<PAGE>
Exhibit 99.3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Set forth below is certain unaudited pro forma consolidated financial
information for our company. In May 1999, APL Land Transport Services was
recapitalized through the purchase of shares of its common stock by affiliates
of Apollo Management, L.P and two other investors from APL Limited and its
redemption of a portion of the shares of common stock held by APL Limited.
After the recapitalization, APL Land Transport Services formed a transitory
subsidiary that was merged with and into Pacer Logistics, making Pacer
Logistics a wholly-owned subsidiary of APL Land Transport Services. In
connection with these transactions, APL Land Transport Services was renamed
Pacer International, Inc.
Since our recapitalization and acquisition of our retail operations, we
have acquired four companies in the retail business. On January 13, 2000, we
acquired substantially all of the assets of Conex Global Logistics Services
Inc. and its subsidiaries, MSL Transportation Group Inc. and Jupiter Freight,
Inc. The Conex companies provide intermodal freight transportation, trucking,
transloading and warehousing services. On August 31, 2000, we acquired all of
the capital stock of GTS Transportation Services, Inc. GTS provides logistics
and truck brokerage services. On October 31, 2000, we acquired all of the
capital stock of RFI Group, Inc. RFI provides us with access to the
international freight forwarding, customs-brokerage and ocean transportation
services market. On December 22, 2000, we acquired all of the capital stock of
Rail Van, Inc., a provider of intermodal products.
The Unaudited Pro Forma Consolidated Balance Sheet as of September 22, 2000
gives effect to the acquisitions of RFI and Rail Van, using the purchase
method of accounting and this offering as if they had occurred at September
22, 2000. The Unaudited Pro Forma Consolidated Statements of Operations for
the year ended December 31, 1999 and the nine months ended September 22, 2000
give effect to our acquisitions in 2000 of Conex, GTS, RFI and Rail Van, our
May 1999 recapitalization and acquisition of Pacer Logistics, an acquisition
effected by Pacer Logistics in 1999 prior to our acquisition of Pacer
Logistics, and this offering as if all such transactions had occurred as of
December 26, 1998. The unaudited pro forma adjustments, as described in the
notes to the unaudited pro forma consolidated financial information, are based
on available information and upon certain assumptions that our management
believes are reasonable. The purchase of Conex, GTS, RFI and Rail Van have
been reflected based on preliminary estimates of fair values, which may be
updated based on final appraisals and other estimates of fair value. Though
the fair value estimates are preliminary, we do not believe there will be a
material change to goodwill when these estimates are finalized.
The unaudited pro forma consolidated financial information does not purport
to represent what our consolidated financial position or consolidated results
of operations would have actually been if the transactions had in fact
occurred on the dates indicated and is not necessarily representative of our
consolidated financial position or results of operations for any future date
or period. The unaudited pro forma consolidated financial information should
be read in conjunction with our historical consolidated financial statements
and notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
1
<PAGE>
PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
September 22, 2000
<TABLE>
<CAPTION>
Historical Balances
------------------------------- Pacer
RFI International, Effects Pacer
Pacer Group, Acquisition Inc. and of Initial International,
International, Rail Van, Inc. Pro Forma Completed Public Inc. Pro Forma
Inc. (a) Inc. (b) (c) Adjustments Acquisitions Offering Balances
-------------- --------- ------ ----------- -------------- ---------- --------------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash
equivalents........... $ -- $ -- $ 0.4 $ -- $ 0.4 $ 27.5 (m) $ 27.9
Accounts receivable,
net................... 152.6 82.4 10.7 (7.2)(d) 238.5 -- 238.5
Accounts receivable
from APL.............. 2.3 -- -- -- 2.3 -- 2.3
Prepaid expenses and
other................. 4.8 1.3 0.8 (0.2)(e) 6.7 -- 6.7
Deferred income taxes.. 4.4 -- 0.2 -- 4.6 -- 4.6
------ ----- ----- ------ ------ ------ -------
Total current
assets.............. 164.1 83.7 12.1 (7.4) 252.5 27.5 280.0
Property and equipment
Property and equipment
at cost............... 65.7 9.0 5.1 (7.3)(f) 72.5 -- 72.5
Accumulated
depreciation.......... (16.2) (3.4) (3.9) 7.3 (f) (16.2) -- (16.2)
------ ----- ----- ------ ------ ------ -------
Property and
equipment, net...... 49.5 5.6 1.2 -- 56.3 -- 56.3
Other assets
