This Management's Discussion and Analysis ("MD&A") should be read in conjunction with the MD&A, including the discussion of our critical accounting policies, and the Condensed Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 26, 2008 (the "2008 Annual Report") filed with the Securities and Exchange Commission on February 17, 2009.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, 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, 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 to be obtained from our cost reduction initiatives. 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," "project" and similar expressions. These forward-looking statements are based on information currently available to us and are 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 quarterly report are discussed in Item 1A of the 2008 Annual Report and in Part II. Item 1A of this Quarterly Report on Form 10-Q and of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and includes:

• general economic and business conditions, including the length and severity of the current economic recession;

• industry trends, including changes in the costs of services from rail and motor transportation providers;

• our ability to borrow amounts under our credit agreement due to borrowing base limitations and/or to comply with the financial ratio and other covenants in our credit agreement;

• increases in interest rates;

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

• the success of our cost reduction initiatives in improving our operating results and cash flows;

• the effect of the current economic recession and credit market disruption on our customers, including reduced transportation needs and an inability to pay us on time or at all;

• the impact of competitive pressures in the marketplace;

• the frequency and severity of accidents, particularly involving our trucking operations;

• the terms of new or replacement contracts with our major underlying rail carriers that are less favorable to us relative to our legacy contracts as these expire (including our legacy contract with UP, expiring in 2011 which continues to apply to our automotive and international lines of business, and our legacy contract with CSX Intermodal, expiring in 2014);

• changes resulting from our new arrangements with UP that will reduce revenues and may compress margins, result in operational difficulties, and reduce our results of operation;

• changes in, or the failure to comply with, government regulations;

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

• congestion, work stoppages, equipment and capacity shortages, weather related issues and service disruptions affecting our rail and motor transportation providers;

• the degree and timing of changes in fuel prices, including changes in the fuel costs and surcharges that we pay to our vendors and those that we are able to collect from our customers;

• our ability to successfully defend or resolve customer and vendor rate and volume adjustment claims against us;

• availability of qualified personnel;

• selecting, developing and implementing applications and solutions to update or replace our diverse legacy systems;

• increases in our leverage;

• our ability to integrate acquired businesses; and

• terrorism and acts of war.

Our actual consolidated results of operations and the execution of our business strategy could differ materially from those expressed in, or implied by, the forward-looking statements we make. In addition, past financial or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate future results or future period trends. We can give no assurances that any of the events anticipated by the forward-looking statements we make will occur or, if any of them do, what impact they will have on our consolidated results of operations, financial condition and cash flows. In evaluating our forward-looking statements, you should specifically consider the risks and uncertainties discussed under "Item 1A. Risk Factors" in our 2008 Annual Report and in Part II
- "Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2009. Except as otherwise required by federal securities laws, we undertake no obligation to publicly revise our forward-looking statements to reflect events or circumstances that arise after the date of this Quarterly Report on Form 10-Q. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this Quarterly Report on Form 10-Q and our other filings with the SEC.

Executive Summary

General. Pacer has made significant progress since the beginning the third quarter of 2009 in laying the foundation for our future. As discussed below, we entered into new multi-year agreements with UP for servicing our domestic big box (48- and 53-ft. container) shipments, entered into an amended and restated credit facility, closed the sale of certain assets of our truck services unit, and accelerated our cost cutting efforts through organizational consolidation. In addition, during the third quarter, traffic volumes began to improve to the extent that we earned $0.7 million in income from operations for the quarter, up from a loss of $11.8 million in the second quarter of 2009. Our wholesale and retail intermodal volumes were up 9.6% and 7.4%, respectively, compared to the second quarter of 2009. The economic recession continues to negatively impact our financial results. While we have seen some improvement in traffic volumes during the third quarter of 2009 compared to the second quarter of 2009, volumes continue to be below those in the comparable 2008 quarter. For the third quarter of 2009, revenues were 24.9% below the 2008 quarter with both segments reporting declines. Income from operations was down $28.6 million overall compared to the 2008 quarter with our intermodal segment reporting a $30.0 million reduction in operating income and our logistics segment reporting a $1.9 million reduction in operating income as compared to the 2008 quarter. The primary drivers of the overall reduced financial results are the depressed traffic volumes, aggressive price competition, continuing excess capacity and reduced fuel surcharges.

