PACER INTERNATIONAL INC/TN, S-1, 2001-01-12

PACER INTERNATIONAL INC/TN
S-1, 2001-01-12
ARRANGEMENT OF TRANSPORTATION OF FREIGHT & CARGO

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<PAGE>

As filed with the Securities and Exchange Commission on January 12, 2001
Registration No. 333-

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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PACER INTERNATIONAL, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Tennessee 4731 62-0935669
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
1340 Treat Boulevard, Suite 200
Walnut Creek, California 94596
(925) 979-4440
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Donald C. Orris
Chairman, President and Chief Executive Officer
5251 DTC Parkway, Suite 1000
Denver, Colorado 80111
(303) 694-5730
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
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With copies to:
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<S> <C>
James M. Lurie John A. Tripodoro
O'Sullivan Graev & Karabell, LLP Cahill Gordon & Reindel
30 Rockefeller Plaza 80 Pine Street
New York, New York 10112 New York, New York 10005
(212) 408-2400 (212) 701-3000
</TABLE>
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. [_]
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CALCULATION OF REGISTRATION FEE

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Title of Each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price Registration Fee
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<S> <C> <C>
Common stock, $0.01 par value... $150,000,000.00 $37,500.00
</TABLE>

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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective time until the Registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

PROSPECTUS (Subject to Completion)
Issued , 2001

[PACER LOGO]

COMMON STOCK

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Pacer International, Inc. is offering shares of its common stock. This is our
initial public offering and no public market currently exists for our shares.
We anticipate that the initial public offering price will be between $ and
$ per share.

-----------

Application will be made to list our common stock on the NASDAQ National Market
under the symbol "PACR."

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Investing in our common stock involves risks. See "Risk Factors" beginning on
page 7.

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PRICE $ A SHARE

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Underwriting Proceeds
Price to Discounts and to
Public Commissions Us
--------- ------------- --------
<S> <C> <C> <C>
Per Share...................................... $ $ $
Total.......................................... $ $ $
</TABLE>

We have granted the underwriters the right to purchase up to an additional
shares to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.

Morgan Stanley & Co. Incorporated and Credit Suisse First Boston Corporation
expect to deliver the shares to purchasers on , 2001.

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Joint Book-Running Managers

MORGAN STANLEY DEAN WITTER CREDIT SUISSE FIRST BOSTON

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DEUTSCHE BANC ALEX. BROWN

MERRILL LYNCH & CO.

UBS WARBURG LLC

, 2001
<PAGE>

[PHOTOS/GRAPHICS]
<PAGE>

TABLE OF CONTENTS

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Page
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Prospectus Summary....................................................... 1
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 15
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Unaudited Pro Forma Financial Information................................ 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
Business................................................................. 52
</TABLE>

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Page
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Management............................................................... 72
Principal Stockholders................................................... 79
Certain Relationships and Related Transactions........................... 82
Description of Certain Indebtedness...................................... 88
Description of Capital Stock............................................. 91
Shares Eligible for Future Sale.......................................... 100
Material Federal Income Tax Consequences to Non-U.S. Holders of Common
Stock................................................................... 101
Underwriters............................................................. 104
Legal Matters............................................................ 107
Experts.................................................................. 107
Additional Information................................................... 107
Index to Financial Statements............................................ F-1
</TABLE>

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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell and seeking offers to
buy shares of common stock only in jurisdictions where such offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, "our
company," "Pacer International," "we," "us" and "our" refer to Pacer
International, Inc. and its consolidated subsidiaries, and "Pacer Logistics"
refers to our subsidiary Pacer Logistics, Inc. Except for the historical
financial information contained in this prospectus, the information in this
prospectus reflects our acquisitions of RFI Group, Inc., which occurred on
October 31, 2000, and Rail Van, Inc., which occurred on December 22, 2000.
References to our wholesale operations include our stacktrain operations and
references to our retail operations include our trucking services, intermodal
marketing, freight consolidation and handling, international freight
forwarding and supply chain management services.

Until , 2001 (25 days after the date of this prospectus), all
dealers that buy, sell or trade shares of the common stock, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.

This prospectus contains market data related to the transportation and
logistics industries and their segments, including the third-party logistics
market, and estimates regarding their size and growth. This market data has
been included in reports published by organizations such as Standard & Poor's,
Cass Information Systems, Forrester Research and Armstrong & Associates. These
industry publications generally indicate that they have derived this data from
sources believed to be reasonable, but do not guarantee the accuracy or
completeness of the data. While we believe these industry publications to be
reliable, we have not independently verified this data or any of the
assumptions on which the estimates and projections included in this data are
based. If any of these assumptions are incorrect, actual results may differ
from the estimates and projections based on these assumptions and these
markets may not grow at the rates projected by the data, or at all. The
failure of these markets to grow at these projected rates may have a material
adverse effect on our business and the market price of our common stock.
Except as otherwise noted, statements as to our size and position relative to
our competitors are based on revenues.

i
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding us and our common stock being sold in this offering and
our financial statements and the notes thereto appearing elsewhere in this
prospectus.

Our Business

We are a leading non-asset based North American third-party logistics
company. We offer a broad array of logistics and other services to facilitate
the movement of freight from origin to destination for numerous Fortune 500
customers such as General Electric, Ford and Wal-Mart Stores and large global
customers such as Sony. Our package of value-added logistics services include
wholesale stacktrain services and retail trucking services, intermodal
marketing, freight consolidation and handling, international freight forwarding
and supply chain management services. Through these services, we optimize the
flow of freight across multiple transportation modes and meet our customers'
specific transportation and logistics needs. We combine these services with our
proprietary advanced information systems to provide integrated, customized
solutions which improve efficiency, reliability and control throughout our
customers' supply chains and reduce their handling, delivery and inventory
costs. Our non-asset based strategy, in which we generally control, without
owning, our assets, allows us to maximize our return on invested capital.

We are one of the largest domestic ground-based third-party logistics
providers. We purchase over $1.1 billion of rail transportation annually and
are the largest provider of intermodal rail service in North America that is
not affiliated with an individual railroad company. We believe we are also the
second largest U.S. truck broker, the second largest intermodal marketing
company in North America and one of the largest freight handlers on the West
Coast of the United States. In addition to our leading domestic position, we
also have a significant international presence as a U.S. based international
freight forwarder. Our comprehensive service offering and strong competitive
position in the markets we serve allow us to operate on a national basis and
pass on the benefits gained by our economies of scale to our customers, and to
earn attractive operating margins relative to our publicly traded peers.

As a non-asset based third-party logistics provider, we have capitalized on
strong industry trends and experienced considerable growth in revenue, net
income and EBITDA. We have also achieved significant growth by acquiring and
integrating businesses which have enhanced our service portfolio and geographic
presence. Since our recapitalization and acquisition of our retail operations
in May 1999, we have acquired four companies with total gross revenues of
$755.6 million in 1999. These acquisitions have enhanced our truck brokerage
and freight handling services, added international freight forwarding to our
portfolio of services and expanded the geographic coverage of our intermodal
marketing services. For 1999 and the nine months ended September 22, 2000, we
generated pro forma gross revenues of $1.8 billion and $1.4 billion, pro forma
net revenues of $305.4 million and $249.7 million, pro forma net income of
$25.1 million and $19.6 million and pro forma EBITDA of $91.6 million and $71.6
million, respectively.

Our senior management team has an average of over 25 years of experience in
the transportation and logistics industries, and we believe their knowledge,
relationships and strong record of successfully integrating businesses within
these industries provide us with a significant competitive advantage. After
giving effect to this offering and our stock option plans, our senior
management team and certain other employees will own approximately % of our
capital stock on a fully diluted basis.

Our Industry

The third-party logistics industry in which we operate is expected to
continue to experience significant growth as businesses are increasingly
outsourcing all or part of their supply chain management to third-party
logistics providers in order to focus on their core competencies and reduce
costs. Total U.S. third-party logistics

1
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spending grew 16.5% in 1999 and is projected to grow 34% per year from $45.3
billion in 1999 to over $198.0 billion in 2004. Total U.S. logistics spending,
including freight transportation and carrying costs, is projected to grow 8%
per year from $921.0 billion in 1999 to $1.4 trillion in 2004. As
transportation management becomes increasingly sophisticated, and the cost
effectiveness of outsourcing increases, we believe companies will continue to
seek full service supply chain management support from a single company, like
us, that can manage their multiple transportation requirements. There has also
been strong historical growth in stacktrain services, which represent half of
the intermodal rail market and which we provide through our wholesale business.
U.S. stacktrain services have grown 15% per year from 1989 to 1997. We expect
the U.S. stacktrain business to take additional market share from other forms
of container and trailer transport due to the economic and operational
efficiencies offered by the double-stack system.

Our Non-Asset Based Approach

We seek to limit our investment in equipment, facilities and working capital
through contracts and arrangements with various transportation providers which
generally provide for favorable rates, minimum service levels, capacity
assurances and priority handling status. Our balance of domestic and
internationally originating freight flow further enables us to achieve high
utilization rates and steady revenue production from our intermodal equipment
due to our high volume of both eastbound and westbound shipments. This allows
us to maximize the return on our intermodal equipment and negotiate incentives
with our transportation providers. As a non-asset based third-party logistics
provider, we can focus on optimizing the transportation solution for our
customers rather than on our own asset utilization. Our non-asset based
approach also allows us to maintain a high level of operating flexibility and
capitalize on a cost structure that is 80%-90% variable in nature. Our
relatively low capital expenditures, minimal working capital requirements and
variable cost structure enable us to generate strong free cash flow in a
variety of market conditions.

Our Services

Our broad array of logistics services includes wholesale services and a
range of value-added retail services designed to meet the transportation and
supply chain management needs of our customers. Many of our customers use more
than one of these services.

. Wholesale Services--As the largest provider of intermodal rail service
in North America that is not affiliated with an individual railroad
company, we transport freight using cargo containers stacked two high on
special rail cars. We sell this service primarily to intermodal
marketing companies, large automotive intermediaries and international
shippers, as well as to our own internal intermodal marketing company.

. Intermodal Marketing--We arrange for and optimize the movement of
freight in containers and trailers utilizing truck and rail
transportation throughout North America, provide customized tracking and
analysis of charges, negotiate transportation rates, consolidate billing
and handle claims for freight loss or damage on behalf of our customers.

. Freight Consolidation & Handling--We offer a variety of freight handling
services, including consolidation/deconsolidation and warehousing, and
focus on providing customers with an integrated package that brings
together their specific shipment patterns and transportation and
inventory needs.

. International Freight Forwarding--We manage international shipping for
our customers and provide or connect them with services necessary to
move our customers' freight to or from a foreign country,

2
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including chartering or brokering vessels, tracking and tracing
shipments, handling compliance with import and export regulations
(including producing the required documentation), and calculating and
optimizing duties, other charges and shipping costs.

. Supply Chain Management--We provide infrastructure and equipment,
integrated with our customers' existing systems, to handle distribution
planning, just-in-time delivery and automated ordering throughout their
operations, and additionally will provide and manage warehouses,
distribution centers and other facilities for them. We also consult on
identifying bottlenecks and inefficiencies and eliminating them by
analyzing freight patterns and costs, optimizing distribution centers
and warehouse locations, and analyzing/developing internal policies and
procedures for our customers.

Our Growth Strategy

We have developed a strategy designed to increase revenues, profitability
and cash flow while maximizing return on invested capital. The primary
components of our growth strategy include:

. Capitalizing on strong logistics industry trends;

. Expanding service offerings;

. Increasing sales to existing customers;

. Expanding our customer base; and

. Pursuing strategic acquisitions.

Corporate Information

We were incorporated in Tennessee on November 4, 1974. Our principal
executive offices are located at 1340 Treat Boulevard, Suite 200, Walnut
Creek, CA 94596 and our telephone number is (925) 979-4440. Our website is
located at www.pacerintl.com. Information contained on our website does not
constitute a part of this prospectus.

3
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THE OFFERING

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<S> <C>
Common stock offered by us.......................... shares

Common stock to be outstanding after the offering... shares

Use of proceeds..................................... We expect to use the net proceeds from this
offering for the repayment of debt and other
general corporate purposes. See "Use of
Proceeds."

Proposed NASDAQ National Market symbol.............. PACR
</TABLE>

The number of shares of common stock to be outstanding after this offering
is based on our shares of common stock outstanding as of September 22, 2000,
after giving effect to

. the issuance of 280,000 shares of our common stock in the Rail Van
acquisition; and

. the issuance between September 22, 2000 and November 30, 2000 of 24,000
shares of common stock upon the exercise of stock options.

The number of shares to be outstanding after the offering excludes:

. 1,332,488 shares of common stock and 44,997 shares of preferred stock
issuable upon the exercise of options outstanding as of September 22,
2000, after giving effect to options granted in connection with our
acquisitions of RFI and Rail Van and option exercises subsequent to
September 22, 2000, at exercise prices ranging from $0.22 to $25.00 per
share, with a weighted average exercise price of $12.90, of which
1,252,488 shares of Common Stock and all shares of preferred stock are
issuable upon exercise of options outstanding under our stock option
plan;

. 253,886 shares of common stock reserved for future grant under our stock
option plan; and

. 2,234,844 shares of common stock issuable upon the exchange of all
outstanding shares of Pacer Logistics exchangeable preferred stock,
based on an exchange rate of 100 shares of common stock for each
outstanding share of Pacer Logistics exchangeable preferred stock.

Unless otherwise indicated, all share and per share information in this
prospectus gives effect to the declaration of a for stock split of the
common stock to be effected on , 2001.

Except as otherwise indicated in this prospectus, we have presented the
information in this prospectus on the assumption that the underwriters do not
exercise their over-allotment option.

4
<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table presents our summary historical and pro forma financial
information. The summary historical data at December 31, 1999 and December 25,
1998 and for the two years ended December 31, 1999 have been derived from, and
should be read in conjunction with, our audited financial statements and
related notes appearing elsewhere in this prospectus.

The summary historical financial data as of September 22, 2000 and for the
nine months ended September 22, 2000 and September 17, 1999 have been derived
from our unaudited financial statements included elsewhere in this prospectus.
These unaudited financial statements include, in the opinion of our management,
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the data for such periods. The results of operations for the
interim periods are not necessarily indicative of operating results for the
full year.

The unaudited pro forma balance sheet data gives effect to our acquisitions
of RFI and Rail Van, this offering and the application of the proceeds of this
offering as if such transactions had occurred as of September 22, 2000. The
unaudited pro forma statements of operations data 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, this
offering and the application of the proceeds of this offering as if all such
transactions had occurred as of December 26, 1998. The pro forma financial
information does not purport to represent what our financial position or
results of operations would have actually been had these transactions in fact
occurred as of the dates indicated or to project our financial position or
results of operations for any future date or period.

The following information should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Information," "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations" included elsewhere in this prospectus.

Balance Sheet Data (at
end of period):
Working capital......... $(37.2) $ (3.7) $ (14.3) $ (4.8) $ 35.0
Total assets............ 156.1 455.0 454.3 484.9 695.4
Total debt including
capital leases and
current maturities..... -- 284.4 285.1 298.7 290.2
Minority interest--
Exchangeable preferred
stock.................. -- 23.4 22.9 24.6 24.6
Total stockholders'
equity (deficit)....... 55.6 (31.7) (34.8) (7.6) 135.5
</TABLE>

5
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<TABLE>
<CAPTION>
Historical Pro Forma
----------------------------------------------------- --------------------------
Year Ended Nine Months Ended Nine Months
------------------------- --------------------------- Year Ended Ended
December 25, December 31, September 17, September 22, December 31, September 22,
1998 1999(a) 1999(a) 2000(b) 1999 2000
------------ ------------ ------------- ------------- ------------ -------------
(in millions)
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Other Financial Data:
EBITDA(d)............... $ 39.8 $ 56.6 $ 39.8 $ 64.6 $91.6 $71.6
EBITDA Margin(e)........ 30.0% 29.4% 30.5% 32.7% 30.0% 28.7%
Capital expenditures.... $ 39.7 $ 2.0 $ 1.5 $ 3.4
Cash provided by
operating activities... 31.8 20.8 17.6 12.4
Cash used in investing
activities............. (38.5) (74.0) (73.2) (44.9)
Cash provided by
financing activities... 6.7 65.4 65.7 20.3
</TABLE>
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(a) Includes the results of Pacer Logistics, Inc. since acquisition on May 28,
1999.
(b) Includes the results of Conex Global Logistics Services, Inc. and GTS
Transportation Services Inc. since their dates of acquisition on January
13, 2000 and August 31, 2000, respectively.
(c) Not applicable as prior to our recapitalization we were a division of APL
Limited and did not have common stock.
(d) EBITDA represents income before income taxes, interest expense,
depreciation and amortization and minority interest (payment-in-kind
dividends on Pacer Logistics 7.5% exchangeable preferred stock). EBITDA is
presented because it is commonly used by investors to analyze and compare
operating performance and to determine a company's ability to service
and/or incur debt. However, EBITDA should not be considered in isolation or
as a substitute for net income, cash flows or other income or cash flow
data prepared in accordance with generally accepted accounting principles
or as a measure of a company's profitability or liquidity. EBITDA as shown
for the fiscal year ended December 25, 1998 has not been adjusted by $2.1
million related to certain non-recurring costs. EBITDA shown for the nine
months ended September 17, 1999 has not been adjusted for the elimination
of one time bonus payments of $0.7 million related to the acquisition of
Pacer Logistics. Additionally, we were historically allocated corporate
overhead costs by APL Limited.
(e) EBITDA margins are calculated as a percentage of net revenues.

6
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RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below before making an
investment decision. The risks described below are not the only ones facing
us. Additional risks not presently known to us or that we currently deem
immaterial may also impair our business operations.

Our business, financial condition or results of operations could be
materially adversely affected by any of these risks. The trading price of our
common stock could decline due to any of these risks, and you may lose all or
part of your investment.

Risk Factors Relating to the Common Stock and the Offering

We have a single stockholder with a controlling interest in our company, who
can determine the outcome of all matters voted upon by our stockholders.

Upon consummation of this offering, Apollo Management, L.P. will
beneficially own approximately % of our outstanding common stock ( % if the
underwriters' overallotment option is exercised in full). As a result, Apollo
Management will be able to control all matters requiring stockholder approval,
including the election of directors and the approval of significant corporate
transactions, such as acquisitions, and to block an unsolicited tender offer.
This concentration of ownership could delay, defer or prevent a change in
control of our company or impede a merger, consolidation, takeover or other
business combination which you, as a stockholder, may otherwise view
favorably.

Because we have various mechanisms in place to discourage takeover attempts, a
change in control of our company that a stockholder may consider favorable
could be prevented.

Provisions of our restated certificate of incorporation and amended bylaws
may discourage, delay or prevent a change in control of our company that a
stockholder may consider favorable. These provisions could also discourage
proxy contests and make it more difficult for you and other shareholders to
elect directors and take other corporate actions. These provisions include:

. authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;

. a classified board of directors with staggered, three-year terms, which
may lengthen the time required to gain control of the board of
directors;

. prohibiting cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;

. requiring super-majority voting to effect particular amendments to our
restated certificate of incorporation and amended bylaws;

. limitations on who may call special meetings of stockholders;

. prohibiting stockholder action by written consent, thereby requiring all
actions to be taken at a meeting of the stockholders; and

. establishing advance notice requirements for nominations of candidates
for election to the board of directors or for proposing matters that can
be acted upon by stockholders at stockholder meetings.

As a result, these provisions could limit the price that investors are
willing to pay in the future for shares of our common stock. In addition, the
Tennessee Business Combination Act and the Tennessee Greenmail Act may
discourage, delay or prevent a change in control of our company.

7
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The market price of our common stock may be volatile, which could cause the
value of your investment to decline.

Any of the following factors could affect the market price of our common
stock:

. changes in earnings estimates and outlook by financial analysts;

. our failure to meet financial analysts' and investors' performance
expectations;

. changes in market valuations of other transportation and logistics
companies; and

. general market and economic conditions.

In addition, many of the risks described elsewhere in this "Risk Factors"
section could materially and adversely affect our stock price. The stock
markets have experienced price and volume volatility that has affected many
companies' stock prices. Stock prices for many companies have experienced wide
fluctuations that have often been unrelated to the operating performance of
those companies. Fluctuations such as these may affect the market price of our
common stock.

There has not been a prior public market for our common stock and we cannot
assure you that one will develop.

Our common stock is a new issue of securities for which there is currently
no trading market. Although we expect our common stock to be quoted on the
NASDAQ National Market, an active trading market for our common stock may not
develop or be sustained following this offering. Moreover, even if an active
market does develop, investors may not be able to resell their shares at
prices equal to or greater than the initial public offering price.

Future sales of our common stock in the public market may depress our stock
price.

The market price of our common stock could decline as a result of sales by
our existing stockholders of a large number of shares of our common stock in
the market after this offering or the perception that such sales may occur.
These sales might also make it more difficult for us to sell additional equity
securities at a time and price that we deem appropriate. Certain of our
existing stockholders have registration rights. For a description of these
registration rights, see the section of this prospectus entitled "Description
of Capital Stock--Registration Rights."

You will experience an immediate and substantial dilution in the book value of
your investment.

Prior investors have paid substantially less per share than the price in
this offering. Investors purchasing shares in this offering will incur
immediate and substantial dilution in net tangible book value per share. To
the extent outstanding options are exercised, there will be further dilution.

We do not expect to pay dividends for the foreseeable future.

We are effectively prohibited from paying cash dividends on our common
stock for the foreseeable future under the terms of our credit agreement.
Moreover, we plan to retain all earnings for investment in our business, and
do not plan to pay cash dividends at any time in the foreseeable future.

Risks Related to the Business

We are dependent upon third parties for equipment and services essential to
operate our business.

We are dependent upon transportation equipment such as chassis and
containers and rail, truck and ocean services provided by independent third
parties. Periods of equipment shortages have occurred historically in the
transportation industry, particularly in a strong economy. If we cannot secure
sufficient transportation equipment or transportation services from these
third parties to meet our customers' needs, our business, results of
operations and financial position could be materially adversely affected and
customers could seek to have their transportation and logistics needs met by
other third parties on a temporary or permanent basis.

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Our reliance on agents and independent contractors could reduce our operating
control and the strength of our relationships with our customers, and we may
have trouble attracting and retaining agents and independent contractors.

We rely extensively on the services of agents and independent contractors
in our transportation services. If an agent terminates its relationship with
us, some customers and independent contractors with whom such agent has a
direct relationship may also terminate their relationship with us. In
addition, we may face potential difficulties attracting such agents or
independent contractors during times of constrained capacity. Contracts with
agents and independent contractors are, in most cases, terminable upon short
notice by either party. We also compete with transportation service companies
for the services of independent commission agents and with trucklines for the
services of independent contractors and drivers. The pool of independent
commission agents, contractors and drivers from which we draw is limited, and
therefore competition from other transportation service companies has the
effect of increasing the price we must pay to obtain their services. Because
independent contractors are not employees, they may not be as loyal to our
company, requiring us to pay more to retain their services. As a result, the
employment and use of agents and independent contractors may cause
disadvantages such as reduced operating control and higher expenses compared
to companies who do not rely as heavily on agents and independent contractors.
Although we believe our relationships with our agents and independent
contractors are good, there can be no assurance that we will continue to be
successful in retaining our agents and independent contractors or that agents
or independent contractors who terminate their contracts with us can be
replaced by equally qualified persons.

A determination by regulators that our independent contractors are employees
could expose us to various liabilities.

From time to time, tax and other regulatory authorities have sought to
assert that independent contractors in the trucking industry are employees,
rather than independent contractors. There can be no assurance that these
authorities will not successfully assert this position, or that these
interpretations and tax laws that consider these persons independent
contractors will not change. If our independent contractors are determined to
be our employees, that determination could materially increase our exposure
under a variety of federal and state tax, worker's compensation, unemployment
benefits, labor, employment and tort laws, as well as our potential liability
for employee benefits. Our business model relies on the fact that our
independent contractors are not deemed to be our employees, and exposure to
any of the above increased costs would impair our competitiveness in the
industry.

If we are unable to successfully integrate acquisitions our profitability
could be adversely affected.

Identifying, acquiring and integrating businesses requires substantial
management, financial and other resources and may pose risks with respect to
customer service and market share. Further, acquisitions involve a number of
special risks, some or all of which could have a material adverse effect on
our business, financial condition and results of operation. These risks
include:

. unforeseen operating difficulties and expenditures;

. difficulties in assimilation of acquired personnel, operations and
technologies;

. the need to manage a significantly larger and more geographically
dispersed business;

. amortization of goodwill and other intangible assets;

. diversion of management's attention from ongoing development of our
business or other business concerns;

. potential loss of customers;

. failure to retain key personnel of the acquired businesses; and

. the use of substantial amounts of our available cash.

We have acquired businesses in the past and may consider acquiring
businesses in the future that provide complementary services to those we
currently provide or expand our geographic presence. There can be no

9
<PAGE>

assurance that the businesses that we have acquired in the past or any
businesses that we may acquire in the future can be successfully integrated.
While we believe that we have sufficient financial and management resources to
successfully conduct our acquisition activities, there can be no assurance in
this regard or that we will not experience difficulties with customers,
personnel or others. Our acquisition activities involve more difficult
integration issues than those of many other companies because the value of the
companies we acquire comes mostly from their business relationships, rather
than their assets. The integration of business relationships poses more of a
risk than the integration of tangible assets because relationships may
suddenly weaken or terminate. Further, logistics businesses we have acquired
and may acquire in the future compete with many customers of our wholesale
operations and these customers may shift their business elsewhere if they
believe our retail operations receive favorable treatment from our wholesale
operations. In addition, although we believe that our acquisitions will
enhance our competitive position, business and financial prospects, there can
be no assurances that such benefits will be realized or that any combination
will be successful.

As we did in the acquisitions of Conex and Rail Van, if we make future
acquisitions, we may issue shares of capital stock that dilute other
stockholders, incur debt, assume significant liabilities or create additional
expenses related to amortized goodwill and other intangible assets, any of
which might reduce our reported earnings or reduce earnings per share and
cause our stock price to decline. In addition, any financing that we might
need for future acquisitions may be available to us only on terms that
restrict our business.

We face competition in our wholesale and retail businesses, putting downward
pressure on prices.

The transportation services industry is highly competitive. Our retail
businesses compete primarily against other domestic non-asset based
transportation and logistics companies, asset-based transportation and
logistics companies, third-party freight brokers, internal shipping
departments and other freight forwarders. Our wholesale business competes
primarily with over-the-road full truckload carriers, conventional intermodal
movement of trailers on flat cars, and containerized intermodal rail services
offered directly by railroads. We also face competition from Internet-based
freight exchanges which attempt to provide an online marketplace for buying
and selling supply chain services. Historically, competition has created
downward pressure on freight rates, and continuation of this rate pressure may
materially adversely affect our net revenues and income from operations. In
addition, some of our competitors have substantially greater financial and
other resources than we do.

Our customers who are also competitors could transfer their business to non-
competitors which would decrease our profitability.

We buy and sell transportation services from and to many companies with
which we compete. This trend is primarily the result of our company operating
in two distinct, but related, segments. It is possible that such customers
could transfer their business away from us to other companies with which they
do not compete. For example, some competitors of our retail operations are
customers of our wholesale operations. The loss of one or more of our major
customers could have a material adverse effect on the profitability of our
wholesale operations.

Our revenues could be reduced by the loss of major customers.

We have derived, and believe we will continue to derive, a significant
portion of our revenues from our largest customers. In 1999, on a pro forma
basis after giving effect to our four acquisitions in 2000, Ford Motor Company
would have accounted for approximately 13% of our gross revenues and our 10
largest customers would have accounted for approximately 46% of our gross
revenues. The loss of one or more of our major customers could have a material
adverse effect on our revenues, business and prospects.

Service instability in the railroad industry could increase costs and decrease
demand for our intermodal services.

We depend on the major railroads in the United States for substantially all
of the intermodal transportation services we provide. In many markets, rail
service is limited to a few railroads or even a single railroad. Any reduction
in service by the railroads with whom we have relationships is likely to
increase the cost of the

10
<PAGE>

rail-based services we provide and reduce the reliability, timeliness and
overall attractiveness of our rail-based services. For example, from 1997 to
1999, service disruptions related to consolidation and restructuring in the
railroad industry interrupted intermodal service throughout the United States.
Service problems arising from prior mergers in the railroad industry appear to
be largely resolved. However, consolidation and restructuring may continue to
occur in the railroad industry and it is possible that future service
disruptions could result, which would decrease the efficiency of our wholesale
business. Although we were not substantially adversely affected by past
service disruptions, we could be substantially affected by service disruptions
in the future. In addition, because the railroads' workforce is generally
subject to collective bargaining agreements, our business could be adversely
affected by labor disputes between the railroads and their union employees.
Our business could also be adversely affected by a work stoppage at one or
more railroads or by adverse weather conditions that hinder the railroads'
ability to provide transportation services. In addition, the railroads are
relatively free to adjust shipping rates up or down as market conditions
permit. Although the application of rate increases to our wholesale business
is limited by our long-term contracts with the railroads, such increases could
result in higher costs to our customers and decreased demand for our services.

As we expand our services internationally, we may become subject to
international economic and political risks.

An increasing portion of our business is providing services between
continents, particularly between North America and Asia. Doing business
outside the United States subjects us to various risks, including changing
economic and political conditions, major work stoppages, exchange controls,
currency fluctuations, armed conflicts and unexpected changes in United States
and foreign laws relating to tariffs, trade restrictions, transportation
regulations, foreign investments and taxation. Significant expansion in
foreign countries will expose us to increased risk of loss from foreign
currency fluctuations and exchange controls as well as longer accounts
receivable payment cycles. We have no control over most of these risks and may
be unable to anticipate changes in international economic and political
conditions and, therefore, unable to alter our business practices in time to
avoid the adverse effect of any of these changes.

We depend on APL Limited for essential services, and we could be adversely
affected by APL Limited's failure or refusal to provide such services or the
termination of the relationship.

Pursuant to long-term contracts, APL Limited, the former owner of our
wholesale business and one of our current stockholders, supplies us with
chassis from its equipment fleet for the transport of international freight on
behalf of other international shippers. In addition, we transport APL
Limited's international cargo on our stacktrain network to locations in the
United States using the chassis and equipment supplied by APL Limited. The
additional wholesale volume attributable to the transport of APL Limited's
international cargo contributes to our ability to obtain favorable provisions
in our rail contracts, although we do not profit from APL Limited's cargo
revenue as we provide these services at cost. APL Limited pays us a fee for
repositioning its empty containers within North America so that the containers
can be reused in trans-Pacific shipping operations. In addition, APL Limited
is currently providing us with computers, software and other information
technology necessary for the operation of our wholesale business. If APL
Limited were unwilling or unable to fulfill its obligations to us under the
terms of these contracts, our business, results of operations and financial
position could be materially adversely affected.

We only have a limited operating history as an independent company.

We have operated as an independent, stand-alone company only since our
recapitalization in May 1999. From 1984 until our recapitalization, our
wholesale business was conducted by various entities owned directly or
indirectly by APL Limited. While owned by APL Limited, our wholesale business
used some of the financial and administrative resources and infrastructure of
APL Limited in such areas as treasury, legal, information systems and benefits
administration. Since our recapitalization, we have provided the
infrastructure, resources and services necessary to operate our wholesale
business independently, although we still utilize computers, software and
other information technology which APL Limited provides to us under a long-
term agreement that is terminable by us upon 120 days' notice. In addition,
our historical financial information prior to our

11
<PAGE>

recapitalization included in this prospectus may not necessarily reflect the
results of operations, financial position and cash flows in the future or what
our results of operations, financial position and cash flows would have been
had we been a separate, independent entity during the periods presented. Also,
due to a lack of historical financial information regarding the wholesale
business on a stand-alone basis, the information regarding our results of
operations, cash flows and financial condition prior to December 30, 1995 is
unavailable as the wholesale business operated as a division of our former
parent and financial results were not tracked separately for divisions.

If we fail to develop, integrate, upgrade or replace our information
technology systems, we may lose orders and customers or incur costs beyond our
expectations.

Increasingly, we compete for customers based upon the flexibility and
sophistication of our technologies supporting our services. The failure of the
hardware or software that supports our information technology systems, the
loss of data contained in the systems, or the inability to access or interact
with our website, could significantly disrupt our operations, prevent
customers from making orders, or cause us to lose orders or customers. If our
information technology systems are unable to handle additional volume for our
operations as our business and scope of services grow, our service levels,
operating efficiency and future freight volumes will decline. In addition, we
expect customers to continue to demand more sophisticated, fully integrated
information systems from their supply chain management service providers. If
we fail to hire qualified personnel to implement and maintain our information
technology systems or we fail to upgrade or replace our information technology
systems to handle increased volumes, meet the demands of our customers and
protect against disruptions of our operations, we may lose orders and
customers which could seriously harm our business.

We are in the process of integrating all of our retail operations onto the
information technology platform we acquired through the acquisition of Rail
Van. We believe the integration of our information technology systems and
training of our employees to use the new system will take approximately six
months and will require that we increase the capacity of the Rail Van system.
If we encounter delays or problems in this integration and/or training or the
capital expenditures necessary to increase the capacity of the Rail Van system
are greater than expected, our retail operations could be adversely affected.
We are also considering replacing the technology provided by APL Limited for
our wholesale operations with information technology systems currently
available in the marketplace from unrelated third parties. If we decide to
replace this technology, we could experience delays or problems in integrating
the new technology and/or training our employees to use the new system which
could adversely affect our wholesale operations or the cost of replacement
could exceed our expectations.

If we lose key personnel and qualified technical staff, our ability to manage
the day-to-day aspects of our business will be weakened.

We believe that the attraction and retention of qualified personnel is
critical to our success. If we lose key personnel or are unable to recruit
qualified personnel, our ability to manage the day-to-day aspects of our
business will be weakened. Our operations and prospects depend in large part
on the performance of our senior management team. The loss of the services of
one or more members of our senior management team, particularly Donald C.
Orris, our chairman, president and chief executive officer, could have a
material adverse effect on our business, financial condition and results of
operation. You should be aware that we face significant competition in the
attraction and retention of personnel who possess the skill sets that we seek.
Because our senior management team, particularly Mr. Orris, has unique
experience with our company and within the transportation industry, it would
be difficult to replace them without adversely affecting our business
operations. In addition to their unique experience, our management team has
fostered key relationships with our suppliers. Such relationships are
especially important in a non-asset based company such as ours. Loss of these
relationships could have a material adverse effect on our profitability. We
have obtained key person life insurance on Mr. Orris.

If we fail to comply with or lose any required licenses, governmental
regulators could assess penalties against us or issue a cease and desist order
against our operations which are not in compliance.

We are licensed by the Department of Transportation as a broker in
arranging for the transportation of general commodities by motor vehicle. The
Department of Transportation has established requirements for acting

12
<PAGE>

in this capacity, including insurance and surety bond requirements. In
addition, we are licensed as an ocean transportation intermediary by the U.S.
Federal Maritime Commission which regulates ocean freight forwarders and non-
vessel operating common carriers that contract for space with vessel operating
common carriers and sell that space to commercial shippers and other non-
vessel operating common carriers for freight originating and/or terminating in
the United States. Non-vessel operating common carriers must publish and
maintain tariffs for the movement of specified commodities into and out of the
United States. The Federal Maritime Commission may enforce these regulations
by instituting proceedings seeking the assessment of penalties for violations
of these regulations. For ocean shipments not originating or terminating in
the United States, the applicable regulations and licensing requirements
typically are less stringent than in the United States. We are also licensed,
regulated and subject to periodic audit as a customs broker by the Customs
Service of the Department of Treasury in each United States custom district in
which we do business. In other jurisdictions in which we perform customs
brokerage services, we are licensed, where necessary, by the appropriate
governmental authority. Our failure to comply with the laws and regulations of
any of these governmental regulators, and any resultant suspension or loss of
our licenses, could result in penalties or a cease and desist order against
any operations that are not in compliance. Such an occurrence would have an
adverse effect on our results of operations, financial condition and
liquidity.

We, our suppliers and our customers are subject to changes in government
regulation which could result in additional costs and thereby affect our
results of operations.

The transportation industry is subject to legislative or regulatory changes
that can affect its economics. Although we operate in the intermodal segment
of the transportation industry, which has been essentially deregulated,
changes in the levels of regulatory activity in the intermodal segment could
potentially affect us and our suppliers and customers. Future laws and
regulations may be more stringent and require changes in operating practices,
influence the demand for transportation services or require the outlay of
significant additional costs. Additional expenditures incurred by us, or by
our suppliers, who would pass the costs onto us through higher prices, would
adversely affect our results of operation. In addition, we have a substantial
number of wholesale customers who provide ocean carriage of intermodal
shipments. The regulatory regime applicable to ocean shipping was revised by
the Ocean Shipping Reform Act of 1998, which took effect on May 1, 1999.
Although the implementation of the Ocean Shipping Reform Act has not to date
had any material impact on the competitiveness and/or efficiency of operations
of our various ocean carrier customers, we cannot assure you that it will not
adversely impact these customers in the future which could adversely affect
our business.

Our operating results are subject to cyclical fluctuations and our quarterly
revenues may also fluctuate, potentially affecting our stock price.

Historically, sectors of the transportation industry have been cyclical as
a result of economic recession, customers' business cycles, increases in
prices charged by third-party carriers, interest rate fluctuations and other
economic factors over which we have no control. Increased operating expenses
incurred by third-party carriers can be expected to result in higher costs to
us, and our net revenues and income from operations could be materially
adversely affected if we were unable to pass through to our customers the full
amount of increased transportation costs. We have a large number of customers
in the automotive and consumer goods industries. If these customers experience
cyclical movements in their business activity, due to an economic downturn,
work stoppages or other factors over which we have no control, the volume of
freight shipped by those customers may decrease and our operating results
could be adversely affected. Any unexpected reduction in revenues for a
particular quarter could cause our quarterly operating results to be below the
expectations of public market analysts or investors. In this event, the
trading price of our common stock may fall significantly.

13
<PAGE>

Our significant debt levels may limit our flexibility in obtaining additional
financing and in pursuing other business opportunities.

As of September 22, 2000 on a pro forma basis after giving effect to the
RFI and Rail Van acquisitions and this offering, our long-term debt would have
been approximately $290.2 million, while our total capitalization would have
been $448.4 million. We also have the ability to incur new debt, subject to
limitations in our credit agreement and the indenture governing our senior
subordinated notes.

Our level of indebtedness could have important consequences to us,
including the following:

. Our ability to obtain additional financing, if necessary, for working
capital, capital expenditures, acquisitions or other purposes may be
impaired or such financing may not be available on favorable terms;

. We will need a substantial portion of our cash flow to pay the principal
and interest on our indebtedness, including indebtedness that we may
incur in the future;

. Payments on our indebtedness will reduce the funds that would otherwise
be available for our operations and future business opportunities;

. A substantial decrease in our net operating cash flows could make it
difficult for us to meet our debt service requirements and force us to
modify our operations;

. We may be more highly leveraged than our competitors, which may place us
at a competitive disadvantage;

. Our debt level may make us more vulnerable than our competitors to a
downturn in our business or the economy generally;

. Our debt level reduces our flexibility in responding to changing
business and economic conditions;

. Some of our debt has a variable rate of interest, which increases our
vulnerability to interest rate fluctuations; and

. There would be a material adverse effect on our business and financial
condition if we are unable to obtain additional financing, as needed.

To service our indebtedness, we will require a significant amount of cash. Our
ability to generate cash depends on many factors, some of which are beyond our
control.

Our ability to service our indebtedness will depend upon, among other
things:

. Our future financial and operating performance, which will be affected
by prevailing economic conditions and financial, business, regulatory
and other factors, some of which are beyond our control; and

. The future availability of borrowings under our credit agreement or any
successor facility, the availability of which may depend on, among other
things, our complying with certain covenants.

If our operating results and borrowings under our credit agreement are not
sufficient to service our current or future indebtedness, we will be forced to
take actions such as reducing or delaying acquisitions, investments, strategic
alliances and/or capital expenditures, selling assets, restructuring or
refinancing our indebtedness, or seeking additional equity capital or
bankruptcy protection. There is no assurance that we can effect any of these
remedies on satisfactory terms, or at all.

Our debt agreements contain operating and financial restrictions which may
restrict our business and financing activities.

The operating and financial restrictions and covenants in our credit
agreement, the indenture governing our senior subordinated notes and any
future financing agreements may adversely affect our ability to finance future

14
<PAGE>

operations or capital needs or to engage in other business activities. In
addition, our debt agreements restrict our ability to:

. declare dividends, redeem or repurchase capital stock;

. prepay, redeem or purchase debt;

. incur liens and engage in sale and leaseback transactions;

. make loans and investments;

. incur additional indebtedness;

. amend or otherwise change debt and other material agreements;

. make capital expenditures;

. engage in mergers, acquisitions and asset sales;

. enter into transactions with affiliates; and

. change our primary business.

Our credit agreement also requires us to achieve certain financial and
operating results and satisfy certain financial ratios.

A breach of any of the restrictions, covenants, ratios or tests in our debt
agreements could result in defaults under these agreements. A significant
portion of our indebtedness then may become immediately due and payable. We
might not have, or be able to obtain, sufficient funds to make these
accelerated payments. In addition, our obligations under our credit agreement
are secured by substantially all of our assets.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements that reflect our
current estimates, expectations and projections about our future results,
performance, prospects and opportunities. In some cases, you can identify
these statements by forward-looking words such as "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "should," "will," "would" and
similar expressions. These forward-looking statements are based on all
information currently available to us and subject to a number of risks,
uncertainties and other factors that could cause our actual results,
performance, prospects or opportunities to differ materially from those
expressed in, or implied by, these forward-looking statements. Important
factors that could cause our actual results to differ materially from the
results referred to in the forward-looking statements we make in this
prospectus are set forth elsewhere in this prospectus. As stated elsewhere in
this prospectus, these risks, uncertainties and other factors include:

. general economic and business conditions;

. industry trends;

. increases in our leverage;

. changes in our business strategy, development plans or cost savings
plans;

. our ability to integrate acquired businesses;

. the loss of one or more of our major customers;

. competition;

. availability of qualified personnel;

. changes in, or the failure to comply with, government regulation; and

. the other factors discussed under "Risk Factors."

15
<PAGE>

You should not place undue reliance on any forward-looking statements.
Except as otherwise required by federal securities laws, we undertake no
obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, changed circumstances
or any other reason after the date of this prospectus.

USE OF PROCEEDS

Our net proceeds from this offering are estimated to be approximately $
million (approximately $ million if the underwriters' over-allotment option
is exercised in full), assuming an offering price of $ per share and after
deducting estimated underwriting discounts and commissions and estimated
expenses of the offering. We intend to use a portion of the net proceeds to us
from this offering to repay $109 million of indebtedness outstanding under our
credit agreement plus accrued interest as follows:

. $40 million of term loans; and

. $69 million under the revolving credit facility.

At September 22, 2000, after giving effect to indebtedness incurred to
finance our acquisitions of RFI and Rail Van, outstanding borrowings under our
credit agreement totaled approximately $243 million, consisting of:

. $174 million of term loans which represents the outstanding portion of
the $135 million term loan that was incurred in May 1999 to finance a
portion of our recapitalization and acquisition of Pacer Logistics and
$40 million term loan that was incurred in December 2000 to finance a
portion of our acquisition of Rail Van. These term loans currently bear
interest at the rate of 9.4% per annum and mature on May 28, 2006.

. $69 million of borrowings under the revolving credit facility incurred
to finance our acquisitions of Conex, GTS, RFI and Rail Van in January,
August, October and December 2000, respectively. Borrowings under the
revolving credit facility currently bear interest at the rate of 8.9%
per annum and mature on May 28, 2004.

We intend to use the remaining net proceeds from this offering of
approximately $ million, to fund working capital and for other general
corporate purposes. We may also use a portion of the remaining proceeds of
this offering to acquire or invest in complementary businesses. We are not
contemplating any specific acquisitions at this time and no portion of the net
proceeds has been allocated for any acquisition. However, we evaluate
acquisition opportunities on an on-going basis. Pending their use for these
purposes, the net proceeds of this offering will be invested in short-term,
interest bearing investment-grade securities, certificates of deposit or
direct or guaranteed obligations of the United States government.

DIVIDEND POLICY

We have not paid any dividends on our common stock and do not intend to pay
any dividends on our common stock in the foreseeable future. We currently
intend to retain our future earnings, if any, to finance the further expansion
and continued growth of our business. In addition, our ability to pay cash
dividends is currently restricted under the terms of our credit agreement.
Future dividends, if any, will be determined by our board of directors.

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<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of September 22, 2000:

. on an actual basis;

. on a pro forma basis to reflect our acquisitions of RFI and Rail Van as
if they had occurred on September 22, 2000; and

. on a pro forma as adjusted basis to reflect the sale of the
shares of our common stock in this offering at an assumed initial
offering price of $ per share (which is the midpoint of the filing
range on the cover of this prospectus), after deducting estimated
underwriting discounts and commissions and estimated expenses of the
offering payable by us.

You should read this table in conjunction with the consolidated and pro
forma financial statements and notes thereto appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
September 22, 2000
----------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------- ------------- -----------
(in millions)
<S> <C> <C> <C>
Cash....................................... $ -- $ 0.4 $ 27.9
======= ====== ======
Current maturities of long-term debt and
capital leases............................ $ 1.4 $ 1.9 $ 1.9

======= ====== ======
Long-term debt:
Capital leases............................ $ -- $ 1.0 $ 1.0
Senior credit facilities(1)
Revolving credit facility................ 10.0 69.0 --
Term loans............................... 132.3 172.3 132.3
Senior subordinated notes................. 150.0 150.0 150.0
Subordinated note(2)...................... 5.0 5.0 5.0
------- ------ ------
Total long-term debt................... 297.3 397.3 288.3
------- ------ ------

Minority interest-exchangeable preferred
stock(3).................................. 24.6 24.6 24.6

Stockholders' equity:
Preferred stock: $0.01 par value;
1,000,000 shares authorized actual and
pro forma, 50,000,000 pro forma as
adjusted; none outstanding (4)........... -- -- --
Common stock: $0.01 par value, 20,000,000
shares authorized actual and pro forma,
150,000,000 pro forma as adjusted;
11,057,373 shares outstanding actual,
11,337,373 shares pro forma, shares
pro forma as adjusted.................... 0.1 0.1 0.2
Additional paid-in capital................ 111.1 118.1 254.5
Accumulated deficit....................... (118.8) (118.4) (119.2)(5)
------- ------ ------
Total stockholders' equity (deficit)..... (7.6) (0.2) 135.5
------- ------ ------
Total capitalization...................... $ 314.3 $421.7 $448.4
======= ====== ======
</TABLE>
--------
(1) For a description of the senior credit facilities see "Description of
Certain Indebtedness--Senior Secured Credit Facility."
(2) Conex Global Logistics Services, Inc., one of our subsidiaries, issued an
8.0% Non-Negotiable Subordinated Note Due 2003 in the aggregate principal
amount of $5.0 million to the former shareholders of Conex in connection
with the Conex acquisition.
(3) For a description of the Pacer Logistics exchangeable preferred stock, see
"Description of Capital Stock--Pacer Logistics Exchangeable Preferred
Stock."
(4) Two series of preferred stock have been designated and no shares of either
such series are outstanding. See "Description of Capital Stock--Preferred
Stock."
(5) Reflects the write-off of deferred loan costs in connection with repayment
of indebtedness under our credit agreement. The write-off will be
recognized in the quarter in which the offering is consummated and the
indebtedness is repaid.

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<PAGE>

The foregoing table excludes:

. 1,332,488 shares of common stock and 44,997 shares of preferred stock
issuable upon the exercise of options outstanding as of September 22,
2000, after giving effect to options granted in connection with our
acquisitions of RFI and Rail Van and option exercises subsequent to
September 22, 2000, at exercise prices ranging from $0.22 to $25.00 per
share, with a weighted average exercise price of $12.90, of which
1,252,488 shares of common stock and all shares of preferred stock are
issuable upon exercise of options outstanding under our stock option
plan;

. 253,886 shares of common stock reserved for future grant under our stock
option plan; and

. 2,234,800 shares of common stock issuable upon the exchange of all
outstanding shares of Pacer Logistics exchangeable preferred stock,
based on an exchange rate of 100 shares of common stock for each
outstanding share of Pacer Logistics exchangeable preferred stock.

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<PAGE>

DILUTION

Our pro forma net tangible book value as of September 22, 2000, after
giving effect to our acquisitions of RFI and Rail Van as if they had occurred
on September 22, 2000, was $(280.6) million, or $(24.75) per share of common
stock. We have calculated this amount by:

. subtracting our pro forma total liabilities from pro forma total
tangible assets; and

. then dividing the difference by the pro forma as adjusted number of
shares of common stock outstanding.

If we give effect to our sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share, after
deducting the estimated underwriting discounts and commissions and the
estimated offering expenses payable by us of $ million, our adjusted pro
forma net tangible book value as of September 22, 2000 would have been $
million, or $ per share. This amount represents an immediate dilution of
$ per share to new investors. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share as of September 22,
2000.......................................................... $
Increase in pro forma net tangible book value per share
attributable to new investors.................................
------
Pro forma net tangible book value per share after this offering..
------
Dilution per share to new investors.............................. $
======
</TABLE>

The following table summarizes on the pro forma basis described above, as
of September 22, 2000, the difference between the number of shares of common
stock purchased from us, the total consideration paid to us, and the average
price per share paid by existing stockholders and by new investors, at an
assumed initial public offering price of $ per share before deducting
estimated underwriting discounts and commissions and estimated offering
expenses payable by us:

<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
--------------------- -------------------- Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 13,572,217(1) % $140,397,989 % $10.35
New investors..............
---------- --- ------------ ---
Total.................... % $ %
========== === ============ ===
</TABLE>
--------
(1) Includes 2,234,844 shares of common stock issuable upon exchange of the
Pacer Logistics exchangeable preferred stock.

If the underwriters exercise their over-allotment option in full, the
number of shares held by new investors will increase to shares, or %
of the total shares of common stock outstanding after this offering, the
number of shares held by existing stockholders will be reduced to % of the
total shares of common stock outstanding after this offering, and the dilution
to new investors will be $ per share.