Goodwill, net.......... 193.4 -- 1.4 85.6 (g) 280.4 -- 280.4
Deferred income taxes.. 67.8 -- 0.3 -- 68.1 -- 68.1
Other assets........... 10.1 0.5 0.2 0.6 (h) 11.4 (0.8)(n) 10.6
------ ----- ----- ------ ------ ------ -------
Total other assets... 271.3 0.5 1.9 86.2 359.9 (0.8) 359.1
------ ----- ----- ------ ------ ------ -------
Total assets............ $484.9 $89.8 $15.2 $ 78.8 $668.7 $ 26.7 $ 695.4
====== ===== ===== ====== ====== ====== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of
long-term debt........ $ 1.4 $23.0 $ -- $(22.5)(i) $ 1.9 $ -- $ 1.9
Accounts payable and
accrued expenses...... 167.5 59.4 11.6 4.6 (j) 243.1 -- 243.1
------ ----- ----- ------ ------ ------ -------
Total current
liabilities......... 168.9 82.4 11.6 (17.9) 245.0 -- 245.0
Long-term liabilities
Long-term debt
Capital leases......... -- 1.0 -- -- 1.0 -- 1.0
Revolving credit
facility.............. 10.0 -- -- 59.0 (b)(c) 69.0 (69.0)(m) --
Term loan.............. 132.3 -- -- 40.0 (b) 172.3 (40.0)(m) 132.3
Senior subordinated
notes................. 150.0 -- -- -- 150.0 -- 150.0
Notes payable to
former shareholders... 5.0 -- 5.8 (5.8)(c) 5.0 -- 5.0
------ ----- ----- ------ ------ ------ -------
Total long-term
debt................ 297.3 1.0 5.8 93.2 397.3 (109.0) 288.3
Other.................. 1.7 -- 0.3 -- 2.0 -- 2.0
------ ----- ----- ------ ------ ------ -------
Total long-term
liabilities......... 299.0 1.0 6.1 93.2 399.3 (109.0) 290.3
Minority interest--
exchangeable preferred
stock.................. 24.6 -- -- -- 24.6 -- 24.6
Stockholders' equity
(deficit)
Preferred stock........ -- -- -- -- -- -- --
Common stock........... 0.1 -- -- -- 0.1 0.1 (m) 0.2
Additional paid-in-
capital............... 111.1 -- 0.6 6.4 (k) 118.1 136.4 (m) 254.5
Retained earnings
(accumulated
deficit).............. (118.8) 6.4 (3.1) (2.9)(l) (118.4) (0.8)(n) (119.2)
------ ----- ----- ------ ------ ------ -------
Total stockholders'
equity.............. (7.6) 6.4 (2.5) 3.5 (0.2) 135.7 135.5
------ ----- ----- ------ ------ ------ -------
Total liabilities and
equity................. $484.9 $89.8 $15.2 $ 78.8 $668.7 $ 26.7 $ 695.4
====== ===== ===== ====== ====== ====== =======
</TABLE>
See Accompanying Notes to the Unaudited Pro Forma Consolidated Balance Sheet.
2
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) Represents the historical unaudited balance sheet of Pacer International,
Inc. as of September 22, 2000.
(b) Represents the historical unaudited balance sheet of Rail Van, Inc. as of
September 30, 2000. On December 22, 2000, we acquired all of the capital
stock of Rail Van, a provider of intermodal products, for a purchase price
of $74.0 million plus acquisition fees of $2.2 million. The acquisition
was funded with a borrowing of $30.0 million under our revolving credit
facility, $40.0 million in new term loans and the issuance of our common
stock valued in the aggregate at $7.0 million. The acquisition will be
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16 with the aggregate purchase price of $76.2 million
allocated to the underlying assets and liabilities based upon preliminary
estimates of fair value as shown below, which may be updated based on
final appraisals, with the remainder allocated to goodwill which will be
amortized over 40 years.
The purchase price allocation, preliminary in nature and subject to change,
is as follows (in millions):
<TABLE>
<S> <C> <C>
Existing book value of Rail Van, Inc.......................... $ 6.5
Goodwill created in the acquisition........................... $69.7
-----
Net adjustment to intangible assets......................... 69.7
-----
Total Purchase Price...................................... $76.2
=====
</TABLE>
Under the purchase agreement, the maximum amount of debt of Rail Van
assumed by us was $11.0 million. As described in notes (d) and (i) below,
debt of Rail Van in excess of this amount is deemed repaid out of Rail Van
working capital prior to the date of acquisition. In addition, the
remaining Rail Van bank debt of $11.0 million was refinanced by a borrowing
under our revolving credit facility.
(c) Represents the historical unaudited balance sheet of RFI Group, Inc. as of
September 30, 2000. On October 31, 2000, we acquired all of the capital
stock of RFI, an international freight forwarder, for $18.0 million plus
acquisition costs of $0.6 million. The acquisition was funded with a
borrowing of $18.0 million under our revolving credit facility. The
acquisition was accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16 with the aggregate purchase price of $18.6
million allocated to the underlying assets and liabilities based upon
preliminary estimates of fair value as shown below, which may be updated
based on final appraisals, with the remainder allocated to goodwill which
will be amortized over 40 years.