New Arrangements with UP. On November 3, 2009, we entered into new multi-year agreements with UP covering domestic big box (48- and 53-ft. container) shipments tendered by Pacer for transportation by UP and received a payment of $30 million from UP. The new arrangements, among other things:

• settle all outstanding claims and counterclaims between UP and the Company relating to domestic big box shipments under our legacy agreement with UP;

• provide for a gradual adjustment over a two-year period to "market" rates of rates payable by us for UP's transportation of domestic big box shipments and for continuation of the rates on competitive terms after October 11, 2011, the termination date of our legacy contract with UP; and

We anticipate that the effect of the new arrangements with UP will be that the wholesale east/west domestic big box business that we currently handle on behalf of intermodal marketing company ("IMC") customers on the UP network will transition away from us, although such transition is at the discretion of the
IMC. We believe that any such transition will be reflected in our revenues by the end of the first quarter of 2010. For the year ended December 26, 2008 and the nine-months ended September 30, 2009, we recognized revenues of approximately $391.3 million and $190.0 million, respectively, from IMC customers in the domestic east/west big box business that may transition away from us as a result of the new arrangements with UP. We will continue to offer to IMCs our domestic small box (20-, 40- and 45-ft. containers) transportation services, stand alone local drayage services through Pacer Cartage, Mexico big box transportation services and Eastern core transportation services (i.e., transportation within the Pacer's eastern network only).

We will also continue to service our north/south Mexico automotive business and international ocean carrier business, including ARC repositioning services, under the terms of our legacy agreement with UP through its October 11, 2011 expiration date. The new arrangements with UP, however, also establish terms and conditions that apply after that date to provide us with a continued exclusive position on the UP network with regard to our offering of products and services to meet international steamship line customers' needs in conjunction with and in addition to the UP rail transportation product; and we are continuing to work with UP on our north/south automotive arrangements beyond the term of the legacy agreement. See Note 11 "Subsequent Events" of the Condensed Consolidated Financial Statements for additional information with respect to these new arrangements with UP.

We used the $30 million payment we received from UP on November 3, 2009 to pay down outstanding borrowings under our credit facility. We expect such payment will be fully recognized as other income in our consolidated financial statements in the fourth quarter of 2009.

Amended Credit Facility. On August 28, 2009, we entered into an Amended and Restated Credit Agreement (the "A&R Credit Agreement") with Bank of America, N.A., as Administrative Agent and Swing Line Lender, the letter of credit issuers parties thereto, the lenders parties thereto, and Banc of America Securities, LLC, as Sole Lead Arranger and Sole Book Manager. The A&R Credit Agreement, which maintains the original maturity of April 5, 2012, provides for a revolving credit facility of up to $125 million. For further information, see "Liquidity and Capital Resources" and Note 3 of the Condensed Consolidated Financial Statements.

Sale of Certain Assets of Pacer Transport. On August 17, 2009, we closed the previously announced sale of certain assets of Pacer Transport, Inc., S&H Transport, Inc. and S&H Leasing, Inc. to subsidiaries of Universal Truckload Services, Inc. ("UTSI") under the Limited Asset Purchase Agreement signed on July 24, 2009. In connection with the sale, subsidiaries of UTSI assumed the real property leases and equipment leases for tractors and trailers used by the truck services unit, as well as certain customer, agent and other agreements, for a purchase price of approximately $2.0 million. We retained all receivables generated by the truck services unit through the closing date. A gain on the sale of $1.4 million is included in Selling, General and Administrative Expenses in the Condensed Consolidated Statements of Operations for the three- and nine-month periods ended September 30, 2009.

