Edgar Filing: PACER INTERNATIONAL INC/TN

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 11, 2002

REGISTRATION NO. 333-53700

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

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)

TENNESSEE 4731 62-0935669
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)

2300 CLAYTON ROAD, SUITE 1200

CONCORD, CALIFORNIA 94520

(887) 917-2237

(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:

JAMES M. LURIE JOHN A. TRIPODORO
O'SULLIVAN 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

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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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Common stock, $0.01 par value $225,000,000.00 $37,500.00(1)

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(1)Previously paid.

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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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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 an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL 11, 2002

PACER INTERNATIONAL, INC.

COMMON STOCK

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We are selling shares of common stock and the selling stockholders
are selling shares of common stock.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. We have applied to list our common stock on
The Nasdaq Stock Market's National Market under the symbol "PACR."

The underwriters have an option to purchase a maximum of additional
shares from the selling stockholders to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 8.

UNDERWRITING
DISCOUNTS PROCEEDS TO
PRICE TO AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS PACER STOCKHOLDERS
-------- ------------ ----------- ------------

Per Share $ $ $ $
Total.... $ $ $ $

Delivery of the shares of common stock will be made on or about ,
2002.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

CREDIT SUISSE FIRST BOSTON BEAR, STEARNS & CO. INC.

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DEUTSCHE BANK SECURITIES

JPMORGAN

UBS WARBURG

THE DATE OF THIS PROSPECTUS IS , 2002.

[PHOTOS/GRAPHICS]

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TABLE OF CONTENTS

PAGE
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PROSPECTUS SUMMARY..................... 1
RISK FACTORS........................... 8
SPECIAL NOTE REGARDING FORWARD-
LOOKING STATEMENTS................... 17
USE OF PROCEEDS........................ 18
DIVIDEND POLICY........................ 18
CAPITALIZATION......................... 19
DILUTION............................... 21
SELECTED FINANCIAL INFORMATION......... 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................... 25
BUSINESS............................... 42
MANAGEMENT............................. 59
PRINCIPAL AND SELLING STOCKHOLDERS..... 66

PAGE
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CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS..................... 69
DESCRIPTION OF CERTAIN INDEBTEDNESS 76
DESCRIPTION OF CAPITAL STOCK....... 80
SHARES ELIGIBLE FOR FUTURE SALE.... 87
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES TO NON-U.S. HOLDERS
OF COMMON STOCK.................. 88
UNDERWRITING....................... 91
NOTICE TO CANADIAN RESIDENTS....... 94
LEGAL MATTERS...................... 95
EXPERTS............................ 95
ADDITIONAL INFORMATION............. 95
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS....................... F-1

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THIS
DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE SECURITIES. THE
INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE ON THE DATE OF THIS DOCUMENT.

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 2002 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING
AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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. References to our wholesale operations include our stacktrain
operations and references to our retail operations include our intermodal
marketing, truck brokerage and services, international freight forwarding,
supply chain management services and freight consolidation and handling.

PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS
BUT MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. BEFORE
INVESTING IN OUR COMMON STOCK, YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY,
INCLUDING THE "RISK FACTORS" SECTION AND THE CONSOLIDATED FINANCIAL STATEMENTS
AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OUR BUSINESS

We are a leading North American non-asset based logistics provider. Within
North America, we are one of the largest truck brokers, and we are one of the
largest intermodal marketing companies, which facilitate the movement of
freight by trailer or container using two or more modes of transportation. With
one of the largest ground-based networks in North America, we were responsible
for approximately 25% of all U.S. intermodal rail container shipments in 2001.
According to Armstrong & Associates, total expenditures managed by third party
logistics service providers in North America grew at a compounded annual rate
of approximately 16% between 1998 and 2001. We believe our size, geographic
scope and comprehensive service offering provide us with distinct competitive
advantages to capitalize on this growth trend. These advantages include: the
ability to pass volume rate savings and economies of scale to our customers; a
significant opportunity to cross-sell services to existing customers; the
flexibility to tailor services to our customers' needs in rapidly changing
freight markets; and the ability to provide more reliable and consistent
services. Using our proprietary information systems, we provide logistics
services to numerous Fortune 500 and multi-national companies, including Ford,
General Electric, Heinz, Wal-Mart, ConAgra, Whirlpool, Union Pacific, Sony and
CompUSA, which together represented 23% of our 2001 gross revenues, as well as
numerous middle-market companies. We utilize a non-asset based strategy in
which we seek to limit our investment in equipment and facilities and reduce
working capital requirements through arrangements with transportation carriers
and equipment providers. This strategy provides us with access to freight
terminals and facilities and control over transportation-related equipment
without owning assets.

We provide our logistics services from two operating segments, our retail
segment which provides services principally to end-user customers and our
wholesale segment which provides services principally to transportation
intermediaries and international shipping companies. We believe the unique
combination of our wholesale and retail products and our ability to provide a
comprehensive portfolio of services in rapidly changing freight markets
provides us with competitive advantages by presenting significant opportunities
for enhanced growth and operational synergies. For example, from 2000 to 2001,
revenues generated by our wholesale segment which were originated by our retail
segment increased from approximately $37 million to $91 million.

RETAIL

. INTERMODAL MARKETING--We are one of the largest intermodal marketing
companies in North America. We arrange for and optimize the movement
of our customers' freight in containers and trailers utilizing truck
and rail transportation. These services are provided both internally
through our wholesale service and our truck brokerage and services
division, and externally through third-party rail and truck carriers.
We provide customized tracking of shipments and analysis of charges,
negotiate transportation rates, consolidate billing and handle claims
for freight loss or damage on behalf of our customers.

. TRUCK BROKERAGE AND SERVICES--We are one of the largest truck brokers
in North America. We arrange the movement of freight in containers or
trailers by truck using a nationwide network of over 5,000
independent trucking contractors. By utilizing our aggregate volumes
to negotiate rates, we are able to provide high quality service at
attractive prices. We also arrange for local trucking and flatbed and
specialized heavy-haul trucking services on behalf of our customers.
Our local trucking services are largely provided in and around major
U.S. cities as an integral part of our wholesale, intermodal
marketing and freight consolidation and handling product offerings.
We provide these services through our independent agents and
contractors who operate a fleet of over 1,400 trucks.

. INTERNATIONAL FREIGHT FORWARDING--We provide our customers with
services necessary to move freight internationally. We purchase cargo
space from ocean vessels and airlines on a wholesale basis for resale
to our customers. We also track and trace shipments and provide
customs brokerage services, including documentation preparation and
calculation of duties and other charges for compliance with import
and export regulations.

. SUPPLY CHAIN MANAGEMENT--We provide customized logistics services
throughout our customers' operations, from raw material delivery
through distribution of finished goods. We arrange for infrastructure
and equipment, integrated with our customers' existing systems, to
handle distribution planning, just-in-time delivery and automated
ordering. We also provide and manage warehouses, distribution centers
and other facilities for select customers and consult on identifying
and eliminating bottlenecks in our customers' supply chains by
analyzing freight patterns and costs, optimizing facility locations,
and developing internal policies and procedures. We leverage these
capabilities to drive additional volume to our service offerings.

. FREIGHT CONSOLIDATION AND HANDLING--We focus on providing customers
with an integrated package of freight handling services that is
customized to their specific shipping patterns and inventory needs.
Some of the more common freight handling services we provide include
the transfer of freight from international containers to rail-based
or truck containers (transloading), repackaging merchandise from
various shipments for distribution to multiple customer sites
(consolidation/deconsolidation) and warehousing. We provide these
services primarily on the West coast where the majority of U.S.
container freight originates.

WHOLESALE

. INTERMODAL SERVICES --We are the largest non-railroad provider of
intermodal rail service in North America. We provide our customers
with single company control over a 50,000 mile rail network through
long term operating agreements with major railroads, including Union
Pacific, CSX, Canadian National Railroad, and the two largest
railroads in Mexico. Using this network, we transport cargo
containers stacked two high on specially designed railcars
(stacktrain method) which provides economic advantages over
traditional rail configurations. We provide our customers with rail
capacity, equipment and shipment tracking on a nationwide basis and
control one of the industry's largest fleets of stacktrain equipment,
including railcars, containers and chassis (steel frames with rubber
tires used to transport containers over the highway). We sell this
service primarily to intermodal marketing companies, including our
own intermodal marketing company, large automotive intermediaries and
international shipping companies.

In 2001, we generated gross revenues of $1.7 billion, net revenues of $331.3
million and adjusted EBITDA of $76.2 million. As a result of strong industry
trends and a disciplined acquisition strategy aimed at developing a
comprehensive portfolio of logistics services, we have experienced considerable
growth since our recapitalization in May 1999. A critical component of our
growth is our management team which has an average of 25 years of experience in
the logistics industry. We believe their knowledge, relationships and
experience provide us with a significant competitive advantage.

BUSINESS STRATEGY

We intend to increase our revenue and profitability by:

. CAPITALIZING ON STRONG LOGISTICS INDUSTRY TRENDS AND FUNDAMENTALS

The highly fragmented logistics market is consolidating and rapidly
growing. We believe we are well positioned to benefit from these trends
as providers of single point to point or limited logistics

offerings will find it increasingly difficult to compete. 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 from a single
company like us. According to Armstrong & Associates, total expenditures
managed by third-party logistics service providers in North America
exceeded $60 billion in 2001 and have grown at a 16% compounded annual
rate over the last three years. We believe that our established market
position, longstanding relationships with rail and truck carriers and
our broad package of services will enable us to benefit from the
expected continued growth in outsourcing of logistics functions.

. LEVERAGING OUR COMPREHENSIVE SERVICE PORTFOLIO ACROSS OUR EXISTING
CUSTOMER BASE

Total expenditures by our customers on third-party logistics providers
is such that capturing only a few additional percentage points of their
total logistics expenditures would result in considerable growth for us.
We believe that we can leverage our portfolio of services, track record,
relationships and understanding of our existing customers' businesses to
capture additional freight volume and provide additional logistics
services. We also believe that the trend toward vendor consolidation
will facilitate our ability to capture additional business from our
existing customers. While we estimate that only 11% of our customer base
currently uses more than one of our services, we have been successful in
cross-selling services to several customers in the past year. For
example, two of our leading retail customers began to use our wholesale
product to move freight more economically out of Mexico and as a lower
cost alternative to trucking and several intermodal customers began to
use our services for their local trucking needs.

. CONTINUING TO DRIVE OPERATIONAL EFFICIENCIES

We initiated several new operating programs in 2001 that we believe will
result in significant cost savings in the future. We have added a sales
management function across our divisions to optimize profitability based
on domestic freight flows. Within our wholesale segment, we have
upgraded our process for collecting container use fees, transferred the
management of the maintenance of our container and chassis fleet in
house, dedicated a team to optimize container utilization and are in the
process of installing an enterprise wide information technology system
to replace an operating agreement with an outside party. In our retail
segment, the consolidation of our rail and truck brokerage business on
one system is expected to reduce systems costs per transaction and also
allow multiple customers to utilize our supply chain management systems.
In addition, we have established formal management processes and
measures to increase utilization of our internal trucking and wholesale
businesses across our divisions.

. CONTINUING OUR NON-ASSET BASED LOGISTICS STRATEGY

We will continue to utilize a non-asset based logistics strategy in
which we limit our investment in equipment and facilities and reduce
working capital requirements through contracts and operating
arrangements with rail carriers, independent trucking operators and
other contractors and leasing companies. In our retail business,
third-party equipment owners and operators and railroads provide the
actual transportation of freight that we arrange on behalf of our
customers. Our wholesale business utilizes leased equipment, a majority
of which can either be returned or terminated within 90 days or is
associated with revenue generating arrangements. Our contracts provide
us with access to freight terminals and facilities and control over
transportation-related equipment without having to own them. We will
continue to leverage our scale and our experience in managing large
fleets of equipment owned by others to obtain favorable contract rates.
Over the past two years, we generated average annual adjusted EBITDA of
$79 million per year while our maintenance capital expenditures have
averaged approximately $3 million per year.

. PURSUING OPPORTUNITIES FOR ADDITIONAL GROWTH

In addition to capitalizing on industry growth trends and leveraging our
existing service portfolio across our current customer base, we intend
to grow our business by expanding our customer base and internally and
externally developed services.

Expanding our customer base--We believe that we will be able to
leverage our size, breadth of service offerings and reputation to
attract new customers. We believe that many companies who currently
purchase logistics services from multiple sources or who are not
currently using a third-party logistics provider will be attracted to an
opportunity to shift to a single full-service logistics provider like
us. We target customers by industry or key end-markets. This enables us
to take advantage of our expertise in specific markets as well as target
freight which is best suited for our service offerings.

Expanding product offerings--In order to handle our customers'
diverse logistics requirements, we intend to continue to increase our
range of service offerings. Because we focus on providing customized
solutions, we frequently assist customers in developing new processes
and solving problems and through acquisitions and internal growth have
expanded our product portfolio and geographic reach in response to our
customers' needs. We believe that as the logistics market continues to
consolidate, providers of a single point to point or limited logistics
offering will find it increasingly difficult to compete which may
increase the number of attractive acquisition opportunities. We intend
to continue to invest in building our comprehensive portfolio of
logistics services and geographic coverage internally or through
opportunistic and accretive acquisitions to take advantage of growth
opportunities.

RISK FACTORS

An investment in our common stock involves a high degree of risk. Potential
investors should carefully consider the risk factors set forth under "Risk
Factors" beginning on page 8 and the other information contained in this
prospectus prior to making an investment decision regarding our common stock.
We have operated as an independent, stand-alone company only since our
recapitalization on May 28, 1999. From 1984 until our recapitalization, we only
provided wholesale intermodal services as a wholly-owned subsidiary of APL
Limited. On the date of our recapitalization, we began providing retail and
logistics services to customers through our acquisition of Pacer Logistics, at
which Don Orris, our Chairman, President and Chief Executive Officer, and other
members of our senior management team, were executive officers. As a result of
the substantial change in our business resulting from the recapitalization and
our acquisition of Pacer Logistics, our historical financial information prior
to our recapitalization is not necessarily indicative of our 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 providing wholesale transportation services during
the periods presented.

CORPORATE INFORMATION

We were incorporated in Tennessee on November 4, 1974. Our principal
executive offices are located at 2300 Clayton Road, Suite 1200, Concord,
California 94520 and our telephone number is 887-917-2237. Our website is
located at www.pacer-international.com. Information contained on our website
does not constitute a part of this prospectus.

THE OFFERING

Common stock offered............................. shares by us

shares by the selling stockholders

Total offering................................ shares

Common stock to be outstanding after the offering shares

Use of proceeds.................................. We expect to use the net proceeds from this
offering to us for the repayment of debt and
other general corporate purposes. See "Use
of Proceeds." We will not receive any
proceeds from the sale of our common stock
by the selling stockholders.

Proposed Nasdaq National Market symbol........... PACR

The number of shares of common stock to be outstanding after this offering
is based on our shares of common stock outstanding as of December 28, 2001
after giving effect to the issuance of 2,234,844 shares of common stock upon
the exchange of all outstanding shares of Pacer Logistics exchangeable
preferred stock prior to the consummation of this offering, based on an
exchange rate of 100 shares of common stock for each outstanding share of Pacer
Logistics exchangeable preferred stock.

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

. 1,202,114 shares of common stock issuable upon the exercise of options
outstanding as of December 28, 2001 under our stock option plan, at
exercise prices ranging from $8.61 to $25.00 per share, with a weighted
average exercise price of $16.45; and

. 66,886 shares of common stock reserved for future grant under our stock
option plan.

Unless otherwise indicated, all share and per share information in this
prospectus gives effect to an amendment to our existing charter to increase the
number of authorized shares of common stock to 150,000,000 shares and the
declaration of a for stock split of the common stock to be effected
prior to the effective date of the registration statement of which this
prospectus is a part.

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.

SUMMARY HISTORICAL FINANCIAL INFORMATION

The following table presents our summary historical financial information.
The summary historical data at December 28, 2001 and for the three years ended
December 28, 2001 have been derived from, and should be read in conjunction
with, our audited financial statements and related notes appearing elsewhere in
this prospectus. The following information should be read in conjunction with
"Selected Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.

YEAR ENDED
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DECEMBER 31, DECEMBER 29, DECEMBER 28,
1999(A) 2000(B) 2001
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(IN MILLIONS, EXCEPT SHARE AND
PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Gross revenues................................. $ 927.7 $ 1,281.3 $ 1,670.9
Cost of purchased transportation and services.. 735.4 1,005.6 1,339.6
----------- ----------- -----------
Net revenues................................... 192.3 275.7 331.3
Direct operating expenses...................... 76.8 90.4 101.7
Selling, general and administrative expenses... 58.9 102.6 155.9
Depreciation and amortization.................. 8.6 11.6 18.3
Merger and severance........................... -- 7.7 0.4
Other.......................................... -- -- 4.0
----------- ----------- -----------
Income from operations......................... 48.0 63.4 51.0
Net income..................................... $ 16.6 $ 14.8 $ 7.0
Earnings per share:
Basic(c)..................................... $ 0.78(d) $ 1.35 $ 0.61
Diluted(c)................................... $ 0.68(d) $ 1.19 $ 0.55
Weighted average common shares outstanding:
Basic........................................ 10,440,000 10,970,770 11,498,231
Diluted...................................... 13,488,826 13,793,363 14,143,976
OTHER FINANCIAL DATA:
EBITDA(e)...................................... $ 56.6 $ 75.0 $ 69.3
EBITDA margin(f)............................... 29.4% 27.2% 20.9%
Adjusted EBITDA(g)............................. $ 57.3 $ 82.7 $ 76.2
Adjusted EBITDA margin(f)...................... 29.8% 30.0% 23.0%
Capital expenditures(h)........................ $ 2.0 $ 5.5 $ 14.6
Cash provided by operating activities.......... 20.8 1.2 21.8
Cash (used in) investing activities............ (74.0) (130.7) (14.4)
Cash provided by (used in) financing activities 65.4 117.3 (7.4)

AS OF
DECEMBER 28, 2001
------------------
AS
ACTUAL ADJUSTED(I)
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BALANCE SHEET DATA:
Working capital.............................................. $ 20.1
Total assets................................................. 632.9
Total debt including capital leases and current maturities... 397.9
Minority interest--exchangeable preferred stock of subsidiary 25.7 --
Total stockholders' equity................................... 3.0

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(a)Includes the results of Pacer Logistics since acquisition on May 28, 1999.

(b)Includes the results of Conex Global Logistics Services, Inc., GTS
Transportation Services, Inc., RFI Group, Inc. and Rail Van, Inc. since
their dates of acquisition on January 13, 2000, August 31, 2000, October 31,
2000 and December 22, 2000, respectively.

(c)For the year ended December 31, 1999, the pre-tax one-time bonus payment of
$0.7 million affected basic earnings per share by $0.04, and diluted
earnings per share by $0.03. For the year ended December 29, 2000, the
pre-tax merger and severance charge of $7.7 million affected basic earnings
per share by $0.39, and diluted earnings per share by $0.31. For the year
ended December 28, 2001, the pre-tax one-time charges of $6.9 million
affected basic earnings per share by $0.41, and diluted earnings per share
by $0.34.

(d)Net income of $8.5 million for the period from January 1, 1999 through May
28, 1999 has been excluded as prior to our recapitalization and acquisition
of Pacer Logistics on May 28, 1999, our wholesale operations 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.

(f)EBITDA margins and adjusted EBITDA margins are calculated as a percentage of
net revenues.

(g)Adjusted EBITDA represents EBITDA as defined in note (d) above adjusted for
the elimination of one-time bonus payments of $0.7 million related to the
acquisition of Pacer Logistics for the year ended December 31, 1999, merger
and severance charges of $7.7 million for the year ended December 29, 2000,
and merger, severance and other one-time charges of $6.9 million for the
year ended December 28, 2001.

(h)Capital expenditures for the year ended December 28, 2001 included $7.2
million for the conversion from APL Limited's computer systems to a
stand-alone system for the wholesale segment, $3.5 million for the expansion
of the Rail Van, Inc. computer systems and $1.1 million for new offices
associated with our warehousing facilities. Capital expenditures for the
year ended December 29, 2000 included $2.3 million for leasehold
improvements. Excluding these amounts, capital expenditures would have been
$2.8 million and $3.2 million for the years ended December 28, 2001 and
December 29, 2000, respectively.

(i)As adjusted for this offering, the repayment of borrowings under our credit
facility with the net proceeds from this offering and the exchange of all
Pacer Logistics' exchangeable preferred stock for shares of our common stock
prior to consummation of this offering.

RISK FACTORS

AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. BEFORE
MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULLY CONSIDER THE RISKS
DESCRIBED BELOW, WHICH WE BELIEVE ARE THE MATERIAL RISKS FACING US. 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, THEREFORE, YOU MAY LOSE ALL OR
PART OF YOUR INVESTMENT.

RISK FACTORS RELATING TO THE COMMON STOCK AND THE OFFERING

WE HAVE A SINGLE STOCKHOLDER WHO CAN SUBSTANTIALLY INFLUENCE THE OUTCOME OF ALL
MATTERS VOTED UPON BY OUR STOCKHOLDERS AND PREVENT ACTIONS WHICH A STOCKHOLDER
MAY OTHERWISE VIEW FAVORABLY.

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 substantially influence all matters requiring
stockholder approval, including the election of directors, the approval of
significant corporate transactions, such as acquisitions, the ability to block
an unsolicited tender offer and any other matter requiring a supermajority vote
of stockholders. 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 YOU AS A STOCKHOLDER MAY CONSIDER
FAVORABLE COULD BE PREVENTED.

Provisions of our restated charter 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 in order to 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 charter 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;

. 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; and

. prohibiting business combinations with interested stockholders unless
particular conditions are met.

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 Greenmail Act may discourage, delay or prevent a change in control of
our company.

THERE HAS NOT BEEN A PRIOR PUBLIC MARKET FOR OUR COMMON STOCK AND WE CANNOT
ASSURE YOU THAT AN ACTIVE PUBLIC MARKET 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 Stock Market's 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, stockholders 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. There will be
approximately shares of common stock outstanding immediately after
this offering. All of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act of 1933,
as amended, except for shares purchased by our "affiliates" as defined in Rule
144 under the Securities Act. The remaining shares will be "restricted
securities" as defined in Rule 144. Subject to the 180-day lock-up agreement
with the underwriters, these restricted securities may be sold in the future
without registration under the Securities Act to the extent permitted under
Rule 144 and Rule 701 under the Securities Act. Commencing 180 days after the
date of this prospectus, approximately outstanding shares of these
restricted securities will be eligible for sale under Rule 144 subject to
applicable holding period, volume limitations, manner of sale and notice
requirements set forth in applicable SEC rules and shares of the
restricted securities will be saleable without regard to these restrictions
under Rule 144(k). In addition, commencing 180 days after the date of this
prospectus, stockholders holding approximately outstanding shares of
these restricted securities will have registration rights which could allow
those holders to sell their shares freely through a registration statement
filed under the Securities Act.

After this offering, we will have shares of common stock reserved
for issuance under our stock option plan, of which options to purchase
shares were outstanding as of December 28, 2001. Promptly following this
offering, we intend to file a registration statement on Form S-8 to register
these shares which, upon effectiveness, will permit substantial additional
sales of shares of our common stock as these shares are issued.

YOU WILL SUFFER AN IMMEDIATE AND SUBSTANTIAL DILUTION IN THE NET TANGIBLE BOOK
VALUE OF THE COMMON STOCK YOU PURCHASE.

Prior investors have paid substantially less per share than the price in
this offering. The initial public offering price is expected to be
substantially higher than the net tangible book value per share of the
outstanding common stock immediately after this offering. Accordingly, based on
an assumed initial public offering price of $ per share (the midpoint of the
range set forth on the cover of this prospectus), purchasers of common stock in
this offering will experience immediate and substantial dilution of
approximately $ per share in net tangible book value of the common stock. In
addition, there were outstanding stock options at December 28, 2001.
If all of these options were exercised on the date of the closing of this
offering, investors purchasing shares in this offering would suffer total
dilution of $ per share.

RISKS RELATED TO OUR BUSINESS

WE ARE DEPENDENT UPON THIRD PARTIES FOR EQUIPMENT AND SERVICES ESSENTIAL TO
OPERATE OUR BUSINESS AND IF WE FAIL TO SECURE SUFFICIENT EQUIPMENT OR SERVICES,
WE COULD LOSE CUSTOMERS AND REVENUES.

We are dependent upon transportation equipment such as chassis and
containers and rail, truck and ocean services provided by independent third
parties. We, along with competitors in our industry, have experienced equipment
shortages in the past, particularly during peak shipping season in October and
November. If we cannot

secure sufficient transportation equipment or transportation services from
these third parties to meet our customers' needs, customers may seek to have
their transportation and logistics needs met by other third parties on a
temporary or permanent basis, and as a result, our business, results of
operations and financial position could be materially adversely affected.

IF WE HAVE DIFFICULTY ATTRACTING AND RETAINING AGENTS AND INDEPENDENT
CONTRACTORS, OUR RESULTS OF OPERATIONS COULD BE ADVERSELY AFFECTED.

We rely extensively on the services of agents and independent trucking
contractors to provide our trucking services. We rely on a fleet of vehicles
which are owned and operated by independent trucking contractors and on agents
representing groups of trucking contractors to transport customers' goods by
truck and have over 5,000 approved agents and independent contractors in our
truck brokerage network. Although we believe our relationships with our agents
and independent trucking contractors are good we may not be able to maintain
our relationships with them. Contracts with agents and independent trucking
contractors are, in most cases, terminable upon short notice by either party.
If an agent terminates its relationship with us, some customers and independent
trucking contractors with whom such agent has a direct relationship may also
terminate their relationship with us. We may have trouble replacing our agents
and independent trucking contractors with equally qualified persons. We compete
with transportation service companies for the services of independent
commission agents and with trucking companies for the services of independent
trucking contractors and drivers. The pool of agents, contractors and drivers
from which we draw is limited, and therefore competition from other
transportation service companies and trucking companies has the effect of
increasing the price we must pay to obtain their services. The industry is
currently experiencing a shortage of independent trucking contractors resulting
in increased compensation expenses to us and our competitors who also rely on
them. In addition, because independent trucking contractors are not employees,
they may not be as loyal to our company, requiring us to pay more to retain
their services. If we are unable to attract or retain agents and independent
contractors or had to increase the amount paid for their services, our results
of operations could be adversely affected and we could experience difficulty
increasing our business volume.

IF WE MAKE FUTURE ACQUISITIONS, THEY MAY BE FINANCED IN A WAY THAT DILUTES YOUR
INVESTMENT IN US, REDUCES OUR REPORTED EARNINGS OR IMPOSES ADDITIONAL
RESTRICTIONS ON OUR BUSINESS.

As we did in the acquisitions of Conex and Rail Van in 2000, 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 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.

COMPETITION IN OUR INDUSTRY MAY CAUSE DOWNWARD PRESSURE ON FREIGHT RATES WHICH
COULD ADVERSELY AFFECT OUR BUSINESS.

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, shipping departments of our
customers 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. Some of our competitors have substantially
greater financial, marketing and other resources than we do, which may allow
them to better withstand an economic downturn, reduce their prices more easily
than us or expand or enhance the marketing of their products. There are a
number of large companies competing in one or more segments of the industry,
although the number of companies with a global network that offer a full
complement of logistics services is more limited. Depending on the location of
the customer and the scope of services requested, we must compete against both
the niche players and larger entities. In addition, customers are increasingly
turning to competitive bidding situations involving bids from a number of
competitors, including

competitors that are larger than us. 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. In particular, we have experienced
downward pressure in the pricing of our wholesale and retail services, which
has reduced our revenues and operating results. Continuation of this rate
pressure may materially adversely affect our net revenues and income from
operations.

OUR CUSTOMERS WHO ARE ALSO COMPETITORS COULD TRANSFER THEIR BUSINESS TO
NON-COMPETITORS WHICH WOULD DECREASE OUR PROFITABILITY.

As a result of our company operating in two distinct but related intermodal
segments, we buy and sell transportation services from and to many companies
with which we compete. For example, Hub Group, GST Corp and Alliance Shippers,
three of the 10 largest customers of our wholesale operations, who accounted
for 21% of the 2001 revenues of our wholesale operations, are also competitors
of our retail operations. It is possible that these customers could transfer
their business away from us to other companies with which they do not compete.
The loss of one or more of these customers could have a material adverse effect
on the profitability of our wholesale operations. In addition, rather than
outsourcing their transportation logistics requirements to us, some of our
customers could decide to provide these services internally which could further
adversely affect our business volumes and revenues.

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 2001, Union Pacific
Railroad Company and Ford Motor accounted for approximately 8% and 6%,
respectively, of our gross revenues and our 10 largest customers accounted for
approximately 40% 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.

WORK STOPPAGES AT SEA PORTS COULD ADVERSELY AFFECT OUR OPERATING RESULTS.

A significant portion of the freight moved by us for our customers
originates at ports on the West coast. Freight arriving at West coast ports
must be offloaded from ships by longshoremen, none of whom are our employees.
The longshoremen labor contracts expire on June 30, 2002. Any work stoppage or
slowdown by the longshoremen at these West coast ports could adversely affect
our operating income and cash flows in both our wholesale and retail segments.

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 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. International revenues
accounted for 10% of our gross revenues in 2001, up from 6% in 2000. 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 HAVE AN EXTENSIVE RELATIONSHIP WITH OUR FORMER PARENT, APL LIMITED, AND WE
DEPEND ON APL LIMITED FOR ESSENTIAL SERVICES. OUR BUSINESS AND RESULTS OF
OPERATIONS COULD BE ADVERSELY AFFECTED IF APL LIMITED FAILED OR REFUSED TO
PROVIDE SUCH SERVICES OR TERMINATED 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 which we manage 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. We are in the process of replacing the technology provided by APL
Limited with information technology systems currently available in the
marketplace. We anticipate this to be completed by the end of 2003. If any of
our contracts with APL Limited were terminated or 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.

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 if 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 replacing the technology provided by APL Limited for
our wholesale operations with information technology systems currently
available in the marketplace. We anticipate this project to be completed by the
end of 2003. If we experience delays or problems in integrating the new
technology and/or training our employees to use the new system, our wholesale
operations could be adversely affected or the cost of the project 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.

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 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. The Federal Maritime Commission regulates ocean freight forwarders
and non-vessel operating common carriers like us that contract for space with
the actual vessel operators 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 those 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 stockholders. In this event, the trading price of our common stock
may fall significantly.

IF THE MARKETS IN WHICH WE OPERATE DO NOT GROW, OUR BUSINESS COULD BE ADVERSELY
AFFECTED.

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 historical growth. This market
data has been included in reports published by organizations such as Standard &
Poor's, Cass Information Systems, Armstrong & Associates, the Association of
American Railroads, and the American Trucking Association. 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 are based. The failure of these markets to continue to grow may have
a material adverse effect on our business and the market price of our common
stock.

OUR DEBT LEVELS MAY LIMIT OUR FLEXIBILITY IN OBTAINING ADDITIONAL FINANCING AND
IN PURSUING OTHER BUSINESS OPPORTUNITIES.

