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Pacer International Reports Third Quarter Results

DUBLIN, Ohio--(BUSINESS WIRE)--Oct. 25, 2012-- Pacer International, Inc. (Nasdaq: PACR), the asset-light North American freight transportation and logistics services provider, today reported financial results for the three and nine month periods ended September 30, 2012.

THIRD QUARTER RESULTS

  • Income from operations in the intermodal segment, excluding the gain on sale of railcar assets of $4.8 million in the third quarter of 2011 and the previously announced reduction in volume from an ocean carrier customer, decreased year over year by $1.0 million. Total intermodal income from operations decreased $8.5 million and logistics income from operations decreased $1.5 million. Overall income from operations decreased by $9.1 million;
  • Earnings per share decreased from $0.19 in the 2011 period to $0.03 in the 2012 period. Excluding the 2011 gain on sale of railcar assets, earnings per share decreased $0.02 year over year;
  • Selling, general and administrative expenses improved by $4.0 million or 10.7%;
  • Total intermodal revenue declined $11.2 million or 3.7%. Excluding the impact from the reduction in volume from an ocean carrier customer of $24.1 million in the third quarter of 2011, intermodal revenues grew by 4.6%. Logistics revenues declined to $58.1 million. In total, revenues decreased by 7.2% to $348.9 million;
  • Intermodal gross margin declined by $5.9 million. Excluding the reduced volume from the ocean carrier customer, intermodal gross margin decreased by $3.2 million. Logistics gross margin declined by $2.2 million;
  • Net income decreased $5.5 million to $1.1 million.
 
 

(In millions, except for per share data)

                         
2012 2011
Q1 Q2 Q3 Q3
Revenue $ 345.9 $ 368.3 $ 348.9 $ 375.8
Gross margin $ 37.8 $ 38.6 $ 37.9 $ 46.0
Gross margin % 10.9 % 10.5 % 10.9 % 12.2 %
SG&A $ 36.0 $ 34.2 $ 33.5 $ 37.5
Income from operations - 2.5 2.3 11.4
Net income (loss) (0.3 ) 1.3 1.1 6.6
Earnings (loss) per share $ (0.01 ) $ 0.04 $ 0.03 $ 0.19
 
 

“We have taken several actions in the quarter to improve our intermodal margins and we are exiting the quarter stronger from all of these actions. However, the competitive pricing environment along with rising rail costs will continue to be a challenge in our intermodal segment. Our logistics segment, excluding the cost of strategic organizational changes in Europe during the quarter, continues to improve in a sluggish global freight forwarding market and an increasingly competitive landscape. We will continue to take actions in both segments to improve financial performance going forward,” said Chief Financial Officer John J. Hafferty.

“Clearly a challenging quarter as a softening economic environment makes it difficult to achieve yields necessary to offset higher purchased transportation costs. We are addressing under-performing traffic corridors, reducing controllable costs and working with our carriers to mitigate cost increases. Our service performance is excellent and we will continue to seek margins that are comparable to the service provided,” said Chief Executive Officer Dan Avramovich.

A tabular reconciliation detailing the adjustments made to arrive at the adjusted financial results set forth above and elsewhere in this press release from financial results determined in accordance with accounting principles generally accepted in the United States of America (“GAAP”) is contained in the reconciliation schedules attached to this press release.

YEAR-TO-DATE RESULTS

  • Income from operations in the intermodal segment, excluding the gain on sale of railcar assets of $4.8 million in 2011 and the reduced volume from the ocean carrier customer, increased year over year by $0.1 million. Total intermodal income from operations decreased $12.5 million and logistics income from operations decreased $6.8 million. Overall income from operations decreased by $18.0 million;
  • Earnings per share decreased from $0.37 in the 2011 period to $0.06 in the 2012 period. Excluding the 2011 gain on sale of railcar assets, earnings per share decreased $0.17 year over year;
  • Selling, general and administrative expenses improved by $7.3 million or 6.6%;
  • Total intermodal revenue declined $2.9 million or 0.3%. Excluding the impact from the previously announced reduction in volume from an ocean carrier customer of $73.2 million through the third quarter of 2011, intermodal revenues grew by 8.7%. Logistics revenues declined by 23.0% to $181.0 million. In total, revenues decreased by 5.1% to $1,063.1 million;
  • Intermodal gross margin declined by $13.4 million. Excluding the reduced volume from the ocean carrier customer, intermodal gross margin decreased by $5.6 million. Logistics gross margin declined by $6.7 million;
  • Net income decreased $10.7 million to $2.1 million.
                 