The tables above assume no exercise of stock options outstanding on
September 22, 2000. As of September 22, 2000, after giving effect to options
granted in connection with our acquisitions of RFI and Rail Van and option
exercises subsequent to September 22, 2000, there were options outstanding to
purchase 1,332,488 shares of common stock and 44,997 shares of preferred
stock, at a weighted average exercise price of $12.90 per share, of which
1,252,488 shares of common stock and all shares of preferred stock are
issuable upon exercise of options outstanding under our stock option plan. To
the extent any of these options are exercised, there will be further dilution
to new investors. If all of these outstanding options had been exercised as of
September 22, 2000, pro forma net tangible book value per share after this
offering would have been and total dilution per share to new investors
would have been $ .

19
<PAGE>

SELECTED FINANCIAL DATA

The following table presents, as of the dates and for the periods
indicated, selected historical financial information for us and our
predecessor as discussed below. The selected historical data at December 31,
1999 and December 25, 1998, for the fiscal years ended December 31, 1999 and
December 25, 1998 and for the periods from November 13, 1997 to December 26,
1997 and December 28, 1996 to November 12, 1997 have been derived from, and
should be read in conjunction with, our audited financial statements and
related notes appearing elsewhere in this prospectus. The selected historical
data at December 26, 1997 and December 27, 1996 and for the year ended
December 27, 1996 has been derived from our audited financial statements which
are not included in this prospectus.

Prior to November 1998, we operated as the American President Lines
Stacktrain Services, a division of APL Land Transport Services, Inc.,
("APLLTS") a wholly-owned subsidiary of APL Limited. See Note 1 to our audited
financial statements included in this prospectus. The historical financial
statements subsequent to November 13, 1997 include the push down effect of the
purchase price allocation resulting from the purchase of APL Limited by
Neptune Orient Lines Limited. The results of operations of the predecessor
period are not comparable to the successor period as a result of the
acquisition of APL Limited by Neptune Orient Lines Limited. In November, 1998,
APLLTS transferred all of its non-stacktrain assets to its parent, APL
Limited. In connection with our recapitalization and acquisition of Pacer
Logistics, Inc., APLLTS was renamed Pacer International.

For the fiscal year ended December 29, 1995, APLLTS was comprised of three
operating divisions: American President Lines Stacktrain Services Division,
American President Lines Automotive Division and American President Lines
Distribution Services. The accounting records for all the divisions were
comingled within the records of APLLTS and APLLTS did not report separate
financial results for each division. Furthermore, the information systems in
place at that time do not facilitate the separation of such records or provide
a reasonable basis for overhead allocation and management responsible for the
accounting records at that time has since ceased employment with us.
Accordingly, we have been unable to obtain financial information for that
fiscal year.

The selected historical financial data as of September 22, 2000 and for the
nine months ended September 22, 2000 and September 17, 1999 have been derived
from our unaudited financial statements included elsewhere in this prospectus.
These unaudited financial statements include, in the opinion of our
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the data for such periods. The results of
operations for the interim periods are not necessarily indicative of operating
results for the full year.

The following table should also be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Information", our audited financial statements
and the related notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.

20
<PAGE>

<TABLE>
<CAPTION>
The Predecessor The Company
------------------------- -------------------------------------------------------------------
For the For the Year Year Nine Months Nine Months
Year Ended Period Period Ended Ended Ended Ended
------------ ------------ ------------ ------------ ------------ ------------- -------------
December 28, November 13,
1996 through 1997 through
December 27, November 12, December 26, December 25, December 31, September 17, September 22,
1996 1997(a) 1997(a) 1998 1999(b) 1999(b) 2000(c)
------------ ------------ ------------ ------------ ------------ ------------- -------------
(in millions, except (in millions, except per share data)
per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Gross revenues.......... $552.8 $523.8 $ 60.7 $598.9 $ 927.7 $ 624.5 $ 916.5
Cost of purchased
transportation and
services............... 423.7 407.5 47.4 466.3 735.4 494.0 718.7
------ ------ ------ ------ ----------- ----------- -----------
Net revenues............ 129.1 116.3 13.3 132.6 192.3 130.5 197.8
Direct operating
expenses............... 38.1 53.1 7.4 64.5 76.8 53.6 60.1
Selling, general and
administrative
expenses............... 25.4 21.4 3.2 28.3 58.9 37.1 73.1
Depreciation and
amortization .......... 4.1 3.0 0.7 6.6 8.6 5.9 8.2
------ ------ ------ ------ ----------- ----------- -----------
Income from operations.. 61.5 38.8 2.0 33.2 48.0 33.9 56.4
------ ------ ------ ------ ----------- ----------- -----------
Net income.............. $ 38.1 $ 22.9 $ 1.0 $ 20.6 $ 16.6 $ 14.2 $ 17.3
====== ====== ====== ====== =========== =========== ===========
Net income per share:
Basic.................. (d) (d) (d) (d) $ 1.59 $ 1.36 $ 1.58
Diluted................ (d) (d) (d) (d) 1.33 1.11 1.36
Weighted average common
shares outstanding:
Basic.................. (d) (d) (d) (d) 10,440,000 10,440,000 10,921,740
Diluted................ (d) (d) (d) (d) 13,338,052 13,337,755 13,624,951

Balance Sheet Data (at
end of period):
Working capital......... $(26.1) $ -- $(32.5) $(37.2) $ (3.7) $ (14.3) $ (4.8)
Total assets............ 71.4 -- 111.9 156.1 455.0 454.3 484.9
Total debt including
capital leases......... -- -- -- -- 284.4 285.1 298.7
Minority interest--
Exchangeable preferred
stock.................. -- -- -- -- 23.4 22.9 24.6
Total stockholders'
equity (deficit)....... (0.1) -- 29.6 55.6 (31.7) (34.8) (7.6)

Other Financial Data:
EBITDA(e)............... $ 65.6 $ 41.8 $ 2.7 $ 39.8 $ 56.6 $ 39.8 $ 64.6
EBITDA Margin(f)........ 50.8% 35.9% 20.3% 30.0% 29.4% 30.5% 32.7%
Capital expenditures.... $ 0.2 $ -- $ -- $ 39.7 $ 2.0 $ 1.5 $ 3.4
Cash provided by
operating activities... 17.4 18.2 12.7 31.8 20.8 17.6 12.4
Cash provided by (used
in) investing
activities............. 0.9 3.6 -- (38.5) (74.0) (73.2) (44.9)
Cash provided by (used
in) financing
activities............. (18.3) (21.8) (12.7) 6.7 65.4 65.7 20.3
Depreciation............ 4.1 3.0 0.7 6.0 6.2 4.5 4.8
Amortization............ -- -- -- 0.6 2.4 1.4 3.4
</TABLE>
-------
(a) The following information for the year ended December 26, 1997 has been
presented for comparative purposes only and is the combination of the
December 28, 1996 to November 12, 1997 period, set forth above as the
Predecessor, and the November 13, 1997 to December 26, 1997 period, set
forth above as the Company. As a result of the change in ownership of
Pacer International, these numbers are not indicative of what the full
year 1997 was or would have been if the change in ownership had not
occurred.
<TABLE>
<CAPTION>
1997
------
<S> <C>
Gross revenues.................................................. $584.5
Cost of purchased transportation and services................... 454.9
Net revenues.................................................... 129.6
Income from operations.......................................... 40.8
Net income...................................................... 23.9
EBITDA(d)....................................................... 44.5
EBITDA margin(e)................................................ 34.3%
</TABLE>

21
<PAGE>

(b) Includes the results of Pacer Logistics, Inc. since acquisition on May 28,
1999.
(c) Includes the results of Conex Global Logistics Services, Inc. and GTS
Transportation Services Inc. since their dates of acquisition on January
13, 2000 and August 31, 2000, respectively.
(d) Not applicable as prior to our recapitalization we were a division of APL
Limited and did not have common stock.
(e) EBITDA represents income before income taxes, interest expense,
depreciation and amortization and minority interest (payment-in-kind
dividends on Pacer Logistics' 7.5% exchangeable preferred stock). EBITDA
is presented because it is commonly used by investors to analyze and
compare operating performance and to determine a company's ability to
service and/or incur debt. However, EBITDA should not be considered in
isolation or as a substitute for net income, cash flows or other income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
EBITDA as shown for the fiscal year ended December 25, 1998 has not been
adjusted by $2.1 million related to certain non-recurring costs. EBITDA
shown for the nine months ended September 17, 1999 has not been adjusted
for the elimination of one time bonus payments of $0.7 million related to
the acquisition of Pacer Logistics. Additionally, we were historically
allocated corporate overhead costs by APL Limited.
(f) EBITDA margins are calculated as a percentage of net revenues.

22
<PAGE>

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.

23
<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.

24
<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>

25
<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>

26
<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.

27
<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

28
<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

29
<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.

30
<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.

31
<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

32
<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>

33
<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>

34
<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

35
<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>

A 1/8% change in interest rates would affect pro forma interest
expense associated with our pro forma variable interest rate debt by
approximately $0.2 million annually.

<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.

<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.

36
<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>

37
<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.

38
<PAGE>

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

You should read the following discussion and analysis together with our
financial statements, including the notes and the other financial information
appearing in the back of this prospectus. Due to our limited operating
history, acquisitions and rapid growth, period-to-period comparisons of
financial data are not necessarily indicative, and you should not rely upon
them as an indicator of our future performance. The following discussion
includes forward-looking statements. For a discussion of important factors
that could cause actual results to differ from results discussed in the
forward-looking statements, see "Special Note Regarding Forward-Looking
Statements."

Overview

As a non-asset based third-party logistics provider, we offer a broad array
of logistics and other services to facilitate the movement of freight from
origin to destination. We operate in two segments, the wholesale segment and
the retail segment. The wholesale segment provides intermodal rail service in
North America by selling intermodal service to shippers pursuant to agreements
with intermodal rail trains. The retail segment provides trucking services,
intermodal marketing, freight consolidation and handling, international
freight forwarding and supply chain management services.

Gross Revenues

The wholesale segment's gross revenues are generated through fees charged
to customers for the transportation of freight. The growth of these revenues
is primarily driven by increases in volume of freight shipped, as overall
rates have historically remained relatively constant. The average rate is
impacted by product mix, rail lanes utilized and market conditions. Also
included in gross revenues are rail car rental income and incentives paid by
APL Limited and others for the repositioning of empty containers with domestic
westbound loads.

The retail segment's gross revenues are generated through fees charged for
a broad portfolio of freight transportation services, including trucking
services, intermodal marketing, freight consolidation and handling,
international freight forwarding and supply chain management services. Overall
gross revenues for the retail segment are driven through expanding our service
offering and marketing our broad array of transportation services to our
existing customer base and to new customers. Trucking services include truck
brokerage, flatbed and specialized heavy-haul operations, and local trucking
services. Gross revenues from truck brokerage are driven primarily through
increased volume and outsourcing by companies of their transportation and
logistics needs. Gross revenues from other trucking services, which primarily
support intermodal marketing and provide specialized and local transportation
services to customers through independent operators, are driven primarily
through increased volume as well as length of haul and the rate per mile
charged to the customer. Intermodal marketing involves arranging the movement
of freight in containers and trailers utilizing truck and rail transportation.
Increases in gross revenues from intermodal marketing are generated primarily
from increased volumes, as rates are dependent upon product mix and
transportation lane, which tend to remain relatively constant as customers'
shipments tend to remain in similar lanes. Gross revenues for freight
consolidation and handling, which includes the handling,
consolidation/deconsolidation and storage of freight on behalf of the shipper,
are driven by increased outsourcing and import volumes and by shipping lines
on the West Coast who are increasingly using third-party containers, rather
than their own, to move freight inland. Through our supply chain management
services, we manage all aspects of the supply chain from inbound sourcing and
delivery logistics through outbound shipment, handling, consolidation,
deconsolidation, distribution, and just-in-time delivery of end products to
our customers' customers. Gross revenues for supply chain management services
are driven by increased outsourcing. As a result of our recent acquisitions of
RFI and Rail Van, we also provide international freight forwarding services,
which involves cross-border shipping execution for our customers. Gross
revenues for international freight forwarding are driven by the globalization
of trade.

39
<PAGE>

Cost of Purchased Transportation and Services/Net Revenues

The wholesale segment's net revenues are the gross revenues earned from
transportation rates charged to customers less the costs of purchased
transportation and services. The cost of purchased transportation and services
consists primarily of the amounts charged by railroads and local trucking
companies. In addition, terminal and cargo handling services represent the
variable expenses directly associated with handling freight at a terminal
location. The cost of these services is variable in nature and is based on the
volume of freight shipped.

The retail segment's net revenues consist of the gross revenues earned from
its third-party transportation services, less the cost of purchased
transportation and services. Net revenues are driven by the mix of services
provided with net revenues as a percentage of gross revenues varying
significantly based on this mix. Purchased transportation and services
consists of amounts paid to third parties to provide services, such as
railroads, independent contractor truck drivers, freight terminal operators
and dock workers. Third-party rail costs are charged through contracts with
the railroads and are dependent upon product mix and traffic lanes.
Sub-contracted or independent operators are paid based on a percentage of
revenues, mileage or a fixed fee.

Direct Operating Expenses

Direct operating expenses are both fixed and variable expenses directly
relating to the wholesale operations and consist of equipment lease and
depreciation expense, equipment maintenance and repair, fixed terminal and
cargo handling expenses and other direct variable expenses. Our fleet of
leased equipment is maintained through a variety of short- and long-term
leases, approximately 40% of which can be terminated without penalty on short
notice. Increases to our equipment fleet will primarily be through additional
leases as the growth of our business dictates. Equipment maintenance and
repair consist of the costs related to the upkeep of the equipment fleet,
which can be considered semi-variable in nature as a certain amount relates to
the annual preventative maintenance costs in addition to amounts driven by
fleet usage. Fixed terminal and cargo handling costs primarily relate to the
fixed rent and storage expense charged to us by terminal operators and is
expected to remain relatively fixed. Other variable expenses primarily include
service credits from for-hire transportation providers, which effectively
reduce our transportation costs.

Selling, General and Administrative Expenses

The wholesale segment's selling, general and administrative expenses prior
to our 1999 recapitalization consisted of allocated APL Limited corporate and
information technology expenses and direct administrative expenses, which
primarily included payroll and fringe benefits and other overhead expenses.
After May 28, 1999, the corporate administrative services previously provided
by APL Limited have been incurred directly by the wholesale segment.

The retail segment's selling, general and administrative expenses relate to
the costs of customer acquisition, billing, customer service and salaries and
related expenses of marketing, as well as the executive and administrative
staff's compensation, office expenses and professional fees. The retail
segment anticipates that it will incur increased overall selling related costs
as it grows its operations, but that such costs will remain relatively
consistent as a percentage of net revenues. The costs related to the retail
segment's corporate functions, such as administration, finance, legal, human
resources and facilities will likely increase as the business grows, but will
likely decrease as a percentage of net revenues as the business grows.

Results of Operations

The following discussion and analysis of financial condition and results of
operations for the nine months ended September 17, 1999 and the year ended
December 31, 1999 include the results of operations after our recapitalization
and the acquisition of Pacer Logistics since their completion on May 28, 1999.
All prior period results discussed represent the results of our wholesale
business only. The results of operations and financial condition for the
periods subsequent to our recapitalization and acquisition of Pacer Logistics
are not necessarily comparable to prior periods.

40
<PAGE>

Nine Months Ended September 22, 2000 Compared to Nine Months Ended
September 17, 1999

Amounts for the retail segment for the 2000 period include the results of
our acquisition of Conex assets and GTS (the "2000 acquisitions") since each
respective date of acquisition. See Note 2 to our Condensed Consolidated
Financial Statements.

Financial Data for 2000 Acquisitions
Nine Months ended September 22, 2000
(in millions)

<TABLE>
<CAPTION>
Conex GTS Total
----- ---- -----
<S> <C> <C> <C>
Gross revenues................................................ $38.5 $7.8 $46.3
Purchased transportation...................................... 27.1 7.0 34.1
----- ---- -----
Net revenues.................................................. 11.4 0.8 12.2
Selling, general & administrative expenses.................... 6.3 0.4 6.7
Depreciation and amortization................................. 0.7 -- 0.7
----- ---- -----
Income from operations........................................ $ 4.4 $0.4 $ 4.8
===== ==== =====
</TABLE>

Certain amounts in the "% Change" column for the retail segment in the
table below are not comparable because the nine month 1999 amounts include
only four months of retail segment data (since acquisition on May 28, 1999)
and do not include Conex data acquired January 13, 2000 nor GTS data acquired
August 31, 2000. Amounts for the retail segment for the 2000 period include
the results of the Conex assets and GTS since acquisition unless specified
otherwise. See Note 2 to our Condensed Consolidated Financial Statements.

The following table sets forth our historical financial data for the nine
months ended September 22, 2000 and September 17, 1999.

Financial Data Comparison by Reportable Segment
Nine Months Ended September 22, 2000 and September 17, 1999
(in millions)

<TABLE>
<CAPTION>
2000 1999 Change % Change
------ ------ ------ --------
<S> <C> <C> <C> <C>
Gross revenues
Wholesale.................................... $594.7 $499.7 $ 95.0 19.0%
Retail....................................... 348.4 134.2 214.2 *
Inter-segment elimination.................... (26.6) (9.4) (17.2) *
------ ------ ------ ----
Total....................................... 916.5 624.5 292.0 46.8

Cost of purchased transportation and services
Wholesale.................................... 462.4 390.9 71.5 18.3
Retail....................................... 282.9 112.5 170.4 *
Inter-segment elimination.................... (26.6) (9.4) (17.2) *
------ ------ ------ ----
Total....................................... 718.7 494.0 224.7 45.5

Net revenues
Wholesale.................................... 132.3 108.8 23.5 21.6
Retail....................................... 65.5 21.7 43.8 *
------ ------ ------ ----
Total....................................... 197.8 130.5 67.3 51.6

Direct operating expenses
Wholesale.................................... 60.1 53.6 6.5 12.1
Retail....................................... -- -- -- --
------ ------ ------ ----
Total....................................... 60.1 53.6 6.5 12.1
</TABLE>

41
<PAGE>

<TABLE>
<CAPTION>
2000 1999 Change % Change
----- ----- ------ --------
<S> <C> <C> <C> <C>
Selling, general & administrative expenses
Wholesale.......................................... $28.0 $22.6 $5.4 23.9%
Retail............................................. 45.1 14.5 30.6 *
----- ----- ---- -----
Total............................................. 73.1 37.1 36.0 97.0

Depreciation and amortization
Wholesale.......................................... 4.0 4.5 (0.5) (11.1)
Retail............................................. 4.2 1.4 2.8 *
----- ----- ---- -----
Total............................................. 8.2 5.9 2.3 38.9

Income from operations
Wholesale.......................................... 40.2 28.1 12.1 43.1
Retail............................................. 16.2 5.8 10.4 *
----- ----- ---- -----
Total............................................. 56.4 33.9 22.5 66.4
Interest (income) expense, net...................... 24.3 9.6 14.7 153.1
Income tax expense.................................. 13.6 9.5 4.1 43.2
Minority interest................................... 1.2 0.6 0.6 100.0
Net income.......................................... $17.3 $14.2 $3.1 21.8%
</TABLE>
--------
*Not comparable.

Gross Revenues. Gross revenues increased $292.0 million, or 46.8%, for the
nine month period ended September 22, 2000 compared to the nine month period
ended September 17, 1999. Approximately $167.9 million, or 57.5%, of the
increase was due to the acquisition of the retail segment (excluding the 2000
acquisitions) and $46.3 million, or 15.9%, of the increase was due to the 2000
acquisitions. The wholesale segment increase of $95.0 million was due
primarily to an $81.8 million, or 17.4%, increase in freight revenues driven
by an overall container volume increase of 80,494 containers or 18.2%. The
volume increase was due to increased customer demand coupled with the addition
of 1,500 53-foot containers during the fourth quarter of 1999 and 2,625
containers during the first nine months of 2000. This volume increase was
partially offset by a 0.7% reduction in the average freight revenue per
container resulting primarily from mix changes. A 3% fuel surcharge
implemented on domestic traffic during the second quarter of 2000 to defray
rail fuel cost increases mitigated the revenue per container reduction.
Automotive and international volumes continued strong for the 2000 period
exceeding the 1999 period by 44% and 45%, respectively. Other wholesale
segment revenues increased approximately $13.2 million due primarily to
increased railcar rental income in the 2000 period resulting from the
registration and marking of our rail cars for participation in the Association
of American Railroad interchange rules and income collection procedures which
allowed us to collect rail car rental income without entering into separate
agreements with each user, increased container per diem revenue generated by
the additional containers received in the fourth quarter of 1999 and the first
nine months of 2000 coupled with higher traffic volumes, and the management
fees associated with the 1999 Wholesale Services Agreement with APL Limited
entered into effective May 28, 1999.

Net Revenues. Net revenues increased $67.3 million, or 51.6%, for the 2000
period compared to the 1999 period. The acquisition of the retail segment
(excluding the 2000 acquisitions) accounted for $31.6 million, or 47.0%, of
the increase, the 2000 acquisitions accounted for $12.2 million, or 18.1%, of
the increase and the wholesale segment accounted for the remaining $23.5
million of the increase. The wholesale segment's cost of purchased
transportation increased $71.5 million, or 18.3%, on container volume
increases of 18.2% discussed above. The wholesale segment gross margin
increased to 22.2% in the 2000 period from 21.8% in the 1999 period due
primarily to increased railcar rental income and to improved train blocking
and loading procedures implemented as a result of the Intermodal
Transportation Agreement with CSX Intermodal, Inc. entered into effective
January 1, 2000, which reduced drayage costs. These gross margin improvements
were partially offset by the significant traffic increase in the lower
yielding international business line.

42
<PAGE>

Direct Operating Expenses. Direct operating expenses, which are only
incurred by the wholesale segment, increased $6.5 million, or 12.1%, in the
2000 period compared to the 1999 period. The increase was due to increased
equipment lease and maintenance expenses of approximately $6.5 million as a
result of the expansion of the fleet of containers and chassis.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $36.0 million, or 97.0%, in the 2000 period
compared to the 1999 period. The retail segment (excluding the 2000
acquisitions) accounted for $23.9 million, or 66.4%, of the increase, the 2000
acquisitions accounted for an additional $6.7 million, or 18.6%, of the
increase and the wholesale segment accounted for $5.4 million, or 15.0%, of
the increase. The increase in wholesale segment costs was due primarily to
higher information technology costs provided under contract with APL Limited
as well as increased headcount since the 1999 period associated with
completing the organizational changeover from APL Limited to Pacer since May
1999.

Depreciation and Amortization. Depreciation and amortization expenses
increased $2.3 million, or 38.9%, for the 2000 period compared to the 1999
period. The retail segment, including $0.7 million related to the 2000
acquisitions, accounted for $2.8 million of the increase in this category. The
wholesale segment decrease of $0.5 million was due primarily to reduced
depreciation expense associated with the sale and leaseback of 199 railcars on
May 28, 1999. Depreciation expense was $4.8 million and $4.5 million and
amortization expense was $3.4 million and $1.4 million for the 2000 period and
1999 period, respectively. The increase in amortization was due to the
amortization of goodwill associated with the acquisition of the retail segment
on May 28, 1999 as well as the 2000 acquisitions.

Income From Operations. Income from operations increased $22.5 million, or
66.4%, from $33.9 million in the 1999 period to $56.4 million in the 2000
period. The acquisition of the retail segment (excluding the 2000
acquisitions) accounted for $5.6 million of the increase, the 2000
acquisitions accounted for $4.8 million of the increase and the wholesale
segment accounted for $12.1 million of the increase. The wholesale segment
increase was due primarily to the 18.2% increase in container volumes for the
2000 period and related higher railcar rental income and container per diem
income.

Interest Expense. Interest expense increased by $14.7 million for the 2000
period compared to the 1999 period due to the issuance of $150.0 million of
senior subordinated notes and borrowing $135.0 million under the term loan
portion of the credit agreement on May 28, 1999 to fund our recapitalization
and the acquisition of the retail segment. In addition, we borrowed $10.0
million from the revolving credit facility to fund the acquisition of GTS on
August 31, 2000 and borrowed $15.0 million from the revolving credit facility
and issued a $5.0 million 8% subordinated note to Conex shareholders to fund
the acquisition of the Conex assets on January 13, 2000. Amounts for the 1999
period were restated to reflect an adjustment to the inter-segment interest
calculation between the wholesale and retail segments which favorably impacted
the wholesale segment and adversely impacted the retail segment but had no
impact on consolidated results.

Income Tax Expense. Income tax expense increased by $4.1 million from $9.5
million in the 1999 period to $13.6 million in the 2000 period due to higher
pre-tax income in the 2000 period and higher applicable tax rates. The
effective tax rate for the 2000 period was 42.4%, compared to 39.8% for the
1999 period.

Net Income. Net income increased $3.1 million, or 21.8%, from $14.2 million
in the 1999 period to $17.3 million in the 2000 period. The retail segment,
including 2000 acquisitions, accounted for $4.1 million of the increase and
the wholesale segment accounted for a $0.4 million decrease in net income. The
wholesale segment decrease was due primarily to increased interest expense
substantially offset by increased income from operations. Additionally, an
increase in minority interest costs (accrued paid-in-kind dividends on the
Pacer Logistics exchangeable preferred stock) of $0.6 million partially offset
the net income increase.

43
<PAGE>

Fiscal Year Ended December 31, 1999 Compared to Fiscal Year Ended December
25, 1998

The following table sets forth our historical financial data comparing data
for the years ended December 31, 1999 and December 25, 1998.

Financial Data Comparison by Reportable Segment
Fiscal Year Ended December 31, 1999 and December 25, 1998
(in millions)

<TABLE>
<CAPTION>
1999 1998 Change % Change
------ ------ ------ --------
<S> <C> <C> <C> <C>
Gross revenues
Wholesale................................... $713.2 $598.9 $114.3 19.1%
Retail...................................... 233.2 -- 233.2 *
Inter-segment elimination................... (18.7) -- (18.7) *
------ ------ ------ -----
Total..................................... 927.7 598.9 328.8 54.9
Cost of purchased transportation and services
Wholesale................................... 559.1 466.3 92.8 19.9
Retail...................................... 195.0 -- 195.0 *
Inter-segment elimination................... (18.7) -- (18.7) *
------ ------ ------ -----
Total..................................... 735.4 466.3 269.1 57.7
Net revenues
Wholesale................................... 154.1 132.6 21.5 16.2
Retail...................................... 38.2 -- 38.2 *
------ ------ ------ -----
Total..................................... 192.3 132.6 59.7 45.0
Direct operating expenses
Wholesale................................... 76.8 64.5 12.3 19.1
Retail...................................... -- -- -- *
------ ------ ------ -----
Total..................................... 76.8 64.5 12.3 19.1
Selling, general & administrative expenses
Wholesale................................... 32.4 28.3 4.1 14.5
Retail...................................... 26.5 -- 26.5 *
------ ------ ------ -----
Total..................................... 58.9 28.3 30.6 108.1
Depreciation and amortization
Wholesale................................... 6.7 6.6 0.1 1.5
Retail...................................... 1.9 -- 1.9 *
------ ------ ------ -----
Total..................................... 8.6 6.6 2.0 30.3
Income from operations
Wholesale................................... 38.2 33.2 5.0 15.1
Retail...................................... 9.8 -- 9.8 *
------ ------ ------ -----
Total..................................... 48.0 33.2 14.8 44.6
Interest (income) expense, net................ 18.6 -- 18.6 *
Income tax expense............................ 11.7 12.6 (0.9) (7.1)
Minority interest expense..................... 1.1 -- 1.1 *
------ ------ ------ -----
Net income.................................... $ 16.6 $ 20.6 $ (4.0) (19.4)%
====== ====== ====== =====
</TABLE>
--------
* Not comparable.

Gross Revenues. Gross revenues increased $328.8 million, or 54.9%, for the
year ended December 31, 1999 compared to the year ended December 25, 1998. The
acquisition of the retail segment accounted for

44
<PAGE>

$233.2 million, or 71.4%, of the increase. The wholesale segment increase of
$114.3 million was due primarily to a $105.0 million, or 18.6%, increase in
freight revenues driven by an overall container volume increase of 109,304
containers or 20.9%. This increase was partially offset by a 1.9% reduction in
the average revenue per container resulting from mix changes. The increases
were due, in part, to correction of the rail service disruption problems
experienced during 1998 and to increased customer demand coupled with the
addition of 2,000 53-foot containers during the second half of 1998. In
addition, international business increased due to both growth among existing
customers as well as the addition of a large new customer in the second
quarter of 1999. Reposition incentive revenues increased $1.4 million in the
1999 period as a result of increased APL Limited shipping volume. Other
wholesale segment revenues increased $7.9 million due primarily to the
management fees associated with the 1999 Stacktrain Services Agreement with
APL Limited and to a $2.2 million increase in rail car rental income due to
the increase in the rail car fleet in mid-1998.

Net Revenues. Net revenues increased $59.7 million, or 45.0%, for the 1999
period compared to the 1998 period. The acquisition of the retail segment
accounted for $38.2 million, or 63.9%, of the increase and the wholesale
segment accounted for the remaining $21.5 million of the increase. The
wholesale segment cost of purchased transportation and services increased
$92.8 million, or 19.9%, on container volume increases of 20.9% discussed
above. The wholesale segment gross margin declined to 21.6% in 1999 from 22.1%
in 1998 due primarily to increased traffic in the lower rated international
business line.

Direct Operating Expenses. Direct operating expenses, which are only
incurred by the wholesale segment, increased $12.3 million, or 19.1%, in 1999
compared to 1998. Expenses for 1998 were reduced by a $5.0 million credit from
a third-party transportation provider that was not received in 1999. In
addition, equipment lease and maintenance expenses increased by $7.7 million
as a result of the expansion of the fleet of containers and chassis discussed
in gross revenues above coupled with the sale and leaseback of 199 railcars in
the second quarter of 1999.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $30.6 million, or 108.1%, in 1999 compared
to 1998. The acquisition of the retail segment accounted for $26.5 million, or
86.6%, of the increase and the wholesale segment accounted for $4.1 million,
or 13.4%, of the increase. The wholesale segment increase was due primarily to
an increase of $1.2 million for information technology costs provided under
contract with APL Limited and vacation accruals and other transition costs.
Wholesale segment costs decreased to 21.0% of net revenues in 1999 from 21.3%
in 1998.

Depreciation and amortization. Depreciation and amortization expenses
increased $2.0 million, or 30.3%, for 1999 compared to 1998. The acquisition
of the retail segment accounted for $1.9 million of the increase while the
wholesale segment accounted for only $0.1 million of the increase.
Depreciation expense was $6.2 million and $6.0 million and amortization
expense was $2.4 million and $0.6 million for 1999 and 1998, respectively. The
increase in amortization was due to the amortization of goodwill associated
with the acquisition of the retail segment on May 28, 1999.

Income From Operations. Income from operations increased $14.8 million, or
44.6%, from $33.2 million in 1998 to $48.0 million in 1999. The acquisition of
the retail segment accounted for $9.8 million, or 66.2%, of the increase and
the wholesale segment accounted for $5.0 million, or 33.8%, of the increase.
The wholesale segment increase was due primarily to the 20.9% container volume
increase in 1999 partially offset by the $5.0 million credit to direct
operating expenses in 1998 discussed above.

Interest Expense. Interest expense increased by $18.6 million for 1999
compared to 1998 due to the issuance of $150.0 million of senior subordinated
notes and borrowing $135.0 million under the term loan portion of our credit
agreement on May 28, 1999 to fund our recapitalization and the acquisition of
the retail segment.

Income Tax Expense. Income tax expense decreased by $0.9 million from $12.6
million in 1998 to $11.7 million in 1999. The effective tax rate for 1999 was
39.8% compared to 38.0% for 1998.

45
<PAGE>

Net Income. Net income decreased $4.0 million, or 19.4%, from $20.6 million
in 1998 to $16.6 million in 1999. The acquisition of the retail segment
accounted for an increase of $4.4 million in net income offset by a
$7.3 million decrease for the wholesale segment and by minority interest costs
(accrued paid-in-kind dividends on the Pacer Logistics exchangeable preferred
stock) of $1.1 million in 1999. The wholesale segment decrease was due
primarily to increased interest expense on the financing for the
recapitalization and acquisition of the retail segment discussed above
partially offset by improved operating income for 1999 as a result of
increased container volumes.

Fiscal Year Ended December 25, 1998 Compared to Fiscal Year Ended December
26, 1997

Our historical financial data subsequent to November 12, 1997 include the
push down effect of the purchase price allocation resulting from the purchase
of APL Limited by Neptune Orient Lines Limited. The following table and
discussion for the year ended December 26, 1997 has been presented for
comparative purposes only and is the combination of the predecessor to the
Stacktrain Services division of APL Land Transport Services, Inc. from
December 28, 1996 through November 12, 1997 and the Stacktrain Services
division of APL Land Transport Services, Inc. from November 13, 1997 through
December 26, 1997. As a result of the change in ownership, these numbers may
not be indicative of what the full year 1997 was or would have been if the
ownership change had not occurred. Further, there is only one segment--the
wholesale segment--for both periods presented.

Financial Data Comparison
Year Ended December 25, 1998 and December 26, 1997
(in millions)

<TABLE>
<CAPTION>
1998 1997 Change % Change
------ ------ ------ --------
<S> <C> <C> <C> <C>
Gross revenues.................................. $598.9 $584.5 $14.4 2.5%
Cost of purchased transportation and services... 466.3 454.9 11.4 2.5
------ ------ -----
Net revenues.................................... 132.6 129.6 3.0 2.3
Direct operating expenses....................... 64.5 60.5 4.0 6.6
Selling, general & administrative expenses...... 28.3 24.6 3.7 15.0
Depreciation and amortization................... 6.6 3.7 2.9 78.4
------ ------ -----
Income from operations.......................... 33.2 40.8 (7.6) (18.6)
Interest (income) expense, net.................. -- 2.3 (2.3) (100.0)
Income tax expense.............................. 12.6 14.6 (2.0) (13.7)
------ ------ -----
Net income...................................... $ 20.6 $ 23.9 $(3.3) (13.8)
====== ====== =====
</TABLE>

Gross Revenues. Gross revenues for 1998 increased $14.4 million to $598.9
million, or 2.5%, from $584.5 million in 1997. Freight revenues increased
$10.0 million, or 1.8%, due to an increase in container volume of 21,438, or
4.3%, offset by a slight decrease per container in the average freight rate as
a result of product mix changes and the loss of certain premium business. The
third-party domestic and third-party international business contributed with
revenue increases of $17.0 million and $3.7 million, respectively, as a result
of increased container volumes of 7.9% and 11.7%, respectively, partially
attributable to the additional 2,000 53-foot containers which were leased
during 1998, and the strong import market positively impacting the third-party
international business. The automotive and refrigerated container business
revenues declined $10.6 million primarily as a result of the rail service
problems, as the refrigerated container business is considered premium
business and time sensitive. The type of automotive business that declined was
primarily the time sensitive "just-in-time" business, which was lost to over-
the-road truck transporters. Historically, our rates have been impacted by
rail service disruptions as customers have shifted certain expedited business,
for which premium rates are charged, to more costly, yet more reliable over-
the-road carriers. Reposition incentive revenues increased $2.3 million from
1997 to 1998 as a result of increased APL Limited shipping volume. Rail car
rental income increased $0.7 million in 1998 as a result of the increased
number of rail cars owned or leased, combined with increased shipments.

Net Revenues. Net revenues increased $3.0 million, or 2.3%, to $132.6
million in 1998 from $129.6 million in 1997, as a result of the increased
revenues discussed above. The net revenues as a percentage of gross revenues
remained relatively constant in 1998 at 22.1% compared to 22.2% in 1997.

46
<PAGE>

Direct Operating Expenses. Direct operating costs increased $4.0 million,
or 6.6%, to $64.5 million in 1998 from $60.5 million in 1997 due to increases
in equipment lease expense of $6.4 million and allocated maintenance and
repair charges of $1.9 million, offset by a $5.0 million credit from a third-
party transportation provider, to effectively reduce our third-party
transportation costs.

The additional lease expense primarily relates to the 2,000 additional 53-
foot containers we leased in 1998 compared to 1997, which were delivered at
various times throughout the year, with all of them in operation by the end of
1998. The additional containers were leased to fulfill customer demand during
the period of rail service disruption. This increase in containers negatively
impacted operating results as a result of the increased trip days combined
with a decline in average revenue per container as discussed above. In
addition, we purchased 200 railcars in the first quarter of 1998 for $39.7
million, increasing depreciation expense in 1998 as discussed below.
Historically, we were allocated maintenance and repair charges from APL
Limited, based on a formula using the number of days the equipment was in use.
The maintenance and repair charges increased in 1998 due to the increased
volume of shipments in 1998 and the increased number of containers, railcars
and chassis owned or leased by us compared to 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $3.7 million, or 15.0%, in 1998 to $28.3
million compared to $24.6 million in 1997 primarily as a result of the total
corporate expenses allocated to us from APL Limited increasing $1.0 million,
and the increase in various direct selling, general and administrative
expenses. In addition, other income decreased $1.9 million in 1998 primarily
due to the reduced gain on the sale of operating equipment compared to 1997.

Depreciation and Amortization. Depreciation and amortization expenses
increased $2.9 million, or 78.4%, to $6.6 million in 1998 from $3.7 million in
1997 due primarily to the purchase of 200 railcars in the first quarter of
1998. Depreciation expense was $6.0 million and $3.7 million and amortization
expense was $0.6 million and $0.0 million for 1998 and 1997, respectively.

Income From Operations. Operating income decreased $7.6 million in 1998 to
$33.2 million or 25.0% of net revenues from $40.8 million or 31.5% in 1997 due
to the foregoing factors.

Interest Expense. Interest expense decreased $2.3 million to $0.0 in 1998
due to reduced intercompany borrowings from APL Limited in 1998.

Income Taxes. Income taxes decreased $2.0 million in 1998 to $12.6 million
compared to $14.6 million in 1997, as a result of the decrease in income
before income taxes from 1997 to 1998. During 1998 and 1997, our operating
results were included in the consolidated income tax returns of APL Limited. A
charge in lieu of income taxes was recorded using the separate return method,
as if we were a separate taxpayer. The effective tax rate for 1998 was 38.0%
compared to 37.9% for 1997.

Net Income. Net income decreased $3.3 million, or 13.8%, due primarily to
increased container lease and rail car depreciation costs discussed above,
partially offset by increased net revenues associated with increased traffic
volume and the $5.0 million credit from a third-party transportation provider
which reduced our direct operating expenses.

Liquidity and Capital Resources

Cash provided by operating activities for the nine months ended September
22, 2000 was $12.4 million compared to $17.6 million for the nine months ended
September 17, 1999. The decreased source of cash for the 2000 period was due
primarily to interest payments of $19.4 million during the first nine months
of 2000 compared to $15.4 million for the same period in 1999 and increases in
shipper volume incentive payments associated with the increase in traffic
volume and revenue in 1999 which were paid in April 2000. The decreased source
of cash was partially offset by the increased income from operations from the
wholesale segment as well as from the acquisition of the retail segment and
the 2000 acquisitions. In April 2000, we transferred the

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processing of APL Limited's international traffic receivables and payables to
APL Limited, which had previously been included in our balance sheet,
resulting in a decrease in both accounts receivable and accounts payable of
approximately $33.0 million. The transfer to APL Limited was facilitated by
changes in computer software which were not previously available. We continue
to handle APL Limited's international traffic under contract for a management
fee. Cash generated from operating activities is typically used for working
capital purposes, to fund capital expenditures and for acquisitions. We had a
working capital deficit of $4.8 million at September 22, 2000 compared to a
deficit of $14.3 million at September 17, 1999.

Cash generated by operating activities was $20.8 million, $31.8 million and
$30.9 million for the years ended December 31, 1999, December 25, 1998 and
December 26, 1997, respectively. The decrease in cash provided by operating
activities from 1998 to 1999 was due to the increase in interest paid during
1999 combined with the change in receivables and payables associated primarily
with the 20.9% increase in wholesale segment traffic volume. Cash generated
from operating activities in 1997 included a decrease in accounts receivable
in 1997 as a result of the sale of APL Limited's intermodal marketing
operations to a customer. Cash generated from operating activities was used
for working capital purposes, to fund capital expenditures, for acquisitions
and prior to our recapitalization on May 28, 1999, to repay intercompany debt.
We had a working capital deficit of $3.7 million at December 31, 1999 compared
to a deficit of $37.2 million at December 25, 1998. This change was due
primarily to the elimination of the intercompany funding procedures between
APL Limited and APL Land Transport Services upon our recapitalization on May
28, 1999.

Cash flows used in investing activities were $44.9 million and $73.2
million for the nine months ended September 22, 2000 and September 17, 1999,
respectively. On August 31, 2000, we acquired the stock of GTS for $15.3
million in cash and, on January 13, 2000, we acquired Conex assets for $26.4
million in cash and issued common stock and a subordinated note as described
below. We had capital expenditures of $3.4 million during the 2000 period
primarily for computer and related equipment, office remodeling and expansion
and leasehold improvements. The use of cash in the 1999 period was due to the
acquisition of the retail segment on May 28, 1999 for $111.3 million partially
offset by the net proceeds of $39.6 million from the sale and leaseback of 199
railcars originally purchased in 1998. We had capital expenditures of $1.5
million during the 1999 period primarily for computer and related equipment
and leasehold improvements to office space and warehouse facilities.

Cash flows (used in) provided by investing activities were $(74.0) million,
$(38.5) million and $3.6 million for 1999, 1998 and 1997, respectively. The
increased use of cash in 1999 was due to the acquisition of the retail segment
for $112.0 million partially offset by the net proceeds of $39.6 million from
the sale and leaseback of 199 railcars originally purchased in 1998 and by the
net proceeds of $0.4 million from the sale of retail segment property. Capital
expenditures of $2.0 million in 1999 were primarily for computer hardware and
leasehold improvements to office space and warehouse facilities. The use of
cash in 1998 was primarily due to the purchase of 200 railcars for $39.7
million.

Cash flows provided by financing activities were $20.3 million and $65.7
million for the nine months ended September 22, 2000 and September 17,1999,
respectively. We borrowed $10.0 million from the revolving credit facility to
purchase the stock of GTS. In connection with the acquisition of Conex assets,
we borrowed $15.0 million from the revolving credit facility, issued Conex
shareholders an 8.0% subordinated note in the aggregate principal amount of
$5.0 million due 2003 and issued Conex shareholders 300,000 shares (valued at
$6.0 million) of our common stock. Our management exercised options to
purchase 337,373 shares of common stock for total proceeds of $0.8 million
during the period. The proceeds were used to repay notes payable to management
which were part of the purchase price for the May 28, 1999 acquisition of
Pacer Logistics and for general corporate purposes. We repaid $15.0 million of
the revolving credit facility, $0.7 million of our $135.0 million term loan
facility, $0.4 million of notes payable to management and $0.1 million of
capital lease obligations during the first nine months of 2000.

Cash flows (used in) provided by financing activities were $65.4 million,
$6.7 million and $(34.5) million for 1999, 1998 and 1997, respectively. Prior
to our recapitalization on May 28, 1999, any excess cash generated

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from or used for operating or investing activities was remitted to or received
from APL Limited, our former parent, through participation in the cash
management plan. During 1998, a net intercompany borrowing of $6.7 million
from APL Limited was necessary to fund the purchase of 200 railcars, 199 of
which were subsequently the subject of the sale and leaseback discussed above.
During 1997, a net intercompany remittance of $(34.5) million to APL Limited
was generated by operating activities.

On May 28, 1999, in connection with our recapitalization and acquisition of
the retail segment, proceeds of $104.4 million were received from the issuance
of our common stock. We also borrowed $135.0 million under a term loan
facility, issued $150.0 million of senior subordinated notes, borrowed $2.0
million under the $100.0 million revolving credit facility expiring in 2004
and issued $24.3 million of Pacer Logistics' exchangeable preferred stock. We
paid $9.5 million of financing costs associated with these borrowings which
are amortized over the term of the debt. The $2.0 million borrowed under the
revolving credit facility was repaid in July 1999. These borrowings were
partially offset by a distribution to APL Limited of $300.0 million and by
fees paid in connection with the recapitalization of $11.7 million. In
addition, $0.7 million of the term loan was repaid and $0.1 million was paid
on capital lease obligations during 1999. In July 1999, we also redeemed $2.0
million of Pacer Logistics' exchangeable preferred stock.

The $150.0 million of senior subordinated notes, due in 2007, bear interest
at 11.75% with interest due semi-annually at June 1 and December 1. The $135.0
million term loan due in 2006, and the $100.0 million revolving credit
facility expiring in 2004, bear interest at variable rates subject to
increases or decreases based upon the achievement of financial ratios set
forth in the credit agreement. At September 22, 2000, the interest rate on the
revolving credit facility was 8.9% and the interest rate on the term loan was
9.4%. Voluntary prepayments and commitment reductions will generally be
permitted without premium or penalty, subject to certain conditions. The
credit facilities are generally guaranteed by all of our existing and future
direct and indirect wholly-owned subsidiaries and are collateralized by liens
on our and our subsidiaries' properties and assets. At September 22, 2000, we
had $85.8 million available under the revolving credit facility. The credit
agreement contains certain restrictions and financial covenants such as an
adjusted total leverage ratio and a consolidated interest coverage ratio. At
September 22, 2000, we were in compliance with these covenants. On August 9,
1999, we entered into a first amendment to the credit agreement to increase
the maximum amount that can be drawn under the revolving credit facility on
the day of notification of borrowing to $10.0 million from $2.5 million. On
January 7, 2000, we entered into a second amendment to the credit agreement to
modify the definition of excess cash flow to allow for the acquisition of the
Conex assets as described below.

In connection with our recapitalization, we recorded a deferred tax asset
of approximately $81.2 million related to future tax deductions for the net
excess of the tax basis of the assets and liabilities over the financial
statement carrying amounts with a corresponding credit to stockholders'
equity. Realization of the deferred tax asset is dependant upon our ability to
generate sufficient future taxable income which management believes is more
likely than not based on historical operating results. Accordingly, no
valuation allowance has been recorded.

The wholesale segment took delivery in the fourth quarter of 1999 of 1,500
new 53-foot containers and chassis financed through an operating lease. We
have received 2,625 of the 3,125 chassis and containers ordered under
operating leases during 1999 to help meet current and projected growth. The
remainder of the chassis and containers are expected to be delivered prior to
the end of 2000. In addition, effective September 1, 2000, we entered into an
operating lease agreement with GATX Third Aircraft Corporation to lease 200
new railcars that are all anticipated for delivery in the fourth quarter of
2000. Additionally, the Company has ordered 500 new railcars under two
operating leases, one of which is currently being finalized, with delivery
having commenced in the fourth quarter 2000 and continuing through the second
quarter 2001.

Based upon the current level of operations and anticipated growth in both
operating segments, management believes that operating cash flow and
availability under the revolving credit facility will be adequate to meet our
liquidity needs for the next five years, although no assurance can be given in
this regard.

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On December 22, 2000, pursuant to a stock purchase agreement, we acquired
all of the capital stock of Rail Van, Inc. Rail Van provides truck brokerage,
intermodal marketing and logistics services. The purchase price was $69.2
million in cash including acquisition fees and expenses and 280,000 shares of
our common stock (valued at $7.0 million) and is subject to a post-closing
adjustment. 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. Operating results of the acquisition will be
included in our retail segment from the date of acquisition.

On October 31, 2000, pursuant to a stock purchase agreement, we acquired
all of the capital stock of RFI Group, Inc. RFI provides international freight
forwarding and freight transportation services. The purchase price at October
31, 2000 was $13.2 million including acquisition fees and expenses plus the
repayment of $5.2 million of certain indebtedness. The acquisition was funded
by borrowings under our revolving credit facility. Operating results of the
acquisition will be included in our retail segment from the date of
acquisition.

On August 31, 2000, we acquired all of the capital stock of GTS
Transportation Services, Inc. for $16.3 million including acquisition fees and
expenses. The purchase price is subject to possible adjustment pursuant to an
earn-out, not to exceed $2.2 million, and a working capital adjustment. The
acquisition was funded by borrowings under our revolving credit facility. GTS
is a provider of transportation services, including logistics and truck
brokerage in North America.

Effective January 13, 2000 pursuant to an asset purchase agreement, Conex
Acquisition Corporation, one of our subsidiaries, acquired substantially all
of the assets and assumed certain specified liabilities of Conex Global
Logistics Services, Inc., MSL Transportation Group, Inc. and Jupiter Freight,
Inc. (collectively, "Conex"). Conex employs approximately 200 persons and
provide intermodal freight transportation, cartage, transloading and
warehousing services in the following locations: Los Angeles, California; San
Diego, California; Calexico, California; Seattle, Washington; and Atlanta,
Georgia. The assets acquired are employed in substantially the same manner as
used by Conex in its business prior to the acquisition. Certain top senior
executives at Conex executed multi-year employment and/or consulting
agreements with us in order to assist in the assimilation and management of
the Conex assets into our retail segment. The acquisition was financed by a
$25.0 million cash payment ($15.0 million of which was borrowed from the
revolving credit facility), the issuance of an 8.0% contingent note in the
aggregate principal amount of $5.0 million, payable semi-annually on each
January 31 and July 31 beginning July 31, 2000, and the issuance of 300,000
shares of our common stock (valued at $6.0 million).

The Year 2000 ("Y2K") issue is the result of computerized systems using two
digits rather than four to identify an applicable year. Date-sensitive systems
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculation causing disruptions of
business operations. In 1999, our computer-based information systems for the
wholesale segment were reviewed and Y2K compliant upgrades were implemented by
APL Limited. We completed a review of our retail segment computer-based
information systems and implemented Y2K compliant upgrades. To date, no
significant Y2K problems have been encountered during year 2000 and none are
expected. However, some factors could remain that might cause Y2K related
problems in the future. We will again monitor critical operations during the
December 31, 2000--January 1, 2001 rollover dates. We spent approximately $2.2
million in internal and external consulting fees for the remediation of the
Y2K issue.

Recently Issued Accounting Pronouncements

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Standards Board issued SFAS No. 138, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB Statement No.
133." SFAS No. 137 deferred the effective date of SFAS No. 133 until fiscal
years beginning after June 15, 2000. We have not historically engaged in
significant hedging activities or invested in derivative instruments and do
not believe this standard, as amended, will have a material impact on our
financial statements upon adoption.