As of December 28, 2001 after giving effect to this offering and the
exchange of all outstanding shares of Pacer Logistics exchangeable preferred
stock for our common stock our long-term debt would have been approximately
$ million, while our total capitalization would have been $ million. We
also have the ability to incur new debt, subject to limitations under 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.

WE MAY NOT HAVE SUFFICIENT CASH TO SERVICE OUR INDEBTEDNESS.

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
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 satisfy interest coverage and leverage
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.

A DETERMINATION BY REGULATORS THAT OUR INDEPENDENT CONTRACTORS ARE EMPLOYEES
COULD EXPOSE US TO VARIOUS LIABILITIES AND ADDITIONAL COSTS.

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 IDENTIFY, MAKE AND 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 a number of 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
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. In
addition, we cannot assure you that we will be able to identify suitable
acquisition candidates or be able to acquire them on reasonable terms or at
all. While we believe that we have sufficient financial and management
resources and experience to successfully conduct our acquisition activities and
integrate the acquired businesses into our operations, 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.

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. Forward-looking statements include, among other
things, the information concerning our possible future results of operations,
business and growth strategies, financing plans, our competitive position and
the effects of competition, the projected growth of the industries in which we
operate, and the benefits and synergies to be obtained from our completed and
any future acquisitions. Forward-looking statements include all statements that
are not historical facts and can be identified by forward-looking words such as
"anticipate," "believe," "could," "estimate," "expect," "intend," "plan,"
"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 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 regulations; and

. the other factors discussed under "Risk Factors."

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, assuming an offering price of $ per share, the midpoint of the
range on the cover of this prospectus, and after deducting estimated
underwriting discounts and commissions and estimated expenses of the offering.
We intend to use the net proceeds to us from this offering to repay
indebtedness outstanding under our credit agreement plus accrued interest as
follows:

. $39.7 million will be used to repay the outstanding principal amount of
the $40 million term loan described below,

. $28.8 million will be used to repay a portion of the $135 million term
loan described below, and

. $68.5 million will be used to repay borrowings under the revolving
credit facility.

At December 31, 2001, outstanding borrowings under our credit agreement
totaled approximately $242 million, consisting of:

. $171.7 million of term loans which represents the outstanding portions
of the $135 million term loan incurred in May 1999 to finance a portion
of our recapitalization and acquisition of Pacer Logistics and the $40
million term loan incurred in December 2000 to finance a portion of our
acquisition of Rail Van. These term loans currently bear interest at the
rate of 5.5% per annum and mature on May 28, 2006.

. $70.8 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 5.1%
per annum and mature on May 28, 2004.

We will not receive any proceeds for the sale of our common stock by the
selling stockholders, including if the underwriters exercise the over-allotment
option.

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 repay debt or 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 and the indenture governing our senior subordinated notes.
Future dividends, if any, will be determined by our board of directors.

CAPITALIZATION

The following table sets forth our capitalization as of December 28, 2001:

. on an actual basis; and

. on an as adjusted basis to reflect the exchange of all outstanding
shares of Pacer Logistics exchangeable preferred stock for 2,234,844
shares of our common stock and the sale by us of shares of our
common stock in this offering at an assumed initial offering price of
$ per share, the midpoint of the range on the cover of this
prospectus, after deducting estimated underwriting discounts and
commissions and estimated expenses of the offering payable by us, and
the application of the proceeds therefrom.

You should read this table in conjunction with the consolidated financial
statements and notes thereto appearing elsewhere in this prospectus.

DECEMBER 28, 2001
--------------
AS
ACTUAL ADJUSTED
------- --------
(IN MILLIONS)

Current maturities of long-term debt and capital leases............................. $ 2.0 $
======= ===
Long-term debt:
Capital leases..................................................................... $ 0.1 $
Senior credit facilities(1)
Revolving credit facility........................................................ 70.8 --
Term loans....................................................................... 170.0
Senior subordinated notes(1)....................................................... 150.0
Subordinated note(2)............................................................... 5.0
------- ---
Total long-term debt......................................................... 395.9
------- ---
Minority interest-exchangeable preferred stock of subsidiary........................ 25.7 --
Stockholders' equity:
Preferred stock: $0.01 par value; 1,000,000 shares authorized actual, 50,000,000 as
adjusted; none issued and outstanding............................................ -- --
Common stock: $0.01 par value, 20,000,000 shares authorized actual, 150,000,000 as
adjusted; 11,544,747 shares issued and outstanding actual, shares as adjusted 0.1
Additional paid-in capital......................................................... 118.6
Unearned compensation.............................................................. (0.3)
Accumulated deficit................................................................ (114.3) (3)
Other accumulated comprehensive income (loss)...................................... (1.1)
------- ---
Total stockholders' equity....................................................... 3.0
------- ---
Total capitalization............................................................... $ 424.6 $
======= ===

--------

(1)For a description of the senior credit facilities and the senior
subordinated notes, see "Description of Certain Indebtedness."

(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 our acquisition of Conex in 2000.

(3)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.

The foregoing table excludes:

. 1,202,114 shares of common stock issuable upon the exercise of options
outstanding as of December 28, 2001, at exercise prices ranging from
$8.61 to $25.00 per share, with a weighted average exercise price of
$16.45; and

. 66,886 shares of common stock reserved for future grant under our stock
option plan.

DILUTION

Our net tangible book value as of December 28, 2001, after giving effect to
the exchange of all outstanding shares of Pacer Logistics exchangeable
preferred stock for 2,234,844 shares of our common stock, was $(278.5) million,
or $(20.21) per share of common stock. We have calculated this amount by:

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

. then dividing the difference by the 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, the
midpoint of the range on the cover of this prospectus, after deducting the
estimated underwriting discounts and commissions and the estimated offering
expenses payable by us, our adjusted net tangible book value as of December 28,
2001 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:

Assumed initial public offering price per share................................ $
Net tangible book value per share as of December 28, 2001................... $(20.21)
Increase in net tangible book value per share attributable to new investors.
-------
Net tangible book value per share after this offering..........................
--
Dilution per share to new investors............................................ $

The following table summarizes on the basis described above, as of December
28, 2001, 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, the midpoint of the range on the
cover of this prospectus, before deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us:

SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- ---------

Existing stockholders(1) 13,779,591(2) % $144,051,552 % $10.45
New investors(1)........
---------- --- ------------ ---
Total................ % $ %
========== === ============ ===

--------

(1)Excludes shares of our common stock to be sold by the selling
stockholders to the new investors in the offering for which we will not
receive any net proceeds.

(2)Includes 2,234,844 shares of common stock to be issued upon exchange of the
Pacer Logistics exchangeable preferred stock prior to the effective date of
the registration statement of which this prospectus is a part.

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 December
28, 2001. As of December 28, 2001, there were options outstanding to purchase
1,202,114 shares of common stock, at a weighted average exercise price of
$16.45 per share. 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 December 28, 2001, net tangible book value per share after
this offering would have been $ and total dilution per share to new
investors would have been $ .

SELECTED FINANCIAL INFORMATION

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 28, 2001 and December
29, 2000 and for the fiscal years ended December 28, 2001, December 29, 2000
and 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 selected historical data at December 31, 1999, December
25, 1998 and December 26, 1997 and for the year ended December 25, 1998 and the
periods from November 13, 1997 through December 26, 1997 and December 28, 1996
through November 12, 1997 have been derived from our, or our predecessor's,
audited financial statements which are not included in this prospectus.

Prior to our May 1999 recapitalization, our name was APL Land Transport
Services, Inc., ("APLLTS") and we were a wholly-owned subsidiary of APL
Limited. See note 1 to our audited financial statements included in this
prospectus. Our 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.

Prior to November 1998, APLLTS was comprised of three operating divisions.
In November, 1998, APLLTS transferred all of its non-stacktrain divisions to
its parent, APL Limited. Accordingly, at the time of our May 1999
recapitalization, we only provided wholesale stacktrain services, but with our
acquisition of Pacer Logistics, we began providing retail and logistics
services to customers. The financial information for the year ended December
31, 1999 includes the results of operations of our wholesale stacktrain
operations for the full year plus the results of Pacer Logistics since May 28,
1999, the date of acquisition. In connection with our recapitalization and
acquisition of Pacer Logistics, we were renamed Pacer International and we
ceased to be a subsidiary of APL Limited.

The following table should also be read in conjunction with 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.

THE PREDECESSOR
--------------------
FOR THE
PERIOD
--------------------
DECEMBER 28,
1996 THROUGH
NOVEMBER 12,
1997(A)
--------------------
(IN MILLIONS, EXCEPT
PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Gross revenues.............................. $523.8
Cost of purchased transportation and
services................................... 407.5
------
Net revenues................................ 116.3
Direct operating expenses................... 53.1
Selling, general and administrative expenses 21.4
Depreciation and amortization............... 3.0
Merger and severance........................ --
Other....................................... --

------
Income from operations...................... 38.8

------
Net income.................................. $ 22.9
Net income per share:
Basic..................................... (d)
Diluted................................... (d)
Weighted average common shares
outstanding:
Basic..................................... (d)
Diluted................................... (d)
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. $ --
Total assets................................ --
Total debt including capital leases and
current maturities......................... --
Minority interest--exchangeable preferred
stock of subsidiary........................ --
Total stockholders' equity (deficit)........ --
OTHER FINANCIAL DATA:
EBITDA(f)................................... $ 41.8
EBITDA Margin(g)............................ 35.9%
Adjusted EBITDA(h).......................... $ 41.8
Adjusted EBITDA margin (g).................. 35.9%
Capital expenditures........................ $ --
Cash provided by operating activities....... 18.2
Cash provided by (used in) investing
activities................................. 3.6
Cash provided by (used in) financing
activities................................. (21.8)

THE COMPANY
-----------------------------------------------------------------
FOR THE YEAR YEAR YEAR YEAR
PERIOD ENDED ENDED ENDED ENDED
------------ ------------ ------------ ------------ ------------
NOVEMBER 13,
1997 THROUGH
DECEMBER 26, DECEMBER 25, DECEMBER 31, DECEMBER 29, DECEMBER 28,
1997(A) 1998 1999(B) 2000(C) 2001
------------ ------------ ------------ ------------ ------------
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)

STATEMENT OF OPERATIONS DATA:
Gross revenues.............................. $ 60.7 $598.9 $ 927.7 $ 1,281.3 $ 1,670.9
Cost of purchased transportation and
services................................... 47.4 466.3 735.4 1,005.6 1,339.6
------ ------ ----------- ----------- -----------
Net revenues................................ 13.3 132.6 192.3 275.7 331.3
Direct operating expenses................... 7.4 64.5 76.8 90.4 101.7
Selling, general and administrative expenses 3.2 28.3 58.9 102.6 155.9
Depreciation and amortization............... 0.7 6.6 8.6 11.6 18.3
Merger and severance........................ -- -- -- 7.7 0.4
Other....................................... -- -- -- -- 4.0

------ ------ ----------- ----------- -----------
Income from operations...................... 2.0 33.2 48.0 63.4 51.0

------ ------ ----------- ----------- -----------
Net income.................................. $ 1.0 $ 20.6 $ 16.6 $ 14.8 $ 7.0
Net income per share:
Basic..................................... (d) (d) $ 0.78(e) $ 1.35 $ 0.61
Diluted................................... (d) (d) 0.68(e) 1.19 0.55
Weighted average common shares
outstanding:
Basic..................................... (d) (d) 10,440,000 10,970,770 11,498,231
Diluted................................... (d) (d) 13,488,826 13,793,363 14,143,976
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................. $(32.5) $(37.2) $ (3.7) $ 12.6 $ 20.1
Total assets................................ 111.9 156.1 455.0 658.4 632.9
Total debt including capital leases and
current maturities......................... -- -- 284.4 405.4 397.9
Minority interest--exchangeable preferred
stock of subsidiary........................ -- -- 23.4 25.0 25.7
Total stockholders' equity (deficit)........ 29.6 55.6 (31.7) (2.9) 3.0
OTHER FINANCIAL DATA:
EBITDA(f)................................... $ 2.7 $ 39.8 $ 56.6 $ 75.0 $ 69.3
EBITDA Margin(g)............................ 20.3% 30.0% 29.4% 27.2% 20.9%
Adjusted EBITDA(h).......................... $ 2.7 $ 41.9 $ 57.3 $ 82.7 $ 76.2
Adjusted EBITDA margin (g).................. 20.3% 31.6% 29.8% 30.0% 23.0%
Capital expenditures........................ $ -- $ 39.7 $ 2.0 $ 5.5 $ 14.6
Cash provided by operating activities....... 12.7 31.8 20.8 1.2 21.8
Cash provided by (used in) investing
activities................................. -- (38.5) (74.0) (130.7) (14.4)
Cash provided by (used in) financing
activities................................. (12.7) 6.7 65.4 117.3 (7.4)

--------

(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, these
numbers are not indicative of what the full year 1997 was or would have been
if the change in ownership had not occurred.

1997
------

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%

(b)Includes the results of Pacer Logistics, since acquisition on May 28, 1999.

(c)Includes the results of Conex Global Logistics Services, Inc., GTS
Transportation Services Inc. RFI Group, Inc. and Rail Van, Inc. since their
dates of acquisition on January 13, 2000, August 31, 2000, October 31, 2000
and December 22, 2000, respectively.

(d)Not applicable as prior to our recapitalization we were a division of APL
Limited and did not have common stock.

(e)Net income of $8.5 million for the period January 1, 1999 through May 28,
1999 has been excluded as prior to the recapitalization and acquisition of
Pacer Logistics on May 28, 1999 our wholesale operations were a division of
APL Limited and did not have common stock.

(f)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.

(g)EBITDA margins and adjusted EBITDA margins are calculated as a percentage of
net revenues.

(h)Adjusted EBITDA represents EBITDA as defined in (f) above adjusted for
non-recurring costs of $2.1 million for the year ended December 25, 1998,
the elimination of one-time bonus payments of $0.7 million related to the
acquisition of Pacer Logistics for the year ended December 31, 1999, merger
and severance charges of $7.7 million for the year ended December 29, 2000,
and merger, severance and other one-time charges of $6.9 million for the
year ended December 28, 2001.

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

We are a leading non-asset based North American third-party logistics
provider offering a broad array of services to facilitate the movement of
freight from origin to destination. We operate in two segments, the wholesale
segment and the retail segment (see note 10 to the consolidated financial
statements for segment information). The wholesale segment provides intermodal
rail service in North America by selling intermodal service to shippers
pursuant to agreements with railroads. The retail segment provides truck
brokerage and services, intermodal marketing, freight consolidation and
handling, international freight forwarding and supply chain management services.

OPERATING HISTORY

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 an agreement with
a remaining term of 17 years that is terminable by us upon 120 days' notice and
by APL Limited if we fail to make required payments or are acquired by a
competitor of APL Limited. We are in the process of replacing the technology
provided by APL Limited with information technology systems currently available
in the marketplace from unrelated third parties. This project is anticipated to
be complete by year-end 2003. In addition, our historical financial information
prior to our recapitalization may not necessarily reflect the results of
operations, financial condition and cash flows in the future or what our
results of operations, financial condition and cash flows would have been had
we been a separate, independent entity during the periods presented.

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 routes utilized, fuel surcharge and market conditions. Also
included in gross revenues are railcar rental income, container per diem and
incentives paid by APL Limited and others for the repositioning of empty
containers with domestic westbound loads. Gross revenues are reported net of
volume rebates provided to customers.

The retail segment's gross revenues are generated through fees charged for a
broad portfolio of freight transportation services, including truck brokerage
and services, intermodal marketing, freight consolidation and handling,
international freight forwarding and supply chain management services. Overall
gross revenues for the retail segment are driven by 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 by 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 route, which tend to remain relatively constant as customers' shipments
tend to remain in similar routes. 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. Revenues for supply chain management services are recognized on a
net basis and are driven by increased outsourcing. We also provide
international freight forwarding services, which involves arranging
transportation and other services necessary to move our customers' freight to
and from a foreign country. Gross revenues for international freight forwarding
are driven by the globalization of trade.

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 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 expense,
equipment maintenance and repair, fixed terminal and cargo handling expenses
and other direct variable expenses. Our fleet of leased equipment is financed
through a variety of short- and long-term leases. 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.

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 include payroll and fringe benefits and other
overhead expenses. After May 28, 1999, the corporate administrative services
previously provided by APL Limited are 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.

CRITICAL ACCOUNTING POLICIES

Management believes the following critical accounting policies, among
others, affect its more significant judgements and estimates used in the
preparation of its consolidated financial statements.

. RECOGNITION OF REVENUE

Our wholesale segment recognizes revenue for loads that are in transit
at the end of an accounting period on a percentage of completion basis.
Revenue is recorded for the portion of the transit that has been
completed because reasonably dependable estimates of the transit status
of loads is available in our computer systems. In addition, our
wholesale segment offers volume discounts based on annual volume
thresholds. We estimate our customer's annual shipments throughout the
year and record a reduction to revenue accordingly. Should our
customer's annual volume vary significantly from our estimates, a
revision to revenue for volume discounts would be required. Our retail
segment recognizes revenue after services have been completed.

. RECOGNITION OF COST OF PURCHASED TRANSPORTATION AND SERVICES

Both our wholesale and retail segments estimate the cost of purchased
transportation and services and accrue an amount on a load by load basis
in a manner that is consistent with revenue recognition. Historically,
upon completion of the payment cycle (receipt and payment of
transportation bills), the actual aggregate transportation costs have
been less than the accrual and therefore we have established an
allowance to reduce the payable amounts. Should actual payments differ
from our estimate, revisions to the cost of purchased transportation and
services would be required. In addition, our retail segment earns
discounts to the cost of purchased transportation and services that are
primarily based on annual volume of loads transported over major
railroads. We estimate our annual volume throughout the year and record
a reduction to cost of purchased transportation accordingly. Should our
annual volume vary significantly from our estimates, a revision to the
cost of purchased transportation would be required.

. ALLOWANCE FOR DOUBTFUL ACCOUNTS

We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments.
Estimates are used in determining this allowance based on our historical
collection experience, current trends, credit policy and a percentage of
our accounts receivable by aging category. If the financial condition of
our customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.

. DEFERRED TAX ASSETS

We have recorded net deferred tax assets of $63.1 million and have not
recorded a valuation reserve as we believe that future earnings will
more likely than not be sufficient to fully utilize the assets. The
minimum amount of future taxable income required to realize this asset
is $205.5 million. Should we

not be able to generate this future income, we would be required to
record valuation allowances against the deferred tax assets resulting in
additional income tax expense in our Statement of Operations.

. GOODWILL

At December 28, 2001, we had recorded $281.5 million of net goodwill. We
evaluate the carrying value of goodwill and recoverability should events
or circumstances occur that bring into question the realizable value or
impairment of goodwill. Our principal considerations in determining
impairment include the strategic benefit to us 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 fair
value. We adopted the Financial Accounting Standards Board Statement of
Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other
Intangible Assets" effective December 29, 2001 and will no longer
amortize goodwill in the 2002 fiscal year. We have completed a
preliminary evaluation of our goodwill, using the new goodwill
impairment testing criteria set forth in SFAS 142, and have determined
that we will not be required to take an initial goodwill impairment
charge as a result of adoption. Future evaluations of goodwill to be
completed on a quarterly basis may, however, require an impairment
charge.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 28, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 29,
2000

The following table sets forth our historical financial data for the fiscal
years ended December 28, 2001 and December 29, 2000. The year 2000 data
includes the results of operations of our four acquisitions since their
respective dates of acquisition. Conex was acquired on January 13, 2000 and is
included in both periods, GTS was acquired on August 31, 2000, RFI was acquired
on October 31, 2000 and Rail Van was acquired on December 22, 2000. An asterix
indicates that retail segment data is not comparable because the 2000 amounts
include the results of operations of the GTS, RFI and Rail Van acquisitions
only since acquisition.

FINANCIAL DATA COMPARISON BY REPORTABLE SEGMENT

FISCAL YEARS ENDED DECEMBER 28, 2001 AND DECEMBER 29, 2000

(IN MILLIONS)

2001 2000 CHANGE %CHANGE
-------- -------- ------ -------

Gross revenues
Wholesale................................. $ 808.8 $ 814.7 $ (5.9) (0.7)%
Retail.................................... 952.8 503.9 448.9 *
Inter-segment elimination................. (90.7) (37.3) (53.4) *
-------- -------- ------ -----
Total................................. 1,670.9 1,281.3 389.6 30.4
Cost of purchased transportation and services
Wholesale................................. 620.9 631.5 (10.6) (1.7)
Retail.................................... 809.4 411.4 398.0 *
Inter-segment elimination................. (90.7) (37.3) (53.4) *
-------- -------- ------ -----
Total................................. 1,339.6 1,005.6 334.0 33.2
Net revenues
Wholesale................................. 187.9 183.2 4.7 2.6
Retail.................................... 143.4 92.5 50.9 *
-------- -------- ------ -----
Total................................. 331.3 275.7 55.6 20.2
Direct operating expenses
Wholesale................................. 101.7 90.4 11.3 12.5
Retail.................................... -- -- -- --
-------- -------- ------ -----
Total................................. 101.7 90.4 11.3 12.5
Selling, general & administrative expenses
Wholesale................................. 43.0 37.7 5.3 14.1
Retail.................................... 112.9 64.9 48.0 *
-------- -------- ------ -----
Total................................. 155.9 102.6 53.3 51.9
Depreciation and amortization
Wholesale................................. 5.6 5.4 0.2 3.7
Retail.................................... 12.7 6.2 6.5 *
-------- -------- ------ -----
Total................................. 18.3 11.6 6.7 57.8
Merger and severance
Wholesale................................. -- -- -- *
Retail.................................... 0.4 7.7 (7.3) *
-------- -------- ------ -----
Total................................. 0.4 7.7 (7.3) *
Other
Wholesale................................. 0.5 -- 0.5 *
Retail.................................... 1.9 -- 1.9 *
Write-off of IPO costs.................... 1.6 -- 1.6 *
-------- -------- ------ -----
Total................................. 4.0 -- 4.0 *
Income from operations
Wholesale................................. 37.1 49.7 (12.6) (25.4)
Retail.................................... 15.5 13.7 1.8 *
Write-off of IPO costs.................... (1.6) -- (1.6) *
-------- -------- ------ -----
Total................................. 51.0 63.4 (12.4) (19.6)
Interest expense, net........................ 39.6 34.1 5.5 16.1
Income tax expense........................... 3.6 12.9 (9.3) (72.1)
Minority interest expense.................... 0.8 1.6 (0.8) (50.0)
-------- -------- ------ -----
Net income................................... $ 7.0 $ 14.8 $ (7.8) (52.7)%
======== ======== ====== =====

--------

* Not comparable

GROSS REVENUES. Our results for 2001 were negatively impacted by the
continuation of the general economic downturn, and particularly a cyclical
slowdown in the automotive sector. As a result, our intermodal marketing, truck
brokerage and freight handling operations experienced reduced shipments from
major retailers and other customers including Ford, Kmart and Bridgestone, and
our wholesale operations were affected by reduced automotive shipments. Ford
and Bridgestone were two key customers of our 2000 acquisitions. These factors
have resulted in reduced shipments which have caused our actual results to be
less than the pro forma results as presented in note 3 to the consolidated
financial statements.

Gross revenues increased $389.6 million, or 30.4%, for the fiscal year ended
December 28, 2001 compared to the fiscal year ended December 29, 2000. Gross
revenues in our retail segment increased $448.9 million in fiscal year 2001 as
compared to fiscal year 2000. The 2000 acquisitions of GTS, RFI and Rail Van
represented $484.5 million of the increase in retail segment gross revenues.
Excluding these three acquisitions, gross revenues for the retail segment
decreased by approximately $35.6 million, reflecting a $49.2 million reduction
in intermodal marketing, truck brokerage and freight handling operations
partially offset by a $13.6 million increase in revenues in truck service
operations. The decrease in intermodal marketing, truck brokerage and freight
handling primarily reflects the cyclical slowdown in the automotive sector. The
truck service increase was due primarily to increased cross-selling business
across our divisions additional J.C. Penney business in Los Angeles as well as
the addition of two agents in the division.

Wholesale segment gross revenues decreased $5.9 million, or 0.7%, reflecting
an increase in wholesale third-party domestic operations offset by a decrease
in wholesale automotive and wholesale international operations. The increase in
the wholesale third-party domestic operations was a result of increased freight
revenues from several intermodal marketing companies, including our intermodal
marketing operations, as well as an increase in repositioning revenues of $3.6
million. The wholesale automotive operations decrease in freight revenues
reflected the cyclical slowdown in the automotive sector, while the wholesale
international operations decrease in freight revenue was primarily a result of
the loss of low margin business of an international shipping customer. In the
aggregate, freight revenues in the wholesale segment decreased $31.9 million,
or 4.2%. This decrease was partially offset by increased ancillary revenues of
$22.4 million from railcar rental and container per diem revenue associated
with the increase in equipment in 2001. The freight revenue decrease reflected
reduced container volumes of 19,151, or 2.7%, as well as a 1.6% decline in the
average freight revenue per container. Container volume declines were due
primarily to the reduction in automotive traffic resulting from the cyclical
slowdown noted above, as well as the loss of the international shipping
customer. The reduction in the average freight revenue per container resulted
primarily from the elimination of the 3% fuel surcharge during 2001 as well as
overcapacity in selected markets which increased competitive pressures to
reduce transportation prices, principally in the first half of 2001.
Inter-segment revenues increased by $53.4 million primarily as the result of
our 2000 acquisitions of GTS, RFI and Rail Van and our strategy to increase the
use of intercompany services and cross-selling activities.

NET REVENUES. Net revenues increased $55.6 million, or 20.2%, for 2001
compared to 2000. The 2000 acquisitions accounted for a $63.3 million increase
in retail segment net revenues, while the remaining retail segment operations
decreased $12.4 million primarily due to the economic downturn discussed above.
The wholesale segment's cost of purchased transportation decreased $10.6
million on container volume decreases of 2.7% as discussed above. Since the
decrease in the cost of purchased transportation was greater than the decrease
in segment gross revenues, the wholesale segment net revenues increased $4.7
million in 2001 compared to 2000. The wholesale segment gross margin increased
to 23.2% in 2001 from 22.5% in 2000 due primarily to the increase in ancillary
services such as railcar rental and container per diem revenue partially offset
by reduced margins on freight transportation associated with the elimination of
the fuel surcharge during 2001 as well as competitive market pressures in the
first half of 2001 related to excess capacity. The retail segment gross margin
decreased to 15.1% in 2001 from 18.4% in 2000 due primarily to the lower
margins associated with business of the 2000 acquisitions.

DIRECT OPERATING EXPENSES. Direct operating expenses, which are only
incurred by the wholesale segment, increased $11.3 million, or 12.5%, in 2001
compared to 2000 due to increased equipment lease expenses as a result of the
expansion of the fleet of railcars partially offset by a reduction in
maintenance expenses. In addition during 2001, $1.4 million was charged for
container and chassis return costs required in order to return 2,700 containers
and 1,300 chassis as part of a program to downsize the container and chassis
fleet.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $53.3 million, or 51.9%, in 2001 compared to
2000 primarily as a result of increased expenses associated with the 2000
acquisitions as well as filling out the infrastructure of our wholesale
division. The 2000 acquisitions of GTS, RFI and Rail Van accounted for $46.9
million of the retail segment increase. An additional $0.8 million of the
increase was due to costs associated primarily with the consolidation of retail
segment operations in Columbus, Ohio and legal fees of $0.3 million related to
a lawsuit filed by us against a former owner of an acquired business accounted
for the remaining retail segment increase. The wholesale segment accounted for
$5.3 million of the increase due primarily to an increase in headcount during
2001 associated with completing the organizational changeover from APL Limited
to Pacer since May 1999. In addition, during March 2001, we terminated a
container and chassis maintenance agreement and brought that function in-house,
which while increasing administrative labor costs, reduced repair and
maintenance costs and provided for more control of the maintenance function.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $6.7 million, or 57.8%, for 2001 compared to 2000. The retail segment
including the 2000 acquisitions of GTS, RFI and Rail Van accounted for $6.5
million of the increase and the wholesale segment accounted for the remaining
$0.2 million. Depreciation expense was $10.8 million and $6.9 million and
goodwill amortization expense was $7.5 million and $4.7 million for 2001 and
2000, respectively. We adopted SFAS No. 142, "Goodwill and Other Intangible
Assets" on December 29, 2001. We will cease goodwill amortization beginning
December 29, 2001. See "--Recently Issued Accounting Pronouncements."

MERGER AND SEVERANCE. In December 2000, we recorded a charge of $7.7
million relating to the consolidation of retail segment operations resulting
from the December 22, 2000 acquisition of Rail Van. The charge included $5.0
million for the severance of 99 employees from the Chicago, Memphis, Los
Angeles and Walnut Creek offices and the termination of agency agreements. An
additional $2.0 million covered lease costs through lease termination in 2006
for facilities no longer required, primarily in Walnut Creek and Memphis. The
remaining $0.7 million of this charge was for the write-off of computer
software under development. Through December 28, 2001, $2.8 million had been
charged to the reserve for the severance of 80 employees and $1.8 million had
been charged related to facilities and other. The severance plan will be
completed by the end of 2003 as payments for senior management severance are
spread over two years. We estimate that the cost savings associated with the
plan were approximately $2.8 million in 2001 and will be approximately $6.0
million annually thereafter. Payments for this charge have been funded from
cash from operations and borrowings under our revolving credit facility.

During 2001, we recorded an additional charge of $1.6 million including $0.8
million for the severance of employees in the wholesale segment, $0.5 million
for additional lease costs due to the worsening of the real estate market and
the difficulty in subletting facilities no longer required and $0.3 million for
the write-off of retail segment assets that have been abandoned. The 2001
charge was partially offset by the release of $1.2 million of remaining unused
liability from the 2000 charge related to planned workforce reductions
(employee and agencies) that are no longer needed due to employees/agents
leaving prior to being terminated. We estimate that the costs savings
associated with the 2001 additions to the plan was approximately $0.1 million
in 2001 and will be approximately $0.2 million annually thereafter. Payments
for this charge will be funded from cash from operations and, if necessary,
borrowings under our revolving credit facility.

OTHER. Other expenses in 2001 included $1.9 million in the retail segment
for the write-off of agent balances due to an agent bankruptcy, $1.6 million
for the write-off of IPO costs and $0.5 million in the wholesale

segment for early termination costs associated with the termination of a
chassis and container maintenance agreement.

INCOME FROM OPERATIONS. Income from operations decreased $12.4 million, or
19.6%, from $63.4 million in 2000 to $51.0 million in 2001. The wholesale
segment accounted for a $12.6 million decrease due primarily to the reduction
in automotive shipments, the $1.4 million charge for container and chassis
return costs required to downsize the container and chassis fleet, the increase
in equipment costs associated with the expansion of the railcar fleet and the
merger and severance charge. Retail segment income from operations increased by
$1.8 million for 2001 compared to 2000. Income from operations for the 2000
acquisitions was approximately $7.5 million while the remaining retail
operations decreased $5.7 million reflecting the economic downturn discussed
above, the write-off of agent balances and the merger and severance charge. The
write-off of IPO costs accounted for an additional $1.6 million of the decline
in income from operations.