The purchase price allocation, preliminary in nature and subject to change,
is as follows (in millions):
<TABLE>
<S> <C> <C>
Existing book value of RFI................................... $(2.5)
Exclusion of RFI investments not acquired.................... (0.2)
Exclusion of prepaid taxes not acquired...................... (0.2)
Working capital adjustment, net.............................. (0.2)
Elimination of historical intangible assets of RFI........... $(1.4)
Goodwill created in the acquisition.......................... 17.3
-----
Net adjustment to intangible assets........................ 15.9
Repayment of RFI note payable to former shareholders......... 5.8
-----
Total Purchase Price..................................... $18.6
=====
</TABLE>
3
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued)
(d) Reflects the following (in millions):
<TABLE>
<S> <C>
Pay down of debt by Rail Van out of working capital to reflect the
maximum amount of debt assumed under the purchase agreement....... $(6.0)
Accounts receivable elimination on net sales between us and Rail
Van............................................................... (1.2)
-----
$(7.2)
=====
</TABLE>
<TABLE>
<S> <C>
(e) Reflects the elimination of RFI prepaid taxes not acquired (see
note c above) (in millions)........................................ $(0.2)
=====
</TABLE>
(f) Though we have not completed an appraisal of the property and equipment,
we believe net book value approximates fair value (in millions):
<TABLE>
<S> <C>
Property and equipment
RFI............................................................... $(3.9)
Rail Van.......................................................... (3.4)
-----
$(7.3)
=====
Accumulated depreciation
RFI............................................................... $ 3.9
Rail Van.......................................................... 3.4
-----
$ 7.3
=====
</TABLE>
(g) Reflects the following (in millions):
<TABLE>
<S> <C>
Goodwill created in Rail Van acquisition (see note b above)....... $69.7
Goodwill created in RFI acquisition (see note c above)............ 17.3
Elimination of historical intangible asset of RFI (see note c
above)........................................................... (1.4)
-----
$85.6
=====
</TABLE>
(h) Reflects the following (in millions):
<TABLE>
<S> <C>
Capitalization of term loan fees relating to the amendment to our
bank credit agreement executed in connection with the Rail Van
acquisition....................................................... $ 0.8
Elimination of RFI investments not acquired (see note (c) above)... (0.2)
-----
$ 0.6
=====
</TABLE>
(i) Reflects the following (in millions):
<TABLE>
<S> <C>
Pay down of debt by Rail Van out of working capital to reflect
the maximum amount of debt assumed under the purchase
agreement:
Accounts receivable (see note d above).......................... $ (6.0)
Accounts payable (see note j below)............................. (5.5)
Refinancing of remaining Rail Van bank debt under our revolving
credit facility................................................ (11.0)
------
$(22.5)
======
</TABLE>
4
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued)
(j) Reflects the following (in millions):
<TABLE>
<S> <C>
Pay down of debt by Rail Van out of working capital to reflect the
maximum amount of debt assumed under the purchase agreement ....... $5.5
Elimination of accounts payable on net sales between us and Rail
Van................................................................ (1.3)
Reversal of Rail Van accrued dividends in accordance with the
purchase agreement................................................. (0.4)
Working capital adjustment on RFI acquisition (see note (c) above).. 0.2
Accrual of acquisition fees for the purchase of RFI................. 0.6
----
$4.6
====
</TABLE>
(k) Reflects the following (in millions):
<TABLE>
<S> <C>
Elimination of historical RFI additional paid-in capital............ $(0.6)
Common stock issued as part of the purchase price of Rail Van (see
note (b) above).................................................... 7.0
-----
$ 6.4
=====
</TABLE>
(l) Reflects the following (in millions):
<TABLE>
<S> <C>
Elimination of historical retained earnings of Rail Van............. $(6.4)
Reversal of Rail Van accrued dividends in accordance with the
purchase agreement................................................. 0.4
Elimination of historical accumulated deficit of RFI................ 3.1
-----
$(2.9)
=====
</TABLE>
(m) Reflects the issuance in this offering of shares of our common stock at
an assumed initial public offering price of $ per share, which is the
mid point of the range set forth on the cover page of this prospectus. The
application of the proceeds are set forth below (in millions):
<TABLE>
<S> <C>
Gross proceeds.................................................... $150.0
======
Fees and expenses associated with the offering, including
underwriting commissions......................................... $ 13.5
Repayment of term loans........................................... 40.0
Repayment of revolving credit facility............................ 69.0
------
Total uses...................................................... 122.5
======
Net increase in cash............................................ $ 27.5
======
</TABLE>
The proceeds from the IPO are recorded in paid-in capital net of the fees
and expenses above.
<TABLE>
<S> <C>
(n) Reflects the write-off of capitalized loan fees associated with the
repayment of term loan with proceeds from this offering (see note n)
(in millions):...................................................... $(0.8)
=====
</TABLE>
The capitalized loan fees will be written off in the quarter in which the
offering is consummated and the term loan repaid.
5
<PAGE>
PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
Pacer Pacer
International, Inc. International, Inc. Effects of Pacer
Pro Forma Balances 2000 and Completed Initial Public International, Inc.
