,019,000 4,127,460 84,000 48,230,460
------------ ----------- ----------- ------------
Other (income) expense:
Interest income - (97,172) - (97,172)
Interest expense 22,085,000 43,089 1,256,250 (h) 23,384,339
Gain on sale of assets - (54,971) - (54,971)
Gain on sale of marketable securities - (993,462) 993,462 (i) -
Dividend income - (15,099) - (15,099)
Other, net - (51,688) - (51,688)
------------ ----------- ----------- ------------
Income before income taxes and minority interest $ 21,934,000 $ 5,296,763 $(2,165,712) $ 25,065,051
============ =========== =========== ============
</TABLE>
- ---------------------------------------------------
1/ See the table on page 21 for development of Pacer International, Inc.
pro forma balances.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
20
<PAGE>
Pacer International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended September 17, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pacer
Logistics
Pacer Pacer Completed Pacer
International Logistics 1998 & 1999 Logistics Pro Forma
Historical (j) Historical (k) Acquisitions (l) Pro Forma Adjustments
-------------- -------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross revenues $616,941,000 $151,708,000 $ 6,333,000 $158,041,000 $ (7,557,000) (m)
Cost of purchased transp. and services 494,056,000 127,157,000 5,447,000 132,604,000 (14,321,000) (n)
------------ ------------ ------------ ------------ ------------
Net revenues 122,885,000 24,551,000 886,000 25,437,000 6,764,000
------------ ------------ ------------ ------------ ------------
Operating expenses:
Direct operating expenses 50,094,000 - - - 988,000 (o)
Selling, general and adm. expenses 37,547,000 17,641,000 376,000 18,017,000 1,176,000 (p)(q)
Amortization 1,348,000 815,000 65,000 880,000 317,000 (r)
Other (income) expense - 700,000 - 700,000 -
------------ ------------ ------------ ------------ ------------
Income from operations 33,896,000 5,395,000 445,000 5,840,000 4,283,000
------------ ------------ ------------ ------------ ------------
Interest (income) expense 9,606,000 1,972,000 148,000 2,120,000 10,359,000 (s)
------------ ------------ ------------ ------------ ------------
Income before income taxes and
minority interest $ 24,290,000 $ 3,423,000 $ 297,000 $ 3,720,000 $ (6,076,000)
============ ============ ============ ============ ============
Pacer
International
Pro Forma
-------------
<S> <C>
Gross revenues $767,425,000
Cost of purchased transp. and services 612,339,000
------------
Net revenues 155,086,000
------------
Operating expenses:
Direct operating expenses 51,082,000
Selling, general and adm. expenses 56,740,000
Amortization 2,545,000
Other (income) expense 700,000
------------
Income from operations 44,019,000
------------
Interest (income) expense 22,085,000
------------
Income before income taxes and
minority interest $ 21,934,000
============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
21
<PAGE>
Pacer International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 25, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pacer Pacer
International, Inc. Conex Conex International, Inc.
Pro Forma Historical Pro Forma Pro Forma
Balances 2/ Balances Adjustments Balances
-------------------- ------------ ------------- --------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Gross revenues $981,630,000 $40,106,155 $ 90,000 (d) $1,021,826,155
Cost of purchased transportation and services 780,415,000 28,313,761 (148,000) (e) 808,580,761
------------ ----------- ----------- --------------
Net revenues 201,215,000 11,792,394 238,000 213,245,394
------------ ----------- ----------- --------------
Operating expenses:
Direct operating expenses 65,291,000 - - 65,291,000
Selling, general and administrative expenses 75,754,000 7,727,482 (456,000) (f) 83,025,482
Amortization 3,696,000 - 800,000 (g) 4,496,000
Other (income) expense (684,000) - - (684,000)
Transaction costs 2,125,000 - - 2,125,000
------------ ----------- ----------- --------------
Income from operations 55,033,000 4,064,912 (106,000) 58,991,912
------------ ----------- ----------- --------------
Other (income) expense:
Interest income - (92,915) - (92,915)
Interest expense 30,103,000 142,037 1,675,000 (h) 31,920,037
Gain on sale of assets - (17,015) - (17,015)
Other, net - (35,119) - (35,119)
------------ ----------- ----------- --------------
Income before income taxes and minority interest $ 24,930,000 $ 4,067,924 $(1,781,000) $ 27,216,924
============ =========== =========== ==============
</TABLE>
- ----------------------------------------------------
2/ See the table on page 23 for development of Pacer International, Inc. pro
forma balances.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
22
<PAGE>
Pacer International, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 25, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pacer