INTEREST EXPENSE. Interest expense increased by $5.5 million, or 16.1%, for
2001 compared to 2000 due to the higher level of outstanding debt during 2001
partially offset by lower interest rates in 2001. We borrowed $68.2 million
under the revolving credit facility and issued $40.0 million in new term loans
to fund the acquisitions of GTS, RFI and Rail Van during 2000. Also during
2000, we borrowed $15.0 million from the revolving credit facility to fund the
acquisition of Conex. Interest expense related to this borrowing is comparable
in both periods.

INCOME TAX EXPENSE. Income tax expense decreased $9.3 million in the 2001
period compared to the 2000 period due to lower pre-tax income in the 2001
period. The effective tax rate also declined from 44.0% in 2000 to 31.6% in
2001 due primarily to the effects of revisions to prior years' estimated
liabilities.

MINORITY INTEREST EXPENSE. Minority interest expense, which represents 7.5%
paid-in-kind dividends on the Series B exchangeable preferred stock of Pacer
Logistics, decreased by $0.8 million because the dividends ceased to accrue as
of May 28, 2001. As a result, we have not recognized any minority interest
expense since that date.

NET INCOME. Net income decreased $7.8 million from $14.8 million in 2000 to
$7.0 million in 2001. The decrease was due to the decreased income from
operations associated with the economic downturn discussed above and increased
interest expense associated with a higher level of outstanding debt in 2001.
Partially offsetting the decrease were reduced income tax expense and minority
interest charges.

FISCAL YEAR ENDED DECEMBER 29, 2000 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1999

The following table sets forth our historical financial data for the fiscal
years ended December 29, 2000 and December 31, 1999. An asterix indicates that
retail segment data is not comparable because the 1999 amounts include only
seven months of retail segment data (since acquisition on May 28, 1999) and do
not include Conex data acquired January 13, 2000, GTS data acquired August 31,
2000, RFI data acquired October 31, 2000 or Rail Van data acquired December 22,
2000.

FINANCIAL DATA COMPARISON BY REPORTABLE SEGMENT

FISCAL YEARS ENDED DECEMBER 29, 2000 AND DECEMBER 31, 1999

(IN MILLIONS)

2000 1999 CHANGE % CHANGE
-------- ------ ------ --------

Gross revenues
Wholesale................................. $ 814.7 $713.2 $101.5 14.2%
Retail.................................... 503.9 233.2 270.7 *
Inter-segment elimination................. (37.3) (18.7) (18.6) *
-------- ------ ------ -----
Total................................. 1,281.3 927.7 353.6 38.1
Cost of purchased transportation and services
Wholesale................................. 631.5 559.1 72.4 12.9
Retail.................................... 411.4 195.0 216.4 *
Inter-segment elimination................. (37.3) (18.7) (18.6) *
-------- ------ ------ -----
Total................................. 1,005.6 735.4 270.2 36.7
Net revenues
Wholesale................................. 183.2 154.1 29.1 18.9
Retail.................................... 92.5 38.2 54.3 *
-------- ------ ------ -----
Total................................. 275.7 192.3 83.4 43.4
Direct operating expenses
Wholesale................................. 90.4 76.8 13.6 17.7
Retail.................................... -- -- -- --
-------- ------ ------ -----
Total................................. 90.4 76.8 13.6 17.7
Selling, general & administrative expenses
Wholesale................................. 37.7 32.4 5.3 16.4
Retail.................................... 64.9 26.5 38.4 *
-------- ------ ------ -----
Total................................. 102.6 58.9 43.7 74.2
Depreciation and amortization
Wholesale................................. 5.4 6.0 (0.6) (10.0)
Retail.................................... 6.2 2.6 3.6 *
-------- ------ ------ -----
Total................................. 11.6 8.6 3.0 34.9
Merger and severance
Wholesale................................. -- -- -- --
Retail.................................... 7.7 -- 7.7 *
-------- ------ ------ -----
Total................................. 7.7 -- 7.7 *
Income from operations
Wholesale................................. 49.7 38.9 10.8 27.8
Retail.................................... 13.7 9.1 4.6 *
-------- ------ ------ -----
Total................................. 63.4 48.0 15.4 32.1
Interest expense, net........................ 34.1 18.6 15.5 *
Income tax expense........................... 12.9 11.7 1.2 10.3
Minority interest expense.................... 1.6 1.1 0.5 *
-------- ------ ------ -----
Net income................................... $ 14.8 $ 16.6 $ (1.8) (10.8)%
======== ====== ====== =====

--------

* Not comparable

GROSS REVENUES. Gross revenues increased $353.6 million, or 38.1%, for the
fiscal year ended December 29, 2000 compared to the fiscal year ended December
31, 1999. Approximately $168.9 million, or 47.8%, of the increase was due to
the acquisition of Pacer Logistics (excluding the four 2000 acquisitions) and
$101.8 million, or 28.8%, of the increase was due to the four 2000
acquisitions. The wholesale segment increase of $101.5 million was due
primarily to an $87.1 million, or 13.0%, increase in freight revenues driven by
an overall container volume increase of 83,071 containers or 13.1%. 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 3,125 containers
during 2000. This volume increase was partially offset by a 0.1% 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 2000
exceeding 1999 volumes by 40% and 28%, respectively. Other wholesale segment
revenues increased approximately $16.0 million due primarily to increased
railcar rental income, increased container per diem revenue and the management
fees associated with the 1999 Stacktrain Services Agreement with APL Limited
entered into effective May 28, 1999. The railcar rental increase in 2000
resulted 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. The increased container per diem
revenue was generated by the additional containers received in the fourth
quarter of 1999 and during 2000 coupled with higher traffic volumes. The
overall revenue increase was partially offset by a $1.6 million reduction in
repositioning revenues due to shippers reloading containers in the westbound
direction rather than paying us to move empty containers westbound.

NET REVENUES. Net revenues increased $83.4 million, or 43.4%, for 2000
compared to 1999. The acquisition of Pacer Logistics (excluding the four 2000
acquisitions) accounted for $33.4 million, or 40.0%, of the increase, the four
2000 acquisitions accounted for $20.9 million, or 25.1%, of the increase and
the wholesale segment accounted for the remaining $29.1 million of the
increase. The wholesale segment's cost of purchased transportation increased
$72.4 million, or 12.9%, on container volume increases of 13.1% discussed
above. The wholesale segment gross margin increased to 22.5% in 2000 from 21.6%
in 1999 due primarily to increased railcar rental income, increased rail volume
incentives and 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 costs. These gross margin
improvements were partially offset by the significant traffic increase in the
lower yielding international business line.

DIRECT OPERATING EXPENSES. Direct operating expenses, which are only
incurred by the wholesale segment, increased $13.6 million, or 17.7%, in 2000
compared to 1999. The increase was due to increased equipment lease and
maintenance expenses of approximately $14.3 million as a result of the
expansion of the fleet of containers and chassis including a fourth quarter
charge of $4.4 million related to a formerly outsourced equipment repair
function that failed to perform and has subsequently been brought in-house.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $43.7 million, or 74.2%, in 2000 compared to
1999. The retail segment (excluding the four 2000 acquisitions) accounted for
$25.7 million, or 58.8%, of the increase, the four 2000 acquisitions accounted
for an additional $12.7 million, or 29.1%, of the increase and the wholesale
segment accounted for $5.3 million, or 12.1%, 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 1999 associated with completing the organizational changeover from APL
Limited since May 1999.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
increased $3.0 million, or 34.9%, for 2000 compared to 1999. The retail
segment, including $1.5 million related to the four 2000 acquisitions,
accounted for $3.6 million of the increase in this category. The wholesale
segment decrease of $0.6 million was due primarily to reduced depreciation
expense associated with the sale and leaseback of 199 railcars on May 28, 1999.
Depreciation expense was $6.9 million and $6.2 million and amortization expense
was $4.7 million and

$2.4 million for 2000 and 1999, respectively. The increase in amortization was
due to the amortization of goodwill associated with the acquisition of Pacer
Logistics on May 28, 1999 as well as the 2000 acquisitions.

MERGER AND SEVERANCE. In December 2000, we recorded a charge of $7.7
million relating to the consolidation of retail segment operations resulting
from the December 22, 2000 acquisition of Rail Van. The charge included $5.0
million for the severance of 99 employees from the Chicago, Memphis, Los
Angeles and Walnut Creek offices and the termination of agency agreements. An
additional $2.0 million covered lease costs through lease termination in 2006
for facilities no longer required, primarily in Walnut Creek and Memphis.
Employee terminations and agency closures will be phased-in and completed
during 2002. The remaining $0.7 million of this charge was for the write-off of
computer software under development. Payments for this charge were funded from
cash from operations and, if necessary, borrowings under our revolving credit
facility.

INCOME FROM OPERATIONS. Income from operations increased $15.4 million, or
32.1%, from $48.0 million in 1999 to $63.4 million in 2000. The retail segment
(excluding the four 2000 acquisitions and the merger and severance charge)
accounted for $5.6 million, or 36.4%, of the increase and the four 2000
acquisitions accounted for $6.7 million, or 43.5%, of the increase. The retail
segment merger and severance charge of $7.7 million partially offset the retail
segment increase over 1999. The wholesale segment accounted for $10.8 million,
or 70.1%, of the increase due primarily to the 13.1% increase in traffic volume
coupled with higher rail car rental income as discussed above.

INTEREST EXPENSE, NET. Interest expense, net increased by $15.5 million
from $18.6 million in 1999 to $34.1 million in 2000. Interest expense, net in
1999 reflects only seven months of interest on our $150.0 million of senior
subordinated notes and borrowings of $135.0 million under the term loan portion
of the credit agreement on May 28, 1999 to fund our recapitalization and the
acquisition of Pacer Logistics. In addition, during 2000 we borrowed $83.2
million under the revolving credit facility to fund the acquisitions of Rail
Van, RFI, GTS and Conex. We also issued $40.0 million in new term loans to fund
the Rail Van acquisition and issued a $5.0 million 8% subordinated note to
Conex shareholders to fund the acquisition of Conex assets. Amounts for 1999
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 $1.2 million from $11.7
million in 1999 to $12.9 million in 2000. The effective tax rate for 2000 was
44.0% compared to 39.8% for 1999 due primarily to the non-deductibility for tax
purposes of goodwill amortization associated with the acquisitions of Pacer
Logistics on May 28, 1999, GTS on August 31, 2000 and RFI on October 31, 2000.

NET INCOME. Net income decreased $1.8 million, or 10.8%, from $16.6 million
in 1999 to $14.8 million in 2000. The merger and severance charge accounted for
an estimated $4.3 million of the after-tax decrease. The retail segment,
including the four 2000 acquisitions but excluding the merger and severance
charge, accounted for a $5.1 million increase in net income while the wholesale
segment accounted for a decrease of $2.1 million and minority interest costs
(accrued paid-in-kind dividends on the exchangeable preferred stock of the
retail segment) accounted for the remaining $0.5 million decrease in net
income. The wholesale segment decrease was due primarily to increased interest
expense on the financing for the recapitalization and acquisition of Pacer
Logistics partially offset by improved operating income for 2000 as a result of
increased container volumes.

LIQUIDITY AND CAPITAL RESOURCES

Cash generated by operating activities was $21.8 million, $1.2 million and
$20.8 million for the years ended December 28, 2001, December 29, 2000 and
December 31, 1999, respectively. The increase in cash provided by operating
activities in 2001 was due primarily to the $11.1 million decrease in accounts
receivable in 2001 compared to a $14.3 million increase in 2000. The 2001
accounts receivable reduction resulted primarily from improved collection
efforts coupled with decreased revenue levels excluding the revenues associated
with the

2000 acquisitions. In addition, we made merger and severance cash payments of
$4.0 million in 2001 and paid acquisition fees and expenses of $2.8 million
primarily for the acquisition of Rail Van. The decrease in cash provided by
operating activities in 2000 compared to 1999 was due primarily to an increase
in interest payments from $15.4 million in 1999 to $32.3 million in 2000 due to
borrowings to finance the 2000 acquisitions. 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
$33.4 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 working
capital of $20.1 million and $12.6 million at December 28, 2001 and December
29, 2000, respectively.

Our operating cash flows are also the primary source for funding our
contractual obligations. The table below summarizes our major commitments
consisting of long-term debt, capital lease and operating lease requirements as
of December 28, 2001 on an actual basis and as adjusted to give effect to this
offering and the application of the proceeds therefrom to repay indebtedness
under our credit facility.

DEBT AND LEASE OBLIGATION PAYMENT REQUIREMENTS

($ IN MILLIONS)

FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEARS
TOTAL 2002 2003 2004 2005-2006 THEREAFTER
- ------------- ------------ ------------ ------------ ------------- -------------
BEFORE/AFTER BEFORE/AFTER BEFORE/AFTER BEFORE/AFTER BEFORE/AFTER BEFORE/AFTER
OFFERING OFFERING OFFERING OFFERING OFFERING OFFERING
- ------------- ------------ ------------ ------------ ------------- -------------

Long-term debt...... $397.5/$260.5 $ 1.7/-- $ 6.8/$5.0 $ 72.5 /$2.2 $166.5/$103.3 $150.0/$150.0
Operating leases (1) $381.0/$381.0 $60.0/$60.0 $48.9/$48.9 $ 44.0/$44.0 $ 69.9/$69.9 $158.2/$158.2
Capital leases...... $ 0.4/$0.4 $ 0.3/$0.3 $ 0.1/$0.1 -- -- --
------------- ----------- ----------- ------------ ------------- -------------
Total:........... $778.9/$641.9 $62.0/$60.3 $55.8/$54.0 $116.5/$46.2 $236.4/$173.2 $308.2/$308.2
============= =========== =========== ============ ============= =============

--------

(1)These amounts represent the aggregate operating lease expense that will be
reflected in our statement of operations during these periods to the extent
these operating leases remain outstanding.

Our total long-term debt was incurred to finance our recapitalization, the
acquisition of Pacer Logistics and the four 2000 acquisitions. There were no
acquisitions in 2001. The majority of the operating lease requirements relate
to our wholesale segment's lease of railcars, containers and chassis. We do not
anticipate additional equipment leases during 2002 and have downsized our
container and chassis fleet. In addition, each year a portion of the operating
leases require renewal or can be terminated based upon equipment requirements.
Partially offsetting these lease payment requirements are railcar and container
per diem revenues which were $52.5 million in 2001, $30.1 million in 2000 and
$16.9 million in 1999.

After giving effect to the repayment of borrowings under our revolving
credit facility from the proceeds of this offering, based upon the current
level of operations including the integration of the 2000 acquisitions and the
anticipated future growth in both operating segments, management believes that
operating cash flow and availability under the revolving credit facility will
be adequate to meet our working capital, capital expenditure and other cash
needs for at least the next two years, although no assurance can be given in
this regard. Our largest customer generated $128.1 million, or 7.7%, of our
gross revenues in 2001. Loss of this customer, or others, could have an adverse
impact on our results of operations and operating cash flows. In addition, if
the financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, our results of operations and
operating cash flows could be adversely impacted.

During 2001, we charged a total of $6.9 million to operating expense as
described below. The charges included $1.9 million for the write-off of agent
balances due to agent bankruptcy; $1.6 million for the write-off

of IPO costs; $1.4 million for container and chassis return costs required as
part of a program to downsize the container and chassis fleet; $0.4 million for
additional merger and severance costs; $0.5 million for early termination costs
associated with the termination of a container and chassis maintenance
agreement; $0.8 million for costs associated primarily with the consolidation
of retail segment operations in Columbus, Ohio; and $0.3 million for legal fees
related to a civil lawsuit filed against the former owner of an acquired
business.

Cash flows used in investing activities were $14.4 million, $130.7 million
and $74.0 million for 2001, 2000 and 1999, respectively. The use of cash in
2001 was due to capital expenditures of $7.2 million, of a planned total of
approximately $10.0 million, for the conversion from APL Limited's computer
systems to a stand-alone capability for our wholesale segment and $3.8 million
for the expansion of the Rail Van computer systems to handle our retail segment
operating requirements. An additional $3.6 million of capital expenditures was
for computer replacement, furniture and fixtures and leasehold improvements.
These amounts were partially offset by net proceeds of $0.2 million for the
sale of property. The use of cash in 2000 was due primarily to purchase price
and fees paid for acquiring Conex assets for $26.1 million, GTS for $15.3
million, RFI for $16.8 million and Rail Van for $67.4 million, partially offset
by net proceeds of $0.4 million for the sale of retired wholesale and retail
segment property. The 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 $5.5 million in 2000 and $2.0 million in 1999
were primarily for computer hardware and leasehold improvements to office space
and warehouse facilities.

Capital expenditures for 2002 are budgeted at $5.4 million primarily for
completion of the wholesale segment computer conversion and the expansion of
the Rail Van computer systems to handle the retail segment requirements.

Cash flows (used in) provided by financing activities were $(7.4) million,
$117.3 million and $65.4 million for 2001, 2000 and 1999, respectively. The use
of cash during 2001 was due to debt repayment. During 2001, we repaid $6.0
million under the revolving credit facility, $1.3 million of term loans and
$0.2 million of capital lease obligations. Also during 2001, certain members of
senior management exercised options to purchase 183,374 shares of our common
stock for total proceeds of $0.1 million. The proceeds were used to repay the
remaining portion of the notes payable to management that were part of the
purchase price for Pacer Logistics acquired on May 28, 1999 and for general
corporate purposes. In addition, certain members of senior management exercised
options to purchase 27,498 shares of our preferred stock for total proceeds of
$0.2 million. We repurchased and retired the preferred stock that arose from
the exercise of the options.

During 2000, we borrowed $83.2 million under the revolving credit facility
and issued $39.4 million in new term loans (net of $0.6 million in loan fees)
to acquire Conex assets, GTS, RFI and Rail Van. In connection with the January
13, 2000 acquisition of Conex assets, we also issued Conex shareholders an 8.0%
subordinated note in the aggregate principal amount of $5.0 million due January
13, 2003 and issued 300,000 shares (valued at $6.0 million) of our common
stock. In connection with the December 22, 2000 acquisition of Rail Van, we
issued Rail Van shareholders 280,000 shares (valued in the aggregate at $7.0
million) of our common stock. Our management exercised options to purchase
341,373 shares of common stock for total proceeds of $0.9 million during 2000.
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 $8.9 million of Rail Van debt assumed at
acquisition, $6.4 million of the revolving credit facility, $1.3 million of
term loans, $0.4 million of notes payable to management and $0.1 million of
capital lease obligations during 2000.

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 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 life 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. Prior to our recapitalization on
May 28, 1999, any excess cash generated from or used for operating or investing
activities was remitted to or received from APL Limited, the former parent,
through participation in the cash management plan.

The $150.0 million of senior subordinated notes, due in 2007, bear interest
at 11 3/4% 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, each bear interest at a variable rate based on, at our
option, the Eurodollar rate or a base rate determined based on the federal
funds rate, prime rate or certificate of deposit rate, plus in either case a
margin ranging from 1.5% to 3% based on our leverage ratio. The margin
increases or decreases by 0.25% for each change in our leverage ratio between
3.25 and 4.0, between 4.0 and 5.0, and greater than 5.0. At December 28, 2001,
the interest rate on the revolving credit facility was 5.1% and the interest
rate on the term loans was 5.5%. Voluntary prepayments and commitment
reductions are generally permitted without premium or penalty. 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
substantially all of our and our subsidiaries' properties and assets. At
December 28, 2001, $171.7 million of term loans were outstanding and we had
$23.4 million available under the revolving credit facility. The credit
agreement contains restrictions and financial covenants such as an adjusted
total leverage ratio and a consolidated interest coverage ratio. At December
28, 2001, 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. On December 22, 2000, we entered into a third amendment to the credit
agreement to provide for an additional term loan in the amount of $40.0 million
which was borrowed to finance the acquisition of Rail Van as described below.

The wholesale segment took delivery of 1,500 new 53-foot containers and
chassis financed through an operating lease in the fourth quarter of 1999.
During 2000, to help meet current and projected growth, we received 4,156
leased containers and 3,425 leased chassis and returned 1,470 primarily 48-ft
leased containers and 506 leased chassis. In addition, we retired 593 owned
48-ft containers. During 2001, we received 1,100 leased containers and 80
leased chassis and returned 2,278 primarily 48-ft leased containers and 1,629
leased chassis.

We entered into operating lease agreements for 1,300 railcars during 2000
and 2001 as described below. The long-term lease obligations associated with
this equipment is reflected in the Debt and Lease Obligation Payment
Requirements table above. All of the railcars have been received and we do not
anticipate ordering any additional railcars during 2002.

LEASE LEASE NO. RECEIVED RECEIVED
DATE TERM ORDERED IN 2000 IN 2001
--------- ------- ------- -------- --------

9/1/2000 Monthly 200 200
10/4/2000 15 Yrs 250 85 165
1/2/01 5 Yrs 250 250
2/14/01 15 Yrs 100 100
6/19/01 15 Yrs 250 250
9/25/01 5 Yrs 250 250
----- --- -----
Total 1,300 285 1,015
===== === =====

The two five-year term lease contracts have two additional five-year renewal
options. All leases include change of control provisions, however these only
apply if the new entity does not assume all of the obligations and when certain
financial requirements are not met, such as, for example, the new entity
maintaining a minimum net worth of $17.4 million or a Standard & Poor's credit
rating of at least B+. If these requirements were not met, the lessor would
have the right to retake the railcars and/or collect damages after disposal of
the equipment, if necessary, to recover costs associated with the lease of the
equipment.

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 of $76.0
million included $4.0 million of acquisition costs, a cash payment to owners of
$67.0 million, the issuance to Rail Van stockholders of 280,000 shares of our
common stock (valued in the aggregate at $7.0 million) and a post-closing
adjustment of $2.0 million refunded by the sellers based on Rail Van's results
for 2000 through December 22. The acquisition was funded with a borrowing of
$40.2 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 are included in our retail segment from the date of acquisition.
The acquisition resulted in $75.2 million of goodwill.

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 was $18.5
million including acquisition fees of $0.5 million, a net cash payment to
owners of $16.4 million and a working capital adjustment of $1.6 million. A
portion of the net cash payment was used to repay $5.2 million of indebtedness.
The acquisition was funded by $18.0 million of borrowings under our revolving
credit facility. In connection with the acquisition, former owners of RFI that
continued as employees were granted 125,000 options to purchase our common
stock, of which 80,000 have been cancelled. Operating results of the
acquisition are included in our retail segment from the date of acquisition.
The acquisition resulted in $17.4 million of goodwill. During 2001, we reviewed
and increased the gross goodwill recorded for this acquisition by $0.3 million.

On August 31, 2000, we acquired all of the capital stock of GTS
Transportation Services, Inc. for $17.8 million including acquisition fees and
expenses and a maximum earn-out amount of $2.2 million. The acquisition was
funded by $10.0 million of borrowings under our revolving credit facility. GTS
is a provider of transportation services, including logistics and truck
brokerage in North America. In connection with the acquisition, former owners
of GTS that continued as employees were granted 30,000 options to purchase our
common stock, of which 15,000 have been cancelled. Operating results of the
acquisition are included in our retail segment from the date of acquisition.
The acquisition resulted in $21.2 million of goodwill. During 2001, we reviewed
and decreased the gross goodwill recorded for this acquisition by $1.1 million
as a result of the finalization of certain pre-acquisition contingencies.

On January 13, 2000, pursuant to the terms of an asset purchase agreement,
we acquired substantially all of the assets and assumed specified 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 of $37.4 million
included acquisition fees of approximately $1.3 million, a cash payment to
owners of $25.1 million, the issuance to Conex shareholders an 8.0%
subordinated note in the aggregate principal amount of $5.0 million and the
issuance to Conex shareholders of 300,000 shares (valued in the aggregate at
$6.0 million) of common stock of Pacer International, Inc. We borrowed $15.0
million under the revolving credit facility to fund the acquisition. Operating
results of the acquisition were included in our retail segment beginning
January 1, 2000. The acquisition resulted in $32.0 million of goodwill. In
2001, we reviewed and increased the gross goodwill recorded for this
acquisition by $0.1 million.

On May 28, 1999, we acquired the common stock of Pacer Logistics, Inc., a
privately-held third-party logistics provider. We paid $137.5 million in the
acquisition which included acquisition fees of $2.9 million and assumed
indebtedness of $62.6 million. We financed the acquisition with a portion of
the proceeds from the senior subordinated notes and with funds under the credit
facility. The acquisition resulted in goodwill of $123.1

million. During 2000, we reviewed and increased the gross goodwill recorded for
the acquisition of Pacer Logistics by $2.9 million. In December 2000, we
determined the deferred tax asset arising as a result of our four 2000
acquisitions. This entry increased gross goodwill by $2.8 million.

In December 2000, we filed a registration statement with the SEC with
respect to an initial public offering of our common stock. In 2001, we
postponed the IPO due to market conditions.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued SFAS No. 143 ("SFAS 143"),
"Accounting for Asset Retirement Obligations," in July, 2001 and SFAS No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets" in October,
2001. SFAS No. 143, which is effective for fiscal years beginning after June
15, 2002, addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
asset retirement costs. We will adopt SFAS No. 143 in the 2003 fiscal year.
SFAS No. 144, which is effective for fiscal years beginning after December 15,
2001, addresses financial accounting and reporting for the impairment of
long-lived assets, excluding goodwill and intangible assets, to be held and
used or disposed of. We have not yet completed our analysis of the effects that
these new standards will have on the results of operations; although we do not
expect the implementation of these standards to have a significant effect on
the results of operations or financial condition.

The Financial Accounting Standards Board also issued SFAS 141, "Business
Combinations" and SFAS 142, "Goodwill and Other Intangible Assets." These
statements prohibit pooling-of-interests accounting for transactions initiated
after June 30, 2001, require the use of the purchase method of accounting for
all combinations after June 30, 2001 and establish a new accounting standard
for goodwill acquired in a business combination. SFAS 141 and SFAS 142 continue
to require recognition of goodwill as an asset, but do not permit amortization
of goodwill as previously required by APB Opinion No. 17 "Intangible Assets."
SFAS 142 was effective for us on December 29, 2001. SFAS 142 will result in
significant modifications relative to our accounting for goodwill.
Specifically, we will cease goodwill amortization, which was $7.5 million in
2001, beginning December 29, 2001. Furthermore, certain intangible assets that
are not separable from goodwill will not be amortized. However, goodwill and
other intangible assets will be subject to periodic (at least annual) tests for
impairment and recognition of impairment losses in the future could be required
based on a new methodology for measuring impairments described below. The
revised standards include transition rules and requirements for identification,
valuation and recognition of a much broader list of intangibles as part of
business combinations than prior practice, most of which will continue to be
amortized. SFAS 142 requires a two-step method for determining goodwill
impairments where step 1 is to compare the fair value of the reporting unit
with the unit's carrying amount, including goodwill. If this test suggests that
it is impaired, then step 2 is required to compare the implied fair value of
the reporting unit's goodwill with the carrying amount of the reporting unit's
goodwill. If the carrying amount of the reporting unit's goodwill is greater
than the implied fair value of its goodwill, an impairment loss must be
recognized for the excess. Also under SFAS 141, a one-step method is used to
determine the impairment for indefinite-lived intangible assets where the fair
value of the intangible asset is compared with its carrying amount. We have
completed a preliminary evaluation of goodwill using the new goodwill
impairment testing criteria set forth in SFAS 142, and have determined that we
will not be required to take an initial goodwill impairment charge as a result
of adoption.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk is affected primarily by changes in interest rates. Under
our policies, we may use hedging techniques and derivative financial
instruments to reduce the impact of adverse changes in market prices. The
quantitative information presented below and the additional qualitative
information presented in this management's discussion and analysis section and
notes 1, 4 and 5 of the consolidated financial statements included in this
prospectus describe significant aspects of our financial instrument programs
which have a material market risk.

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.

Based upon the average variable interest rate debt outstanding during 2001,
a 1% change in our variable interest rates would have affected our 2001 pre-tax
earnings by approximately $2.5 million. For 2000, a 1% change would have
affected 2000 pre-tax earnings by approximately $1.9 million.

As our foreign business expands, we will be subjected to greater foreign
currency risk.

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.

BUSINESS

OVERVIEW

We are a leading North American non-asset based logistics provider. Within
North America, we are one of the largest truck brokers, and we are one of the
largest intermodal marketing companies, which facilitate the movement of
freight by trailer or container using two or more modes of transportation. With
one of the largest ground-based networks in North America, we were responsible
for approximately 25% of all U.S. intermodal rail container shipments in 2001.
According to Armstrong & Associates, total expenditures managed by third-party
logistics service providers in North America grew at a compounded annual rate
of approximately 16% between 1998 and 2001. We believe our size, geographic
scope and comprehensive service offering provide us with distinct competitive
advantages to capitalize on this growth trend. These advantages include: the
ability to pass volume rate savings and economies of scale to our customers; a
significant opportunity to cross-sell services to existing customers; the
flexibility to tailor services to our customers' needs in rapidly changing
freight markets; and the ability to provide more reliable and consistent
services. Using our proprietary information systems, we provide logistics
services to numerous Fortune 500 and multi-national companies, including Ford,
General Electric, Heinz, Wal-Mart, ConAgra, Whirlpool, Union Pacific, Sony and
CompUSA, which together represented 23% of our 2001 gross revenues, as well as
numerous middle-market companies. We utilize a non-asset based strategy in
which we seek to limit our investment in equipment and facilities and reduce
working capital requirements through arrangements with transportation carriers
and equipment providers. This strategy provides us with access to freight
terminals and facilities and control over transportation-related equipment
without owning assets.

BUSINESS STRATEGY

We intend to increase our revenue and profitability by:

. CAPITALIZING ON STRONG LOGISTICS INDUSTRY TRENDS AND FUNDAMENTALS

The highly fragmented logistics market is consolidating and rapidly
growing. We believe we are well positioned to benefit from these trends
as providers of single point to point or limited logistics offerings
will find it increasingly difficult to compete. 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 from a single company like us.
Manufacturer 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. According to Armstrong &
Associates, total expenditures managed by third-party logistics service
providers in North America exceeded $60 billion in 2001 and have grown
at a 16% compounded annual rate over the last three years. We believe
that our established market position, longstanding relationships with
rail and truck carriers and our broad package of services will enable us
to benefit from the expected continued growth in outsourcing of
logistics functions.

. LEVERAGING OUR COMPREHENSIVE SERVICE PORTFOLIO ACROSS OUR EXISTING
CUSTOMER BASE

additional logistics services. While we estimate that only 11% of our
customer base currently uses more than one of our services, we have been
successful in cross-selling services to several customers in the past
year. For example, two of our leading retail customers began to use our
wholesale product to move freight more economically out of Mexico and as
a lower cost alternative to trucking and several intermodal customers
began to use our services for their local trucking needs.

We believe the unique combination of our wholesale and retail products
and our ability to provide a comprehensive portfolio of services in
rapidly changing freight markets provides us with competitive advantages
by presenting significant opportunities for enhanced growth and
operational synergies. We have dedicated a portion of our sales force to
focus on selling additional services to our existing customers and have
aligned our employee incentive program to encourage cross-selling. In
addition, we have implemented new performance measurement tools to track
on-time pick-up and delivery and claims management which allow our sales
force to distinguish our high service reliability from our competitors.