(a) Acquisitions (b)(g) Acquisitions Offering Pro Forma Balances
------------------- ------------------- ------------------- -------------- -------------------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Gross revenues.......... $1,078.1 $713.4 $1,791.5 $ -- $1,791.5
Cost of purchased
transportation and
services............... 849.6 636.5 1,486.1 -- 1,486.1
-------- ------ -------- ------ --------
Net revenues.......... 228.5 76.9 305.4 -- 305.4
Operating expenses
Direct operating
expenses............. 76.8 -- 76.8 -- 76.8
Selling, general and
administrative
expenses............. 79.8 57.5 137.3 -- 137.3
Depreciation and
amortization......... 9.9 6.0 15.9 -- 15.9
-------- ------ -------- ------ --------
Total operating
expenses........... 166.5 63.5 230.0 -- 230.0
Income from operations.. 62.0 13.4 75.4 -- 75.4
Interest expense
(income), net.......... 31.0 11.4 42.4 (11.5)(c) 30.9
Other (income) expense,
net.................... -- (0.3) (0.3) -- (0.3)
-------- ------ -------- ------ --------
Income before income
taxes and minority
interest............... 31.0 2.3 33.3 11.5 44.8
Income tax expense...... 12.2 1.0 13.2 4.6 (d) 17.8
-------- ------ -------- ------ --------
Income before minority
interest............... 18.8 1.3 20.1 6.9 27.0
Minority interest....... 1.9 -- 1.9 -- 1.9
-------- ------ -------- ------ --------
Net income.............. $ 16.9 $ 1.3 $ 18.2 $ 6.9 $ 25.1
======== ====== ======== ====== ========
</TABLE>
Earnings per share (e):
<TABLE>
<S> <C>
Basic........................................................... $
Pro forma weighted average shares outstanding...................
Diluted......................................................... $
Pro forma weighted average shares outstanding...................
</TABLE>
See accompanying notes to the Unaudited Pro Forma Consolidated Statements of
Operations
6
<PAGE>
PACER INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 22, 2000
<TABLE>
<CAPTION>
Pacer
International, Inc. Pacer Pacer
Consolidated 2000 International, Inc. Effects of International, Inc.
Historical Balances Acquisitions and Completed Initial Public Consolidated Pro
(f) (b)(g) Acquisitions Offering Forma Balances
------------------- ------------ ------------------- -------------- -------------------
(in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Gross revenues.......... $916.5 $495.4 $1,411.9 $ -- $1,411.9
Cost of purchased
transportation and
services............... 718.7 443.5 1,162.2 -- 1,162.2
------ ------ -------- ----- --------
Net revenues.......... 197.8 51.9 249.7 -- 249.7
Operating expenses
Direct operating
expenses............. 60.1 -- 60.1 -- 60.1
Selling, general and
administrative
expenses............. 73.1 45.0 118.1 -- 118.1
Depreciation and
amortization......... 8.2 4.2 12.4 -- 12.4
------ ------ -------- ----- --------
Total operating
expenses........... 141.4 49.2 190.6 -- 190.6
Income from operations.. 56.4 2.7 59.1 -- 59.1
Interest expense
(income), net.......... 24.3 7.2 31.5 (8.3)(c) 23.2
Other (income) expense,
net.................... -- (0.1) (0.1) -- (0.1)
------ ------ -------- ----- --------
Income (loss) before
income taxes and
minority interest...... 32.1 (4.4) 27.7 8.3 36.0
Income tax expense
(benefit).............. 13.6 (1.7) 11.9 3.3 (d) 15.2
------ ------ -------- ----- --------
Income (loss) before
minority interest...... 18.5 (2.7) 15.8 5.0 20.8
Minority interest....... 1.2 -- 1.2 -- 1.2
------ ------ -------- ----- --------
Net income (loss)....... $ 17.3 $ (2.7) $ 14.6 $ 5.0 $ 19.6
====== ====== ======== ===== ========
</TABLE>
Earnings per share (e):
<TABLE>
<S> <C>
Basic................................................................ $
Pro forma weighted average shares outstanding........................
Diluted.............................................................. $
Pro forma weighted average shares outstanding........................
</TABLE>
See accompanying notes to the Unaudited Pro Forma Consolidated Statements of
Operations
7
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(a) Our recapitalization and acquisition of Pacer Logistics, financed
primarily with the issuance of $150.0 million in senior subordinated
notes, $135.0 million in term loans, $133.0 million in issued, rolled or
exchanged equity and $39.7 million in net proceeds from the sale and
leaseback of 199 railcars purchased in 1998, resulted in affiliates of
Apollo Management, LP holding 89.9%, APL Limited holding 7.2% and two
other entities holding 2.9% of our outstanding common stock as of May 28,
1999.
On May 28, 1999, we acquired the common stock of Pacer Logistics (formerly
known as Pacer International, Inc.), a privately-held third party logistics
provider pursuant to a stock purchase agreement, dated as of March 15, 1999
between APL Limited (the former parent) and Coyote Acquisition LLC (a
transitory subsidiary which was merged with and into Pacer Logistics,
Inc.).