In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements" as amended by Staff
Accounting Bulletins No. 101 A and 101 B. These bulletins summarize certain of
the staff's views about applying generally accepted accounting principles to
revenue recognition in financial statements. We will be required to follow the
guidance in SAB 101 no later than its fourth quarter of 2000, with restatement
of earlier quarters in 2001 required, if necessary. The SEC has recently
issued further guidance with respect to adoption of specific issues addressed
by SAB 101. We are currently assessing the impact, if any, SAB 101 may have on
our consolidated financial position or results of operations.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--an Interpretation of APB
25." This interpretation clarifies (1) the definition of employee for purposes
of applying Opinion 25, (2) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (3) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and
(4) the accounting for an exchange of stock compensation awards in a business
combination. This interpretation is effective July 1, 2000, but certain
conclusions in this interpretation cover specific events that occur after
either December 15, 1998 or January 12, 2000. To the extent that this
interpretation covers events occurring during the period after December 15,
1998 or January 12, 2000, but before the effective date of July 1, 2000, the
effects of applying this interpretation are recognized on a prospective basis
from July 1, 2000. The adoption of FIN 44 did not have a material impact on
our financial statements.

Quantitative and Qualitative Disclosures About Market Risk

Our market risk is affected primarily by changes in interest rates. Under
our policies, we may use natural hedging techniques and derivative financial
instruments to reduce the impact of adverse changes in market prices, however,
we currently do not have any derivative financial instruments.

We have market risk in interest rate exposure, primarily in the United
States. We manage interest exposure through our mix of fixed and floating rate
debt. Interest rate swaps may be used to adjust interest rate exposure when
appropriate based on market conditions. For qualifying hedges, the interest
differential of swaps is included in interest expense. A 1% change in our
variable interest rates would affect our earnings by approximately
$0.8 million.

Inflation

We contract with railroads and independent truck operators for our
transportation requirements. These third parties are responsible for providing
their own diesel fuel. To the extent that increased fuel prices are passed
along to us, we have historically passed these increases along to our
customers. However, there is no guarantee that this will be possible in the
future.

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BUSINESS

Overview

We are a leading non-asset based North American third-party logistics
company. We offer a broad array of logistics and other services to facilitate
the movement of freight from origin to destination for numerous Fortune 500
customers such as General Electric, Ford and Wal-Mart Stores and large global
customers such as Sony. Our package of value-added logistics services include
wholesale stacktrain services and retail trucking services, intermodal
marketing, freight consolidation and handling, international freight
forwarding and supply chain management services. Through these services, we
optimize the flow of freight across multiple transportation modes and meet our
customers' specific transportation and logistics needs. We combine these
services with our proprietary advanced information systems to provide
integrated, customized solutions which improve efficiency, reliability and
control throughout our customers' supply chains and reduce their handling,
delivery and inventory costs. Our non-asset based strategy, in which we
generally control, without owning, our assets, allows us to maximize our
return on invested capital.

We are one of the largest domestic ground-based third-party logistics
providers. We purchase over $1.1 billion of rail transportation annually on a
pro forma basis and are the largest provider of intermodal rail service in
North America that is not affiliated with an individual railroad company. We
believe we are also the second largest U.S. truck broker, the second largest
intermodal marketing company in North America and one of the largest freight
handlers on the West Coast of the United States. In addition to our leading
domestic position, we also have a significant international presence as a U.S.
based international freight forwarder. Our comprehensive service offering and
strong competitive position in the markets we serve allow us to operate on a
national basis and pass on the benefits gained by our economies of scale to
our customers, and to earn attractive operating margins relative to our
publicly traded peers.

As a non-asset based third-party logistics provider, we have capitalized on
strong industry trends, including increasing outsourcing by businesses to
companies like us that can manage their multiple transportation requirements,
and experienced considerable growth in revenue, net income and EBITDA. We have
also achieved significant growth by acquiring and integrating businesses which
enhance our service portfolio and geographic presence. Since our
recapitalization and acquisition of our retail operations in May 1999, we have
acquired four companies with total gross revenues of $755.6 million in 1999.
These acquisitions have enhanced our truck brokerage and freight handling
services, added international freight forwarding to our portfolio of services
and expanded the geographic coverage of our intermodal marketing services. For
1999 and the nine months ended September 22, 2000, we generated pro forma
gross revenues of $1.8 billion and $1.4 billion, pro forma net revenues of
$305.4 million and $249.7 million, pro forma net income of $25.1 million and
$19.6 million and pro forma EBITDA of $91.6 million and $71.6 million,
respectively.

We seek to limit our investment in equipment, facilities and working
capital through contracts and arrangements with various transportation
providers which generally provide for favorable rates, minimum service levels,
capacity assurances and priority handling status. Our balance of domestic and
internationally originating freight flow further enables us to maximize the
return on our intermodal equipment and negotiate incentives with our
transportation providers. As a non-asset based third-party logistics provider,
we can focus on optimizing the transportation solution for our customers
rather than on our own asset utilization. Our non-asset based approach also
allows us to maintain a high level of operating flexibility and capitalize on
a cost structure that is 80%-90% variable in nature. Our relatively low
capital expenditures, minimal working capital requirements and variable cost
structure enable us to generate strong free cash flow in a variety of market
and economic conditions.

Our broad array of logistics services includes wholesale stacktrain
services and a range of value-added retail services designed to meet the
transportation and supply chain management needs of our customers. Many of our
customers use more than one of these services.

. Wholesale Services--Intermodal transportation is the movement of freight
via trailer or container using two or more transportation modes.
Intermodal transportation nearly always includes a rail and truck

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segment. Our use of the stacktrain method, consisting of the movement of
cargo containers stacked two high on special rail cars, significantly
improves the efficiency of our service by increasing capacity at low
incremental cost without sacrificing quality of service. We sell
intermodal service primarily to intermodal marketing companies, large
automotive intermediaries, international shippers as well as to our own
internal intermodal marketing company and compete primarily with rail
carriers offering intermodal service and indirectly with over-the-road
full truckload carriers. Through long-term contracts and other operating
arrangements with major railroads, we have access to a 50,000-mile North
American rail network serving most major population and commercial
centers in the United States, Canada and Mexico. The long-term operating
arrangements with the rail carriers provide for, among other things,
favorable rates, minimum service levels, capacity assurances, priority
handling and the utilization of certain terminal facilities. The size of
our equipment fleet, our frequent departures, the breadth of our
geographic coverage and our use of sophisticated information technology
allow us to provide the high level of service quality and reliability
required by our customers at a competitive price. Our wholesale business
was recognized in 1997, 1998 and 1999 as "Best of the Best" for on-time
performance, value, equipment and operations, customer service and
technology and was ranked first overall as an intermodal service
provider in a survey of 3,500 shippers conducted by Logistics Management
& Distribution Report and Cahners Research.

. Trucking Services--We offer a variety of trucking services, including
truck brokerage, truckload and less-than-truckload operations and local
trucking services. We arrange trucking services with licensed
independent carriers. Through our nationwide truck brokerage network of
over 5,000 approved independent carriers, we are able to manage our
customers' need for multiple modes of transportation that utilizes
trucking services as a component. Through our contractual arrangements,
we take advantage of the opportunities provided by long haul national
carriers, short haul regional carriers, private fleets and dedicated
fleets. By utilizing our aggregate volumes to negotiate rates, we are
able to provide high quality service at attractive prices. We also
provide flatbed and specialized heavy-haul trucking services as well as
local trucking services. We contract with agents and independent
contractors who control more than 1,300 trucks, and also maintain
interchange agreements with all of the major ocean carriers, railroads
and stacktrain operators. These contracts and agreements and our
extensive network of agents and independent contractors allow us to
serve shippers, ocean carriers and freight forwarders across the
country. We believe that our ability to provide a range of trucking
services creates a competitive advantage as companies increasingly seek
to outsource to those service providers which can manage multiple
transportation requirements over a broad geographic area.

. Intermodal Marketing--We arrange for and optimize the movement of
freight in containers and trailers utilizing truck and rail
transportation throughout North America for global, national and
regional manufacturers and retailers, and provide customized tracking
and analysis of charges. In addition, we negotiate transportation rates,
consolidate billing and handle claims for freight loss or damage on
behalf of our customers. We believe that our intermodal marketing
services combined with the resources of our wholesale operations enables
us to provide enhanced services to our customers.

. Freight Consolidation & Handling--We offer a variety of freight handling
services, including consolidation/deconsolidation and warehousing, and
are one of the largest freight handlers on the West Coast. Because of
the complexity of freight patterns and the need to optimize multi-modal
routes, the handling and storage of freight on behalf of our customers
is often required during the transportation process. We focus on
providing customers with an integrated package that brings together
their specific shipment patterns and transportation and inventory needs.

. International Freight Forwarding--We manage international shipping for
our customers and provide or connect them with the range of services
necessary to run a global business. We arrange transportation and other
services necessary to move our customers' freight to and from a foreign
country, including chartering or brokering vessels, tracking and tracing
shipments, handling compliance with import and export regulations
(including producing the required documentation), and calculating

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and optimizing duties, other charges and shipping costs. Our
international product offerings serve more than 1,000 clients
internationally through 17 offices and over 100 agents worldwide.

. Supply Chain Management--We leverage the information from our advanced
information system to provide consulting and supply chain management
services to our customers. These specialized services allow our
customers to realize cost savings and concentrate on their core
competencies by outsourcing their inventory management and
transportation to us. We provide infrastructure and equipment,
integrated with our customers' existing systems, to handle distribution
planning, just-in-time delivery and automated ordering throughout their
operations, and additionally will provide and manage warehouses,
distribution centers and other facilities for them. We can manage all
aspects of the supply chain from inbound sourcing and delivery logistics
through outbound shipment, handling, consolidation, deconsolidation,
distribution, and just-in-time delivery of end products to our
customers' customers. We also consult on identifying bottlenecks and
inefficiencies and eliminating them by analyzing freight patterns and
costs, optimizing distribution and warehouse locations, and
analyzing/developing internal policies and procedures.

Competitive Strengths

We believe our market leadership, financial performance and opportunities
for continued growth and increased profitability are primarily attributable to
the following competitive strengths:

Leading Market Position

We are one of the largest domestic ground-based logistics providers. In
addition, we believe we are the second largest U.S. truck broker, the second
largest intermodal marketing company in North America and one of the largest
freight handlers on the West Coast. In addition to our leading domestic
position, we also have a significant international presence as a U.S. based
international freight forwarder. Our size and product breadth allow us to
provide a comprehensive product offering on a national basis and pass on
volume rate savings and economies of scale to our customers. We purchase over
$1.1 billion of rail transportation annually on a pro forma basis and are the
largest provider of intermodal rail service in North America not affiliated
with an individual railroad company. Our North American rail network spans
over 50,000 miles and directly serves most major population and commercial
centers. We have leveraged our size to develop close working relationships
with major railroads, including long-term operating agreements with favorable
rates, minimum service levels, capacity assurances, priority handling status
and access to nationwide terminal facilities. We believe that the contract
terms with our rail providers combined with our extensive fleet of leased
equipment allow us to pass significant cost savings to our customers and
provide them with a high degree of reliability and responsiveness.

Broad Service Offering

We offer a broad array of services which allow our customers to improve
cost, efficiency, reliability and control throughout their supply chain. We
can create a customized package of integrated transportation services for our
customers and seek to expand our customer relationships by matching each
customer's transportation and logistics needs with our broad menu of service
offerings, with many customers using more than one service. Our size and scope
allow us to provide a comprehensive product offering on a national basis and
serve a strong, diverse customer base consisting of global, national and
regional manufacturers and retailers, including numerous Fortune 500
companies. We have served many of our customers for over 15 years and believe
that the strength of our customer base is attributable to our customer-focused
marketing and service philosophy. We believe that our customers will
increasingly look to us as the industry's trend towards single-source
outsourcing continues.

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Flexible Business Model

We seek to limit the capital investment required to maintain and grow our
business and, therefore, maximize our returns on invested capital. Our
business model provides the following key benefits:

. We have limited our investment in equipment, facilities and working
capital by developing our transportation network through contracts and
arrangements with various rail partners, trucking companies, independent
contractors and agents and other providers;

. We are able to lease equipment on flexible terms, which contributes to
our ability to maintain an 80%-90% variable cost structure;

. We operate with minimal net working capital due to favorable contractual
terms with our rail and truck service providers which result from our
high shipment volume;

. We have low capital expenditure requirements;

. We are able to expand our business geographically or by offering new
products through internal growth or acquisitions; and

. We are able to generate strong free cash flow in a variety of market
conditions.

Advanced Information Systems

We believe that our high quality service and reliability evidences the
sophistication and successful implementation of our proprietary advanced
information systems. We believe our technology, experience and operating
procedures significantly enhance the attractiveness of our logistics offering
and allow us to deliver service superior to that of our competitors. Because
of our size and scale of operations, we are able to invest in and support
these proprietary advanced information systems. Our systems:

. monitor and track shipments at every stage in the cycle and across
varying transportation modes, providing accurate, real-time visibility
of shipment status, location and estimated delivery times;

. include an exception notification system which informs us of any
potential delays so we can proactively alert our customer and other
supply chain participants to minimize the impact of any delays;

. continually measure transit times, rates, and capacity of our
transportation providers to enable us to plan and execute
transactions/freight movements reliably, efficiently and cost
effectively;

. analyze each customer's usage patterns and needs to resolve performance
bottlenecks, determine optimal distribution locations and identify areas
for cost savings throughout its supply chain;

. prepare and distribute customized reports detailing shipping patterns,
volumes, reliability, timeliness and overall transportation costs; and

. have a scaleable network architecture which provides a flexible
electronic data interchange, or EDI, and web-enabled platform allowing
our users to easily customize deployment and integration of the system
to meet their needs.

Counterbalanced Freight Flows

We have a balance of domestic and internationally originating freight flow
which enables us to maximize the return on our intermodal equipment and
negotiate incentives with our transportation providers. The majority of Asian
exports to the United States are moved from ports on the West Coast by rail to
population centers in the midwest and northeast regions. However, domestic
railroad freight which originates in the United States moves predominantly
westbound from eastern and midwestern production centers to consumption
centers on the West Coast. Our access to APL Limited's and other shipping
companies' international equipment delivered to the interior of the United
States from trans-Pacific ships supports our domestic westbound business. We
achieve high

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utilization rates and steady revenue production from our intermodal equipment
due to our high volume of both eastbound and westbound shipments.

Experienced Management Team with Substantial Equity Ownership

Our senior management team has an average of over 25 years of experience in
the transportation and logistics industries, and we believe their knowledge,
relationships and strong record of successfully integrating businesses within
the these industries provide us with a significant competitive advantage.
After giving effect to this offering and our stock option plans, our senior
management team and certain other employees will own approximately % of our
capital stock on a fully diluted basis.

Growth Strategy

We have developed a strategy designed to increase revenues, profitability
and cash flow while maximizing returns on invested capital. The primary
components of our growth strategy include:

Capitalize on Strong Logistics Industry Trends

Manufacturers and retailers are facing increasingly complex supply chain
management issues due to rapidly changing freight patterns, increased
international trade and global sourcing, more prevalent just-in-time inventory
systems, increasingly demanding customer fulfillment requirements and
pressures to reduce costs. Growth within the logistics industry is being
driven by the continuing trend of companies outsourcing their logistics needs
in order to focus on their core businesses and achieve the cost savings third-
party logistics providers can provide through improved efficiency, lower
inventory requirements, volume rate savings and other economies of scale.
Total U.S. third-party logistics spending grew 16.5% in 1999 and is projected
to grow 34.3% per year from $45.3 billion in 1999 to over $198.0 billion in
2004. Total U.S. logistics spending, including freight transportation and
carrying costs, is projected to grow 8.7% per year from $921.0 billion in 1999
to $1.4 trillion in 2004. As transportation management becomes increasingly
sophisticated, and the cost effectiveness of outsourcing increases, we believe
companies will continue to seek full service supply chain management support
from a single company like us, who can manage their multiple transportation
requirements. There has also been strong historical growth in stacktrain
services, which represent half of the intermodal rail market and which we
provide through our wholesale business. Stacktrain services have grown 15.2%
per year from 1989 to 1997. We expect the stacktrain business to take
additional market share from other forms of container and trailer transport
due to the economic and operational efficiencies offered by the double-stack
system. In addition, as a vertically-integrated provider, we believe that the
growth of our retail business will fuel higher growth of our wholesale
business.

Expand Service Offerings

We intend to capitalize on the continuing trend of vendor consolidation and
outsourcing by maintaining a broad range of service offerings to handle our
customers' diverse transportation and logistics requirements. In many
instances, we have added service capabilities in response to specific requests
from our existing customers or expanded the reach of existing service
capabilities into other geographic areas. We have recently added rail-related
logistics services, truck brokerage, freight handling and international
freight forwarding services and expanded our geographic coverage for our
intermodal marketing capabilities. We believe that through our broad menu of
existing services and the development and acquisition of new services we can
continue to provide and expand our integrated transportation service on an
efficient and cost effective basis.

Increase Sales to Existing Customers

We intend to increase our revenues by capturing additional freight volume
from existing customers as well as providing additional logistics services to
these existing customers. Currently, many of our customers use transportation
services provided by long-haul trucking companies or intermodal competitors.
We believe that we

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can leverage our existing relationships and broad menu of services by taking
advantage of customers' desire to have a single provider that takes
responsibility for, and has capability to supply, all necessary services.
Moreover, our sales force is compensated based on total dollar margin
contribution to the company and, therefore, has strong incentives to cross-
sell additional services to our customers.

Expand Our Customer Base

We believe that our national presence, large size and broad scope of
services make us well positioned to capture new customers and expand into
additional geographic regions. We have expanded our sales force both in size
and focus, and now have a national sales force that targets large national and
multi-national customers. We believe that many new customers will be attracted
by the opportunity to shift to a single provider of the logistics and
transportation services they currently purchase from numerous sources, which
can optimize their use of these services. We also believe that we will be able
to leverage our size and breadth of services we provide to enter new markets
and gain new customers from regional and specialized service provider
competitors.

Pursue Strategic Acquisitions

We intend to continue our disciplined acquisition program. Due to the
fragmented nature of the industry and the size and scope benefits that larger
third-party transportation and logistics companies can provide, we believe
there will continue to be increased pressure on smaller companies to
consolidate. We intend to seek acquisition candidates with complementary
management and operating philosophies and service capabilities that we can add
to and integrate with our current menu of services. Acquisition candidates
typically will have operations that:

. expand our presence in a particular service category;

. expand our existing services in a new geographic area; or

. enable us to provide a new or expanded form of complementary services to
our customer base.

The Logistics Industry

Overview

The domestic logistics market includes the transport of goods made and
consumed domestically, the domestic portion of the transport of international
freight and the supply of logistics services such as warehousing and logistics
administration. The total domestic logistics market, including freight
transportation and carrying costs, in 1999 was approximately $921.0 billion,
representing over 9.9% of the U.S. economy measured as a percentage of gross
domestic product. Providers of freight transportation services include private
shippers who manage the transportation of their own freight, for-hire service
providers such as over-the-road trucking companies and third-party
transportation and logistics companies such as intermodal marketing companies.
The bases of competition in the freight transportation segment of the industry
are primarily cost, delivery time, reliability and precision of delivery and
pick-up, as well as freight-specific requirements such as handling and
temperature control.

Transportation modes include rail, highway, water, air and pipeline
transportation. Ground transportation is the largest component of the domestic
freight transportation market, totaling approximately $429.0 billion in 1999.
Ground transportation consists primarily of trucking and rail services, with a
small portion related to pipeline transport. Transportation service offerings
that utilize multiple modes of transportation are commonly known as
intermodal.

The logistics market also includes several types of intermediary firms that
facilitate the movement of freight by providing services such as logistics
administration, warehousing and intermodal marketing. Intermodal marketing
companies sell intermodal service to shippers while buying space on intermodal
rail trains. These companies provide a link between intermodal rail service
providers and a significant number of shippers and often provide additional
transportation and logistical services such as consolidation and warehousing.

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Manufacturers and retailers are facing increasingly complex supply chain
management issues due to rapidly changing freight patterns, increased world
trade and global sourcing, more prevalent just-in-time inventory systems,
increasingly demanding customer fulfillment requirements and pressures to
reduce costs. In 1999, the third-party logistics industry grew at a rate of
approximately 16.5%. Growth within the third-party logistics industry is being
driven by the continuing trend of companies outsourcing their transportation
and logistics needs in order to focus on their core businesses and achieve the
cost savings third-party logistics providers can provide through improved
efficiency, lower inventory requirements, volume rate savings and other
economies of scale.

The U.S. market for third-party logistics services is highly fragmented;
however, we believe there is increased pressure on smaller companies to
consolidate given the size and scope benefits that larger third-party
logistics companies can provide. As transportation management continues to
become increasingly sophisticated, and the cost effectiveness of outsourcing
increases, we believe companies will continue to seek full service supply
chain management support from a single company, like us, that can manage their
multiple transportation requirements.

Intermodal/Stacktrain

Rail transportation is the primary mode for the movement of intermodal
freight with motor carriers typically providing transportation at the points
of origin and destination. Intermodal transportation addresses some of the
problems of traditional rail service because the use of multiple modes of
transit allows for "door-to-door" transportation in a competitive manner. The
intermodal market comprised approximately $10.0 billion, or 2.2%, of total
domestic freight transportation costs in 1999. From 1980 to 1999, railroad
intermodal traffic increased at a compound annual rate of 5.9% while overall
rail traffic grew only 2.2% compounded annually. In 1999, the annual growth
rate of total domestic intermodal shipments was 3.1%. However, the shipment of
intermodal freight in containers, which constitutes all of our wholesale
business, increased 6.0% in 1999.

In 1999, approximately $6.5 billion, or 18.0%, of railroads' total revenues
were generated from intermodal shipments. As intermodal transportation has
increased as a percentage of railroad revenues and volume, railroads have made
significant capital expenditures upgrading track and equipment to increase the
efficiency of intermodal service. Cost reduction and improved technology are
expected to yield improved process management, asset utilization and service
quality and reliability. We anticipate that these improvements will be passed
through to intermodal service. In addition, the increased spending on railroad
infrastructure is expected to further improve the ability of intermodal rail
transport to compete with motor carriers.

Intermodal transportation has benefited from the introduction of stacktrain
service, consisting of the movement of cargo containers stacked two high on
special rail cars. Stacktrain service significantly improves the efficiency of
intermodal transportation by increasing capacity at low incremental cost
without sacrificing quality of service. For both international and domestic
freight, stacktrain service has grown faster than intermodal freight
transportation generally, with revenues for domestic stacktrain services
growing at a compound annual rate of 15.0% from 1989 to 1997.

In the intermodal sector, railroads and shippers rely on intermodal
marketing companies which currently handle 60% to 70% of all intermodal
shipments. An intermodal marketing company arranges intermodal transportation
for global, national and regional retailers and manufacturers. The intermodal
marketing industry originated because railroads chose not to invest in the
infrastructure and resources needed to market their intermodal services.
Intermodal marketing companies pass on the economies of scale attributable to
volume purchasing arrangements to shippers and provide shippers access to
large equipment pools. In addition, intermodal marketing companies generally
have superior information systems and can take full responsibility for
shipments that may move among numerous railroads or truckers while in transit.

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Trucking

The trucking segment of the transportation industry generated revenues of
approximately $367.0 billion in 1999, or 80.0% of total domestic freight
transportation costs. The trucking market is comprised of private and for-hire
fleets, handling either truckload or less-than-truckload shipments over
various lengths of haul. Relative advantages of trucking versus other modes
include flexibility of pickup, route, and delivery as well as relatively rapid
delivery cycles. Trucking is often at a cost disadvantage versus other modes
of transportation, such as rail, due to capacity limitations and high variable
costs related to fuel and labor. However, trucking is often advantageous for
shorter lengths of haul. Private fleets operated by shippers represent the
largest sector of the non-local trucking industry, but has been losing market
share to for-hire carriers since deregulation of the industry began in 1980.
Shippers' increased focus on cost reduction and core competencies has led to
an accelerated rate of growth of the for-hire trucking sector.

The trucking industry is divided into the truckload and less-than-truckload
sectors, both of which are highly fragmented. The truckload sector is composed
primarily of specialized carriers operating in markets defined by the length
of haul and the type of equipment utilized. Excluding private fleets, revenues
in the truckload segment were $75.0 billion in 1999, generated by 50,000
carriers, approximately 95.0% of which had annual revenue of less than $1.0
million. A majority of the trucking services we provide are truckload
services. Less-than-truckload carriers specialize in consolidating smaller
shipments into truckload quantities for transportation across regional and
national networks. Many less-than-truckload carriers have high fixed costs due
to investments in infrastructure. Other less-than-truckload carriers utilize
the fixed facilities of others and provide specialized outsourced services.
The less-than-truckload market generated approximately $20.0 billion of
revenues in 1999. We derive only a small portion of our revenues from less-
than-truckload freight.

Other elements of the trucking industry include truck brokerage and the use
of independent contractors to provide services. Truck brokerage involves the
outsourced arrangement of trucking services by a third-party with a licensed
carrier on behalf of a shipper. Truck brokerage allows the provider to offer
trucking services without actually having dedicated capacity. The use of
independent contractors generally facilitates a low investment in
transportation equipment and increased flexibility.

Railroads

The railroad industry generated revenues of approximately $36.0 billion in
1999, or 7.8% of the total domestic freight transportation market excluding
logistics services. The major participants in the rail market are Union
Pacific ($10.0 billion of 1999 revenues), Burlington Northern Santa Fe ($9.1
billion), CSX Transportation ($5.6 billion) and Norfolk Southern ($5.2
billion). Rail transportation is particularly competitive for moving freight
over long distances, due to its high capacity per shipment and low variable
labor and fuel requirements per ton/mile. Rail service generally offers less
flexibility relative to trucking because it is limited in its origin and
destination points. The railroad industry has been characterized in recent
years by several mergers, including Burlington Northern and Santa Fe in 1995,
Union Pacific and Southern Pacific in 1996 and most recently, the division of
Conrail between CSX and Norfolk Southern which was completed in June 1999.
Integration problems have contributed to rail service disruptions following
certain of the mergers. For example, following the Union Pacific/Southern
Pacific merger, labor shortages and delayed integration of the companies'
information systems contributed to misrouted and lost freight cars as well as
general service delays. In addition, the Conrail/CSX/Norfolk Southern
transaction has resulted in some service disruptions in markets formerly
served by Conrail. Despite these difficulties, the railroad mergers have
generally contributed to cost savings in the industry by cutting employment,
and the railroads are expected to return to historical service levels as the
integration problems are resolved. In addition, railroads have reduced their
costs through increased utilization of new technology and outsourcing.

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Third-party Logistics Services

Logistics services is the management and transportation of materials and
inventory throughout the supply chain. The third-party logistics services
business has been bolstered in recent years by the competitiveness of the
global economy, which causes shippers to focus on reducing handling costs,
operating with lower inventories and shortening inventory transit times. The
third-party logistics services sector of the domestic logistics market was
approximately $45.3 billion in 1999. Using a network of transportation,
handling and storage providers in multiple transportation modes, third-party
logistics services companies seek to improve their customers' operating
efficiency by reducing their inventory levels and related handling costs. Many
third-party logistics service providers are non-asset-based, primarily
utilizing physical assets owned by others in multiple transport modes. The
third-party logistics services business increasingly relies upon advanced
information technology to link the shipper with its inventory and as an
analytical tool to optimize transportation solutions. This trend favors the
larger, more professionally managed companies that have the resources to
support a sophisticated information technology infrastructure.

Freight Handling, Consolidation and Storage

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

International Freight Forwarding

International freight forwarding includes airfreight forwarding, ocean
freight forwarding and customs brokerage. In airfreight forwarding, an
indirect air carrier procures shipments from a large number of customers,
consolidates shipments bound for a particular destination from a common place
of origin, determines the routing over which the consolidated shipment will
move and purchases cargo space from airlines on a volume basis. In addition,
air freight forwarders may secure space on an airline in the spot market,
based upon the immediate volume needs of the customer. In ocean freight
forwarding, an indirect ocean carrier or non-vessel operating common carrier
(NVOCC) contracts with ocean shipping lines to obtain transportation for a
fixed number of containers between various points in a specified time period
at an agreed upon rate. Customs brokerage requires knowledge of complex tariff
laws and customs regulation in each country in which freight is transported. A
customs broker prepares and files all documentation required to clear customs,
pays and collects freight charges and deposits import duties with the
appropriate foreign and domestic governmental authorities. A customs broker
may also provide for the posting of surety bonds, bonded warehousing,
assistance in obtaining the most appropriate commodity classification, duty
reduction and duty drawback programs (which involve obtaining refunds of
duties or taxes when goods or materials are exported out of a region after
previously being imported into that region). We provide ocean freight
forwarding and customs brokerage services and, to a lesser extent, air freight
forwarding services.

Our Service Offerings

Wholesale Services

We are the largest provider of intermodal rail service in North America
that is not affiliated with an individual railroad company. We sell intermodal
service primarily to intermodal marketing companies, large automotive
intermediaries, international ocean carriers as well as to our own internal
intermodal marketing company and compete primarily with rail carriers offering
intermodal service and indirectly with over-the-road full truckload carriers.
The size of our equipment fleet, our frequent departures and the scope of our
geographic coverage provide us with a significant advantage in attaining the
responsiveness and reliability

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required by our customers at a competitive price. In addition, the geographic
coverage provided by our transportation network provides our customers with
single-company control over their rail transportation requirements and thereby
increases both cost effectiveness and reliability. Our access to sophisticated
information technology enables us to continuously track cargo containers,
chassis and railcars throughout our transportation network.

Our rail network and terminal locations serve most major population and
commercial centers in the United States, Canada and Mexico. Given our
significant intermodal rail market share, we have developed close working
relationships with the railroads. We have long-term contracts with the rail
carriers which provide, among other things, for favorable rates, minimum
service levels, capacity assurances and the utilization of terminal
facilities.

We maintain an extensive fleet of doublestack railcars, containers and
chassis, substantially all of which are leased. As of September 22, 2000, our
equipment consists of 627 doublestack railcars, 24,091 containers and 28,087
chassis, which are steel frames with rubber tires used to transport containers
over the highway. We also have access to APL Limited's fleet of equipment,
which we use to support the eastbound domestic transport of international
freight for international shipping companies. In addition, we provide APL
Limited and other shipping companies with equipment repositioning services
through which we transport empty containers from destinations within North
America to their West Coast points of origin. To the extent we are able to
fill these empty containers with the westbound freight of other wholesale
customers, we receive compensation from the shipping companies for our
repositioning service and from the other customers for shipment of their
freight. Management believes that we have access to over 100,000 empty
containers annually for repositioning. In 1999, we filled 73,741 repositioned
containers with freight for shipment via our stacktrain network on behalf of
our domestic customers. Because of increased volumes in our retail business,
we believe that we will be able to increase the percentage of repositioned
containers that are filled and transported on behalf of our customers and
thereby increase the profitability of our repositioning business.

Our fleet of equipment, priority handling status with rail carriers and
range of transportation services has resulted in a track record of high
service quality, reliability and consistency. Through our equipment fleet and
long-term arrangements with rail carriers, we can control our assets, linehaul
operations and terminal operations and thereby provide a high level of
intermodal service. We are therefore positioned to provide a reliable, cost
effective and highly competitive transportation alternative. Our wholesale
business was recognized in 1997, 1998 and 1999 as "Best of the Best" for on-
time performance, value, equipment and operations, customer service and
technology and was ranked first overall as an intermodal service provider in a
survey of 3,500 shippers conducted by Logistics Management & Distribution
Report and Cahners Research. We also received the "Quality One" award from
Ford in 1999. We believe that our unique market position and service offerings
position us to capitalize on considerable growth opportunities in the
intermodal transportation market.

Trucking Services

We offer a number of trucking services. We believe that our ability to
provide a range of trucking services provides a competitive advantage as
companies increasingly seek to outsource their transportation and logistics
needs to companies that can manage multiple transportation requirements.

We provide truck brokerage services throughout North America through our
customer service centers in Los Angeles and Walnut Creek (California), Dallas
(Texas), Chicago (Illinois), East Rutherford (New Jersey) and Columbus (Ohio).
Truck brokerage involves the procurement of trucking services of a licensed
independent carrier on behalf of a shipper. Goods shipped in this manner are
received by us at our customer service centers before the independent carriers
take charge of their delivery. We manage all aspects of these and related
services for our customers, including selecting qualified carriers,
negotiating rates, organizing or reconsolidating shipments into optimal
truckloads, storing goods at our customer service centers until pickup,
tracking shipments, resolving difficulties and billing. Our nationwide network
of over 5,000 approved independent carriers provides service to virtually any
North American destination.

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We compete in both the truckload and less-than-truckload segments of the
trucking industry, although the majority of our trucking revenues are derived
from truckload operations. Our truckload operations consist of flatbed and
specialized heavy-haul trucking services, as well as full-load, regional and
local trucking services. Our less-than-truckload operation specializes in
long-haul transportation of freight through hubs operated by others throughout
the United States. Our less-than-truckload operations leverage the mix of
traffic we receive from customers by integrating shipments which have common
destinations in order to lower the linehaul, pick-up and delivery costs. Our
capital investment in both less-than-truckload and truckload operations is
limited. We utilize a fleet of 600 vehicles equipped with flatbed and
specialized trailers which are owned and operated by independent contractors.

We maintain local trucking operations in Los Angeles, Oakland, and San
Diego (California), Houston and Dallas (Texas), Jacksonville (Florida),
Chicago (Illinois), Memphis (Tennessee), Kansas City (Kansas), Baltimore
(Maryland), Seattle (Washington) and Atlanta (Georgia). We contract with
independent contractors who control more than 700 trucks. We also maintain
interchange agreements with all of the major steamship lines, railroads and
stacktrain operators. This network allows us to supply the local
transportation requirements of shippers, ocean carriers and freight forwarders
across the country.

Intermodal Marketing

In our role as an intermodal marketing company, we arrange for the movement
of freight in containers and trailers throughout North America for global,
national and regional manufacturers and retailers and provide customized
electronic tracking and analysis of charges. In addition, we negotiate rail,
truck and intermodal rates, determine optimal routes, track and monitor
shipments in transit, consolidate billing, handle claims of freight loss or
damage on behalf of our customers and manage the handling, consolidation and
storage of freight throughout the process. We provide the majority of these
services through a network of agents and independent contractors. Our
intermodal marketing operations are based in Los Angeles and Walnut Creek
(California), East Rutherford (New Jersey), Memphis (Tennessee), Chicago
(Illinois) and Columbus (Ohio). Our experienced transportation personnel are
responsible for operations, customer service, marketing, management
information systems and our relationships with the rail carriers.

Through our intermodal marketing operations, we assist the railroads and
our wholesale operation in balancing freight originating in or destined to
particular service areas, resulting in improved asset utilization. In
addition, we serve our customers by passing on certain economies of scale that
we achieve as a volume buyer from railroads, stacktrain operators, trucking
companies and other third-party transportation providers, providing access to
large equipment pools and streamlining the paperwork and logistics of an
intermodal move. We believe that the combination of our wholesale operations
with our intermodal marketing services will enable us to provide enhanced
service to our customers and the opportunity for increased profitability and
growth.

Freight Consolidation & Handling

We offer a variety of freight handling services, including
consolidation/deconsolidation and warehousing. Because of the complexity of
freight patterns and the need to optimize multi-modal routes, the handling and
storage of freight on behalf of the shipper is often required during the
transportation process. Our retail operation focuses on providing customers
with specially designed transportation packages which fit their specific
shipment patterns and transportation and inventory needs. Additionally, we
have designed service packages intended to reduce our customers' handling
requirements and improve inventory efficiency. These services are primarily
offered on the West Coast.

International Freight Forwarding Services

As an international freight forwarder, we typically provide freight
forwarding services which involve transportation of freight into or out of the
United States. As an indirect ocean carrier or non-vessel operating

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common carrier and a customs broker, we manage international shipping for our
customers and provide or connect them with the range of services necessary to
run a global business. We also provide air freight forwarding services, though
to a lesser extent. Our international product offerings serve more than 1,000
clients internationally through 17 offices and over 100 agents worldwide.

As an indirect ocean carrier or non-vessel operating common carrier, we
transport our customers' freight by contracting with vessel operating common
carriers to obtain transportation for a fixed number of containers between
various points during a specified time period at an agreed wholesale
discounted volume rate. We charge rates lower than the rates our customers
could obtain from those same vessel operating common carriers for similar type
shipments. We consolidate the freight bound for a particular destination from
a common shipping point, prepare all required shipping documents, arrange for
any inland transportation, deliver the freight to the vessel operating common
carrier and provide shipment all the way to the final destination. At the
destination port, we, or our agent, effect delivery of the freight to the
receivers of the goods, which may include custom clearance and inland freight
transportation to the final destination.

As a customs broker, we are licensed by the U.S. Customs Service to act on
behalf of importers in handling custom formalities and other details critical
to exporting and importing of goods. We prepare and file formal documentation
required for clearance through customs agencies, obtain customs bonds,
facilitate the payment of import duties on behalf of the importer, arrange for
the payment of collect freight charges, assist with determining and obtaining
the best commodity classifications for shipments and assist with qualifying
for duty drawback refunds. We provide customs brokerage services in connection
with many of the shipments which we handle as an ocean freight forwarder or
non-vessel operating common carrier, as well as shipments arranged by other
freight forwarders, non-vessel operating common carriers or vessel operating
common carriers.

Supply Chain Management

We leverage the information from our advanced information system to provide
consulting and supply chain management services to our customers. These
specialized services allow our customers to realize cost savings and
concentrate on their core competencies by outsourcing their inventory
management and transportation to us. We provide infrastructure and equipment,
integrated with our customers' existing systems, to handle distribution
planning, just-in-time delivery and automated ordering throughout their
operations, and additionally will provide and manage warehouses, distribution
centers and other facilities for them. We can manage all aspects of the supply
chain from inbound sourcing and delivery logistics through outbound shipment,
handling, consolidation, deconsolidation, distribution, and just-in-time
delivery of end products to our customers' customers. We also consult on
identifying bottlenecks and inefficiencies and eliminating them by analyzing
freight patterns and costs, optimizing distribution and warehouse locations,
and analyzing/developing internal policies and procedures.

Information Technology

We believe that our high quality of service and reliability evidences the
sophistication and successful implementation of our proprietary advanced
information systems. Our technology, experience and operating procedures
significantly enhance the attractiveness of our logistics offering and deliver
service superior to that of our smaller competitors. Our systems' scaleable
network architecture provides an EDI and web-enabled platform that allows our
users to easily customize deployment and integration of the system to meet
their needs. This interconnection allows us to easily communicate with our
customers and transportation providers. Our systems monitor and track
shipments at every stage in the cycle and across varying transportation modes,
providing accurate, real-time visibility on shipment status, location and
estimated delivery times. Our exception notification system informs us of any
potential delays so we can proactively alert our customer and other supply
chain participants to minimize the impact of any problems. Our systems also
continually measure transit times, rates, availability and logistics activity
of our transportation providers to enable us to plan and execute transactions
and freight movements most reliably, efficiently and cost effectively. By
monitoring and tracking all containers,

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chassis and railcars throughout our network, we can identify their location
and availability and provide increased equipment utilization and balanced
freight flows.

Our systems also analyze each customer's usage patterns and needs to
resolve performance bottlenecks, determine optimal distribution locations and
identify areas for cost savings throughout their supply chain. We can also
prepare and distribute customized reports detailing shipping patterns,
volumes, reliability, timeliness and overall transportation costs, and can
generate management reports to meet federal highway authority requirements and
perform accounting and billing functions. Currently, our technological efforts
are primarily focused on reducing customer service response time, enhancing
the customer service profile database and expanding the number of customers
and service providers with which we share data using EDI applications.

We manage our wholesale services with highly sophisticated computer systems
that enable continuous tracking of cargo containers, chassis and railcars
throughout the intermodal system. These systems also provide us with
performance, utilization and profitability indicators in all aspects of the
wholesale business. These information systems create a competitive advantage
for us as they increase the efficiency of our intermodal operations and enable
us to provide shippers with the level of information which they increasingly
demand as part of their freight management operations.

During 1999 and the first three quarters of 2000, we spent a total of $4.1
million and $3.8 million, respectively, on information technology, of which
$1.0 million and $1.5 million, respectively, was capitalized and the remainder
expensed. These expenditures were for computer hardware and software and
related equipment used in our retail operations. During 1999, we consolidated
all of our retail operations under a new information technology platform.
However, our acquisition of Rail Van and its advanced proprietary information
technology systems allows us to further upgrade our information technology
platform by integrating all of our retail operations onto the Rail Van
information technology platform over the next six months. During 1999 and the
first three quarters of 2000, Rail Van spent a total of $6.1 million and $5.8
million, respectively, on information technology, of which $1.6 million and
$2.2 million, respectively, was capitalized and the remainder expensed. We
believe this integration can be accomplished without any disruption to our
retail operations but will require approximately $1.5 million of capital
expenditures to increase the capacity of the Rail Van system. In addition, for
an annual fee of $10.0 million, APL Limited, pursuant to a long-term
information technology agreement, provides us with the computers, software and
other information technology necessary for the operation of our wholesale
business. We are considering replacing the technology provided by APL Limited
with information technology systems currently available in the marketplace
from unrelated third parties at a one-time cost which we currently estimate to
be approximately $10.0 million, and thereafter at on-going annual costs which
we believe would be significantly below the $10.0 million annual fee currently
paid to APL Limited.

Customers

We currently provide retail services on a nationwide basis to retailers and
manufacturers, including a number of Fortune 500 companies such as General
Electric, Ford and Wal-Mart Stores and large global customers such as Sony. We
have served many of our customers for over 15 years and believe that the
strength of our customer base is attributable to our customer-focused
marketing and service philosophy. A significant portion of our retail sales
are with customers that utilize more than one of our services.

Our sales and customer service organizations, supported by our centralized
pricing and logistics management systems, market our wholesale services
primarily to intermodal marketing companies, who sell intermodal service to
shippers while buying space on intermodal rail trains. We also market our
wholesale services to the automotive industry and ocean carriers. Through our
sales network, and the sales networks of the intermodal marketing companies to
which we sell wholesale services, we provide wholesale services to more than
4,700 shippers.

Ford Motor Company would have accounted for approximately 13% of our 1999
revenues on a pro forma basis after giving effect to our four acquisitions in
2000 and no other customer would have accounted for 10% or more of our pro
forma 1999 revenues.

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<PAGE>

Sales and Marketing

As of September 22, 2000, our retail marketing operations included 264
sales agents, 172 of whom are independent sales agents, 97 of whom are
salaried sales representatives. All of our sales people are supported by
regional sales offices in 17 cities, including Los Angeles and Walnut Creek
(California), Chicago (Illinois), Seattle (Washington), Memphis (Tennessee),
Rutherford (New Jersey) and Houston (Texas). Our salaried sales
representatives are deployed in major business centers throughout the country
and target mid-size and large customers. Our national network of commissioned
sales agents provides additional geographic coverage and contributes
additional business that enables us to achieve volume discounts and balance
traffic flows. Both our salaried and commissioned sales forces are compensated
by overall net revenue margin contribution to the company and therefore are
strongly incentivized to cross-sell additional services to their
customers.With our growing portfolio of services, the capability for our
nationwide salesforce to cross-sell into other products provides a significant
opportunity to expand our business with current customers.

As of September 22, 2000, our wholesale services were marketed by 16 sales
and 25 customer service representatives. These representatives operate through
seven regional and district sales offices and three regional service centers
which are situated in the major shipping locations for the wholesale business
in order to provide support for the customers of the wholesale business. The
16 sales representatives are directly responsible for managing and liaising
with existing customers and for soliciting new business. The customer service
representatives are responsible for supporting existing customers and sales
representatives by providing cargo tracking services, responding to customer
complaints and processing customer inquiries. In addition, intermodal
marketing companies are an important link between our wholesale operations and
shippers. Intermodal marketing companies, who sell intermodal service to
shippers while buying space on intermodal rail trains, enable us to market our
services through their sales networks and indirectly access shippers in more
than 100 major metropolitan areas.

In addition to our domestic sales force, we also have an international
network of 85 sales and 100 customer service representatives. These
representatives are located in 5 offices and 75 agencies in over 70 countries.

Development of 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 with total gross revenues
of $755.6 million in 1999, for a total consideration of approximately $151.3
million. Each acquisition has complemented our core retail business
operations, expanded our geographic reach and service offerings for intermodal
marketing, local trucking, international freight forwarding and other
logistics services, and is expected to be accretive to our earnings in the
first year of ownership. Our four recent acquisitions include the following:

. 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,
which had $43.4 million of gross revenues in 1999, provide intermodal
freight transportation, trucking, transloading and warehousing services
at three locations in California and one location in each of Atlanta and
Seattle. This acquisition expanded our presence in these services and
furthered our vertical integration.

. On August 31, 2000, we acquired all of the capital stock of GTS
Transportation Services, Inc. GTS, which had $87.0 million of gross
revenues in 1999, provides logistics and truck brokerage services in
North America. This acquisition expanded our service offerings.

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. On October 31, 2000, we acquired all of the capital stock of RFI Group,
Inc. RFI, which had $112.1 million of gross revenues in 1999, provides
us with access to the international freight forwarding, customs-
brokerage and ocean transportation services market. This acquisition
expanded our portfolio of services to include international freight
forwarding and related activities and gave us a strong international
presence.

. On December 22, 2000, we acquired all of the capital stock of Rail Van,
Inc. Rail Van, which had $513.1 million of gross revenues in 1999,
provides rail and truck brokerage, intermodal marketing and logistics
services. In addition to expanding and strengthening our customer base
and product offering, this acquisition provides us with advanced
information systems, which we plan to transfer to and use in all of our
retail operations over the next six months, as well as a highly focused
sales force.

Facilities/Equipment

Our wholesale transportation network operates out of 58 railroad terminals
across North America. Our integrated rail network, combined with our leased
equipment fleet, enables us to provide our customers with single-company
control over rail transportation to locations throughout North America.

Substantially all of the terminals that we use are owned and managed by
rail or highway carriers. However, we employ full-time personnel on-site at
major locations to ensure close coordination of the services provided at the
facilities. In addition to these terminals, other locations throughout the
eastern United States serve as stand-alone container depots, where empty
containers can be picked up or dropped off, or supply points, where empty
containers can be picked up only. In connection with our trucking services,
agents provide marketing and sales, terminal facilities and driver recruiting,
while an operations center provides, among other services, insurance, claims
handling, safety compliance, credit, billing and collection and operating
advances and payments to drivers and agents.

Our wholesale equipment fleet consists of a large number of double stack
railcars, containers and chassis which are owned or subject to short and long
term leases. We lease almost all of our containers, approximately 79% of our
chassis and approximately 67% of our doublestack railcars. As of September 22,
2000, our wholesale equipment fleet consisted of the following:

<TABLE>
<CAPTION>
Owned Leased Total
----- ------ ------
<S> <C> <C> <C>
Containers
48' Containers......................................... 359 14,828 15,187
53' Containers......................................... 31 8,873 8,904
----- ------ ------
Total................................................ 390 23,701 24,091
Chassis
48' Chassis............................................ 5,813 7,986 13,799
53' Chassis............................................ 50 9,553 9,603
----- ------ ------
Subtotal............................................. 5,863 17,539 23,402
20', 40' and 45*....................................... -- 4,685 4,685
----- ------ ------
Total................................................ 5,863 22,224 28,807
===== ====== ======
Doublestack Railcars..................................... 210 417 627
</TABLE>
--------
* Represents the current allocation of chassis sublet to us pursuant to
our agreement with APL Limited. See "Certain Relationships and Related
Transactions."

Supplementing the equipment listed above we have access to an extensive
inventory of 20-, 40- and 45-foot containers from APL Limited's international
network in addition to the empty containers which we reposition on behalf of
APL Limited.

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We also own a limited amount of equipment to support our trucking
operations. The majority of our trucking operations are conducted through
contracts with independent contractors who own and operate their own
equipment. We lease two warehouses in Kansas City (Kansas) and five facilities
in Los Angeles (California) for dockspace, warehousing and parking for
tractors and trailers.

Suppliers

Railroads

We have long-term contracts with certain railroads regarding movement of
our stacktrains. These contracts generally provide for access to terminals
controlled by the railroads as well as support services related to our
wholesale operations. Through these contracts, our wholesale business has
established a North American transportation network. Our retail business also
maintains contracts with the railroads which govern the transportation
services and payment terms pursuant to which the railroads handle intermodal
shipments. These contracts are typically of short duration, usually twelve
month terms, and subject to renewal or extension. We maintain close working
relationships with all of the major railroads in the United States and view
each relationship as a partnership. We will continue to focus our efforts on
strengthening these relationships.

Through our contracts with rail carriers, we have access to a 50,000 mile
rail network throughout North America. Our rail contracts, which generally
provide that the rail carriers will perform linehaul and terminal services for
us, are typically long-term agreements, with the major contracts providing for
a remaining term of 11 to 14 years. Pursuant to the service provisions, the
rail carriers provide transportation of our stacktrains across their rail
networks and terminal services related to loading and unloading of containers,
equipment movement and general administration. Our rail contracts generally
establish per container rates for stacktrain shipments made on rail carriers'
transportation networks and typically provide that we are obligated to
transport a certain percentage of our total stacktrain shipments with each of
the rail carriers. The terms of our rail contracts, including rates, are
generally subject to adjustment or renegotiation throughout the term of the
contract, based on factors such as the continuing fairness of the contract
terms, prevailing market conditions and changes in the rail carriers' costs to
provide rail service. Generally, we benefit from advantageous rate provisions
in our rail contracts. Based upon these provisions, and the volume of freight
which we ship with each of the rail carriers, we believe that we enjoy
favorable transportation rates for our stacktrain shipments.

Agents and Independent Contractors

We rely on the services of agents and independent contractors in our long
haul and local trucking services. Although we own a small number of tractors
and trailers, the majority of our truck equipment and drivers are provided by
agents and independent contractors. Our relationships with agents and
independent contractors allow us to provide customers with a broad range of
trucking services without the need to commit capital to acquire and maintain
an asset base. Although our agreements with agents and independent contractors
are typically long-term in practice, they are generally terminable by either
party on short notice.

Agents and independent contractors are compensated on the basis of mileage
rates and a fixed percentage of the revenue generated from the shipments they
haul. Under the terms of our typical lease contracts, agents and independent
contractors must pay all the expenses of operating their equipment, including
driver wages and benefits, fuel, physical damage insurance, maintenance and
debt service.

Local Trucking Companies

We have established a good working relationship with a large network of
local truckers in major urban centers throughout the United States. The
quality of these relationships helps ensure reliable pickups and deliveries,
which is a major differentiating factor among intermodal marketing companies.
Our strategy has been to concentrate business with a select group of local
truckers in a particular urban area, which increases our economic value to the
local truckers and in turn raises the quality of service that we receive.