. CONTINUING TO DRIVE OPERATIONAL EFFICIENCIES

We initiated several new operating programs in 2001 that we believe will
result in significant cost savings in the future. We have added a sales
management function across our divisions to optimize profitability based
on domestic freight flows. Within our wholesale segment, we have
upgraded our process for collecting container use fees, transferred the
management of the maintenance of our container and chassis fleet in
house, dedicated a team to optimize container utilization and are in the
process of installing an enterprise wide information technology system
to replace an operating agreement with an outside party. In addition, we
feel that there exists considerable opportunity for additional cost
savings from our recently acquired businesses. In our retail segment,
the consolidation of our rail and truck brokerage business on one system
is expected to reduce system costs per transaction and also allow
multiple customers to utilize our supply chain management systems. We
have also established formal management processes and measures to
increase utilization of our internal trucking and wholesale businesses
across our divisions.

. CONTINUING OUR NON-ASSET BASED LOGISTICS STRATEGY

We will continue to utilize a non-asset based logistics strategy in
which we limit our investment in equipment and facilities and reduce
working capital requirements through contracts and operating
arrangements with rail carriers, independent trucking operators and
other contractors and leasing companies. In our retail business,
third-party equipment owners and operators and railroads provide the
actual transportation of freight that we arrange on behalf of our
customers. Our wholesale business utilizes leased equipment, a majority
of which can either be returned or terminated within 90 days or is
associated with revenue generating arrangements. Our contracts provide
us with access to freight terminals and facilities and control over
transportation-related equipment without having to own them. As a
non-asset based logistics provider, we can focus on optimizing the
transportation solution for our customers. We will continue to leverage
our scale and our experience in managing large fleets of equipment owned
by others to obtain favorable contract rates.

This strategy allows us to maintain a high level of operating
flexibility and expand operations or introduce new products without
having to invest a significant amount of capital. Also, by maintaining a
cost structure that is highly variable in nature, we are able to respond
quickly to changing market and economic conditions by adjusting the size
of our operating fleet. Over the past two years, we generated average
annual adjusted EBITDA of $79 million per year while our maintenance
capital expenditures have averaged approximately $3 million per year.

. PURSUING OPPORTUNITIES FOR ADDITIONAL GROWTH

Expanding our customer base--We believe that we will be able to
leverage our size, breadth of service offerings and reputation to
attract as new customers both companies that currently buy logistics
services from our competitors as well as companies that are not
currently using a third-party logistics provider. We believe that many
companies will be attracted to an opportunity to shift to a single
full-service logistics provider like us. We target customers by industry
or key end-markets. This enables us to take advantage of our expertise
in specific markets as well as target freight which is best suited for
our service offerings.

Expanding product offerings--In order to handle our customers'
diverse logistics requirements, we intend to continue to increase our
range of service offerings. Because we focus on providing customized
solutions, we frequently assist customers in developing new processes
and solving problems and have expanded our product portfolio and
geographic reach in response to our customers' needs. In addition to
organic new product development, through strategic acquisitions we have
successfully added rail-related logistics services, truck brokerage,
freight handling and international freight forwarding to our service
portfolio and expanded the geographic coverage of our intermodal
marketing capabilities. We believe that as the logistics market
continues to consolidate, providers of a single point to point or
limited logistics offering will find it increasingly difficult to
compete which may increase the number of attractive acquisition
opportunities. We intend to continue to invest in building our
comprehensive portfolio of logistics services and geographic coverage
internally or through opportunistic and accretive acquisitions to take
advantage of growth opportunities.

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. According to Cass Information Systems, the total domestic
logistics market, including freight transportation and carrying costs, in 2000,
the last year for which information is currently available, exceeded $1
trillion, representing over 10% of the U.S. economy measured as a percentage of
2000 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. According to the American Trucking Association, the total
domestic transportation market in 2001 was $698.8 billion, with ground
transportation, comprised of highway and rail, the largest component, totaling
$652.3 billion in 2001. 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.

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. 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 of 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.

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.
According to Armstrong & Associates, the third-party logistics services sector
of the domestic logistics market was approximately $61 billion in 2001 and grew
at a compounded annual rate of approximately 16% between 1998 and 2001. 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.

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.
According to the ATA, the intermodal rail market comprised approximately $6.7
billion, or 1.0%, of total domestic freight transportation costs in 2001.
According to the Association of American Railroads, from 1991 to 2001, U.S.
railroad intermodal traffic increased at a compound annual rate of
approximately 6% while overall rail traffic grew only approximately 3%
compounded annually.

According to the ATA, in 2001, approximately $6.7 billion, or 16%, 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.

According to S&P, in the intermodal sector, railroads and shippers rely on
intermodal marketing companies which currently handle approximately two-thirds
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.

TRUCKING

According to the ATA, the trucking segment of the transportation industry
generated revenues of $610.2 billion in 2001, or 87.3% 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. According to the ATA, excluding
private fleets, revenues in the truckload segment were $273.9 billion in 2001.
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. According to the ATA,
the less-than-truckload market generated $62.7 billion of revenues in 2001. 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

According to the ATA, the railroad industry generated revenues of $35.4
billion in 2001, or 5.1% of the total domestic freight transportation market
excluding logistics services. The major participants in the rail market are
Union Pacific ($12 billion of 2001 revenues), Burlington Northern Santa Fe
($9.2 billion), CSX Transportation ($8.1 billion) and Norfolk Southern ($6.2
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.

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 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, customs brokerage
services and air freight forwarding services.

OUR SERVICE OFFERINGS

We provide our logistics services from two operating segments, our retail
segment which provides services principally to end-user customers and our
wholesale segment which provides services principally to transportation
intermediaries and international shipping companies. We believe the unique
combination of our wholesale and retail product and our ability to provide a
comprehensive portfolio of services in rapidly changing freight markets
provides us with competitive advantages by presenting significant opportunities
for enhanced growth and operational synergies. For example, from 2000 to 2001,
revenues generated by our wholesale segment and originated by our retail
segment increased from approximately $37 million to $91 million. See note 10 to
the consolidated financial statements for the financial results by segment.

RETAIL SERVICES

INTERMODAL MARKETING

We are one of the largest intermodal marketing companies in North America.
We arrange for and optimize the movement of our customers' freight in
containers and trailers throughout North America utilizing truck and rail
transportation. Typically, we arrange for a full container or trailer load
shipment to be picked up at origin by truck and transported a distance of less
than 100 miles to a site for loading onto a train. The shipment is then
transported via railroad (using either our wholesale services or rail carriers
directly) several hundred miles to a site for unloading from the train in the
vicinity of the final destination. After the shipment has been unloaded

from the train and is available for pick-up, we arrange for the shipment to be
transported by truck to the final destination. In addition, we provide
customized electronic tracking and analysis of charges, negotiate rail, truck
and intermodal rates, determine the 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 trucking contractors, as well as
through our own trucking services. Our intermodal marketing operations are
based in Los Angeles and Livermore (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 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 enables us to provide enhanced service to our customers and the
opportunity for increased profitability and growth.

TRUCK BROKERAGE AND SERVICES

We are one of the largest truck brokers in North America. We provide truck
brokerage services throughout North America through our customer service
centers in Los Angeles (California), Dallas (Texas), Chicago (Illinois), East
Rutherford (New Jersey) and Columbus (Ohio). We arrange the movement of freight
in containers or trailers by truck using a network of over 5,000 independent
trucking contractors. We manage all aspects of these services for our
customers, including selecting qualified carriers, negotiating rates, tracking
shipments, billing and resolving difficulties. Our nationwide network of
approved independent carriers provides service to virtually any North American
destination. Through this network, we are able to manage our customers' needs
for multiple modes of transportation using 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.

Our truckload operations consist of flatbed and specialized heavy-haul
trucking services, as well as full-load, regional and local trucking services.
Our capital investment is limited. We contract with independent trucking
contractors who in the aggregate own and operate a fleet of more than 725
vehicles equipped with flatbed and specialized trailers.

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 675 trucks. We also maintain interchange
agreements with many 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.

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.

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 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, as an
indirect air carrier. 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
arrange for the transportation our customers' freight by contracting with the
actual vessel operator 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 then are able to charge our customers
rates lower than the rates they could obtain from actual vessel operators 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 operator and provide shipment 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 to us the management and
transportation of their materials and inventory throughout their supply chains
and distribution of finished goods to the end user. We provide infrastructure
and equipment, integrated with our customers' existing systems, to handle
distribution planning, just-in-time delivery and automated ordering. We also
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. In addition, we 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.

FREIGHT CONSOLIDATION & HANDLING

Because of the complexity of freight patterns and the need to use multiple
types of transportation, 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.
Some of the more common freight handling services we provide include the
transfer of freight from international containers to rail-based or truck
containers (transloading), repackaging merchandise from various shipments for
distribution to multiple customer sites (consolidation/deconsolidation) and
warehousing. These services are primarily offered on the West coast where the
majority of U.S. container freight originates.

WHOLESALE SERVICES

INTERMODAL RAIL SERVICES

Intermodal transportation is the movement of freight via trailer or
container using two or more modes of transportation which nearly always include
a rail and truck segment. Our use of the stacktrain method, consisting of the
movement of cargo containers stacked two high on special railcars,
significantly improves the efficiency of our service by increasing capacity at
low incremental cost without sacrificing quality of service. We are the

largest non-railroad provider of intermodal rail service in North America. We
sell intermodal service primarily to intermodal marketing companies, large
automotive intermediaries, international shipping companies as well as to our
own internal intermodal marketing company. We compete primarily with rail
carriers offering intermodal service and indirectly with over-the-road full
truckload carriers.

Given our significant intermodal rail market share, we have developed close
working relationships with the railroads. Through long-term contracts and other
operating arrangements with railroads, including Union Pacific Railroad, CSX,
Canadian National Railroad and the two largest railroads in Mexico, 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.
These contracts provide for, among other things, competitive rates, minimum
service standards, capacity assurances, priority handling and the utilization
of nationwide terminal facilities.

We maintain an extensive fleet of doublestack railcars, containers and
chassis, substantially all of which are leased. As of December 28, 2001, our
equipment consisted of 1,855 doublestack railcars, 22,333 containers and 27,420
chassis, which are steel frames with rubber tires used to transport containers
over the highway. We provide APL Limited and other shipping companies with
equipment repositioning services 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 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
2001, 2000 and 1999, we filled 81,376, 68,579 and 73,741 repositioned
containers, respectively, with freight for shipment via our stacktrain network
on behalf of our domestic customers. Because of increased volumes in our retail
business, due primarily to our acquisitions in 2000 we have been 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.

The size of our leased and owned equipment fleet, the frequent departures
available to us through our rail contracts and the scope of the geographic
coverage of our rail network provide our customers with single company control
over their transportation requirements and gives us a significant advantage in
attaining the responsiveness and reliability required by our customers at a
competitive price. In addition, our access to sophisticated information
technology enables us to continuously track cargo containers, chassis and
railcars throughout our transportation network. Through our equipment fleet and
long-term arrangements with rail carriers, we can control the transportation
equipment used in our wholesale operations and are able to employ full-time
personnel on-site at the terminals, which allow us to ensure close coordination
of the services provided at these facilities. 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 received the "Quality One" award from Ford in 1999 and the
Truckload Carrier Quality Award for Intermodal in 1999 and 2000 from Ryder
Transportation. We were also the Rail Carrier of the Year in 2000 for GE and
the Intermodal Marketing Company Carrier of the Year in 1999 for Wal-Mart. In
addition, we are ISO 9002 certified. We believe that our unique market position
and service offerings position us to capitalize on considerable growth
opportunities in the intermodal transportation market.

INFORMATION TECHNOLOGY

Our information technology systems have an expandable network architecture
that provides for the exchange of data electronically between us and our
customers and an internet-based platform that allows our customers to easily
customize use and integration of our 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,
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.

Our acquisition of Rail Van in December 2000 and its proprietary information
technology systems has allowed us to further upgrade our information technology
platform by integrating a significant portion of our retail operations onto the
Rail Van information technology platform. 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 in the
process of replacing the technology provided by APL Limited with information
technology systems currently available in the marketplace from unrelated third
parties which will cost approximately $10.0 million, and thereafter at on-going
annual costs which will be significantly below the $10.0 million annual fee
currently paid to APL Limited. We anticipate that this replacement will be
completed by the end of 2003.

CUSTOMERS

We currently provide retail services on a nationwide basis to retailers and
manufacturers, including a number of Fortune 500 and multi-national companies
such as Ford, General Electric, Heinz, Wal-Mart, ConAgra, Whirlpool, Union
Pacific, Sony and CompUSA, as well as numerous middle market 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.

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.

For the year ended December 28, 2001 there were no customers that
contributed more than 10% of our total gross revenues.

For the year ended December 29, 2000, we had one customer that contributed
more than 10% of our total gross revenues. Total gross revenues of $146.9
million were generated from Union Pacific (generated by both reporting
segments).

For the year ended December 31, 1999, we had two customers that contributed
more than 10% of our 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).

SALES AND MARKETING

As of December 28, 2001, our retail marketing operations included 100 sales
employees and agents. All of our sales people are supported by regional sales
offices in 17 cities, including Los Angeles and Livermore (California), Chicago
(Illinois), Columbus (Ohio), Memphis (Tennessee) and Rutherford (New Jersey).
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 December 28, 2001, our wholesale services were marketed by over 40
sales and 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 across North
America. The sales representatives are directly responsible for managing the
business relationships with shippers and railroads, supporting and influencing
the selling activities and achieving the mutually agreed upon volume and
revenue goals of our intermodal marketing company. This sales force assist, our
intermodal marketing channel through joint selling efforts directed at the
owner of the freight who is the customer of our intermodal marketing company.
The customer service representatives are responsible for supporting existing
customers and sales representatives by providing cargo tracking services,
acquiring new customers, proactively resolving problems, and processing
customer inquiries. In addition, third-party intermodal marketing companies
that sell intermodal service to shippers while buying space on intermodal rail
trains through our wholesale services, enable us to market our wholesale
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 over 180 sales and customer service representatives. These
representatives are located in five offices and 75 agencies in over 70
countries.

DEVELOPMENT OF OUR COMPANY

In May 1999, we were recapitalized through the purchase of shares of our
common stock by affiliates of Apollo Management, L.P. and two other investors
from APL Limited and our redemption of a portion of the shares of common stock
held by APL Limited. On the date of the recapitalization, we began providing
retail and logistics services to customers through our acquisition of Pacer
Logistics, which was run by Mr. Orris and several other of our senior
executives. In connection with these transactions, our name was changed from
APL Land Transport Services, Inc. to Pacer International, Inc.

Pacer Logistics, Inc. was incorporated on March 5, 1997 and is the successor
to a company formed in 1974. Between the time of its formation and our
acquisition of Pacer Logistics in May, 1999, Pacer Logistics acquired and
integrated six logistics services companies.

In 2000 we acquired four companies in the segment that have complemented our
core retail business operations and expanded our geographic reach and service
offerings for intermodal marketing, local trucking, international freight
forwarding and other logistics services:

. 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,
consolidation/deconsolidation 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, provides logistics and truck
brokerage services in North America. This acquisition expanded our
service offerings.

. On October 31, 2000, we acquired all of the capital stock of RFI Group,
Inc. RFI provides international freight forwarding, customs-brokerage
and ocean transportation services. 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 provides rail and truck brokerage, intermodal marketing
and logistics services. This acquisition expanded our customer base and
product offerings and provided us with advanced information systems,
which we are now in the process of integrating into all of our retail
segment operations, as well as a highly focused sales force.

FACILITIES/EQUIPMENT

Our wholesale transportation network operates out of 54 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 80% of
our chassis and approximately 90% of our doublestack railcars. A majority of
our leased equipment can either be returned or terminated within 90 days or is
associated with revenue generating arrangements. As of December 28, 2001, our
wholesale equipment fleet consisted of the following:

OWNED LEASED TOTAL
----- ------ ------

Containers
48' Containers........................... 144 12,970 13,114
53' Containers........................... -- 9,219 9,219
----- ------ ------
Total................................ 144 22,189 22,333
===== ====== ======
Chassis
48' Chassis.............................. 5,813 7,238 13,051
53' Chassis.............................. 50 10,059 10,109
----- ------ ------
Subtotal............................. 5,863 17,297 23,160
20', 40' and 45'* Chassis................ -- 4,260 4,260
----- ------ ------
Total................................ 5,863 21,557 27,420
===== ====== ======
Doublestack Railcars
Total................................ 210 1,645 1,855
===== ====== ======

--------

* Represents the current allocation of chassis sublet to us pursuant to our
agreement with APL Limited. See "Certain Relationships and Related
Transactions."

During 2001, we received 1,100 leased containers and 80 leased chassis and
returned 2,278, primarily 48-ft, leased containers and 1,629 leased chassis as
part of a program to downsize our equipment fleet. Leased railcars increased
1,015 in 2001 reflecting the receipt of all equipment ordered during 2000 and
2001. No new railcar leases are anticipated during 2002.

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.

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 trucking 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.

Our wholesale equipment operating lease expense and rental income for
containers, chassis and railcars is shown below (in millions):

EQUIPMENT RENTAL

2001 2000 1999
----- ----- -----

Operating Lease Expense..................... $72.0 $59.9 $51.3
Rental Income Revenue....................... $52.5 $30.1 $16.9

The large increase in rental income in 2001 compared to 2000 and for 2000
compared to 1999 was due primarily to the increase in railcar rental income due
to the additional railcars leased during the latter half of 2000 and 2001.
Rental income for railcars exceeds the related operating lease expense. In
addition, we have improved our billing and collection process for per diem on
containers and chassis over the last two years.

The following table shows our expense for on-going maintenance and repairs
for containers, chassis and railcars (in millions):

MAINTENANCE OPERATING EXPENSE

2001 2000 1999
----- ----- -----

Containers.................................. $ 4.9 $ 5.9 $ 4.1
Chassis..................................... 15.8 17.1 13.9
Doublestack Railcars........................ 4.7 3.7 3.0
----- ----- -----
Total Maintenance Operating Expense......... $25.4 $26.7 $21.0
===== ===== =====

At the time of our recapitalization in May 1999, we outsourced to a
third-party the management of the maintenance and repair of our container and
chassis fleet. In March 2001, we terminated the management agreement and
brought the management of this function in-house. We believe that this change
will result in a net savings to us in future periods.

SUPPLIERS

RAILROADS

We have long-term contracts with five railroads, Union Pacific, CSX,
Canadian National Railroad, and the two largest railroads in Mexico, regarding
the 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 these 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 point to point, commonly referred
to as linehaul and terminal services for us, are typically long-term
agreements, with major contracts having a remaining term of 10 to 13 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 specified 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 who procure business for and manage a
group of trucking contractors, and independent trucking 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 a
large trucking fleet. 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 trucking 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 many 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.

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 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. 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.

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. 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 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 in our wholesale and retail
business 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. Our major competitors in the
retail business include C.H. Robinson, Expeditors International, ForwardAir,
UTI Worldwide, Exel, Alliance Shippers, Menlo Logistics, EGL, Inc. and Hub
Group and in the wholesale business include Burlington Northern Santa Fe, Union
Pacific, CSX Intermodal and J.B. Hunt Transport.

EMPLOYEES

As of December 28, 2001, we had a total of 1,484 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.

Our trucking operations are subject to licensing and regulation as a
transportation provider. 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. 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 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 in 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 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

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 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
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, Interstate's retention on its liability policy
was $250,000. The court has ordered that restitution of $488,978 be paid for
this omission. The court entered judgment on the August 11, 2000 decision on
January 23 2002. 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 consolidated financial position, results of operations or
liquidity.

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.

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 2002 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.

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

NAME AGE POSITION
---- --- --------

Donald C. Orris........................ 60 Chairman, President and Chief Executive Officer
Gerry Angeli........................... 55 Executive Vice President
Lawrence C. Yarberry................... 59 Executive Vice President, Chief Financial Officer
Carl K. Kooyoomjian.................... 55 Chairman--Retail Segment
Charles T. Shurstad.................... 55 President--Wholesale Segment
Michael F. Killea...................... 40 Executive Vice President and General Counsel
Denis M. Bruncak....................... 47 Chief Commercial Officer--Retail Segment
Jeffrey R. Brashares................... 49 President, Transportation Services--Retail Segment
Joshua J. Harris....................... 37 Director
Thomas L. Finkbiner.................... 48 Director
Michael S. Gross....................... 40 Director
Bruce H. Spector....................... 59 Director
Marc E. Becker......................... 29 Director
Timothy J. Rhein....................... 61 Director

DONALD C. ORRIS has served as Chairman, President and Chief Executive
Officer of our company since May 1999. Mr. Orris serves as Chief Executive
Officer pursuant to the terms of the Management Shareholder Agreement. 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. Mr. Orris is also a director of Quality
Distribution, Inc.

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 subsidiaries of Pacer Logistics. 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.

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 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.

CARL K. KOOYOOMJIAN has served as Chairman of the retail segment of our
company since July 2001. Prior to joining our company, Mr. Kooyoomjian served
as Corporate Vice President & Officer for The Coca-Cola Company from 1996. From
1972 to 1995, Mr. Kooyoomjian held various positions with Digital Equipment
Corporation, including distribution planning, manufacturing, and logistics
services eventually attaining the position of Vice President, Acquisition and
Purchasing.

CHARLES T. SHURSTAD has served as President of the wholesale segment of our
company since January 2002. Prior to joining our company, Mr. Shurstad was the
President of The Belt Railway Company of Chicago from 1998. From 1997 to 1998,
Mr. Shurstad was the Chief Operating Officer of the Malayan Railway and from
1995 to 1997 the President of the Terminal Railroad of St. Louis. Prior to
1995, Mr. Shurstad held a number of positions with Southern Pacific
Transportation Company, the last of which was Vice President and General
Manager Operations for the Western Region.

MICHAEL F. KILLEA has served as Executive Vice President and General Counsel
of our company since August 2001. From October 1999 through July 2001 he was a
partner at the law firm of Holland & Knight LLP in New York City and
Jacksonville, Florida, and from September 1987 through September 1999 he was a
partner and an associate at the law firm of O'Sullivan LLP in New York City.

DENIS M. BRUNCAK has served as Chief Commercial Officer of the retail
segment of our company since December 2000. Prior to joining our company, Mr.
Bruncak was an owner and served as Chief Executive Officer of Rail Van Global
Logistics since 1984. Rail Van Global Logistics became a subsidiary of Pacer
Logistics in December 2000. Mr. Bruncak joined Rail Van Global Logistics as
General Manager in 1979.

JEFFREY R. BRASHARES has served as President of Transportation Services of
the retail segment of our company since December 2000. Prior to joining our
company, Mr. Brashares was an owner and served as President of Rail Van Global
Logistics since 1984. Rail Van Global Logistics became a subsidiary of Pacer
Logistics in December 2000. Mr. Brashares joined Rail Van Global Logistics as
Regional Sales Manager in 1976.

JOSHUA J. HARRIS has served as a Director of our company since May 1999. Mr.
Harris is a founding senior 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 NRT,
Incorporated, Clark Retail Enterprises, Inc., Breuners Home Furnishings
Corporation, Quality Distribution, Inc., Compass Minerals Group, 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 senior 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., Encompass Services Corporation, Rare Medium, Inc.,
Saks, Inc. and United Rentals, Inc.

BRUCE H. SPECTOR has served as a Director of our company since May 1999. Mr.
Spector served as a full time consultant to Apollo Management commencing in
1992 and became a partner in Apollo Management in 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 Park
Media, LLC, 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, Quality
Distribution, Inc. and WMC Mortgage Corp.

TIMOTHY J. RHEIN has served as a Director of our Company since May 1999. Mr.
Rhein was Chairman of the Board of APL Limited from October 1995 until his
retirement in June 2001. Mr. Rhein served as APL Limited's President and Chief
Executive Officer from October 1995 to October 1999, and President and Chief
Operating Officer from July 1995 to October 1999. 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.

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:

BOARD
CLASS EXPIRATION MEMBER
----- ---------- -------

Class I.......................................... 2003
Class II......................................... 2004
Class III........................................ 2005

COMMITTEES OF THE BOARD OF DIRECTORS

The board of directors has an executive committee, a compensation committee
and an audit 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 takes those
actions as it deems necessary to satisfy itself that the auditors are
independent of management. Prior to this offering, the members of the audit
committee consisted of Messrs. Harris, Rhein and Becker. Effective upon
consummation of this offering, the audit committee will consist of Mr. Harris
and two new directors to be named within 90 days of this offering who will
qualify as independent directors 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 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

Mr. Orris serves as a director of Quality Distribution, Inc., of which Mr.
Finkbiner, one of our directors, is Chief Executive Officer and a director. No
other 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 Summary Compensation 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 2001.

SUMMARY COMPENSATION TABLE

LONG-TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUT
--------------------------------- ---------- ------
SECURITIES
RESTRICTED UNDERLYING ALL
OTHER ANNUAL STOCK OPTIONS LTIP OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S)(2) SARS PAYOUT COMP.(3)
--------------------------- ---- -------- -------- --------------- ----------- ---------- ------ --------

Donald C. Orris.......... 2001 $300,000 $124,200 -- -- -- -- $4,442
(CEO) 2000 $300,000 $161,880 -- -- -- -- $5,250
1999 $300,000 $161,880 -- -- 100,000 -- $5,688

Gerry Angeli............. 2001 $270,000 $130,950 -- -- -- -- $4,846
2000 $270,000 $121,410 -- -- -- -- $5,250
1999 $270,000 $121,410 -- -- 100,000 -- $3,025

Robert L. Cross(4)....... 2001 $235,000 $ 63,450 -- -- -- -- $5,250
2000 $235,000 $121,410 -- -- -- -- $4,038
1999 $235,000 $121,410 -- -- 100,000 -- $5,604

Jeffrey R. Brashares(5).. 2001 $572,000 -- -- -- -- -- $2,625

Denis M. Bruncak(5)...... 2001 $572,000 -- -- -- -- -- $2,625

--------
(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, and Cross
received 2,329.25, 2,264.16, and 2,264.16 shares of Pacer Logistics 7.5%
Exchangeable Preferred Stock, respectively, with a fiscal year end 2001 fair
market value of $6.9 million (based on a fiscal year end 2001 fair market
value of $1,000 per share of such preferred stock, plus accrued dividends).
These shares of Pacer Logistics preferred stock will be exchanged for
232,925, 226,416 and 226,416 shares of our common stock, respectively, prior
to the consummation of this offering.

(3)Consists of company matching contributions to 401(k) plan.

(4)Mr. Cross resigned as Executive Vice President effective December 31, 2001.

(5)Messrs. Brashares and Bruncak joined Pacer International on December 22,
2000 as a result of our acquisition of Rail Van.

OPTION GRANTS IN LAST FISCAL YEAR

There were no stock options granted to the named executive officers during
the fiscal year 2001.

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
28, 2001.

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL YEAR END(1)
SHARES ACQUIRED ------------------------- -------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------------- ----------- ------------- ----------- -------------

Donald C. Orris.....
Common............ 60,958 $1,510,539 26,667 73,333 $400,005 $1,099,995
Preferred.......... 9,166 (2) -- -- -- --

Gerry Angeli
Common............ 60,958 $1,510,539 26,667 73,333 $400,005 $1,099,995
Preferred......... 9,166 (2) -- -- -- --

Robert L. Cross(3)..
Common............. 60,958 $1,510,539 26,667 73,333 $400,005 $1,099,995
Preferred......... 9,166 (2) -- -- -- --

Jeffrey R. Brashares
Common............ -- -- -- -- -- --

Denis M. Bruncak
Common............ -- -- -- -- -- --

--------

(1)Based on an assumed initial offering price of per share, the midpoint
of the range set forth on the cover of this prospectus, less the exercise
price, multiplied by the number of shares underlying the option.

(2)Upon exercise of preferred stock options, we repurchased the shares at the
option exercise price and cancelled and retired those shares.

(3)Mr. Cross resigned effective December 31, 2001.

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, thereby increasing their personal
interest in our growth and success and to provide a means of rewarding
outstanding contribution by these employees. All of our employees and
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. In the event of specified corporate
reorganizations, recapitalizations, or other specified corporate transactions
affecting our stock, the plan permits proportionate adjustments to the number
and kinds of shares subject to options and/or the exercise price of those
shares. 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. With

the exception of the 562,861 incentive stock options which were rolled into
this plan from the 1997 and 1998 Pacer Logistics stock option plans, 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 of common stock have been authorized to be
issued pursuant to all option grants under this plan. Forfeitures under the
plan are available for future grants. At December 28, 2001, options to purchase
1,202,114 shares of our common stock were outstanding under the plan and 66,886
options were available for future grant.

Under the plan, in connection with the recapitalization, an initial grant of
985,500 options was made with an exercise price of $10.00 per share, to
specified employees. These options under this initial grant 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 specified 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 the 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.

Additionally, 470,247 and 92,614 options which were part of the 1997 and
1998 Pacer Logistics, Inc. Stock Option Plan, respectively, were rolled over as
part of the acquisition of Pacer Logistics.

During 1999, subsequent to the initial grant discussed above, we granted an
additional 80,000 options and 24,000 were forfeited. During 2000, we granted an
additional 296,500 options and 316,000 options were forfeited. During 2001, we
granted an additional 279,000 options and 137,000 options were forfeited.

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.

In addition, under the 1999 Stock Option Plan, options to purchase 44,997
shares of our preferred stock were granted which were rolled over from the 1997
Pacer Logistics Stock Option Plan. These options were granted to certain
members of our management and had an exercise price of $9.00 per share. All of
these options were exercised in 2000 and 2001. We elected, at our discretion,
to repurchase and retire the preferred stock that arose from the exercise of
the options.

EMPLOYMENT AGREEMENTS

We have entered into employment agreements dated as of March 31, 1997, and
amended as of April 7, 2000, with each of Donald C. Orris, and Gerry Angeli.
Each of these employment agreements, as amended, has a term of two years
commencing 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 per year for each of Messrs. Orris and Angeli, 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. We have also entered into employment agreements dated as of December
22, 2000 with each of Denis M. Bruncak and Jeffrey Brashares. Each of these
agreements has a term of one year commencing December 22, 2000, with automatic
two year renewals on each anniversary of their commencement date. The minimum
base salary under these employment agreements is $572,000 for each of Mess.
Bruncak and Brashares, subject to increase by our board of directors.

Under the employment agreements Messrs. Orris and Angeli may receive annual
bonuses of up to $180,000 and $135,000, respectively, based on the attainment
of operating income targets. Further, an additional bonus of up to 25% of the
annual bonus may be awarded to each of Messrs. Orris and Angeli based upon
acquisitions made during the year. The employment agreements of Messrs. Bruncak
and Brashares do not provide for the grant of annual bonuses. 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 equal to the
greater of the number of months remaining in the employment term or one year,
in the case of Messrs. Orris and Angeli, and for a period of two years
following termination, in the case of Messrs. Bruncak and Brashares.

