PACR » Topics » Changes in freight rates, as a result of competition in our industry and pricing strategies of our transportation suppliers, could adversely affect our business and results of operations.

These excerpts taken from the PACR 10-K filed Feb 17, 2009.

Changes in freight rates, as a result of competition in our industry and pricing strategies of our transportation suppliers, could adversely affect our business and results of operations.

 

The transportation services industry is highly competitive. Our logistics businesses compete primarily against other domestic asset-based and non-asset based transportation and logistics companies, third-party freight brokers, shipping departments of our customers and other freight forwarders. Our intermodal business competes primarily with over-the-road full truckload carriers, conventional intermodal movement of trailers on flat cars, and containerized intermodal rail services offered by railroads and other intermodal service providers. Some of our competitors have substantially greater financial, marketing and other resources than we do, which may allow them to withstand better an economic downturn, reduce their prices more easily than we can or expand or enhance the marketing of their products. There are a number of large companies competing in one or more segments of our industry, although the number of companies with a North American 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 soliciting competitive bids for transportation services from a number of competitors, including competitors that are larger than we are. We also face competition from Internet-based freight exchanges, or electronic bid environments, that provide an online marketplace for buying and selling supply chain services.

 

Historically, competition has created downward pressure on freight rates. In the past and currently in the worsening economic environment, we have experienced downward pressure in the pricing of our intermodal and logistics services that has affected our revenues and operating results. In particular, our intermodal segment has offered lower rates to its customers to match lower rates offered by our railroad competitors in the intermodal business. Rate reductions by truckload carriers may also exert downward pressures on intermodal rates. Such rate reductions could adversely affect the yields of our intermodal product.

 

Rate increases, particularly when taken by our railroad and motor transportation suppliers, may also have an adverse impact if our brokerage operations are unable to obtain commensurate price increases from our customers, on a timely basis or if at all. Because transportation costs represent such a significant portion of our costs, even a relatively small increase in transportation costs, if we are unable to pass them through to customers, are likely to have a significant effect on our margins and operating income. Even variances between the time that the supplier assesses higher charges and the time we are able to begin collecting higher charges from our customers can deteriorate margins and operating income. Although the application of intermodal rate increases to a portion of our Stacktrain business is limited by some of our multi-year rail contracts, such increases have resulted in higher costs to some of our Stacktrain business and to our rail brokerage operation that we have not been able to fully pass on as quickly as the increases are implemented by the rail carriers. While our Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for intermodal services and thereby affect our consolidated results of operations.

 

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Changes in freight rates, as a result of competition in our industry and pricing
strategies of our transportation suppliers, could adversely affect our business and results of operations.

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:7%">The transportation services industry is highly competitive. Our logistics businesses compete primarily against other domestic asset-based and non-asset
based transportation and logistics companies, third-party freight brokers, shipping departments of our customers and other freight forwarders. Our intermodal business competes primarily with over-the-road full truckload carriers, conventional
intermodal movement of trailers on flat cars, and containerized intermodal rail services offered by railroads and other intermodal service providers. Some of our competitors have substantially greater financial, marketing and other resources than we
do, which may allow them to withstand better an economic downturn, reduce their prices more easily than we can or expand or enhance the marketing of their products. There are a number of large companies competing in one or more segments of our
industry, although the number of companies with a North American 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 soliciting competitive bids for transportation services from a number of competitors, including competitors that are larger than we are. We also face competition from
Internet-based freight exchanges, or electronic bid environments, that provide an online marketplace for buying and selling supply chain services.

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:7%">Historically, competition has created downward pressure on freight rates. In the past and currently in the worsening economic environment, we have
experienced downward pressure in the pricing of our intermodal and logistics services that has affected our revenues and operating results. In particular, our intermodal segment has offered lower rates to its customers to match lower rates offered
by our railroad competitors in the intermodal business. Rate reductions by truckload carriers may also exert downward pressures on intermodal rates. Such rate reductions could adversely affect the yields of our intermodal product.