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Relationship with APL Limited

We have entered into a long-term agreement with APL Limited involving
domestic transportation of APL Limited's international freight. The majority
of APL Limited's imports to the United States are transported on stacktrains
from ports on the West Coast to population centers in the Midwest and
Northeast regions. However, domestic stacktrain freight which originates in
the United States moves predominantly westbound from eastern and midwestern
production centers to consumption centers on the West Coast. Because of our
agreement with APL Limited, we are able to achieve high utilization and steady
revenue production from our intermodal equipment due to our high volume of
both eastbound and westbound shipments. The APL Limited freight also
significantly increases the associated stacktrain volume, thereby improving
our bargaining position with the railroads regarding contract terms. In
addition, we provide APL Limited with equipment repositioning services through
which we transport APL Limited's empty containers from destinations within
North America to their West Coast points of origin. To the extent we are able
to fill these empty containers with the westbound freight of other wholesale
customers, we receive compensation from both APL Limited for our repositioning
service and from the other customers for shipment of their freight.

Business Cycle

The transportation industry has historically performed cyclically as a
result of economic recession, customers' business cycles, increases in prices
charged by third-party carriers, interest rate fluctuations and other economic
factors, many of which are beyond our control. We believe we have generally
been successful in passing on cost increases to our wholesale customers
without substantial decreases in shipping volumes. During difficult economic
conditions, our wholesale customers may shift between transportation modes,
trading speed for cost savings, but generally do not reduce shipments. Because
we offer a variety of transportation modes, we generally retain shipping
volumes and benefit from increased use of our stacktrain services at the
expense of long-haul trucking competitors. Moreover, we believe our retail
business is positioned to perform well even in an economic recession or during
a downturn in its customers' business cycles. This is because at these times
customers focus on cost-reduction and as a result increase their outsourcing
of their supply-chain operations to us as well as their use of our other
logistics services. We also believe that difficult economic conditions magnify
the competitive advantage that large service providers like us enjoy over
smaller competitors and offer additional opportunities for us to make
acquisitions on favorable financial terms.

Competition

The transportation services industry is highly competitive. Our retail
business competes primarily against other domestic non-asset-based
transportation and logistics companies, asset-based transportation and
logistics companies, third-party freight brokers, private shipping departments
and freight forwarders. Competition is based primarily on freight rates,
quality of service, such as damage free shipments, on-time delivery and
consistent transit times, reliable pickup and delivery and scope of
operations. We also compete with transportation services companies for the
services of independent commission agents, and with trucklines for the
services of independent contractors and drivers. Our major competitors in the
retail business include, C.H. Robinson, Exel, Hub Group, Alliance Shippers,
Menlo Logistics, EGL Eagle Global Logistics, Fritz Companies and Ryder System.

Our wholesale business competes primarily with over-the-road full truckload
carriers, conventional intermodal movement of trailers-on-flatcars and
containerized intermodal rail services offered directly by railroads.
Competition between our wholesale business and truckload carriers is
particularly intense for shipments of freight over shorter distances. This is
primarily because intermodal transportation's competitive advantage of low
variable labor and fuel requirements per ton/mile is diminished for shorter
distance shipments. The major competitors of our wholesale business include
Burlington Northern Santa Fe, Union Pacific, CSX Intermodal and J.B. Hunt
Transport.

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Employees

At September 22, 2000, after giving effect to our acquisitions of RFI and
Rail Van, we would have had a total of 1,655 employees. None of our employees
are represented by unions and we generally consider our relationships with our
employees to be satisfactory.

Government Regulation

Regulation of Our Trucking and Wholesale Operations

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

We are subject to licensing and regulation as a transportation provider
pursuant to our trucking operations. We are licensed by the U.S. Department of
Transportation as a national freight broker in arranging for the
transportation of general commodities by motor vehicle and operate pursuant to
a 48-state, irregular route common and contract carrier authority. The
Department of Transportation prescribes qualifications for acting in our
capacity as a national freight broker, including surety bonding requirements.
We provide motor carrier transportation services that require registration
with the Department of Transportation and compliance with economic regulations
administered by the Department of Transportation, including a requirement to
maintain insurance coverage in minimum prescribed amounts. We are also subject
to regulation by the U.S. Federal Maritime Commission as an ocean freight
forwarder and maintain a non-vessel operating common carrier bond, and provide
customs brokerage services as a customs broker under a license issued by the
U.S. Customs Service of the U.S. Department of Treasury. Other sourcing and
distribution activities may be subject to various federal and state food and
drug statutes and regulations. Although Congress enacted legislation in 1994
that substantially preempts the authority of states to exercise economic
regulation of motor carriers and brokers of freight, we and several of our
subsidiaries continue to be subject to a variety of vehicle registration and
licensing requirements. We and the carriers that we rely on in arranging
transportation services for our customers are also subject to a variety of
federal and state safety and environmental regulations. Although compliance
with regulations governing licenses in these areas has not had a materially
adverse effect on our operations or financial condition in the past, there can
be no assurance that these regulations or changes in these regulations will
not adversely affect our operations on the future. Violations of these
regulations could also subject us to fines or, in the event of serious
violations, suspension or revocation of operating authority as well as
increased claims liability.

Intermodal operations, like ours, were exempted from virtually all active
regulatory supervision by the U.S. Interstate Commerce Commission, predecessor
to the regulatory responsibilities now held by the U.S. Surface Transportation
Board. Such exemption is revocable by the Surface Transportation Board, but
the standards for revocation of regulatory exemptions issued by the Interstate
Commerce Commission or Surface Transportation Board are high.

Regulation of Our International Freight Forwarding Operations

We maintain licenses issued by the U.S. Federal Maritime Commission as an
ocean transportation intermediary. Our licenses govern both our operations as
an ocean freight forwarder and as a non-vessel operating common carrier. The
Federal Maritime Commission has established qualifications for shipping
agents, including surety bond requirements. The Federal Maritime Commission
also is responsible for the regulation and oversight of non-vessel operating
common carriers that contract for space with vessel operating carriers and
sell that space to commercial shippers and other non-vessel operating common
carriers for freight originating and/or terminating in the United States. Non-
vessel operating common carriers are required to publish and maintain tariffs
that establish the rates to be charged for the movement of specified
commodities into and out of the United States. The Federal Maritime Commission
has the power to enforce these regulations by commencing enforcement

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proceedings seeking the assessment of penalties for violation of these
regulations. For ocean shipments not originating or terminating in the United
States, the applicable regulations and licensing requirements typically are
less stringent than in the United States. We believe that we are in
substantial compliance with all applicable regulations and licensing
requirements in all countries in which we transact business.

We are also licensed as a customs broker by the Customs Service of the
Department of Treasury in each United States custom district in which we do
business. All United States customs brokers are required to maintain
prescribed records and are subject to periodic audits by the Customs Service.
In other jurisdictions in which we perform customs brokerage services, we are
licensed, where necessary, by the appropriate governmental authority. We
believe we are in substantial compliance with these requirements.

Litigation

In June 1995, APL Limited, our former parent, sold the assets of its
trucking company, American President Trucking to Burlington Motor Carriers.
The sale included the sublease of terminal real estate to BMC and the sublease
of tractor units to Stoops Freightliner, which in turn entered into a use
agreement with BMC. We and BMC entered into a service agreement whereby we
guaranteed certain levels of traffic to BMC. Under new ownership from a 1995
bankruptcy proceeding, BMC advised APL Limited and us that it believed we
breached the service agreement when APL Limited sold its Distribution Services
unit, and demanded $0.8 million in compensation. We disputed the claim. BMC
and Stoops filed subsequent complaints in the BMC bankruptcy proceedings
demanding unspecified damages. We and APL Limited filed motions to dismiss
both complaints, which were granted on November 13, 1998. Stoops did not
appeal; BMC did. The appellate court upheld part of the decision and reversed
part of the decision and encouraged the parties to engage in settlement
discussions. In early February 2000, APL Limited offered $200,000 in
settlement of all claims; BMC countered with a demand of $1.2 million. APL
Limited rejected that offer and reiterated its $200,000 offer in early April.
Subsequently, all the parties have entered into an agreement in principle
which will settle all claims among them. The settlement agreement, which was
executed in December 2000, will not result in any payment by us.

Two subsidiaries of Pacer Logistics, Interstate Consolidation, Inc. and
Intermodal Container Service, Inc., are named defendants in a class action
filed by Irwin Albillo in July, 1997 in the State of California, Los Angeles
Superior Court, Central District, alleging, among other things, breach of
fiduciary duty, unfair business practices, conversion and money had and
received in connection with monies allegedly wrongfully deducted from truck
drivers' earnings. Defendants have entered into a Judge Pro Tempore Submission
Agreement dated as of October 9, 1998 pursuant to which the plaintiffs and
defendants have waived their rights to a jury trial, stipulated to a certified
class and agreed to a minimum judgment of $250,000 and a maximum judgment of
$1.75 million. On August 11, 2000, the court issued its Statement of Decision,
in which Interstate and Intermodal prevailed on all issues except one. The
court found that Interstate failed to issue certificates of insurance to the
owner-operators and therefore failed to disclose that in 1998, our retention
on its liability policy was $250,000. The court has ordered that restitution
of $488,978 be paid for this omission. Plaintiff's counsel has indicated he
intends to appeal the entire ruling and we intend to appeal the restitution
issue. Based upon information presently available and in light of legal and
other defenses and insurance coverage, management does not expect these legal
proceedings, claims and assessments, individually or in the aggregate, to have
a material adverse effect on our financial position or results of operations.

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

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Environmental

Our facilities and operations are subject to federal, state and local
environmental, hazardous materials transportation and occupational health and
safety requirements, including those relating to the handling, labeling,
shipping and transportation of hazardous materials, discharges of substances
to the air, water and land, the handling, storage and disposal of wastes and
the cleanup of properties affected by pollutants. In particular, a number of
our facilities have underground and aboveground tanks for the storage of
diesel fuel and other petroleum products. These facilities are subject to
requirements regarding the storage of such products and the clean-up of any
leaks or spills. We could also have liability as a responsible party for costs
to clean-up contamination at off-site locations where we have sent, or
arranged for the transport of, wastes. We have not received any notices that
we are potentially responsible for material clean-up costs at any off-site
waste disposal location. We do not currently anticipate any material adverse
effect on our business or financial condition as a result of our efforts to
comply with environmental requirements nor do we believe that we have any
material environmental liabilities. We also do not expect to incur material
capital expenditures for environmental controls in this or the next fiscal
year. However, there is no guarantee that changes in environmental
requirements or liabilities from newly-discovered environmental conditions
will not have a material effect on our business.

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MANAGEMENT

Directors and Executive Officers

The following table sets forth information regarding our directors and
executive officers.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Donald C. Orris....... 59 Chairman, President and Chief Executive Officer
Gerry Angeli.......... 54 Executive Vice President
Robert L. Cross....... 53 Executive Vice President
Lawrence C. Yarberry.. 58 Executive Vice President and Chief Financial Officer
Joseph P. Atturio..... 43 Vice President, Controller and Secretary
Joseph B. Doherty..... 41 Treasurer
Eugene Pentimonti..... 58 President, Wholesale Operations
Michael W. Keller..... 50 President, Warehousing and Freight Consolidation
Mitchel Robbins....... 44 President, International Freight Forwarding
Alan Baer............. 45 Vice President
Joshua J. Harris...... 35 Director
Thomas L. Finkbiner... 47 Director
Michael S. Gross...... 39 Director
Bruce H. Spector...... 58 Director
Marc E. Becker........ 28 Director
Timothy J. Rhein...... 59 Director
</TABLE>

Donald C. Orris has served as Chairman, President and Chief Executive
Officer of our company since May 1999. From Pacer Logistics' inception in
March 1997 until May 1999, Mr. Orris served as Chairman, President and Chief
Executive Officer of Pacer Logistics. From March 1997 until May 1998, Mr.
Orris served as President and Chief Executive Officer of an affiliate of Pacer
Logistics. He also has served as Chairman of Pacer Logistics' other
subsidiaries since their formation or acquisition by Pacer Logistics. Mr.
Orris has been the President of Pacer International Consulting LLC (f/k/a
Logistics International LLC), a wholly-owned subsidiary of Pacer Logistics,
since September 1996. From January 1995 to September 1996, Mr. Orris served as
President and Chief Operating Officer, and from 1990 until January 1995, he
served as an Executive Vice President, of Southern Pacific Transportation
Company. Mr. Orris was the President and Chief Operating Officer of American
President Domestic Company and American President Intermodal Company from 1982
until 1990.

Gerry Angeli has served as an Executive Vice President of our company since
May 1999. From Pacer Logistics' inception in March 1997 until May 1999, Mr.
Angeli served as an Executive Vice President and Assistant Secretary of Pacer
Logistics and as a Director of Pacer Logistics from April 1998 until May 1999.
He also served as a Director of each of Pacer Logistics' subsidiaries. Since
May 1998, Mr. Angeli has served as President and Chief Executive Officer and
Vice President of certain Pacer Logistics subsidiaries. Mr. Angeli also served
as a Vice President and Assistant Secretary of Pacific Motor Transport Company
("PMTC") from March 1997 until May 1998. Since 1982, Mr. Angeli has served as
President and Chief Executive Officer of the Pacer division of PMTC and,
concurrent therewith, from 1987 until December 1993, Mr. Angeli served as
President and Chief Executive Officer of Southern Pacific Motor Trucking, a
wholly-owned subsidiary of the Southern Pacific Railroad.

Robert L. Cross has served as an Executive Vice President of our company
since May 1999. Mr. Cross served as an Executive Vice President and Assistant
Secretary of Pacer Logistics and as an officer of certain Pacer Logistics
subsidiaries from Pacer Logistics' inception in March 1997 until May 1999.
From 1991 until March 1997, Mr. Cross served as President of ABL-TRANS.

Lawrence C. Yarberry has served as an Executive Vice President and Chief
Financial Officer of our company since May 1999. Mr. Yarberry served as an
Executive Vice President, Chief Financial Officer and

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Treasurer of Pacer Logistics from May 1998 until May 1999. Mr. Yarberry served
as a consultant to Pacer Logistics from February 1998 until May 1998. From
April 1990 until December 1997, Mr. Yarberry served as a Vice President of
Finance of Southern Pacific Transportation Company and was Vice President of
Finance and Chief Financial Officer of Southern Pacific Rail Corporation.

Joseph P. Atturio has served as a Vice President, Controller and Secretary
of our company since May 1999. Mr. Atturio served as Vice President and
Secretary of Pacer Logistics since its inception in March 1997 until May 1999.
Prior to joining Pacer Logistics, Mr. Atturio served as Comptroller of SPMT
from August 1988 until December 1993 and as a Vice President of SPMT from July
1992 until December 1993. From January 1994 until March 1997, he served as
Vice President and Controller of PMTC and served as a Regional Director of PMT
Auto Transport, a division of PMTC, from January 1986 until 1988.

Joseph B. Doherty has served as Treasurer of our company since July 2000.
Prior to joining our company, Mr. Doherty served as Vice President and
Treasurer for Rail America, Inc. from August 1998 to July 2000. From 1981 to
1998, Mr. Doherty held various positions at Southern Pacific Transportation
Company, including Assistant Vice President--Finance and Assistant Treasurer.

Eugene Pentimonti has served as President of Wholesale Services of our
company since April 2000. Prior to joining Pacer Stacktrain, Mr. Pentimonti
served as Senior Vice President for the American Trucking Association from
February 1996 to 2000. Mr. Pentimonti also served as a Vice President for
American President Lines from 1979 to 1996.

Michael W. Keller has served as President of Warehousing and Freight
Consolidation of our company since January 2000. Prior to joining our company,
Mr. Keller was President of Conex Global Logistics Services, Inc. since 1977.
From 1975 to 1977, Mr. Keller was the General Sales manager for the Western
Region with Japan Lines. From 1970 to 1975, Mr. Keller served at Matson, where
his last capacity was Assistant Vice President of Operations.

Mitchel Robbins has served as President of International Freight Forwarding
of our company since October 2000. Mr. Robbins served as Chief Executive
Officer of RFI Group, Inc. from January 1993 to October 2000. Mr. Robbins
served as Vice President of RFI Group, Inc. from 1984 to 1993 and as a Manager
from 1977 to 1984.

Alan Baer has served as a Vice President of our company since October 31,
2000 and as Chief Operating Officer of RFI Group, Inc. since January 1, 1998.
Mr. Baer served as President of Ocean World Lines from 1989 to 1998. Prior to
joining Ocean World Lines, Mr. Baer served as Line Manager for United States
Navigation since 1982.

Joshua J. Harris has served as a Director of our company since May 1999.
Mr. Harris is a partner in Apollo Management, L.P. and has served as an
officer of certain affiliates of Apollo Management since 1990. Prior to that
time, Mr. Harris was a member of the Mergers and Acquisitions Department of
Drexel Burnham Lambert Incorporated. Mr. Harris is also a director of
Florsheim Group Inc., NRT, Incorporated, Clark Retail Enterprises, Inc.,
Breuners Home Furnishings Corporation, Quality Distribution, Inc., Converse
Inc. and Resolution Performance Products Inc.

Thomas L. Finkbiner was elected to serve as a Director of our company
effective April 1, 2000. Mr. Finkbiner is currently a Director and Chief
Executive Officer of Quality Distribution, Inc. Prior to joining Quality
Distribution, Mr. Finkbiner served as Vice President of Intermodal for Norfolk
Southern Corporation since 1987. From 1981 to 1987, he was Vice President of
Marketing & Administration for North American Van Lines.

Michael S. Gross was elected to serve as a Director of our company
effective April 1, 2000. Mr. Gross is a founding partner of Apollo Management.
Prior to that time, Mr. Gross was a member of the Mergers and Acquisitions
Department of Drexel Burnham Lambert Incorporated. Mr. Gross is also a
Director of Allied Waste Industries, Inc., Breuners Home Furnishings
Corporation, Clark Retail Enterprises, Inc., Converse, Inc., Encompass
Services Corporation, Florsheim Group, Inc., Rare Medium, Inc., Saks, Inc. and
United Rentals.

73
<PAGE>

Bruce H. Spector has served as a Director of our company since May 1999.
Mr. Spector has been a consultant to Apollo Management since 1992 and has been
a principal in Apollo Management since 1995. Prior to October 1992, Mr.
Spector, a reorganization attorney, was a member of the Los Angeles law firm
of Stutman Triester and Glatt. Mr. Spector is also a Director of Telemundo
Group, Inc., United International Holdings, Inc., Nexthealth, Inc., Vail
Resorts, Inc. and Metropolis Realty Trust, Inc.

Marc E. Becker has served as a Director of our company since May 1999. Mr.
Becker has been associated with Apollo Management since 1996. Prior to that
time, Mr. Becker was employed by Smith Barney Inc. in the Financial
Entrepreneurs group within its Investment Banking division. Mr. Becker also
serves as a Director of National Financial Partners Corporation and Quality
Distribution, Inc.

Timothy J. Rhein has served as a Director of our Company since May 1999.
Mr. Rhein has been President and Chief Executive Officer of APL Limited since
October 1995. Mr. Rhein served as APL Limited's President and Chief Operating
Officer from July 1995 to October 1995. Prior to that, Mr. Rhein served as
President and Chief Executive Officer of APL Land Transport Services, Inc.
from May 1990 to October 1995 and President and Chief Operating Officer of
American President Lines, Ltd. from January 1987 to May 1990. Mr. Rhein has
served as a Director of APL Limited since July 1990.

Directors' Terms

Upon completion of this offering, our board of directors will be divided
into three classes that serve staggered three-year terms, as follows:

<TABLE>
<CAPTION>
Class Expiration Board Member
----- ---------- ------------
<S> <C> <C>
Class I............................................ 2002
Class II........................................... 2003
Class III.......................................... 2004
</TABLE>

Committees of the Board of Directors

The board of directors has an executive committee, a compensation committee
and an audit committee. The executive committee. The executive committee may
exercise all the powers of the board of directors in the management of our
business and affairs except for those powers expressly reserved to the board
under Tennessee law. The members of the executive committee are Messrs. Orris,
Harris and Spector. The compensation committee reviews and makes
recommendations regarding our compensation policies and forms of compensation
provided to our directors and officers. The compensation committee also
reviews and determines bonuses for our officers and other employees. In
addition, the compensation committee reviews and determines stock-based
compensation for our directors, officers, employees and consultants and
administers our option plan. The members of the compensation committee are
Messrs. Orris, Harris and Spector. The audit committee provides assistance to
the board in fulfilling its legal and fiduciary obligations in matters
involving our accounting, auditing, financial reporting, internal control and
legal compliance functions. The audit committee also oversees the audit
efforts of our independent accountants and take those actions as it deems
necessary to satisfy itself that the auditors are independent of management.
Prior to this offering, the audit committee consisted of Messrs. Harris, Rhein
and Becker. Effective upon consummation of this offering, the audit committee
will consist of Messrs. and and a new director to
be named within 90 days of this offering who will qualify as an independent
director under NASDAQ rules.

Director Compensation

The members of our board of directors who are employees do not receive
compensation for their service on our board of directors or any committee of
our board but are reimbursed for their out-of-pocket expenses. Our non-
employee directors receive a monthly $1,500 retainer plus a $1,500 fee for
each board meeting that they

74
<PAGE>

attend. In addition, each non-employee director has received options to
purchase 6,000 shares of our common stock under our stock option plan.

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee serves as a member of the board of
directors or compensation committee of any entity that has one or more
executive officers serving as members of our board of directors or
compensation committee.

Executive Compensation

The following table sets forth information concerning the compensation paid
by us for services rendered in the years indicated to our Chief Executive
Officer and our four other most highly compensated executive officers whose
salary and bonus exceeded $100,000 in 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------
Annual Compensation Awards Payout
--------------------------------- ------------ ------
Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation(1) Award(s)(2) Options SARs Payout Comp.(3)
------------------ ---- -------- -------- --------------- ----------- ------------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald C. Orris......... 1999 $300,000 $161,880 -- -- 100,000 $5,688
Chairman, President and 1998 $250,000 $ 90,000 -- -- -- -- $6,250
Chief Executive Officer
Gerry Angeli............ 1999 $270,000 $121,410 -- -- 100,000 $3,025
Executive Vice
President 1998 $250,000 $ 90,000 -- -- -- -- $7,500
Gary I. Goldfein (4).... 1999 $255,000 $121,410 -- -- 100,000 $3,975
1998 $235,000 $ 90,000 -- -- -- -- $1,600
Robert L. Cross......... 1999 $235,000 $121,410 -- -- 100,000 $5,604
Executive Vice
President 1998 $220,000 $990,000 -- -- -- -- $6,558
Alan E. Steiner (5)..... 1999 $235,000 $121,410 -- -- 100,000 $3,975
Executive Vice
President 1998 $220,000 $ 90,000 -- -- -- -- $1,600
</TABLE>
-------
(1) The value of perquisites and other personal benefits is not included in
the amounts disclosed because it did not exceed for any officer in the
table above the lesser of either $50,000, or 10% of the total annual
salary and bonus reported for the officer.
(2) In connection with the recapitalization, Messrs. Orris, Angeli, Goldfein,
Cross and Steiner received 2,329, 2,264, 4,963, 2,264 and 4,963 shares of
Pacer Logistics 7.5% Exchangeable Preferred Stock, respectively, with a
fiscal year end 1999 fair market value of $17.5 million (based on a fiscal
year end 1999 fair market value of $1,000 per share of such preferred
stock, plus accrued dividends).
(3) Consists of company matching contributions to 401(k) plan.
(4) Mr. Goldfein was one of our executive vice presidents, but resigned
effective January 1, 2000 and forfeited 90,000 options to purchase Pacer
International common stock.
(5) Mr. Steiner was one of our executive vice presidents, but resigned
effective May 31, 2000 and forfeited 80,000 options to purchase Pacer
International common stock.

75
<PAGE>

Option Grants in Last Fiscal Year

The following table lists the stock options granted to each of the officers
named in the Summary Compensation Table above during the fiscal year 1999.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term(1)
---------------------------------------------- ---------------------
Number of
Securities % of
Underlying Options
Name and Principal Options Granted Exercise Price Expiration
Position Granted In Year ($/Sh) Date 0% ($) 5% ($) 10% ($)
------------------ ---------- ------- -------------- ------------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Donald C. Orris (CEO)... 100,000 9.4% $10.00 May 28, 2009 $ $ $
Gerry Angeli............ 100,000 9.4% $10.00 May 28, 2009 $ $ $
Gary I. Goldfein........ 100,000 9.4% $10.00 May 28, 2009 $ $ $
Robert L. Cross......... 100,000 9.4% $10.00 May 28, 2009 $ $ $
Alan E. Steiner......... 100,000 9.4% $10.00 May 28, 2009 $ $ $
</TABLE>

--------
(1) These amounts represent hypothetical gains that could be achieved if those
options are exercised at the end of the option term. These gains are based
on assumed rates of stock price appreciation of 0%, 5% and 10% compounded
annually from the date the respective options were granted to their
expiration dates, based upon an assumed initial public offering price of
per share (the midpoint of the range set forth on the cover of this
prospectus). These assumptions are not intended to forecast future
appreciation of our stock price. Actual gains, if any, on stock option
exercises are dependent on the future performance of our common stock and
overall market conditions. The potential realizable value computation does
not take into account federal or state income tax consequences of option
exercises or sales of appreciated stock.

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table sets forth information concerning the options held by
each of the officers named in the above Summary Compensation Table at December
31, 1999.

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Fiscal year end(1) Fiscal year end(2)
Shares Acquired ------------------------- -------------------------
Name On Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald C. Orris Common.. -- -- 34,833 221,916
Preferred.............. -- -- 3,333 11,666
Gerry Angeli
Common................. -- -- 34,833 221,916
Preferred.............. -- -- 3,333 11,666
Gary I. Goldfein
Common (3)............. -- -- -- 100,000
Robert L. Cross Common.. -- -- 34,833 221,916
Preferred.............. -- -- 3,333 11,666
Alan E. Steiner
Common (4)............. -- -- -- 100,000
</TABLE>
--------
(1) In connection with our acquisition of Pacer Logistics, certain of the
options relating to Pacer Logistics preferred stock converted to options
to purchase our Series A preferred stock. See "Description of Capital
Stock--Preferred Stock."
(3) Mr. Goldfein resigned effective January 1, 2000 and forfeited 90,000
options to purchase Pacer International common stock.
(4) Mr. Steiner resigned effective May 31, 2000 and forfeited 80,000 options
to purchase Pacer International common stock.

76
<PAGE>

Stock Option Plan

Our Board of Directors adopted the Pacer International, Inc. 1999 Stock
Option Plan in May 1999. The purpose of this plan is to further our growth and
success by permitting our employees, as well as employees of Pacer Logistics,
to acquire shares of our common stock and the preferred stock of Pacer
Logistics, in the case of employees of Pacer Logistics, thereby increasing
their personal interest in our growth and success and to provide a means of
rewarding outstanding contribution by these employees. With the exception of
the 562,861 incentive stock options which were rolled into this plan from the
PMT Holdings, Inc. 1997 Stock Option Plan and the Pacer International, Inc.
1998 Stock Option Plan, options subject to this plan do not qualify as
incentive stock options under the provisions of section 422 of the Internal
Revenue Code.

No more than 1,793,747 shares have been authorized to be issued pursuant to
all option grants under this plan. A total of 1,604,361 common stock options
have been granted at or above fair market value at the date of grant. Of the
options granted, 470,247 and 92,614 were part of the 1997 and 1998 Pacer
Logistics, Inc. Stock Option Plan, respectively, that were rolled over as part
of the acquisition of Pacer Logistics. In addition, under the 1999 Stock
Option Plan, options to purchase 44,997 shares of preferred stock were granted
which were rolled over from the 1997 Pacer Logistics Stock Option Plan. In the
event of certain corporate reorganizations, recapitalizations, or other
specified corporate transactions affecting our stock, this plan permits
proportionate adjustments to the number and kinds of shares subject to options
and/or the exercise price of those shares.

All of our employees, as well as the employees of any of our subsidiaries,
as well as non-employee directors are eligible for option grants under this
plan. This plan is administered by a committee of our Board of Directors and,
except with respect to initial grants described below, such committee has the
power and authority to approve the persons to whom options are granted, the
time or times at which options are granted, the number of shares subject to
each option, the exercise price of each option and the vesting and
exercisability provisions of each option and has all powers with respect to
the administration and interpretation of this plan.

This plan provides for initial grants to specified employees. The aggregate
number of shares subject to these initial grants is 832,000 and their exercise
price is $10.00 per share. These initial grants are divided into three
tranches, Tranche A, Tranche B and Tranche C. Tranche A options vest in five
equal installments on the date of the grant's first five anniversary dates,
provided the employee is employed by us on each anniversary date. Tranche B
options generally vest on the date of grant's seventh anniversary date if the
employee is employed by us on that date. However, if on any of the grant's
first five anniversary dates certain per share target values are attained and
the employee is employed by us on that date, then 20% of the Tranche B options
will vest. Accelerated vesting of the Tranche B options is possible if a sale
of the company occurs prior to the date of grant's fifth anniversary and the
fair market value of the per share consideration to be received by the
shareholder equals or exceeds an amount calculated in accordance with this
plan. Tranche C options vest in substantially the same manner as Tranche B
options, including acceleration upon a sale of us, except that the per share
target values as of a given anniversary date are increased. Options granted to
non-employee directors vest in four equal installments on the date of grant's
first four anniversary dates. A vested option that has not yet been exercised
will automatically terminate on the first to occur of the grant's tenth
anniversary, ninety days following the employee's termination of employment
for any reason other than death or disability, twelve months following the
employee's termination of employment due to death or disability, or as
otherwise determined by the committee.

Each option that is vested as of the date of the sale of our company
remains exercisable until the sale's closing, after which time such option is
unenforceable. Non-vested Tranche A, Tranche B and Tranche C options will vest
in accordance with the vesting schedules described above, however, an option
that vests after our company is sold will remain exercisable for 10 days
before such portion of the option terminates and is of no further force or
effect. All options granted under this plan are nontransferable except upon
death, by such employee's will or the laws of descent and distribution, or
transfers to family members of the employee that are approved by the
committee.

77
<PAGE>

This plan has a term of ten years, subject to earlier termination by our
Board of Directors, who may modify or amend this plan in any respect, provided
that no amendment or modification affects an option already granted without
the consent of the option holder.

Employment Agreements

We have entered into employment agreements dated as of March 31, 1997, and
amended as of April 7, 1999, with each of Donald C. Orris, Gerry Angeli and
Robert L. Cross. Each of these employment agreements, as amended, has a term
of two years commencing on May 28, 1999, with automatic one year renewals on
each anniversary of their commencement date. The minimum base salary under
these employment agreements is $225,000, $200,000 and $235,000, per year for
Messrs. Orris, Angeli and Cross, respectively, subject to increase by our
board of directors, except in the case of Mr. Orris, in which case the base
salary is subject to increase as agreed to by Mr. Orris and our Board of
Directors.

Under the employment agreement of Mr. Orris, our Board of Directors may
award an annual bonus to him in an amount up to $120,000 and under the
employment agreements of Messrs. Angeli and Cross, such bonus may be in an
amount up to $90,000. In each case, such bonus is based on the attainment of
certain operating income targets. Further, an additional bonus of up to 50% of
the annual bonus may be awarded to each of Messrs. Orris, Angeli and Cross,
based upon acquisitions made during the year. The bonus amounts may be changed
from time to time by the Board of Directors.

All of the employment agreements provide that if the employment of these
employees is terminated for any reason, they would be entitled to receive any
unpaid portion of their base salary, reimbursement for any expenses incurred
prior to the date of termination and any unpaid amounts earned prior to the
effective date of termination pursuant to the terms of any bonus or benefit
program in which they participated at the time of termination. In addition,
the employment agreements provide that if the employment of these employees is
terminated without "cause", as defined in the employment agreements, they
would be entitled to receive 100% of their base salary for a period of between
twelve and twenty-four months, with such amount to be reduced by 50% of any
salary earned during this severance period from other sources.

All of the employment agreements include certain restrictive covenants for
our benefit relating to the non-disclosure by these employees of our
confidential business information and trade secrets, the disclosure grant and
assignment of inventions and non-competition with regards to any business in
competition with us.

78
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our common stock as of November 30, 2000, and as adjusted to
reflect the sale of the shares of common stock offered by us in this offering
and the issuance of 280,000 shares in the Rail Van acquisition, for:

. each person or entity known by us to beneficially own more than 5% of
the common stock;

. each executive officer named in the summary compensation table;

. each of our directors; and

. all executive officers and directors as a group.

The amounts and percentage of common stock beneficially owned are reported
on the basis of regulations of the SEC governing the determination of
beneficial ownership of securities. Under the rules of the SEC, a person is
deemed to be a "beneficial owner" of a security if that person has or shares
"voting power," which includes the power to vote or to direct the voting of
such security, or "investment power," which includes the power to dispose of
or to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to acquire
beneficial ownership within 60 days. Under these rules, more than one person
may be deemed a beneficial owner of the same securities and a person may be
deemed a beneficial owner of securities as to which he has no economic
interest. The number of shares of common stock outstanding used in calculating
the percentage for each listed person includes the shares of common stock
underlying options held by such person that are exercisable within 60 days of
October 31, 2000, but excludes shares of common stock underlying options held
by any other person.

Except in cases where community property laws apply or as indicated by
footnote, the persons named in the table below have sole voting and investment
power with respect to all shares of common stock shown as beneficially owned
by them.

Percentage of beneficial ownership is based on 11,081,373 shares of common
stock outstanding as of November 30, 2000, shares of common stock
outstanding after completion of this offering, including those issued in the
Rail Van acquisition, and 22,348.44 shares of Pacer Logistics Exchangeable
Preferred Stock outstanding as of November 30, 2000 and upon completion of
this offering. The Pacer Logistics Exchangeable Preferred Stock is
exchangeable for shares of our common stock on the basis of 100 shares of
common stock for each share of preferred stock. The table assumes that the
underwriters' over-allotment option is not exercised and excludes any shares
purchased in this offering by the respective beneficial owners.

79
<PAGE>

<TABLE>
<CAPTION>
Beneficial Ownership Before Offering
--------------------------------------------------
Common Stock
Underlying
Options and Beneficial
Exchangeable Ownership
Securities After
Common Exercisable/ Offering
Stock Exchangeable ----------
Outstanding Within 60 Days Total Percent Percent
----------- -------------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C>
Apollo Management IV,
L.P.(1)................ 9,390,000 -- 9,390,000 84.8%
c/o Apollo Management,
L.P.
1301 Avenue of the
Americas
New York, NY 10019

APL Limited............. 750,000 -- 750,000 6.8
1111 Broadway
Oakland, CA 94607

Donald C. Orris(2)...... 95,791 252,925(3) 348,716 3.1

Gerry Angeli(2)......... 95,791 246,416(4) 342,207 3.0

Gary I. Goldfein(2)..... 10,000 496,375(5) 506,375 4.4

Robert L. Cross(2)...... 95,791 246,416(4) 342,207 3.0

Allen E. Steiner(2)..... 20,000 496,375(5) 516,375 4.5

Joshua J. Harris(6)..... 9,690,000(7) 1,500(8) 9,691,500 87.5

Thomas L. Finkbiner(9).. -- -- -- --

Michael S. Gross(6)..... 9,390,000(7) -- 9,390,000 84.8

Bruce M. Spector(6)..... 9,390,000(7) 1,500(8) 9,391,500 84.8

Marc E. Becker(6)....... 9,390,000(7) 1,500(8) 9,391,500 84.8

Timothy J. Rhein(10).... 750,000 1,500(8) 751,500 6.8

All directors and
executive officers as a
group (16
persons)(11)........... 10,757,373 1,853,871(12) 12,611,244 97.5
</TABLE>
--------
(1) Beneficial ownership of common stock includes 8,912,000 shares, or 80.4%
before this offering and % after this offering, owned by Coyote
Acquisition LLC ("Coyote I") and 478,000 shares, or 4.3% before this
offering and % after this offering, owned by Coyote Acquisition II LLC
("Coyote II"). Coyote I is a Delaware limited liability company, the sole
member of which Apollo Investment Fund IV, L.P. ("AIF") and Coyote II is
a Delaware limited liability company, the sole member of which is Apollo
Overseas Partners IV, L.P. ("AOP"). Each of AIF and AOP is a private
investment fund, the general partner of which is Apollo Advisors IV, L.P.
("Advisors") which is an affiliate of Apollo Management IV, L.P.
("Management"), the manager of AIF and AOP. Each of Advisors and
Management may be deemed the beneficial owner of the shares owned by
Coyote I and Coyote II.
(2) The business address for Messrs. Orris, Angeli, Goldfein, Cross and
Steiner is c/o Pacer International, Inc., 1340 Treat Boulevard, Suite
200, Walnut Creek, CA 94596.
(3) Represents 20,000 shares of common stock underlying options exercisable
within 60 days and 232,925 shares of common stock issuable upon exchange
of the Pacer Logistics 7.5% Exchangeable Preferred Stock. Does not
include an additional 140,958 options which vest in the future.
(4) Represents 20,000 shares of common stock underlying options exercisable
within 60 days and 226,416 shares of common stock issuable upon exchange
of the Pacer Logistics 7.5% Exchangeable Preferred Stock. Does not
include an additional 140,958 options which vest in the future.

80
<PAGE>

(5) Represents 496,375 shares of common stock issuable upon exchange of the
Pacer Logistics 7.5% Exchangeable Preferred Stock. Mr. Goldfein resigned
as an officer of our company effective January 1, 2000 and forfeited
options to purchase 90,000 shares of our common stock. Mr. Steiner
resigned as an officer of our company effective May 31, 2000 and
forfeited options to purchase 80,000 shares of our common stock.
(6) The business address for Messrs. Harris, Gross and Becker is c/o Apollo
Management L.P., 1301 Avenue of the Americas, New York, NY 10019. The
business address for Mr. Spector is c/o Apollo Management L.P., 1999
Avenue of the Stars, Suite 1900, Los Angeles, CA 90067.
(7) Messrs. Harris, Gross, Spector and Becker are each principals and/or
employees of certain affiliates of Apollo Management IV, L.P.
Accordingly, each such person may be deemed to beneficially own shares of
common stock held by Apollo Management IV, L.P. Each such person
disclaims beneficial ownership of any such shares in which he does not
have a pecuniary interest. With respect to Mr. Harris, also includes
200,000 shares owned by BT Capital Investors L.P., an affiliate of
Deutsche Bank Securities Inc., one of the representatives of the
underwriters, and 100,000 shares owned by Pacer International Equity
Investors, LLC, an affiliate of Credit Suisse First Boston Corporation,
one of the representatives of the underwriters, with respect to which Mr.
Harris has been granted a voting proxy. See "Description of Capital
Stock--Other Agreements--Shareholders Agreements."
(8) Represents shares underlying options exercisable within 60 days. Does not
include 4,500, 6,000, 4,500 and 4,500 options which vest in the future
granted to each of Messrs. Harris, Gross, Spector and Becker,
respectively.
(9) The business address for Mr. Finkbiner is 3802 Corporex Park Drive,
Tampa, Florida 33619. Does not include 6,000 options which vest in the
future.
(10) The business address for Mr. Rhein is c/o APL Limited, 1111 Broadway,
Oakland, CA 94607. Mr. Rhein is President, Chief Executive Officer and a
director of APL Limited. Accordingly, he may be deemed to beneficially
own shares of common stock held by APL Limited. Mr. Rhein disclaims
beneficial ownership of any such shares in which he does not have a
pecuniary interest. Does not include 6,000 options which vest in the
future.
(11) Includes all shares held by entities affiliated with specific directors
as described in notes (7) and (10) above.
(12) Represents 175,364 shares underlying options exercisable within 60 days
and 1,678,507 shares of common stock issuable upon exercise of the Pacer
Logistics 7.5% exchangeable preferred stock.

81
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Our 1999 Recapitalization

On May 28, 1999, we consummated a recapitalization through the purchase by
entities formed by affiliates of Apollo Management, L.P. and two other
investors of shares of our outstanding common stock from APL Limited for
$292.5 million and our redemption of shares of our common stock held by APL
Limited for a total purchase price of $300.0 million. Immediately following
our recapitalization, we acquired Pacer Logistics, Inc. In connection with the
acquisition, members of Pacer Logistics management received shares (valued at
$24.3 million) of a series of Pacer Logistics preferred stock exchangeable for
our common stock. In connection with the acquisition of Pacer Logistics, we
used cash to refinance the existing debt of Pacer Logistics, redeem
outstanding Pacer Logistics preferred stock from its former stockholders and
made payments in connection with other Pacer Logistics transactions.

Our recapitalization and the acquisition of Pacer Logistics was financed
by:

. the private placement of our senior subordinated notes which were
subsequently exchanged for senior subordinated notes registered under
the Securities Act;

. borrowings under our credit agreement;

. the sale and leaseback of 199 double stack rail cars; and

. equity investments totaling $96.9 million, of which $93.9 million was
made by affiliates of Apollo Management and $3.0 million by affiliates
of Deutsche Bank Securities Inc. and Credit Suisse First Boston
Corporation.

The following table sets forth the sources and uses of funds for our
recapitalization and the acquisition of Pacer Logistics:

<TABLE>
<CAPTION>
Amount
Source of Funds (in millions)
--------------- -------------
<S> <C> <C>
Senior credit facilities:(1)
Borrowings under the revolving credit facility............ $ 2.0
Borrowings under the term loan............................ 135.0
Issuance of senior subordinated notes...................... 150.0
Exchange of Pacer Logistics common stock for Pacer
Logistics exchangeable preferred stock(2)................ $24.3
Rollover of common stock options from Pacer Logistics(2).. 4.3
Rollover of common stock from APL Limited(2).............. 7.5
Proceeds from the issuance of common stock(3)............. 96.9
-----
Issued, rolled and exchanged equity........................ 133.0
------
Total sources............................................. $420.0
======
</TABLE>

<TABLE>
<CAPTION>
Amount
Use of Funds (in millions)
------------ -------------
<S> <C>
Purchase and rollover of APL Limited common equity............... $300.0
Purchase and rollover of Pacer Logistics common equity........... 71.9
Purchase of Pacer Logistics preferred stock...................... 3.4
Repayment of existing debt....................................... 62.6
Proceeds from sale and leaseback transaction(4).................. (40.0)
Fees and expenses................................................ 22.1
------
Total uses...................................................... $420.0
======
</TABLE>

--------
(1) At the time of our recapitalization, the senior credit facilities
consisted of a seven-year $135.0 million term loan and a five-year
$100.0 million revolving credit facility. See "Description of Certain
Indebtedness" for a summary of terms of the credit agreement.
(2) Represents non-cash consideration.
(3) Includes (a) an aggregate $93.9 million cash equity investment by
affiliates of Apollo Management and (b) an aggregate $3.0 million cash
equity investment by affiliates of Deutsche Bank Securities Inc. and
Credit Suisse First Boston Corporation.
(4) We executed a sale and leaseback transaction for 199 railcars purchased in
1998.

82
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Arrangements with APL Limited

Prior to our recapitalization, we provided intermodal services to APL
Limited, and in connection with our recapitalization we entered into long-term
agreements with APL Limited for the domestic transportation on our stacktrain
network of APL Limited's international freight. These services include moving
containers from ports to inland points, moving containers from inland points
to ports, and repositioning empty containers. These transactions are performed
on a cost reimbursement basis. Thus, no revenues or expenses are recognized
for financial reporting purposes. In April 2000, we transferred the processing
of APL Limited's international traffic receivables and payables to APL
Limited, which had previously been included in our balance sheet, resulting in
a decrease in both accounts receivable and accounts payable of approximately
$33.0 million. The transfer to APL Limited was facilitated by changes in
computer software which were not previously available. We continue to handle
APL Limited's international traffic under contract for an annual management
fee of $6.6 million. Reimbursements amounted to $79.2 million, $273.6 million,
$276.7 million, $22.3 million and $154.1 million, for the nine months ended
September 22, 2000, the fiscal years ended December 31, 1999 and December 25,
1998, and the periods ended December 26, 1997 and November 12, 1997,
respectively. For the seven months ended December 31, 1999 and the nine months
ended September 22, 2000, we have recognized $3.9 million and $4.8 million,
respectively, in revenues for this fee.

In addition, we receive a credit from APL Limited for the repositioning
expense that APL Limited has avoided due to us using APL Limited's containers
in surplus locations. The total amount of revenue recognized for these
services was $14.2 million, $21.0 million, $20.0 million, $1.9 million and
$15.8 million for the nine months ended September 22, 2000, the fiscal years
ended December 31, 1999 and December 25, 1998, the periods ended December 26,
1997 and November 12, 1997, respectively. At September 22, 2000, $1.2 million
was receivable from APL Limited.

We also provide services to the Automotive Division of APL Limited. These
services include moving containers primarily in the U.S.-Mexico trade. Total
amount of revenue recognized for these services was $70.6 million, $49.1
million, $38.7 million, $5.0 million and $38.4 million for the nine months
ended September 22, 2000, the fiscal years ended December 31, 1999 and
December 25, 1998, the periods ended December 26, 1997 and November 12, 1997,
respectively. At September 22, 2000, $4.1 million was receivable from APL
Limited.

Prior to the recapitalization, APL Land Transport Services Inc. shared in
certain expenses of the former parent for services including systems support,
office space and other corporate services. These expenses were $5.6 million,
$14.4 million, $1.6 million and $12.0 million for the period ended May 28,
1999, the fiscal year ended December 25, 1998, the periods ended December 26,
1997 and November 12, 1997, respectively. Pursuant to the recapitalization, we
have signed long-term agreements with APL Limited for administrative services
such as billing and accounts receivable and payable processing on a per
transaction basis. For the seven months ended December 31, 1999 and the nine
months ended September 22, 2000, $1.1 million and $0.8 million, respectively,
has been accrued and was payable at those dates for these services. In
addition, APL Limited provides us with information technology services
pursuant to a long-term agreement for an annual fee of $10 million. For the
seven months ended December 31, 1999 and the nine months ended September 22,
2000, $5.8 million and $7.5 million, respectively, has been paid for these
services.

Prior to the recapitalization, we received an allocation for lease and
maintenance and repair expenses from APL Limited. These expenses were $7.0
million, $19.5 million, $1.9 million and $14.1 million for the period ended
May 28, 1999, the fiscal year ended December 25, 1998, the periods ended
December 26, 1997 and November 12, 1997, respectively.

In 1997, in connection with the acquisition of APL Limited by Neptune
Orient Lines, Limited, APL Limited incurred certain merger related costs
totaling approximately $61.0 million. These non-operating costs do not relate
to our ongoing operations and have not been allocated to our results of
operations.

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APL de Mexico, S.A. de C.V. ("APL Mexico"), a wholly-owned Mexican
subsidiary of APL Limited, provides various agency services to us with respect
to its bills of lading in Mexico. Expenses recorded by us from APL Mexico were
$0.9 million, $1.8 million, $0.5 million, $0.1 million and $0.3 million for
the nine months ended September 22, 2000, the fiscal years ended December 31,
1999 and December 25, 1998 and the periods ended December 26, 1997 and
November 12, 1997, respectively. At September 22, 2000, $0.8 million was
payable to APL Mexico.

In connection with our recapitalization, we entered into several agreements
with APL Limited and its affiliates. We believe that each of the agreements
are as fair to us as any agreement we could have obtained from unrelated third
parties and arms-length negotiation.

Non-Competition Agreement

Pursuant to a non-competition agreement, Neptune Orient Lines Limited, a
Singapore corporation and the parent of APL Limited, APL Limited and their
affiliates agreed not to compete with us, either through ownership of,
participation in management of, or by lending their respective names to, any
business involved in arranging stacktrain services for a period of ten years
from the closing date of our recapitalization. Neptune Orient Lines, APL
Limited and their affiliates further agreed to refrain from soliciting or
recruiting any person employed by us as of the closing date of our
recapitalization for a period of ten years.

Administrative Services Agreement

Pursuant to an administrative services agreement, APL Limited provides us
with certain administrative and support services. These administrative and
support services include:

. accounts payable,

. cargo claims,

. walker administration,

. office space and associated office services,

. training, and

. front line office accounting and information resource support.

We compensate APL Limited on a per transaction basis and a headcount basis,
as applicable, and we have the right to audit, at our own expense, the total
expenditures paid to APL Limited. The administrative services agreement
expires on May 29, 2001, or on such other date as may be mutually agreed upon
by us and APL Limited. We may terminate all or any portion of any service
provided under the agreement on 90 days' notice. Either party may terminate
this agreement if the other party defaults on the performance of its material
obligations and such default is not cured within thirty days. Upon expiration
of the administrative services agreement we will perform the services
ourselves.

Information Technology Outsourcing and License Agreement

We are currently operating under an IT supplemental agreement, dated as of
May 11, 1999 by and among APL Limited, Coyote Acquisition LLC, an affiliate of
Apollo Management, and us, which contemplates that we will enter into a final
information technology outsourcing and license agreement. If any party so
elects, the parties may enter into private mediation to finalize the
information technology outsourcing and license agreement.

The IT supplemental agreement provides that APL Limited will, for a period
of twenty years, provide us with all necessary software, licenses and related
services necessary to conduct the stacktrain business as it is now being
conducted and as it is enhanced pursuant to and during the term of the
agreement. These services will, at a minimum, include the same level of
services provided to us by APL Limited prior to our recapitalization. APL
Limited will also be responsible for obtaining, maintaining, upgrading, and
replacing any

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software, equipment, facilities or personnel necessary in order to provide the
services during the term of the agreement. APL Limited will be required to
provide personnel with the adequate skills, experience and knowledge of our
business to ensure that all information technology systems are supported at
previously existing levels, and as these levels are subsequently enhanced. In
addition, any software that relates solely to our business will be transferred
to us directly. In accordance with the agreement, we have access to APL
Limited's proprietary software that is used to run the information systems
through perpetual, worldwide, royalty-free licenses granted to us by APL
Limited. APL Limited will also ensure that we are licensed to use all other
software needed to operate the systems. These rights will remain in place even
after the agreement expires or terminates and regardless of the reason for
termination. We will pay APL Limited an annual fee of $10 million for these
services subject to increase after four years. In addition, for the first five
years we will be charged for costs related to increased usage of the services
only to the extent the increase exceeds certain specified growth levels for
the company and thereafter for all of our actual direct costs related to
volume growth.