We entered into an employment agreement with Robert L. Cross providing for a
minimum base salary of $200,000 per year and otherwise having substantially the
same terms as the employment agreements with Messrs. Orris and Angeli. Mr.
Cross resigned effective December 31, 2001. We have entered into a separation
and release agreement as of December 31, 2001 with Mr. Cross. Mr. Cross is
entitled to receive $235,000 per year for a period of two years commencing
January 1, 2002.

All of the employment agreements and the separation and release agreement
include 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 regard
to any business in competition with us.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of shares of the common stock as of December 28, 2001, and as
adjusted to reflect the sale of the shares of common stock offered by us and
the selling stockholders in this offering, 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;

. all executive officers and directors as a group; and

. each selling stockholder.

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
December 28, 2001, 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 13,779,591 shares of common
stock outstanding as of December 28, 2001 after giving effect to the 2,234,844
shares of our common stock to be issued upon exchange of the Pacer Logistics
preferred stock prior to the consummation of this offering, and
shares of common stock outstanding after completion of this offering, 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.

BENEFICIAL OWNERSHIP BEFORE OFFERING
-----------------------------------------------
COMMON STOCK BENEFICIAL
UNDERLYING OWNERSHIP
COMMON OPTIONS SHARES TO BE AFTER OFFERING(2)
STOCK EXERCISABLE SOLD IN THE -----------------
OUTSTANDING WITHIN 60 DAYS TOTAL PERCENT OFFERING(2) TOTAL PERCENT
----------- -------------- ---------- ------- ------------ ----- -------

Apollo Management IV,
L.P.(1).................. 9,390,000 -- 9,390,000 68.1%
c/o Apollo Management,
L.P.
1301 Avenue of the
Americas
New York, NY 10019

APL Limited................ 750,000 -- 750,000 5.4
1111 Broadway
Oakland, CA 94607

Donald C. Orris(3)......... 389,674(4) 26,667 416,341 3.0

Gerry Angeli(3)............ 383,165(5) 26,667 409,832 3.0

Robert L. Cross(3)......... 383,165(5) 26,667 409,832 3.0

Jeffrey R. Brashares(3).... 80,000 -- 80,000 *

Denis M. Bruncak(3)........ 80,000 -- 80,000 *

Joshua J. Harris(6)........ 9,690,000(7) 3,000 9,693,000 70.3

Thomas L. Finkbiner(8)..... -- 1,500 1,500 *

Michael S. Gross(6)........ 9,390,000(7) 1,500 9,391,500 68.1

Bruce M. Spector(6)........ 9,390,000(7) 3,000 9,393,000 68.2

Marc E. Becker(6).......... 9,390,000(7) 3,000 9,393,000 68.2

Timothy J. Rhein(3)........ -- 3,000 3,000 *

All directors and executive
officers as a group (14
persons)(9).............. 10,622,839(10) 101,334 10,724,173 77.8

--------

* Less than 0.1%

(1)Beneficial ownership of common stock includes 8,912,000 shares, or 64.7%
before this offering and shares, or % after this offering, owned by
Coyote Acquisition LLC ("Coyote I") and 478,000 shares, or 3.4% before this
offering and shares, or % after this offering, owned by Coyote
Acquisition II LLC ("Coyote II" and together with Coyote I, "Coyote").
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)Excludes the underwriters' over-allotment option. If the underwriter's
over-allotment option is exercised in full, Coyote I and Coyote II would
beneficially own and shares, respectively, of common stock.

(3)The business address for Messrs. Orris, Angeli, Cross and Rhein is c/o Pacer
International, Inc., 2300 Clayton Road, Suite 1200, Concord CA 94520. The
business address for Messrs. Brashares and Bruncak is c/o Pacer Global
Logistics, Inc., 6805 Perimeter Drive, Dublin, Ohio 43016. Mr. Cross
resigned effective December 31, 2001.

(4)Includes 232,925 shares of common stock issuable upon exchange of the Pacer
Logistics 7.5% Exchangeable Preferred Stock prior to the consummation of
this offering.

(5)Includes 226,416 shares of common stock issuable upon exchange of the Pacer
Logistics 7.5% Exchangeable Preferred Stock prior to the consummation of
this offering.

(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)The business address for Mr. Finkbiner is 3802 Corporex Park Drive, Tampa,
Florida 33619.

(9)Includes all shares held by entities affiliated with specific directors as
described in note (7) above.

(10)Includes 685,757 shares of common stock issuable upon exchange of the Pacer
Logistics 7.5% exchangeable preferred stock prior to the consummation of
this offering.

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
senior subordinated notes, borrowings under our credit agreement, the sale and
leaseback of 199 doublestack rail cars, and equity investments by affiliates of
Apollo Management, Deutsche Bank Securities Inc. and Credit Suisse First Boston
Corporation.

RELATED PARTY TRANSACTIONS

The following table summarizes related party transactions recorded in the
statement of operations.

FISCAL YEAR ENDED
--------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
RELATED PARTY TYPE 2001 2000 1999
----------------------------------- ------------------------- ------------ ------------ ------------

GROSS REVENUES:
APL Limited Freight transportation $ 82.8 $ 90.6 $49.1
APL Limited Avoided repositioning
international freight 17.4 16.2 21.0
APL Limited Management fee 6.6 6.6 3.9
------ ------ -----
Total related party revenues $106.8 $113.4 $74.0
====== ====== =====
OPERATING EXPENSES:
DIRECT OPERATING EXPENSES:
APL Limited Lease, maintenance and
repair expense $ -- $ -- $ 7.0
------ ------ -----
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
APL Limited Corporate overhead $ -- $ -- $ 5.6
APL Limited Administrative services 1.0 0.6 1.1
APL Limited Information technology
services 10.0 10.0 5.8
APL de Mexico, S.A. de C.V. Agency services 0.1 2.7 1.8
Apollo Management Management fee 0.5 0.5 0.3
A&G Investments Facility lease 0.6 0.5 0.3
KU Realty, LLC Facility lease 1.8 1.8 --
Rich Hyland Facility lease -- -- 0.1
Perimeter West Facility lease 1.1 -- --
------ ------ -----
Total related party SG&A expenses..... $ 15.1 $ 16.1 $15.0
------ ------ -----
INTEREST EXPENSE:
Keller Uchida Realty $5.0 million subordinated
Resources, LLC................... note $ 0.4 $ 0.2 $ --
------ ------ -----
Total related party expenses $ 15.5 $ 16.3 $22.0
====== ====== =====

Management believes that the terms of the related party transactions listed
above were at fair market rates.

ARRANGEMENTS WITH APL LIMITED, ONE OF OUR STOCKHOLDERS, AND ITS AFFILIATES

We provide 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 were performed on
a cost reimbursement basis. Thus, no revenues or expenses were recognized for
financial reporting purposes. Reimbursements amounted to $0, $79.2 million and
$273.6 million for the fiscal years ended December 28, 2001, December 29, 2000
and December 31, 1999, respectively. The decrease in reimbursement reflects our
transfer in April 2000 of the processing of APL Limited's international traffic
receivables and payables to APL Limited, which had previously been included in
our balance sheet. This resulted 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. At December 29, 2000 and December 31, 1999, we had a receivable from
APL Limited for these transactions of $0 and $31.3 million, respectively. We
continue to handle APL Limited's international traffic under contract for an
annual management fee of $6.6 million in 2001 and 2000 and $3.9 million in 1999.

Prior to the recapitalization, APL Land Transport Services Inc. shared in
expenses of the former parent for services including systems support, office
space and other corporate services. These expenses were $5.6 million for the
period ended May 28, 1999. In connection with the recapitalization, we 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 2001, 2000 and the seven months ended December 31, 1999, $1.0, $0.6
million and $1.1 million was paid for these services, respectively. In
addition, APL Limited is currently providing us information technology services
under a long-term agreement for an annual fee of $10.0 million. For the fiscal
years ended December 28, 2001, December 29, 2000 and December 31, 1999, $10.0
million, $10.0 million and $5.8 million was paid for these services,
respectively.

In addition, we receive compensation from APL Limited for the repositioning
expense that APL Limited has avoided due to our using APL Limited's containers
in surplus locations. The total amount of revenue recognized for these services
was $17.4 million, $16.2 million and $21.0 million for the fiscal years ended
December 28, 2001, December 29, 2000 and December 31, 1999, respectively. At
December 28, 2001 and December 29, 2000, $1.9 million and $1.6 million was
receivable from APL Limited, respectively.

We also provide services to the Automotive Division of APL Limited. These
services include moving containers primarily in the U.S.-Mexico trade. The
amount of revenue recognized for these services was $82.8 million, $90.6
million, $49.1 million for the fiscal years ended December 28, 2001, December
29, 2000 and December 31, 1999, respectively. At December 28, 2001 and December
29, 2000, $4.7 and $4.4 million was receivable from APL Limited including
related local trucking and miscellaneous charges, respectively.

Prior to the recapitalization, we received an allocation for lease and
maintenance and repair expenses from APL Limited. These expenses were $7.0 for
the fiscal year ended December 31, 1999.

APL de Mexico, S.A. de C.V. ("APL Mexico"), a wholly-owned Mexican
subsidiary of APL Limited, provided various agency services to us with respect
to its bills of lading in Mexico. Expenses recorded from APL Mexico were $0.1
million, $2.7 million and $1.8 million for the fiscal years ended December 28,
2001, December 29, 2000 and December 31, 1999, respectively. At December 28,
2001 and December 29, 2000, $0 and $0.5 million, respectively, was payable to
APL Mexico. Effective in 2001, we began using Pacer de Mexico S.A. de C.V., a
wholly owned Mexican subsidiary of our company, to handle the services
previously provided by APL Mexico.

ADMINISTRATIVE SERVICES AGREEMENT

Pursuant to an administrative services agreement, APL Limited currently
provides us with administrative and support services, including:

. accounts payable,

. general ledger administration, and

. office space and associated office services.

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. This agreement terminates on May 31, 2002 and
may be renewed annually. 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 30 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 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 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 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 specified perforance 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:

. an uncorrected material breach by APL Limited;

. the occurrence of specified performance failures resulting from APL
Limited's willful misconduct or gross negligence; or

. 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. We are in the process of replacing the technology provided by APL
Limited with information technology systems currently available in the market
place from unrelated third parties. We anticipate that this replacement will be
completed by the end of 2003.

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 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 in 2019. 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 is the same as the term of the stacktrain services
agreement. If the TPI chassis sublet agreement is terminated prior to 2019, we
may require APL Limited to assign the leases for all of the chassis covered
under the agreement to us.

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. If we fail to reposition the
equipment within the time frame specified in the agreement, we are charged $10
per day per container and $4.85 per day per chassis until repositioned. Under
the equipment supply agreement we are liable for the actual cost of repair for
each damaged container and chassis if the cost exceeds $100. The equipment
supply agreement has the same term as the stacktrain services agreement.

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 May 28, 1999, 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.

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.

TAX SHARING AGREEMENT WITH COYOTE

We and our direct and indirect subsidiaries have entered into a tax sharing
agreement with Coyote, our principal stockholder. 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, 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.

MANAGEMENT AGREEMENT WITH APOLLO

We have entered into a management agreement with Apollo Management, an
affiliate of Coyote, our principal shareholder, for financial and strategic
services as the Board of Directors may reasonably request. The annual fee which
has been paid for these services for each of the years ended December 28, 2001
and December 29, 2000 was $0.5 million, and for the partial year ended December
31, 1999 was $0.3 million. In addition, we paid Apollo a fee of $1.5 million in
1999 in connection with the recapitalization.

ARRANGEMENTS WITH CURRENT AND FORMER 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 $0.6 million, $0.5 million and $0.3 million for the years ended
December 28, 2001, December 29, 2000 and December 31, 1999, respectively.

We lease warehouse and dock facilities in Southern California from KU
Realty, Inc. which is owned by Messrs. Keller and Uchida. Mr. Keller is a
stockholder and former President of the Freight Consolidation and Handling
Division of our company. Lease payments were $1.8 million for the years ended
December 28, 2001 and December 29, 2000.

In July 2001, February 2001 and August 2000 we paid scheduled semi-annual
interest payments amounting to $0.4 million in 2001 and $0.2 million in 2000 to
Mr. Keller 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.

In April 2000, we repaid $0.4 million, including accrued interest, in notes
payable to Messrs. Orris, Angeli and Cross. The notes were part of the purchase
price for Pacer Logistics acquired on May 28, 1999.

We leased a facility consisting of office space from Richard P. Hyland, a
stockholder and a former Executive Vice President of our company. Such lease
was pursuant to an oral agreement and was on a month-to-month basis. The lease
terminated on December 31, 1999.

In connection with the acquisition of Rail Van, we assumed a lease that had
been entered into by Rail Van with an entity associated with Messrs. Bruncak
and Brashares and certain former shareholders of Rail Van. This lease commenced
in April 2001, with an annual rental payment of approximately $1.3 million.
Lease payments were $1.1 million for the year ended December 28, 2001.

RESTRICTIONS ON TRANSACTIONS WITH AFFILIATES

Transactions between us and our officers, directors and affiliates are
subject to the provisions of Tennessee law and to the provisions of our credit
agreement and the indenture for our senior subordinated notes. The Tennessee
Business Corporation Act provides that a transaction with the corporation in
which a director or officer of the corporation has a direct or an indirect
interest is not voidable by the corporation solely because of the director's or
officer's interest if the material facts are disclosed or known to, and the
transaction is approved or ratified by, the disinterested directors or
stockholders, or if the transaction was fair to the corporation. The Tennessee
Business Corporation Act also provides that a corporation may not lend money or
guarantee the obligation of a director or officer, unless the arrangement is
approved by the stockholders or the board of directors determines that the
arrangement benefits the corporation and approves it.

Under the indenture for our senior subordinated notes, we may not, subject
to specified exceptions, enter into any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any of our
affiliates except for transactions on terms that are no less favorable than
those that might reasonably have been obtained in a comparable transaction at
such time on an arm's-length basis from a person that is not our affiliate; and

. if the affiliate transaction involves aggregate payments or other
property with a fair market value in excess of $2.0 million, the
transaction must be approved by our Board of Directors, and

. if the affiliate transaction involves an aggregate fair market value of
more than $10.0 million, we have, prior to the consummation of the
transaction, obtained a favorable opinion from an independent financial
advisor as to the fairness of the transaction to us from a financial
point of view.

Similarly under our credit facility, we may not, subject to specified
exceptions, enter into any transaction or series of transactions with any of
our affiliates other than on terms and conditions substantially as favorable to
us as would be reasonably expected to be obtainable by us at the time in a
comparable arm's-length transaction with a person that is not our affiliate.
The foregoing restrictions of our indenture and credit agreement will continue
to apply to us so long as the notes and borrowings under our credit agreement,
respectively, are outstanding.

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:

. a seven-year term loan maturing in 2006 in an original principal amount
of $135 million, of which $132.0 million was outstanding as of December
28, 2001, which was used to finance in part our recapitalization and
certain related costs and expenses, and to refinance certain
indebtedness of our company;

. a seven-year $40.0 million term loan maturing in 2006, of which $39.7
million was outstanding as of December 28, 2001, which was used to
finance, in part, our acquisition in 2000 of Rail Van and certain
related costs and expenses, and to refinance certain indebtedness of
Rail Van and its subsidiaries; and

. a five-year $100.0 million revolving credit facility maturing in 2004,
of which up to $25 million may include letters of credit, to be used
for, among other things, working capital and general corporate purposes
of our company and its subsidiaries, including, without limitation,
effecting acquisitions having an aggregate consideration not exceeding
$25 million and satisfying other specified conditions, including pro
forma ratios relating to interest coverage, total debt to EBITDA and
senior debt to EBITDA.

We intend to use the net proceeds of this offering to repay the remaining
outstanding portion of the $40.0 million term loan, approximately $29 million
of the outstanding portion of the $135 million term loan and approximately $68
million of borrowings under the revolving credit facility. See "Use of
Proceeds."

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:

. 100.0%, or 75% if our ratio of total debt to EBITDA is less than 3.50 to
1, of the net cash proceeds of all asset sales and dispositions by our
company and its subsidiaries, subject to exceptions;

. 100.0%, or 75% if our ratio of total debt to EBITDA is less than 3.50 to
1, of the net cash proceeds of issuances of certain debt obligations and
certain preferred stock by our company and its subsidiaries, subject to
exceptions;

. 50.0%, or 0% if our ratio of total debt to EBITDA is less than 3.50 to
1, of the net cash proceeds from common equity and specified preferred
stock issuances by our company and its subsidiaries, subject to
exceptions, including in connection with acquisitions described above;

. a specified percentage, ranging from 75% if our ratio of total debt to
EBITDA is greater than 3.50 to 1 to 0% if such ratio is less than 2.5%
to 1, of annual excess cash flow, determined generally as the amount by
which our operating cash flow exceeds the sum of our capital
expenditures, repayments of indebtedness and certain other amounts; and

. 100.0% of certain insurance proceeds, subject to the exceptions.

Such mandatory prepayments and permanent reductions will be allocated first,
to the term loans and second, to permanently reduce the revolving credit
facility. With respect to the term loans, in the case of proceeds received as a
result of the occurrence of an event described in the first, fourth and fifth
bullets of the immediately preceding paragraph, the proceeds shall be applied
among the term loans on a pro rata basis and, in the case of proceeds received
as a result of the occurrence of an event described in second and third bullets
of the immediately preceding paragraph, the proceeds shall be applied first, to
the $40.0 million term loan and, after the repayment in full of the $40.0
million term loan, to the $135.0 million term loan. Our credit agreement
requires that we make annual amortization payments of $1.35 million in the
years 2002 to 2005, in the case of the

$135.0 million term loan, and $0.4 million in the years 2002 to 2005, in the
case of the $40.0 million term loan, in each case payable in quarterly
installments.

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 loans bearing interest based
on the Eurodollar rate on a date other than the last day of the relevant
interest period are subject to payment of customary breakage costs, if any,
which are intended to compensate the lender for all costs and liabilities
resulting from the need to liquidate or reemploy deposits used by the lender to
fund its loan to us.

Borrowings under our credit agreement bear interest at our option at the
Eurodollar rate or a base rate equal to the highest of the prime lending rate
as determined by the agent, 1/2 of 1% in excess of the federal funds rate and
1/2 of 1% in excess of an adjusted certificate of deposit rate, plus in each
case an applicable margin, determined by reference to our ratio of total debt
to EBITDA, ranging from 2.75% to 2% in the case of revolving credit loans
bearing interest at the Eurodollar rate, 1.75% to 1.0% in the case of revolving
credit loans bearing interest at the base rate, 3.0% to 2.5% in the case of
term loans bearing interest at the Eurodollar rate and 2.0% to 1.5% in the case
of term loans bearing interest at the base rate.

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 loans bearing interest at the Eurodollar rate.
With respect to loans bearing interest at the Eurodollar rate, interest is
payable at the end of each interest period and, in any event, at least every 3
months. With respect to loans bearing interest based on the base rate, 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:

. an annual fee equal to the applicable margin from time to time in effect
for loans bearing interest at the Eurodollar rate on the aggregate
outstanding stated amounts of such letters of credit;

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

. 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 decrease based on our ratio of total debt to EBITDA
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, generally no more than 66 2/3% of the stock of our foreign subsidiaries
is 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 our organizational, corporate and other specified documents;

. make capital expenditures;

. engage in mergers, acquisitions and asset sales;

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

. issue redeemable common stock and preferred stock.

In addition, we are required to comply with customary affirmative covenants
and maintain financial ratios relating to interest coverage and total debt for
EBITDA.

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. 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 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;

. 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 a
make-whole premium, plus accrued interest. The make-whole amount is equal to
the greater of 1% of the then outstanding principal amount of the notes, and an
amount equal to the sum of the present values of all remaining interest and
principal payments due on the notes and the premium payment due assuming a
redemption on June 1, 2003, computed by using a discount rate equal to the
yield to maturity at the time of determination plus 50 basis points of United
States Government Treasury securities with a constant maturity most nearly
equal to the period from the date of redemption to June 1, 2003 minus the then
outstanding principal amount of the notes and accrued interest paid on the date
of redemption.

DESCRIPTION OF CAPITAL STOCK

Under our second amended and restated charter which will be effective 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 December 28, 2001 and after
giving effect to the exchange of all outstanding shares of Pacer Logistics
exchangeable preferred stock for 2,234,844 shares of our common stock prior to
the consummation of this offering, there were outstanding 13,779,591 shares of
common stock held by 24 stockholders of record and no shares of preferred stock
were outstanding. In addition, there were outstanding options to purchase an
aggregate of 1,202,114 shares of common stock at December 28, 2001.

The following description of our capital stock, provisions of our second
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 second
amended and restated charter and amended bylaws. Copies of our second 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 second 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.

OTHER CHARTER AND BY-LAW PROVISIONS

Some provisions of our second 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 second 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 second 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 second 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 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
will not be discussed or transacted.

NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES

Our second amended and restated charter and amended bylaws will provide that
our board of directors will consist of not less than 3 nor more than 18
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 second 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 second 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.

BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS

Our second amended and restated charter will provide that a "related person"
cannot engage in a "business combination" with us unless the combination:

. takes place at least five years after the related person became a
related person; and

. either is approved by at least two-thirds of the outstanding voting
stock not beneficially owned by the related person or satisfies
specified fairness conditions including, among others, the requirement
that the per share consideration received in any such business
combination by each of our stockholders is not less than the higher of

-- the highest per share price paid by the related person during the
preceding five year period for shares of the same class or series
plus interest thereon from such date at a treasury bill rate less the
aggregate amount of any cash dividends paid and the market value of
any dividends paid other than in cash since such earliest date, up to
the amount of such interest,

-- the highest preferential amount, if any, such class or series is
entitled to receive on liquidation, or

-- the market value of the shares on either the date the business
combination is announced or the date when the related person reaches
the 10% threshold, whichever is higher, plus interest thereon less
dividends as noted above.

These provisions apply unless the business combination is with an entity
approved by our board of directors before that entity becomes a related person.

Our second amended and restated charter will define "business combination,"
generally to mean any:

. merger or consolidation;

. share exchange;

. sale, lease, exchange, pledge, mortgage or other transfer (in one
transaction or a series of transactions) of assets representing 10% or more
of

-- the market value of consolidated assets,

-- the market value of the corporation's outstanding shares or

-- the corporation's consolidated net income;

. issuance or transfer of shares from the corporation to the interested
shareholder;

. plan of liquidation;

. transaction in which the interested shareholder's proportionate share
of the outstanding shares of any class of securities is increased; or

. financing arrangements pursuant to which the interested shareholder,
directly or indirectly, receives a benefit except proportionately as a
shareholder.

Our second amended and restated charter will define "related person"
generally to mean any person, other than Apollo Management and its affiliates,
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 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.

The foregoing provisions of our second amended and restated charter are
substantially similar to the provisions of the Tennessee Business Combination
Act. We have included these provisions in our second amended and restated
charter because we are not currently subject to the Combination Act. In order
for a corporation to be governed by the provisions of the Combination Act, the
corporation must satisfy two of five specified tests and we currently satisfy
only one of the five tests. If in the future we satisfy any two of the five
tests, we would also become subject to the provisions of the Combination Act as
well as the provisions of our charter.

AMENDMENT OF CHARTER

The provisions of our second 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 second 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 second 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.

TENNESSEE GREENMAIL ACT

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.

LIMITATION ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

Our second 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 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.

OTHER AGREEMENTS

SHAREHOLDERS' AGREEMENTS

APL SHAREHOLDERS AGREEMENT. We are a party to a shareholders agreement with
Coyote I and Coyote II, both of which are affiliates of and controlled by
Apollo Management, and APL Limited (the "APL Shareholders Agreement") which
governs aspects of the relationship between ourselves and our currently
existing shareholders. The APL Shareholders Agreement contains, among other
matters:

. a provision restricting the rights of APL Limited to transfer its shares
of our common stock, subject to permitted or required transfers and a
right of first refusal in favor of us and Coyote. Such transfer
restrictions include,

-- 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

-- 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;

. incidental registration rights in the event we effect a registration of
our common stock other than in connection with an initial public
offering;

. 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

. 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:

. the tenth anniversary thereof; or

. 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 Donald C.
Orris, Gerry Angeli, Robert L. Cross, Gary I. Goldfein, Allen E. Steiner, John
W. Hein and Richard P. Hyland, all of whom were members of Pacer Logistics
management at the time of our recapitalization (the "Management Shareholders").
As of December 28, 2001 after giving effect to the shares of our common stock
to be issued in exchange for the Pacer Logistics exchangeable preferred stock,
the Management Shareholders would have owned shares, or %, of our
outstanding common stock (or % of our common stock upon consummation of this
offering). The terms of the Management Shareholders Agreement, including
termination provisions, are substantially similar to those of the APL
Shareholders' Agreement set forth above and contain, among other matters,

. 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;

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

. a provision restricting our right to engage in specified 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

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

. 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;

. 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;

. a grant of a voting proxy with respect to 300,000 shares, or % of the
shares of common stock to be outstanding after the offering, 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:

-- 10 years; and

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

. 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.

COYOTE REGISTRATION RIGHTS AGREEMENT

In addition to the shareholders' agreements, we entered into a separate
registration rights agreement with Coyote pursuant to which such affiliates
obtained 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 Coyote. All of the
shares of common stock owned by Coyote after this offering ( if the
underwriters exercise the over-allotment option in full) have registration
rights under this agreement. In addition, should we propose to register any of
our own common stock for sale to the public, Coyote 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 have applied to have our common stock quoted on The Nasdaq Stock Market's
National Market under the symbol "PACR."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is .

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, shares of common stock will be
outstanding, excluding 1,202,114 shares reserved at December 28, 2001 for
issuance upon exercise of options that have been granted under our stock option
plan (257,781 of which were exercisable at such date). 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 of one
percent of the then outstanding shares of the common stock (approximately
shares immediately after this offering) and 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.

Commencing 180 days after the date of this prospectus, approximately
outstanding restricted securities will be eligible for sale under Rule 144
subject to applicable holding period, volume limitations, manner of sale and
notice requirements set forth in applicable SEC rules and of the
restricted securities will be saleable without regard to these restrictions
under Rule 144(k).

We and our directors and executive officers and substantially all of our
shareholders 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
Credit Suisse First Boston Corporation and Bear, Stearns & Co. Inc.

Promptly upon completion of the offering, we intend to file a registration
statement on Form S-8 with the SEC to register 1,269,000 shares of our common
stock reserved for issuance or sale under our stock option plan. As of December
28, 2001, there were outstanding options to purchase a total of 1,202,114
shares of common stock, 257,781 of which were vested. Shares of common stock
issuable upon the exercise of options granted or to be 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 have granted Coyote demand and incidental registration rights with
respect to the shares of common stock owned by Coyote after this offering
( shares assuming the underwriters exercise the over-allotment option in
full). In addition, stockholders holding approximately outstanding
shares of our common stock after this offering have been granted incidental
registration rights in the event we effect a registration of our common stock
under the Securities Act. See "Description of Capital Stock--Other
Agreements--Shareholders' Agreements" and "--Coyote Registration Rights
Agreement."

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.

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.

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 currently at a rate of 30%, but subject to
reduction, 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 this backup withholding tax 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,

. 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.

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2002, we and the selling stockholders have agreed to
sell to the underwriters named below, for whom Credit Suisse First Boston
Corporation, Bear, Stearns & Co. Inc., Deutsche Bank Securities Inc., J.P.
Morgan Securities Inc. and UBS Warburg LLC are acting as representatives, the
following respective numbers of shares of common stock:

NUMBER
UNDERWRITER OF SHARES
----------- ---------

Credit Suisse First Boston Corporation
Bear, Stearns & Co. Inc...............
Deutsche Bank Securities Inc..........
J.P. Morgan Securities Inc............
UBS Warburg LLC.......................
-------
Total..............................
=======

The underwriting agreement provides that the underwriters are severally
obligated to purchase all the shares of common stock in the offering if any are
purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults the purchase commitments of non-defaulting underwriters
may be increased or the offering may be terminated.

The selling stockholders have granted to the underwriters a 30-day option to
purchase on a pro rata basis up to additional shares at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a selling concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share on
sales to other broker/dealers. After the initial public offering the
representatives may change the public offering price and concession and
discount to broker/dealers.

The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay:

PER SHARE TOTAL
----------------------------- -----------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------

Underwriting Discounts and Commissions paid
by us..................................... $ $ $ $
Expenses payable by us...................... $ $ $ $
Underwriting Discounts and Commissions paid
by the selling stockholders............... $ $ $ $
Expenses payable by the selling stockholders $ $ $ $

The representatives have informed us that the underwriters do not expect
discretionary sales to exceed 5% of the shares of common stock being offered.

We intend to use more than 10% of the net proceeds from the sale of the
common stock to repay indebtedness owed by us to affiliates of Credit Suisse
First Boston Corporation and Deutsche Bank Securities Inc. Accordingly, the
offering is being made in compliance with the requirements of Rule 2710(c)(8)
of the National Association of Securities Dealers, Inc. Conduct Rules. This
rule provides generally that if more than 10% of the net proceeds from the sale
of stock, not including underwriting compensation, is paid to the

underwriters or their affiliates, the initial public offering price of the
stock may not be higher than that recommended by a "qualified independent
underwriter" meeting certain standards. Accordingly, Bear, Stearns & Co. Inc.
is assuming the responsibilities of acting as the qualified independent
underwriter in pricing the offering and conducting due diligence. The initial
public offering price of the shares of common stock will be no higher than the
price recommended by Bear, Stearns & Co. Inc.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose the intention to make any offer, sale,
pledge, disposition or filing, without the prior written consent of Credit
Suisse First Boston Corporation and Bear, Stearns & Co. Inc. for a period of
180 days after the date of this prospectus, except issuances pursuant to the
exercise of an option or warrant or the conversion of a security outstanding on
the date of this prospectus of which the underwriters have been advised in
writing, the issuance of options under our existing stock plans and the
issuance of common stock (or options, warrants or convertible securities in
respect thereof) in connection with a bona fide merger or acquisition
transaction, provided that the common stock (or such options, warrants and
convertible securities) so issued is subject to the terms of a lock-up
agreement having provisions that are substantially the same as the agreements
described in the following paragraph.

Our executive officers, directors and stockholders named in this prospectus,
together with other stockholders that collectively hold most of the shares of
common stock and common stock issuable upon exercise of options have agreed,
subject to specified exceptions, that they will not offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, any shares of our
common stock or securities convertible into or exchangeable or exercisable for
any shares of our common stock, enter into a transaction that would have the
same effect, or enter into any swap, hedge or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of our
common stock, whether any of these transactions are to be settled by delivery
of our common stock or other securities, in cash or otherwise, or publicly
disclose the intention to make any offer, sale, pledge or disposition, or to
enter into any transaction, swap, hedge or other arrangement, without, in each
case, the prior written consent of Credit Suisse First Boston Corporation and
Bear, Stearns & Co. Inc. for a period of 180 days after the date of this
prospectus.