Cost Reductions. In view of the significant effect that the current economic recession has had on the transportation needs of customers and on our industry in general, we are continuing to take further steps to reduce costs and conserve cash while also seeking to simplify and streamline our organization without sacrificing the quality of service delivery. Since the end of 2008 and through the first nine months of 2009, we have reduced employment through attrition or severance, including through the sale of truck services assets, by 425 people and recorded $4.3 million in severance expense, and, as reported in our first and

second quarter reports, reduced wage levels for the remaining personnel by up to 10% and discontinued the 401(k) company matching contributions, effective in April 2009. In addition, we had previously discontinued our $0.15 per share quarterly cash dividend in order to conserve cash. These measures will remain in effect until our financial performance improves. With the implementation of the SAP finance and accounting modules throughout our business units, we have completed the consolidation of our cartage accounting functions in Dublin, Ohio, and we are in the process of consolidating additional decentralized accounting functions. As described in Note 5 to our Condensed Consolidated Financial Statements, we plan to further reduce our workforce, consolidate operations and offices, and will record additional charges in the fourth quarter of 2009 for costs associated with these activities. These charges, which when combined with charges already incurred, are expected to range from $4.5 million to $5.0 million and consist of severance and lease termination costs. In addition, we are implementing additional actions that are expected to result in approximately $12 million in additional annualized SG&A savings in response to the new arrangements with UP.

SAP License Amendment. On June 25, 2009, we entered into an amendment to the software license agreement with SAP America, Inc. ("SAP") dated September 30, 2007, under which the software licensed was reduced from the full enterprise suite of applications to the financial and accounting applications that have been successfully implemented. In connection with this amendment, we received a cash payment of $22.5 million and wrote-off $22.4 million of previously capitalized software and associated costs related to the development of the SAP transportation operations modules. The write-off, net of the cash received, is included in Selling, General and Administrative Expenses.

New California Environmental Regulations Affecting Drayage Operations. The California Air Resources Board ("CARB") has issued regulations that impact drayage trucks that operate within 80 miles of California's ports and rail yards. By January 1, 2010, trucks with model year 1994-2003 engines must be equipped with certified devices (e.g. particulate filters) to meet California and Federal emission standards. Trucks with model year 1993 and older will be banned from entering California ports and intermodal rail yards commencing January 1, 2010. On October 9, 2009, the Port of Oakland adopted a strict dirty truck ban effective January 1, 2010. Drayage trucks with engine year models between 1994 and 2003 will have to be retrofitted with particulate filters to enter the port. This truck ban goes beyond the requirements of the CARB regulations by establishing a turn-away requirement for non-compliant trucks at the port, whereas the CARB intends to assess fines against the motor carrier and owner-operator for entering a port or ramp with a non-compliant truck. Pacer's owner-operator fleet is currently approximately 50% compliant with those emission standards and we are working to ensure that all of our California owner-operators will operate compliant tractors by January 1, 2010. We anticipate incurring increased operating costs in order to effect compliance with these new requirements.

Change in Accounting Policy and Fiscal Year-End. Beginning in the first quarter of 2009, the Company's Stacktrain business unit changed its revenue and cost recognition method to a completed service basis from the percent of completed service basis used in prior periods. All other business units already apply the completed service revenue and cost recognition method. All prior period amounts have been adjusted for this change in the Stacktrain revenue and cost recognition method. In addition, before 2009 the Company's fiscal year was the 52- or 53-week annual accounting period ending on the last Friday in December. Following the implementation of the SAP finance and accounting modules during the 2009 quarter at our Stacktrain business unit, the Company's fiscal year was changed to December 31 of each year. Operating results for the transition period between December 27, 2008 and December 31, 2008 are included in the 2009 first quarter. Accordingly, Stacktrain data included in the intermodal segment financial comparisons in this report reflect 92 days for the third quarter of 2009 compared to 84 days for the third quarter of 2008 and 278 days for the nine months ended September 30, 2009 compared to 266 days for the nine months ended September 19, 2008. For further information regarding the status of the SAP software project, see "Liquidity and Capital Resources" below.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be predicted with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. Management believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. For additional information regarding critical accounting policies, including the potential effect of specified deviations from certain management estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our 2008 Annual Report.