STYLE="margin-top:0px;margin-bottom:0px"> 

Rate increases, particularly when taken by our railroad and motor
transportation suppliers, may also have an adverse impact if our brokerage operations are unable to obtain commensurate price increases from our customers, on a timely basis or if at all. Because transportation costs represent such a significant
portion of our costs, even a relatively small increase in transportation costs, if we are unable to pass them through to customers, are likely to have a significant effect on our margins and operating income. Even variances between the time that the
supplier assesses higher charges and the time we are able to begin collecting higher charges from our customers can deteriorate margins and operating income. Although the application of intermodal rate increases to a portion of our Stacktrain
business is limited by some of our multi-year rail contracts, such increases have resulted in higher costs to some of our Stacktrain business and to our rail brokerage operation that we have not been able to fully pass on as quickly as the increases
are implemented by the rail carriers. While our Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for intermodal services and thereby affect our consolidated
results of operations.

 


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These excerpts taken from the PACR 10-K filed Feb 19, 2008.

Changes in freight rates, as a result of competition in our industry and pricing strategies of our transportation suppliers, could adversely affect our business and results of operations.

 

The transportation services industry is highly competitive. Our logistics 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 intermodal business competes primarily with over-the-road full truckload carriers, conventional intermodal movement of trailers on flat cars, and containerized intermodal rail services offered by railroads and other intermodal service providers. Some of our competitors have substantially greater financial, marketing and other resources than we do, which may allow them to withstand better an economic downturn, reduce their prices more easily than we can or expand or enhance the marketing of their products. There are a number of large companies competing in one or more segments of our industry, although the number of companies with a North American 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 soliciting competitive bids for transportation services from a number of

 

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competitors, including competitors that are larger than we are. We also face competition from Internet-based freight exchanges, or electronic bid environments, that provide an online marketplace for buying and selling supply chain services.

 

Historically, competition has created downward pressure on freight rates. In the past, we have experienced downward pressure in the pricing of our intermodal and logistics services that has affected our revenues and operating results. In particular, our intermodal segment has offered lower rates to its customers to match lower rates offered by our railroad competitors in the intermodal business. Rate reductions by truckload carriers may also exert downward pressures on intermodal rates. Such rate reductions could adversely affect the yields of our intermodal product.

 

Rate increases, particularly when taken by our railroad and highway transportation suppliers, may also have an adverse impact if our brokerage operations are unable to obtain commensurate price increases from our customers. For example, during 2005, due to increased demand, all the major rail carriers instituted price increases. Price increases were also taken in 2006 and 2007. Although the application of rate increases to a portion of our Stacktrain business is limited by our long-term rail contracts, such increases have resulted in higher costs to some of our Stacktrain business and to our rail brokerage operation that we have not been able to fully pass on as quickly as the increases are implemented by the rail carriers. While our Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for intermodal services and thereby affect our consolidated results of operations.

 

Changes in freight rates, as a result of competition in our industry
and pricing strategies of our transportation suppliers, could adversely affect our business and results of operations.

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:7%">The transportation services industry is highly competitive. Our logistics 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 intermodal business competes primarily with
over-the-road full truckload carriers, conventional intermodal movement of trailers on flat cars, and containerized intermodal rail services offered by railroads and other intermodal service providers. Some of our competitors have substantially
greater financial, marketing and other resources than we do, which may allow them to withstand better an economic downturn, reduce their prices more easily than we can or expand or enhance the marketing of their products. There are a number of large
companies competing in one or more segments of our industry, although the number of companies with a North American 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 soliciting competitive bids for transportation services from a number of

 


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competitors, including competitors that are larger than we are. We also face competition from Internet-based freight exchanges, or electronic bid
environments, that provide an online marketplace for buying and selling supply chain services.

 

FACE="Times New Roman" SIZE="2">Historically, competition has created downward pressure on freight rates. In the past, we have experienced downward pressure in the pricing of our intermodal and logistics services that has affected our revenues and
operating results. In particular, our intermodal segment has offered lower rates to its customers to match lower rates offered by our railroad competitors in the intermodal business. Rate reductions by truckload carriers may also exert downward
pressures on intermodal rates. Such rate reductions could adversely affect the yields of our intermodal product.