The IT supplemental agreement provides that we may terminate the agreement
for our convenience at any point during the term, either in its entirety or on
a system-by-system basis, by giving 120 days' notice to APL Limited. In
addition, we may terminate by giving 30 days' notice if APL Limited fails to
meet certain specified performance standards or is in material breach of the
agreement and fails to correct the breach in a timely fashion. The agreement
is also terminable by APL Limited, but only if we fail to meet our payment
obligations or are acquired by a competitor of APL Limited, in which case
APL Limited will be responsible for all costs related to establishing us with
a comparable service provider on a similar computer infrastructure if it
elects to terminate. APL Limited would also be responsible for the costs of
transferring our systems if we terminate the agreement for any of the
following reasons:

(1) an uncorrected material breach by APL Limited;

(2) the occurrence of certain specified performance failures resulting
from APL Limited's willful misconduct or gross negligence; or

(3) the occurrence of any two performance failures within a 12-month
period, regardless of the cause.

In the IT supplemental agreement APL Limited has made customary
representations and warranties to us, including, that the information
technology, software, hardware and services being provided to us constitute
all such items required to provide the information technology services
necessary to run our business and relating to Year 2000 compliance of the
software and hardware used in providing the services under the agreement. APL
Limited also indemnifies us against breaches of these representations, losses
resulting from claims brought by third parties alleging infringement of their
intellectual property and losses associated with a failure of the information
technology systems to operate that is either caused by APL Limited or covered
by indemnification or warranties provided to APL Limited by the responsible
third parties.

Stacktrain Services Agreement

Pursuant to a stacktrain services agreement, we arrange and administer
inland intermodal rail transportation for APL Limited's international freight
shipments and its empty containers between points in the United States,
between points in Canada and between points in the United States and Canada.
In addition, we arrange and administer inland intermodal rail transportation
for any other volume tendered by APL Automotive Logistics and APL Intermodal
Management Services, each a division of APL Limited, between points in the
United States, Canada and Mexico. In connection with this agreement, APL
Limited agreed to tender to us all of its international shipments and
containerized freight for United States or Canadian rail movement and APL
Automotive Logistics and APL Intermodal Management Services will use their
best efforts to deliver their business to us for handling.

Each year, during the term of the agreement, APL Limited has agreed to pay
us $6.6 million as a management fee in consideration for the services outlined
above. In addition, APL Limited has agreed to pay us a fee for each container
moved equal to the amount payable by us to the underlying rail carrier for the
movement of such containers. Any savings received by us under the terms of our
agreements with the underlying rail

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carriers will be passed through on a dollar-for-dollar basis to APL Limited.
We do not assess any administrative fees against APL Limited for the movement
of its containers. In addition, for the repositioning of its empty containers,
APL Limited pays us a fee, based on established rates agreed upon by the
parties, for each empty container of APL Limited that is repositioned by us.

The stacktrain service agreement expires twenty years following the closing
date of our recapitalization. However, the term of the stacktrain services
agreement will be extended in the event that the current agreement between
Pacer International and the Union Pacific Railroad Company, or its successor,
is extended. The effect of this provision is that the stacktrain services
agreement and our agreement with the Union Pacific Railroad Company will
expire simultaneously.

TPI Chassis Sublet Agreement

Pursuant to a TPI chassis sublet agreement, APL Limited sublets chassis to
us for use in the transport of international freight on the stacktrain network
on behalf of international shippers other than APL Limited. The number of
chassis to be sublet is determined according to a market plan which we deliver
to APL Limited prior to each year during the term of the TPI chassis sublet
agreement. If our chassis requirements decrease from the current market plan
allocation and APL Limited does not absorb the additional chassis into its own
fleet, we are responsible for any early lease termination penalties incurred
by APL Limited. If our need for chassis increases beyond the current market
plan allocation, APL Limited will supply additional chassis to the extent they
are available for our use. The TPI chassis sublet agreement provides that if
we consistently exceed our allocation of chassis under our market plan, or if
APL Limited consistently supplies less than such allocation, both parties will
promptly discuss the remedies for such an excess or shortage. The term of the
TPI chassis sublet agreement will be the same as the term of the stacktrain
services agreement. If the TPI chassis sublet agreement is terminated prior to
twenty years from its execution, we may require APL Limited to assign the
leases for all of the chassis covered under the agreement to us. In addition,
during the first year of the agreement we may require APL Limited to assign to
us the leases for the chassis.

Equipment Supply Agreement

An equipment supply agreement sets forth the mechanics of the supply of
containers and chassis from APL Limited to us for repositioning by us within
the interior United States. The containers and chassis which are subject to
the agreement are used by APL Limited in its international shipping
operations. Specifically, the equipment supply agreement sets forth the
underlying interchanges of possession and supply points and return locations
for the repositioning of the containers and chassis. In addition, the
equipment supply agreement sets forth the requirements for timely
repositioning of the equipment and charges which may be incurred by us for
failing to reposition the equipment in a timely manner. The equipment supply
agreement also sets forth certain charges which may be incurred by us for
damage to the containers and chassis during repositioning. The equipment
supply agreement has the same term as the stacktrain services agreement.

Primary Obligation and Guaranty Agreement

We are a party to a primary obligation and guaranty agreement dated March
15, 1999, with Neptune Orient Lines Limited, the parent of APL Limited. The
primary obligation and guaranty agreement provides that, prior to an initial
public offering by APL Limited or APL Bermuda Pte. Ltd., its affiliate,
Neptune Orient Lines will be directly liable for all of APL Limited's
obligations under the agreements described above. Following an initial public
offering of APL Limited or APL Bermuda Pte. Ltd., Neptune Orient Lines will
guarantee any payments owed to us by APL Limited. Such guarantee is subject to
the requirement that we first exhaust our rights to collect any guaranteed
obligations from APL Limited, so long as the collection efforts against APL
Limited, in our judgment or the judgment of Coyote Acquisition, do not
prejudice in any manner the ability of Coyote Acquisition and us to collect on
the guarantee, in which case we and Coyote Acquisition can proceed directly
against Neptune Orient Lines. The primary obligation and guaranty agreement
will terminate when all other agreements and all other guaranteed obligations
are terminated or satisfied.

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Tax Sharing Agreement with Coyote Acquisition

We and our direct and indirect subsidiaries have entered into a tax sharing
agreement with Coyote Acquisition. The tax sharing agreement generally
contemplates that two or more of the parties to the tax sharing agreement may
become members of an affiliated group that files a consolidated federal income
tax return for U.S. federal income tax purposes and, perhaps, one or more
consolidated, combined or unitary groups for state, local and/or foreign tax
purposes. The tax sharing agreement provides, among other things, methods for
allocating the tax liability of an affiliated group among its members, for
reimbursing Coyote Acquisition, or another entity as appropriate, for the
payment of an affiliated group's tax liability, and for reimbursing members of
an affiliated group for the use of net operating losses and other tax benefits
that reduce an affiliated group's tax liability otherwise payable.

Arrangements with Apollo Management

We have entered into a management agreement with Apollo Management for
financial and strategic services as the board of directors may reasonably
request. The annual fee for these services is $0.5 million. At September 22,
2000, $0.6 million was payable to Apollo Management under the agreement. In
addition, in connection with our recapitalization, we paid Apollo Management a
fee of $1.5 million.

Arrangements with Directors and Executive Officers

We lease a facility consisting of office, warehousing and trucking space
from A&G Investments, a California general partnership of which Messrs.
Goldfein and Steiner are the only partners. Mr. Goldfein is a stockholder and
a former Director and Executive Vice President of our company. Mr. Steiner is
a stockholder and a former Executive Vice President of our company. Lease
payments were $0.3 million for the seven month period ended December 31, 1999.

We lease office space, dock and warehousing facilities from Keller Uchida
Investments, LLC, in which Mr. Keller is a member. Mr. Keller is an executive
officer of our company. Lease payments were $1.4 million for the nine month
period ended September 22, 2000.

In April 2000, we repaid $371,891, including accrued interest, in notes
payable to Messrs. Orris, Cross and Angeli. The notes were part of the
purchase price for the Pacer Logistics acquisition on May 28, 1999. In August
2000, we paid a scheduled semi-interest payment of $218,082 to Mr. Keller and
the other former shareholder of Conex on the $5.0 million 8.0% subordinated
note issued in January 2000 as part of the purchase price for the acquisition
of the Conex assets.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

Senior Secured Credit Facility

We have entered into a credit agreement, as amended, with a syndicate of
financial institutions. Our credit agreement provides for the following:

(1) a seven-year $135.0 million term loan which was used to finance in
part our recapitalization and certain related costs and expenses, and to
refinance certain indebtedness of our company;

(2) a seven-year $40.0 million term loan which was used to finance, in
part, the acquisition of Rail Van and certain related costs and expenses, and
to refinance certain indebtedness of Rail Van and its subsidiaries; and

(3) a five-year $100.0 million revolving credit facility, which may
include letters of credit, subject to a sublimit of $25.0 million, to be used
for, among other things, working capital and general corporate purposes of our
company and its subsidiaries, including, without limitation, effecting certain
permitted acquisitions.

The term loans are required to be prepaid with, and after the repayment in
full of such loans, permanent reductions to the revolving credit facility are
required in an amount equal to:

(a) 100.0%, or a lesser percentage determined based upon the
achievement of the financial ratios set forth in the credit agreement, of
the net cash proceeds of all asset sales and dispositions by our company
and its subsidiaries, subject to exceptions;

(b) 100.0%, or a lesser percentage determined based upon the
achievement of the financial ratios set forth in the credit agreement, of
the net cash proceeds of issuances of certain debt obligations and certain
preferred stock by our company and its subsidiaries, subject to exceptions;

(c) 50.0%, or a lesser percentage determined based upon the
achievement of the financial ratios set forth in the credit agreement, of
the net cash proceeds from common equity and certain preferred stock
issuances by our company and its subsidiaries, subject to exceptions,
including in connection with permitted acquisitions;

(d) 75.0%, or a lesser percentage determined based upon the
achievement of the financial ratios set forth in the credit agreement, of
annual Excess Cash Flow, as defined in our credit agreement; and

(e) 100.0% of certain insurance proceeds, subject to the exceptions
set forth in the credit agreement.

Such mandatory prepayments and permanent reductions will be allocated
first, to the term loans (i) in the case of proceeds received as a result of
the occurrence of an event described in clause (a), (d) or (e) above, among
the term loans on a pro rata basis and (ii) in the case of proceeds received
as a result of the occurrence of an event described in clause (b) or (c)
above, first, to the $40.0 million term loan and, after the repayment in full
of the $40.0 million term loan, the $135.0 million term loan and second, to
the revolving credit facility. Our credit agreement requires our company to
make annual amortization payments of $1.35 million between the year 2000 and
2005, payable in quarterly installments, in respect of the term loans.

Voluntary prepayments and commitment reductions are permitted in whole or
in part, subject to minimum prepayment or reduction requirements, without
premium or penalty, provided that voluntary prepayments of certain loans on a
date other than the last day of the relevant interest period are subject to
payment of customary breakage costs, if any.

The interest rates under our credit agreement are as follows:

(1) At our option, the interest rate on our term loans, subject to
increases or decreases based upon the achievement of certain financial ratios,
is

(a) 2.0% in excess of the prime lending rate as determined by the
administrative agent;

(b) 2.5% in excess of the federal funds rate; or

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(2) At our option, the interest rate on our revolving credit facility,
subject to increases or decreases based upon the achievement of certain
financial ratios, is:

(a) 1.5% in excess of the prime lending rate as determined by the
administrative agent; or

(b) 2.0% in excess of the federal funds rate; or

We may elect interest periods of 1, 2, 3 or 6 months or to the extent
available to each lender with loans and/or commitments under the relevant
facility, 9 or 12 months for Eurodollar Loans. With respect to Eurodollar
Loans, interest is payable at the end of each interest period and, in any
event, at least every 3 months. With respect to Base Rate Loans, as defined in
our credit agreement, interest is payable quarterly on the last business day
of each fiscal quarter. In each case, calculations of interest are based on a
360-day year and actual days elapsed.

Our credit agreement provides for payment by our company in respect of
outstanding letters of credit of:

(1) an annual fee equal to the applicable margin over the Eurodollar
rate for Eurodollar Loans under the revolving credit facility from time to
time in effect on the aggregate outstanding stated amounts of such letters of
credit;

(2) a fronting fee equal to 1/4 of 1.0% per annum on the aggregate
outstanding stated amounts of such letters of credit; and

(3) customary administrative charges.

We pay a commitment fee equal to a percentage equal to 1/2 of 1.0% per
annum on the undrawn portion of the available commitment under the revolving
credit facility, subject to decreases based on the achievement of specified
financial ratios and subject to increases based on the amount of unused
commitments under the revolving credit facility.

The loans, letters of credit and other obligations under our credit
agreement are guaranteed by all of our existing and future direct and indirect
wholly-owned domestic subsidiaries. Our obligations and the obligations of
such subsidiaries are secured by a first priority perfected lien on
substantially all of our properties and assets and substantially all of the
properties and assets of such subsidiaries, whether such properties and assets
are now owned or subsequently acquired, subject to exceptions. The security
includes a pledge of all capital stock and notes owned by us and such
subsidiaries, provided that, in certain cases, no more than 66 2/3% of the
stock of our foreign subsidiaries was required to be pledged.

Our credit agreement and related documentation contains customary
representations and warranties by our company and its subsidiaries. In
addition, our credit agreement contains customary covenants restricting our
ability and the ability of certain of our subsidiaries to, among other things:

. declare dividends;

. prepay debt;

. incur liens;

. make investments;

. incur additional indebtedness;

. amend certain organizational, corporate and other documents;

. make capital expenditures;

. engage in mergers, acquisitions and asset sales;

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. engage in certain transactions with affiliates and formation of
subsidiaries; and

. issue redeemable common stock and preferred stock, subject to
exceptions.

In addition, we are required to comply with specified financial covenants
and customary affirmative covenants.

Events of default under our credit agreement include:

. our failure to pay principal or interest when due or pay a reimbursement
obligation on a letter of credit;

. a material breach of any representation or warranty;

. covenant defaults;

. events of bankruptcy;

. a change of control of our company; and

. other customary events of default.

Senior Subordinated Notes

On May 28, 1999 we issued $150.0 million aggregate principal amount of 11
3/4% Senior Subordinated Notes due 2009. On December 9, 1999, we exchanged
those notes for $150.0 million aggregate principal amount of notes that had
been registered under the Securities Act of 1933. Interest on the senior
subordinated notes is payable semi-annually in cash on June 1 and December 1
of each year, beginning December 1, 1999.

The senior subordinated notes are guaranteed by all of our subsidiaries.
The senior subordinated notes are our unsecured obligations and rank behind
all our existing and future senior indebtedness.

The indenture pursuant to which our senior subordinated notes were issued
contains certain covenants that, among other things, limit our ability to
incur additional indebtedness, engage in sale-leaseback transactions, pay
dividends or make certain other distributions, sell assets, redeem capital
stock, effect a consolidation or merger and enter into transactions with
stockholders and affiliates and create liens on our assets. We have the option
to redeem the senior subordinated notes at any time after June 1, 2003, at
redemption prices declining from 105.875% to 100% on or after June 1, 2005 of
their principal amount, plus any accrued and unpaid interest. Before June 1,
2002, we may also redeem up to 35% of the aggregate principal amount of the
senior subordinated notes with the proceeds from sales of our common equity at
a redemption price equal to 111.750% of their principal amount on such date
plus accrued and unpaid interest. Upon a change of control, we are required to
make an offer to purchase the senior subordinated notes at a purchase price
equal to 101% of their principal amount, plus accrued interest. In addition,
upon a change of control prior to June 1, 2003, we may redeem the notes at a
redemption price equal to the principal amount thereof plus an applicable
premium, plus accrued interest.

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DESCRIPTION OF CAPITAL STOCK

Upon the completion of this offering, our capital stock will consist of
150,000,000 shares of common stock, $0.01 par value per share, and 50,000,000
shares of preferred stock, $0.01 par value per share. As of November 30, 2000,
there were outstanding 11,081,373 shares of common stock held by 12
stockholders of record and no shares of preferred stock were outstanding.
Under our amended and restated charter, two series of preferred stock have
been established and designated as the Series A Preferred Non-Participating
Pay-In-Kind Stock (the "Series A Preferred Stock") and the Series B Preferred
Stock (the "Series B Preferred Stock"). In addition, there were outstanding
options to purchase an aggregate of 1,252,488 shares of common stock and
44,947 shares of Series B Preferred Stock at November 30, 2000. Our wholly-
owned subsidiary, Pacer Logistics, also has outstanding a series of
exchangeable preferred stock as described under "Pacer Logistics Exchangeable
Preferred Stock" below.

The following description of our capital stock, provisions of our amended
and restated charter and our amended bylaws and specific provisions of
Tennessee laws are summaries thereof and are qualified in their entirety by
reference to the Tennessee Business Corporation Act ("TBCA"), and our amended
and restated charter and amended bylaws. Copies of our amended and restated
charter and amended bylaws have been filed with the Commission as exhibits to
our registration statement, of which this prospectus forms a part.

Common Stock

The holders of our common stock are entitled to dividends as our board of
directors may declare from time to time from funds legally available therefor,
subject to the preferential rights of the holders of any shares of our
preferred stock that we may issue in the future. The holders of our common
stock are entitled to one vote for each share held of record on any matter to
be voted upon by stockholders. Our amended and restated charter does not
provide for cumulative voting in connection with the election of directors,
and, accordingly, holders of more than 50% of the shares voting will be able
to elect all of the directors. There are no preemptive, conversion, redemption
or sinking fund provisions applicable to our common stock.

Upon any voluntary or involuntary liquidation, dissolution or winding up of
our affairs, the holders of our common stock are entitled to share ratably in
all assets remaining after payment to creditors and subject to prior
distribution rights of any shares of preferred stock that we may issue in the
future. All of the outstanding shares of common stock are, and the shares
offered by us will be, fully paid and non-assessable.

Preferred Stock

As of the closing of this offering, no shares of our preferred stock will
be outstanding. Under our amended and restated charter, our board of
directors, without further action by our stockholders, will be authorized to
issue 50,000,000 shares of preferred stock in one or more classes or series.
The board may fix the rights, preferences and privileges of the preferred
stock, along with any limitations or restrictions, including voting rights,
dividend rights, conversion rights, redemption privileges and preferences on
liquidation or dissolution of each class or series of preferred stock. The
preferred stock could have voting or conversion rights that could adversely
affect the voting power or other rights of holders of our common stock. The
issuance of preferred stock could also have the effect, under certain
circumstances, of delaying, deferring or preventing a change of control of our
company. Except with respect to the Series A Preferred Stock and Series B
Preferred Stock, we currently have no plans to issue any shares of preferred
stock.

Series A and Series B Preferred Stock

50,000 shares of Series A Preferred Stock are authorized for issuance and
no such shares are outstanding. The Series A Preferred Stock is available for
use to redeem the outstanding shares of Pacer Logistics 7.5% exchangeable
preferred stock described below. 45,000 shares of the Series B Preferred Stock
are authorized for issuance and no such shares are outstanding. The Series B
Preferred Stock is issuable upon exercise of options

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granted under our 1999 Stock Option Plan. Options to purchase 44,997 shares of
Series B Preferred Stock have been granted.

Dividends. Subject to the rights of holders of other classes of stock
ranking on a parity with or senior to, as applicable, the Series A Preferred
Stock and the Series B Preferred Stock which we may from time to time issue,
the holders of Series A Preferred Stock and the Series B Preferred Stock are
entitled to receive, when, as and if our board of directors declares a
dividend on such shares, out of assets legally available for dividends,
dividends from the issue date of the Series A Preferred Stock or Series B
Preferred Stock, as applicable, at the rate of:

. in the case of the Series A Preferred Stock, $75 per share per annum,
and

. in the case of the Series B Preferred Stock, at a rate of 12% per annum
on the original issue price of $9.00 per share of Series B Preferred
Stock, subject to adjustment to reflect stock splits, stock dividends,
recapitalizations and like occurrences.

Such dividends shall be payable in each case, if declared, annually in arrears
on the last business day of each fiscal year. Dividends on the Series A
Preferred Stock are cumulative from the date of issue and are payable only in
additional shares of Series A Preferred Stock. Dividends on the Series B
Preferred Stock are not cumulative and are payable, if declared, in cash.

Dividends on the Series A Preferred Stock accrue whether or not we have
earnings, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are declared and will
accumulate to the extent they are not paid on the dividend payment date for
the year for which they accrue. Accumulated and unpaid dividends on the Series
A Preferred Stock do not bear interest.

Liquidation Rights. Subject to the rights of holders of other classes of
stock ranking on a parity with or senior to, as applicable, the Series A
Preferred Stock and the Series B Preferred Stock, in the event of our
liquidation, dissolution or the winding-up of our business, whether voluntary
or involuntary (any such event, a "Liquidation"), the holders of the Series A
Preferred Stock and the Series B Preferred Stock, after payment or provision
for payment of our debts and other liabilities, will be entitled to receive:

. in the case of the Series A Preferred Stock, an amount equal to the sum
of $1,000 per share and all accrued and unpaid dividends thereon, and no
more; and

. in the case of the Series B Preferred Stock, an amount equal to $9.00
per share subject to adjustment as set forth above plus all dividends
declared and unpaid on the Series B Preferred Stock, and no more.

If, upon any Liquidation, there are insufficient assets to permit full payment
of the applicable liquidation payment to the holders of Series A Preferred
Stock, Series B Preferred Stock and shares of any other class of outstanding
preferred stock, the holders of Series A Preferred Stock, Series B Preferred
Stock and such other shares shall be paid ratably in proportion to the full
distributable amounts to which holders of Series A Preferred Stock, Series B
Preferred Stock and such other shares are respectively entitled upon
Liquidation.

Rank. The Series B Preferred Stock ranks senior to the Series A Preferred
Stock with respect to dividends and upon Liquidation. Each such series ranks
senior to our common stock and any other class or series of preferred stock
hereafter issued not designated as senior to or on a parity with, as
applicable, the Series A Preferred Stock or Series B Preferred Stock, on a
parity with any other class or series of preferred stock hereafter issued
designated as on a parity with the Series A Preferred Stock or Series B
Preferred Stock, and junior to any class or series of preferred stock
hereafter issued designated as, as applicable, senior to, as applicable, the
Series A Preferred Stock or Series B Preferred Stock.

Redemption. Each share of Series A Preferred Stock is redeemable in cash on
the tenth anniversary of the issue date at a redemption price of $1,000.00 per
share of Series A Preferred Stock plus accrued and unpaid dividends to the
date of redemption. The Series B Preferred Stock is redeemable in whole or in
part at our option

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at any time or from time to time at 100% of the original issue price of $9.00
per share of Series B Preferred Stock, subject to adjustment as set forth
above, plus all dividends declared and unpaid in the Series B Preferred Stock.
Neither the Series A Preferred Stock nor the Series B Preferred Stock is stock
is entitled to the benefits of any sinking fund.

Voting Rights. Except as required by law, the Series A Preferred Stock and
the Series B Preferred Stock do not have any voting rights.

Transferability. The Series A Preferred Stock may not be transferred, sold,
assigned, pledged, mortgaged or otherwise disposed of, and no gift may be made
of such shares, except as expressly approved by our board of directors. No
such restrictions apply to the Series B Preferred Stock.

Other Charter and By-law Provisions

Some provisions of our amended and restated charter and amended bylaws
could have anti-takeover effects. These provisions are intended to enhance the
likelihood of continuity and stability in the composition of the corporate
policies formulated by our board of directors. In addition, these provisions
also are intended to ensure that our board of directors will have sufficient
time to act in what the board of directors believes to be in our best
interests and the best interests of our stockholders. These provisions also
are designed to reduce our vulnerability to an unsolicited proposal for our
takeover that does not contemplate the acquisition of all of our outstanding
shares or an unsolicited proposal for the restructuring or sale of all or part
of Pacer International. The provisions are also intended to discourage some
tactics that may be used in proxy fights. However, these provisions could
delay or frustrate the removal of incumbent directors or the assumption of
control of us by the holder of a large block of common stock, and could also
discourage or make more difficult a merger, tender offer, or proxy contest,
even if the event would be favorable to the interests of our stockholders.

Classified Board of Directors

Our amended and restated charter will provide for our board of directors to
be divided into three classes of directors, with each class as nearly equal in
number as possible, serving staggered three-year terms, other than directors
who may be elected by holders of any preferred stock we may issue in the
future. As a result, approximately one-third of our board of directors will be
elected each year. The classified board provision will promote the continuity
and stability of our board of directors and our business strategies and
policies as determined by our board of directors. The classified board
provision could have the effect of discouraging a third party from making an
unsolicited tender offer or otherwise attempting to obtain control of us
without the approval of our board of directors. In addition, the classified
board provision could delay stockholders who do not like the policies of our
board of directors from electing a majority of our board of directors for two
years.

No Stockholder Action by Written Consent; Special Meetings

Our amended and restated charter will provide that stockholder action can
only be taken at an annual or special meeting of stockholders and prohibits
stockholder action by written consent in lieu of a meeting. Our amended and
restated charter also provides that special meetings of stockholders may be
called only by our board of directors or our Chairman or Chief Executive
Officer. Our stockholders are not permitted to call a special meeting of
stockholders or to require that our board of directors call a special meeting.
Our amended bylaws provide that only those matters included in the notice of
special meeting may be considered or acted upon at the special meeting unless
otherwise provided by law.

Advance Notice Requirements for Shareholder Proposals and Director Nominees

Our amended bylaws will establish an advance notice procedure for our
stockholders to make nominations of candidates for election as directors or to
bring other business before an annual meeting of our stockholders. The
stockholder notice procedure provides that only persons who are nominated by,
or at the direction of, our

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board of directors or by a stockholder who has given timely written notice to
our Secretary prior to the meeting at which directors are to be elected will
be eligible for election as our directors. The stockholder notice procedure
also provides that at an annual meeting only business properly brought before
the meeting by, or at the direction of, our board of directors or by a
stockholder who has given timely written notice to our Secretary of that
stockholder's intention to bring the business before the meeting. Under the
stockholder notice procedure, if a stockholder desires to submit a proposal or
nominate persons for election as directors at an annual meeting, the
stockholder's written notice must be delivered to or mailed and received not
less than 90 days nor more than 120 days prior to the first anniversary of the
previous year's annual meeting. In addition, under the stockholder notice
procedure, a stockholder's notice proposing to nominate a person for election
as a director or relating to the conduct of business other than the nomination
of directors must contain specified information. If the chairman of a meeting
determines that business was not properly brought before the meeting in
accordance with the stockholder notice procedure, the business shall not be
discussed or transacted.

Number of Directors; Removal; Filling Vacancies

Our amended and restated charter and amended bylaws will provide that our
board of directors will consist of not less than 3 nor more than 15 directors,
other than directors elected by holders of our preferred stock, the exact
number to be fixed from time to time by resolution adopted by our directors.
Further, subject to the rights of the holders of any series of our preferred
stock, if any, our amended and restated charter and amended bylaws will
authorize our board of directors to elect additional directors under specified
circumstances and fill any vacancies that occur in our board of directors by
reason of death, resignation, removal or otherwise. A director so elected by
our board of directors to fill a vacancy or a newly created directorship holds
office until the next annual meeting of stockholders and until his successor
is elected and qualified. Subject to the rights of the holders of any series
of our preferred stock, if any, our amended and restated charter and amended
bylaws will also provide that directors may be removed only for cause and only
by the affirmative vote of holders of 66 2/3% of the voting power of the then
outstanding shares of stock entitled to vote generally in the election of
directors, voting together as a single class. The effect of these provisions
is to preclude a stockholder from removing incumbent directors without cause
and simultaneously gaining control of our board of directors by filling the
vacancies created by a director's removal with its own nominees.

Amendment of Charter

The provisions of our amended and restated charter that would have anti-
takeover effects as described above will be subject to amendment, alteration
or repeal at a meeting of the stockholders by the affirmative vote of the
holders of not less than two-thirds (66 2/3%) of the outstanding shares of
voting securities. This requirement will make it more difficult for
stockholders to make changes to the provisions in our amended and restated
charter which could have anti-takeover effects by allowing the holders of a
minority of the voting securities to prevent the holders of a majority of
voting securities from amending these provisions of our amended and restated
charter.

Amendment of Bylaws

Our amended and restated charter will provide that our amended bylaws are
subject to adoption, amendment, alteration or repeal either by our board of
directors without the assent or vote of our stockholders, or by the
affirmative vote of the holders of not less than two-thirds (66 2/3%) of the
outstanding shares of voting securities. This provision makes it more
difficult for stockholders to make changes in our amended bylaws by allowing
the holders of a minority of the voting securities to prevent the holders of a
majority of voting securities from amending our amended bylaws.

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Tennessee Anti-takeover Laws

The Tennessee Business Combination Act (the "Combination Act") provides
that in an "interested shareholder" cannot engage in a "business combination"
with a "resident domestic corporation" unless the combination:

-- takes place at least five years after the interested shareholder
became an interested stockholder; and

-- either is approved by at least two-thirds of the outstanding voting
stock not beneficially owned by the interested shareholder or
satisfies fairness conditions specified in the Combination Act.

These provisions apply unless one of two events occurs:

-- a business combination with an entity can proceed without delay when
approved by the target corporation's board of directors before that
entity becomes an interested shareholder, or

-- the resident corporation may enact a charter amendment or bylaw to
remove itself entirely from the Combination Act. This charter or
bylaw amendment must be approved by a majority of the shareholders
who have held shares for more than one year before the vote. In
addition, the charter amendment or bylaw cannot become operative
until two years after the vote.

The Combination Act defines "business combination," generally to mean any:
(i) merger or consolidation; (ii) share exchange; (iii) sale, lease, exchange,
pledge, mortgage or other transfer (in one transaction or a series of
transactions) of assets representing 10% or more of (A) the market value of
consolidated assets, (B) the market value of the corporation's outstanding
shares or (C) the corporation's consolidated net income; (iv) issuance or
transfer of shares from the corporation to the interested shareholder; (v)
plan of liquidation; (vi) transaction in which the interested shareholder's
proportionate share of the outstanding shares of any class of securities is
increased; or (vii) financing arrangements pursuant to which the interested
shareholder, directly or indirectly, receives a benefit except proportionately
as a shareholder.

The Combination Act defines "interested shareholder" generally to mean any
person who is the beneficial owner, either directly or indirectly, of 10% or
more of any class or series of the outstanding voting stock or any affiliate
or associate of the corporation who has been the beneficial owner, either
directly or indirectly, of 10% or more of the voting power of any class or
series of the corporation's stock at any time within the five-year period
preceding the date in question.

The Tennessee Greenmail Act prohibits us from purchasing or agreeing to
purchase any of our securities, at a price higher than fair market value, from
a holder of 3% or more of any class of our securities who has beneficially
owned the securities for less than two years. We can make this purchase if the
majority of the outstanding shares of each class of voting stock issued by us
approves the purchase or if we make an offer of at least equal value per share
to all holders of shares of that class.

The effect of the above may make a change of control of us harder by
delaying, deferring or preventing a tender offer or takeover attempt that you
might consider to be in your best interest, including those attempts that
might result in the payment of a premium over the market price for your
shares. They may also promote the continuity of our management by making it
more difficult for shareholders to remove or change the incumbent members of
the board of directors.

Limitation on Liability and Indemnification of Officers and Directors

Our amended and restated charter provides that, to the fullest extent
permitted by the TBCA, a director will not be liable to us or our shareholders
for monetary damages resulting from a breach of his or her fiduciary duty as a
director. Under the TBCA, directors have a fiduciary duty which is not
eliminated by this provision in our charter. In some circumstances, equitable
remedies such as injunctive or other forms of nonmonetary relief will

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remain available. In addition, each director will continue to be subject to
liability under the TBCA for breach of the director's duty of loyalty, for
acts or omissions which are found by a court of competent jurisdiction to be
not in good faith or knowing violations of law, for actions leading to
improper personal benefit to the director and for payment of dividends that
are prohibited by the TBCA. This charter provision does not affect the
directors' responsibilities under any other laws, such as the Federal
securities laws or state or Federal environmental laws.

The TBCA provides that a corporation may indemnify any director or officer
against liability incurred in connection with a proceeding if the director or
officer acted in good faith or reasonably believed, in the case of conduct in
his or her official capacity with the corporation, that the conduct was in the
corporation's best interest. In all other civil cases, a corporation may
indemnify a director or officer who reasonably believed that his or her
conduct was not opposed to the best interest of the corporation. In connection
with any criminal proceeding, a corporation may indemnify any director or
officer who had no reasonable cause to believe that his or her conduct was
unlawful.

In actions brought by or in the right of the corporation, however, the TBCA
does not allow indemnification if the director or officer was adjudged to be
liable to the corporation. Similarly, the TBCA prohibits indemnification in
connection with any proceeding charging improper personal benefit to a
director or officer in which the director or officer was adjudged liable
because a personal benefit was improperly received.

In cases when the director or officer is wholly successful, on the merits
or otherwise, in the defense of any proceeding instigated because of his or
her status as a director or officer of a corporation, the TBCA mandates that
the corporation indemnify the director or officer against reasonable expenses
incurred in the proceeding. Notwithstanding the foregoing, the TBCA provides
that a court may order a corporation to indemnify a director or officer for
reasonable expense if, in consideration of all relevant circumstances, the
court determines that the individual is fairly and reasonably entitled to
indemnification, whether or not the standard of conduct set forth above was
met.

Our amended bylaws provide that we shall indemnify and advance expenses to
our directors and officers to the fullest extent permitted by the TBCA. We
also maintain insurance to protect any director or officer against any
liability and will enter into indemnification agreements to indemnify our
directors in addition to the indemnification provided in our amended and
restated charter and amended bylaws.

Pacer Logistics Exchangeable Preferred Stock

Pacer Logistics has a series of 7.5% exchangeable preferred stock
outstanding. Since the 7.5% exchangeable preferred stock of Pacer Logistics is
convertible into shares of our common stock, it is described below. The
following description is a summary of the material terms of the 7.5%
exchangeable preferred stock, but does not restate the certificate of
designation in its entirety.

24,300 of Pacer Logistics' one million authorized shares of preferred stock
are designated "7.5% exchangeable preferred stock." The 24,300 shares of 7.5%
exchangeable preferred stock were issued to certain management shareholders of
Pacer Logistics in connection with our acquisition of Pacer Logistics. The
remainder have been reserved for issuance by Pacer Logistics as payment-in-
kind dividends.

Liquidation Preference

The exchangeable preferred stock has a liquidation preference of $1,000 per
share, plus accrued and unpaid dividends thereon. In addition, holders of the
preferred stock are entitled to an amount per share equal to 5% of the total
assets available for distribution to equity holders divided by the number of
shares of preferred stock outstanding.

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Dividends

Dividends payable per share of the exchangeable preferred stock are equal
to the greater of:

(1) 7.5% of the $1,000 liquidation preference per share payable annually in
arrears in additional shares of the exchangeable preferred stock; or

(2) an amount equal to 10% of the aggregate of certain dividends paid on
the Pacer Logistics common stock divided by the number of outstanding
shares of Pacer Logistics preferred stock, payable annually in arrears
in cash.

Voluntary Exchange

At any time at least 15 months after, but before 24 months following the
closing of, our recapitalization, each holder of the exchangeable preferred
stock has the right to exchange its shares into shares of our common stock.
Each share of exchangeable preferred stock is exchangeable at the option of
the holder into 100 shares of our common stock.

Purchase Right

At any time at least 15 months after the closing of our recapitalization,
we may purchase the exchangeable preferred stock for newly issued shares of
our Series A Preferred Stock described above or cash. Our credit agreement and
the indenture governing our senior subordinated notes prohibit us from
purchasing the exchangeable preferred stock for cash.

Change of Control

Upon a change of control, each holder of exchangeable preferred stock shall
have the right to exchange the shares of exchangeable preferred stock held by
such holder for our common stock at the ratio [set forth in the certificate of
designation] multiplied by the following applicable premium which shall be
allocated pro rata on a monthly basis:

<TABLE>
<S> <C>
Prior to the End of Year 1......................................... 115.00%
End of Year 1...................................................... 106.75%
End of Year 2...................................................... 100.00%
</TABLE>

Voting Provisions

Except as required by law and except for matters which affect the rights
and preferences of the exchangeable preferred stock, the exchangeable
preferred stock is not entitled to vote on any matter submitted to a vote of
the stockholders of Pacer Logistics.

If (1) the voluntary exchange of the exchangeable preferred stock by the
holders thereof for our common stock or (2) the purchase of the exchangeable
preferred stock by us as contemplated above does not occur, Mr. Orris and
other members of our senior management team will remain holders of the Pacer
Logistics' exchangeable preferred stock.

Other Agreements

Shareholders' Agreements

APL Shareholders Agreement. We are a party to a shareholders agreement with
Coyote Acquisition, Coyote Acquisition II and APL Limited (the "APL
Shareholders Agreement") which governs certain aspects of

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the relationship between ourselves and our currently existing shareholders.
The APL Shareholders Agreement contains, among other matters:

(1) a provision restricting the rights of APL Limited to transfer its
shares of Pacer International common stock, subject to certain
permitted or required transfers and a right of first refusal in favor
of Pacer International, Coyote Acquisition and Coyote Acquisition II
(collectively, "Coyote"). Such transfer restrictions include,

(a) the right of our board of directors to prohibit the proposed
transfer if they determine that the proposed transferee is engaged
in any competitive business or such transfer would be materially
detrimental to our interests; and

(b) a prohibition on the transfer of our common stock by APL Limited
prior to 30 months after the closing of our acquisition of Pacer
Logistics, provided that this restriction does not apply to an
initial public offering;

(2) incidental registration rights in the event we effect a registration of
our common stock;

(3) participation rights, triggered by the sale of more than 25% of our
common stock held by Coyote, that permit APL Limited to participate in
the sale on a pro rata basis; provided that the participation rights
are not triggered by a public offering; and

(4) bring along rights, triggered in the event that Coyote shall transfer
to any person other than us an amount greater than 25% of the number of
shares of our common stock outstanding at the time of the proposed
transfer, that permit Coyote to require APL Limited to transfer an
equivalent portion of our common stock held by it.

The APL Shareholders Agreement will terminate upon the earlier of:

(a) the tenth anniversary thereof; or

(b) such time as we are a public company with equity securities listed
on a national securities exchange or publicly traded in the over-
the-counter market and Coyote shall have sold, in the aggregate,
pursuant to one or more public offerings a total of fifty percent
of the total shares of our common stock held by them as of the
effective time of our recapitalization.

Management Shareholders Agreement. We are party to a shareholders'
agreement (the "Management Shareholders' Agreement") with Coyote and certain
members of Pacer Logistics management (the "Management Shareholders"). The
terms of the Management Shareholders Agreement are substantially similar to
those of the APL Shareholders' Agreement set forth above and contain, among
other matters,

(1) the grant of an irrevocable voting proxy by each of the Management
Shareholders to the other Management Shareholders upon the happening of
certain events such as death or change in marital status;

(2) the appointment of Donald C. Orris as our chief executive officer;

(3) a provision restricting our right to engage in certain material
transactions with Apollo Management, or any affiliates of Apollo unless
such transactions are on an "arms-length basis" and receive the consent
of our chief executive officer; and

(4) a non-compete covenant restricting the Management Shareholders from
participating directly or indirectly in any business which may deemed
competitive with ours.

Investors Shareholders Agreement. We are party to a shareholders' agreement
(the "Investors Shareholders' Agreement") with affiliates of Credit Suisse
First Boston Corporation, and Deutsche Bank Securities Inc., two of the
representatives of the underwriters (collectively, the "Investors"), and
Coyote. The

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terms of the Investors Shareholders Agreement are substantially similar to
those of the APL Shareholders Agreement set forth above and contain, among
other matters,

(1) participation rights, triggered by the sale of more than $16 million of
our common stock by Coyote, that permit the Investors to participate in
the sale on a pro rata basis; provided however that the participation
rights are not triggered by a public offering;

(2) bring along rights, triggered in the event that Coyote transfers any of
its shares of our common stock to a third party, that permit Coyote to
require the Investors to transfer an equivalent portion of their common
stock;

(3) a grant of a voting proxy by the Investors to Joshua J. Harris and any
additional successor proxyholder as may be appointed by Coyote, coupled
with the exclusive right to take all actions in such proxyholder's sole
and absolute discretion; provided that the voting proxy shall terminate
upon the earlier of:

(a) 10 years; and

(b) at such time that Coyote shall own less than 10% of our outstanding
common stock on a fully diluted basis; and

(4) an automatic termination provision providing for the termination of the
Investors Shareholders Agreement at such time that Coyote shall own
less than 10% of our outstanding common stock on a fully diluted basis.

Apollo Registration Rights Agreement

In addition to the shareholders' agreements, we entered into a separate
registration rights agreement with certain affiliates of Apollo pursuant to
which such affiliates obtained certain demand and incidental registration
rights. As a result, at Apollo's written request, we are obliged to prepare
and file a registration statement covering the shares so requested to be
registered by Apollo. In addition, should we propose to register any of our
own common stock for sale to the public, Apollo has the opportunity to include
its common stock in the same or concurrent registration statement filed by us.
We will bear all expenses, with the exception of selling expenses, incurred in
the registration process.

NASDAQ Trading

We will apply to have our common stock quoted on the NASDAQ National Market
of the NASDAQ Stock Market under the symbol "PACR."

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is .

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, shares of common stock will be
outstanding, excluding shares reserved for issuance upon exercise of options
that have been granted under our stock option plan ( of which are currently
vested). Of these shares, shares of common stock sold in the offering
will be freely tradable without restriction or further registration under the
Securities Act, except for any shares which may be acquired by an affiliate of
ours as that term is defined in Rule 144 under the Securities Act, which will
be subject to the resale limitations of Rule 144. The remaining shares of
common stock outstanding will be restricted securities, as that term is
defined in Rule 144, and may in the future be sold without restriction under
the Securities Act to the extent permitted by Rule 144 or any applicable
exemption under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned its, his or her shares
of common stock for at least one year from the date such securities were
acquired from us or an affiliate of ours would be entitled to sell within any
three-month period a number of shares that does not exceed the greater (i) one
percent of the then outstanding shares of the common stock and (ii) the
average weekly trading volume of the common stock during the four calendar
weeks preceding a sale by such person. Sales under Rule 144 are also subject
to certain manner-of-sale provisions, notice requirements and the availability
of current public information about us. Under Rule 144, however, a person who
has held restricted securities for a minimum of two years from the later of
the date of such securities were acquired from us or an affiliate of ours and
who is not, and for the three months prior to the sale of such restricted
securities has not been, an affiliate of ours, is free to sell such shares of
common stock without regard to the volume, manner-of-sale and the other
limitations contained in Rule 144. The foregoing summary of Rule 144 is not
intended to be a complete discussion thereof.

We and our directors and executive officers who will beneficially own, as
of the completion of this offering, an aggregate of shares of common
stock (or presently exercisable options) have each agreed, subject to certain
limited exceptions, not to offer, sell or contract to sell, or otherwise
dispose of, directly or indirectly, or announce an offering of, any shares of
capital stock or any securities convertible into, or exchangeable for, shares
of capital stock for a period of 180 days from the date of this prospectus,
without the prior written consent of Morgan Stanley & Co. Incorporated and
Credit Suisse First Boston Corporation.

Promptly upon completion of the offering, we intend to file a registration
statement on Form S-8 with the SEC to register shares of common stock reserved
for issuance or sale under our stock option plan. As of November 30, 2000,
there were outstanding options to purchase a total of 1,252,488 shares of
common stock, 296,830 of which were vested. Shares of common stock issuable
upon the exercise of options granted under our stock option plan will be
freely tradable without restriction under the Securities Act, unless such
shares are held by an affiliate of ours. We do not intend to register under
the Securities Act the shares of Series B Preferred Stock issuable upon
exercise of outstanding stock options.

For a description of registration rights held by certain of our security
holders, see the section of this prospectus entitled "Description of Capital
Stock--Other Agreements--Apollo Registration Rights."

Prior to the offering, there has been no established market for our common
stock, and no predictions can be made about the effect, if any, that market
sales of shares of common stock or the availability of such shares for sale
will have on the market price prevailing from time to time. Nevertheless, the
actual sale of, or the perceived potential for the sale of, common stock in
the public market may have an adverse effect on the market price for the
common stock.

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MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO
NON-U.S. HOLDERS OF COMMON STOCK

General

The following is a general discussion of the material U.S. federal income
and estate tax consequences of the ownership and disposition of our common
stock that may be relevant to you if you are a non-U.S. holder that acquires
our common stock pursuant to this offering. This discussion is limited to non-
U.S. holders who hold our common stock as a capital asset within the meaning
of Section 1221 of the Internal Revenue Code (the "Code"). For purposes of
this discussion, a non-U.S. holder is a beneficial owner of common stock that
is any of the following for U.S. federal income tax purposes:

. a nonresident alien individual within the meaning of Section 7701(b) of
the Code,

. a foreign corporation or other foreign entity taxable as a corporation
under U.S. federal income tax law, or

. a foreign estate or trust within the meaning of Section 7701(a) of the
Code.

If an entity treated as a partnership for U.S. federal income tax purposes
holds shares of common stock, the tax treatment of a partner will generally
depend on the status of the partner and upon the activity of the partnership.
If you are a partner of a partnership holding shares of common stock, we
suggest you consult your own tax advisor.

This discussion does not address all aspects of U.S. federal income and
estate taxation that may be relevant to you in light of your particular
circumstances, and does not address any foreign, state or local tax
consequences. Furthermore, this discussion does not consider specific facts
and circumstances that may be relevant to a particular non-U.S. holder's tax
position, specific rules that may apply to certain non-U.S. holders, including
banks, insurance companies, dealers and traders in securities, or special tax
rules that may apply to a non-U.S. holder that holds our common stock as part
of a straddle, hedge or conversion transaction. This discussion is based on
provisions of the Code, Treasury regulations and administrative and judicial
interpretations as of the date of this prospectus. All of these are subject to
change, possibly with retroactive effect, or different interpretations. If you
are considering buying common stock, you should consult your own tax advisor
about current and possible future tax consequences of holding and disposing of
common stock in your particular situation.

Distributions

If distributions are paid on the shares of our common stock, these
distributions generally will constitute dividends for U.S. federal income tax
purposes to the extent paid from our current or accumulated earnings and
profits, as determined under U.S. federal income tax principles, and then will
constitute a return of capital that is applied against your tax basis in the
common stock to the extent these distributions exceed those earnings and
profits. Distributions in excess of our current and accumulated earnings and
profits and your tax basis in the common stock will be treated as a gain from
the sale or exchange of the common stock , the treatment of which is discussed
below. Dividends paid to a non-U.S. holder that are not effectively connected
with the conduct of a U.S. trade or business of the non-U.S. holder will be
subject to U.S. federal withholding tax at a 30% rate or, if an income tax
treaty applies and the information reporting requirements described below are
satisfied, a lower rate specified by the treaty. Non-U.S. holders should
consult their tax advisors regarding their entitlement to benefits under a
relevant tax treaty.

Withholding generally is imposed on the gross amount of a distribution,
regardless of whether we have sufficient earnings and profits to cause the
distribution to be a dividend for U.S. federal income tax purposes. However,
we may elect to withhold less than the gross amount of the distribution if we
determine that the distribution is not paid out of our current or accumulated
earnings and profits, based on our reasonable estimates.

101
<PAGE>

A non-U.S. holder eligible for a reduced rate of U.S. federal withholding
tax under a tax treaty may obtain a refund of any excess amounts withheld by
filing an appropriate claim for a refund together with the required
information with the Internal Revenue Service.

Dividends that are effectively connected with a non-U.S. holder's conduct
of a trade or business within the U.S. and, if a tax treaty applies,
attributable to a non-U.S. holder's U.S. permanent establishment, are exempt
from U.S. federal withholding tax if the non-U.S. holder furnishes to us or
our paying agent the appropriate Internal Revenue Service form. However,
dividends exempt from U.S. federal withholding tax because they are
"effectively connected" or attributable to a U.S. permanent establishment
under an applicable tax treaty are subject to U.S. federal income tax on a net
income basis at the regular graduated U.S. federal income tax rates. Any such
effectively connected dividends received by a foreign corporation may, under
certain circumstances, be subject to an additional "branch profits tax" at a
30% rate or a lower rate specified by an applicable tax treaty.

Gain on Disposition of Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax
with respect to gain recognized on a sale or other disposition of our common
stock unless one of the following applies:

. The gain is effectively connected with a non-U.S. holder's conduct of a
trade or business within the United States and, if a tax treaty applies,
the gain is attributable to a non-U.S holder's U.S. permanent
establishment. In such a case, the non-U.S. holder will, unless an
applicable tax treaty provides otherwise, generally be taxed on its net
gain derived from the sale at regular graduated U.S. federal income tax
rates, and in the case of a foreign corporation, may also be subject to
the branch profits tax described above.

. A non-U.S. holder who is an individual, holds our common stock as a
capital asset and is present in the United States for 183 or more days
in the taxable year of the sale or other disposition, and certain other
conditions are met. In such a case, the non-U.S. holder will be subject
to a flat 30% tax on the gain derived from the sale, which may be offset
by certain U.S. capital losses.

. A non-U.S. holder is subject to tax pursuant to the provisions of U.S.
tax law applicable to some U.S. expatriates.

Information Reporting and Backup Withholding Tax

We must report annually to the Internal Revenue Service and to each non-
U.S. holder the amount of dividends paid to that holder and the tax withheld
with respect to those dividends. These information reporting requirements
apply even if withholding was not required. Pursuant to an applicable tax
treaty, copies of the information returns reporting those dividends and
withholding may also be made available to the tax authorities in the country
in which the non-U.S. holder resides.

Under certain circumstances, Treasury regulations require information
reporting and backup withholding at a rate of 31% on certain payments on
common stock. A non-U.S. holder of common stock that fails to certify its non-
U.S. holder status in accordance with applicable Treasury regulations or
otherwise establish an exemption may be subject to information reporting and
backup withholding at a rate of 31% on payments of dividends.