We paid approximately $137.5 million for the acquisition of Pacer
Logistics, which included acquisition fees of $2.9 million and assumed
indebtedness of $62.6 million. The acquisition of Pacer Logistics has been
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations". The aggregate purchase price has
been allocated to the underlying assets and liabilities based upon fair
values, with the remainder allocated to goodwill which is being amortized
over 40 years. We determined a 40-year amortization period was appropriate
after considering that there are no legal, regulatory or contractual
provisions associated with the retail segment that may limit the useful
life of the goodwill, the services provided by the retail segment are not
subject to obsolescence, we are not aware of any expected actions of
competitors and others that may restrict the retail segment's ability to
successfully compete in the industry and the predecessor company of the
retail segment has successfully operated since 1928. The results of
operations for the acquired business are included in our consolidated
financial statements beginning May 28, 1999. The financial information set
forth under Pacer International, Inc. pro forma balances for the year ended
December 31, 1999 are reconciled as follows (in millions):
<TABLE>
<CAPTION>
Pacer Pacer
International, Inc. Logistics, Inc. Pacer
Historical Balances Historical Keystone Pro Forma International, Inc.
(1) Balances (2) (3) Adjustments Pro Forma Balances
------------------- --------------- -------- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Gross revenues.......... $927.7 $151.7 $ 6.3 $(7.6)(4)(5) $1,078.1
Cost of purchased
transportation and
services............... 735.4 127.1 5.4 (18.3)(6) 849.6
------ ------ ----- ----- --------
Net revenues........... 192.3 24.6 0.9 10.7 228.5
Operating expenses
Direct operating
expenses.............. 76.8 -- 76.8
Selling, general and
administrative
expenses.............. 58.9 17.9 0.5 2.5 (7) 79.8
Depreciation and
amortization.......... 8.6 1.3 -- -- (8) 9.9
------ ------ ----- ----- --------
Total operating
expenses.............. 144.3 19.2 0.5 2.5 166.5
Income from operations.. 48.0 5.4 0.4 8.2 62.0
Interest expense
(income), net.......... 18.6 2.0 (0.1) 10.5 (9) 31.0
------ ------ ----- ----- --------
Income before income
taxes and minority
interest............... 29.4 3.4 0.5 (2.3) 31.0
Income tax expense
(benefit).............. 11.7 1.5 -- (1.0)(10) 12.2
------ ------ ----- ----- --------
Net income before
minority interest...... 17.7 1.9 0.5 (1.3) 18.8
Minority interest....... 1.1 -- -- 0.8 (11) 1.9
------ ------ ----- ----- --------
Net income (loss)....... $ 16.6 $ 1.9 $ 0.5 $(2.1) $ 16.9
====== ====== ===== ===== ========
</TABLE>
--------
(1) For the year ended December 31, 1999 amounts were derived from our
historical audited statement of operations included elsewhere in
this prospectus. The audited results include the results of Pacer
International, Inc. and Pacer Logistics, Inc. since its acquisition
on May 28, 1999.
8
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(2) Represents amounts derived from the historical consolidated
statement of operations of Pacer Logistics, Inc. for the period
January 1, 1999 to the May 28, 1999 acquisition date.
(3) On April 20, 1999, Pacer Logistics acquired certain assets of
Keystone Terminals, Inc. (DE) and Keystone Terminals, Inc. (NJ),
collectively referred to as Keystone. The amounts above reflect the
unaudited historical combined results of operations for the period
January 1, 1999 to the acquisition date.
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
(4) Elimination of intercompany revenues and costs between
Pacer International and Pacer Logistics (in millions):... $(10.3)
======
(5) Incremental management fee charged to APL Limited for the
period January 1, 1999 to May 28, 1999 for services
rendered in connection with the Stacktrain Services
Agreement (in millions):................................. $ 2.7
------
</TABLE>
(6) As an integral part of our acquisition of Pacer Logistics, we
reached an agreement with CSX Intermodal, Inc., which effectively
provides us with $8 million in annual rate reductions in purchased
transportation costs. This amount, together with the elimination
of the $10.3 million intercompany costs discussed in Note (4)
above results in an adjustment to Cost of Purchased Transportation
of $18.3 million.
(7) Reflects the following selling, general and administrative
adjustments (in millions):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Lease expense associated with the sale and leaseback
transaction(i)............................................ $ 1.4
Elimination of historical information technology expenses
allocated to Pacer International by APL Limited........... (3.0)
Cost to outsource information technology services in
accordance with the Information Technology Outsourcing and
License Agreement entered into in connection with our
recapitalization.......................................... 4.0
Adjustment for Keystone contractual reduction in former
owners salary and benefits................................ (0.1)
Incremental management fee charged to Pacer International
by Apollo Management in accordance with the new management
agreement entered into in connection with our
recapitalization.......................................... 0.2
-----
$ 2.5
=====
</TABLE>
--------
(i) In 1998, we purchased $39.7 million of railroad cars. In
connection with our recapitalization and the acquisition of
Pacer Logistics, we executed a sale and leaseback transaction
for these railcars.