The underwriters have reserved for sale at the initial public offering price
up to shares of the common stock for employees, directors and other persons
associated with us who have expressed an interest in purchasing common stock in
the offering. The number of shares available for sale to the general public in
the offering will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares not so purchased will be offered by the
underwriters to the general public on the same terms as the other shares.

We and the selling stockholders have agreed to indemnify the underwriters
against liabilities under the Securities Act, or contribute to payments that
the underwriters may be required to make in that respect. The underwriters have
agreed to indemnify us, our directors, our officers who sign the registration
statements of which this prospectus is a part and our controlling persons
against liabilities under the Securities Act, or contribute to payments that we
and our controlling persons may be required to make in that respect.

We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market.

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.

Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiations
among 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.

In connection with the offering the underwriters may engage in stabilizing
transactions, over-allotment transactions, syndicate covering transactions and
penalty bids and passive market making in accordance with Regulation M under
the Exchange Act.

. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

. Over-allotment involves sales by the underwriters of shares in excess of
the number of shares the underwriters are obligated to purchase, which
creates a syndicate short position. The short position may be either a
covered short position or a naked short position. In a covered short
position, the number of shares over-allotted by the underwriters is not
greater than the number of shares that they may purchase in the
over-allotment option. In a naked short position, the number of shares
involved is greater than the number of shares in the over-allotment
option. The underwriters may close out any covered short position by
either exercising their over-allotment option and/or purchasing shares
in the open market.

. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions. In determining the source of shares to
close out the short position, the underwriters will consider, among
other things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase shares
through the over-allotment option. If the underwriters sell more shares
than could be covered by the over-allotment option, a naked short
position, the position can only be closed out by buying shares in the
open market. A naked short position is more likely to be created if the
underwriters are concerned that there could be downward pressure on the
price of the shares in the open market after pricing that could
adversely affect investors who purchase in the offering.

. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

. In passive market making, market makers in the common stock who are
underwriters or prospective underwriters may, subject to limitations,
make bids for or purchases of our common stock until the time, if any,
at which a stabilizing bid is made.

These stabilizing transactions, syndicate covering transactions and penalty
bids may have the effect of raising or maintaining the market price of our
common stock or preventing or retarding a decline in the market price of the
common stock. As a result the price of our common stock may be higher than the
price that might otherwise exist in the open market. These transactions may be
effected on The Nasdaq National Market and, if commenced, may be discontinued
at any time.

A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters, or selling group members, if
any, participating in this offering. The representatives may agree to allocate
a number of shares to underwriters and selling group members for sale to their
online brokerage account holders. Internet distributions will be allocated by
the underwriters and selling group members that will make internet
distributions on the same basis as other allocations.

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we and the selling
shareholders prepare and file a prospectus with the securities regulatory
authorities in each province where trades of common stock are made. Any resale
of the common stock in Canada must be made under applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made under available statutory exemptions or under a
discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the common stock.

REPRESENTATIONS OF PURCHASERS

By purchasing common stock in Canada and accepting a purchase confirmation a
purchaser is representing to us, the selling shareholders and the dealer from
whom the purchase confirmation is received that

. the purchaser is entitled under applicable provincial securities laws to
purchase the common stock without the benefit of a prospectus qualified
under those securities laws,

. where required by law, that the purchaser is purchasing as principal and
not as agent, and

. the purchaser has reviewed the text above under Resale Restrictions.

RIGHTS OF ACTION--ONTARIO PURCHASERS ONLY

Under Ontario securities legislation, a purchaser who purchases a security
offered by this prospectus during the period of distribution will have a
statutory right of action for damages, or while still the owner of the shares,
for rescission against us and the selling shareholders in the event that this
prospectus contains a misrepresentation. A purchaser will be deemed to have
relied on the misrepresentation. The right of action for damages is exercisable
not later than the earlier of 180 days from the date the purchaser first had
knowledge of the facts giving rise to the cause of action and three years from
the date on which payment is made for the shares. The right of action for
rescission is exercisable not later than 180 days from the date on which
payment is made for the shares. If a purchaser elects to exercise the right of
action for rescission, the purchaser will have no right of action for damages
against us or the selling shareholders. In no case will the amount recoverable
in any action exceed the price at which the shares were offered to the
purchaser and if the purchaser is shown to have purchased the securities with
knowledge of the misrepresentation, we and the selling shareholders will have
no liability. In the case of an action for damages, we and the selling
shareholders will not be liable for all or any portion of the damages that are
proven to not represent the depreciation in value of the shares as a result of
the misrepresentation relied upon. These rights are in addition to, and without
derogation from, any other rights or remedies available at law to an Ontario
purchaser. The foregoing is a summary of the rights available to an Ontario
purchaser. Ontario purchasers should refer to the complete text of the relevant
statutory provisions.

ENFORCEMENT OF LEGAL RIGHTS

All of our directors and officers as well as the experts named herein and
the selling shareholders may be located outside of Canada and, as a result, it
may not be possible for Canadian purchasers to effect service of process within
Canada upon us or those persons. All or a substantial portion of our assets and
the assets of those persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against us or those persons in
Canada or to enforce a judgment obtained in Canadian courts against us or those
persons outside of Canada.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and about the eligibility of the common
stock for investment by the purchaser under relevant Canadian legislation.

RELATIONSHIP WITH AFFILIATES OF CERTAIN UNDERWRITERS

We are in compliance with the terms of the indebtedness owed by us to
affiliates of Credit Suisse First Boston Corporation and Deutsche Bank
Securities Inc. The decision of Credit Suisse First Boston Corporation and
Deutsche Bank Securities Inc. to distribute our shares of common stock was not
influenced by their respective affiliates that are our lenders and those
affiliates had no involvement in determining whether or when to distribute our
shares of common stock under this offering or the terms of this offering.
Credit Suisse First Boston Corporation and Deutsche Bank Securities Inc. will
not receive any benefit from this offering other than the underwriting
discounts and commissions paid by us and the selling shareholders.

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 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 28, 2001 and December 29, 2000 and for the years ended December 28,
2001, December 29, 2000 and December 31, 1999 included in this prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

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 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 a 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 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.

PACER INTERNATIONAL INC. AND SUBSIDIARY COMPANIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE
----

Report of Independent Accountants................................................................... F-2
Consolidated Balance Sheets as of December 28, 2001 and December 29, 2000........................... F-3
Consolidated Statement of Operations for the fiscal years ended December 28, 2001, December 29, 2000
and December 31, 1999............................................................................. F-4
Consolidated Statement of Stockholders' Equity for the fiscal years ended December 28, 2001,
December 29, 2000 and December 31, 1999........................................................... F-5
Consolidated Statement of Cash Flows for the fiscal years ended December 28, 2001, December 29, 2000
and December 31, 1999............................................................................. F-6
Notes to Consolidated Financial Statements.......................................................... F-7

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders

of Pacer International, Inc.:

In our opinion, the consolidated financial statements listed in the index on
page F-1 present fairly, in all material respects, the financial position of
Pacer International, Inc. and its subsidiaries at December 28, 2001 and
December 29, 2000, and the results of their operations and their cash flows for
each of the three years in the period ended December 28, 2001, 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 audits. We conducted our audits 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 audits provide a
reasonable basis for our opinion.

/S/ PRICEWATERHOUSECOOPERS LLP

San Francisco, California

March 1, 2002

F-2

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 28, DECEMBER 29,
2001 2000
------------ ------------
(IN MILLIONS)

ASSETS
CURRENT ASSETS
Cash and cash equivalents....................................................... $ -- $ --
Accounts receivable, net of allowances of $ 7.0 million and $ 9.0 million,
respectively.................................................................. 204.6 215.7
Accounts receivable from APL.................................................... 6.6 6.0
Prepaid expenses and other...................................................... 8.4 10.3
Deferred income taxes........................................................... 5.6 9.7
------- -------
Total current assets........................................................ 225.2 241.7
------- -------
PROPERTY AND EQUIPMENT
Property and equipment at cost.................................................. 87.1 74.3
Accumulated depreciation........................................................ (27.8) (17.8)
------- -------
Property and equipment, net................................................. 59.3 56.5
------- -------
OTHER ASSETS
Goodwill, net................................................................... 281.5 289.8
Deferred income taxes........................................................... 57.5 59.0
Other assets.................................................................... 9.4 11.4
------- -------
Total other assets.......................................................... 348.4 360.2
------- -------
TOTAL ASSETS....................................................................... $ 632.9 $ 658.4
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt and capital leases......................... $ 2.0 $ 1.9
Accounts payable and other accrued liabilities.................................. 203.1 227.2
------- -------
Total current liabilities................................................... 205.1 229.1
------- -------
LONG-TERM LIABILITIES
Long-term debt and capital leases............................................... 395.9 403.5
Other........................................................................... 3.2 3.7
------- -------
Total long-term liabilities................................................. 399.1 407.2
------- -------
TOTAL LIABILITIES.................................................................. 604.2 636.3
------- -------
MINORITY INTEREST--EXCHANGEABLE PREFERRED STOCK OF A SUBSIDIARY.................... 25.7 25.0
------- -------
COMMITMENTS AND CONTINGENCIES (NOTES 9 & 13)
STOCKHOLDERS' EQUITY
Preferred stock, par value $ 0. 01 per share; 1,000,000 shares authorized; none
issued and outstanding........................................................ -- --
Common stock, par value $ 0.01 per share; 20,000,000 shares authorized;
11,544,747 and 11,361,373 issued and outstanding.............................. 0.1 0.1
Additional paid-in capital...................................................... 118.6 118.5
Unearned compensation........................................................... (0.3) (0.3)
Accumulated deficit............................................................. (114.3) (121.3)
Other accumulated comprehensive income (loss)................................... (1.1) 0.1
------- -------
Total stockholders' equity (deficit)........................................ 3.0 (2.9)
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $ 632.9 $ 658.4
======= =======

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

F-3

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DEC. 28, 2001 DEC. 29, 2000 DEC. 31, 1999
------------- ------------- -------------
(IN MILLIONS, EXCEPT PER SHARE DATA)

Gross revenues.................................. $ 1,670.9 $ 1,281.3 $ 927.7
Cost of purchased transportation and services... 1,339.6 1,005.6 735.4
----------- ----------- -----------
Net revenues................................. 331.3 275.7 192.3
----------- ----------- -----------
Operating expenses:
Direct operating expenses.................... 101.7 90.4 76.8
Selling, general and administrative expenses. 155.9 102.6 58.9
Depreciation and amortization................ 18.3 11.6 8.6
Merger and severance......................... 0.4 7.7 --
Other........................................ 4.0 -- --
----------- ----------- -----------
Total operating expenses................. 280.3 212.3 144.3
----------- ----------- -----------
Income from operations.......................... 51.0 63.4 48.0
Interest expense, net........................... 39.6 34.1 18.6
----------- ----------- -----------
Income before income taxes and minority interest 11.4 29.3 29.4
----------- ----------- -----------
Income taxes or charge in lieu of income taxes.. 3.6 12.9 11.7
Minority interest............................... 0.8 1.6 1.1
----------- ----------- -----------
Net income...................................... $ 7.0 $ 14.8 $ 16.6
=========== =========== ===========
Earnings per share (Note 16):

Basic:
Earnings per share....................... $ 0.61 $ 1.35 $ 0.78
=========== =========== ===========
Weighted average shares outstanding...... 11,498,231 10,970,770 10,440,000
=========== =========== ===========
Diluted:
Earnings per share....................... $ 0.55 $ 1.19 $ 0.68
=========== =========== ===========
Weighted average shares outstanding...... 14,143,976 13,793,363 13,488,826
=========== =========== ===========

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

F-4

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

PREFERRED STOCK COMMON STOCK OTHER
--------------- ----------------- ADDITIONAL DIVISIONAL CUMULATIVE
NO. OF NO. OF PAID-IN- ACCUMULATED CONTROL UNEARNED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ACCOUNT COMPENSATION INCOME (LOSS)
------- ------ ---------- ------ ---------- ----------- ---------- ------------ -------------
(IN MILLIONS, EXCEPT SHARE AMOUNTS)

Balance December 25, 1998...... -- $ -- -- $ -- $ -- $ -- $ 55.6 $ -- $ --
======= ==== ========== ==== ====== ======= ======== ===== =====
Net and Comprehensive Income... -- -- -- -- -- 16.6 -- -- --
Distribution to Shareholder.... -- -- -- -- -- (300.0) -- -- --
Effects of Recapitalization.... -- -- -- -- -- 147.3 (55.6) -- --
Issuance of Common Stock....... -- -- 10,440,000 0.1 104.3 -- -- -- --
------- ---- ---------- ---- ------ ------- -------- ----- -----
Balance December 31, 1999...... -- $ -- 10,440,000 $0.1 $104.3 $(136.1) $ -- $ -- $ --
======= ==== ========== ==== ====== ======= ======== ===== =====
Net Income..................... -- -- -- -- -- 14.8 -- -- --
Other Comprehensive Income..... -- -- -- -- -- -- -- -- 0.1
------- ---- ---------- ---- ------ ------- -------- ----- -----
Total Comprehensive Income..... -- -- -- -- -- 14.8 -- -- 0.1
Issuance of Preferred Stock for
Exercise of Options........... 17,499 -- -- -- 0.2 -- -- -- --
Repurchase and Retirement of
Preferred Stock............... (17,499) -- -- -- (0.2) -- -- -- --
Unearned Compensation.......... -- -- -- -- 0.3 -- -- (0.3) --
Amort--Unearned Compensation
(Note 7)...................... -- -- -- -- -- -- -- -- --
Issuance of Common Stock for
Acquisitions.................. -- -- 580,000 -- 13.0 -- -- -- --
Issuance of Common Stock for
Exercise of Options........... -- -- 341,373 -- 0.9 -- -- -- --
------- ---- ---------- ---- ------ ------- -------- ----- -----
Balance December 29, 2000...... -- $ -- 11,361,373 $0.1 $118.5 $(121.3) $ -- $(0.3) $ 0.1
======= ==== ========== ==== ====== ======= ======== ===== =====
Net Income..................... -- -- -- -- -- 7.0 -- -- --
Other Comprehensive Loss....... -- -- -- -- -- -- -- -- (1.2)
------- ---- ---------- ---- ------ ------- -------- ----- -----
Total Comprehensive Income..... -- -- -- -- -- 7.0 -- -- (1.2)
Issuance of Preferred Stock for
Exercise of Options........... 27,498 -- -- -- 0.2 -- -- -- --
Repurchase and Retirement of
Preferred Stock............... (27,498) -- -- -- (0.2) -- -- -- --
Amort--Unearned Compensation
(Note 7)...................... -- -- -- -- -- -- -- -- --
Issuance of Common Stock for
Exercise of Options........... -- -- 183,374 -- 0.1 -- -- -- --
------- ---- ---------- ---- ------ ------- -------- ----- -----
Balance December 28, 2001...... -- $ -- 11,544,747 $0.1 $118.6 $(114.3) $ -- $(0.3) $(1.1)
======= ==== ========== ==== ====== ======= ======== ===== =====

TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------

Balance December 25, 1998...... $ 55.6
=======
Net and Comprehensive Income... 16.6
Distribution to Shareholder.... (300.0)
Effects of Recapitalization.... 91.7
Issuance of Common Stock....... 104.4
-------
Balance December 31, 1999...... $ (31.7)
=======
Net Income..................... 14.8
Other Comprehensive Income..... 0.1
-------
Total Comprehensive Income..... 14.9
Issuance of Preferred Stock for
Exercise of Options........... 0.2
Repurchase and Retirement of
Preferred Stock............... (0.2)
Unearned Compensation.......... --
Amort--Unearned Compensation
(Note 7)...................... --
Issuance of Common Stock for
Acquisitions.................. 13.0
Issuance of Common Stock for
Exercise of Options........... 0.9
-------
Balance December 29, 2000...... $ (2.9)
=======
Net Income..................... 7.0
Other Comprehensive Loss....... (1.2)
-------
Total Comprehensive Income..... 5.8
Issuance of Preferred Stock for
Exercise of Options........... 0.2
Repurchase and Retirement of
Preferred Stock............... (0.2)
Amort--Unearned Compensation
(Note 7)...................... --
Issuance of Common Stock for
Exercise of Options........... 0.1
-------
Balance December 28, 2001...... $ 3.0
=======

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

F-5

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DEC. 28, 2001 DEC. 29, 2000 DEC. 31, 1999
------------- ------------- -------------
(IN MILLIONS)

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income....................................................................... $ 7.0 $ 14.8 $ 16.6
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization.................................................. 18.3 11.6 8.6
Gain on Sale of Property and Equipment......................................... (0.1) (0.1) --
Deferred Taxes................................................................. 5.6 11.4 4.6
Minority Interest.............................................................. 0.8 1.6 1.1
Merger and Severance........................................................... 0.4 7.7 --
Other.......................................................................... 3.5 -- --
Change in Current Assets and Liabilities excluding effects of acquisitions:
Accounts Receivable, net...................................................... 11.1 (14.3) (10.8)
Receivable from APL........................................................... (0.6) 2.2 (39.6)
Prepaid Expenses and Other.................................................... 1.9 (5.1) --
Accounts Payable and Other Accrued Liabilities................................ (27.3) (27.9) 39.4
Other......................................................................... 1.2 (0.7) 0.9
------ ------- -------
Net Cash Provided by Operating Activities............................... 21.8 1.2 20.8
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions, Net of Cash Acquired............................................... -- (125.6) (112.0)
Capital Expenditures............................................................. (14.6) (5.5) (2.0)
Proceeds from Sales of Property and Equipment.................................... 0.2 0.4 40.0
------ ------- -------
Net Cash Used In Investing Activities................................... (14.4) (130.7) (74.0)
------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Checks Drawn in Excess of Cash Balances.......................................... -- 10.9 --
Proceeds of Long-Term Debt, Net of Costs......................................... -- 122.6 277.5
Proceeds from Issuance of Common Stock........................................... 0.1 0.9 104.4
Proceeds from Issuance of Preferred Stock........................................ 0.2 0.2 --
Repurchase of Preferred Stock.................................................... (0.2) (0.2) --
Distribution to APL and Recap Costs.............................................. -- -- (311.7)
Redemption of Preferred Stock of Subsidiary...................................... -- -- (2.0)
Debt, Revolving Credit Facility and Capital Lease Obligation Repayment........... (7.5) (17.1) (2.8)
------ ------- -------
Net Cash (Used In) Provided By Financing Activities..................... (7.4) 117.3 65.4
------ ------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. -- (12.2) 12.2
------ ------- -------
Cash and Cash Equivalents at Beginning of Year................................... -- 12.2 --
------ ------- -------
Cash and Cash Equivalents at End of Year......................................... $ -- $ -- $ 12.2
====== ======= =======
Disclosure of Non-Cash Financing Activities:
Issuance of Common Stock for acquisitions........................................ $ -- $ 13.0 $ --
Issuance of 8.0% subordinated note for acquisition............................... $ -- $ 5.0 $ --
Issuance of Exchangeable Preferred Stock for recapitalization.................... $ -- $ -- $ 24.3
Issuance of note payable to management for recapitalization...................... $ -- $ -- $ 0.4

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

F-6

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Pacer International, Inc. ("Pacer" or the "Company") is a leading non-asset
based North American third-party logistics provider offering a broad array of
services to facilitate the movement of freight from origin to destination. The
Company operates in two segments, the wholesale segment and the retail segment
(see Note 10 to the Consolidated Financial Statements for segment information).
The wholesale segment provides intermodal rail service in North America by
selling intermodal service to shippers pursuant to agreements with intermodal
rail carriers. The retail segment provides trucking services, intermodal
marketing, freight consolidation and handling, international freight forwarding
and supply chain management services.

The Company has operated as an independent, stand-alone company only since
the recapitalization in May 1999. From 1984 until the recapitalization, the
wholesale business was conducted by various entities owned directly or
indirectly by APL Limited.

As of May 28, 1999, APL Land Transport Services, Inc. ("APLLTS") 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, APLLTS formed a transitory subsidiary that was
merged with and into Pacer Logistics, making Pacer Logistics a wholly-owned
subsidiary of APLLTS. In connection with these transactions, APLLTS was renamed
Pacer International, Inc.

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.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all entities in which the Company controls. For the year ended December 29,
2000, this includes Pacer Logistics for the entire year, Conex assets acquired
January 13, 2000, GTS Transportation Services, Inc. acquired August 31, 2000,
RFI Group, Inc. acquired October 31, 2000 and Rail Van Inc. acquired December
22, 2000. For the year ended December 31, 1999, this includes Pacer Logistics
acquired May 28, 1999. 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 "wolesale" segment) and providing
logistic services (the "retail" segment). The wholesale segment's fiscal year
ends on the last Friday in December and the retail segment's fiscal year ends
on the last day in December.

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 statements and the reported amounts of revenues
and expenses during the reporting period. Significant estimates include
allowance for doubtful accounts, costs of purchased transportation and services
and valuation of deferred income taxes. Actual results could differ from those
estimates.

F-7

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CASH AND CASH EQUIVALENTS

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

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
corresponding amount recorded as a capital lease obligation. Depreciation and
amortization are provided on a straight-line basis over the estimated useful
lives of the assets as follows:

CLASSIFICATION ESTIMATED USEFUL LIFE
-------------- ---------------------

Rail Cars....................................... 28 Years
Containers and Chassis.......................... 5 Years
Leasehold Improvements.......................... Term of Lease
Other (including computer hardware and software) 3 to 7 Years

When assets are sold, the applicable costs and accumulated depreciation are
removed from the accounts, and any gain or loss is included in income.
Expenditures, including those on leased assets, that extend an assets useful
life or increase its utility are capitalized and amortized. Expenditures for
maintenance and repairs are expensed as incurred.

The Company capitalizes certain costs of internally developed software.
Capitalized costs include purchased materials and services, and payroll and
payroll related costs. The cost of internally developed software is amortized
on a straight-line basis over the estimated useful life which is between three
to seven years.

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.

GOODWILL

Goodwill represents the excess of cost over the estimated fair value of the
net tangible and intangible assets acquired and has been amortized over 40
years on a straight-line basis after consideration of the characteristics of
each acquisition. 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 fair
value. Amortization expense was $7.5 million, $4.7 million and $2.4 million for
2001, 2000 and 1999, respectively; and accumulated amortization was $15.0
million and $7.5 million at December 28, 2001 and December 29, 2000,
respectively.

F-8

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The Company has adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets", effective December 29, 2001 and will,
among other things, cease amortizing goodwill for the 2002 fiscal year (see
Recently Issued Accounting Pronouncements below).

REVENUE RECOGNITION

The Company's wholesale segment recognizes revenue and rail linehaul
expenses on a percentage-of-completion basis and remaining expenses as
incurred. Revenues from retail transportation activities including highway and
rail brokerage, local cartage and specialized trucking are recorded when
delivery requirements are met. Revenues from freight handling activities are
recorded upon receipt at the warehouse and storage revenues are recorded as
earned. Supply chain management/consulting services net revenues are recorded
as earned. Revenues are reported net of volume rebates provided to customers.

ALLOCATION OF EXPENSES

Prior to May 28, 1999, APLLTS was a wholly-owned subsidiary of APL Limited
(as discussed above) and was allocated certain expenses. These expenses
included 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.

INCOME TAXES

The Company recognizes income tax expense using the liability method of
accounting for deferred income taxes. A deferred tax asset or liability is
recorded based upon the tax effect of temporary differences between the tax
bases of assets and liabilities and their carrying value for financial
reporting purposes. Deferred tax expense or benefit is the result of changes in
the deferred tax assets and liabilities during the year.

OTHER COMPREHENSIVE INCOME

The Company classifies items of comprehensive income by their nature in the
financial statements and displays the accumulated balance of comprehensive
income separately from accumulated deficit and additional paid-in-capital in
the equity section of the balance sheet.

Other comprehensive income (loss) includes foreign currency translation
adjustments and derivative transactions, net of related tax. Other
comprehensive income (loss) consists of the following (in millions):

DERIVATIVE
INSTRUMENT FAIR TOTAL OTHER
FOREIGN CURRENCY VALUE, NET OF COMPREHENSIVE
TRANSLATION ADJUST. AMORTIZATION INCOME (LOSS)
------------------- --------------- -------------

Beginning Balance December 31, 1999............ $ -- $ -- $ --
Activity during 2000 (net of $ 0.0 million tax) 0.1 -- 0.1
----- ----- -----
Balance at December 29, 2000................... $ 0.1 $ -- $ 0.1
===== ===== =====
Activity during 2001 (net of $0.8 million tax). (0.1) (1.1) (1.2)
----- ----- -----
Balance at December 28, 2001................... $ -- $(1.1) $(1.1)
===== ===== =====

F-9

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The assets and liabilities of the Company's foreign operations have been
translated at rates of exchange at the balance sheet date, and related revenues
and expenses have been translated at average rates of exchange in effect during
the year. As of December 28, 2001, the deferred loss on derivative instruments
accumulated in other comprehensive income (loss), are expected to be
reclassified to interest expense during the next 12 months.

STOCK-BASED COMPENSATION

The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25 ("APB
No. 25"), "Accounting for Stock Issued to Employees" and related
interpretations and complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Under APB No. 25, compensation cost is recognized based on the
difference, if any, on the date of grant between the fair value of the
Company's stock and the amount an employee must pay to acquire the stock.

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.

RECLASSIFICATION

During 2000, the Company reclassified railcar rental income of $10.3 million
for the fiscal year ended December 31, 1999 from direct operating expenses to
revenues to be consistent with the Company's classification of container per
diem revenue. The Company also reclassified corresponding financial information
presented in Notes 3, 10 and 16 for such change. The reclassification had no
effect on the Company's income from operations, net income or cash flows.

FINANCIAL INSTRUMENTS

The carrying amounts for cash, accounts receivables and accounts payable
approximate fair value due to the short-term nature of these instruments.
Management estimates that the Senior Subordinated Notes of $150.0 million are
valued at $120.0 million and $141.8 million as of December 28, 2001 and
December 29, 2000, respectively, based on quoted market prices. The carrying
value of long term debt, other than the Senior Subordinated Notes, approximates
fair value due to the floating nature of the interest rates.

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 had no customers in 2001, one customer in 2000 and two customers
in 1999 accounting for 10% or more of revenues. Union Pacific generated $146.9
million of revenues in both segments in 2000. The Hub Group generated $128.2
million of revenues in the wholesale segment in 1999 and Union Pacific generated

F-10

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

$100.8 million of revenues in both reporting segments in 1999. The receivable
from Union Pacific was $6.0 million at December 29, 2000. In addition, the
Company had receivables from APL Limited at December 28, 2001 and December 29,
2000 of $6.6 million and $6.0 million, respectively, primarily for freight
transportation and the repositioning of APL Limited's equipment.

CONCENTRATION OF BUSINESS ON INTERMODAL MARKETING

Significant portions of the Company's retail segment revenue 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.

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.

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.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 143 ("SFAS 143"), "Accounting for Asset Retirement
Obligations," in July, 2001 and SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets" in October, 2001. SFAS No. 143, which is
effective for fiscal years beginning after June 15, 2002, addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS No.
143 will be adopted by the Company in the 2003 fiscal year. SFAS No. 144, which
is effective for fiscal years beginning after December 15, 2001, addresses
financial accounting and reporting for the impairment of long-lived assets,
excluding goodwill and intangible assets, to be held and used or disposed of.
The Company has not yet completed its analysis of the effects that these new
standards will have on the results of operations; although it does not expect
the implementation of these standards to have a significant effect on its
results of operations or financial condition.

F-11

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

transactions initiated after June 30, 2001, require the use of the purchase
method of accounting for all combinations after June 30, 2001 and establish a
new accounting standard for goodwill acquired in a business combination. SFAS
141 and SFAS 142 continue to require recognition of goodwill as an asset, but
do not permit amortization of goodwill as previously required by APB Opinion
No. 17 "Intangible Assets." SFAS 142 was effective for the Company on December
29, 2001. SFAS 142 will result in significant modifications relative to the
Company's accounting for goodwill. Specifically, the Company will cease
goodwill amortization, which was $7.5 million in 2001, beginning December 29,
2001. Furthermore, certain intangible assets that are not separable from
goodwill will not be amortized. However, goodwill and other intangible assets
will be subject to periodic (at least annual) tests for impairment and
recognition of impairment losses in the future could be required based on a new
methodology for measuring impairments described below. The revised standards
include transition rules and requirements for identification, valuation and
recognition of a much broader list of intangibles as part of business
combinations than prior practice, most of which will continue to be amortized.
SFAS 142 requires a two-step method for determining goodwill impairments where
step 1 is to compare the fair value of the reporting unit with the unit's
carrying amount, including goodwill. If this test suggests that it is impaired,
then step 2 is required to compare the implied fair value of the reporting
unit's goodwill with the carrying amount of the reporting unit's goodwill. If
the carrying amount of the reporting unit's goodwill is greater than the
implied fair value of its goodwill, an impairment loss must be recognized for
the excess. Also under SFAS 141, a one-step method is used to determine the
impairment for indefinite-lived intangible assets where the fair value of the
intangible asset is compared with its carrying amount. The Company has
completed a preliminary evaluation of goodwill using the new goodwill
impairment testing criteria set forth in SFAS 142, and has determined that the
Company will not be required to take an initial goodwill impairment charge as a
result of adoption.

NOTE 2. STATEMENTS OF OPERATIONS

During 2001, the Company recorded a total of $6.9 million of charges
described below.

Direct operating expenses included $1.4 million for the repair and return of
2,700 containers and 1,300 chassis as part of a program to downsize the
container and chassis fleet. Selling, general and administrative expenses
included $0.8 million for costs associated primarily with the consolidation of
retail segment operations in Columbus, Ohio, and $0.3 million for legal fees
related to a civil lawsuit filed by the Company against the former owner of an
acquired business. Other operating expenses included $1.9 million for the
write-off of agent balances due to an agent bankruptcy, $1.6 million for the
write-off of costs related to a postponed public offering and $0.5 million for
early termination of a chassis and container maintenance agreement. For the
2000 and 1999 periods there were no significant amounts relating to these
matters.

MERGER AND SEVERANCE

In December 2000, the Company recorded a charge of $7.7 million relating to
the consolidation of retail segment operations resulting from the December 22,
2000 acquisition of Rail Van. The charge included $5.0 million for the
severance of 99 employees from the Chicago, Memphis, Los Angeles and Walnut
Creek offices and the termination of agency agreements. An additional $2.0
million was included to cover lease costs through lease termination in 2006 for
facilities no longer required primarily in Walnut Creek and Memphis. The
remaining $0.7 million of this charge was for the write-off of computer
software under development. Through December 28, 2001, $2.8 million had been
charged to the reserve for the severance of 80 employees and termination of
agency agreements, and $1.8 million had been charged related to facilities and
other. A total of $1.2 million of the unused reserve was released related to
planned workforce reductions (employees and agencies) that are no longer needed
due to employees/agents leaving prior to being terminated. The remaining
severance payments will be completed by the end of 2003 as payments for senior
management severance are spread over a two year period.