Payment of the proceeds of a sale of our common stock by or through a U.S.
office of a broker is subject to both information reporting and backup
withholding unless the holder certifies to the payor in the manner required as
to its non-U.S. status under penalties of perjury or otherwise establishes an
exemption. As a general matter, information reporting and backup withholding
will not apply to a payment of the proceeds of a sale of our common stock by
or through a foreign office of a foreign broker effected outside the United
States. However, information reporting requirements, but not backup
withholding, will apply to payment of the proceeds of a sale of our common
stock by or through a foreign office of a broker effected outside the United
States if that broker is:

. a U.S. person,

102
<PAGE>

. a foreign person that derives 50% or more of its gross income for
specified periods from the conduct of a trade or business in the United
States,

. a "controlled foreign corporation" as defined in the Code, or

. a foreign partnership that at any time during its tax year either (i)
has one or more U.S. persons that, in the aggregate, own more than 50%
of the income or capital interests in the partnership or (ii) is engaged
in the conduct of a trade or business in the United States.

Information reporting requirements will not apply to the payment of the
proceeds of a sale of our common stock if the broker receives a statement from
the owner, signed under penalty of perjury, certifying such owner's non-U.S.
status or an exemption is otherwise established. Backup withholding may apply
to the payment of the proceeds of a sale of our common stock by or through a
non-U.S. office of a broker described above unless certification requirements
are satisfied or an exemption is otherwise established. Non-U.S. holders
should consult their own tax advisors regarding the application of the
information reporting and backup withholding rules to them.

Amounts withheld under the backup withholding rules do not constitute a
separate U.S. federal income tax. Rather, any amounts withheld under the
backup withholding rules will be refunded or allowed as a credit against the
holder's U.S. federal income tax liability, if any, provided the required
information and appropriate claim for refund is filed with the Internal
Revenue Service.

Federal Estate Tax

Common stock owned or treated as owned by an individual who is not a
citizen or resident, as defined for U.S. federal estate tax purposes, of the
United States at the time of death will be included in that individual's gross
estate for U.S. federal estate tax purposes and may be subject to U.S. federal
estate tax, unless an applicable estate tax treaty provides otherwise.

The foregoing discussion is a summary of the material federal tax
consequences of the ownership, sale or other disposition of our common stock
by non-U.S. holders for U.S. federal income and estate tax purposes. You are
urged to consult your own tax advisor with respect to the particular tax
consequences to you of ownership and disposition of our common stock,
including the effect of any state, local, non-U.S. or other tax laws.

103
<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom Morgan Stanley & Co. Incorporated, Credit Suisse First Boston
Corporation, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and UBS Warburg LLC are acting as representatives, have
severally agreed to purchase, and we have agreed to sell to them, severally,
the number of shares indicated below:

<TABLE>
<CAPTION>
Number of
Name Shares
---- ---------
<S> <C>
Underwriters:
Morgan Stanley & Co. Incorporated................................
Credit Suisse First Boston Corporation...........................
Deutsche Bank Securities Inc. ...................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated...............
UBS Warburg LLC..................................................
------
Total..........................................................
======
</TABLE>

The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the obligations of the several underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus
are subject to the approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take and pay for
all of the shares of common stock offered by this prospectus if any such
shares are taken. However, the underwriters are not required to take or pay
for the shares covered by the underwriters' over-allotment option described
below.

The underwriters initially propose to offer part of shares of common stock
directly to the public at the public offering price listed on the cover page
of this prospectus and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other underwriters or to certain dealers. After the
initial offering of the shares of common stock, the offering price and other
selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
shares of common stock at the public offering price listed on the cover page
of this prospectus, less underwriting discounts and commissions. The
underwriters may exercise this option solely for the purpose of covering
overallotments, if any, made in connection with the offering of the shares of
common stock offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to certain
conditions, to purchase about the same percentage of the additional shares of
common stock as the number listed next to the underwriter's name in the
preceding table bears to the total number of shares of common stock listed
next to the names of all underwriters in the preceding table. If the
underwriters' option is exercised in full, the total price to the public would
be $ million, the total underwriters' discounts and commissions would be
$ million and total proceeds to us would be $ million.

The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares
offered by them.

Application will be made to have our common stock quoted on the Nasdaq
National market under the symbol " PACR."

104
<PAGE>

Each of us and our directors, executive officers and certain other
stockholders of ours will agree that, without the prior written consent of
Morgan Stanley & Co. Incorporated and Credit Suisse First Boston Corporation
on behalf of the underwriters, it will not during the period ending 180 days
after the date of this prospectus:

. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of
directly or indirectly, any of our or our subsidiaries' shares of
capital stock or any securities convertible into or exercisable or
exchangeable for our or our subsidiaries' capital stock; or

. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of our
or our subsidiaries' capital stock,

whether any such transaction described above is to be settled by delivery of
our or our subsidiaries' capital stock or other securities, in cash or
otherwise.

The restrictions described in the immediately preceding paragraph do not
apply to:

. the sale of shares to the underwriters;

. transactions by any person other than us relating to shares of our or
our subsidiaries' capital stock or other securities acquired in open
market transactions after the completion of the offering of the shares;

. transfers of shares of our or our subsidiaries' capital stock or any
securities convertible into or exercisable or exchangeable for our or
our subsidiaries' capital stock as a bona fide gift or gifts; or

. distributions of shares of our or our subsidiaries' capital stock or any
securities convertible into or exercisable or exchangeable for our or
our subsidiaries' capital stock to partners, members or shareholders of
us and our directors, executive officers and certain other shareholders,

provided certain conditions are met.

In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the underwriters may bid for, and purchase,
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering, if the syndicate repurchases
previously distributed common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above
independent market levels. The underwriters are not required to engage in
these activities and may end any of these activities at any time.

From time to time, certain of the underwriters have provided, and will
continue to provide, investment banking and other services to us and certain
existing stockholders for which they receive customary fees and commissions.
Affiliates of Credit Suisse First Boston Corporation and Deutsche Bank
Securities Inc. beneficially own directly, and indirectly through funds
affiliated with Apollo Management, Inc., shares of our common stock.
Additionally, affiliates of Morgan Stanley & Co. Incorporated, Credit Suisse
First Boston Corporation and Deutsche Bank Securities Inc. are lenders under
our credit agreement and will receive proceeds from this offering in repayment
of loans under our credit agreement. More than 10% of the net proceeds we
receive from this offering will be used to repay indebtedness owing to those
lenders. As a result, this offering must be conducted in compliance with
conflict-of-interest requirements of the National Association of Securities
Dealers, Inc., or NASD, the regulatory agency that governs the compensation
paid to underwriters in securities offerings. Under these rules, the initial
public offering price of the common stock can be no higher than that
recommended by a qualified independent underwriter, as that term is defined in
the NASD's rules. has agreed to serve as a qualified independent
underwriter and has conducted due diligence and will recommend the maximum
price for the shares of common stock to be offered.

105
<PAGE>

We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.

Directed Share Program

At our request, the underwriters have reserved for sale, at the initial
offering price, up to shares offered by this prospectus to our employees,
officers, directors, business associates, and related persons. We will pay all
fees and disbursements of counsel incurred by the underwriters in connection
with offering the shares to such persons. The number of shares of common stock
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which are not so
purchased will be offered by the underwriters to the general public on the
same basis as the other shares offered by this prospectus.

Pricing of the Offering

Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
between us and the representatives. Among the factors to be considered in
determining the initial public offering price will be our future prospects and
those of our industry in general, our sales, earnings, and certain other
financial operating information in recent periods, and the price-earnings
ratios, price-sales ratios, market prices of securities and certain financial
and operating information of companies engaged in activities similar to ours.
The estimated public offering price range listed on the cover page of this
preliminary prospectus may change as a result of market conditions and other
factors.

106
<PAGE>

LEGAL MATTERS

The validity of the shares of our common stock offered by this prospectus
will be passed upon for us by Bass Berry Sims PLC, Nashville, Tennessee.
Certain legal matters relating to this offering will be passed upon for us by
O'Sullivan Graev & Karabell, LLP, New York, New York and for the underwriters
by Cahill Gordon & Reindel, New York, New York.

EXPERTS

The consolidated financial statements of Pacer International, Inc. as of
December 31, 1999 and for the year then ended have been included in this
prospectus in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

The consolidated financial statements of Rail Van, Inc. as of December 31,
1999 and for the year then ended have been included in this prospectus in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

The combined financial statements of Conex Global Logistics Services, Inc.,
MSL Transportation Group, Inc. and Jupiter Freight, Inc. as of December 31,
1999 and for the year then ended have been included in this prospectus in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.

The financial statements of American President Lines Stacktrain Services, a
division of APL Land Transport Services, Inc., currently known as Pacer
International, Inc., as of December 25, 1998 and for the fiscal year ended
December 25, 1998 and the period from November 13, 1997 to December 26, 1997
and the financial statements of American President Lines Stacktrain Services'
predecessor for the period from December 28, 1996 through November 12, 1997
included in this prospectus to the extent and for the periods indicated in
their reports have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said
firm as experts in accounting and auditing in giving said reports.

ADDITIONAL INFORMATION

We have filed a registration statement on Form S-1 under the Securities Act
to register with the SEC the shares offered by this prospectus. The term
"registration statement" means the original registration statement and any and
all amendments thereto, including the schedules and exhibits to the original
registration statement or any amendment. This prospectus is part of that
registration statement. This prospectus does not contain all of the
information set forth in the registration statement or the exhibits to the
registration statement. We refer you to the registration statement for any
information in the registration statement that is not included in this
prospectus. In addition, each statement made in this prospectus concerning a
document filed as an exhibit to the registration statement is qualified in its
entirety by reference to that exhibit for a complete statement of its
provisions.

We are currently subject to some of the informational requirements of the
Securities Exchange Act of 1934, as amended, and file periodic reports, and
other information relating to our business, financial statements and other
matters with the SEC. We are not yet, however, subject to the SEC's proxy
rules and do not currently file proxy statement with the SEC. Upon completion
of this offering, we will become subject to the SEC's proxy rules. Our SEC
filings are available to the public over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file at the
SEC's public reference room located at 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the regional offices of the SEC located at 7 World
Trade Center, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms and their copy charges.

We intend to distribute to all holders of the shares of common stock
offered in the offering annual reports containing audited consolidated
financial statements together with a report by our independent certified
public accountants.

107
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PACER INTERNATIONAL, INC.
AUDITED FINANCIAL STATEMENTS

Report of Independent Accountants (PricewaterhouseCoopers LLP)............ F-3
Report of Independent Public Accountants (Arthur Andersen LLP)............ F-4

Consolidated Balance Sheet of Pacer International, Inc. as of December 31,
1999 and American President Lines Stacktrain Services--a division of APL
Land Transport Services, Inc.--Statement of Assets, Liabilities and
Divisional Control Account as of December 25, 1998 (currently known as
Pacer International, Inc.)............................................... F-5

Consolidated Statement of Operations of Pacer International, Inc. for the
fiscal year ended December 31, 1999 and American President Lines
Stacktrain Services--a division of APL Land Transport Services, Inc.--
Statements of Operations for the fiscal year ended December 25, 1998, the
period November 13, 1997 through December 26, 1997 and the period
December 28, 1996 through November 12, 1997.............................. F-6

Consolidated Statement of Stockholders' Equity of Pacer International,
Inc. for the fiscal year ended December 31, 1999 and American President
Lines Stacktrain Services--a division of APL Land Transport Services,
Inc.--Statements of Divisional Control Account for the fiscal year ended
December 25, 1998, the period November 13, 1997 through December 26, 1997
and the period December 28, 1996 through November 12, 1997............... F-7

Consolidated Statement of Cash Flows of Pacer International, Inc. for the
fiscal year ended December 31, 1999 and American President Lines
Stacktrain Services--a division of APL Land Transport Services, Inc.--
Statements of Cash Flows for the fiscal year ended December 25, 1998, the
period November 13, 1997 through December 26, 1997 and the period
December 28, 1996 through November 12, 1997.............................. F-8

Notes to Consolidated Financial Statements................................ F-9

UNAUDITED INTERIM FINANCIAL STATEMENTS

Consolidated Balance Sheet as of September 22, 2000 and December 31, 1999
......................................................................... F-28
Consolidated Statements of Operations for the nine months ended September
22, 2000 and September 17, 1999.......................................... F-29
Consolidated Statements of Stockholders' Equity for the year ended
December 31, 1999 and the nine months ended September 22, 2000........... F-30
Consolidated Statements of Cash Flows for the nine months ended September
22, 2000 and September 17, 1999.......................................... F-31
Notes to Consolidated Financial Statements ............................... F-32

CONEX GLOBAL LOGISTICS SERVICES, INC., MSL TRANSPORTATION GROUP, INC. AND
JUPITER FREIGHT, INC.
AUDITED COMBINED FINANCIAL STATEMENTS

Report of Independent Accountants ........................................ F-39
Combined Balance Sheet as of December 31, 1999............................ F-40
Combined Statement of Operations for the year ended December 31, 1999..... F-41
Combined Statement of Stockholders' Equity for the year ended December 31,
1999..................................................................... F-42
</TABLE>

F-1
<PAGE>

INDEX TO FINANCIAL STATEMENTS--(Continued)

<TABLE>
<CAPTION>
Page
----
<S> <C>
Combined Statement of Cash Flows for the year ended December 31,.......... F-43
Notes to Combined Financial Statements.................................... F-44

RAIL VAN, INC.
AUDITED AND UNAUDITED FINANCIAL STATEMENTS

Report of Independent Accountants......................................... F-50
Consolidated Balance Sheets as of December 31, 1999 and September 30, 2000
(unaudited).............................................................. F-51
Consolidated Statements of Operations for the year ended December 31, 1999
and nine months ended September 30, 2000 (unaudited) and September 30,
1999 (unaudited)......................................................... F-52
Consolidated Statements of Shareholders' Equity for the year ended
December 31, 1999 and nine months ended September 30, 2000 (unaudited) .. F-53
Consolidated Statements of Cash Flows for the year ended December 31, 1999
and nine months ended September 30, 2000 (unaudited) and 1999
(unaudited).............................................................. F-54
Notes to Consolidated Financial Statements................................ F-55
</TABLE>

F-2
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Pacer International, Inc.:

In our opinion, the consolidated financial statements of Pacer
International, Inc. listed in the index on page F-1 present fairly, in all
material respects, the consolidated financial position of Pacer International,
Inc. and its subsidiaries at December 31, 1999, and the consolidated results
of their operations and their consolidated cash flows for the year then ended
in conformity with accounting principles generally accepted in the United
States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America, 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 our opinion.

/s/ PricewaterhouseCoopers LLP
San Francisco, California

March 14, 2000, except for
information regarding the reclassification in 2000
as described in Note 1, as to which the
date is November 3, 2000.

F-3
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To APL Land Transport Services, Inc., a wholly-owned subsidiary of APL
Limited:

We have audited the accompanying statements of assets, liabilities and
divisional control account of American President Lines Stacktrain Services (a
division of APL Land Transport Services, Inc., a Tennessee corporation and a
wholly-owned subsidiary of APL Limited) as of December 25, 1998 and the
related statements of operations, divisional control account and cash flows
for the fiscal year ended December 25, 1998 and the period from November 13,
1997 through December 26, 1997. We have also audited the accompanying
statements of operations, divisional control account and cash flows of the
Predecessor (identified in Note 1) for the period from December 28, 1996
through November 12, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American President Lines
Stacktrain Services as of December 25, 1998 and the results of its operations
and cash flows for the fiscal year ended December 25, 1998 and the period from
November 13, 1997 through December 26, 1997, and the results of the
Predecessor's operations and cash flows for the period from December 28, 1996
through November 12, 1997, in conformity with accounting principles generally
accepted in the United States.

/s/ Arthur Andersen LLP

Memphis, Tennessee,
January 29, 1999, except with respect to the reclassification discussed in
Note 1, as to which the date is November 3, 2000.

F-4
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999
AND
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.

STATEMENT OF ASSETS, LIABILITIES AND DIVISIONAL CONTROL ACCOUNT AS OF
DECEMBER 25, 1998
(SEE NOTE 1)

<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
------------ ------------
(In millions)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .......................... $ 12.2 $ --
Accounts receivable, net of allowances of $3.0
million and $0.7 million, respectively ............ 114.7 43.9
Accounts receivable from APL ....................... 39.6 --
Intercompany trade receivables ..................... -- 3.4
Prepaid expenses and other ......................... 2.9 0.1
Deferred income taxes .............................. 4.4 --
------- ------
Total current assets ............................. 173.8 47.4
------- ------
Property and equipment
Property and equipment at cost ..................... 61.8 95.4
Accumulated depreciation ........................... (11.4) (6.6)
------- ------
Property and equipment, net....................... 50.4 88.8
------- ------
Other assets
Goodwill, net ...................................... 143.1 19.2
Deferred income taxes .............................. 75.7 --
Other assets ....................................... 12.0 0.7
------- ------
Total other assets ............................... 230.8 19.9
------- ------
Total assets ........................................ $ 455.0 $156.1
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
OR DIVISIONAL CONTROL ACCOUNT
Current liabilities
Current maturities of long-term debt and capital
leases............................................. $ 1.5 $ --
Accounts payable and accrued liabilities............ 176.0 84.6
------- ------
Total current liabilities......................... 177.5 84.6
------- ------
Long-term liabilities
Deferred income taxes............................... -- 15.4
Long-term debt and capital leases................... 282.9 --
Other............................................... 2.9 0.5
------- ------
Total long-term liabilities....................... 285.8 15.9
------- ------
Total liabilities.................................... 463.3 100.5
------- ------
Minority interest--exchangeable preferred stock...... 23.4 --
------- ------
Commitments and contingencies (Note 7)
Stockholders' equity or divisional control account
Divisional control account.......................... -- 55.6
Preferred stock at December 31, 1999: $0.01 par
value, 1,000,000 shares authorized, none
outstanding........................................ -- --
Common stock at December 31, 1999: $0.01 par value,
20,000,000 shares authorized, 10,440,000 issued
and outstanding.................................... 0.1 --
Additional paid in capital.......................... 104.3 --
Retained earnings (accumulated deficit)............. (136.1) --
------- ------
Total stockholders' equity (deficit) or divisional
control account.................................. (31.7) 55.6
------- ------
Total liabilities and equity or divisional control
account............................................. $ 455.0 $156.1
======= ======
</TABLE>

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

F-5
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
AND
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.

STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 25, 1998
AND THE PERIOD NOVEMBER 13, 1997 THROUGH DECEMBER 26, 1997
AND DECEMBER 28, 1996 THROUGH NOVEMBER 12, 1997
(SEE NOTE 1)

Earnings per share:

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

F-6
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY AS OF DECEMBER 31, 1999
AND
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.

STATEMENTS OF DIVISIONAL CONTROL ACCOUNT AS OF
DECEMBER 25, 1998, DECEMBER 26, 1997 AND NOVEMBER 12, 1997
(SEE NOTE 1)

<TABLE>
<CAPTION>
Common Stock Retained
------------- Additional Earnings Divisional Total
No. of Paid-in (Accumulated Control Stockholders'
Shares Amount Capital Deficit) Account Equity(Deficit)
------ ------ ---------- ------------ ---------- --------------
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 27,
1996................... -- $ -- $ -- $ -- $ (0.1) $ (0.1)
Net Income ............. 22.9 22.9
Intercompany Funding.... 18.4 18.4
---- ---- ------ ------- ------ ------- ---
Balance November 12,
1997................... -- -- -- -- 41.2 41.2
Net Income.............. 1.0 1.0
Intercompany Funding.... (12.6) (12.6)
---- ---- ------ ------- ------ ------- ---
Balance December 26,
1997................... -- -- -- -- 29.6 29.6
Net Income.............. 20.6 20.6
Intercompany Funding.... 5.4 5.4
---- ---- ------ ------- ------ ------- ---
Balance December 25,
1998................... -- -- -- -- 55.6 55.6
Distribution to
Shareholders........... (300.0) -- (300.0)
Effects of
Recapitalization....... 147.3 (55.6) 91.7
Issuance of Common
Stock.................. 10.4 0.1 104.3 -- -- 104.4
Net Income.............. 16.6 -- 16.6
---- ---- ------ ------- ------ ------- ---
Balance December 31,
1999................... 10.4 $0.1 $104.3 $(136.1) $ -- $ (31.7)
==== ==== ====== ======= ====== ======= ===
</TABLE>

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

F-7
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999
AND
AMERICAN PRESIDENT LINES STACKTRAIN SERVICES,
a division of APL Land Transport Services, Inc.

STATEMENTS OF CASH FLOWS FOR THE FISCAL YEAR ENDED DECEMBER 25, 1998
AND THE PERIOD NOVEMBER 13, 1997 THROUGH DECEMBER 26, 1997 AND
DECEMBER 28, 1996 THROUGH NOVEMBER 12, 1997 AND
(SEE NOTE 1)

<TABLE>
<CAPTION>
The
The Company Predecessor
----------------------------------------- -------------
Fiscal Year Fiscal Year Nov. 13, 1997 Dec. 28, 1996
Ended Ended through through
Dec. 31, 1999 Dec. 25, 1998 Dec. 26, 1997 Nov. 12, 1997
------------- ------------- ------------- -------------
(In millions)
<S> <C> <C> <C> <C>
Cash Flows from
Operating Activities
Net Income............. $ 16.6 $ 20.6 $ 1.0 $ 22.9
Adjustments to
Reconcile Net Income
to Net Cash Provided
By Operating
Activities:
Depreciation and
Amortization........ 8.6 6.6 0.7 3.0
Gain on Sale of
Property and
Equipment........... -- (0.4) -- (2.6)
Deferred Taxes....... 4.6 1.0 1.7 (3.4)
Change in Operating
Assets and
Liabilities, net of
acquisitions:
Trade and Other
Receivables....... (10.8) (10.5) 5.5 0.7
Receivable from
APL............... (39.6) -- -- --
Intercompany Trade
Receivables....... -- (1.0) 0.3 (0.3)
Prepaid Expenses
and Other Current
Assets............ -- (0.1) 4.3 (3.8)
Accounts Payable
and Accrued
Liabilities....... 39.4 16.2 (2.4) 2.1
Other.............. 2.0 (0.6) 1.6 (0.4)
------- ------ ------ ------
Net Cash Provided
By Operating
Activities...... 20.8 31.8 12.7 18.2
------- ------ ------ ------
Cash Flows from
Investing Activities
Purchase of Business,
Net of Cash Acquired.. (112.0) -- -- --
Capital Expenditures... (2.0) (39.7) -- --
Proceeds from Sales of
Property and
Equipment............. 40.0 1.2 -- 3.6
------- ------ ------ ------
Net Cash Provided
By (Used in)
Investing
Activities...... (74.0) (38.5) -- 3.6
------- ------ ------ ------
Cash Flows from
Financing Activities
Proceeds of Long-Term
Debt, Net of Deferred
Financing Costs....... 277.5 -- -- --
Proceeds from Issuance
of Common Stock....... 104.4 -- -- --
Distribution to APL and
Recap Costs........... (311.7) -- -- --
Redemption of Preferred
Stock of Subsidiary... (2.0) -- -- --
Intercompany Funding,
Net................... -- 6.7 (12.7) (21.8)
Debt, Revolving Credit
Facility and Capital
Lease Obligation
Repayment............. (2.8) -- -- --
------- ------ ------ ------
Net Cash Provided
By (Used in)
Financing
Activities...... 65.4 6.7 (12.7) (21.8)
------- ------ ------ ------
Net Increase in Cash
and Cash Equivalents.. 12.2 -- -- --
------- ------ ------ ------
Cash and Cash
Equivalents at
Beginning of
Year/Period -- -- -- --
------- ------ ------ ------
Cash and Cash
Equivalents at End of
Year/Period........... $ 12.2 $ -- $ -- $ --
======= ====== ====== ======
</TABLE>

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

F-8
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Pacer International, Inc. and its subsidiaries are a freight transportation
and logistics provider operating with two complementary business segments, the
wholesale segment and the retail segment. The Company was recently
recapitalized and acquired the retail segment as discussed below.

Prior to November 1998 APL Land Transport Services, Inc. consisted of two
operating divisions: Stacktrain Services Division and the Automotive Division.
On November 20, 1998, APL Land Transport Services, Inc. transferred all of its
assets, except those of the Stacktrain Services Division, to its parent, APL
Limited. As of May 28, 1999 APL Land Transport Services, Inc. was renamed
Pacer International, Inc. ("the Company") and was recapitalized through (1)
the purchase by a group led by entities formed by affiliates of Apollo
Management, L.P of shares of the Company's common stock from APL Limited and
(2) the Company's redemption of shares of its common stock held by APL
Limited. As part of the recapitalization, the assets and liabilities of the
Company remained at their historical basis for financial reporting purposes;
for income tax purposes, the transaction has been treated as a taxable
transaction such that the consolidated financial statements reflect a "step-
up" in tax basis resulting in the establishment of a deferred tax asset. See
Note 4. Immediately following its recapitalization, the Company acquired Pacer
Logistics, Inc, resulting in Pacer Logistics becoming a subsidiary of the
Company. The acquisition of Pacer Logistics was accounted for using the
purchase method of accounting. See Note 2.

On November 12, 1997 APL Limited was acquired by Neptune U.S.A., Inc., a
Delaware corporation and an indirect, wholly-owned subsidiary of Neptune
Orient Lines Limited, a Singapore corporation. In the acquisition, Neptune
U.S.A., Inc. merged with and into APL Limited. The surviving company, APL
Limited, was a subsidiary of Neptune Orient Lines Limited. The transaction was
accounted for by APL Limited using the purchase method of accounting. The
purchase price exceeded the fair market value of the underlying net assets
acquired by approximately $165 million which was allocated to goodwill and
other intangible assets and is being amortized on a straight-line basis over
various periods, none in excess of 40 years. APL Limited pushed down the fair
value adjustments arising in the purchase to its subsidiaries, including the
American President Lines Stacktrain Services division of APL Land Transport
Services, Inc.

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. Significant estimates include allowance for doubtful
accounts, rail valuation costs and valuation of deferred income taxes. Actual
results could differ from those estimates. Prior to May 28, 1999, APL Land
Transport Services, Inc. was a wholly-owned subsidiary of APL Limited (as
discussed above) and was allocated certain expenses. These expenses include
systems support, office space, salaries, and other corporate services which
were either allocated or charged on a cost reimbursement basis. Management
believes that these allocations were reasonable. Subsequent to May 28, 1999,
the corporate administrative services previously provided by APL Limited are
incurred directly by the wholesale segment.

Principles of Consolidation

The consolidated financial statements as of and for the year ended December
31, 1999 include the accounts of the Company and all entities in which the
Company has more than a 50% equity ownership including its subsidiary, Pacer
Logistics, Inc., acquired May 28, 1999. All significant intercompany
transactions and balances have been eliminated in consolidation.

F-9
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The financial statements subsequent to November 12, 1997 include the
accounts of the Company and include the "push down" effect of the purchase
price allocation. Prior to November 13, 1997, the financial statements include
the accounts of the Stacktrain Services division (the "Predecessor") of APL
Land Transport Services, Inc.

Industry Segments

The Company operates in two reportable industry segments, providing
intermodal rail services (the "Wholesale" segment) and providing logistic
services (the "Retail" segment) in North America. The Wholesale segment's
fiscal year ends on the last Friday in December and the Retail segment's
calendar year ends on the last day in December. The Wholesale segment was
formerly known as the Stacktrain segment and the Retail segment was formerly
known as the Logistics segment.

Goodwill

Goodwill represents the excess of cost over the estimated fair value of the
net tangible and intangible assets acquired and is being amortized over 40
years on a straight-line basis. The Company evaluates the carrying value of
goodwill and recoverability should events or circumstances occur that bring
into question the realizable value or impairment of goodwill. The Company's
principal considerations in determining impairment include the strategic
benefit to the Company of the business related to the goodwill as measured by
undiscounted current and expected future operating income levels of the
business and expected undiscounted future cash flows. When goodwill is
determined to not be recoverable, an impairment is recognized as a charge to
operations to the extent the carrying value of related assets (including
goodwill) exceeds the sum of the undiscounted cash flows from those related
assets. Amortization expense was $2.4 million and $0.6 million for 1999 and
1998, respectively; and accumulated amortization was $2.8 million and $0.6
million for 1999 and 1998, respectively.

Deferred Financing Costs

The deferred financing costs included in other assets relate to the cost
incurred in the placement of the Company's debt and are being amortized using
the effective interest method over the terms of the related debt which range
from 5 to 7 years.

Cash and Cash Equivalents

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

Revenue Recognition

The Company's Wholesale segment recognizes revenue and rail linehaul
expenses on a percentage-of-completion basis and remaining expenses as
incurred. The Retail segment recognizes revenue and related expenses when
shipments are complete.

Property and Equipment

Property and equipment are recorded at cost. For assets financed under
capital leases, the present value of the future minimum lease payments is
recorded at the date of acquisition as property and equipment, with a

F-10
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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:

<TABLE>
<CAPTION>
Classification Estimated Useful Life
-------------- ---------------------
<S> <C>
Rail Cars .......................................... 28 Years
Containers and Chassis.............................. 5 Years
Leasehold Improvements.............................. Term of Lease
Other............................................... 3 to 7 Years
</TABLE>

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.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts receivable.
The Company sells primarily on net 30-day terms, performs credit evaluation
procedures on its customers and generally does not require collateral on its
accounts receivable. The Company maintains an allowance for potential credit
losses. The Company has two customers accounting for 10% or more of revenues.
Hub Group generated $128.2 million of revenues in the Wholesale segment in
1999 and Union Pacific generated $100.8 million of revenues in both reporting
segments in 1999. The receivables from these customers were $15.1 million and
$12.6 million at December 31, 1999 and December 25, 1998, respectively. In
addition, the Company had a receivable from APL Limited at December 31, 1999
of $39.6 million primarily for the movement of APL Limited's international
business.

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.

Reclassification

During 2000, the Company reclassified rail car rental income from direct
operating expenses to revenues to be consistent with the Company's
classification of container per diem revenue. To conform to the quarterly
financial reporting presentation during 2000, the Company reclassified from
amounts previously reported in its Form 10-K for the fiscal year ended
December 31, 1999 filed with the Securities and Exchange Commission $10.3
million, $8.1 million, $0.7 million and $6.7 million of rail car rental income
to gross revenues for the fiscal years ended December 31, 1999 and December
25, 1998, and the periods ended December 26, 1997 and November 12, 1997,
respectively. The Company also reclassified corresponding financial
information presented in Notes 2, 8 and 14 for such change. The
reclassification had no effect on the Company's financial position or net
income.

Certain reclassifications have been made to the 1998 and 1997 balances to
conform to the 1999 presentation. These reclassifications had no effect on the
Company's financial position or net income.

Earnings per Share

The computation of earnings per share-basic is based on net income
available to common shareholders and the weighted-average number of
outstanding common shares. The computation of earning per share-diluted
includes the dilutive effect, if any, of outstanding Pacer Logistics 7.5%
Exchangeable Preferred Stock calculated using the as if converted method, and
common stock options calculated using the treasury stock method and is based
on net income plus minority interest.

F-11
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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 materially
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 affect on the Company's results of operations.

Other Comprehensive Income

In June, 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130 ("FAS 130") "Reporting
Comprehensive Income." FAS 130 requires companies to classify items of
comprehensive income by their nature in the financial statements and display
the accumulated balance of comprehensive income separately from retained
earnings and additional paid-in-capital in the equity section of the balance
sheet. To date, the Company has not had any transactions that are required to
be reported as other comprehensive income.

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("FAS 133"), "Accounting for Derivative
Instruments and Hedging Activities". FAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities, FAS 133 is effective for fiscal
years beginning after June 15, 2000, with earlier application encouraged. The
Company is evaluating the possible impact, if any, that FAS 133 may have on
its financial statements.

NOTE 2. THE RECAPITALIZATION AND PURCHASE TRANSACTIONS

The recapitalization of the Company 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

F-12
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

exchanged equity and $39.6 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 affiliates of
Deutsche Bank Securities, Inc. and Credit Suisse First Boston holding 2.9% of
the Company's outstanding common stock as of May 28, 1999.

As discussed in Note 1, on May 28, 1999, the Company acquired the common
stock of Pacer Logistics, Inc. (formerly known as Pacer International, Inc.),
a privately-held third party logistics provider pursuant to a stock purchase
agreement (the "Purchase Agreement"), dated as of March 15, 1999 between APL
Limited (the Company's former parent) and Coyote Acquisition LLC (a transitory
subsidiary which was merged with and into Pacer Logistics, Inc. after the
acquisition).

The Company paid approximately $137.5 million for the acquisition of Pacer
Logistics, Inc., which included acquisition fees of $2.9 million and assumed
indebtedness of $62.6 million. The Company financed the acquisition with a
portion of the proceeds raised in the note offering and with funds under the
Credit Facility as discussed in Note 3. 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
preliminary estimates of fair values at the date of acquisition, which may be
updated based on final appraisals, with the remainder allocated to goodwill to
be amortized over 40 years. The Company 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 service provided by the Retail segment is
not subject to obsolescence, the Company is 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. Though the fair value estimates
are preliminary, management does not believe there will be a material change
to goodwill when these estimates are finalized. The results of operations for
the acquired business are included in the Company's consolidated financial
statements beginning May 28, 1999. The purchase price allocation, preliminary
in nature and subject to change, is as follows (in millions):

<TABLE>
<S> <C>
Accounts receivable, net........................................... $ 45.9
Prepaid expenses and other current assets.......................... 6.3
Property and equipment, net........................................ 4.4
Other non-current assets........................................... 1.7
Goodwill........................................................... 123.1
Current liabilities................................................ (43.2)
Long-term liabilities.............................................. (0.7)
------
Total purchase price............................................. $137.5
======
</TABLE>

Pro forma results of operations, giving effect to the Company's
recapitalization and acquisition of Pacer Logistics, including acquisitions
made by Pacer Logistics, at the beginning of each period presented is as
follows (in millions):

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 25, 1998
----------------- -----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Gross revenues........................ $1,079.2 $989.7
Income before extraordinary items..... $ 17.4 $ 13.3
Net income............................ $ 17.4 $ 13.0
</TABLE>

F-13
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 3. LONG-TERM DEBT AND CAPITAL LEASES

Long-term debt and capital leases are summarized as follows (in millions):

<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
------------ ------------
<S> <C> <C>
Senior subordinated notes (11.75%; due June 1,
2007).............................................. $150.0 $--
Term loan ( 9.5%; due May 28, 2006)................. 134.3 --
Revolving credit facility ( 9.00%; due May 28,
2004).............................................. -- --
Capital lease obligations (Note 11)................. 0.1 --
------ ---
Total........................................... $284.4 $--
Less current portion................................ 1.5 --
------ ---
Total long-term................................. $282.9 $--
====== ===
</TABLE>

In conjunction with the transactions described above, the Company issued
$150 million aggregate principal amount of 11.75% senior subordinated notes
due June 1, 2007 under the indenture dated as of May 28, 1999. Interest on the
notes is payable semi-annually in cash on each June 1 and December 1,
commencing on December 1, 1999. The Company may redeem the notes, in whole at
any time or in part from time to time on and after June 1, 2003, upon notless
than 30 nor more than 60 days' notice, at the following redemption prices:
2003 -105.875%; 2004 -102.938%; 2005 and thereafter -100.00%. The indenture
provides that upon the occurrence of a change of control, each holder of notes
will have the right to require that the Company purchase all or a portion of
such holder's notes at a purchase price equal to 101.0% of the principal
amount thereof plus accrued interest to the date of purchase.

The notes are fully and unconditionally guaranteed, on a senior
subordinated basis, jointly and severally, by all of the Company's
subsidiaries. The indenture contains covenants limiting the Company's ability
to incur additional indebtedness, and restricts the Company's ability to pay
dividends or make certain other restricted payments, consummate certain asset
sales, or otherwise dispose of all or substantially all of the assets of the
Company and its subsidiaries.

The Company also entered into a credit agreement that provides for a seven-
year $135 million term loan (the "Term Loan") which was used to finance the
recapitalization and certain indebtedness of the Company and a five-year $100
million revolving credit facility (the "Revolving Credit Facility"). The
interest rate for the Term Loan is the lesser of 2% in excess of the prime
lending rate as determined by the administrative agent, 2.5% in excess of the
federal funds rate, or 3% in excess of the Eurodollar rate subject to
increases and decreases based upon achievement of certain financial ratios.
The Term Loan requires minimum scheduled repayments of $1.35 million annually
between the year 2000 and 2005. The interest rate for the Revolving Credit
Facility is the lesser of 1.5% in excess of the prime lending rate as
determined by the administrative agent, 1.5% in excess of the federal funds
rate or 2.5% in excess of the Eurodollar rate subject to increases and
decreases based upon achievement of certain financial ratios. At December 31,
1999, the interest rate on the Term Loan and the Revolving Credit Facility was
9.50% and 9.00%, respectively. The rates for the Term Loan and Revolving
Credit Facility are reset on a monthly basis.

The Company must pay a commitment fee equal to 0.5% per annum on the unused
portion of the Revolving Credit Facility, subject to decreases based on the
achievement of certain financial ratios and subject to increases based on the
amount of unused commitments. In addition, the credit agreement contains
customary covenants, the most restrictive of which limits the Company's
ability to declare dividends, prepay debt, make investments, incur additional
indebtedness, make capital expenditures, engage in mergers, acquisitions and
asset sales, and issue redeemable common stock and preferred stock, subject to
certain exceptions. The Company is also required

F-14
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

to comply with specified financial covenants including a consolidated interest
coverage ratio and an adjusted total leverage ratio. At December 31, 1999, the
Company was in compliance with these covenants. At December 31, 1999, the
Company had $100 million available under the Revolving Credit Facility. On
August 9, 1999, the Company entered into a first amendment to the credit
agreement to increase the maximum swingline amount (the amount that can be
drawn under the Revolving Credit Facility on the day of notification of
borrowing) to $10.0 million from $2.5 million. On January 7, 2000, the Company
entered into a second amendment to the credit agreement to modify the
definition of excess cash flow to allow for the acquisition of Conex assets.
On January 13, 2000, in connection with the acquisition of Conex (see Note
15), the Company borrowed $15 million from the Revolving Credit Facility.

The loans and letters of credit under the credit agreement are guaranteed
by all of the existing and future direct and indirect wholly-owned
subsidiaries. The Company's obligations and the obligations of such
subsidiaries are collateralized by a first priority perfected lien on
substantially all of the Company's properties and assets and all of the
properties and assets of such subsidiaries, whether such properties and assets
are now owned or subsequently acquired, subject to exceptions.

Contractual maturities of long-term debt (including capital lease
obligations) during each of the five years subsequent to 1999 and thereafter
are as follows (in millions):

<TABLE>
<S> <C>
2000.............................................................. $ 1.5
2001.............................................................. 1.4
2002.............................................................. 1.4
2003.............................................................. 1.4
2004.............................................................. 1.4
Thereafter........................................................ 277.3
------
Total........................................................... $284.4
======
</TABLE>

Management estimates the Company's debt at December 31, 1999 approximates
fair value based on interest rates for similar issues and financings.

At December 31, 1999, the Company was a party to an interest rate swap
agreement for which it pays a fixed rate on an aggregate notional amount of
$2.7 million which is used to hedge its variable interest rate exposure on
certain debt and is accounted for as an adjustment of interest expense over
the life of the debt. The Company receives a variable rate of interest on the
swap of 5.5% at December 31, 1999 and pays a fixed rate based on LIBOR, which
was 5.9% at December 31, 1999. During 1999, an insignificant amount was
charged to interest expense for the swap. The swap terminated on January 10,
2000.

NOTE 4. INCOME TAXES

The Company is required to file separate U.S. corporate income tax returns,
independent of Pacer Logistics, Inc. and its subsidiaries. The Company and its
subsidiary, Pacer Logistics, Inc., would be eligible to elect and file U.S.
consolidated corporation income tax returns if the Company owns at least 80%
of the total voting power and total value of the stock of Pacer Logistics,
Inc. Income taxes are recognized utilizing the asset and liability method,
under which deferred income taxes are recognized for the consequences of
temporary differences by applying currently enacted statutory rates to
differences in the financial statement carrying amounts and the tax basis of
existing assets and liabilities.

For federal and state income tax purposes, the recapitalization of the
Company was a taxable business combination and a qualified stock purchase. The
buyer and seller jointly agreed to treat the transaction as an

F-15
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

asset acquisition in accordance with Section 338 (h)(10) of the Internal
Revenue Code and such election has been made. The buyer and the seller jointly
agreed to treat the transaction as an asset acquisition in accordance with
Section 338h(10) of the Internal Revenue Code and such election has been made.
An allocation of the purchase price to the tax basis of assets and liabilities
based on their respective fair value at May 28, 1999 has not been finalized
for income tax purposes.

In connection with the recapitalization, the Company recorded a deferred
tax asset of approximately $81.2 million at May 28, 1999 related to future tax
deductions for the net excess of the tax basis of the assets and liabilities
over the financial statement carrying amounts with a corresponding credit to
Stockholders' Equity. Realization of the deferred tax asset is dependent upon
the Company's ability to generate sufficient future taxable income which
management believes is more likely than not based on historical operating
results. Accordingly, no valuation allowance has been recorded.

For periods prior to May 28, 1999, the Company's operating results were
included in the consolidated income tax returns of APL Limited. A charge in
lieu of income taxes was recorded using the separate return method, as if the
Company were a separate taxpayer.

The reconciliation of the net effective income tax rate to the U.S. federal
statutory income tax rate is as follows:

The provision for income taxes from continuing operations is as follows (in
millions):

F-16
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table shows the tax effects of the Company's and
Predecessor's cumulative temporary differences included in the Consolidated
Balance Sheet at December 31, 1999 and in the Statement of Assets,
Liabilities, and Divisional Control Account at December 25, 1998 (in
millions):

<TABLE>
<CAPTION>
December 31, December 25,
1999 1998
------------ ------------
<S> <C> <C>
Property and Equipment................................ $(0.7) $(17.1)
Allowance for Doubtful Accounts....................... 1.2 0.7
Accrued Liabilities................................... 3.5 0.4
Tax Basis in Excess of Book--Stacktrain............... 81.2 --
Other................................................. (5.1) 0.6
----- ------
Total Net Deferred Tax Asset...................... $80.1 $(15.4)
===== ======
</TABLE>

NOTE 5. PENSION PLANS AND STOCK OPTION PLANS

Effective May 28, 1999, the Company's employees were eligible for the Pacer
Logistics, Inc. 401(k) plan and no longer participate in the former parent's
pension, postretirement benefits and profit-sharing plans. Under the Pacer
Logistics, Inc. 401(k) plan, the Company matches 50% of the first 6% of base
salary contributed by the employee. Matching contributions by the Company to
the plan in 1999 were $0.5 million. In prior periods, contributions by the
former parent to the prior profit-sharing plan were $3.5 million, $0.4 million
and $2.7 million for the year ended December 25, 1998, and the periods ended
December 26, 1997 and November 12, 1997, respectively.

The former parent maintained defined benefit pension plans for certain
domestic shoreside employees, healthcare benefit plans for retired employees
and profit-sharing plans for non-union employees. The costs and benefits of
these plans were allocated by the former parent to the Company and were
included in general and administrative expenses.

On May 28, 1999, the Board of Directors authorized the creation of the
Pacer International, Inc. 1999 Stock Option Plan under which 1,793,747 options
for the Company's common stock were authorized, of which 1,604,361 options
have been granted and outstanding at or above fair market value at the date of
grant. Of the options granted, 470,247 and 92,614 were part of the 1997 and
1998 Pacer Logistics, Inc. Stock Option Plan, respectively, that were rolled
over as part of the acquisition of Pacer Logistics. In addition, under the
1999 Stock Option Plan, options to purchase 44,997 shares of preferred stock
were granted which were rolled over from the 1997 Pacer Logistics Stock Option
Plan. There are no cash-out provisions for the Company's common or preferred
stock in the event of exercise since, at December 31, 1999, the Company's
stock is not public.

The 1999 plan provides for initial grants to specified employees. The
aggregate number of shares subject to these initial grants is 832,000 and
their exercise price is $10.00 per share. These initial grants are divided
into three tranches, Tranche A, Tranche B and Tranche C. Tranche A options
vest in five equal installments on the date of the grant's first five
anniversary dates, provided the employee is employed by the Company on each
anniversary date. Tranche B options generally vest on the date of grant's
seventh anniversary date if the employee is employed by the Company on that
date. However, if on any of the grant's first five anniversary dates certain
per share target values are attained and the employee is employed by the
Company on that date, then 20% of the Tranche B options will vest. Accelerated
vesting of the Tranche B options is possible if a sale of the Company occurs
prior to the date of grant's fifth anniversary and the fair market value of
the per share consideration to be received by the shareholder equals or
exceeds an amount calculated in accordance with this plan. Tranche C options
vest in substantially the same manner as Tranche B options, including
acceleration upon a sale of the

F-17
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Company, except that the per share target values as of a given anniversary
date are increased. Options granted to non-employee directors vest in four
equal installments on the date of grant's first four anniversary dates.

A vested option that has not yet been exercised will automatically
terminate on the first to occur of the grant's tenth anniversary, ninety days
following the employee's termination of employment for any reason other than
death or disability, twelve months following the employee's termination of
employment due to death or disability, or as otherwise determined by the
committee.

Each option that is vested as of the date of the sale of the Company
remains exercisable until the sale's closing, after which time such option is
unenforceable. Non-vested Tranche A, Tranche B and Tranche C options will vest
in accordance with the vesting schedules described above; however, an option
that vests after the Company is sold will remain exercisable for 10 days
before such portion of the option terminates and is of no further force or
effect. All options granted under this plan are nontransferable except upon
death, by such employee's will or the laws of descent and distribution, or
transfers to family members of the employee that are approved by the
committee.

This plan has a term of ten years, subject to earlier termination by the
Board of Directors, who may modify or amend this plan in any respect, provided
that no amendment or modification affects an option already granted without
the consent of the option holder.

The following table summarizes the transactions of the Pacer International,
Inc. 1999 Stock Option Plan adopted May 28, 1999 as of December 31, 1999.

<TABLE>
<CAPTION>
December 31, 1999
------------------------------
Preferred
Common Stock Stock
-------------- --------------
<S> <C> <C>
Outstanding options, beginning of period....... -- --
Options rolled over from prior plan at May 28,
1999.......................................... 562,861 44,997
Granted........................................ 1,065,500 --
Canceled or expired............................ (24,000) --
Exchanged...................................... -- --
Exercised...................................... -- --
-------------- --------------
Outstanding options, end of year............... 1,604,361 44,997
============== ==============

Weighted average exercise price of options
exercised..................................... None exercised None exercised
Weighted average exercise price of options
granted....................................... $ 10.75 None granted
Weighted average exercise price, end of year... $ 7.79 $ 9.00
Options exercisable, end of year............... 143,158 9,999
Options available for future grant............. 189,386 --
</TABLE>

F-18
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following table summarizes information about stock options outstanding
at December 31, 1999:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- ----------------------------
Weighted Average
Number Remaining Weighted Average Number Weighted Average
Range of Exercise Prices Outstanding Life (Months) Exercise Price Exercisable Exercise Price
------------------------ ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Common Stock
------------
$0.22 365,748 87 $ 0.22 -- $ 0.22
$ 2.96 104,499 39 $ 2.96 104,499 $ 2.96
$ 8.61 29,364 109 $ 8.61 19,576 $ 8.61
$10.00 1,024,750 113 $10.00 19,083 $10.00
$20.00 80,000 117 $20.00 -- $20.00
--------- -------
Total 1,604,361 143,158

Preferred
Stock
---------
$9.00 44,997 39 $ 9.00 9,999 $ 9.00
</TABLE>

In 1995, the FASB issued FASB Statement No. 123 ("FAS 123") "Accounting for
Stock-Based Compensation" which, if fully adopted by the Company, would change
the methods the Company applies in recognizing the cost of the stock based
plans. Adoption of the cost recognition provisions of FAS 123 is optional and
the Company has decided not to elect the provisions of FAS 123. However, pro
forma disclosures as if the Company adopted the cost recognition provisions of
FAS 123 are required by FAS 123. Had the compensation cost for the Company's
stock-based compensation plan been determined consistent with FAS 123, the
Company's net income for 1999 would not have been significantly different.

The fair value of each stock option granted is estimated on the date of
grant using the minimum value method of option pricing with the following
weighted-average assumptions for grants: dividend yield of 0.0%, risk-free
interest rate of 6.5% and expected life of 7 years (in determining the
"minimum value", FAS 123 does not require the volatility of the Company's
common stock underlying the options to be calculated or considered because the
Company is not publicly traded).

NOTE 6. RELATED PARTY TRANSACTIONS

Prior to the recapitalization, the Company provided intermodal services to
APL Limited. These services include moving containers from ports to inland
points, moving containers from inland points to ports, and repositioning empty
containers. These transactions are performed on a cost reimbursement basis.
Thus, no revenues or expenses are recognized for financial reporting purposes.
Reimbursements amounted to $273.6 million, $276.7 million, $22.3 million and
$154.1 million, for the fiscal years ended December 31, 1999, December 25,
1998, and the periods ended December 26, 1997 and November 12, 1997,
respectively. At December 31, 1999 the Company had a receivable from APL
Limited for these transactions of $31.3 million. Pursuant to the
recapitalization, the Company has signed long-term agreements with APL Limited
for the domestic transportation on the stacktrain network of APL Limited's
international freight for an annual management fee of $6.6 million. For the
seven months since the recapitalization, the Company recognized $3.9 million
in revenues for this fee.

F-19
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Pursuant to the recapitalization, the Company has signed long-term agreements
with APL Limited for administrative services such as billing and accounts
receivable and payable processing on a per transaction basis. For the seven
months ended December 31, 1999, $1.1 million has been accrued and was payable
at December 31, 1999 for these services. In addition, the information
technology services of APL Limited are currently being provided to the Company
according to a term sheet upon which negotiations for a long-term agreement
are based. For the seven months ended December 31, 1999, $5.8 million has been
paid for these services. The annual fee for these services is $10 million.

In addition, the Company receives a credit from APL Limited for the
repositioning expense that APL Limited has avoided due to the Company using
APL Limited's containers in surplus locations. The total amount of revenue
recognized for these services was $21.0 million, $20.0 million, $1.9 million
and $15.8 million for the fiscal years ended December 31, 1999 and December
25, 1998, the periods ended December 26, 1997 and November 12, 1997,
respectively. At December 31, 1999, $3.7 million was receivable from APL
Limited.

The Company also provides services to the Automotive Division of APL
Limited. These services include moving containers primarily in the U.S.--
Mexico trade. Total amount of revenue recognized for these services was $49.1
million, $38.7 million, $5.0 million and $38.4 million for the fiscal years
ended December 31, 1999 and December 25, 1998, the periods ended December 26,
1997 and November 12, 1997, respectively. At December 31, 1999, $4.6 million
was receivable from APL Limited.