Logistics
Pacer Pacer Completed Pacer
International Logistics 1998 & 1999 Logistics Pro Forma
Historical (j) Historical (k) Acquisitions (t) Pro Forma Adjustments
-------------- -------------- ---------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Gross revenues $590,800,000 $252,762,000 $155,844,000 $408,606,000 $(17,776,000) (m)
Cost of purchased transp. and services 466,300,000 211,222,000 135,269,000 346,491,000 (32,376,000) (n)
------------ ------------ ------------ ------------ ------------
Net revenues 124,500,000 41,540,000 20,575,000 62,115,000 14,600,000
------------ ------------ ------------ ------------ ------------
Operating expenses:
Direct operating expenses 62,400,000 329,000 35,000 364,000 2,527,000 (o)
Selling, general and adm. expenses 29,000,000 28,054,000 15,625,000 43,679,000 3,075,000 (p)(q)
Amortization 600,000 1,334,000 746,000 2,080,000 1,016,000 (r)
Other (income) expense (700,000) - 16,000 16,000 -
Transaction costs - 1,500,000 625,000 2,125,000 -
------------ ------------ ------------ ------------ ------------
Income from operations 33,200,000 10,323,000 3,528,000 13,851,000 7,982,000
------------ ------------ ------------ ------------ ------------
Interest (income) expense - 2,867,000 1,907,000 4,774,000 25,329,000 (s)
------------ ------------ ------------ ------------ ------------
Income before income taxes and
minority interest $ 33,200,000 $ 7,456,000 $ 1,621,000 $ 9,077,000 $(17,347,000)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Pacer
International
Pro Forma
--------------
<S> <C>
Gross revenues $981,630,000
Cost of purchased transp. and services 780,415,000
------------
Net revenues 201,215,000
------------
Operating expenses:
Direct operating expenses 65,291,000
Selling, general and adm. expenses 75,754,000
Amortization 3,696,000
Other (income) expense (684,000)
Transaction costs 2,125,000
------------
Income from operations 55,033,000
------------
Interest (income) expense 30,103,000
------------
Income before income taxes and
minority interest $ 24,930,000
============
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
23
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- -------------------------------------------------------------------------------
(a) Reflects the elimination of certain assets and liabilities not being
acquired under the Purchase Agreement as follows:
<TABLE>
<CAPTION>
Excluded Assets:
<S> <C> <C>
All cash and cash equivalents $ 5,159,712
Smith Barney Investment account 1,195,020
Property, Plant and Equipment
Building located at 550 S. Alameda $ 3,135,468
Land located at 550 S. Alameda 2,607,770
Aircraft 4,002,325
BMW Vehicle 72,584
Leasehold improvements not acquired 68,877
------------------------
Total Property, Plant and Equipment 9,887,024
Less Accumulated Depreciation (2,330,055)
------------------------
Net Property, Plant and Equipment 7,556,969
Aircraft deposits 400,000
--------------------------
Total Excluded Assets $14,311,701
Excluded Liabilities:
Note payable on BMW Vehicle (5,742)
Stockholders notes (163,896)
--------------------------
Total Excluded Liabilities $ (169,638)
--------------------------
Net Excluded Assets in Excess of Liabilities $14,142,063
==========================
</TABLE>
(b) After elimination of the Excluded Assets and Excluded Liabilities
identified above in (a), Pacer acquired the remaining assets of Conex and
assumed certain liabilities. The preliminary purchase price of $37,250,000
(including $1,200,000 of estimated fees and other transaction expenses) has
been allocated to the underlying assets and liabilities based upon their
respective estimated fair market values at the date of acquisition, with
the remainder ($31,984,433) allocated to goodwill, which will be amortized
over 40 years as shown in the table below.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
24
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Accounts receivable, net ............... $ 5,896,550
Prepaid expenses and other current
assets ................................ 96,420
Property, plant and equipment, net...... 586,540
Other assets ........................... 24,862
Current liabilities .................... (1,338,805)
Goodwill ............................... 31,984,433
-----------
Total purchase price ......... $37,250,000
===========
</TABLE>
(c) The acquisition was funded by cash on hand of $11,250,000 and
approximately $15,000,000 financed through Pacer's revolving credit
facility (collectively, total cash consideration of $25,050,000 paid to the
Sellers and other fees and expenses of $1,200,000 paid), the issuance of
300,000 shares of Pacer common stock with an aggregate value of $6,000,000
and the issuance of a note payable to the Seller in an amount up to
$5,000,000.