9
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(8) Reflects the following depreciation and amortization adjustments
(in millions):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Elimination of historical railcar depreciation expense
(see note 7 above)....................................... $(0.4)
Estimated goodwill amortization as if the acquisition of
Keystone had occurred on January 1, 1999, amortized over
40 years................................................. 0.1
Elimination of Pacer Logistics historical goodwill
amortization............................................. (0.8)
Elimination of Keystone historical goodwill amortization.. (0.1)
Incremental goodwill amortization for the period January
1, 1999 to the May 28, 1999 acquisition date............. 1.2
-----
$ --
=====
</TABLE>
(9) Reflects the following (in millions):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <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................................................. $(2.0)
Elimination of pro forma Pacer Logistics interest expense.. (0.2)
Incremental interest expense for the period January 1, 1999
to May 28, 1999 on our $135 million term loan at an
assumed interest rate of 8%............................... 4.5
Incremental interest expense for the period January 1, 1999
to May 28, 1999 on our $150 million senior subordinated
notes at an interest rate of 11 3/4%...................... 7.3
Amortization of debt issuance costs of $8.2 million
associated with our bank credit facilities and the notes
over the life of the related debt......................... 0.7
Interest expense that Pacer Logistics would have incurred
had the Keystone 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...................................................... 0.2
-----
$10.5
=====
</TABLE>
(10) Reflects a benefit for income taxes which would have been
recorded, based on the statutory federal and state tax rate net
of state taxes, as Keystone was previously taxed as a Subchapter
S Corporation.
(11) In connection with the acquisition of Pacer Logistics, members of
management received Pacer Logistics exchangeable preferred stock
calling for an annual 7.5% paid-in-kind dividend. The adjustment
represents five months of the annual charge, with the remainder
being included in the historical results.
(b) During 2000, we have completed four acquisitions as follows: on January
13, 2000, we acquired substantially all of the assets and assumed certain
liabilities of Conex Global Logistics Services, Inc., MSL Transportation
Group, Inc., and Jupiter Freight, Inc. (collectively "Conex"); on August
31, 2000, we acquired the stock of GTS Transportation Services, Inc.
("GTS"); on October 31, 2000, we acquired the stock of RFI Group, Inc.
("RFI"); and on December 22, 2000, we acquired the stock of Rail Van,
Inc. ("Rail Van"). The first table below presents information derived
from the audited historical statement of
10
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
operations of Rail Van, Conex and RFI for the year ended December 31, 1999,
and the unaudited GTS historical statement of operations for the year ended
December 31, 1999 along with the applicable pro forma adjustments. The
second table below presents information derived from the unaudited
historical statement of operations of GTS from January 1, 2000 to date of
acquisition on August 31, 2000, and of Rail Van and RFI for the nine months
ended September 30, 2000, along with the applicable pro forma adjustments.
No adjustment to the historical nine months data was made for the Conex
results from January 1, 2000 until January 13, 2000 due to immateriality.
For the year ended December 31, 1999 (in millions):
<TABLE>
<CAPTION>
Completed
Pro Forma 2000
Rail Van Conex GTS RFI Adjustments Acquisitions
-------- ----- ----- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Gross revenues.......... $513.1 $43.4 $87.0 $112.1 $(42.2)(1) $713.4
Cost of purchased
transportation and
services............... 474.5 30.3 78.1 96.1 (42.5)(1)(2) 636.5
------ ----- ----- ------ ------ ------
Net revenues........... 38.6 13.1 8.9 16.0 0.3 76.9
Operating expenses:
Selling, general and
administrative
expenses.............. 33.0 6.8 5.2 13.5 (1.0)(3) 57.5
Depreciation and
amortization.......... 0.9 1.2 -- 0.7 3.2 (4) 6.0
------ ----- ----- ------ ------ ------
Total operating
expenses.............. 33.9 8.0 5.2 14.2 2.2 63.5
Income from operations.. 4.7 5.1 3.7 1.8 (1.9) 13.4
Interest expense
(income), net.......... 0.8 -- (0.2) 0.6 10.2 (5) 11.4
Other (income) expenses,
net.................... (0.1) (1.2) -- -- 1.0 (6) (0.3)
------ ----- ----- ------ ------ ------
Income (loss) before
income taxes........... 4.0 6.3 3.9 1.2 (13.1) 2.3
Income taxes (benefit).. -- -- -- (0.3) 1.3 (7) 1.0
------ ----- ----- ------ ------ ------
Net income (loss)....... $ 4.0 $ 6.3 $ 3.9 $ 1.5 $(14.4) $ 1.3
====== ===== ===== ====== ====== ======
</TABLE>
For the nine months ended September 22, 2000 (in millions):
<TABLE>
<CAPTION>
Completed
Pro Forma 2000
Rail Van GTS RFI Adjustments Acquisitions
-------- ----- ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gross revenues.............. $364.4 $64.9 $81.7 $(15.6)(1) $495.4