 

STYLE="margin-top:0px;margin-bottom:0px; text-indent:7%">Rate increases, particularly when taken by our railroad and highway transportation suppliers, may also have an adverse impact if our brokerage operations
are unable to obtain commensurate price increases from our customers. For example, during 2005, due to increased demand, all the major rail carriers instituted price increases. Price increases were also taken in 2006 and 2007. Although the
application of rate increases to a portion of our Stacktrain business is limited by our long-term rail contracts, such increases have resulted in higher costs to some of our Stacktrain business and to our rail brokerage operation that we have not
been able to fully pass on as quickly as the increases are implemented by the rail carriers. While our Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for
intermodal services and thereby affect our consolidated results of operations.

 

SIZE="2">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 such as changes in fuel costs or the timing of changes in fuel surcharge assessments (compared to fuel surcharge collections) over which we have little
or no control. Increased operating expenses incurred by third-party carriers can be expected to result in higher costs to us, and our 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 or if we were to experience a dramatic change in the timing of our recovery of such costs relative to our requirements to pay such costs to our third party carriers. 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. For example, the economic downturn in 2007, impacting particularly the housing and related building products industries, has negatively impacted our truck
brokerage and truck services operations in our logistics segment in 2007 due to decreased demand to transport materials. 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.

 

STYLE="margin-top:0px;margin-bottom:0px">We may be required to record a significant charge to earnings if our goodwill becomes impaired.

SIZE="1"> 

At December 28, 2007, we had recorded $288.3 million of goodwill, net of amortization, allocated to our two reporting
units, which are our intermodal and logistics operating segments. A total of $169.0 million is allocated to our intermodal segment and $119.3 million is allocated to our logistics segment. The fair value of our operating segments is determined under
Financial Accounting Standards Board Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets” on at least an annual basis. Under this statement, the fair value of each operating segment is compared to
the carrying value to determine if goodwill impairment exists. The larger the excess of a unit’s fair value over its carrying value, the better a reporting unit or company can survive negative financial events or results and determine that its
goodwill is unimpaired. This determination for 2007 resulted in a significant reduction from prior years in the excess of fair value over carrying value for both of our operating segments. The excess of fair value over carrying value for our
intermodal and logistics segments as of December 28, 2007 was approximately $288 million and $3 million, respectively, as compared to $1.1 billion and approximately $23 million,

 


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respectively, as of December 29, 2006. Should the economic downturn in 2007 continue or worsen, growth rates in the transportation industry decline, the
trading price of our common stock deteriorate or other adverse events occur, the determination of fair value in the future could result in a goodwill impairment with respect to one or both of our reporting units, but particularly our logistics
segment, which would negatively impact the operating results and net worth of the logistics segment and the company. We plan to monitor the fair value calculations of our reporting units on a quarterly basis during 2008. See ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates for further discussion on goodwill evaluation.

SIZE="1"> 

This excerpt taken from the PACR 10-K filed Feb 21, 2007.

Changes in freight rates, as a result of competition in our industry and pricing strategies of our transportation suppliers, could adversely affect our business and results of operations.

 

The transportation services industry is highly competitive. Our logistics 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 intermodal business competes primarily with over-the-road full truckload carriers, conventional intermodal movement of trailers on flat cars, and containerized intermodal rail services offered by railroads and other providers. Some of our competitors have substantially greater

 

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financial, marketing and other resources than we do, which may allow them to withstand better an economic downturn, reduce their prices more easily than we can or expand or enhance the marketing of their products. There are a number of large companies competing in one or more segments of our industry, although the number of companies with a North American 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 soliciting competitive bids for transportation services from a number of competitors, including competitors that are larger than we are. We also face competition from Internet-based freight exchanges, or electronic bid environments, that provide an online marketplace for buying and selling supply chain services.