(d) Reflects reimbursement for adjustment for Rail Terminal Services:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 25, 1998 September 17, 1999
----------------- ------------------
<S> <C> <C>
RTS Adjustment $90,000 $84,000
</TABLE>
(e) Cost of purchased transportation adjustments:
As part of the acquisition of Conex assets, the former owners' salaries and
benefits were contractually reduced in the aggregate by $492,000 for the
year ended December 25, 1998 and $588,000 for the nine months ended
September 17, 1999. (Note: 80% of the adjustment is recorded as an
adjustment to cost of purchased transportation and services and the
remaining 20% is recorded as an adjustment to selling, general and
administrative).
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 25, 1998 September 17, 1999
--------------------- -----------------------
<S> <C> <C>
Elimination of 80% historical owners salaries,
personal expenses paid by Conex and other
benefits $(393,600) $(470,400)
Recording 80% of salaries to be paid in
accordance with the new compensation agreements $ 245,600 $ 192,800
--------------------- -----------------------
Net adjustment $(148,000) $(277,600)
===================== =======================
</TABLE>
One of the new compensation agreements stipulates a per day salary. For the
adjustments above, it was estimated that 214 days and 182 days for the year
ended December 25, 1998 and the nine months ended September 17, 1999,
respectively, would be worked under the agreement.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
25
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
(f) Selling, general and administrative adjustments:
1) Adjustment for the remaining 20% of owners compensation (see (e) above
for details).
2) Elimination of historical selling, general and administrative expenses
associated with operating the aircraft, net of estimated additional cost of
commercial flights of $50,000 and $38,000 for the year ended December 25,
1998 and September 17, 1999, respectively.
3) Adjustment for rental expense for buildings to be utilized that are
not being acquired in the acquisition.
4) Elimination of historical depreciation expense associated with fixed
assets not being acquired.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 25, 1998 September 17, 1999
---------------------------- ------------------------------
<S> <C> <C>
$ (98,400) $(117,600)
Elimination of 20% historical owners salaries, personal expenses
paid by Conex and other benefits
61,400 48,200
Recording 20% of salaries to be paid in accordance with the new
compensation agreements
Elimination of Aircraft Expenses (239,000) (118,000)
Rental Expense for building 720,000 540,000
Elimination of Historical Depreciation (for assets not acquired):
Building (100,000) (75,000)
Aircraft (800,000) (600,000)
---------------------------- ----------------------------
Total SG&A adjustment $(456,000) $(322,400)
============================ ============================
</TABLE>
(g) Amortization:
Amortization of goodwill established in the purchase over a 40-year life:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 25, 1998 September 17, 1999
--------------------- -----------------------
<S> <C> <C>
$800,000 $600,000
Amortization of Goodwill
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
26
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
(h) Reflects the inclusion of interest expense associated with the debt of
$15,000,000 incurred under Pacer's revolving credit facility to fund the
acquisition at an assumed interest rate of 8.5% and a note payable to
Sellers of $5,000,000 at an interest rate of 8.0% resulting in interest
expense of $1,675,000 and $1,256,250 for the year ended December 25, 1998
and the nine months ended September 17, 1999, respectively.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 25, 1998 September 17, 1999
---------------------------- -------------------------------
<S> <C> <C>
Revolving Credit Facility $1,275,000 $ 956,250
Note Payable to Sellers 400,000 300,000
---------------------------- -------------------------------
Total Interest Expense $1,675,000 $1,256,250
============================ ===============================
</TABLE>
(i) Reflects the elimination of the gain on sale associated with assets not
being acquired.
The following notes relate to the pro forma statements of operations for Pacer
International's acquisition of Pacer Logistics. The acquisition was completed on
May 28, 1999 and therefore the pro forma adjustments for the nine months ended
September 17, 1999 reflect the first five months of 1999 as actual results
are included in the statement of operations since May 28, 1999.