Prior to the recapitalization, the Company received an allocation for lease
and maintenance and repair expenses from APL Limited. These expenses were $7.0
million, $19.5 million, $1.9 million and $14.1 million for the period ended
May 28, 1999, the fiscal year ended December 25, 1998, the periods ended
December 26, 1997 and November 12, 1997, respectively.

In 1997, in connection with Neptune Orient Lines ("NOL") acquisition of APL
Limited, NOL incurred certain merger related costs totaling approximately $61
million. These non-operating costs do not relate to the ongoing operations of
the Company and have not been allocated to the Company's results of
operations.

APL de Mexico, S.A. de C.V. ("APL Mexico"), a wholly owned Mexican
subsidiary of the APL Limited, provides various agency services to the Company
with respect to its bills of lading in Mexico. Expenses recorded by the
Company from APL Mexico were $1.8 million, $0.5 million, $0.1 million and $0.3
million for the fiscal years ended December 31, 1999 and December 25, 1998,
the periods ended December 26, 1997 and November 12, 1997, respectively. At
December 31, 1999, $1.2 million was payable to APL Mexico.

The Company has entered into a management agreement with Apollo Management
("Apollo") for financial and strategic services as the Board of Directors may
reasonably request. The annual fee for these services is $0.5 million. At
December 31, 1999, $0.3 million was payable to Apollo.

The Company leases a facility consisting of office, warehousing and
trucking space from A&G Investments, a California general partnership of which
Messrs. Goldfein and Steiner are the only partners. Mr. Goldfein is a
stockholder and a Director and Executive Vice President of the Company. Mr.
Steiner is a stockholder and an Executive Vice President of the Company. Lease
payments were $0.3 million for the seven month period ended December 31, 1999.

The Company leases a facility consisting of office space from Richard P.
Hyland, a stockholder and an Executive Vice President of the Company. Such
lease is pursuant to an oral agreement and is on a month-to-month basis. The
lease terminated on December 31, 1999.

F-20
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 7. COMMITMENTS AND CONTINGENCIES

The Company is party to various legal proceedings, claims and assessments
arising in the normal course of its business activities.

In June 1995, APL Limited, the Company's former parent, sold the assets of
its trucking company, American President Trucking ("APT") to Burlington Motor
Carriers ("BMC"). The sale included the sublease of terminal real estate to
BMC and the sublease of tractor units to Stoops Freightliner, which in turn
entered into a use agreement with BMC. BMC and the Company entered into a
service agreement whereby the Company guaranteed certain levels of traffic to
BMC. Under new ownership from a 1995 bankruptcy proceeding, BMC advised APL
Limited and the Company that it believed the Company breached the service
agreement when APL Limited sold its Distribution Services unit, and demanded
$0.8 million in compensation. The Company disputed the claim. BMC and Stoops
Freightliner filed subsequent complaints in BMC bankruptcy proceedings
demanding unspecified damages. APL Limited and the Company filed motions to
dismiss both complaints. On November 13, 1998, APL Limited and the Company's
motions were granted; BMC has filed an appeal; Stoops Freightliners has not.
The Company does not believe that the ultimate outcome, if unfavorable, will
have a material adverse impact on the financial position or results of
operations of the Company, and has not reserved for this contingency.

Two subsidiaries of Pacer Logistics, Interstate Consolidation, Inc. and
Intermodal Container Service, Inc., are named defendants in a class action
filed in July 1997 in the State of California, Los Angeles Superior Court,
Central District, alleging, among other things, breach of fiduciary duty,
unfair business practices, conversion and money had and received in connection
with monies allegedly wrongfully deducted from truck drivers' earnings. The
defendants have entered into a Judge Pro Tempore Submission Agreement dated as
of October 9, 1998, pursuant to which the plaintiffs and defendants have
waived their rights to a jury trial, stipulated to a certified class, and
agreed to a minimum judgement of $250,000 and a maximum judgement of $1.75
million. On January 14, 2000, the Court issued its Statement of Decision, in
which Interstate Consolidation, Inc. and Intermodal Container Service, Inc.
prevailed on all issues except one. The Court found that Interstate failed to
issue certificates of insurance to the owner-operators and therefore failed to
disclose that in 1998, the Company's retention on its liability policy was
$250,000. The court has tentatively ordered that restitution be paid for this
omission, which in the worst case is well below the agreed upon high of $1.75
million. An appeal to this decision is likely by the class. Based upon
information presently available and in light of legal and other defenses and
insurance coverage, management does not expect these legal proceedings, claims
and assessments, individually or in the aggregate, to have a material adverse
impact on the Company's consolidated financial position or results of
operations. At December 31, 1999, the Company had $1.1 million accrued for
this case.

In May 1996, APL Limited sold a portion of its third operating division
("Distribution Services") to a third party purchaser. In connection with this
sale, the Company and the purchaser entered into a 10-year agreement to
provide stacktrain services to the purchaser.

NOTE 8. SEGMENT INFORMATION

The Company has adopted SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", which changes the way the Company reports
information about its reportable operating segments.

With the acquisition of Pacer Logistics on May 28, 1999, the Company has
two reportable segments, the Wholesale segment and the Retail segment, which
have separate management teams and offer different but related products and
services. The Wholesale segment provides intermodal rail service in North
America by selling intermodal service to shippers while buying space on
intermodal rail trains. The large majority of business is conducted
domestically, with minor services in Mexico and Canada. Customers include
intermodal marketers

F-21
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

who serve customers in various industries as well as the ocean carrier
industry. The Retail segment offers trucking services, intermodal marketing,
freight consolidation and handling, international freight forwarding and
supply chain management services. Prior to May 28, 1999, the Company had only
one reportable segment, the Wholesale segment.

The following table presents reportable segment information for the fiscal
years ended December 31, 1999 and December 25, 1998 and the periods ended
December 26, 1997 and November 12, 1997 (in millions).

<TABLE>
<CAPTION>
Wholesale Retail Other Consolidated
--------- ------ ------ ------------
<S> <C> <C> <C> <C>
Fiscal year ended December 31, 1999
Gross revenues......................... $713.2 $233.2 $(18.7) $927.7
Net revenues........................... 154.1 38.2 192.3
Income from operations................. 38.2 9.8 48.0
Interest expense, net.................. 16.4 2.2 18.6
Tax expense............................ 8.5 3.2 11.7
Net income............................. 13.3 4.4 (1.1) 16.6
Depreciation and amortization.......... 6.7 1.9 8.6
Capital expenditures................... 0.1 1.9 2.0
Total assets........................... 391.7 139.9 (76.6) 455.0
Fiscal year ended December 25, 1998
Gross revenues......................... $598.9 $ -- $ -- $598.9
Net revenues........................... 132.6 -- -- 132.6
Income from operations................. 33.2 -- -- 33.2
Interest expense, net.................. -- -- -- --
Tax expense............................ 12.6 -- -- 12.6
Net income............................. 20.6 -- -- 20.6
Depreciation and amortization.......... 6.6 -- -- 6.6
Capital expenditures................... 39.7 -- -- 39.7
Total assets........................... 156.1 -- -- 156.1
Period ended December 26, 1997
Gross revenues......................... $ 60.7 $ -- $ -- $ 60.7
Net revenues........................... 13.3 -- -- 13.3
Income from operations................. 2.0 -- -- 2.0
Interest expense, net.................. 0.3 -- -- 0.3
Tax expense............................ 0.7 -- -- 0.7
Net income............................. 1.0 -- -- 1.0
Depreciation and amortization.......... 0.7 -- -- 0.7
Capital expenditures................... -- -- -- --
Total assets........................... 111.9 -- -- 111.9
Period ended November 12, 1997
Gross revenues......................... $523.8 $ -- $ -- $523.8
Net revenues........................... 116.3 -- -- 116.3
Income from operations................. 38.8 -- -- 38.8
Interest expense, net.................. 2.0 -- -- 2.0
Tax expense............................ 13.9 -- -- 13.9
Net income............................. 22.9 -- -- 22.9
Depreciation and amortization.......... 3.0 -- -- 3.0
Capital expenditures................... -- -- -- --
Total assets........................... n/a -- -- n/a
</TABLE>

Data in the "Other" column includes elimination of intercompany balances and
subsidiary investment. All intersegment services are provided and purchased at
quoted market rates.

F-22
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

For the year ended December 31, 1999, the Company had two customers,
respectively which contributed more than 10% of the Company's total gross
revenues. Total gross revenues of $128.2 million were generated by the
Wholesale segment from Hub Group and total gross revenues of $100.8 million
were generated from Union Pacific (generated by both reporting segments).

NOTE 9. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 1999 and
December 25, 1998, (in millions):

<TABLE>
<CAPTION>
1999 1998
------ -----
<S> <C> <C>
Rail Cars................................................. $ 26.9 $66.5
Containers and Chassis.................................... 27.6 27.6
Leasehold improvements and Other.......................... 7.3 1.3
------ -----
Total................................................. 61.8 95.4
Less: Accumulated Depreciation............................ (11.4) (6.6)
------ -----
Property and Equipment, net............................. $ 50.4 $88.8
====== =====

Depreciation and amortization of property and equipment was $6.2 million,
$6.0 million, $0.7 million and $3.0 million for the years ended December 31,
1999, December 25, 1998 and the periods ended December 26, 1997 and November
12, 1997, respectively. Trailers under capital lease are included above with a
cost of $0.3 million and accumulated depreciation of $0.1 million.

As part of the recapitalization of the Company and acquisition of Pacer
Logistics, the Company received $39.6 million in net proceeds from the sale
and leaseback of 199 railcars originally purchased in 1998. A deferred gain of
$1.6 million was recorded upon sale and is being amortized over the 13 year
life of the lease. An additional $0.4 million was received from sales of other
property in 1999.

NOTE 10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at December 31, 1999 and December
25, 1998 were as follows (in millions):

<CAPTION>
1999 1998
------ -----
<S> <C> <C>
Accounts Payable.......................................... $ 49.2 $14.2
Accrued Rail Liability.................................... 71.8 49.8
Accrued Volume Rebates Payable............................ 10.1 7.2
Accrued Equipment Maintenance and Lease................... 8.1 3.0
Accrued Interest Payable.................................. 2.7 --
Other Accrued Liabilities................................. 34.1 9.8
Unearned Revenue.......................................... -- 0.6
------ -----
Total Accounts Payable and Accrued Liabilities.......... $176.0 $84.6
====== =====
</TABLE>

F-23
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 11. LEASES

The Company leases certain doublestack railcars, containers, chassis, data
processing equipment and other property. Future minimum lease payments under
noncancelable leases at December 31, 1999 for the five years subsequent to
1999 and thereafter are summarized as follows (in millions):

<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
2000................................................. $0.1 $ 36.8
2001................................................. -- 32.2
2002................................................. -- 25.0
2003................................................. -- 22.1
2004................................................. -- 17.6
Thereafter........................................... -- 87.6
---- ------
Total Minimum Payments........................... $0.1 $221.3
======
Less amount representing interest (at an effective
rate of 10.4%)...................................... --
----
Present value of minimum lease payments.............. $0.1
====
</TABLE>

Rental expense was $50.4 million, $49.7 million, $5.5 million and $37.1
million for the fiscal years ended December 31, 1999 and December 25, 1998,
the periods ended December 26, 1997 and November 12, 1997, respectively. The
net book value of property under capital lease at December 31, 1999 was
approximately $0.2 million.

On May 28, 1999 the Company received, as part of the Company's
recapitalization and acquisition of Pacer Logistics, $39.6 million in net
proceeds from the sale and leaseback (operating) of 199 railcars originally
purchased in 1998.

The Company took delivery of 1,500 new 53-foot containers and chassis in
the fourth quarter of 1999 financed through an operating lease.

The Company receives income from others for the use of its doublestack
railcars. These amounts are included in gross revenues. Rental income was
$10.3 million, $8.1 million, $0.7 million and $6.7 million for the fiscal
years ended December 31, 1999 and December 25, 1998, the periods ended
December 26, 1997 and November 12, 1997, respectively.

NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows (in millions):
<TABLE>
<CAPTION>
The
The Company Predecessor
----------------------------------------- -------------
Fiscal Year Fiscal Year Nov. 13, 1997 Dec. 28, 1996
Ended Ended through through
Dec. 31, 1999 Dec. 25, 1998 Dec. 26, 1997 Nov. 12, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash Payments:
Interest............. $15.4 $ -- $0.3 $ 2.0
Income Taxes......... $ 2.5 $3.4 $0.6 $12.2
</TABLE>

NOTE 13. MINORITY INTEREST

Pursuant to the Company's recapitalization and acquisition of Pacer
Logistics, 24,300 of Pacer Logistics' one million authorized shares of
preferred stock were issued to certain management shareholders of Pacer

F-24
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Logistics as 7.5% exchangeable preferred stock on May 28, 1999. The remainder
have been reserved for issuance by Pacer Logistics as payment-in-kind
dividends. The preferred shares are convertible into shares of Pacer
International common stock. In July 1999, the Company redeemed 1,986 shares
for $2.0 million. At December 31, 1999, dividends of $1.1 million were accrued
and unpaid and recorded as minority interest deductions from net income.

Liquidation Preference

Dividends

Dividends payable per share of the exchangeable preferred stock are equal
to the greater of:

(1) 7.5% of the $1,000 liquidation preference per share payable annually
in arrears in additional shares of the exchangeable preferred stock or

Voluntary Exchange

At any time at least 15 months after, but before 24 months following the
closing of the Company's recapitalization, each holder of the exchangeable
preferred stock has the right to exchange its shares into shares of Pacer
International common stock. As a condition to the exchange of such preferred
stock, each holder will be required to become a party to the shareholders'
agreement and will be bound by all of the terms and conditions of the
shareholders' agreement as though such persons were original parties thereto.
Upon joining in the shareholders' agreement, such persons will have the same
rights and responsibilities as those of APL Limited, as set forth in the
shareholders' agreement.

Purchase Right

At any time at least 15 months after the closing of the Company's
recapitalization, the exchangeable preferred stock may be purchased by Pacer
International for newly issued shares of preferred stock of Pacer
International or cash. The credit agreement and the indenture governing the
notes restricts the Company from purchasing the exchangeable preferred stock
for cash for the initial 15 month time period. The Pacer International
preferred stock has a 7.5% dividend, payable in shares of such preferred stock
and is mandatorily redeemable by Pacer International on the tenth anniversary
of issue.

Change of Control

Upon a change of control, each holder of exchangeable preferred stock shall
have the right to exchange the shares of exchangeable preferred stock held by
such holder for Pacer International common stock at the ratio set forth in the
certificate of designation multiplied by the following applicable premium
which shall be allocated pro rata on a monthly basis:

<TABLE>
<S> <C>
Prior to the End of Year 1....................................... 115.00%
End of Year 1.................................................... 106.75%
End of Year 2.................................................... 100.00%
</TABLE>

F-25
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Voting Provisions

If (1) the voluntary exchange of 7.5% exchangeable preferred stock by the
holders thereof for Pacer International common stock or (2) the purchase of
such preferred stock by Pacer International as contemplated above does not
occur, the Chief Executive Officer and other members of the senior management
team will remain holders of the 7.5% exchangeable preferred stock.

NOTE 14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table sets forth selected quarterly financial data for each
of the quarters in 1999 and 1998 (in millions):

<TABLE>
<CAPTION>
Quarters
--------------------------------------
First Second (a) Third (a) Fourth (a)
------ ---------- --------- ----------
<S> <C> <C> <C> <C>
Fiscal year ended December 31, 1999
Revenues................................ $166.0 $197.7 $260.8 $303.2
Net revenues............................ 36.2 40.9 53.3 61.9
Income from operations.................. 7.5 11.4 15.0 14.1
Net income.............................. 4.7 5.4 4.1 2.4

Fiscal year ended December 25, 1998
Revenues................................ $153.1 $135.6 $132.7 $177.5
Net revenues............................ 33.5 27.0 30.5 41.6
Income from operations.................. 5.5 3.0 10.9 13.8
Net income.............................. 3.5 1.5 7.1 8.5
</TABLE>
--------
(a) 1999 amounts include the acquisition of Pacer Logistics, Inc. on May 28,
1999 (see Note 2).

NOTE 15. ACQUISITION OF CONEX

Pursuant to the terms of an Asset Purchase Agreement dated as of December
31, 1999, as amended (the "Purchase Agreement"), among Conex Acquisition
Corporation, a Delaware corporation ("Acquisition Corp."), Conex Global
Logistics Services, Inc., a California corporation ("Conex"), MSL
Transportation Group, Inc., a California corporation ("MSL"), Jupiter Freight,
Inc.,a California corporation ("Jupiter"), and certain other persons,
Acquisition Corp. acquired substantially all of the assets, and assumed
certain specified liabilities, of Conex, MSL and Jupiter for approximately
$25,050,000 in cash, issued Conex shareholders an 8.0% contingent note in the
aggregate principal amount of $5,000,000 and issued Conex shareholders 300,000
shares of common stock of Pacer International, Inc. Acquisition Corp. is a
wholly-owned subsidiary of Pacer International, Inc.. The transaction closed
on January 13, 2000. On January 13, 2000, Acquisition Corporation and the
Company executed a supplement to the indenture for the senior subordinated
notes, resulting in Acquisition Corporation becoming a guarantor of the
Company's obligations thereunder.

F-26
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 16. EARNINGS PER SHARE

The following table sets forth the computation of earnings per share-basic
and diluted (in millions, except share and per share amounts):

<TABLE>
<CAPTION>
Fiscal year ended
December 31, 1999
-----------------
<S> <C>
Numerator:
Net income-basic........................................... $ 16.6
Minority interest.......................................... 1.1
-----------
Numerator for earnings per share-diluted..................... $ 17.7
===========
Denominator:
Denominator for earnings per share-basic-common shares
outstanding............................................... 10,440,000
Effect of dilutive securities:
Stock options............................................ 663,208
Exchangeable preferred stock............................. 2,234,844
-----------
Denominator for earnings per share-diluted................... 13,338,052
===========
Earnings per share-basic..................................... $ 1.59
===========
Earnings per share-diluted.................................. $ 1.33
===========
</TABLE>

Earnings per share for fiscal years prior to December 31, 1999 is not
presented as the Company was an operating division and earnings per share was
not meaningful.

F-27
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

<TABLE>
<CAPTION>
September 22, December 31,
2000 1999
------------- ------------
(In millions)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ........................ $ -- $ 12.2
Accounts receivable, net of allowances of $4.6
million and $3.0 million, respectively........... 152.6 114.7
Accounts receivable from APL...................... 2.3 39.6
Prepaid expenses and other........................ 4.8 2.9
Deferred income taxes............................. 4.4 4.4
------- -------
Total current assets............................ 164.1 173.8
------- -------
Property and equipment
Property and equipment at cost.................... 65.7 61.8
Accumulated depreciation.......................... (16.2) (11.4)
------- -------
Property and equipment, net....................... 49.5 50.4
------- -------
Other assets
Goodwill, net..................................... 193.4 143.1
Deferred income taxes............................. 67.8 75.7
Other assets...................................... 10.1 12.0
------- -------
Total other assets.............................. 271.3 230.8
------- -------
Total assets........................................ $ 484.9 $ 455.0
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt and capital
leases........................................... $ 1.4 $ 1.5
Accounts payable and accrued liabilities.......... 167.5 176.0
------- -------
Total current liabilities....................... 168.9 177.5
------- -------
Long-term liabilities
Long-term debt and capital leases................. 297.3 282.9
Other............................................. 1.7 2.9
------- -------
Total long-term liabilities..................... 299.0 285.8
------- -------
Total liabilities................................... 467.9 463.3
------- -------
Minority interest--exchangeable preferred stock..... 24.6 23.4
------- -------
Commitments and contingencies (Note 6)..............
Stockholders' equity
Preferred stock: $0.01 par value, 1,000,000 shares
authorized, none outstanding..................... -- --
Common stock: $0.01 par value, 20,000,000 shares
authorized, 11,057,373 and 10,440,000 issued and
outstanding at September 22, 2000 and December
31, 1999, respectively........................... 0.1 0.1
Additional paid-in-capital........................ 111.1 104.3
Retained earnings (accumulated deficit)........... (118.8) (136.1)
------- -------
Total stockholders' equity (deficit)............ (7.6) (31.7)
------- -------
Total liabilities and equity........................ $ 484.9 $ 455.0
======= =======
</TABLE>

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

F-28
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
Nine Months Ended
---------------------
Sept. 22, Sept. 17,
2000 1999
---------- ----------
(in millions)
<S> <C> <C> <C> <C>
Gross revenues.................................. $ 916.5 $ 624.5
Cost of purchased transportation and services... 718.7 494.0
---------- ----------
Net revenues ................................. 197.8 130.5
---------- ----------
Operating expenses:
Direct operating expenses .................... 60.1 53.6
Selling, general and administrative expenses.. 73.1 37.1
Depreciation and amortization................. 8.2 5.9
---------- ----------
Total operating expenses ................... 141.4 96.6
---------- ----------
Income from operations ......................... 56.4 33.9
---------- ----------
Interest expense (income), net ................. 24.3 9.6
---------- ----------
Income before income taxes and minority interest
............................................... 32.1 24.3
---------- ----------
Income taxes or charge in lieu of income taxes.. 13.6 9.5
Minority interest .............................. 1.2 0.6
---------- ----------
Net income ..................................... $ 17.3 $ 14.2
========== ==========
Earnings per share:
Basic:
Earnings per share............................ $ 1.58 1.36
========== ==========
Weighted average shares outstanding........... 10,921,740 10,440,000
========== ==========
Diluted:
Earnings per share............................ $ 1.36 1.11
========== ==========
Weighted average shares outstanding........... 13,624,951 13,337,755
========== ==========
</TABLE>

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

F-29
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 22, 2000
(Unaudited)

<TABLE>
<CAPTION>
Common Stock Retained
------------- Additional Earnings Total
No. of Paid-in (Accumulated Stockholders'
Shares Amount Capital Deficit) Equity(Deficit)
------ ------ ---------- ------------ ---------------
(in millions)
<S> <C> <C> <C> <C> <C>
December 31, 1999....... 10.4 $0.1 $104.3 $(136.1) $(31.7)
Issuance of Common Stock
for Acquisitions....... 0.3 -- 6.0 -- 6.0
Issuance of Common Stock
for Exercise of
Options................ 0.4 -- 0.8 -- 0.8
Net Income.............. -- -- -- 17.3 17.3
---- ---- ------ ------- ------
September 22, 2000...... 11.1 $0.1 $111.1 $(118.8) $ (7.6)
==== ==== ====== ======= ======
</TABLE>

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

F-30
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
Sept. 22, 2000 Sept. 17, 1999
-------------- --------------
(in millions)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income...................................... $ 17.3 $ 14.2
------ -------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 8.2 5.9
Deferred income taxes......................... 7.9 1.7
Changes in operating assets and liabilities
net of acquisitions:
Trade and other receivables................... (20.9) (30.1)
Prepaid expenses and other current assets..... (1.7) (0.5)
Accounts payable and accrued liabilities...... (0.5) 26.0
Other......................................... 2.1 0.4
------ -------
Net cash provided by operating activities... 12.4 17.6
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of business, net of cash acquired...... (41.7) (111.3)
Capital expenditures............................ (3.4) (1.5)
Proceeds from sales of property and equipment... 0.2 39.6
------ -------
Net cash used in investing activities....... (44.9) (73.2)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks drawn in excess of cash balances......... 10.7 (1.9)
Proceeds of long-term debt, net of deferred
financing costs................................ 25.0 277.5
Proceeds from issuance of common stock.......... 0.8 104.4
Distribution to APL and recap costs............. -- (310.2)
Redemption of preferred stock of subsidiary..... -- (2.0)
Debt, revolver and capital lease obligation
repayment...................................... (16.2) (2.1)
------ -------
Net cash provided by financing activities... 20.3 65.7
------ -------
NET CHANGE IN CASH AND CASH EQUIVALENTS......... (12.2) 10.1
CASH AND CASH EQUIVALENTS--BEGINNING OF PERIOD.. 12.2 --
------ -------
CASH AND CASH EQUIVALENTS--END OF PERIOD........ $ -- $ 10.1
====== =======
DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Issuance of Common Stock in connection with
acquisitions................................... $ 6.0 $ --
Issuance of 8.0% subordinated note in connection
with acquisitions.............................. $ 5.0 $ --
Issuance of Exchangeable Preferred Stock in
connection with recapitalization............... $ 24.3
Issuance of note payable to management in
connection with recapitalization............... $ 0.4
</TABLE>

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

F-31
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited interim financial statements as of September 22, 2000 and for
the nine months ended September 22, 2000 and September 17, 1999 are condensed
and do not contain all information required by accounting principles generally
accepted in the United States of America to be included in a full set of
financial statements. In the opinion of management, all adjustments,
consisting of only normal recurring adjustments, that are necessary for fair
presentation have been included. The results of operations for any interim
period are not necessarily indicative of the results of operations to be
expected for any full fiscal year. The amounts for the Statement of Operations
for the nine month period ended September 17, 1999 and amounts for the
Statement of Cash Flows for the nine month period ended September 17, 1999
include amounts which were derived from the unaudited financial statements of
American President Lines Stacktrain Services, a division of APL Land Transport
Services, Inc., the predecessor company. As of May 28, 1999 APL Land Transport
Services, Inc. was recapitalized and renamed Pacer International, Inc. (the
"Company"). These unaudited interim financial statements and footnotes should
be read in conjunction with the audited financial statements for the fiscal
year ended December 31,1999 included elsewhere in this prospectus.

Principles of Consolidation

The consolidated financial statements as of and for the nine months ended
September 22, 2000 include the accounts of the Company and its subsidiary,
Pacer Logistics, Inc., acquired May 28, 1999, Conex assets (as defined below)
acquired January 13, 2000 and GTS Transportation Services, Inc. acquired
August 31, 2000. All significant intercompany transactions and balances have
been eliminated in consolidation.

Industry Segments

The Company operates in two reportable industry segments, providing
intermodal rail stacktrain services (the "Wholesale" segment) and providing
logistic services (the "Retail" segment) in North America.

Use of Estimates

Reclassification

Certain reclassifications have been made to the 1999 balances to conform to
the 2000 presentation. These reclassifications had no effect on the Company's
financial position or net income.

Earnings per Share

The computation of earnings per share-basic is based on net income
available to common shareholders and the weighted-average number of
outstanding common shares. The computation of earnings per share-diluted
includes the dilutive effect, if any, of outstanding Pacer Logistics 7.5%
Exchangeable Preferred Stock calculated using the as if converted method, and
common stock options calculated using the treasury stock method and is based
on net income plus minority interest.

F-32
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities.
SFAS No. 133 requires that all derivative instruments be recognized at fair
value in the statement of financial position, and that the corresponding gains
and losses be reported either in the statement of operations or as a component
of comprehensive income, depending on the type of relationship that exists. In
July 1999, the Financial Accounting
Standards Board issued SFAS No. 138, "Accounting for Derivative Instruments
and Hedging Activities--Deferral of the Effective Date of FASB Statement No.
133." SFAS No. 137 deferred the effective date of SFAS No. 133 until fiscal
years beginning after June 15, 2000. We have not historically engaged in
significant hedging activities or invested in derivative instruments and do
not believe this standard, as amended, will have a material impact on the
Company's financial statements upon adoption.

In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements" as amended by Staff
Accounting Bulletins No. 101 A and 101 B. These bulletins summarize certain of
the staff's views about applying generally accepted accounting principles to
revenue recognition in financial statements. We will be required to follow the
guidance in SAB 101 no later than its fourth quarter of 2000, with restatement
of earlier quarters in 2001 required, if necessary. The SEC has recently
issued further guidance with respect to adoption of specific issues addressed
by SAB 101. We are currently assessing the impact, if any, SAB 101 may have on
the Company's consolidated financial position or results of operations.

NOTE 2. ACQUISITIONS

On January 13, 2000, pursuant to the terms of an asset purchase agreement,
the Company 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"), a multipurpose
provider of transportation services including intermodal marketing, local
trucking and freight consolidation and handling. The purchase price was $37.4
million including acquisition fees of approximately $1.3 million. The Company
paid approximately $26.4 million in cash, issued Conex shareholders an 8.0%
subordinated note in the aggregate principal amount of $5.0 million and issued
Conex shareholders 300,000 shares (valued in the aggregate at $8.0 million) of
common stock of Pacer International, Inc. The results of operations for the
acquired assets are included in the Company's consolidated financial
statements beginning January 1, 2000. The purchase price allocation,
preliminary in nature and subject to change, is as follows (in millions):

F-33
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

<TABLE>
<S> <C>
Accounts receivable, net.......................................... $ 6.2
Prepaid expenses and other........................................ 0.3
Property and equipment............................................ 0.6
Goodwill.......................................................... 32.0
Current liabilities............................................... (1.7)
-----
Total purchase price............................................ $37.4
=====
</TABLE>

On August 31, 2000, the Company acquired all of the stock of GTS
Transportation Services, Inc. ("GTS"), a provider of transportation services
including logistics and truck brokerage in the 48 contiguous states as well as
in Canada and Mexico. The purchase price was $17.8 million including
acquisition fees and expenses of approximately $0.6 million. The purchase
price is subject to adjustment, if at all, pursuant to an earn-out amount and
a working capital adjustment. The Company paid approximately $15.3 million in
cash. The results of operations for the acquired company are included in the
Company's consolidated financial statements beginning September 1, 2000. The
purchase price allocation, preliminary in nature and subject to change, is as
follows (in millions):

<TABLE>
<S> <C>
Accounts receivable, net......................................... $ 6.7
Property, equipment and other.................................... 0.1
Goodwill......................................................... 21.2
Liabilities...................................................... (10.2)
------
Total purchase price........................................... $ 17.8
======
</TABLE>

The acquisitions have been accounted for as purchases in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations". The
aggregate purchase prices have been allocated to the underlying assets and
liabilities based upon preliminary estimates of fair values at the date of the
acquisitions, which may be updated based upon final appraisals, with the
remainder allocated to goodwill to be amortized over 40 years. The Company
determined 40-year amortization periods were appropriate after considering a
number of factors: 1) there are no legal, regulatory or contractual provisions
associated with the acquisitions that may limit the useful lives of the
goodwill, 2) the services provided by the acquired companies (as part of the
Company's Retail segment) are not subject to obsolescence, and 3) the Company
is not aware of any expected actions of competitors and others that may
restrict the Retail segment's ability to successfully compete in the industry.
Though the fair value estimates are preliminary, management does not believe
there will be a material change to goodwill when these estimates are
finalized.

Pro forma results of operations, giving effect to the Company's acquisition
of Conex assets, GTS (and the Company's recapitalization and acquisition of
Pacer Logistics which occurred on May 28, 1999) at the beginning of each
period presented is as follows:

<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 22, 2000 September 17, 2000
------------------ ------------------
<S> <C> <C>
Gross revenues................... $981.4 $870.4
Income before extraordinary
items........................... $ 18.7 $ 16.3
Net income....................... $ 18.7 $ 16.3
</TABLE>

NOTE 3. LONG-TERM DEBT

In conjunction with the acquisition of Conex assets described above, the
Company borrowed $15.0 million under its five-year $100.0 million revolving
credit facility which expires in 2004 and issued Conex shareholders an 8%
subordinated note in the aggregate principal amount of $5.0 million due 2003.
Interest on the revolving

F-34
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

credit facility is payable quarterly, except upon rate adjustment, in which
case adjusted interest is payable monthly. Interest on the $5.0 million
subordinated note is payable semi-annually on each January 31 and July 31
beginning July 31, 2000.

At September 22, 2000, the Company had $85.8 million available under the
$100.0 million revolving credit facility expiring in 2004. At September 22,
2000, the interest rate on the revolving credit facility was 8.9%.

NOTE 4. RELATED PARTY TRANSACTIONS

The Company has signed long-term agreements with APL Limited (the Company's
former parent) for the domestic transportation on the stacktrain network of
APL Limited's international freight for an annual management fee of $6.6
million and for administrative services such as billing and accounts
receivable and payable processing on a per transaction basis. In addition, the
information technology services of APL Limited are currently being provided to
the Company. The annual fee for these services is $10 million.

In April 2000, the Company transferred the processing of APL Limited's
international traffic receivables and payables to APL Limited, which had
previously been included in the Company's balance sheet, resulting in a
decrease in both accounts receivable and accounts payable of approximately
$33.0 million. The transfer to APL
Limited was facilitated by changes in computer software which were not
previously available. The Company continues to handle APL Limited's
international traffic under contract for the annual management fee.

In April 2000, the Company repaid $0.3 million in notes payable to certain
members of senior management including accrued interest. The notes were part
of the purchase price for Pacer Logistics acquired on May 28, 1999.

In August 2000, the Company paid a scheduled semi-annual interest payment
of $0.2 million to certain members of senior management on the $5.0 million
8.0% subordinated note issued in January 2000 as part of the purchase price
for the acquisition of Conex assets.

NOTE 5. PENSION PLANS AND STOCK OPTION PLANS

During the first quarter of 2000, certain members of senior management
exercised 287,373 options to purchase Pacer International, Inc. common stock
at an average purchase price of $1.22 per share, exercised 10,000 options at
$10.00 per share and forfeited 90,000 options. The proceeds of these
transactions were used to repay the notes payable as discussed above in Note 4
and for general corporate purposes. In addition, the Company granted an
additional 36,500 options to management personnel to purchase Pacer
International, Inc. common stock at an exercise price of $20.00 per share.

During the second quarter of 2000, 181,004 options were forfeited due to
employee resignations and 167,000 options were granted to management personnel
to purchase Pacer International, Inc. common stock (45,000 shares at $20.00
per share and 122,000 shares at $25.00 per share).

During the third quarter of 2000, certain members of senior management
exercised 40,000 options to purchase Pacer International, Inc. common stock at
an average purchase price of $10.00 per share. In addition, 15,000 options
were forfeited due to employee resignations and 132,000 options were granted
to management personnel to purchase Pacer International, Inc. common at $25.00
per share.

NOTE 6. CONTINGENCIES

The Company is party to various legal proceedings, claims and assessments
arising in the normal course of its business activities.

F-35
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

real estate to BMC and the sublease of tractor units to Stoops Freightliner,
which in turn entered into a use agreement with BMC. BMC and the Company
entered into a service agreement whereby the Company guaranteed certain levels
of traffic to BMC. Under new ownership from a 1995 bankruptcy proceeding, BMC
advised APL Limited and the Company that it believed the Company breached the
service agreement when APL Limited sold its Distribution Services unit, and
demanded $0.8 million in compensation. The Company disputed the claim. BMC and
Stoops Freightliner filed subsequent complaints in BMC bankruptcy proceedings
demanding unspecified damages. APL Limited and the Company filed motions to
dismiss both complaints, which were granted on November 13, 1998. Stoops did
not appeal; BMC did. The appellate court upheld part of the decision and
reversed part of the decision and encouraged the parties to engage in
settlement discussions. In early February 2000, APL Limited offered $200,000
in settlement of all claims; BMC countered with a demand of $1.2 million. APL
Limited rejected that offer and reiterated its $200,000 offer in early April.
Subsequently, all the parties have entered into an agreement in principle
which will settle all claims among them. The settlement agreement, which was
executed in December 2000, will not result in any payment by the Company.

Two subsidiaries of Pacer Logistics, Interstate Consolidation, Inc. and
Intermodal Container Service, Inc., were named defendants in a class action
filed in July 1997 in the State of California, Los Angeles Superior Court,
Central District, alleging, among other things, breach of fiduciary duty,
unfair business practices, conversion and money had and received in connection
with monies allegedly wrongfully deducted from truck drivers' earnings. The
defendants entered into a Judge Pro Tempore Submission Agreement dated as of
October 9, 1998, pursuant to which the plaintiffs and defendants waived their
rights to a jury trial, stipulated to a certified class, and agreed to a
minimum judgment of $250,000 and a maximum judgment of $1.75 million. On
August 11, 2000, the Court issued its Statement of Decision, in which
Interstate Consolidation, Inc. and Intermodal Container Service, Inc.
prevailed on all issues except one. The only adverse ruling was a Court
finding that Interstate failed to issue certificates of insurance to the
owner-operators and therefore failed to disclose that in 1998, the Company's
retention on its liability policy was $250,000. The court has ordered that
restitution of $488,978 be paid for this omission. Plaintiff's counsel has
indicated he intends to appeal the entire ruling. Defendants will be appealing
the restitution issue. Based upon information presently available and in light
of legal and other defenses and insurance coverage, management does not expect
these legal proceedings, claims and assessments, individually or in the
aggregate, to have a material adverse impact on the Company's consolidated
financial position or results of operations.

NOTE 7. SEGMENT INFORMATION

The Company has two reportable segments, the Wholesale segment and the
Retail segment, which have separate management teams and offer different but
related products and services. The Wholesale segment provides intermodal rail
service in North America by selling intermodal service to shippers while
buying space on intermodal rail trains. The large majority of business is
conducted domestically, with services in Mexico and Canada. Customers include
intermodal marketers who serve customers in various industries as well as the
ocean carrier industry. The Retail segment complements the Wholesale segment
by offering marketing, freight handling, truck and local pickup and delivery
services. Prior to May 28, 1999, the Company had only one reportable segment,
the Wholesale segment.

The following table presents reportable segment information for the nine
months ended September 22, 2000 and September 17, 1999 (in millions). The nine
month 1999 data for the Retail segment in the tables below contains only four
months of data since acquisition on May 28, 1999.

F-36
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

<TABLE>
<CAPTION>
Wholesale Retail Other Consolidated
--------- ------ ------ ------------
<S> <C> <C> <C> <C>
9 Months ended September 22, 2000
Gross revenues.......................... $594.7 $348.4 $(26.6) $916.5
Net revenues............................ 132.3 65.5 197.8
Income from operations.................. 40.2 16.2 56.4
Interest expense, net................... 17.9 6.4 24.3
Tax expense............................. 9.5 4.1 13.6
Net income.............................. 12.8 5.7 (1.2) 17.3
Depreciation and amortization........... 4.0 4.2 8.2
Capital expenditures.................... 0.7 2.7 3.4
Total assets............................ 364.3 198.7 (78.1) 484.9

9 Months ended September 17, 1999
Gross revenues.......................... $499.7 $134.2 $ (9.4) $624.5
Net revenues............................ 108.8 21.7 -- 130.5
Income from operations.................. 28.1 5.8 -- 33.9
Interest expense, net................... 7.0 2.6 -- 9.6
Tax expense............................. 7.9 1.6 -- 9.5
Net income.............................. 13.2 1.6 (0.6) 14.2
Depreciation and amortization........... 4.5 1.4 -- 5.9
Capital expenditures.................... -- 1.5 -- 1.5
Total assets............................ 388.0 133.4 (67.1) 454.3
</TABLE>

Data in the "Other" column includes elimination of intercompany balances and
subsidiary investment. Amounts for 1999 interest expense, tax expense and net
income have been restated to reflect an adjustment to the inter-segment
interest calculation which favorably impacted the Wholesale segment and
adversely impacted the Retail segment but had no impact on consolidated
results.

For the nine month period ended September 22, 2000, the Company had one
customer that contributed more than 10% of the Company's total gross revenues.
Total gross revenues of $114.4 million were generated by both reporting
segments from Union Pacific. For the 1999 period, two customers contributed
more than 10% of the Company's total gross revenues. Total gross revenues of
$94.0 million were generated by the Wholesale segment from Hub City and $69.0
million generated by both reporting segments from Union Pacific.

NOTE 8. SUBSEQUENT EVENT

On October 31, 2000, pursuant to a stock purchase agreement, the Company
acquired all of the stock of RFI Group, Inc., a Delaware corporation providing
international freight forwarding and freight transportation services. The
purchase price was $18.0 million plus acquisition costs of $0.6 million . The
acquisition was funded by borrowings of $18.0 million under the Company's
revolving credit facility. Operating results of the acquisition will be
included in the Company's Retail segment. 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.

F-37
<PAGE>

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

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 excluding cash acquired................ $(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 not payable to former shareholders............... 5.8
-----
Total Purchase Price.......................................... $18.6
=====
</TABLE>

On December 22, 2000 pursuant to a stock purchase agreement the Company
acquired all of the stock of Rail Van, Inc., a corporation providing
intermodal products. The purchase price was $76.2 million. The acquisition was
funded by a borrowing of $30.0 million under the revolving credit facility,
$40.0 million in new term loans, and the issuance of common stock valued in
the aggregate at $7.0 million.

NOTE 9. EARNINGS PER SHARE

The following table sets forth the computation of earnings per share-basic
and diluted (in millions, except share and per share amounts):

<TABLE>
<CAPTION>
Nine months ended
---------------------------
September 22, September 17,
2000 1999
------------- -------------
<S> <C> <C>
Numerator:
Net income-basic................................. $ 17.3 $ 14.2
Minority interest................................ 1.2 0.6
----------- -----------
Numerator for earnings per share-diluted........... $ 18.5 $ 14.8
=========== ===========
Denominator:
Denominator for earnings per share-basic-common
shares outstanding.............................. 10,921,740 10,440,000
Effect of dilutive securities:
Stock options.................................... 468,367 662,911
Exchangeable preferred stock..................... 2,234,844 2,234,844
----------- -----------
Denominator for earnings per share-diluted......... 13,624,951 13,337,755
=========== ===========
Earnings per share-basic........................... $ 1.58 $ 1.36
=========== ===========
Earnings per share-diluted......................... $ 1.36 $ 1.11
=========== ===========
</TABLE>

F-38
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Pacer International, Inc.:

In our opinion, the combined financial statements listed in the index on
pages F-1 and F-2 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")
at December 31, 1999, and the combined results of their operations and their
combined cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America. 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 of these statements in accordance with
auditing standards generally accepted in the United States of America, 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 our opinion.

/s/ PricewaterhouseCoopers LLP

San Francisco, California
November 22, 2000

F-39
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT, INC.

COMBINED BALANCE SHEET
December 31, 1999

<TABLE>
<CAPTION>
(in millions)
<S> <C>
Assets
Marketable equity securities--available for sale................ $ 3.1
Accounts receivable, net........................................ 6.6
Prepaid expenses and other...................................... 0.3
-----
Total current assets........................................ 10.0
Property, plant and equipment, at cost.......................... 12.9
Accumulated depreciation and amortization....................... (5.0)
-----
Property, plant and equipment, net.............................. 7.9
Other assets.................................................... 0.4
-----
Total assets................................................ $18.3
=====
Liabilities and Stockholders' Equity
Accounts payable and accrued expenses........................... $ 2.0
-----
Total current liabilities................................... 2.0
Notes payable to Stockholders................................... 0.2
-----
Total long-term liabilities................................. 0.2
Stockholders' Equity
Conex Global Logistics Services, Inc.--Common stock, no par
value; 2,000,000 shares authorized; 10,000 shares issued and
outstanding.................................................... --
MSL Transportation Group, Inc.--Common stock, no par value;
500,000 shares authorized, 100 shares issued and outstanding... --
Jupiter Freight, Inc.--Common stock, no par value; 500,000
shares authorized, 50 shares issued and outstanding............ --
Retained earnings............................................... 16.7
Accumulated other comprehensive loss............................ (0.6)
-----
Total stockholders' equity.................................. 16.1
-----
Total liabilities and stockholders' equity.................. $18.3
=====
</TABLE>

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

F-40
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT, INC.

COMBINED STATEMENT OF OPERATIONS
For the year Ended December 31, 1999

<TABLE>
<CAPTION>
(in millions)
<S> <C>
Gross revenues.................................................... $43.4
Cost of purchased transportation and services..................... 30.3
-----
Net revenues.................................................. 13.1
Operating expenses:
Selling, general and administrative expenses.................... 6.8
Depreciation and amortization................................... 1.2
-----
Income from operations........................................ 5.1
Other (income) expense:
Interest income................................................. (0.1)
Interest expense................................................ 0.1
Gain on sale of marketable securities........................... (1.0)
Dividend income................................................. (0.1)
Other, net...................................................... (0.1)
-----
Income before income taxes.................................... 6.3
-----
Income taxes...................................................... --
-----
Net income.................................................... $ 6.3
=====
</TABLE>

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

F-41
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT, INC.

COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
For the year Ended December 31, 1999

<TABLE>
<CAPTION>
Accumulated
Other
Common Retained Comprehensive
Stock Earnings Loss Total
------ -------- ------------- -----
(in millions)
<S> <C> <C> <C> <C>
Balance, December 31, 1998................ $-- $15.4 $ -- $15.4
Distributions to stockholders, net...... -- (5.0) -- (5.0)
Net income.............................. -- 6.3 -- 6.3
Other comprehensive loss--unrealized
holding losses......................... -- -- (0.6) (0.6)
--- ----- ----- -----
Comprehensive loss...................... -- 6.3 (0.6) 5.7
--- ----- ----- -----
Balance, December 31, 1999................ $-- $16.7 $(0.6) $16.1
=== ===== ===== =====
</TABLE>

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

F-42
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT, INC.

COMBINED STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1999

<TABLE>
<CAPTION>
(in millions)
<S> <C>
Cash flow from operating activities:
Net income..................................................... $ 6.3
Adjustments to reconcile net income to net cash provided by
operating activities:
Gain on sale of marketable securities........................ (1.0)
Depreciation and amortization................................ 1.2
Decrease in Accounts receivable.............................. 0.8
Increase in Accounts payable and accrued expenses............ 0.9
-----
Total adjustments........................................ 1.9
-----
Net cash provided by operating activities................ 8.2
-----
Cash flows from investing activities:
Purchases of property, plant and equipment..................... (0.1)
Proceeds from sale of property, plant and equipment............ 0.2
Proceeds from sale of marketable securities.................... 7.1
Payments for marketable securities............................. (9.9)
-----
Net cash used in investing activities.................... (2.7)
-----
Cash flows from financing activities:
Repayment of checks drawn in excess of cash balances........... (0.1)
Payments on long-term debt..................................... (0.2)
Payments on stockholders notes................................. (0.1)
Principal payments under capital lease obligations............. (0.1)
Distributions to stockholders, net............................. (5.0)
-----
Net cash used in financing activities.................... (5.5)
-----
Net increase (decrease) in cash and cash equivalents..... --
Cash and cash equivalents at beginning of the period............. --
-----
Cash and cash equivalents at end of the period................... $ --
=====
Supplemental cash flow disclosure:
Cash paid for:
Interest..................................................... $ 0.1
Income taxes................................................. --
</TABLE>

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

F-43
<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 presented combined
in these financial statements as they are controlled by common stockholders.
The Company's business consists of providing logistics services such as
(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.

Use of Estimates

Cash and Cash Equivalents

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

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 (loss) in the accompanying
statement of stockholders' equity. Realized gains or losses have been computed
using the specific identification method.

Accounts Receivable

Accounts receivable is reflected net of allowances for doubtful accounts of
$1.0 million at December 31, 1999.

F-44
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

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:

<TABLE>
<CAPTION>
Estimated
Classification Useful Life
-------------- -------------
<S> <C>
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
</TABLE>

Reliance on Independent Contractors

Dependence on Railroads and Equipment and Service Availability

Concentration of Business on Intermodal Marketing

F-45
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration
of credit risk consist primarily of 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 balance at December 31, 1999 and sales activity for the
year then ended (in millions):

<TABLE>
<CAPTION>
Accounts
Receivable Sales
------------ ------------
Year ended
December 31, December 31,
Customer 1999 1999
-------- ------------ ------------
<S> <C> <C>
A............................................... $ 2.5 $ 14.8
</TABLE>

The Company maintains its cash accounts in commercial banks, money market
accounts and certificates of deposit. As of December 31, 1999 the Company had
cash balances in excess of the Federal Deposit Insurance Corporation ("FDIC")
limit of $0.1 million per institution. However, the Company does not
anticipate nonperformance by the counterparties.

Financial Instruments

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.

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.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS No. 133 requires that all derivative
instruments be recognized at fair value in the statement of financial
position, and that the corresponding gains and losses be reported either in
the statement of operations or as a component of comprehensive income,
depending on the type of relationship that exists. In July 1999, the Financial
Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133." SFAS No. 137 deferred the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. The Company has not engaged
in significant hedging activities or invested in derivative instruments and
does not believe this standard, as amended, will have a material impact on the
financial statements upon adoption.

F-46
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

In December 1999, the SEC staff issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements" as amended by Staff
Accounting Bulletins No. 101 A and 101 B. These bulletins summarize certain of
the staff's views about applying generally accepted accounting principles to
revenue recognition in financial statements. The Company will be required to
follow the guidance in SAB101 no later than its fourth quarter of 2001, with
restatement of earlier quarters in 2001 required, if necessary. The SEC has
recently issued further guidance with respect to adoption of specific issues
addressed by SAB 101. The Company is currently assessing the impact, if any,
SAB101 may have on its financial position or results of operations.

In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--an Interpretation of APB
25." This interpretation clarifies (1) the definition of employee for purposes
of applying Opinion 25, (2) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (3) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and
(4) the accounting for an exchange of stock compensation awards in a business
combination. This interpretation is effective July 1, 2000, but certain
conclusions in this interpretation cover specific events that occur after
either December 15, 1998 or January 12, 2000. To the extent that this
interpretation covers events occurring during the period after December 15,
1998 or January 12, 2000, but before the effective date of July 1, 2000, the
effects of applying this interpretation are recognized on a prospective basis
from July 1, 2000. The adoption of FIN 44 is not expected to have a material
impact on the financial statements.

3. Property, Plant and Equipment

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
December 31,
1999
-------------
(in millions)
<S> <C>
Land........................................................... $ 2.6
Building....................................................... 3.1
Airplane....................................................... 4.0
Equipment...................................................... 1.7
Trucks......................................................... 0.7
Automobiles.................................................... 0.3
Furniture and fixtures......................................... 0.3
Leasehold improvements......................................... 0.2
-----
12.9
Less, accumulated depreciation and amortization................ (5.0)
-----
Property, plant and equipment.............................. $ 7.9
=====
</TABLE>

The Company leases certain equipment totaling $0.3 million at December 31,
1999 under capital lease agreements that expire in 2000. Accumulated
depreciation for these assets at December 31, 1999 amounted to $0.3 million,
for a net book value of $0.

F-47
<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,
1999
-------------
(in millions)
<S> <C>
Accounts payable........................................... $1.9
Drayage.................................................... 0.1
----
Total.................................................. $2.0
====
</TABLE>

5. Related Party Transactions

The terms of the following related-party transactions are arranged between
the stockholders and the Company:

Notes Payable to Stockholders

The Company has notes payable to stockholders in the amount of $0.2 million
at December 31, 1999. These notes bear interest at the reference rate plus
1.25%, payable monthly. The reference rate at December 31, 1999 was 8.25%.