F-12

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

During 2001, the Company recorded an additional charge of $1.6 million
including $0.8 million for the severance of employees in the wholesale segment,
$0.5 million for additional lease costs due to the worsening of the real estate
market and the difficulty in subletting facilities no longer required and $0.3
million for the write-off of retail segment assets that have been abandoned.
The 2001 charge was partially offset by the release of $1.2 million of
remaining unused liability from the 2000 charge previously discussed. As
previously indicated, the remaining severance is to be paid to senior
management spread over a two year period. The table below details merger and
severance activity (in millions).

SEVERANCE FACILITIES AND OTHER TOTAL
--------- -------------------- -----

Beginning balance December 29, 2000 $ 5.0 $ 2.7 $ 7.7
Accruals........................ 0.8 0.8 1.6
Payments........................ (2.8) (1.8) (4.6)
Other........................... (1.2) -- (1.2)
----- ----- -----
Balance at December 28, 2001....... $ 1.8 $ 1.7 $ 3.5
===== ===== =====

NOTE 3. ACQUISITIONS

There were no acquisitions during 2001.

The Company completed four retail segment acquisitions during 2000. The
table below summarizes the purchase price allocation, net of cash acquired for
each acquisition, followed by a description of each transaction.

2000 ACQUISITIONS PURCHASE PRICE ALLOCATION, NET OF CASH ACQUIRED

RAIL
CONEX GTS RFI VAN TOTAL
----- ------ ------ ------ ------
(IN MILLIONS)

Accounts receivable, net.. $ 6.2 $ 6.7 $ 11.0 $ 62.8 $ 86.7
Prepaid expenses and other 0.3 -- 0.9 0.5 1.7
Property and equipment.... 0.6 0.1 1.1 5.9 7.7
Goodwill.................. 32.0 21.2 17.4 75.2 145.8
Liabilities............... (1.7) (10.2) (11.9) (68.4) (92.2)
----- ------ ------ ------ ------
Total purchase price... $37.4 $ 17.8 $ 18.5 $ 76.0 $149.7
===== ====== ====== ====== ======

On January 13, 2000, pursuant to the terms of an asset purchase agreement,
the Company acquired substantially all of the assets and assumed specified
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 of $37.4 million
included acquisition fees of $1.3 million, a cash payment to owners of $25.1
million, the issuance to Conex shareholders of an 8.0% subordinated note in the
aggregate principal amount of $5.0 million and the issuance to Conex
shareholders of 300,000 shares (valued in the aggregate at $6.0 million) of
common stock of Pacer International, Inc. The Company borrowed $15.0 million
under the revolving credit facility to fund the acquisition. The results of
operations for the acquired assets are included in the Company's consolidated
financial statements beginning January 1, 2000. The acquisition resulted in
$32.0 million of goodwill. In 2001, the Company reviewed and increased the
gross goodwill recorded on this acquisition by $0.1 million.

F-13

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

On August 31, 2000, the Company acquired all of the capital stock of GTS
Transportation Services, Inc. ("GTS"), a provider of transportation services
including logistics and truck brokerage in North America. The purchase price of
$17.8 million included acquisition fees and expenses of approximately $0.6
million, a net cash payment to owners of $15.0 million and a maximum earn-out
amount of $2.2 million. The Company borrowed $10.0 million under the revolving
credit facility to fund the acquisition. In connection with the acquisition,
former owners of GTS that continued as employees were granted 30,000 options
(issued at fair value on the date granted) to purchase the Company's common
stock. The results of operations for the acquired company are included in the
Company's consolidated financial statements beginning September 1, 2000. The
acquisition resulted in $21.2 million of goodwill. During 2001, the Company
reviewed and decreased the gross goodwill recorded on this acquisition by $1.1
million as a result of the finalization of certain pre-acquisition
contingencies.

On October 31, 2000, the Company acquired all of the capital stock of RFI
Group, Inc. ("RFI"), a provider of international freight forwarding and freight
transportation services. The purchase price of $18.5 million included
acquisition costs of $0.5 million, a net cash payment to owners of $16.4
million and an estimated working capital adjustment of $1.6 million. A portion
of the net cash payment was used to repay $5.2 million of indebtedness. The
Company borrowed $18.0 million under the revolving credit facility to fund the
acquisition. In connection with the acquisition, former owners of RFI that
continued as employees were granted 45,000 plan and 80,000 non-plan options
(issued at fair value on the date granted) to purchase the Company's common
stock. The 80,000 non-plan options expired in 2001. The results of operations
for the acquired company are included in the Company's consolidated financial
statements beginning November 1, 2000. The acquisition resulted in $17.4
million of goodwill. During 2001, the Company reviewed and increased the gross
goodwill on this acquisition by $0.3 million.

On December 22, 2000, the Company acquired all of the capital stock of Rail
Van Inc. ("Rail Van"), a provider of intermodal transportation and other
logistics services. The purchase price of $76.0 million included $4.0 million
of acquisition costs, a cash payment to owners of $67.0 million, the issuance
to Rail Van shareholders of 280,000 shares of the Company's common stock valued
in the aggregate at $7.0 million and a post-closing adjustment of $2.0 million
refunded by the sellers to the Company based on Rail Van's results for 2000
through December 22. The acquisition was funded by a borrowing of $40.2 million
under the Company's revolving credit facility, the issuance of $40.0 million in
new term loans under the credit agreement and the issuance of common stock.
Proceeds from these loans were also used to repay $8.9 million in Rail Van debt
assumed during the transaction. The results of operations for the acquired
company are included in the Company's consolidated financial statements
beginning December 23, 2000. A Section 338(h)(10) election was made to allow
the acquisition of Rail Van to be treated as an acquisition of assets for tax
purposes. The acquisition resulted in $75.2 million of goodwill.

On May 28, 1999, the Company acquired the common stock of Pacer Logistics,
Inc., a privately-held third-party logistics provider. The Company paid $137.5
million for the acquisition 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 from the Senior Subordinated Note offering and
with funds under the credit facility. The acquisition resulted in goodwill of
$123.1 million.

During 2000, the Company reviewed and increased the gross goodwill recorded
on the 1999 acquisition of Pacer Logistics by $2.9 million. In December 2000,
the Company determined the deferred tax asset arising as a result of the 2000
acquisitions. This entry increased gross goodwill by $2.8 million.

The acquisitions of Pacer Logistics, Inc., Conex, GTS, RFI and Rail Van were
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16, "Business Combinations". The aggregate

F-14

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

purchase price as shown above were allocated to the underlying assets and
liabilities based upon preliminary estimates of fair values at the date of
acquisition, with the remainder allocated to goodwill.

The acquisitions of Pacer Logistics, Inc., Conex assets, GTS, RFI and Rail
Van were accounted for as a purchase in accordance with Accounting Principles
Board Opinion No. 16, "Business Combinations". For the 2001, 2000 and 1999
years goodwill was being 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 acquisitions (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. With the adoption of
FAS 142, goodwill will cease to be amortized commencing December 29, 2001, but
will be subject to new impairment testing criteria.

Pro forma results of operations, giving effect to the Company's acquisition
of Conex assets, GTS, RFI and Rail Van (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:

FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 29, 2000 DECEMBER 31, 1999
----------------- -----------------
(UNAUDITED)

Gross revenues.............................. $1,897.4 $1,791.5
Net revenues................................ 338.1 305.4
Net income.................................. 8.8 18.2
Earnings per share:
Basic.................................... $ 0.78 $ 1.66
Diluted.................................. $ 0.74 $ 1.41

NOTE 4. LONG-TERM DEBT AND CAPITAL LEASES

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

DECEMBER 28, DECEMBER 29,
2001 2000
------------ ------------

Senior subordinated notes (11.75%; due June 1, 2007).. $150.0 $150.0
Term loan (5.5%; due May 28, 2006).................... 171.7 173.0
Revolving credit facility (5.1%; due May 28, 2004).... 70.8 76.8
Subordinated note (8.0%; due January 13, 2003)........ 5.0 5.0
Capital lease obligations (Note 13)................... 0.4 0.6
------ ------
Total.......................................... 397.9 $405.4
Less current portion.................................. 2.0 1.9
------ ------
Long-term portion.............................. $395.9 $403.5
====== ======

In conjunction with the Company's recapitalization and acquisition of Pacer
Logistics on May 28, 1999, the Company issued $150.0 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 not less than 30 nor more than 60
days' notice, at the following redemption prices: 2003--105.875%;
2004--102.938%; 2005 and thereafter--100.00%.

F-15

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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 each 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
other restricted payments, consummate asset sales, or otherwise dispose of all
or substantially all of the assets of the Company and its subsidiaries.

On May 28, 1999, the Company also entered into a credit agreement that
originally provided for a seven-year $135.0 million term loan (the "Term Loan")
which was used to finance the recapitalization and specified indebtedness of
the Company and a five-year $100.0 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
financial ratios. The Term Loan requires minimum scheduled repayments of $1.3
million annually between the year 2000 and 2005 with the remaining portion
maturing in 2006. 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 financial ratios. The interest rate for the Term Loan and the
Revolving Credit Facility increases or decreases by 0.25% for each change in
our leverage ratio between 3.5 and 4.0, between 4.0 and 5.0, and greater than
5.0. At December 28, 2001, the interest rates for the Term Loan and Revolving
Credit Facility were 5.5% and 5.1%, respectively. The rates for the Term Loan
and Revolving Credit Facility are reset on a monthly basis.

The credit agreement contains customary covenants, the most restrictive of
which limit 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 exceptions. The Company is also required to comply
with specified financial covenants including a consolidated interest coverage
ratio and an adjusted total leverage ratio. At December 28, 2001, the Company
was in compliance with these covenants.

On December 22, 2000, the Company entered into a third amendment to the
credit agreement to provide for an additional term loan in the amount of $40.0
million which was borrowed to finance the acquisition of Rail Van. Similar to
the original term loan, the interest rate for the new 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. At December 28, 2001, the interest rate for the new
term loan was 5.5%. The new term loan requires minimum scheduled repayments of
$0.4 annually between 2001 and 2005. The maturity date for the new term loan is
May 28, 2006.

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 financial ratios and subject to increases based on the amount of
unused commitments. At December 28, 2001, the Company had $23.4 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
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.

F-16

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In conjunction with the transactions described above in Note 3, the Company
borrowed $83.2 million under the Revolving Credit Facility, issued $40.0
million in new term loans (as discussed below) and issued Conex shareholders an
8% subordinated note in the aggregate principal amount of $5.0 million due
January 13, 2003.

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.

During 2001, the Company repaid $0.2 million in capital lease obligations,
$6.0 million of the Revolving Credit Facility, $1.3 million of the Term Loans
and $36,000 remaining of the notes payable to management. During 2000, the
Company repaid $0.1 million in capital lease obligations, $8.9 million of debt
assumed as part of the Rail Van acquisition, $6.4 million of the Revolving
Credit Facility, $1.3 million of the Term Loan and $0.4 million of notes
payable to management.

Contractual maturities of long-term debt (including capital lease
obligations) during each of the five years subsequent to 2001 and thereafter
are as follows (in millions):

2002........................................ $ 2.0
2003........................................ 6.8
2004........................................ 72.6
2005........................................ 1.8
2006........................................ 164.7
Thereafter.................................. 150.0
------
Total.................................... $397.9
======

NOTE 5. HEDGING ACTIVITIES

On December 30, 2000, the Company adopted SFAS 133, "Accounting for
Derivative Instruments and Hedging Activities" (as amended by SFAS 138
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities--an Amendment of SFAS 133."). SFAS 133 established accounting and
reporting standards for derivatives and hedging activities, which requires that
all derivative instruments be reported on the balance sheet at fair value and
establishes criteria for designation and effectiveness of transactions entered
into for hedging purposes. The adoption of SFAS 133 did not result in a
cumulative effect adjustment being recorded to net income for the change in
accounting as the Company had no derivative instruments outstanding.

The Company has an interest rate risk management policy with the objective
of managing its interest costs. To meet these objectives, the Company employs
hedging strategies to limit the effects of changes in interest rates on its
income and cash flows. The Company does not acquire derivative instruments for
any purpose other than cash flow hedging purposes. The Company does not
speculate using derivative instruments. The Company believes that its interest
rate risk management policy is generally effective. Nonetheless, the Company's
profitability may be adversely affected during particular periods as a result
of changing interest rates. In addition, hedging transactions using derivative
instruments involve risks such as counter-party credit risk and legal
enforceability of hedging contracts. The counter-parties to the Company's
arrangements are major financial institutions with which the Company and its
affiliates may also have other financial relationships. These counter-parties
potentially expose the Company to loss in the event of nonperformance.

F-17

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CASH FLOW HEDGING INSTRUMENTS

Management continually identifies and monitors changes in interest rate
exposures that may adversely impact expected future cash flows by evaluating
hedging opportunities. The Company maintains risk management control systems to
monitor interest rate cash flow risk attributable both to the Company's
outstanding or forecasted debt obligations and to the Company's offsetting
hedge positions. The risk management control systems involve the use of
analytical techniques, including cash flow sensitivity analyses, to estimate
the impact of changes in interest rates on the Company's future cash flows.

The Company entered into two interest rate swap agreements on April 11, 2001
with a combined notional amount of $100.0 million which mature on October 11,
2002, to manage fluctuations in cash flows resulting from interest rate risk.
These swap agreements effectively change the variable-rate cash flows on the
Company's debt obligations to fixed-rate cash flows. Under the terms of the
interest rate swap agreements, the Company receives variable interest rate
payments based on LIBOR and makes fixed interest rate payments at 4.43%.

The Company records the fair value of interest rate swap agreements
designated as hedging instruments as a derivative asset or liability. Changes
in the fair value of the interest rate swap agreements are reported as
unrealized gains or losses in stockholders' equity as a component of
accumulated other comprehensive income (loss). If a derivative instrument is
designated as a hedge but the derivative instrument is not fully effective in
hedging the designated risk, the ineffective portion of the gain or loss is
reported in interest expense immediately. The cash flows associated with the
hedge are classified in the same category as the item being hedged.

Interest expense for 2001 includes no net gains or losses representing cash
flow hedge ineffectiveness, since the critical terms of the Company's swap
agreements and debt obligations are matched. The Company recognizes additional
interest expense resulting from amortization of amounts deferred to Other
Comprehensive Income (Loss).

At December 31, 1999, the Company was a party to an interest rate swap
agreement for which it paid 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 was accounted for as an adjustment of interest expense over
the life of the debt. The Company received a variable rate of interest on the
swap of 5.5% at December 31, 1999 and paid 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 6. 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.

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 asset
acquisition in accordance with Section 338(h)(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 was finalized for income tax purposes during 1999.

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.

F-18

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

For periods prior to May 28, 1999, APLLTS' 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:

FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DEC. 28, 2001 DEC. 29, 2000 DEC. 31, 1999
------------- ------------- -------------

U.S. Federal Statutory Rate............................ 35.0% 35.0% 35.0%
Increases (Decreases) in Rate Resulting From:
State Tax, Net of Federal Benefit................... 6.9% 6.0% 3.8%
Revisions to Prior Years' Estimated Liability
Including Tax Audit Adjustments................... (21.3)% -- --
Non-Deductible Book Goodwill........................ 9.0% 2.7% 1.0%
Other Permanent Book/Tax Differences................ 2.0% 0.3% --
----- ---- ----
Net Effective Tax Rate.............................. 31.6% 44.0% 39.8%
===== ==== ====

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

FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DEC. 28, 2001 DEC. 29, 2000 DEC. 31, 1999
------------- ------------- -------------

Current:
Federal............................................ $(2.2) $ 4.8 $ 6.3
State.............................................. (0.6) 1.4 0.9
Foreign............................................
----- ----- -----
Total Current.................................. (2.8) 6.2 7.2
Deferred:
Federal............................................ 4.5 5.2 3.7
State.............................................. 1.9 1.5 0.8
----- ----- -----
Total Deferred..................................... 6.4 6.7 4.5
----- ----- -----
Total Provision................................ $ 3.6 $12.9 $11.7
===== ===== =====

The following table shows the tax effects of the Company's cumulative
temporary differences included in the Consolidated Balance Sheets at December
28, 2001 and December 29, 2000 (in millions):

DECEMBER 28, DECEMBER 29,
2001 2000
------------ ------------

Tax Loss Carry-Forwards...................... $ 7.6 $ --
Property and Equipment....................... (6.8) (4.8)
Allowance for Doubtful Accounts.............. 2.8 3.8
Accrued Liabilities.......................... 3.0 6.0
Tax Basis in Excess of Book--Recapitalization 60.3 67.7
Other........................................ (3.8) (4.0)
----- -----
Total Net Deferred Tax Asset.......... $63.1 $68.7
===== =====

F-19

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

As of December 28, 2001, the Company has net operating loss carryforwards of
$24.1 million for federal income tax purposes. These carryforwards will expire
in 2021. In order for these net operating loss carryforwards to be utilized,
the Company must continue to comply with the change in ownership restrictions.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. Pacer has not recognized
a valuation allowance since management has determined that it is more likely
than not that the results of future operations will generate sufficient taxable
income to realize all deferred tax assets.

NOTE 7. 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 2001, 2000 and 1999 were $1.2 million, $0.8 million and $0.5
million, 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 options to purchase
1,793,747 shares of the Company's common stock may be granted, including
options for 470,247 and 92,614 shares which were part of the 1997 and 1998
Pacer Logistics, Inc. Stock Option Plan, respectively, that were rolled over
into the 1999 plan 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.

The 1999 plan provided for initial grants to specified employees. The
aggregate number of shares subject to these initial grants was 985,500 and
their exercise price was $10.00 per share. The options were granted at fair
value. These initial grants were 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 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.

F-20

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

In 1999, subsequent to the initial grants, 80,000 options were granted to
management personnel to purchase Pacer International, Inc. common stock at
$20.00 per share. The options were granted at an exercise price that exceeded
the fair value. The weighted-average grant-date fair value of these options was
$16.71 per share. In addition, 24,000 options with an exercise price of $10.00
per share were forfeited due to employee resignations.

During 2000, 151,500 options were granted under the plan to management
personnel to purchase Pacer International, Inc. common stock at $20.00 per
share, and 145,000 options were granted to management personnel at $25.00 per
share. All of the 151,500 $20.00 options were granted at below market price.
The weighted-average grant-date fair value of these options was $20.10 per
share. The $25.00 exercise price options were granted at an exercise price that
exceeded the fair value. The weighted-average grant-date fair value of these
options was $22.72 per share. Options forfeited due to employee resignations
were 301,000 options with an exercise price of $10.00 per share, and 15,000
options with an exercise price of $20.00 per share. Certain members of
management exercised 287,373 options to purchase Pacer International Inc.
common stock at an average exercise price of $1.22 per share, and 54,000
options were exercised by management at $10.00 per share. In addition, certain
members of management exercised 17,499 Pacer International, Inc. preferred
stock options with an exercise price of $9.00 per share. The Company elected,
at its discretion, to repurchase and retire the preferred stock that arose from
the exercise of the options. Included in selling, general and administrative
expenses on the Statement of Operations is $53,904 and $22,000 of amortization
of unearned compensation for 2001 and 2000, respectively.

During 2001, 279,000 options were granted under the plan to management
personnel to purchase Pacer International, Inc. common stock at $25.00 per
share. The options were granted at fair value. Options forfeited due to
employee resignations were 67,000 options with an exercise price of $10.00 per
share, 65,000 options with an exercise price of $20.00 per share and 5,000
options with an exercise price of $25.00 per share. Certain members of
management exercised 182,874 options to purchase Pacer International Inc.
common stock at an average exercise price of $0.22 per share, and 500 options
were exercised by management at $10.00 per share. In addition, certain members
of management exercised 27,498 Pacer International, Inc. preferred stock
options with an exercise price of $9.00 per share. The Company elected, at its
discretion, to repurchase and retire the preferred stock that arose from the
exercise of the options.

As of December 28, 2001, 66,886 options remain available for future grant
under the plan.

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.

F-21

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table summarizes the transactions of the Pacer International,
Inc. 1999 Stock Option Plan adopted May 28, 1999 as of December 28, 2001.

WEIGHTED WEIGHTED
AVG. EXERCISE AVG. EXERCISE
COMMON PRICE- PREFERRED PRICE-
STOCK COMMON STOCK PREFERRED
--------- ------------- --------- -------------

Balance at December 25, 1998...... -- -- -- --
Options rolled over............... 562,861 $ 2.27 44,997 $9.00
Granted........................... 1,065,500 $10.75 -- --
Cancelled or expired.............. (24,000) $10.00 -- --
--------- ------ ------- -----
Balance at December 31, 1999...... 1,604,361 $ 7.79 44,997 $9.00
========= ====== ======= =====
Options exercisable, end of year.. 143,158 $ 4.67 9,999 $9.00
Granted........................... 296,500 $22.40 -- --
Canceled or expired............... (316,000) $10.47 -- --
Exchanged......................... -- -- -- --
Exercised......................... (341,373) $ 2.61 (17,499) $9.00
--------- ------ ------- -----
Balance at December 29, 2000...... 1,243,488 $12.02 27,498 $9.00
========= ====== ======= =====
Options exercisable, end of year.. 206,030 $10.38 9,999 $9.00
Granted........................... 279,000 $25.00 -- --
Canceled or expired............... (137,000) $15.29 -- --
Exchanged......................... -- -- -- --
Exercised......................... (183,374) $ 0.25 (27,498) $9.00
--------- ------ ------- -----
Balance at December 28, 2001...... 1,202,114 $16.45 -- --
========= ====== ======= =====
Options exercisable, end of year.. 257,781 $10.87 -- --
Options available for future grant 66,886 -- --

The following table summarizes information about stock options outstanding
at December 28, 2001:

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ----------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING LIFE (MONTHS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- ---------------- ----------- ----------------

Common Stock
$8.61 29,364 85 $ 8.61 29,364 $ 8.61
$10.00 602,250 88 $10.00 204,517 $10.00
$20.00 151,500 99 $20.00 18,900 $20.00
$25.00 419,000 109 $25.00 5,000 $25.00
----- ---
Total 1,202,114 97 $16.45 257,781 $10.87

A total of 80,000 non-plan options were granted upon consummation of the RFI
acquisition on October 31, 2000. These options vested immediately and were
exercisable on or before June 30, 2001. These options expired during 2001.

The Company applies APB Opinion 25 interpretations in accounting for its
stock option plans. Had compensation expense been determined for the stock
options granted in 2000 and 1999 based on the fair value at

F-22

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

grant date consistent with SFAS 123 "Accounting for Stock-Based Compensation",
the Company's pro forma net income and earnings per share for 2000 and 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 4.9% and expected life of 7 years (in determining the "minimum
value", SFAS 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 8. RELATED PARTY TRANSACTIONS

The following table summarizes related party transactions recorded in the
Statements of Operations.

FISCAL YEAR ENDED
--------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
RELATED PARTY TYPE 2001 2000 1999
------------- ---- ------------ ------------ ------------

GROSS REVENUES:
APL Limited............................ Freight transportation $ 82.8 $ 90.6 $49.1
APL Limited............................ Avoided repositioning 17.4 16.2 21.0
International freight
APL Limited............................ Management fee 6.6 6.6 3.9
------ ------ -----
Total related party revenues........ $106.8 $113.4 $74.0
====== ====== =====
OPERATING EXPENSES:
DIRECT OPERATING EXPENSES:
APL Limited............................ Lease, maintenance and
repair expense $ -- $ -- $ 7.0
------ ------ -----
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES:
APL Limited............................ Corporate overhead $ -- $ -- $ 5.6
APL Limited............................ Administrative services 1.0 0.6 1.1
APL Limited............................ Information technology
services 10.0 10.0 5.8
APL de Mexico, S.A. de C.V............. Agency services 0.1 2.7 1.8
Apollo Management...................... Management fee 0.5 0.5 0.3
A&G Investments........................ Facility lease 0.6 0.5 0.3
KU Realty, LLC......................... Facility lease 1.8 1.8 --
Rich Hyland............................ Facility lease -- -- 0.1
Perimeter West......................... Facility lease 1.1 -- --
------ ------ -----
Total related party SG&A expenses... $ 15.1 $ 16.1 $15.0
------ ------ -----
INTEREST EXPENSE:
Keller Uchida Realty Resources, LLC.... $5.0 Million Sub Note $ 0.4 $ 0.2 $ --
------ ------ -----
Total related party expenses........ $ 15.5 $ 16.3 $22.0
====== ====== =====

Management believes that the terms of the related party transactions listed
above were at fair market rates.

The Company provides 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

F-23

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

transactions were performed on a cost reimbursement basis. Thus, no revenues or
expenses were recognized for financial reporting purposes. Reimbursements
amounted to $0, $79.2 million and $273.6 million for the fiscal years ended
December 28, 2001, December 29, 2000 and December 31, 1999, respectively. The
decrease in reimbursement reflects the Company's transfer in April 2000 of 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.
This resulted 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 an
annual management fee of $6.6 million in 2001 and 2000 and $3.9 million in 1999.

Prior to the recapitalization, APL Land Transport Services, Inc. ("APLLTS")
shared in expenses of the former parent for services including systems support,
office space and other corporate services. These expenses were $5.6 million for
the period ended May 28, 1999. In connection with 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 2001, 2000 and the seven months ended December 31,
1999, $1.0 million, $0.6 million and $1.1 million was paid for these services,
respectively. In addition, APL Limited is currently providing the Company
information technology under a long-term agreement for an annual fee of $10.0
million. For the fiscal years ended December 28, 2001, December 29, 2000 and
December 31, 1999, $10.0 million, $10.0 million and $5.8 million was paid for
these services, respectively.

In addition, the Company receives compensation 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 $17.4 million, $16.2 million and $21.0
million for the fiscal years ended December 28, 2001, December 29, 2000 and
December 31, 1999, respectively. At December 28, 2001 and December 29, 2000
$1.9 million and $1.6 million was receivable from APL Limited, respectively.

The Company also provides services to the Automotive Division of APL
Limited. These services include moving containers primarily in the U.S.--Mexico
trade. The amount of revenue recognized for these services was $82.8 million,
$90.6 million and $49.1 million for the fiscal years ended December 28, 2001,
December 29, 2000 and December 31, 1999, respectively. At December 28, 2001 and
December 29, 2000, $4.7 million and $4.4 million was receivable from APL
Limited including related drayage and miscellaneous charges, respectively.

Prior to the recapitalization, APLLTS received an allocation for lease and
maintenance and repair expenses from APL Limited. These expenses were $7.0
million for the fiscal year ended December 31, 1999.

APL de Mexico, S.A. de C.V. (APL Mexico), a wholly owned Mexican subsidiary
of 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 $0.1 million, $2.7 million and $1.8 million for the fiscal years ended
December 28, 2001, December 29, 2000 and December 31, 1999, respectively. At
December 28, 2001 and December 29, 2000, $0 and $0.5 million was payable to APL
Mexico, respectively. Effective in 2001, the Company began using Pacer de
Mexico S.A. de C.V. (Pacer Mexico), a wholly owned Mexican subsidiary of the
Company, to handle the services previously provided by APL Mexico.

The Company has entered into a management agreement with Apollo Management
("Apollo"), an affiliate of our principal shareholder, for financial and
strategic services as the Board of Directors may reasonably request. The annual
fee which has been paid for these services for the years ended December 28,
2001 and December 29, 2000 was $0.5 million, and for the partial year ended
December 31, 1999 was $0.3 million. In addition, the Company paid Apollo a fee
of $1.5 million in 1999 in connection with the recapitalization.

F-24

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

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
former Director and Executive Vice President of the Company. Mr. Steiner is a
stockholder and a former Executive Vice President of the Company. Lease
payments were $0.6 million, $0.5 million and $0.3 million for the years ended
December 28, 2001, December 29, 2000 and December 31, 1999, respectively.

The Company leases warehouse and dock facilities in Southern California from
KU Realty, Inc. which is owned by Messrs. Keller and Uchida. Mr. Keller is a
stockholder and President of the Freight Consolidation and Handling Division of
the Company. Lease payments were $1.8 million for the years ended December 28,
2001 and December 29, 2000.

In July 2001, February 2001 and August 2000 the Company paid scheduled
semi-annual interest payments amounting to $0.4 million in 2001 and $0.2
million in 2000 to Mr. Keller 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.

In April 2000, the Company repaid $0.4 million, including accrued interest,
in notes payable to Messrs. Orris, Angeli and Cross. The notes were part of the
purchase price for Pacer Logistics acquired on May 28, 1999.

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

In connection with the acquisition of Rail Van, the Company assumed a lease
that had been entered into by Rail Van with an entity associated with Messrs.
Bruncak and Brashares and certain former shareholders of Rail Van. This lease
commenced in April, 2001, with an annual rental payment of approximately $1.3
million. Lease payments were $1.1 million for the year ended December 28, 2001.

NOTE 9. COMMITMENTS AND CONTINGENCIES

The Company is party to various legal proceedings, claims and assessments,
including environmental, arising in the normal course of its business
activities. However, management believes none of these items will have a
material adverse impact on the Company's consolidated financial position,
results of operations or liquidity.

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 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
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, Interstate's retention on its
liability policy was $250,000. The court has ordered that restitution of
$488,978 be paid for this omission. The court entered judgment on the August
11, 2000 decision on January 23, 2002. Plaintiffs' counsel has indicated that
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 impact on the Company's consolidated financial position,
results of operations or liquidity.

F-25

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 10. 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 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. Prior to
May 28, 1999, the Company had only one reportable segment, the wholesale
segment.

International revenues generated by the Company's retail segment for 2001
were $108.8 million in Europe and $7.6 million in Canada. The Company's
wholesale segment generated $54.5 million in revenues for 2001 from Mexico. For
2000, revenues generated from RFI's international operations since acquisition
were $18.0 million. The Company's wholesale segment generated $51.7 million in
revenues for 2000 from Mexico and the retail segment generated $12.4 million
from Canada. The Company's asset base is predominantly in the United States.

The following table presents reportable segment information for the fiscal
years ended December 28, 2001, December 29, 2000 and December 31, 1999 (in
millions).

WHOLESALE RETAIL OTHER CONSOLIDATED
--------- ------ ------ ------------

Fiscal year ended December 28, 2001
Gross revenues.................. $808.8 $952.8 $(90.7) $1,670.9
Net revenues.................... 187.9 143.4 331.3
Income from operations.......... 37.1 15.5 (1.6) 51.0
Interest expense, net........... 22.1 17.5 39.6
Tax expense..................... 4.8 (1.2) 3.6
Net income...................... 10.2 (0.8) (2.4) 7.0
Depreciation and amortization... 5.6 12.7 18.3
Capital expenditures............ 8.1 6.5 14.6
Total assets.................... 439.7 258.1 (64.9) 632.9

Fiscal year ended December 29, 2000
Gross revenues.................. $814.7 $503.9 $(37.3) $1,281.3
Net revenues.................... 183.2 92.5 275.7
Income from operations.......... 49.7 13.7 63.4
Interest expense, net........... 25.3 8.8 34.1
Tax expense..................... 12.5 0.4 12.9
Net income...................... 11.9 4.5 (1.6) 14.8
Depreciation and amortization... 5.4 6.2 11.6
Capital expenditures............ 2.0 3.5 5.5
Total assets.................... 457.2 279.4 (78.2) 658.4

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.......... 38.9 9.1 48.0
Interest expense, net........... 16.4 2.2 18.6
Tax expense..................... 8.5 3.2 11.7
Net income...................... 14.0 3.7 (1.1) 16.6
Depreciation and amortization... 6.0 2.6 8.6
Capital expenditures............ 0.1 1.9 2.0
Total assets.................... 391.7 139.9 (76.6) 455.0

F-26

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Data in the "Other" column includes elimination of intercompany balances,
subsidiary investment and additionally for 2001, the write-off of IPO costs.
All intersegment services are provided and purchased at quoted market rates.