(j) Represents amounts derived from the historical audited statement of
operations of Pacer International, Inc. for the year ended December 25,
1998. Prior to the consummation of our recapitalization, Pacer
International was known as APL Land Transport Services, Inc. Prior to
November 1998, Pacer International operated as the American President Lines
Stacktrain Services, a division of APL Land Transport Services, Inc. For
the nine months ended September 17, 1999 amounts were derived from the
unaudited statement of operations of Pacer International, Inc. and includes
the results of Pacer Logistics since the date of acquisition.
(k) Represents amounts derived from the historical audited consolidated
statement of operations of Pacer Logistics, Inc. for the year ended
December 31, 1998. Prior to the consummation of the acquisition of Pacer
Logistics, Pacer Logistics, Inc. was known as Pacer International, Inc. For
the pro forma statement of operations for the nine months ended September
17, 1999, amounts represent the results of operations from January 1, 1999
through May 31, 1999. The results of operations for the period from the
acquisition date of May 28, 1999 until May 31, 1999 were immaterial and no
adjustment has been made to include them in the results of Pacer
International, Inc.
(l) On April 20, 1999, Pacer Logistics acquired certain assets of the Keystone
companies and as part of the acquisition of the Manufacturers
Consolidation Service companies in December 1998, Pacer Logistics initiated
a plan of employee reductions resulting in annual cost savings of $900,000.
To reflect the pro forma effect of this acquisition and cost reductions on
Pacer Logistics' operations, the schedule below presents the unaudited
historical statement of operations of the Keystone companies, for the
period January 1, 1999 to April 20, 1999, along with applicable pro forma
adjustments for the Keystone Terminals acquisition and the impact of cost
savings from the Manufacturers Consolidation Service companies' employee
reductions.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
27
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Completed
Pro Forma 1999
Keystone Adjustments Acquisition
----------- ------------ ------------
<S> <C> <C> <C>
Gross revenues .................................................... $6,333,000 - $6,333,000
Cost of revenues................................................... 5,447,000 - 5,447,000
---------- --------- ----------
Net revenues...................................................... 886,000 - 886,000
Operating expenses:
Selling, general and administrative expenses...................... 544,000 $(168,000) (1)(2) 376,000
Amortization...................................................... - 65,000 (3) 65,000
---------- --------- ----------
Total operating expenses........................................... 544,000 (103,000) 441,000
---------- --------- ----------
Income from operations ........................................... 342,000 103,000 445,000
Interest income/(expense) ......................................... 53,000 (201,000) (4) (148,000)
---------- --------- ----------
Income before income taxes ....................................... $ 395,000 $ (98,000) $ 297,000
========== ========= ==========
</TABLE>
- ------------------------
(1) As part of the Keystone Terminals acquisition in April 1999 the former
owners' salaries and benefits of $93,000 were eliminated. The adjustment
represents the elimination of the former owners' salary and benefits.
(2) The adjustment represents the elimination of Manufacturers Consolidation
Service salaries and benefits of $75,000 representing one month of the
$900,000 annual cost savings not included in historical results, as the
reductions were made in February 1999.
(3) Reflects the following
<TABLE>
<CAPTION>
Nine Months
Ended
September 17,
1999
-------------
<S> <C>
Goodwill amortization if the Keystone Terminals acquisition occurred
On January 1, 1999..................................................... $65,000
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
28
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
(4) Reflects the following:
<TABLE>
<CAPTION>
Nine Months
Ended
September 17,
1999
-------------
<S> <C>
Interest expense that Pacer Logistics would have incurred had the
Keystone Terminals acquisition occurred on January 1, 1999,
based on Pacer Logistics' historical average interest rate
of 8.16% for the period January 1, 1999 to April 20, 1999....... $201,000
</TABLE>
(m) Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Nine Months
Ended Ended
December 25, September 17,
1998 1999
------------------ -------------------
<S> <C> <C>
Intercompany revenues and cost elimination on net sales between
Pacer International and Pacer Logistics........................ $(24,376,000) $(10,294,000)
Management fee to be charged to APL Limited for services rendered
In connection with the Stacktrain Services Agreement ......... 6,600,000 2,737,000
------------ ------------
$(17,776,000) $ (7,557,000)
============ ============
</TABLE>
(n) As an integral part of the Pacer International acquisition of Pacer
Logistics, Pacer International has reached an agreement with CSX
Intermodal, Inc., which effectively provides Pacer International with
$8,000,000 in annual rate reductions or a $2,000,000 quarterly reduction.