 

Historically, competition has created downward pressure on freight rates. In the past, we have experienced downward pressure in the pricing of our intermodal and logistics services that has affected our revenues and operating results. In particular, our intermodal segment has offered lower rates to its customers to match lower rates offered by our railroad competitors in the intermodal business. Rate reductions by truckload carriers may also exert downward pressures on intermodal rates. Such rate reductions could adversely affect the yields of our intermodal product.

 

Rate increases, particularly when taken by our railroad and highway transportation suppliers, may also have an adverse impact if our brokerage operations are unable to obtain commensurate price increases from our customers. For example, during 2005, due to increased demand, all the major rail carriers instituted price increases. Price increases were also taken in 2006. Although the application of rate increases to a portion of our Stacktrain business is limited by our long-term rail contracts, such increases have resulted in higher costs to some of our Stacktrain business and to our rail brokerage operation that we have not been able to fully pass on as quickly as the increases are implemented by the rail carriers. While our Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for intermodal services and thereby affect our consolidated results of operations.

 

This excerpt taken from the PACR 10-K filed Mar 2, 2006.

Changes in freight rates, as a result of competition in our industry and pricing strategies of our transportation suppliers, 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 withstand better an economic downturn, reduce their prices more easily than we can or expand or enhance the marketing of their products. There are a number of large companies competing in one or more segments of our 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 soliciting competitive bids for transportation services from a number of competitors, including competitors that are larger than we are. We also face competition from Internet-based freight exchanges, or electronic bid environments, which attempt to provide an online marketplace for buying and selling supply chain services.

 

Historically, competition has created downward pressure on freight rates. In the past, we have experienced downward pressure in the pricing of our wholesale and retail services that has affected our revenues and operating results. In particular, our wholesale segment has offered lower rates to its customers to match lower rates offered by our railroad competitors in the intermodal business. Such rate reductions could adversely affect the yields of our intermodal product.

 

Rate increases, particularly when taken by our railroad and highway transportation suppliers, may also have an adverse impact if our brokerage operations are unable to obtain commensurate price increases from our customers. For example, during 2005, due to increased demand, all the major rail carriers instituted price increases. Although the application of rate increases to a portion of our wholesale Stacktrain business is limited by our long-term contracts with the railroads, such increases have resulted in higher costs to some of our wholesale Stacktrain business and to our retail rail brokerage operation that we have not been able to fully pass on as quickly as the increases are implemented by the rail carriers. While our wholesale Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for intermodal services and thereby affecting our consolidated results of operations.

 

This excerpt taken from the PACR 10-K filed Mar 14, 2005.

Changes in freight rates, as a result of competition in our industry and pricing strategies of our transportation suppliers, 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 we can or expand or enhance the marketing of their products. There are a number of large companies competing in one or more segments of our 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 soliciting competitive bids for transportation services from a number of competitors, including competitors that are larger than we are. We also face competition from Internet-based freight exchanges, or electronic bid environments, which attempt to provide an online marketplace for buying and selling supply chain services.

 

Historically, competition has created downward pressure on freight rates. In the past, we have experienced downward pressure in the pricing of our wholesale and retail services that has affected our revenues and operating results. In particular, our wholesale segment, has offered lower rates to its customers to match lower rates offered by our railroad competitors in the intermodal business. Such rate reductions could adversely affect the yields of our intermodal product.

 

Rate increases, particularly when taken by our railroad and highway transportation suppliers, may also have an adverse impact if our brokerage operations are unable to obtain commensurate price increases from our customers. For example, during 2004, due to increased demand, all the major rail carriers instituted price increases. Although the application of rate increases to our wholesale Stacktrain business is limited by our long-term contracts with the railroads, such increases have resulted in higher costs to our retail rail brokerage operation that it has not been able to fully pass on as quickly as the increases are implemented by the rail carriers. While our wholesale Stacktrain operation may benefit from the intermodal rate increases, such rate increases may have the impact of slowing overall demand for intermodal services and thereby affecting our consolidated results of operations.

 

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