For the year ended December 28, 2001 no customer contributed more than 10%
of the Company's total gross revenues. For the year ended December 29, 2000,
the Company had one customer which contributed more than 10% of the Company's
total gross revenues. Total gross revenues of $146.9 million were generated
from Union Pacific (generated by both reporting segments).

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 11. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 28, 2001 and
December 29, 2000 ($ in millions):

2001 2000
------ ------

Railcars......................................................... $ 26.9 $ 26.9
Containers and Chassis........................................... 26.6 27.2
Leasehold improvements and Other (including computer hardware and
software)...................................................... 33.6 20.2
------ ------
Total..................................................... 87.1 74.3
Less: Accumulated Depreciation and Amortization.................. (27.8) (17.8)
------ ------
Property and Equipment, net................................... $ 59.3 $ 56.5
====== ======

Depreciation and amortization of property and equipment was $10.8 million,
$6.9 million and $6.2 million for the years ended December 28, 2001, December
29, 2000 and December 31, 1999, respectively. The Company retired $0.8 million
and $0.5 million of accumulated depreciation associated with the sale of
containers and chassis in 2001 and 2000, respectively. Equipment under capital
lease are included above with a cost of $1.1 million and $1.0 million and
accumulated amortization of $0.7 million and $0.4 million at December 28, 2001
and December 29, 2000, respectively.

During 2001, the Company had capital expenditures of $14.6 million primarily
for wholesale and retail segment computer conversion and expansion. The Company
received $0.2 million from the sale of containers and other equipment and
retired $1.8 million of property during the year.

During 2000, the Company added $7.8 million in property and equipment due to
the acquisition of Conex assets, GTS, RFI and Rail Van. In addition, capital
expenditures of $5.5 million primarily for leasehold improvements and computer
and related equipment were incurred during 2000. The Company received $0.4
million from the sale of containers and other equipment during the year and
retired $0.8 million of property.

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.

F-27

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at December 28, 2001 and December
29, 2000 were as follows (in millions):

2001 2000
------ ------

Accounts Payable.................................. $ 96.8 $102.7
Accrued Rail Liability............................ 31.8 37.5
Accrued Volume Rebates Payable.................... 17.9 11.5
Accrued Equipment Maintenance and Lease........... 5.7 13.5
Accrued Acquisition Costs......................... 2.1 8.1
Accrued Compensation and Benefits................. 4.1 6.7
Merger and Severance.............................. 3.5 6.1
Accrued Interest Payable.......................... 3.8 2.9
Other Accrued Liabilities......................... 37.4 38.2
------ ------
Total Accounts Payable and Accrued Liabilities. $203.1 $227.2
====== ======

NOTE 13. LEASES

The Company leases certain doublestack railcars, containers, chassis, data
processing equipment and other property. Future minimum lease payments under
noncancelable leases at December 28, 2001 for the five years subsequent to 2001
and thereafter are summarized as follows (in millions):

CAPITAL OPERATING
LEASES LEASES
------- ---------

2002.......................................................... $0.3 $ 60.0
2003.......................................................... 0.1 48.9
2004.......................................................... -- 44.0
2005.......................................................... -- 37.4
2006.......................................................... -- 32.5
Thereafter.................................................... -- 158.2
---- ------
Total Minimum Payments................................. 0.4 $381.0
==== ======
Less amount representing interest (at an effective rate of 6%) --
----
Present value of minimum lease payments....................... $0.4
====

Rental expense was $85.6 million, $66.7 million and $50.4 million for the
fiscal years ended December 28, 2001, December 29, 2000 and December 31, 1999,
respectively. The net book value of property under capital lease at December
28, 2001 and December 29, 2000 was approximately $0.4 million and $0.6 million,
respectively.

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
financed through an operating lease in the fourth quarter of 1999. During 2000,
the Company received 4,156 leased containers and 3,425 leased

F-28

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

chassis and returned 1,470 primarily 48-ft leased containers and 506 leased
chassis. In addition, 593 owned 48-ft containers were retired. During 2001, the
Company received 1,100 leased containers and 80 leased chassis and returned
2,278 primarily 48-ft leased containers and 1,629 leased chassis.

The Company has entered into operating lease agreements for 1,300 railcars
during 2000 and 2001 as described below. All of the railcars have been received
and the Company does not anticipate ordering any additional railcars during
2002.

LEASE LEASE NO. RECEIVED RECEIVED
DATE TERM ORDERED IN 2000 IN 2001
--- --- ------- ------ ------
9/1/2000 Monthly 200 200
10/4/2000 15 Yrs 250 85 165
1/2/01 5 Yrs 250 250
2/14/01 15 Yrs 100 100
6/19/01 15 Yrs 250 250
9/25/01 5 Yrs 250 250
----- --- -----
Total 1,300 285 1,015
===== === =====

The two five-year term lease contracts have two additional five-year renewal
options. The leases include change of control provisions, however these only
apply if the new entity does not assume all of the obligations and when certain
financial requirements are not met, such as, for example, the new entity
maintaining a minimum net worth of $17.4 million or a Standard & Poor's credit
rating of at least B+. If these requirements were not met, the lessor would
have the right to retake the railcars and/or collect damages after disposal of
the equipment, if necessary, to recover costs associated with the lease of the
equipment.

The Company receives income from others for the use of its doublestack
railcars and containers. These income amounts are included in gross revenues.
Rental income was $52.5 million, $30.1 million and $16.9 million for the fiscal
years ended December 28, 2001, December 29, 2000 and December 31, 1999,
respectively.

NOTE 14. SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information is as follows ($ in millions):

FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DEC. 28, 2001 DEC. 29, 2000 DEC. 31, 1999
------------- ------------- -------------

Cash Payments:
Interest..... $35.3 $32.3 $15.4
Income Taxes. $ 1.0 $10.8 $ 2.5

NOTE 15. 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
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
of 7.5% annually. The preferred shares are convertible into 100 shares of Pacer
International common stock for each preferred share and may be converted at the
holders option until May 28, 2003. Subject to limitations under the Company's
credit agreement, the Company has the option to

F-29

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

convert the Pacer Logistics exchangeable preferred stock into Pacer
International preferred stock or cash anytime after August 28, 2000. The shares
are mandatorily redeemable for $1,000 per share by Pacer International on May
28, 2009. Prior to conversion, the preferred stock of the subsidiary has no
voting rights.

Pursuant to the Second Amended and Restated Certificate of Incorporation of
Pacer Logistics, Inc. effective in May 2001, the Company, among other things,
extended the date that existing provisions apply, from May 28, 2001 to May 28,
2003 including the right to exchange deadline for the Series B Exchangeable
Preferred Stock of Pacer Logistics. The annual 7.5% paid-in-kind dividends on
the Series B Exchangeable Preferred Stock ceased to accrue as of May 28, 2001
and were replaced by a cash only participation dividend equal to a percentage
of common stock dividends paid, if any by Pacer Logistics to the Company.

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):

FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
DECEMBER 28, DECEMBER 29, DECEMBER 31,
2001 2000 1999
------------ ------------ ------------

Numerator:
Net income......................................... $ 7.0 $ 14.8 $ 16.6
Less: Net income for the period January 1, 1999
Through May 28, 1999 (a)......................... -- -- (8.5)
----------- ----------- -----------
Net income-basic................................... $ 7.0 $ 14.8 $ 8.1
Minority interest.................................. 0.8 1.6 1.1
----------- ----------- -----------
Numerator for earnings per share-diluted.............. $ 7.8 $ 16.4 $ 9.2
=========== =========== ===========
Denominator:
Denominator for earnings per share-basic
Common shares outstanding........................ 11,498,231 10,970,770 10,440,000
Effect of dilutive securities:.....................
Stock options.................................. 410,901 587,749 813,982
Exchangeable preferred stock of subsidiary..... 2,234,844 2,234,844 2,234,844
----------- ----------- -----------
Denominator for earnings per share-diluted............ 14,143,976 13,793,363 13,488,826
=========== =========== ===========
Earnings per share-basic.............................. $ 0.61 $ 1.35 $ 0.78
=========== =========== ===========
Earnings per share-diluted............................ $ 0.55 $ 1.19 $ 0.68
=========== =========== ===========

--------

(a)Net income for the period from January 1, 1999 through May 28, 1999 has been
excluded as prior to the recapitalization on May 28, 1999 the Company was a
division of APL Limited and did not have common stock.

NOTE 17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

As discussed in Note 4, in conjunction with the Company's recapitalization
and acquisition of Pacer Logistics on May 28, 1999 the Company issued $150.0
million of 11.75% senior subordinated notes due June 1, 2007 and entered into a
credit agreement that provided for a seven-year $135.0 million term loan due
May 28,

F-30

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

2006 and a five-year $100.0 million revolving credit facility due May 28, 2004.
In addition, on December 22, 2000, the Company entered into an amendment to the
credit agreement that provided for an additional term loan in the amount of
$40.0 million that was borrowed to finance the acquisition of Rail Van. The
notes are fully and unconditionally guaranteed, on a senior subordinated basis,
jointly and severally, by each of the Company's subsidiaries. The term 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.

The accompanying condensed consolidating financial information has been
prepared and presented pursuant to SEC Regulation S-X Rule 3-10 "Financial
statements of Guarantors and Issuers of Guaranteed Securities Registered or
Being Registered." This information is not intended to present the financial
position, results of operations and cash flows of the individual companies or
groups of companies in accordance with generally accepted accounting principles.

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

DECEMBER 28, 2001 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------ ------------ ------------- ------------

Gross revenues.................................. $808.8 $952.8 $(90.7) $1,670.9
Cost of purchased transportation and services... 620.9 809.4 (90.7) 1,339.6
------ ------ ------ --------
Net revenues................................. 187.9 143.4 -- 331.3
Operating expenses.............................. 152.4 127.9 -- 280.3
------ ------ ------ --------
Income (loss) from operations................... 35.5 15.5 -- 51.0
Interest expense................................ 22.1 17.5 39.6
Equity in net earnings (losses) of subsidiaries. (1.6) -- 1.6 --
------ ------ ------ --------
Income before income taxes and minority Interest 11.8 (2.0) 1.6 11.4
Income taxes (benefit).......................... 4.8 (1.2) -- 3.6
Minority interest............................... -- 0.8 -- 0.8
------ ------ ------ --------
Net income (loss)............................... $ 7.0 $ 1.6 $ 1.6 $ 7.0
====== ====== ====== ========

F-31

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 29, 2000 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------ ------------ ------------- ------------

Gross revenues.................................. $814.7 $503.9 $(37.3) $1,281.3
Cost of purchased transportation and services... 631.5 411.4 (37.3) 1,005.6
------ ------ ------ --------
Net revenues................................. 183.2 92.5 -- 275.7
Operating expenses.............................. 133.5 78.8 -- 212.3
------ ------ ------ --------
Income (loss) from operations................... 49.7 13.7 -- 63.4
Interest expense................................ 25.3 8.8 -- 34.1
Equity in net earnings (losses) of subsidiaries. 2.9 -- (2.9) --
------ ------ ------ --------
Income before income taxes and minority Interest 27.3 4.9 (2.9) 29.3
Income taxes (benefit).......................... 12.5 0.4 -- 12.9
Minority interest............................... -- 1.6 -- 1.6
------ ------ ------ --------
Net income (loss)............................... $ 14.8 $ 2.9 $ (2.9) $ 14.8
====== ====== ====== ========

DECEMBER 31, 1999 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------ ------------ ------------- ------------

Gross revenues.................................. $713.2 $233.2 $(18.7) $927.7
Cost of purchased transportation and services... 559.1 195.0 (18.7) 735.4
------ ------ ------ ------
Net revenues................................. 154.1 38.2 -- 192.3
Operating expenses.............................. 115.2 29.1 -- 144.3
------ ------ ------ ------
Income (loss) from operations................... 38.9 9.1 -- 48.0
Interest expense................................ 16.4 2.2 -- 18.6
Equity in net earnings (losses) of subsidiaries. 2.6 -- (2.6) --
------ ------ ------ ------
Income before income taxes and minority Interest 25.1 6.9 (2.6) 29.4
Income taxes (benefit).......................... 8.5 3.2 -- 11.7
Minority interest............................... -- 1.1 -- 1.1
------ ------ ------ ------
Net income (loss)............................... $ 16.6 $ 2.6 $ (2.6) $ 16.6
====== ====== ====== ======

F-32

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 28, 2001 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------ ------------ ------------- ------------

ASSETS
Current assets......................................................... $ 66.5 $162.9 $ (4.2) $225.2
Property and equipment, net............................................ 45.1 14.2 -- 59.3
Investment in subsidiaries............................................. 239.5 -- (239.5) --
Goodwill, net.......................................................... 23.3 258.2 -- 281.5
Deferred income taxes.................................................. 56.8 0.7 -- 57.5
Other assets........................................................... 8.5 0.9 -- 9.4
------ ------ ------- ------
Total assets....................................................... $439.7 $436.9 $(243.7) $632.9
====== ====== ======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.................................................... $184.3 $ 25.0 $ (4.2) $205.1
Long-term debt......................................................... 250.8 145.1 -- 395.9
Other liabilities...................................................... 1.6 1.6 3.2
Minority interest--exchangeable preferred stock of a subsidiary........ -- 25.7 -- 25.7
Total stockholders' equity (deficit)............................... 3.0 239.5 (239.5) 3.0
------ ------ ------- ------
Total liabilities and stockholders' equity......................... $439.7 $436.9 $(243.7) $632.9
====== ====== ======= ======

DECEMBER 29, 2000 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------ ------------ ------------- ------------

ASSETS
Current assets......................................................... $ 79.9 $177.2 $ (15.4) $241.7
Property and equipment, net............................................ 42.0 14.5 -- 56.5
Investment in subsidiaries............................................. 239.5 -- (239.5) --
Goodwill, net.......................................................... 24.1 265.7 -- 289.8
Deferred income taxes.................................................. 62.2 (3.2) -- 59.0
Other assets........................................................... 9.5 5.1 (3.2) 11.4
------ ------ ------- ------
Total assets....................................................... $457.2 $459.3 $(258.1) $658.4
====== ====== ======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities.................................................... $202.9 $ 42.3 $ (16.1) $229.1
Long-term debt......................................................... 255.4 148.1 -- 403.5
Other liabilities...................................................... 1.8 1.9 3.7
Minority interest--exchangeable preferred stock of a subsidiary........ -- 25.0 -- 25.0
Total stockholders' equity (deficit)............................... (2.9) 242.0 (242.0) (2.9)
------ ------ ------- ------
Total liabilities and stockholders' equity......................... $457.2 $459.3 $(258.1) $658.4
====== ====== ======= ======

F-33

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

DECEMBER 28, 2001 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------ ------------ ------------- ------------

Net cash provided by operating activities....................... $15.1 $ 6.7 $-- $ 21.8

Investing activities:
Capital expenditures......................................... (8.1) (6.5) -- (14.6)
Proceeds from sales of property and equipment................ 0.2 -- -- 0.2
----- ----- --- ------
Net cash used in investing activities........................... (7.9) (6.5) -- (14.4)

Financing activities:
Proceeds from issuance of common stock....................... 0.1 -- -- 0.1
Proceeds from issuance of preferred stock.................... 0.2 -- -- 0.2
Repurchase of preferred stock................................ (0.2) -- -- (0.2)
Debt, revolving credit facility and capital Lease obligation
repayment.................................................. (7.3) (0.2) -- (7.5)
----- ----- --- ------
Net cash (used in) provided by financing activities............. (7.2) (0.2) -- (7.4)
Net increase (decrease) in cash and cash equivalents............ -- -- -- --
Cash and cash equivalents at beginning of year.................. -- -- -- --
----- ----- --- ------
Cash and cash equivalents at end of year........................ $ -- $ -- $-- $ --
===== ===== === ======

DECEMBER 29, 2000 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------- ------------ ------------- ------------

Net cash provided by operating activities............ $ 11.0 $(9.8) $-- $ 1.2

Investing activities:
Acquisitions, net of cash acquired................ (125.6) -- -- (125.6)
Capital expenditures.............................. (2.0) (3.5) -- (5.5)
Proceeds from sales of property and equipment..... 0.3 0.1 -- 0.4
------- ----- --- -------
Net cash used in investing activities................ (127.3) (3.4) -- (130.7)

Financing activities:
Checks drawn in excess of cash balances........... (2.4) 13.3 -- 10.9
Proceeds of long-term debt, net of costs.......... 122.6 -- -- 122.6
Proceeds from issuance of common stock............ 0.9 -- -- 0.9
Proceeds from issuance of preferred stock......... 0.2 -- -- 0.2
Repurchase of preferred stock..................... (0.2) -- -- (0.2)
Debt, revolving credit facility and capital lease
obligation repayment............................ (17.0) (0.1) -- (17.1)
------- ----- --- -------
Net cash (used in) provided by financing activities.. 104.1 13.2 -- 117.3
Net increase (decrease) in cash and cash equivalents. (12.2) -- -- (12.2)
Cash and cash equivalents at beginning of year....... 12.2 -- -- 12.2
------- ----- --- -------
Cash and cash equivalents at end of year............. $ -- $ -- $-- $ --
======= ===== === =======

F-34

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DECEMBER 31, 1999 (DOLLARS IN MILLIONS)

GUARANTOR CONSOLIDATING CONSOLIDATED
PARENT SUBSIDIARIES ADJUSTMENTS PACER
------- ------------ ------------- ------------

Net cash provided by operating activities............ $ 15.9 $ 4.9 $-- $ 20.8

Investing activities:
Acquisitions, net of cash acquired................ (112.0) -- -- (112.0)
Capital expenditures.............................. (0.1) (1.9) -- (2.0)
Proceeds from sales of property and equipment..... 39.6 0.4 -- 40.0
------- ----- --- -------
Net cash used in investing activities................ (72.5) (1.5) -- (74.0)

Financing activities:
Proceeds of long-term debt, net of costs.......... 277.5 -- -- 277.5
Proceeds from issuance of common stock............ 104.4 -- -- 104.4
Distribution to APL and recap costs............... (310.4) (1.3) -- (311.7)
Redemption of preferred stock of subsidiary....... -- (2.0) -- (2.0)
Debt, revolving credit facility and capital Lease
obligation repayment............................ (2.7) (0.1) -- (2.8)
------- ----- --- -------
Net cash (used in) provided by financing activities.. 68.8 (3.4) -- 65.4
Net increase (decrease) in cash and cash equivalents. 12.2 -- -- 12.2
Cash and cash equivalents at beginning of year....... -- -- -- --
Cash and cash equivalents at end of year............. $ 12.2 $ -- $-- $ 12.2
======= ===== === =======

F-35

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table sets forth selected quarterly financial data for each of
the quarters in 2001 and 2000 (in millions, except per share amounts):

QUARTERS
----------------------------
FIRST SECOND THIRD FOURTH
------ ------ ------ ------

Fiscal year ended December 28, 2001

Gross revenues........................ $440.3 $431.5 $398.1 $401.0
Net revenues.......................... 80.9 80.8 80.3 89.3
Income from operations (a)............ 11.4 14.2 11.4 14.0
Net income (loss) (a)................. (0.4) 2.4 1.0 4.0
Basic earnings (loss) per share....... $(0.04) $ 0.21 $ 0.09 $ 0.35
Diluted earnings (loss) per share (d). $(0.04) $ 0.19 $ 0.07 $ 0.28

Fiscal year ended December 29, 2000 (b)

Gross revenues........................ $308.6 $299.6 $307.2 $365.9
Net revenues.......................... 65.5 65.9 66.3 78.0
Income from operations (c)............ 17.5 20.1 18.8 7.0
Net income (c)........................ 4.4 6.9 6.0 (2.5)
Basic earnings (loss) per share....... $ 0.41 $ 0.62 $ 0.54 $(0.22)
Diluted earnings (loss) per share (d). $ 0.36 $ 0.52 $ 0.46 $(0.22)

--------

(a)In September, 2001 the Company recorded a $0.4 million merger and severance
charge as well as $4.0 million in other charges related to the restructuring
and consolidation of operations.

(b)2000 amounts include the results of operations since acquisition for the
acquisitions of Conex assets on January 13, 2000, GTS on August 31, 2000,
RFI on October 31, 2000 and Rail Van on December 22, 2000.

(c)In December 2000 the Company recorded a $7.7 million merger and severance
charge for the consolidation and restructuring of the retail segment.

(d)Diluted earnings per share for the first quarter of 2001 and the fourth
quarter of 2000 excludes the effects of stock options and minority interest
as they were determined to be anti-dilutive. This differs from the Company's
first quarter 2001 Form 10-Q filed on May 17, 2001 and from the fourth
quarter amount shown in the Quarterly Financial Data footnote, included in
the Company's year 2000 annual report on Form 10-K filed on March 29, 2001.
The minority interest is now also considered anti-dilutive.

F-36

[PHOTOS/GRAPHICS]

[PACER LOGO]

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. ("NASD") filing fee and the Nasdaq
National Market listing fee.

AMOUNT
TO BE PAID
----------

SEC registration fee.............. $37,500.00
NASD filing fee................... $23,000.00
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.......................... $ *
==========

--------
* 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

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, PREFERRED STOCK AND SENIOR SUBORDINATED NOTES. Set forth in
chronological order is information regarding shares of common stock and
preferred stock issued by the Registrant or its subsidiary, Pacer Logistics
Inc., since January 1, 1999 which were not registered under the Securities Act
of 1933 as amended (the "Securities Act"). 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, 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 members 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.

12.In April 2001, the Registrant issued 182,874 shares of common stock to
three employees upon exercise of options for an aggregate purchase price
of $40,232.28.

13.In May 2001, the Registrant issued 500 shares of common stock to one
employee upon exercise of options for an aggregate purchase price of
$5,000.

14.In March 2002, the Registrant issued 1,330 shares of common stock to one
employee upon exercise of options for an aggregate purchase price of
$13,330.

II-2

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.

NUMBER OF EXERCISE
SHARES PRICE
--------- --------

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 December 31, 2000 381,500 $22.95
January 1, 2001 to December 31, 2001 279,000 $25.00

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

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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 for the year ended December 31, 1999).

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.***

II-3

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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. (Incorporated by reference to
Exhibit No. 4.1 to the Registrant's Current Report on Form 8-K dated January 8, 2001).

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 [Intentionally Omitted]

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 [Intentionally Omitted]

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 Corporation, 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 for the year
ended December 31, 1999).

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 Corporation, 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 for the year
ended December 31, 1999 ).

II-4

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

10.9 Third Amendment dated December 22, 2000 among Pacer International, Inc., the lending
institutions party to the Pacer International, Inc. Credit Agreement dated May 28, 1999, Credit
Suisse First Boston Corporation, Morgan Stanley Senior Funding, Inc. and Bankers Trust
Company. (Incorporated by reference to Exhibit No. 10.1 to the Registrant's Current Report on
Form 8-K dated January 8, 2001).

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 Registrant's 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 Registrant's 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 Registrant's 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 Registrant's 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 Registrant's
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
Registrant's 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 Registrant's 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 Registrant's Registration
Statement on Form S-4 dated November 5, 1999).

II-5

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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 Registrant's Registration Statement on
Form S-4 dated November 5, 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 Registrant's Current Report on Form 8-K
dated January 13, 2000).

10.24 Amendment dated January 12, 2000 to Conex Asset Purchase Agreement dated December 31,
1999 (Incorporated by reference to Exhibit 2.2 of the Registrant's Current Report on Form 8-K
dated January 13, 2000).

10.25 [Intentionally Omitted]

10.26 [Intentionally Omitted]

10.27 [Intentionally Omitted]

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 [Intentionally Omitted]

10.33 [Intentionally Omitted]

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. (Incorporated by reference
to Exhibit No. 10.2 to the Registrant's Current Report on Form 8-K dated January 8, 2001)

10.35 Equipment Use Agreement, dated May 28, 1999, between PAMC UC and Pacer International,
Inc.***

10.36 Stock Exchange Agreement and Plan of Reorganization, dated , 2002 among Pacer
International, Inc., Pacer Logistics, Inc., Donald C. Orris, Gerry Angeli, Robert L. Cross, Allen E.
Steiner, John W. Hein and Richard P. Hyland.*

10.37 Contribution Agreement dated , 2002 between Pacer International, Inc. and Coyote
Acquisition, LLC.*

II-6

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

10.38 Amendment to the Pacer International, Inc. 1999 Stock Option Plan.*

10.39 Employment Agreement dated as of December 1, 1998 between Pacer International, Inc. and
Lawrence C. Yarberry. (Incorporated by reference to Exhibit 10.36 to the Registrants' Annual
Report on Form 10-K for the year ended December 29, 2000).

10.40 Employment Agreement dated as of April 12, 2000 between Pacer International, Inc. and Charles
T. Shurstad. (Incorporated by reference to Exhibit 10.35 to the Registrants' Annual Report on
Form 10-K for the year ended December 28, 2001).

10.41 Employment Agreement dated as of December 22, 2000 between Pacer International, Inc. and
Jeffrey R. Brashares. (Incorporated by reference to Exhibit B to the Registrant's Current Report on
Form 8-K dated January 8, 2001).

10.42 Employment Agreement dated as of December 22, 2000 between Pacer International, Inc. and
Denis M. Bruncak. (Incorporated by reference to Exhibit C to the Registrant's Current Report on
Form 8-K dated January 8, 2001).

10.43 Employment Agreement dated as of August 22, 2001 between Pacer International, Inc. and
Michael Killea. (Incorporated by reference to Exhibit 10.36 to the Registrant's Annual Report on
Form 10-K for the year ended December 28, 2001).

10.44 Amendment No. 1 to Domestic Incentive Agreement between CSX Intermodal, Inc. and Pacer
International, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report
on Form 10-Q for the Quarter Ended April 6, 2001).

10.45 Software License, Development, Support and Information Service Provider Agreement between
Qiva, Inc. and Pacer International, Inc. (Incorporated by reference to Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the Quarter Ended April 6, 2001).

10.46 Rail Car Lease Agreement dated September 25, 2001 by and between General Electric Railcar
Services Corporation and Pacer International, Inc. (Incorporated by reference to Exhibit 10.39 to
the Registrant's Annual Report on Form 10-K for the year ended December 28, 2001).

10.47 Rail Car Lease Agreement dated January, 2001 by and between LaSalle National Leasing
Corporation and the Company. (Incorporated by reference to Exhibit 10.40 to the Registrant's
Annual Report on Form 10-K for the year ended December 28, 2001).

10.48 Rail Car Lease Agreement dated February 14, 2001 by and between Greenbrier Leasing
Corporation and the Company. (Incorporated by reference to Exhibit 10.41 to the Registrant's
Annual Report on Form 10-K for the year ended December 28, 2001).

10.49 Separation and Release Agreement dated as of December 31, 2001 between Pacer International,
Inc. and Robert L. Cross. (Incorporated by reference to Exhibit 10.42 to the Registrant's Annual
Report on Form 10-K for the year ended December 28, 2001).

21.1 Subsidiaries of Registrant (Incorporated by reference to the Exhibit 21.1 to the Registrant's Form
10-K for the year ending December 28, 2001).

23.1 Consent of Bass Berry & Sims PLC (included in Exhibit 5.1).*

23.2 Consent of PricewaterhouseCoopers LLP.**

24.1 Powers of Attorney.***

--------

* To be filed by amendment

** Filed herewith

*** Previously filed

II-7

(b) FINANCIAL STATEMENT SCHEDULES:

Report of Independent Public Accountants on Financial Statement Schedule

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-8

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 FOR THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF DENVER,
STATE OF COLORADO, ON APRIL 11, 2002.

PACER INTERNATIONAL, INC.

By: /S/ LAWRENCE C. YARBERRY
-----------------------------
LAWRENCE C. YARBERRY
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 FOR THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----

* Chairman, President and Chief April 11, 2002
------------------------------- Executive Officer
DONALD C. ORRIS

* Executive Vice President and Chief April 11, 2002
------------------------------- Financial Officer (Principal
LAWRENCE C. YARBERRY Financial and Accounting Officer)

* Director April 11, 2002
-------------------------------
JOSHUA J. HARRIS

* Director April 11, 2002
-------------------------------
BRUCE H. SPECTOR

* Director April 11, 2002
-------------------------------
MARC E. BECKER

* Director April 11, 2002
-------------------------------
TIMOTHY J. RHEIN

* Director April 11, 2002
-------------------------------
MICHAEL S. GROSS

* Director April 11, 2002
-------------------------------
THOMAS L. FINKBINER

*BY: /S/ LAWRENCE C. YARBERRY
-------------------------------
ATTORNEY-IN-FACT

II-9

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 1, 2002 appearing in Amendment No. 1 to 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 1, 2002

S-1

SCHEDULE II

PACER INTERNATIONAL, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)

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

DECEMBER 28, 2001
Allowance for doubtful accounts.......... $(9.0) $(3.3) $5.3 $(7.0)
DECEMBER 29, 2000
Allowance for doubtful accounts.......... $(3.0) $(1.8) $1.6 $(5.8)(2) $(9.0)
DECEMBER 31, 1999
Allowance for doubtful accounts.......... $(0.7) $(0.8) $0.4 $(1.9)(3) $(3.0)

--------
(1)Represents write-off of amounts.
(2)Represents the historical allowance recorded on Conex, GTS, RFI and Rail Van
books at the date of acquisition.
(3)Represents the historical allowance recorded on Pacer Logistics books at the
date of acquisition.

S-2

EXHIBIT INDEX

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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., Rail Van LLC and Wilmington Trust Company.***

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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 [Intentionally Omitted]

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 [Intentionally Omitted]

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 Corporation, 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 for
the year ended December 31, 1999).

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 Registrant's Registration
Statement on Form S-4 dated August 12, 1999).

10.12 Administrative Services Agreement, dated as of May 29, 1999, between APL Limited and Pacer
International, Inc.***

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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 Registrants' Current Report on Form 8-K
dated January 13, 2000).

10.25 [Intentionally Omitted]

10.26 [Intentionally Omitted]

10.27 [Intentionally Omitted]

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

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 [Intentionally Omitted]

10.33 [Intentionally Omitted]

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.***

10.37 Contribution Agreement dated , 2002 between Pacer International, Inc. Coyote
Acquisition, LLC.*

10.38 Amendment to the Pacer International, Inc. 1999 Stock Option Plan.*

EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------

21.1 Subsidiaries of Registrant (Incorporated by reference to the Exhibit 21.1 to the Registrants' Form
10-K for the year ending December 28, 2001).

23.1 Consent of Bass Berry & Sims PLC (included in Exhibit 5.1).*

23.2 Consent of PricewaterhouseCoopers LLP.**

24.1 Powers of Attorney.***

--------

* To be filed by amendment

** Filed herewith

*** Previously filed