These amounts, together with the elimination of intercompany costs
discussed in Note (p) below, results in adjustments to cost of purchased
transportation and services of $32,376,000 for the fiscal year ended
December 25, 1998 and $14,321,000 for the nine months ended September
17, 1999.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
29
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
(o) Reflects the adjustment to lease expense and depreciation as a result of
the sale and leaseback transaction completed in connection with our
recapitalization and the acquisition of Pacer Logistics:
<TABLE>
<CAPTION>
Fiscal Year Nine Months
Ended Ended
December 25, September 17,
1998 1999
------------------ ------------------
<S> <C> <C>
Elimination of historical railcar depreciation expense...... $ (973,000) $ (448,000)
Lease expense associated with the sale and leaseback 3,500,000 1,436,000
transaction................................................ ---------- ----------
$2,527,000 $ 988,000
========== ==========
</TABLE>
(p) Pacer International historically was allocated corporate overhead costs by
APL Limited and, although we believe the allocation was reasonable, we
believe our current corporate structure will effectively allow us to reduce
the historical allocations. Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Nine Months
Ended Ended
December 25, September 17,
1998 1999
------------------ -------------------
<S> <C> <C>
Elimination of historical information technology expenses
allocated to Pacer International by APL Limited.......... $(7,300,000) $(3,014,000)
Cost to outsource information technology services in
accordance with the Information Technology Outsourcing
and License Agreement.................................... 10,000,000 4,038,000
----------- -----------
$ 2,700,000 $ 1,024,000
=========== ===========
</TABLE>
(q) Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Nine Months
Ended Ended
December 25, September 17,
1998 1999
----------------- -----------------
<S> <C> <C>
Incremental management fee charged to Pacer International
by Apollo Management in accordance with the new
management agreement.................................... $375,000 $152,000
======== ========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
30
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
(r) Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Nine Months
Ended Ended
December 25, September 17,
1998 1999
------------------ ------------------
<S> <C> <C>
Elimination of Pacer Logistics historical goodwill
amortization........................................... $(1,334,000) $ (815,000)
Elimination of Pacer Logistics 1998 and 1999 completed
acquisition goodwill amortization...................... (746,000) (65,000)
Estimated goodwill amortization as if the acquisition of
Pacer Logistics had occurred on January 1, 1998, 3,096,000 1,197,000
amortized over forty years ............................ ----------- ----------
$ 1,016,000 $ 317,000
=========== ==========
</TABLE>
(s) Reflects the following:
<TABLE>
<CAPTION>
Fiscal Year Nine Months
Ended Ended
December 25, September 17,
1998 1999
------------------ -------------------
<S> <C> <C>
Elimination of historical Pacer Logistics interest expense
and the amortization of debt issuance costs related to
debt repaid in connection with the acquisition of Pacer
Logistics................................................. $(2,867,000) $(1,972,000)
Elimination of pro forma Pacer Logistics interest expense.. (1,879,000) (201,000)
Interest expense resulting from our $135 million term loan
at an assumed interest rate of 8%......................... 10,800,000 4,500,000
Interest expense resulting from the $150 million notes at
an interest rate of 11 3/4%............................... 17,625,000 7,344,000
Amortization of debt issuance costs of $8.2 million
associated with our Senior credit facilities and the
notes over the life of the related debt................... 1,650,000 688,000
----------- -----------
$25,329,000 $10,359,000
=========== ===========
</TABLE>
(t) Pacer Logistics acquired Intraco Inc. on April 3, 1998, Cross Con
Transport, Inc. and Cross Con Terminals, Inc. on June 6, 1998, Professional
Logistics Management Co., Inc. and 3PL Corporation on July 26, 1998,
Manufacturers Consolidation Service, Inc. and its subsidiaries Levcon,
Inc., MCS of Kansas, Inc. and Manufacturers Consolidation Service of Canada
Inc. on December 10, 1998 and Keystone Terminals, Inc. (DE) and Keystone
Terminals, Inc. (NJ) on April 20, 1999. The schedule below presents the
unaudited historical combined results of operations of the acquired
businesses for the periods from January 1, 1998 until their respective
acquisitions by Pacer Logistics, except for the Keystone companies, which