 

(In millions, except for per share data)

 
2012 2011
Year-to-Date Year-to-Date
Revenue $ 1,063.1 $ 1,120.5
Gross margin $ 114.3 $ 134.4
Gross margin % 10.8 % 12.0 %
SG&A $ 103.7 $ 111.0
Income from operations 4.8 22.8
Net income 2.1 12.8
Earnings per share $ 0.06 $ 0.37
 
 

2012 GUIDANCE

Given our year-to-date results, we are revising our full year 2012 earnings per share guidance which we now expect to range between $0.10 and $0.14 per share. We expect revenues in 2012 to range between $1.400 billion and $1.450 billion.

2013 GUIDANCE

As we continue to operate in an uncertain economic environment we are offering a cautious early look at 2013. We expect earnings per share in 2013 to range between $0.25 and $0.35.

CONFERENCE CALL TODAY Pacer International will hold a conference call for investors, analysts, business and trade media, and other interested parties at 8:30 a.m. ET, today (Thursday, October 25, 2012). To participate, please call five minutes early by dialing (800) 230-1059(in USA) and ask for "Pacer International Earnings Call." International callers can dial (612) 234-9959.

An audio-only, simultaneous Webcast of the live conference call can be accessed through the Investors link on the company’s website at www.pacer.com. For persons unable to participate in either the conference call or the Webcast, a digitized replay will be available from October 25, 2012 at 11:00 a.m. ET to November 25, 2012 at 11:59 p.m. ET. For the replay, dial (800) 475-6701(USA) or (320) 365-3844 (international), using access code 252022. During such period, the replay also can be accessed through the Events Calendar within the Investors link on the company's website at www.pacer.com.

USE OF NON-GAAP FINANCIAL MEASURES: This press release contains “non-GAAP financial measures” as defined by the Securities and Exchange Commission. These non-GAAP measures are adjusted intermodal revenue, adjusted intermodal gross margin and adjusted intermodal operating income, each of which excludes from 2011 results the impact of the previously announced volume reduction of the ocean carrier customer that transitioned its western business directly to the railroad. Adjusted intermodal operating income also excludes from 2011 results the gain on the sale of railcar assets. Non-GAAP measures are used by management and the Board of Directors in their analysis of the company's ongoing core operating performance. Management believes that these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the company's core businesses and allows investors to more easily compare operating results from period to period. A tabular reconciliation of the differences between the non-GAAP financial information discussed in this release and the most directly comparable financial information calculated and presented in accordance with GAAP is contained in the financial summary statements attached to this press release.

CERTAIN FORWARD-LOOKING STATEMENTS--This press release contains or may contain forward-looking statements, including earnings per share and revenue guidance for 2012 and earnings per share guidance for 2013, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on the Company's current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions. Among the important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements are general economic and business conditions including the current U.S. and global economic environment and the timing and strength of economic recovery in the U.S. and internationally; industry trends, including changes in the costs of services from rail, motor, ocean and air transportation providers; competitive pressures that may limit our ability to pass through cost increases from the transportation providers to our customers; our ability to implement operational and cost improvements and execute growth plans; our success at growing our direct US-Mexico or other business to offset declines in revenue and margins for equipment and services under our new Cross-Border Agreement with UP; and other risks discussed in the Company’s Form 10-K and other filings with the Securities and Exchange Commission, which are incorporated herein by reference. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, expected or intended. Except as otherwise required by federal securities laws, the company does not undertake any obligation to update such forward-looking statements whether as a result of new information, future events or otherwise.

         
 
 

Pacer International, Inc.

Unaudited Condensed Consolidated Balance Sheets

(in millions)

 
 
          September 30, 2012 December 31, 2011
 
Assets
 
Current assets
Cash and cash equivalents $ 12.3 $ 24.0
Accounts receivable, net 141.0 133.5
Prepaid expenses and other 13.5 12.3
Deferred income taxes   2.6     4.0  
Total current assets   169.4     173.8  
 
Property and equipment
Property and equipment, cost 107.0 99.8
Accumulated depreciation   (60.2 )   (56.1 )
Property and equipment, net   46.8     43.7  
 
Other assets
Deferred income taxes 14.5 14.1
Other assets   11.0     11.7  
Total other assets   25.5     25.8  
 
Total assets $ 241.7   $ 243.3  
 
Liabilities and Stockholders' Equity
 
Current liabilities
Accounts payable and other accrued liabilities 122.4 127.1
 
Long-term liabilities
Other 1.3 0.9
           
Total liabilities   123.7     128.0  
 
Stockholders' equity
Common stock 0.4 0.4
Additional paid-in-capital 305.8 304.7
Accumulated deficit (188.1 ) (190.2 )
Accumulated other comprehensive (loss) income   (0.1 )   0.4  
Total stockholders' equity   118.0     115.3  
 
Total liabilities and stockholders' equity $ 241.7   $ 243.3  
 
 
               
 

Pacer International, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in millions, except share and per share data)