Recognition of Revenue. We recognize revenue when all of the following conditions are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is determinable and collectability is reasonably assured. We maintain signed contracts with many of our customers and have bills of lading specifying shipment details including the rates charged for our services. In 2009, our Stacktrain business unit changed its method of revenue and cost recognition. Prior to 2009, the Stacktrain business unit recognized revenue for loads that are in transit at the end of an accounting period on a percentage-of-completion basis. Beginning in 2009, the Stacktrain business unit recognizes revenue and costs using the completed service method. The completed service method was retrospectively applied to all prior periods. See Notes 1 and 2 to the Condensed Consolidated Financial Statements for further details. Our intermodal segment and our logistics segment recognize revenue after services have been completed.

Recognition of Cost of Purchased Transportation and Services. Both our intermodal and logistics 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.

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 could be required. Historically, our actual losses have been within the estimated allowances. However, unexpected or significant future changes could result in a material impact to future results of operations.

Deferred Tax Assets. At September 30, 2009, we have recorded net deferred tax assets of $45.2 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 $120 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, the operating results of our intermodal and logistics reporting units during that quarter, and the effect that the current economic recession is expected to have on the operating results of both business segments until at least the end of 2009, 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 about the goodwill accounting processes, see Note 1 to the Condensed Consolidated Financial Statements.

Use of Non-GAAP Financial Measures

From time to time in press releases regarding quarterly earnings, presentations and other communications, we may provide financial information determined by methods other than in accordance with GAAP. Recent non-GAAP financial measures have presented financial information excluding our non-cash goodwill impairment write-off in the first quarter and first nine months of 2009. Management uses this non-GAAP measure in its analysis of the company's performance and regularly reports such information to our Board of Directors. Management believes that presentations of financial measures excluding the impact of these non-cash charges provides useful supplemental information that is essential to a proper understanding of the operating results of our core businesses and allows investors, management and our Board to more easily compare operating results from period to period. However, the use of any such non-GAAP financial information should not be considered in isolation or as a substitute for net income or loss, operating income or loss, cash flows from operations or other income or cash flow data prepared in accordance with GAAP or as a measure of our profitability or liquidity. These non-GAAP measures may not be comparable to those used by other companies.

Results of Operations

      Three Months Ended September 30, 2009 Compared to Three Months Ended
                               September 19, 2008

The following table sets forth our historical financial data by reportable
segment for the three months ended September 30, 2009 and September 19, 2008 (in
millions).



                                            2009              2008              Change        % Change
                                                          (as adjusted)
Revenues
Intermodal                                 $ 314.9       $         431.9       $ (117.0 )        (27.1 )%
Logistics                                    104.4                 126.7          (22.3 )        (17.6 )
Inter-segment elimination                     (0.6 )                (0.8 )          0.2          (25.0 )

Total                                        418.7                 557.8         (139.1 )        (24.9 )

Cost of purchased transportation and
services
Intermodal                                   252.4                 336.4          (84.0 )        (25.0 )
Logistics                                     90.1                 107.8          (17.7 )        (16.4 )
Inter-segment elimination                     (0.6 )                (0.8 )          0.2          (25.0 )

Total                                        341.9                 443.4         (101.5 )        (22.9 )

Direct operating expenses
Intermodal                                    31.1                  31.4           (0.3 )         (1.0 )
Logistics                                       -                     -              -              -

Total                                         31.1                  31.4           (0.3 )         (1.0 )

Selling, general & administrative
expenses
Intermodal                                    25.2                  27.9           (2.7 )         (9.7 )
Logistics                                     14.2                  17.0           (2.8 )        (16.5 )
Corporate                                      3.9                   7.3           (3.4 )        (46.6 )

Total                                         43.3                  52.2           (8.9 )        (17.0 )

Depreciation and amortization
Intermodal                                     1.3                   1.3             -              -
Logistics                                      0.3                   0.2            0.1           50.0
Corporate                                      0.1                    -             0.1            N/A

Total                                          1.7                   1.5            0.2           13.3

Income (loss) from operations
Intermodal                                     4.9                  34.9          (30.0 )        (86.0 )
Logistics                                     (0.2 )                 1.7           (1.9 )       (111.8 )
Corporate                                     (4.0 )                (7.3 )          3.3          (45.2 )

Total                                          0.7                  29.3          (28.6 )        (97.6 )

Interest (expense)/income                     (1.7 )                (0.1 )         (1.6 )      1,600.0
. . .