were acquired in 1999 and are included for the full year.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
31
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended December 25, 1998:
Cross Professional
Intraco Con Logistics MCS (1) Keystone
------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues $1,245,000 $23,661,000 $11,152,000 $95,969,000 $24,281,000
Cost of purchased transportation
and services 845,000 20,971,000 8,512,000 84,725,000 20,680,000
---------- ----------- ----------- ----------- -----------
Net revenues 400,000 2,690,000 2,640,000 11,244,000 3,601,000
Operating expenses:
Direct operating expenses 35,000 - - - -
Selling, general and adm
expenses 123,000 1,664,000 2,356,000 11,745,000 2,341,000
Other (income) expense - - - 16,000 -
Amortization - - - 80,000 -
Transaction costs - - - 625,000 -
---------- ----------- ----------- ----------- -----------
Total operating expenses 158,000 1,664,000 2,356,000 12,466,000 2,341,000
---------- ----------- ----------- ----------- -----------
Income from operations 242,000 1,026,000 284,000 (1,222,000) 1,260,000
Interest income (expense) (3,000) 41,000 (138,000) (649,000) 145,000
---------- ----------- ----------- ----------- -----------
Income before income taxes $ 239,000 $ 1,067,000 $ 146,000 $(1,871,000) $ 1,405,000
========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Completed
Pro Forma 1998 & 1999
Adjustments Acquisitions
------------ --------------
<S> <C> <C>
Gross revenues $ (464,000) (2) $155,844,000
Cost of purchased transportation
and services (464,000) 135,269,000
----------- ------------
Net revenues - 20,575,000
Operating expenses:
Direct operating expenses - 35,000
Selling, general and adm
expenses (2,604,000) (3)(4) 15,625,000
Other (income) expense - 16,000
Amortization 666,000 (5) 746,000
Transaction costs - 625,000
----------- ------------
Total operating expenses (1,938,000) 17,047,000
----------- ------------
Income from operations 1,938,000 3,528,000
Interest income (expense) (1,303,000) (6) (1,907,000)
----------- ------------
Income before income taxes $ 635,000 $ 1,621,000
=========== ============
</TABLE>
- ---------
(1) As part of the acquisition of the Manufacturers Consolidation Service
companies in December 1998, Pacer Logistics elected to exit such companies'
over the road trucking business. The divestiture of this business was
completed in February 1999. Over the road trucking gross revenues of
$8,365,000, cost of purchased transportation and services of $7,644,000,
selling, general and administrative expenses of $1,249,000 and interest
expense of $105,000 have been appropriately excluded from the Manufacturers
Consolidation Service companies results of operations presented.
(2) Reflects the elimination of $464,000 in intercompany revenues and costs
between Pacer Logistics and Intraco.
(3) As part of the acquisition of the Manufacturers Consolidation Service
companies in December 1998, Pacer Logistics initiated a plan of employee
reductions which were made in February, 1999, resulting in the elimination
of salaries and benefits of $900,000 annually in connection with the
employees subject to the reductions.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
32
<PAGE>
Pacer International, Inc.
Notes to Unaudited Pro Forma Financial Statements
- --------------------------------------------------------------------------------
(4) As part of the acquisitions of Intraco in April 1998, the Cross Con
companies in June 1998, the Manufacturers Consolidation Service companies
in December 1998 and the Keystone companies in April 1999, the former
owners' annual salaries and benefits were contractually reduced in the
aggregate by $1,704,000. The components of the reduction were $7,000
related to Intraco, $18,000 related to the Cross Con companies, $786,000
related to the Manufacturers Consolidation Service companies and $893,000
related to the Keystone companies.
(5) Reflects the elimination of historical goodwill amortization for completed
1998 and 1999 acquisitions of $80,000 and recognition of goodwill
amortization, as if the completed 1998 and 1999 acquisitions had occurred
on January 1, 1998, of $746,000, resulting in a net adjustment of $666,000.
(6) Reflects the elimination of historical interest expense relating to assumed
debt paid off at the closing of the acquisition of $576,000 and recognition
of interest expense that Pacer Logistics would have incurred had the
completed 1998 and 1999 acquisitions occurred on January 1, 1998, based on
Pacer Logistics' historical average interest rate of 8.04% of $1,879,000,
resulting in a net adjustment of $1,303,000.
The accompanying notes are an integral part of these unaudited pro forma
financial statements.
33