 
 
Three Months Ended Nine Months Ended
September 30, 2012     September 30, 2011 September 30, 2012     September 30, 2011
 
 
Revenues $ 348.9 $ 375.8 $ 1,063.1 $ 1,120.5
 
Operating Expenses:
Cost of purchased transportation and services 287.7 306.7 880.6 914.5
Direct operating expenses (excluding depreciation) 23.3 23.1 68.2 71.6
Selling, general and administrative expenses 33.5 37.5 103.7 111.0
Other income - (4.8 ) - (4.8 )
Depreciation and amortization   2.1         1.9     5.8         5.4  
Total operating expenses   346.6         364.4     1,058.3         1,097.7  
 
Income from operations 2.3 11.4 4.8 22.8
 
Interest expense   (0.3 )       (0.5 )   (1.1 )       (1.8 )
 
Income before income taxes 2.0 10.9 3.7 21.0
 
Income tax expense   (0.9 )       (4.3 )   (1.6 )       (8.2 )
 
Net income $ 1.1       $ 6.6   $ 2.1       $ 12.8  
 
 
Earnings per share:
 
Basic:
Earnings per share $ 0.03     $ 0.19   $ 0.06     $ 0.37  
Weighted average shares outstanding   35,087,082       34,978,646     35,064,057       34,979,784  
 
Diluted:
Earnings per share $ 0.03     $ 0.19   $ 0.06     $ 0.37  
Weighted average shares outstanding   35,380,600       35,019,152     35,328,023       35,010,005  
 
 
 
 

Pacer International, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in millions)

       
 
 
 
Nine Months Ended
September 30, 2012     September 30, 2011
 
Cash Flows from Operating Activities
Net income $ 2.1 $ 12.8
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 5.8 5.4
Gain on sale of railcar assets - (4.8 )
Amortization of deferred gain on sale lease-back transactions (0.6 ) (0.5 )
Deferred taxes 1.0 8.0
Stock based compensation expense 1.3 1.8
Changes in operating assets and liabilities:
Accounts receivable, net (7.5 ) 14.3
Prepaid expenses and other (1.2 ) 0.7
Accounts payable and other accrued liabilities (4.6 ) (11.9 )
Other long-term assets 0.9 0.8
Other long-term liabilities   (1.1 )   (0.3 )
 
Net cash (used in) provided by operating activities   (3.9 )   26.3  
 
Cash Flows from Investing Activities
Capital expenditures (9.3 ) (5.4 )
Purchase of railcar assets (28.4 ) (22.1 )
Net proceeds from sale of railcar assets - 28.9
Net proceeds from sale lease-back transaction 30.2 -
Net proceeds from sales of property and equipment   0.1     0.2  
 
Net cash (used in) provided by investing activities   (7.4 )   1.6  
 
Cash Flows from Financing Activities
Net repayments under revolving line of credit - (13.4 )
Debt issuance costs paid to third parties (0.2 ) -
Repurchase and retirement of Pacer common stock (0.1 ) (0.1 )
Withholding tax paid upon vesting of restricted and performance stock units   (0.1 )   -  
 
Net cash used in financing activities   (0.4 )   (13.5 )
 
Net (decrease) increase in cash and cash equivalents (11.7 ) 14.4
 
Cash and cash equivalents - beginning of period   24.0     4.2  
Cash and cash equivalents - end of period $ 12.3   $ 18.6  
 
 
 
 

Pacer International, Inc.

Unaudited Results by Segment

(in millions)

               
 
Three Months Ended September 30,   Nine Months Ended September 30,
      2012     2011     Change % Change 2012     2011   Change   % Change
 
Revenues
Intermodal $ 291.0 $ 302.2 $ (11.2 ) (3.7 ) % $ 882.7 $ 885.6 $ (2.9 ) (0.3 ) %
Logistics 58.1 73.7 (15.6 ) (21.2 ) 181.0 235.2 (54.2 ) (23.0 )
Inter-segment eliminations       (0.2 )       (0.1 )       (0.1 )     N/M     (0.6 )       (0.3 )       (0.3 )     N/M  
Total 348.9 375.8 (26.9 ) (7.2 ) 1,063.1 1,120.5 (57.4 ) (5.1 )
 
Cost of purchased transportation and services
and direct operating expense 1/
Intermodal 263.7 269.0 (5.3 ) (2.0 ) 800.9 790.4 10.5 1.3
Logistics 47.5 60.9 (13.4 ) (22.0 ) 148.5 196.0 (47.5 ) (24.2 )
Inter-segment eliminations       (0.2 )       (0.1 )       (0.1 )     N/M     (0.6 )       (0.3 )       (0.3 )   N/M  
Total 311.0 329.8 (18.8 ) (5.7 ) 948.8 986.1 (37.3 ) (3.8 )
 