Guarantees of Indebtedness

The Company has guaranteed certain indebtedness of a related party totaling
approximately $4 million at December 31, 1999.

Lease Contract

The Company leases certain of the office facilities and warehouses from a
related party owned by the stockholders. There is a ten-year lease agreement
covering these facilities, which expires in 2010. The rent expenses related to
these leases were $1.0 million for the year ended December 31, 1999 (see Note
6).

Other

Included in these combined financial statements are expenses of
approximately $0.1 million for the year ended December 31, 1999, incurred on
behalf of a related party for which the Company expects no reimbursement.

6. 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.

F-48
<PAGE>

CONEX GLOBAL LOGISTICS SERVICES, INC.,
MSL TRANSPORTATION GROUP, INC.
AND JUPITER FREIGHT INC.

NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)

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 are as follows:

<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
2000........................................................... $ 1.9
2001........................................................... 1.9
2002........................................................... 1.9
2003........................................................... 1.9
2004 and thereafter............................................ 16.8
-----
$24.4
=====
</TABLE>

Total rent expenses under all operating leases were $1.5 million for the
year ended December 31, 1999.

7. 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 $0.1
million for the year ended December 31, 1999.

8. Subsequent Events

Effective January 13, 2000, the Company was acquired by a subsidiary of
Pacer International, Inc. ("Pacer") whereby the subsidiary of Pacer acquired
substantially all the operating assets and assumed certain liabilities of the
Company.

F-49
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Rail Van, Inc.

In our opinion, the accompanying consolidated balance sheet as of December
31, 1999 and the related consolidated statements of operations, of
shareholders' equity and of cash flows present fairly, in all material
respects, the consolidated financial position of Rail Van, Inc. (the Company)
as of December 31, 1999, and the consolidated results of its operations and
its consolidated cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
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 of these statements in accordance
with auditing standards generally accepted in the United States of America,
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 our opinion.

/s/ PricewaterhouseCoopers LLP

Columbus, Ohio
March 24, 2000

F-50
<PAGE>

RAIL VAN, INC.

CONSOLIDATED BALANCE SHEETS
As of December 31, 1999 and September 30, 2000 (Unaudited)

<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------ -------------
(unaudited)
ASSETS (in millions)
<S> <C> <C>
Current assets
Cash and cash equivalents......................... $ .4 $ --
Accounts receivable
Trade--less allowance for doubtful accounts of
$1,000,000 and $2,962,000, respectively........ 83.2 79.2
Railroad incentives............................. 2.7 1.7
Shareholders and employees...................... .2 .1
Accounts receivable, Maersk, Inc. .............. -- 1.0
Affiliated entities............................. .1 .1
Other........................................... .4 .3
Investment in Maersk Rail Van..................... -- .6
Prepaid expenses and other current assets......... .3 .7
----- -----
Total current assets............................ 87.3 83.7
----- -----
Property and equipment, net....................... 4.3 5.6
Investment in Ratliff Logistics................... .2 .3
Other assets...................................... .3 .2
----- -----
Total assets........................................ $92.1 $89.8
===== =====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
Trade........................................... $57.7 $54.0
Bank overdrafts................................. 8.2 2.2
Customer incentives............................. 1.3 .5
Revolving line of credit.......................... 11.3 22.9
Shareholder distributions payable................. 1.2 .4
Current maturities of capital lease obligations... .2 .1
Minority interest--Maersk, Inc. .................. -- .6
Other accrued liabilities......................... 2.1 1.7
----- -----
Total current liabilities....................... 82.0 82.4
Capital lease obligations........................... .8 1.0
----- -----
Total liabilities................................... 82.8 83.4
----- -----
Shareholders' equity
Class A common stock, no par value; 60 shares
authorized, issued and outstanding............... -- --
Class B common stock, no par value; 7,140 shares
authorized, issued and outstanding............... -- --
Retained earnings................................. 9.3 6.4
----- -----
Total shareholders' equity...................... 9.3 6.4
----- -----
Total liabilities and shareholders' equity.......... $92.1 $89.8
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-51
<PAGE>

RAIL VAN, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1999 and the Nine Months Ended September 30,
2000 (Unaudited) and 1999 (Unaudited)

<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
December 31, September 30, September 30,
1999 2000 1999
------------ ------------- -------------
(unaudited) (unaudited)
(in millions)
<S> <C> <C> <C>
Net revenues......................... $513.1 $364.4 $368.8
Line haulage expenses................ 474.5 332.5 341.4
------ ------ ------
Gross profit....................... 38.6 31.9 27.4
Selling, general and administrative
expenses............................ 33.9 31.6 23.9
------ ------ ------
Income from operations............. 4.7 .3 3.5
------ ------ ------
Other income (expense)
Interest expense................... (.8) (.9) (.6)
Equity income from Ratliff
Logistics......................... .1 -- .1
Other, net......................... -- .1 --
------ ------ ------
(.7) (.8) (.5)
------ ------ ------
Net income (loss).................... $ 4.0 $ (.5) $ 3.0
====== ====== ======
</TABLE>

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

F-52
<PAGE>

RAIL VAN, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Year Ended December 31, 1999 and the Nine Months Ended September 30,
2000 (Unaudited)

<TABLE>
<CAPTION>
Common Stock
-------------------------- Total
Number Number Retained Shareholders'
of Shares of Shares Amount Earnings Equity
--------- --------- ------ -------- -------------
Class A Class B (in millions)
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1999.... 60 7,140 $ -- $ 7.7 $ 7.7
Net income................. -- -- -- 4.0 4.0
Distributions to
shareholders ($342.90 per
share).................... -- -- -- (2.4) (2.4)
--- ----- ----- ----- -----
Balances, December 31, 1999.. 60 7,140 -- 9.3 9.3

Unaudited:
Net loss................... -- -- -- (.5) (.5)
Distributions to
shareholders ($330.95 per
share).................... -- -- -- (2.4) (2.4)
--- ----- ----- ----- -----
Balances, September 30,
2000........................ 60 7,140 $ -- $ 6.4 $ 6.4
=== ===== ===== ===== =====
</TABLE>

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

F-53
<PAGE>

RAIL VAN, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 1999 and the Nine Months Ended September 30,
2000 (Unaudited) and 1999 (Unaudited)

<TABLE>
<CAPTION>
Nine Months Ended
---------------------------
December 31, September 30, September 30,
1999 2000 1999
------------ ------------- -------------
(unaudited) (unaudited)
(in millions)
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss)................... $ 4.0 $ (.5) $ 3.0
Adjustment to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation........................ .9 1.4 .7
Provision for doubtful accounts..... .6 2.0 .5
Income from investment in Ratliff
Logistics.......................... (.1) -- (.1)
Change in certain assets and
liabilities:
Accounts receivable............... (20.2) 2.2 5.8
Other assets...................... (.4) (.3) (.2)
Accounts payable--trade........... 9.2 (3.8) (3.7)
Customer incentives............... .4 (.8) .1
Accrued expenses.................. .8 (.4) 1.0
------ ----- -----
Net cash provided by (used in)
operating activities........... (4.8) (.2) 7.1
------ ----- -----
Cash flows from investing activities
Capital expenditures................ (1.8) (2.4) (1.3)
Investment in Maersk Rail Van....... -- (.6) --
Proceeds from disposal of assets.... .2 -- .2
------ ----- -----
Net cash used in investing
activities....................... (1.6) (3.0) (1.1)
------ ----- -----
Cash flows from financing activities
Net proceeds (payments) on revolving
line of credit..................... 3.4 11.7 (4.0)
Net bank overdraft increase
(decrease)......................... 5.2 (6.0) .7
Capital contribution from minority
interest........................... -- .6 --
Payment of capital lease
obligations........................ (.2) (.3) (.1)
Distributions to shareholders....... (2.4) (3.2) (2.4)
------ ----- -----
Net cash provided by (used in)
financing activities............. 6.0 2.8 (5.8)
------ ----- -----
Net increase (decrease) in cash and
cash equivalents..................... (.4) (.4) .2
Cash and cash equivalents, beginning
of period............................ .8 .4 .8
------ ----- -----
Cash and cash equivalents, end of
period............................... $ .4 $ -- $ 1.0
====== ===== =====
Supplemental Cash Flow Disclosures
Cash paid for interest.............. $ .8 $ 1.0 $ .6
====== ===== =====
Shareholder distributions payable... $ 1.2 $ .4 $ .1
====== ===== =====
Equipment acquired under capital
leases............................. $ 1.2 $ .4 $ .9
====== ===== =====
</TABLE>

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

F-54
<PAGE>

RAIL VAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1999 and September 30, 2000 (unaudited) and 1999 (unaudited)

1. Description of Business

Rail Van, Inc. was organized in 1984. The Company's principal activity is
the conduct of operations as an intermodal marketing company specializing in
transportation and logistics management programs utilizing railroad and
trucking companies for national and international customers.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include Rail Van, Inc.
and its 99.9% owned subsidiary, Transportes Rail Van, S. de R.L. de C.V.
(collectively the Company). All significant intercompany transactions and
balances have been eliminated in consolidation. On December 22, 2000, the
Company was sold to Pacer International, Inc. The transaction was accounted
for as a purchase; accordingly, these financial statements are presented on a
historical basis and do not include any adjustments related to the acquisition
of the Company (see Note 11).

Interim Financial Information

The unaudited interim consolidated financial statements as of September 30,
2000 and for the nine-month periods ended September 30, 2000 and 1999 have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with the
instructions to Form 10Q and Article 10 of Regulation SX. Accordingly, they
may not contain all information required by accounting principles generally
accepted in the United States of America to be included in a full set of
financial statements. In the opinion of management, all adjustments,
consisting of only normal recurring adjustments, that are necessary for fair
presentation have been included. The results of operations for any interim
period are not necessarily indicative of the results of operations to be
expected for any full fiscal year.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and short-term investments with
an original maturity date of three months or less. Cash is maintained
primarily in one bank.

Property and Equipment

Property and equipment are recorded at cost. Significant additions or
improvements extending asset lives are capitalized, while maintenance and
repair costs are expensed as incurred. The cost and accumulated depreciation
for assets sold, retired or otherwise disposed of are removed from the
accounts at the time of disposition, and the resulting gains or losses are
reflected in operations.

Capitalized Software Costs

The Company capitalizes the cost of developing computer software for
internal use. Such costs include all direct external consulting fees and
purchased software costs. Capitalized costs are amortized over four years
using the straight-line method. Software costs capitalized during the year
ended December 31, 1999 and the nine months ended September 30, 2000
(unaudited) amounted to $1.2 million and $2.2 million, respectively.
Amortization of software costs for the year ended December 31, 1999 and the
nine months ended September 30, 2000 (unaudited) and 1999 (unaudited) was $.4
million, $.7 million and $.3 million, respectively.

Income Taxes

The Company's shareholders have elected to be treated as an S corporation
for federal and state income tax purposes. Accordingly, the Company is not
required to pay federal and state income taxes, and the Company's

F-55
<PAGE>

RAIL VAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1999 and September 30, 2000 (unaudited) and 1999 (unaudited)

shareholders include their respective share of the Company's taxable income in
their individual income tax returns.

Revenue Recognition

The Company recognizes revenue when shipments are complete. Provisions for
discounts and rebates from vendors and to customers are recognized when
earned.

Fair Value of Financial Instruments

The carrying amounts of trade accounts receivable, other assets, accounts
payable and accrued expenses approximate fair value due to their short-term
maturities. The carrying value of the revolving line of credit approximates
fair value due to its variable interest rate.

Advertising

Advertising costs are expensed as incurred. Advertising costs for the year
ended December 31, 1999 and the nine months ended September 30, 2000
(unaudited) and 1999 (unaudited) were $.2 million, $.1 million and $.2
million, respectively.

Concentration of Credit Risk and Major Customers

The Company's largest customer (consisting of nine divisions) and second
largest customer (consisting of 13 divisions) accounted for approximately 40%
and 14%, respectively, of the Company's year ended December 31, 1999 net
revenues and approximately 39% and 9%, respectively, and 39% and 16%,
respectively, of the Company's nine months ended September 30, 2000
(unaudited) and 1999 (unaudited) net revenues. Likewise, the Company's largest
customer and second largest customer comprised approximately 38% and 5%,
respectively, of the total trade receivable balances at December 31, 1999 and
approximately 30% and 7%, respectively, of the total trade receivable balances
at September 30, 2000 (unaudited). Credit risk associated with the Company's
trade receivables is limited due to the wide geographic, industry and
divisional dispersion of the Company's customers.

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 it provides. 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.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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

F-56
<PAGE>

RAIL VAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1999 and September 30, 2000 (unaudited) and 1999 (unaudited)

statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include allowance for doubtful
accounts and line haulage costs. Actual results could differ from those
estimates.

Recently Issued Accounting Pronouncements (unaudited)

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. SFAS 133 is effective for fiscal
years beginning after June 15, 2000, with earlier application encouraged. In
June 2000, the Financial Accounting Standards Board released Statement of
Financial Accounting Standards (SFAS) No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities--on Amendment to FASB
Statement No. 133, which modifies certain provisions and definitions in
accounting principles used in accounting for derivative instruments and
hedging activities. The Company is evaluating the possible effect, if any, of
SFAS No. 133 and has not yet determined the impact of this pronouncement, as
amended by SFAS No. 138.

In December 1999, the Securities and Exchange Commission (SEC) staff issued
Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial
Statements, as amended by Staff Accounting Bulletins No. 101A and 101B. These
bulletins summarize certain of the staff's views about applying accounting
principles generally accepted in the United States of America to revenue
recognition in financial statements. The Company will be required to follow
the guidance in SAB 101 no later than its fourth quarter of 2000, with
restatement of earlier quarters in 2001 required, if necessary. The SEC has
recently issued further guidance with respect to adoption of specific issues
addressed by SAB 101. The Company is currently assessing the impact, if any,
SAB 101 may have on its consolidated financial position or results of
operations.

3. Property and Equipment

Property and equipment and estimated useful lives consist of the following:

<TABLE>
<CAPTION>
December 31, September 30, Useful
1999 2000 Life
------------ ------------- -------
(unaudited)
(in millions)
<S> <C> <C> <C> <C>
Data processing equipment and
software........................... $ 4.0 $ 6.2 3 Years
Data processing equipment and
software under capital lease....... 1.2 1.6 4 Years
Furniture and other equipment....... 1.0 1.2 7 Years
----- -----
Property and equipment............ 6.3 9.0
Less accumulated depreciation..... (2.0) (3.4)
----- -----
Property and equipment, net..... $ 4.3 $ 5.6
===== =====
</TABLE>

4. Debt

At December 31, 1999, the Company had a $15.0 million revolving line of
credit agreement with a bank. Interest at December 31, 1999 was payable using
LIBOR rate plus 100 basis points (6.82% at December 31, 1999 and 7.62% at
September 30, 2000 (unaudited)) for amounts borrowed up to $5.0 million, and
amounts borrowed in excess of $5,000,000 are payable at the bank's prime rate
less 25 basis points (8.25% at December 31, 1999 and 9.25% at September 30,
2000 (unaudited)). Available amounts under the line of credit at December 31,
1999 amounted to approximately $3.7 million. The line of credit is
collateralized by substantially all assets of the Company and contains various
restrictive covenants including maintaining minimum amounts of tangible net
worth.

September 30, 2000 (unaudited):

In May 2000, the Company renegotiated and increased its revolving line of
credit to $19.0 million expiring on May 31, 2001. The new agreement has
substantially the same terms as the previous agreement. Based on a

F-57
<PAGE>

RAIL VAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1999 and September 30, 2000 (unaudited) and 1999 (unaudited)

verbal agreement, the bank allowed the Company to exceed the maximum
borrowings allowed under the line of credit for a short period of time as of
September 30, 2000. The Company reduced the amount outstanding to
approximately $12.6 million as of October 3, 2000. As of September 30, 2000,
the Company was not in compliance with certain of the restrictive covenants
contained in the revolving line-of-credit agreement; however, coincident with
the sale of the Company to Pacer International, Inc. (see Note 11), all
amounts outstanding under this agreement were paid and the agreement was
terminated.

5. Employee Benefit Plans

The Company provides retirement, long-term disability and health benefits
to substantially all employees principally through a defined contribution plan
and a group contract. Contributions are made at the discretion of the Board of
Directors, and the Company reserves the right to amend or terminate the plans
at any time. The plans cover substantially all employees who have met age
and/or service requirements.

The defined contribution plan is The Rail Van, Inc. Retirement Savings Plan
Trust (the Plan). At December 31, 1999 and at September 30, 2000 (unaudited),
the long-term disability income plan and the health benefits plan were under a
group contract with Unum.

The Plan is organized to provide a salary deferral under Section 401(k) of
the Internal Revenue Code. Under the Plan, eligible employees may defer up to
ten percent of their salary until retirement by making periodic contributions
to the nontaxable trust. The Company matches eligible employee contributions
at a rate of $.25 for each $1 of employee contributions. The Company's
contributions to the Plan totaled $.1 million, $.1 million and $.1 million for
the year ended December 31, 1999 and the nine months ended September 30, 2000
(unaudited) and 1999 (unaudited), respectively.

6. Leases and Related-Party Transactions

The Company has various noncancelable operating leases for office space,
equipment and automobiles.

During the year ended December 31, 1999 and for the nine months ended
September 30, 2000 (unaudited), the Company entered into several capital lease
obligations for office and data processing equipment and related software. The
cost of assets under capital leases was $1.2 million and $1.6 million and the
accumulated amortization was $.2 million and $.3 million at December 31, 1999
and September 30, 2000 (unaudited), respectively. Future minimum annual lease
payments for all leases and the present value of the net minimum lease
payments for capital leases are as follows as of December 31, 1999:

<TABLE>
<CAPTION>
Capital Operating
For the Year Ending December 31: Leases Leases
-------------------------------- ------- ---------
(in millions)
<S> <C> <C>
2000....................................................... $ .4 $1.0
2001....................................................... .4 .9
2002....................................................... .3 .7
2003....................................................... -- --
---- ----
Total minimum lease payments............................. 1.1 $2.6
====
Less amount representing interest........................ .1
----
Present value of net minimum lease payments................ 1.0
Less current maturities.................................. .2
----
Long-term obligation under capital leases.................. $ .8
====
</TABLE>

F-58
<PAGE>

RAIL VAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1999 and September 30, 2000 (unaudited) and 1999 (unaudited)

Rental expense for the year ended December 31, 1999 and the nine months
ended September 30, 2000 (unaudited) and 1999 (unaudited) was $2.5 million,
$1.9 million and $2.0 million, respectively.

The Company rents an aircraft from an affiliated corporation. Three of the
Company's shareholders are the principal shareholders of the affiliated
corporation. For the year ended December 31, 1999 and the nine months ended
September 30, 2000 (unaudited) and 1999 (unaudited), total rent expense for
use of the airplane was $1.0 million, $1.0 million and $.7 million,
respectively.

The Company had advances of $.1 million and $0 at December 31, 1999 and
September 30, 2000 (unaudited), respectively, to an affiliated corporation to
pay for general operating expenses for the aircraft. The Company received
payment of the advances from the affiliated corporation in 2000. In addition,
the Company had receivables from shareholders of $.2 million and $.1 million
at December 31, 1999 and September 30, 2000 (unaudited), respectively.

In April 2000, the Company entered into a 15-year building lease agreement
with an entity that is 50% owned by substantially all shareholders of the
Company. The lease will commence upon completion of building construction
which is estimated to be in March 2001. Annual rental commitments under this
lease range from $1.3 million to $1.7 million during the initial lease term.
The Company had advances of $0 and $.1 million at December 31, 1999 and
September 30, 2000 (unaudited), respectively, to an affiliated entity to pay
for various expenses for the new building.

7. Equity Investment

In August 1998, the Company acquired a 40% interest in Ratliff Logistics,
LLC (Ratliff), a joint venture with Ratliff Trucking Corporation, Inc., a
Michigan-based motor carrier, for $.1 million. The investment is accounted for
using the equity method.

Condensed financial information of Ratliff as of and for the year ended
December 31, 1999 and as of and for the nine months ended September 30, 2000
(unaudited) and 1999 (unaudited) is summarized as follows:

<TABLE>
<CAPTION>
December 31, September 30, September 30,
1999 2000 1999
------------ ------------- -------------
(unaudited) (unaudited)
(in millions)
<S> <C> <C> <C>
Current assets...................... $ 5.2 $ 3.8 $ 6.4
Noncurrent assets................... .8 .7 .8
Total liabilities................... 5.4 3.8 6.8
Members' equity..................... .5 .7 .5
Total revenues...................... 36.1 25.8 28.1
Net income.......................... .4 .1 .3
</TABLE>

8. Shareholders' Equity

The Company's common stock consists of Class A and Class B common stock.
Holders of Class A common stock are entitled to one vote per share; holders of
Class B common stock have no voting rights except as required by law. The
Company has a close corporation agreement among its shareholders. The
agreement provides for restrictions on stock transfers, sale and redemption of
common stock and provisions in the event of the death, disability or
retirement of a shareholder. The agreement was terminated upon the sale of the
Company (see Note 11).

F-59
<PAGE>

RAIL VAN, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 1999 and September 30, 2000 and 1999 (unaudited)

9. Contingencies

The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.

10. Agreements on Formation of Intermodal Joint Venture

On July 1, 1999, the Company and Maersk, Inc. (Maersk) entered into an
agreement to form Rail Van LLC and Maersk Rail Van LCC and the shareholders of
the Company entered into the Rail Van Buy Sell Shareholder Agreement
(Agreement). Pursuant to these agreements, on January 1, 2000, the Company
contributed its operating assets and liabilities to Rail Van LLC in exchange
for 99% of the member interests in Rail Van LLC, and Maersk contributed cash
of $.6 million in exchange for the remaining 1% member interest in Rail Van
LLC. In addition, on January 1, 2000, Maersk contributed certain of its
business services to Maersk Rail Van LLC in exchange for 99% of the member
interests in Maersk Rail Van LLC, and Rail Van LLC contributed cash of
$.6 million in exchange for the remaining 1% member interest in Maersk Rail
Van LLC. Pursuant to the Agreement, Maersk received the right to acquire all
of the outstanding shares of the Company at a price determined by a formula
set forth in the Agreement. This right may be exercised on the last day of
each quarter beginning September 30, 1999 through July 1, 2002 (see Note 11).

11. Subsequent Events (Unaudited)

Agreements on Formation of Intermodal Joint Venture

Effective November 10, 2000, the Company and Maersk entered into a mutual
redemption agreement to sever the relationships, rights and obligations
created by the Agreement. Pursuant to the mutual redemption agreement, Maersk
Rail Van LLC will pay Rail Van LLC $.6 million to redeem its 1% member
interest in Maersk Rail Van LLC. In addition, Rail Van LLC will pay Maersk $.6
million to redeem its 1% member interest in Rail Van LLC.

Sale of the Company to Pacer International, Inc. and Assignment of Transportes
Rail Van S. de R.L. de C.V.

On December 22, 2000, the Company's shareholders sold all of the common
stock of the Company to Pacer International, Inc. (Pacer). In connection
therewith, and immediately prior to the stock sale, the Company sold its
99.97% interest in Transportes Rail Van, S. de R.L. de C.V. (Transportes) to
an entity owned by substantially all selling shareholders of the Company.
Transportes was organized to provide certain services to Rail Van, Inc.
customers in Mexico. It is intended that these services will be provided by a
different entity organized by Pacer subsequent to its acquisition of the
Company. Operating revenues of Transportes for the year ended December 31,
1999 and the nine-month periods ended September 30, 2000 (unaudited) and 1999
(unaudited) were $63.0 million, $69.8 million and $59.6 million, respectively.
Coincident with the acquisition of the Company, all debt outstanding under the
Company's bank line of credit was refinanced by Pacer and the bank agreement
was terminated. Further, the shareholder agreement referred to in Note 8 was
terminated.

F-60
<PAGE>

[Photos/Graphics]
<PAGE>

[Pacer Logo]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

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

<TABLE>
<CAPTION>
Amount
To Be Paid
-------------
<S> <C>
SEC registration fee............................................. $ 37,500.00
NASD filing fee.................................................. $ 15,500.00
Nasdaq National Market listing fee............................... *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Blue Sky fees and expenses....................................... *
Transfer agent and registrar fees................................ *
Miscellaneous fees and expenses.................................. *
-------------
Total.......................................................... $ *
=============
</TABLE>
--------
* To be filed by amendment

Item 14. Indemnification of Directors and Officers.

Under the Tennessee Business Corporation Act ("TBCA"), there is no specific
provision either expressly permitting or prohibiting a corporation from
limiting the liability of its directors for monetary damages. Our amended and
restated charter provides that, to the fullest extent permitted by the TBCA, a
director will not be liable to the corporation or its shareholders for
monetary damages for breach of his or her fiduciary duty as a director.

In actions brought by or in the right of the corporation, however, the TBCA
does not allow indemnification if the director or officer is adjudged to be
liable to the corporation. Similarly, the TBCA prohibits indemnification in
connection with any proceeding charging improper personal benefit to a
director or officer if the director or officer is adjudged liable because a
personal benefit was improperly received.

II-1
<PAGE>

Our amended bylaws provide that we will indemnify and advance expenses to
our directors and officers to the fullest extent permitted by the TBCA. We
also maintain insurance to protect any director or officer against any
liability and will enter into indemnification agreements with each of our
directors.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under our charter. We are not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.

Item 15. Recent Sales of Unregistered Securities.

Common Stock and Preferred Stock. Set forth in chronological order is
information regarding shares of common stock and preferred stock issued by the
Registrant since January 1, 1997. All common stock share numbers have been
adjusted to reflect a 30,000 for 1 stock split effected in May 1999 and a
for stock split to be effected prior to the effectiveness of this
Registration Statement. Further included is the consideration, if any,
received by the Registrant for such shares and information relating to the
section of the Securities Act of 1933, as amended (the "Securities Act"), or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed.

1. In May 1999, the Registrant issued 750,000 shares of common stock to
APL Limited as consideration for the acquisition of all of the issued
and outstanding capital stock of APL Land Transport Services, Inc.

2. In May 1999, the Registrant issued 9,690,000 shares of common stock to
four accredited investors for an aggregate purchase price of $96.9
million, for $10.00 per share.

3. In May 1999 in connection with the acquisition of Pacer Logistics,
Pacer Logistics, a subsidiary of the Registrant, issued 24,333.94
shares of its Series B 7.5% Exchangeable Preferred Stock (1,985.5 of
which were subsequently redeemed by Pacer Logistics) to certain member
of management, which shares are exchangeable for shares of the
Registrant's common stock.

4. In May 1999, the Registrant issued $150 million principal amount of 11
3/4% Senior Subordinated Notes due 2009 to Morgan Stanley & Co.
Incorporated and Credit Suisse First Boston Corporation as initial
purchasers, which notes were resold to qualified institutional buyers
pursuant to Rule 144A. These notes were subsequently exchanged for
substantially similar notes registered under the Securities Act
pursuant to a registration statement on Form S-4.

5. In January 2000, the Registrant issued 300,000 shares of common stock
(valued at $6.0 million) to the former shareholders of Conex Global
Logistics Services in connection with the acquisition of substantially
all the assets of Conex and its subsidiaries.

6. In April 2000, the Registrant issued 287,373 shares of common stock to
three employees upon exercise of options for an aggregate purchase
price of $349,549.32.

7. In April 2000, the Registrant issued 10,000 shares of common stock to
a trust for the benefit of the family of an employee upon the exercise
of an option for an aggregate purchase price of $100,000.

8. In August 2000, the Registrant issued 20,000 shares of common stock to
an employee upon the exercise of an option for the aggregate purchase
price of $200,000.

9. In September 2000, the Registrant issued 20,000 shares of common stock
to a trust for the benefit of an employee upon the exercise of an
option for the aggregate purchase price of $200,000.

10. In November 2000, the Registrant issued 4,000 shares of common stock
to a former employee upon the exercise of an option for the aggregate
purchase price of $40,000.

11. In December 2000, the Registrant issued 280,000 shares of common stock
(valued at $7.0 million) to the former shareholders of Rail Van, Inc.
in connection with the purchase of all the capital stock of Rail Van,
Inc.

II-2
<PAGE>

Options. The Registrant from time to time has granted stock options to
employees, directors and consultants. The following table sets forth certain
information regarding such grants.

<TABLE>
<CAPTION>
Number of Exercise
Shares Price
--------- --------
<S> <C> <C>
January 1, 1997 to December 31, 1997......................... 470,247 $ 0.83
January 1, 1998 to December 31, 1998......................... 29,364 $ 8.61
January 1, 1999 to May 27, 1999.............................. 63,250 $10.00
May 28, 1999 to December 31, 1999............................ 1,060,500 $10.71
January 1, 2000 to October 31, 2000.......................... 381,500 $22.95
</TABLE>

All of the above-described issuances were exempt from registration (i)
pursuant to Section 4(2) of the Securities Act, or Regulation D or Rule 144A
promulgated thereunder, as transactions not involving a public offering or
(ii) Rule 701 promulgated under the Securities Act or (iii) as transactions
not involving a sale of securities. With respect to each transaction listed
above, no general solicitation was made by either the Registrant or any person
acting on its behalf; the securities sold are subject to transfer
restrictions, and the certificates for the shares contained an appropriate
legend stating such securities have not been registered under the Securities
Act and may not be offered or sold absent registration or pursuant to an
exemption therefrom. Except with respect to item 4 above, no underwriters were
involved in connection with the sales of securities referred to in this Item
15.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1 Form of Underwriting Agreement*

3.1 Amended and Restated Charter of Pacer International, Inc.
(Incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-4 (Reg. No. 333-85041) filed with the
Securities and Exchange Commission (the "Commission") on November 5,
1999.

3.2 Articles of Amendment of Charter*

3.3 Form of Second Amended and Restated Charter of Pacer International,
Inc.*

3.4 Amended and Restated Bylaws of Pacer International, Inc. (Incorporated
by reference to Exhibit 3.2 to the Registrant's Registration Statement
on Form S-4 dated November 5, 1999).

3.5 Form of Second Amended and Restated Bylaws of Pacer International,
Inc.*

3.6 Form of Certificate for Common Stock*

4.1 Indenture, dated as of May 28, 1999, among Pacer International, Inc.
the Guarantors and Wilmington Trust Company, as Trustee (including
form of 11 3/4% Senior Subordinated Notes due 2007) (Incorporated by
reference to Exhibit No. 4.2 to the Registrant's Registration
Statement on Form S-4 dated August 12, 1999).

4.2 Form of 11 3/4% Senior Subordinated Notes due 2007 (filed as part of
Exhibit 4.1). (Incorporated by reference to Exhibit 4.3 to the
Registrant's Registration Statement on Form S-4 dated August 12,
1999).

4.3 First Supplemental Indenture dated as of January 13, 2000, among Pacer
International, Inc., Conex Acquisition Corporation and Wilmington
Trust Company. (Incorporated by reference to Exhibit No. 10.25 to the
Annual Report on Form 10-K dated March 30, 2000)

4.4 Second Supplemental Indenture dated as of August 31, 2000, among Pacer
International, Inc., GTS Transportation and Wilmington Trust Company.

4.5 Third Supplemental Indenture dated as of October 31, 2000, among Pacer
International, Inc., RFI Group, RFI International Ltd., Ocean World
Lines, International Logistics Management, Inc. and Wilmington Trust
Company.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
4.6 Fourth Supplemental Indenture dated as of December 22, 2000, among
Pacer International, Inc., Rail Van, Inc., Rail Van LLC and Wilmington
Trust Company.*

4.7 Shareholders' Agreement, dated as of May 28, 1999, among APL Limited,
Pacer International, Inc., Coyote Acquisition LLC and Coyote
Acquisition II LLC. (Incorporated by reference to Exhibit No. 4.12 to
the Registrant's Registration Statement on Form S-4 dated August 12,
1999).

4.8 Shareholders' Agreement, dated as of May 28, 1999, by and among Pacer
International, Inc., Coyote Acquisition LLC and Coyote Acquisition II
LLC and The Management Stockholders. (Incorporated by reference to
Exhibit No. 4.13 to the Registrant's Registration Statement on Form S-
4 dated August 12, 1999).

4.9 Shareholders' Agreement, dated as of May 28, 1999, by and among Pacer
International, Inc., Coyote Acquisition LLC and Coyote Acquisition II
LLC, BT Capital Investors, L.P. and Pacer International Equity
Investors, LLC. (Incorporated by reference to Exhibit No. 4.14 to the
Registrant's Registration Statement on Form S-4 dated August 12,
1999).

4.10 Registration Rights Agreement, dated as of May 28, 1999, between Pacer
International, Inc. and the Purchasers named therein. (Incorporated by
Reference to Exhibit No. 4.18 to the Registrant's Registration
Statement on Form S-4 dated August 12, 1999).

4.11 Registration Rights Agreement, dated as of May 28, 1999 between Pacer
International, Inc., Coyote Acquisition LLC and Coyote Acquisition II
LLC.

5.1 Opinion of Bass Berry & Sims PLC*

10.1 Employment Agreement for Donald C. Orris. (Incorporated by reference
to Exhibit No. 10.1 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.2 Employment Agreement for Gerry Angeli. (Incorporated by reference to
Exhibit No. 10.2 to the Registrant's Registration Statement on Form S-
4 dated November 5, 1999).

10.3 Employment Agreement for Gary I. Goldfein. (Incorporated by reference
to Exhibit No. 10.3 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.4 Employment Agreement for Robert L. Cross. (Incorporated by reference
to Exhibit No. 10.4 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.5 Employment Agreement for Allen E. Steiner. (Incorporated by reference
to Exhibit No. 10.5 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.6 Credit Agreement, dated as of May 28, 1999, among Pacer International,
Inc., the lenders party thereto from time to time, Morgan Stanley
Senior Funding, Inc., as Syndication Agent, Credit Suisse First Boston
Corporation, as Documentation Agent and Bankers Trust Company, as
Administrative Agent. (Incorporated by reference to Exhibit No. 4.1 to
the Registrant's Registration Statement on Form S-4 dated August 12,
1999).

10.7 First Amendment dated August 9, 1999, among Pacer International, Inc.,
the lending institutions party to the Pacer International, Inc. Credit
Agreement dated May 28, 1999, Credit Suisse First Boston, Morgan
Stanley Senior Funding, Inc., and Bankers Trust Company. (Incorporated
by reference to Exhibit No. 10.26 to the Annual Report on Form 10-K
dated March 30, 2000)

10.8 Second Amendment dated January 7, 2000, among Pacer International,
Inc., the Lending institutions party to the Pacer International, Inc.
Credit Agreement dated May 28, 1999, Credit Suisse First Boston,
Morgan Stanley Senior Funding, Inc., and Bankers Trust Company.
(Incorporated by reference to Exhibit No. 10.27 to the Annual Report
on Form 10-K dated March 30, 2000)
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.9 Third Amendment dated December 22, 2000 among Pacer International,
Inc., the lending institutions parties to the Pacer International,
Inc. Credit Agreement dated May 28, 1999, Credit Suisse First Boston,
Morgan Stanley Senior Funding, Inc. and Bankers Trust Company.*

10.10 Stock Purchase Agreement, dated as of March 15, 1999, between APL
Limited And Coyote Acquisition LLC. (Incorporated by reference to
Exhibit No. 4.4 to the Registration Statement on Form S-4 dated August
12, 1999).

10.11 Non-Competition Agreement, dated as of May 28, 1999, among Neptune
Orient Lines Limited, APL Limited, Pacer International, Inc. and
Coyote Acquisition LLC. (Incorporated by reference to Exhibit No. 4.5
to the Registration Statement on Form S-4 dated August 12, 1999).

10.12 Administrative Services Agreement, dated as of May 29, 2000, between
APL Limited and Pacer International, Inc.

10.13 IT Supplemental Agreement, dated as of May 11, 1999, between APL
Limited, APL Land Transport Services, Inc. and Coyote Acquisition LLC.
(Incorporated By reference to Exhibit 10.10 to the Registration
Statement on Form S-4 dated November 5, 1999).

10.14 Stacktrain Services Agreement, dated as of May 28, 1999, among
American President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and
Pacer International, Inc. (Incorporated by reference to Exhibit No.
4.8 to the Registration Statement on Form S-4 dated August 12, 1999).

10.15 TPI Chassis Sublet Agreement, dated as of May 28, 1999, among American
President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer
International, Inc. (Incorporated by reference to Exhibit No. 4.9 to
the Registration Statement on Form S-4 dated August 12, 1999).

10.16 Equipment Supply Agreement, dated as of May 28, 1999, among American
President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer
International, Inc. (Incorporated by reference to Exhibit No. 4.10 to
the Registration Statement on Form S-4 dated August 12, 1999).

10.17 Primary Obligation and Guaranty Agreement, dated as of March 15, 1999,
by Neptune Orient Lines Limited in favor of Coyote Acquisition LLC and
APL Land Transport Services, Inc. (Incorporated by reference to
Exhibit No. 4.11 to the Registration Statement on Form S-4 dated
August 12, 1999).

10.18 Management Agreement, dated as of May 28, 1999, between Apollo
Management IV, L.P. and Pacer International, Inc. (Incorporated by
reference to Exhibit No. 4.15 to the Registration Statement on
Form S-4 dated August 12, 1999).

10.19 Tax Sharing Agreement, dated as of May 28, 1999, by and among Coyote
Acquisition LLC, Pacer International, Inc. and Pacer Logistics, Inc.
(Incorporated by reference to Exhibit No. 4.16 to the Registration
Statement on Form S-4 dated August 12, 1999).

10.20 Intermodal Transportation Agreement No. 1111, dated as of May 4, 1999
Between CSX Intermodal, Inc., APL Land Transport Services, Inc., APL
Limited and APL Co. Pte. Ltd. (Incorporated by reference to Exhibit
No. 10.19 to the Registration Statement on Form S-4 dated November 5,
1999).

10.21 Domestic Incentive Agreement, dated as of May 4, 1999, between CSX
Intermodal, Inc. and Pacer International, Inc. (Incorporated by
reference to Exhibit No. 10.20 to the Registration Statement on Form
S-4 dated November 5, 1999).

10.22 Rail Transportation Agreement, dated as of October 11, 1996, between
Union Pacific Railroad Company, APL Land Transport Services, Inc.,
American President Lines, Ltd., and APL Co. Pte. Ltd. (Incorporated by
reference to Exhibit No. 10.21 to the Registration Statement on Form
S-4 dated November 5, 1999).
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.23 Asset Purchase Agreement dated December 31, 1999, among Conex
Acquisition Corporation, Conex Global Logistics Services, Inc., MSL
Transportation Group, Inc., Jupiter Freight, Inc. The Michael W.
Keller Living Trust, The Uchida Family Trust, Michael Keller and
Shigehiro Uchida (Incorporated by reference to Exhibit No. 2.1 to the
Current Report on Form 8-K dated January 13, 2000).

10.24 Amendment dated January 12, 2000 to Asset Purchase Agreement dated
December 31, 2000 (Incorporated by reference to Exhibit 2.2 of the
Registrant's Current Report on Form 8-K dated January 13, 2000).

10.25 Employment Agreement dated January 13, 2000, between Conex Acquisition
Corporation and Michael Keller. (Incorporated by reference to Exhibit
No. 10.23 to the Annual Report on Form 10-K dated March 30, 2000)

10.26 Employment Agreement dated January 13, 2000, between Conex Acquisition
Corporation and Shigehiro Uchida. (Incorporated by reference to
Exhibit No. 10.24 to the Annual Report on Form 10-K dated March 30,
2000)

10.27 Equipment Services Agreement dated December 31, 1999 among
Transamerica Leasing, Inc., Pacer Logistics, Inc. and the Registrant
(Incorporated by reference to the Registrant's Quarterly Report on
Form 10-Q for the Quarter Ended April 7, 2000)

10.28 Rail Car Lease Agreement dated September 1, 2000 among GATX Third
Aircraft Corporation and the Registrant (Incorporated by reference to
the Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
September 22, 2000)

10.29 Pacer International, Inc. 1999 Stock Option Plan.

10.30 Stock Purchase Agreement, dated August 31, 2000 by and among Pacer
International, Inc., GTS Transportation Services, Inc. and All of the
Shareholders of GTS Transportation Services, Inc.

10.31 Stock Purchase Agreement, dated October 31, 2000 by and among Pacer
International, Inc., All of the Stockholders of RFI Group, Inc.,
Everett Fleisig, Bernard W. Robbins, and Certain Trusts that are
owners of Certain Stockholders of RFI Group, Inc.

10.32 Employment Agreement, dated as of October 31, 2000, between Pacer
International Inc. and Mitchel Robbins.

10.33 Employment Agreement, dated as of October 31, 2000, between Pacer
International, Inc. and Allan Baer.

10.34 Stock Purchase Agreement, dated December 18, 2000 by and among Pacer
International, Inc., Rail Van, Inc., Rail Van LLC and All of the
Shareholders of Rail Van, Inc.*

10.35 Equipment Use Agreement, dated May 28, 1999, between PAMC UC and Pacer
International, Inc.

21.1 Subsidiaries of Registrant

23.1 Consent of Bass Berry & Sims PLC (included in Exhibit 5.1)*

23.2 Consent of PricewaterhouseCoopers LLP

23.3 Consent of Arthur Andersen LLP

24.1 Powers of Attorney (included on the signature page)

27.1 Financial Data Schedule
</TABLE>
--------
* To be filed by amendment

II-6
<PAGE>

(b) Financial Statement Schedules:
Report of Independent Public Accountants on Financial Statement Schedule
(PricewaterhouseCoopers LLP)
Report of Independent Public Accountants on Financial Statement Schedule
(Arthur Andersen LLP)
Schedule II -- Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions, are inapplicable or not material, or the information called for
thereby is otherwise included in the financial statements and therefore have
been omitted.

Undertakings.

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

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

The Registrant undertakes that:

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

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

II-7
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver, State of
Colorado, on December 22, 2000.

Pacer International, Inc.

/s/ Donald C. Orris
By: _________________________________
Donald C. Orris
Chairman, President and
Chief Executive Officer

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Donald C. Orris,
Lawrence C. Yarberry and James M. Lurie, and each of them individually, with
full power of substitution and resubstitution, his or her true and lawful
attorney-in fact and agent, with full powers to each of them to sign for us,
in our names and in the capacities indicated below, the Registration Statement
on Form S-1 filed with the Securities and Exchange Commission, and any and all
amendments to said Registration Statement (including post-effective
amendments), and any registration statement filed pursuant to Rule 462(b)
under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity
securities of the Registrant, and to file or cause to be filed the same, with
all exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this
Power of Attorney. This power of attorney may be executed in counterparts and
all capacities to sign any and all amendments.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Donald C. Orris Chairman, President and December 22, 2000
_________________________________ Chief Executive Officer
Donald C. Orris

/s/ Lawrence C. Yarberry Executive Vice President and December 22, 2000
_________________________________ Chief Financial Officer
Lawrence C. Yarberry

/s/ Joseph P. Atturio Vice President, Controller December 22, 2000
_________________________________ and Secretary
Joseph P. Atturio

/s/ Joshua J. Harris Director December 22, 2000
_________________________________
Joshua J. Harris

/s/ Bruce M. Spector Director December 22, 2000
_________________________________
Bruce M. Spector
</TABLE>

II-8
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<S> <C> <C>
/s/ Marc E. Becker Director December 22, 2000
_________________________________
Marc E. Becker

/s/ Timothy J. Rhein Director December 22, 2000
_________________________________
Timothy J. Rhein

/s/ Michael S. Gross Director December 22, 2000
_________________________________
Michael S. Gross

/s/ Thomas L. Finkbiner Director December 22, 2000
_________________________________
Thomas L. Finkbiner
</TABLE>

II-9
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of Pacer International, Inc.:

Our audit of the consolidated financial statements referred to in our
report dated March 14, 2000, except for information regarding the
reclassification in 2000 as described in Note 1, as to which the date is
November 3, 2000 appearing in this Registration Statement on Form S-1 of Pacer
International, Inc. also included an audit of the financial statement schedule
listed in Item 16 of this Registration Statement. In our opinion, this
financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

San Francisco, California
March 14, 2000

S-1
<PAGE>

Report of Independent Public Accountants on Financial Statement Schedule

To APL Land Transport Services, Inc.,
a wholly-owned subsidiary of APL Limited:

We have audited in accordance with generally accepted auditing standards,
the financial statements of American President Lines Stacktrain Services (a
division of APL Land Transport Services, Inc.) included in this registration
statement and have issued our report thereon dated January 29, 1999, except
with respect to the reclassification discussed in Note 1, as to which the date
is November 3, 2000. Our audit was made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The schedule listed in
Item 16 of this registration statement is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to set forth therein in
relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Memphis, Tennessee,
January 29, 1999

S-2
<PAGE>

Schedule II

Pacer International, Inc.

Valuation and Qualifying Accounts

For the interim period ended September 22, 2000 (unaudited) the
fiscal years ended December 31, 1999 and December 25, 1998 and the
period November 13, 1997 through December 26, 1997 and
December 28, 1996 through November 12, 1997

<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
------------------------------------------------------------------------------------------ --------------
Balances at Additions Balances at
Beginning (Charged)/ End of
of Fiscal Credited to Fiscal
Description Period Income Deductions(1) Other Period
------------------------------------------------------------------------------------------ --------------
<S> <C> <C> <C> <C> <C>

September 22, 2000 (unaudited):
------------------
Allowance for doubtful
accounts................. $(3.0) $(1.2) $0.9 $(1.3)(2) $(4.6)

December 31, 1999
-----------------
Allowance for doubtful
accounts................. $(0.7) $(0.8) $0.4 $(1.9)(3) $(3.0)

December 25, 1998
-----------------
Allowance for doubtful
accounts................. $(0.9) $ - $ - $ 0.2(4) $(0.7)

December 26, 1997
-----------------
Allowance for doubtful
accounts................. $(0.8) $(0.1) $ - $ - $(0.9)

November 12, 1997
-----------------
Allowance for doubtful
accounts................. $(0.7) $(0.3) $0.2 $ - $(0.8)

</TABLE>

_________

(1) Represents write-off of amounts.
(2) Consists of allowances acquired as part of the Conex and GTS acquisitions.
(3) Represents the historical allowance recorded on Pacer Logistics books at
the date of acquisition.
(4) Represents a reduction of the allowance based on historical analysis.

S-3

<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1 Form of Underwriting Agreement*

3.2 Articles of Amendment of Charter*

3.3 Form of Second Amended and Restated Charter of Pacer International,
Inc.*

3.4 Amended and Restated Bylaws of Pacer International, Inc. (Incorporated
by reference to Exhibit 3.2 to the Registrant's Registration Statement
on Form S-4 dated November 5, 1999).

3.5 Form of Second Amended and Restated Bylaws of Pacer International,
Inc.*

3.6 Form of Certificate for Common Stock*

4.4 Second Supplemental Indenture dated as of August 31, 2000, among Pacer
International, Inc., GTS Transportation and Wilmington Trust Company.

4.6 Fourth Supplemental Indenture dated as of December 22, 2000, among
Pacer International, Inc., Rail Van, Inc., Railvan LLC and Wilmington
Trust Company.*

4.11 Registration Rights Agreement, dated as of May 28, 1999 between Pacer
International, Inc., Coyote Acquisition LLC and Coyote Acquisition II
LLC.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
5.1 Opinion of Bass Berry & Sims PLC*

10.1 Employment Agreement for Donald C. Orris. (Incorporated by reference
to Exhibit No. 10.1 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.2 Employment Agreement for Gerry Angeli. (Incorporated by reference to
Exhibit No. 10.2 to the Registrant's Registration Statement on Form S-
4 dated November 5, 1999).

10.3 Employment Agreement for Gary I. Goldfein. (Incorporated by reference
to Exhibit No. 10.3 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.4 Employment Agreement for Robert L. Cross. (Incorporated by reference
to Exhibit No. 10.4 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.5 Employment Agreement for Allen E. Steiner. (Incorporated by reference
to Exhibit No. 10.5 to the Registrant's Registration Statement on Form
S-4 dated November 5, 1999).

10.9 Third Amendment dated December 22, 2000 among Pacer International,
Inc., the lending institutions parties to the Pacer International,
Inc. Credit Agreement dated May 28, 1999, Credit Suisse First Boston,
Morgan Stanley Senior Funding, Inc. and Bankers Trust Company.*

10.12 Administrative Services Agreement, dated as of May 29, 1999, between
APL Limited and Pacer International, Inc.

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.15 TPI Chassis Sublet Agreement, dated as of May 28, 1999, among American
President Lines, Ltd., APL Co. Pte. Ltd., APL Limited and Pacer
International, Inc. (Incorporated by reference to Exhibit No. 4.9 to
the Registration Statement on Form S-4 dated August 12, 1999).

10.23 Asset Purchase Agreement dated December 31, 1999, among Conex
Acquisition Corporation, Conex Global Logistics Services, Inc., MSL
Transportation Group, Inc., Jupiter Freight, Inc. The Michael W.
Keller Living Trust, The Uchida Family Trust, Michael Keller and
Shigehiro Uchida (Incorporated by reference to Exhibit No. 2.1 to the
Current Report on Form 8-K dated January 13, 2000).

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.29 Pacer International, Inc. 1999 Stock Option Plan.

10.30 Stock Purchase Agreement, dated August 31, 2000 by and among Pacer
International, Inc., GTS Transportation Services, Inc. and All of the
Shareholders of GTS Transportation Services, Inc.

10.32 Employment Agreement, dated as of October 31, 2000, between Pacer
International Inc. and Mitchel Robbins.

10.33 Employment Agreement, dated as of October 31, 2000, between Pacer
International, Inc. and Allan Baer.

10.34 Stock Purchase Agreement, dated December 22, 2000 by and among Pacer
International, Inc., Rail Van, Inc. and All of the Stockholders of
Rail Van, Inc.*

10.35 Equipment Use Agreement, dated May 28, 1999, between PAMC UC and Pacer
International, Inc.

21.1 Subsidiaries of Registrant

23.1 Consent of Bass Berry & Sims PLC (included in Exhibit 5.1)*

23.2 Consent of PricewaterhouseCoopers LLP

23.3 Consent of Arthur Andersen LLP

24.1 Powers of Attorney (included on the signature page)

27.1 Financial Data Schedule
</TABLE>
--------
* To be filed by amendment