Cost of purchased
transportation and
services................... 332.5 57.1 69.5 (15.6)(1) 443.5
------ ----- ----- ------ ------
Net revenues............... 31.9 7.8 12.2 -- 51.9
Operating expenses:
Selling, general and
administrative expenses... 30.2 4.9 10.8 (0.9)(3) 45.0
Depreciation and
amortization.............. 1.4 0.1 0.7 2.0 (4) 4.2
------ ----- ----- ------ ------
Total operating expenses... 31.6 5.0 11.5 1.1 49.2
Income from operations...... 0.3 2.8 0.7 (1.1) 2.7
Interest expense (income),
net........................ 0.9 (0.1) 0.5 5.9 (5) 7.2
Other (income) expenses,
net........................ (0.1) -- -- -- (0.1)
------ ----- ----- ------ ------
Income (loss) before income
taxes...................... (0.5) 2.9 0.2 (7.0) (4.4)
Income tax benefit.......... -- -- -- (1.7)(7) (1.7)
------ ----- ----- ------ ------
Net income (loss)........... $ (0.5) $ 2.9 $ 0.2 $ (5.3) $ (2.7)
====== ===== ===== ====== ======
</TABLE>
11
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(1) Reflects the following (in millions):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Elimination of intercompany revenues and
costs on net sales between us and Rail
Van....................................... $(41.7) $(15.6)
Elimination of intercompany revenues and
costs on net sales between us and Conex... (0.6) --
Reimbursement of Rail Terminal Services
expenses in accordance with the Conex
asset purchase agreement.................. 0.1 --
------ ------
$(42.2) $(15.6)
====== ======
</TABLE>
(2) As part of the acquisition of Conex assets, the former owners'
salaries and benefits were contractually reduced in the aggregate
for the year ended December 31, 1999, with 80% of the adjustment
recorded as an adjustment to cost of purchased transportation and
services and the remaining 20% recorded as an adjustment to
selling, general and administrative to conform to the historical
presentation of such costs. In millions:
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Elimination of 80% historical owners salaries, personal
expenses paid by Conex and other benefits............... $(0.6)
Recording of 80% of Conex salaries to be paid in
accordance with the compensation agreements............. 0.3
-----
$(0.3)
=====
</TABLE>
12
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--
(Continued)
(3) Reflects the following (in millions):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Elimination of historical expense for leased
aircraft contractually terminated under the
purchase agreement with Rail Van, net of
additional costs of commercial travel...... $(0.7) $(0.9)
Transfer of auto lease expenses to the
former owners' as contractually required
under the Rail Van purchase agreement...... (0.1) (0.1)
Elimination of 20% historical owners
salaries, personal expenses paid by Conex
and other benefits (see note 2 above)...... (0.1) --
Recording of 20% of Conex salaries to be
paid in accordance with the compensation
agreements (see note 2 above).............. 0.1 --
Elimination of Conex aircraft expenses
associated with operating an aircraft that
was not acquired, net of additional costs
of commercial flights...................... (0.2) --
Elimination of historical GTS owners
salaries contractually reduced in the
acquisition................................ (0.3) (0.2)
Inclusion of GTS salaries to be paid in
accordance with agreements executed in
connection with the acquisition............ 0.4 0.3
Elimination of loss from RFI investment in
BFR not acquired........................... (0.1) --
----- -----
$(1.0) $(0.9)
===== =====
</TABLE>
(4) Reflects the following (in millions):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Amortization of goodwill ($32.0 million)
related to the Conex acquisition............ $0.8 $--
Amortization of goodwill ($21.2 million)
related to the GTS acquisition.............. 0.5 0.4
Amortization of goodwill ($17.3 million)
related to the RFI acquisition.............. 0.4 0.3
Amortization of goodwill ($69.7 million)
related to the Rail Van acquisition......... 1.8 1.4
Elimination of Conex historical depreciation
for buildings and aircraft not acquired, net
of rental expense of $0.7 million to be paid
to utilize buildings not acquired........... (0.2) --
Elimination of RFI historical goodwill
amortization................................ (0.1) (0.1)
---- ----
$3.2 $2.0
==== ====
</TABLE>
We determined a 40-year amortization period for each of the
acquisitions was appropriate after considering that there are no
legal, regulatory or contractual provisions associated with the
acquired company that may limit the useful life of the goodwill
associated with that acquisition, the services provided by the
acquired company are not subject to obsolescence, we are not aware
of any expected actions of competitors and others that may restrict
the acquired company's ability
13
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--
(Continued)
to successfully compete in the industry, and each acquired company
has been successfully operated for many years, since 1969 in the
case of both RFI and Rail Van, since 1977 in the case of Conex and
since 1981 in the case of GTS.