Gross margin
Intermodal 27.3 33.2 (5.9 ) (17.8 ) 81.8 95.2 (13.4 ) (14.1 )
Logistics       10.6         12.8         (2.2 )     (17.2 )   32.5         39.2         (6.7 )   (17.1 )
Total $ 37.9 $ 46.0 $ (8.1 ) (17.6 ) % $ 114.3 $ 134.4 $ (20.1 ) (15.0 ) %
 
Gross margin percentage
Intermodal 9.4 % 11.0 % (1.6 ) % 9.3 % 10.7 % (1.4 ) %
Logistics       18.2         17.4         0.8     18.0         16.7         1.3  
Total 10.9 % 12.2 % (1.3 ) % 10.8 % 12.0 % (1.2 ) %
 
Income (loss) from operations
Intermodal 8.7 17.2 (8.5 ) (49.4 ) 26.3 38.8 (12.5 ) (32.2 )
Logistics (2.3 ) (0.8 ) (1.5 ) N/M (8.0 ) (1.2 ) (6.8 ) N/M
Corporate       (4.1 )       (5.0 )       0.9       (18.0 )   (13.5 )       (14.8 )       1.3       (8.8 )
Total $ 2.3 $ 11.4 $ (9.1 ) (79.8 ) % $ 4.8 $ 22.8 $ (18.0 ) (78.9 ) %
 
 
1/ Direct operating expenses are only incurred in the intermodal segment
 
 
 
 

Pacer International, Inc.
Reconciliation of GAAP Results to Adjusted Results
For the Three and Nine Months Ended September 30, 2012 and September 30, 2011
(in millions)

                 
 
 

Three Months
Ended
September 30,
2012

Three Months Ended September 30, 2011

Adjusted
Variance
2012 vs 2011

% Adjusted
Variance
2012 vs 2011

            GAAP Results

GAAP
Results

 

Adjustments

 

Adjusted
Results

   
Revenues
Intermodal $ 291.0 $ 302.2 $ (24.1 ) /1 $ 278.1 $ 12.9 4.6 %
 

Cost of purchased transportation and services and direct operating expense

 
Intermodal 263.7 269.0 (21.4 ) /1 $ 247.6 16.1 6.5
 
Gross margin
Intermodal 27.3 33.2 (2.7 ) 30.5 (3.2 ) (10.5 )
 
Gross margin percentage
Intermodal 9.4 % 11.0 % 11.0 % 11.0 % (1.6 ) %
 
Income (loss) from operations
Intermodal $ 8.7 $ 17.2 $ (7.5 ) /2 $ 9.7 $ (1.0 ) (10.3 ) %
 
 
 
 

 

Nine Months
Ended
September 30,
2012

Nine Months Ended September 30, 2011

Adjusted
Variance 2012
vs 2011

% Adjusted
Variance
2012 vs 2011

            GAAP Results GAAP Results  

Adjustments

  Adjusted Results    
Revenues

Intermodal

$ 882.7 $ 885.6 $ (73.2 ) /1 $ 812.4 $ 70.3 8.7 %
 

Cost of purchased transportation and services and direct operating expense

 
Intermodal 800.9 790.4 (65.4 ) /1 $ 725.0 75.9 10.5
 
Gross margin
Intermodal 81.8 95.2 (7.8 ) 87.4 (5.6 ) (6.4 )
 
Gross margin percentage
Intermodal 9.3 % 10.7 % 10.7 % 10.7 % (1.4 ) %
 
Income (loss) from operations
Intermodal $ 26.3 $ 38.8 $ (12.6 ) /2 $ 26.2 $ 0.1 0.4 %
 
 
1/ Adjustment to reflect previously announced reduction in volume from an ocean carrier customer that transitioned its western U.S. intermodal business directly to the railroad. Purchased transportation and direct operating expenses were adjusted at the average intermodal margin percentage for the 2011 period.
 
2/ Adjustment to reflect previously announced reduction in volume from an ocean carrier customer that transitioned its western U.S. intermodal business directly to the railroad. Purchased transportation and direct operating expenses were adjusted at the average intermodal margin percentage for the 2011 period. In addition, adjustment to eliminate the gain on sale of railcar assets of $4.8 million which occurred in Q3 2011.
 
 

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Source: Pacer International, Inc.

INVESTOR:
Pacer International, Inc.
Steve Markosky, 614-923-1703
VP Investor Relations & Financial Planning & Analysis
steve.markosky@pacer.com
or
MEDIA:
Princeton Partners
Erin Bijas
Senior Account Manager, Public Relations
609-452-8500 x118; 732-895-0792 (mobile)
ebijas@princetonpartners.com


Copyright 2011 Pacer International, Inc. All rights reserved.