Pacer International Inc. has a market cap of $304.1 million; its shares were traded at around $8.7 with a P/E ratio of 67 and P/S ratio of 0.2. PACR is in the portfolios of Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:For the first six months of 2010, Pacer has continued to make progress in achieving its strategic objectives and improving its financial results. We have increased overall revenues, operating income and cash flow from operations in the second quarter and first six months of 2010 as compared to the corresponding 2009 periods notwithstanding the transition of substantially all of the wholesale domestic east-west big box business we previously handled for intermodal marketing companies as discussed below. Income from operations for the first six months of 2010 was $3.8 million compared to a loss from operations of $234.9 million for the 2009 period which included a $200.4 million non-cash goodwill impairment charge. Excluding the $200.4 million non-cash goodwill impairment charge recorded in the first quarter of 2009 and all severance expenses in the 2010 and 2009 periods, Pacers first six months of 2010 adjusted operating income improved by $38.7 million as compared to the 2009 period. Our cash flow from operations also continues to improve, and was $39.7 million more in the first six months of 2010 compared to the 2009 period. A reconciliation of GAAP financial results to adjusted financial results included in this Quarterly Report which exclude the impact of the goodwill impairment and severance charges is contained elsewhere in this Quarterly Report. In addition, our average employment level has remained steady since the first quarter of 2010, but is reduced by 31.0%, or 466 people, compared to the six-month average for 2009 through the combined impacts of severance activity, attrition, and the August 2009 sale of certain assets of our truck services unit. In July 2010, management rescinded the wage reduction that had been in effect since April 2009 due to the improving financial results.
Our intermodal segment recorded operating income of $6.7 million in the second quarter of 2010 compared to a loss of $5.7 million in the second quarter of 2009. This improvement reflected strong wholesale intermodal automotive and international business coupled with quarter-over-quarter improvement in our retail intermodal product. As expected, under the new arrangements with Union Pacific, substantially all of the wholesale east-west domestic big box business that we have historically handled on behalf of intermodal marketing company customers on the Union Pacific network transitioned away from Pacer during the first half of 2010 as a result of the increased rate structure for that business under the new arrangements.
Our logistics segment recorded a $1.7 million operating income for the second quarter 2010 compared to a $1.4 million loss in the 2009 period. Operating income for each business unit improved over the 2009 quarter. This segment also benefited from the elimination of losses incurred by our former truck services unit in the 2009 period.
Deferred Tax Assets. At June 30, 2010, we have recorded net deferred tax assets of $38.4 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 approximately $98.5 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. The Company complies with FASB ASC Topic 350 Intangibles Goodwill and Other and Topic 820 Fair Value Measurements and Disclosures to evaluate goodwill. Based on a combination of factors, including the continued, sustained decline in our stock price and market capitalization during the first quarter of 2009, and the operating results of our intermodal and logistics reporting units during that quarter, we concluded that a goodwill impairment triggering event had occurred in the first quarter of 2009 for purposes of ASC Topic 350, and, accordingly, performed a testing of the carrying values of goodwill for both the intermodal and logistics reporting units as of March 31, 2009. As a result, we recorded a non-cash goodwill impairment charge of $200.4 million in the 2009 first quarter ($169.0 million of the pre-tax charge was recorded in the intermodal reporting unit and $31.4 million in the logistics reporting unit). After the charge, there was no remaining goodwill assigned to either the intermodal or logistics reporting units. For more information, see Note 1 to the Condensed Consolidated Financial Statements.
Revenues for our wholesale intermodal product decreased $10.9 million, or 5.6%, from the prior year to $183.3 million. The decrease in revenue was the result of an overall decline in volumes of 10.2%. Average freight revenue per container increased 4.1%, driven by a combination of price increases and higher fuel surcharge revenue. The transition of the east-west big box business away from us as a result of the November 2009 Union Pacific arrangements resulted in domestic wholesale volume declines of 74.8%. Revenues associated with the transitioned business were $64.7 million in the second quarter of 2009 as compared to revenues of $6.7 million in the corresponding 2010 period. Excluding the impact of the east-west big box business volumes, wholesale intermodal volumes increased 18.8%. International volumes increased 30.4%, due primarily to increased traffic from our steamship line customers who participated in the 2010 recovery of the ocean freight business, particularly from Asia. Auto volumes increased 68.2%, as our automotive customers increased shipments to support the continuing rebound in automotive production from 2009 levels throughout the first half of 2010. This increase was primarily driven by the introduction of new models and reduced new car inventories at U.S. dealerships. We expect this trend to continue throughout the remainder of 2010 as new car dealer inventories days are lower than they have been historically.
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