(5) Reflects the inclusion of interest expense associated with (i) the
term loan of $40.0 million to partially fund the acquisition of
Rail Van at an assumed interest rate of 9.5%, (ii) $41.0 million,
$15.0 million, $10.0 million and $18.0 million incurred under our
revolving credit facility to fund the acquisition of Rail Van
(including the refinancing of existing debt), Conex, GTS and RFI at
an assumed interest rate of 9.0%, and (iii) a $5.0 million note
payable to former shareholders of Conex at an interest rate of
8.0%. Also reflects the elimination of existing Rail Van, RFI and
Conex interest expense for the periods presented (in millions):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Conex related interest expense.............. $ 1.4 $ --
GTS related interest expense................ 0.9 0.6
RFI related interest expense................ 1.6 1.2
Rail Van related interest expense........... 7.4 5.6
Elimination of historical Rail Van existing
interest expense........................... (0.8) (1.0)
Elimination of historical RFI existing
interest expense........................... (0.6) (0.5)
Elimination of historical Conex existing
interest expense........................... (0.1) --
Conex Note.................................. 0.4 --
----- -----
$10.2 $ 5.9
===== =====
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
(6) Reflects the elimination of gain on sale of Conex
assets not acquired.................................... $1.0
====
</TABLE>
(7) Reflects a provision (benefit) for income taxes which would have
been recorded, based on the statutory federal and state tax rate
net of state taxes, had the acquisitions occurred on January 1,
1999 and elimination of previously recorded RFI historical tax
benefit not realizable by Pacer. Rail Van, Conex and GTS were
previously taxed as Subchapter S Corporations.
(c) Reflects the following (in millions):
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Elimination of interest
expense related to:
Term loan repaid with
proceeds from the IPO.. $ (3.8) $(2.9)
Revolving credit
facility repaid........ (7.7) (5.4)
------ -----
$(11.5) $(8.3)
====== =====
</TABLE>
(d) Reflects a provision for income taxes which would have been recorded,
based on the statutory federal and state tax rate net of state taxes.
14
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
(e) Calculation of pro forma weighted average shares outstanding: The
calculation for each period are prior to the stock split of to 1 shares.
<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Basic:
Shares issued in our recapitalization....... 10,440,000 10,440,000
Shares issued in the acquisition of Conex... 300,000 300,000
Shares issued in the acquisition of Rail
Van........................................ 280,000 280,000
Shares issued upon exercise of options...... 317,373 317,373
Shares issued in the IPO....................
---------- ----------
Total.....................................
========== ==========
Diluted:
Shares issued in our recapitalization....... 10,440,000 10,440,000
Shares issued in the acquisition of Conex... 300,000 300,000
Shares issued in the acquisition of Rail
Van........................................ 280,000 280,000
Shares issued upon exercise of options...... 317,373 317,373
Exchangeable preferred stock converted to
common..................................... 2,234,844 2,234,844
Shares issued in the IPO....................
Dilutive effect of stock options............
---------- ----------
Total.....................................
========== ==========
</TABLE>
(f) For the nine months ended September 22, 2000, amounts were derived from
our unaudited statement of operations included elsewhere in this
prospectus and includes the results of Conex assets since the date of
acquisition on January 13, 2000. Due to the amounts being immaterial no
adjustment has been made in the 2000 pro formas for the period prior to
acquisition.
(g) The above pro forma financial statements exclude the effects of certain
estimated operating cost reductions related to the acquisition of Rail Van
as the inclusion of these reductions are not permitted under applicable
SEC rules. We estimate that these operating cost reductions would have
been $3.1 million for the year ended December 31, 1999 and $2.4 million
for the nine months ended September 22, 2000 assuming such cost reductions
had been realized at the beginning of the periods presented. A summary of
these estimated cost reductions is presented below:
<TABLE>
<CAPTION>
Nine months
Year ended ended
December 31, September 22,
1999 2000
------------ -------------
<S> <C> <C>
Consolidation of certain highway and
intermodal operations........................ $ 2.1 $ 1.7
Consolidation of (a) the accounting
departments and (b) the sales departments.... 1.0 0.7
Rationalization of certain IT software
license, maintenance and development fees.... 0.3 0.2
----- -----
Total estimated net operating cost
reductions................................... 3.4 2.6
Equalization of benefit plans................. (0.3) (0.2)
----- -----
Net operating cost reductions................. $ 3.1 $ 2.4
===== =====
</TABLE>
15
<PAGE>
PACER INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATION STATEMENTS OF OPERATIONS--
(Continued)
The consolidation synergies primarily consist of headcount reductions
and termination of lease agreements. We believe the above mentioned
initiatives once commenced will take up to one year to complete and
will require $3.3 million of one time costs, principally severance
costs, and $1.5 million of capital expenditures. We also believe that
the acquisition of Rail Van will result in certain net revenue
synergies, principally increased revenues resulting from improved asset
utilization across our customer base, as well as additional operating
cost reductions.
16
